-----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, BRdNGTgQ+ilpuV55ZV4X8TeibmpyIBOabkbebln4UfXDn1849PxHEgOyUdJYR92b J3ttH6p+wFt+PBRk916AmA== 0000950168-02-002399.txt : 20020814 0000950168-02-002399.hdr.sgml : 20020814 20020814141503 ACCESSION NUMBER: 0000950168-02-002399 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REPTRON ELECTRONICS INC CENTRAL INDEX KEY: 0000918765 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 382081116 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23426 FILM NUMBER: 02734503 BUSINESS ADDRESS: STREET 1: 14401 MCCORMICK DR CITY: TAMPA STATE: FL ZIP: 33626 BUSINESS PHONE: 8138542351 MAIL ADDRESS: STREET 1: 14401 MCCORMICK DR CITY: TAMPA STATE: FL ZIP: 33626 10-Q 1 d10q.txt JUNE 30, 2002 UNITED STATES 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 June 30, 2002 ( ) 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 - 23426 --------- REPTRON ELECTRONICS, INC. ------------------------- (Exact name of registrant as specified in its charter) Florida 38-2081116 - ------------------------------ ------------------------------------- State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization 14401 McCormick Drive, Tampa, Florida 33626 - -------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (813) 854-2351 -------------- 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 ----- ------- There were 6,417,196 shares of common stock issued and outstanding as of August 14, 2002. REPTRON ELECTRONICS, INC. INDEX Page PART I. FINANCIAL INFORMATION Number ------ Item 1. Financial Statements Consolidated Statements of Operations -- Three months ended June 30, 2002 and June 30, 2001 and Six months ended June 30, 2002 and June 30, 2001 3 Consolidated Balance Sheets -- June 30, 2002 and December 31, 2001 4 Consolidated Statement of Shareholders' Equity -- Six months ended June 30, 2002 and year ended December 31, 2001 5 Consolidated Statements of Cash Flows -- Six months ended June 30, 2002 and June 30, 2001 6 Notes to Consolidated Financial Statements -- June 30, 2002 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of the Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 PART I. FINANCIAL INFORMATION Item 1. Financial Statements REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data)
Three months ended Six months ended June 30, June 30, (Unaudited) (Unaudited) ---------------------------------------------------------- 2002 2001 2002 2001 ---------- ----------- ----------- ---------- Net sales $ 78,778 $ 99,327 $ 161,894 $ 233,557 Cost of goods sold 68,433 85,063 141,703 197,666 Inventory writedown - 12,000 - 12,000 ---------- ----------- ----------- ---------- Gross profit 10,345 2,264 20,191 23,891 Selling, general and administrative expenses 13,977 18,586 28,232 37,335 ---------- ----------- ----------- ---------- Operating loss (3,632) (16,322) (8,041) (13,444) Interest expense, net 1,971 2,821 4,099 5,888 ---------- ----------- ----------- ---------- Loss before income taxes 5,603) (19,143) (12,140) (19,332) Income tax benefit - (7,291) - (7,210) ---------- ----------- ----------- ---------- Net loss $ (5,603) $ (11,852) $ (12,140) $ (12,122) ========== =========== =========== ========== Net loss per common share - basic: $ (0.87) $ (1.85) $ (1.89) $ (1.90) ========== =========== =========== ========== Weighted average common shares outstanding - basic 6,417,196 6,391,237 6,415,196 6,381,623 ========== =========== =========== ========== Net loss per common share - diluted: $ (0.87) $ (1.85) $ (1.89) $ (1.90) ========== =========== =========== ========== Weighted average common shares outstanding - diluted 6,391,237 6,391,237 6,381,623 6,381,623 ========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements 3 REPTRON ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data) ASSETS
June 30, December 31, 2002 2001 ---------- ------------ CURRENT ASSETS Cash and cash equivalents $ 369 $ 197 Accounts receivable - trade, net 47,761 53,018 Inventories, net 67,252 75,633 Prepaid expenses and other 2,475 1,995 Income tax receivable - 5,900 -------- -------- Total current assets 117,857 136,743 PROPERTY, PLANT & EQUIPMENT - AT COST, NET 25,584 27,133 EXCESS OF COST OVER NET ASSETS ACQUIRED (GOODWILL), NET 30,073 30,073 DEFERRED INCOME TAX 2,434 3,551 OTHER ASSETS 1,551 1,895 -------- -------- $177,499 $199,395 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 36,120 $ 26,873 Current portion of long-term obligations 1,030 1,252 Accrued expenses 6,140 7,646 -------- -------- Total current liabilities 43,290 35,771 NOTE PAYABLE TO BANK 33,301 50,596 LONG-TERM OBLIGATIONS, less current portion 80,813 80,856 SHAREHOLDERS' EQUITY Preferred Stock - authorized 15,000,000 shares of $.10 par value; no shares issued - - Common Stock - authorized 50,000,000 shares of $.01 par value; issued and outstanding, 6,417,196 and 6,397,196, respectively 64 64 Additional paid-in capital 23,146 23,083 Retained earnings (deficit) (3,115) 9,025 -------- -------- TOTAL SHAREHOLDERS' EQUITY 20,095 32,172 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $177,499 $199,395 ======== ========
The accompanying notes are an integral part of these financial statements 4 REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands, except share data)
Common Stock ---------------- Additional Retained Total Shares Par Paid-In Earnings Shareholders' Outstanding Value Capital (Deficit) Equity ----------- ----- ------------- --------- ---------------- Balance at December 31, 2000 6,359,257 $64 $22,862 $ 30,849 $ 53,775 Exercise of stock options 37,939 - 221 - 221 Net loss - - - (21,824) (21,824) --------- --- -------- -------- --------- Balance at December 31, 2001 6,397,196 64 23,083 9,025 32,172 Exercise of stock options (Unaudited) 20,000 - 63 - 63 Net loss (Unaudited) - - - (12,140) (12,140) --------- --- -------- --------- ---------- Balance at June 30, 2002 (Unaudited) 6,417,196 $64 $23,146 $ (3,115) $ 20,095 ========= === ======== ========= ==========
The accompanying notes are an integral part of this financial statement 5 REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Six months ended June 30, (Unaudited) ---------------------------- 2002 2001 ----------- ----------- Increase (decrease) in cash and cash equivalents: Cash flows from operating activities: Net loss $ (12,140) $ (12,122) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 3,942 5,229 Deferred income taxes - (299) Change in assets and liabilities: Accounts receivable - trade 5,257 35,208 Inventories 8,381 25,138 Prepaid expenses and other current assets (480) 391 Other assets (70) (771) Accounts payable - trade 9,247 (29,033) Accrued expenses (1,506) (4,813) Income taxes payable/receivable 7,017 (8,087) --------- --------- Net cash provided by operating activities 19,648 10,841 --------- --------- Cash flows from investing activities: Purchases of property, plant and equipment (1,440) (2,810) --------- --------- Net cash used in investing activities (1,440) (2,810) --------- -------- Cash flows from financing activities: Proceeds from exercise of stock options 63 221 Net payments on note payable to bank (17,295) (6,479) Payments on long term obligations (804) (1,615) --------- --------- Net cash used in financing activities (18,036) (7,873) --------- --------- Net increase (decrease) in cash and cash equivalents 172 158 Cash and cash equivalents at beginning of period 197 108 --------- --------- Cash and cash equivalents at end of period $ 369 $ 346 ========= ========= Supplemental cash flow information: Interest paid $ 4,145 $ 6,172 ========= ========= Income taxes paid (refunded) $ (7,017) $ 1,176 ========= =========
The accompanying notes are an integral part of these financial statements 6 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 (Unaudited) NOTE A -- BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. The consolidated financial statements as of June 30, 2002, and for the three and six months ended June 30, 2002 and June 30, 2001, 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 results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of results that may be expected for the year ending December 31, 2002. The consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, included in the 2001 Form 10-K which was filed in March 2002. NOTE B -- RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all business combinations completed after June 30, 2001. SFAS 142 is effective for the year beginning January 1, 2002, however, certain provisions of that Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. Management does not believe that adoption of this pronouncement will have a material effect on the Company's financial position or results of operations. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. The provisions of the statement were adopted by the Company as of January 1, 2002. The adoption of this pronouncement did not have a significant impact on Reptron's financial position or results of operations. NOTE C -- INVENTORIES Inventories consist of the following (in thousands): June 30, December 31, 2002 2001 ---------- ------------ Electronic Component Distribution: Inventories $34,832 $43,110 Electronic Manufacturing Services: Work in process 10,953 9,326 Raw materials 21,467 23,197 -------- -------- $67,252 $75,633 ======== ======== 7 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JUNE 30, 2002 (Unaudited) NOTE D -- FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Reptron Electronics, Inc. is a leading electronics manufacturing supply chain services company operating as a national distributor of electronic components, a contract manufacturer of electronic products and display solution provider. Our Electronic Component Distribution customers are in diverse industries' including robotics, telecommunications, computers and computer peripherals, consumer electronics, healthcare, industrial controls and contract manufacturing. Our Electronic Manufacturing Services segment manufactures electronic products according to customer design, primarily for customers in the telecommunications, healthcare, industrial/instrumentation, banking and office products industries. As a display solution provider, we provide display design engineering, systems integration and turnkey manufacturing services. The following table shows net sales and gross profit by industry segments.
Three months ended Six months ended June 30, June 30, (in thousands) (in thousands) ----------------------------------------------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Net Sales Electronic Component Distribution $ 35,776 $ 60,240 $ 83,114 $ 138,588 Electronic Manufacturing Services 43,002 39,087 78,780 94,969 --------- --------- --------- --------- $ 78,778 $ 99,327 $ 161,894 $ 233,557 ========= ========= ========= ========= Gross Profit Electronic Component Distribution $ 5,904 $ 758 $ 13,209 $ 15,200 Electronic Manufacturing Services 4,441 1,506 6,982 8,691 --------- --------- --------- --------- $ 10,345 $ 2,264 $ 20,191 $ 23,891 ========= ========= ========= =========
June 30, (in thousands) ------------------------ 2002 2001 ------- ------- Goodwill, Gross Electronic Component Distribution $ 4,889 $ 4,889 Electronic Manufacturing Services 30,140 30,140 --------- --------- $ 35,029 $ 35,029 ========= ========= Goodwill, net of accumulated amortization Electronic Component Distribution $ 3,294 $ 3,416 Electronic Manufacturing Services 26,779 27,357 --------- --------- $ 30,073 $ 30,773 ========= ========= 8 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JUNE 30, 2002 (Unaudited) NOTE E -- EARNINGS PER SHARE The following table sets forth the computation of basic and diluted net loss per common share:
Three months ended Six months ended June 30, June 30, ------------------------- --------------------------- 2002 2001 2002 2001 --------- --------- --------- ----------- Numerator: Net loss (in thousands) $ (5,603) $ (11,852) $ (12,122) $ (12,122) ========= ========== ========== =========== Denominator: For basic loss per share - Weighted average shares 6,417,196 6,391,237 6,415,196 6,381,623 Effect of dilutive securities: Employee stock options - - - - --------- ----------- ---------- ----------- For diluted loss per share 6,417,196 6,391,237 6,415,196 6,381,623 ========= =========== ========== =========== Net loss per common share - basic $ (0.87) $ (1.85) $ (1.89) $ (1.90) ========= =========== ========== =========== Net loss per common share - diluted $ (0.87) $ (1.85) $ (1.89) $ (1.90) ========= =========== ========== ===========
For the three-month and six-month periods ended June 30, 2002 and 2001, all options have been excluded from the computation of diluted earnings per share because their effect on loss per share would be anti-dilutive. The convertible notes were not included in the computation of diluted earnings per share for all periods due to the conversion price of $28.50 exceeding the average market price of the common stock and, therefore the effect would be anti-dilutive. NOTE F - INCOME TAXES During the three month period ended June 30, 2002, the Company incurred losses before income taxes of $5.6 million. As a result, Reptron recognized a deferred tax asset and an offsetting valuation allowance of $2.2 million, resulting in no income tax benefit. Realization of the tax loss carryforwards are contingent upon future taxable earnings in the appropriate jurisdiction. Each carryforward item is reviewed for expected utilization, using a "more likely than not" approach, based on the character of the carryforward item (credit, loss, etc.), the associated taxing jurisdiction (federal or state), the relevant history for the particular item, the applicable expiration dates, and identified actions under the Company's control in realizing the associated carryforward benefits. The Company assesses the available positive and negative evidence surrounding the recoverability of the deferred tax assets and applies judgment in estimating the amount of valuation allowance necessary under the circumstances. Management continues to assess and evaluate strategies that will enable the carryforward, or a greater portion thereof, to be utilized, and will adjust the valuation allowance appropriately for each item at such time when it is determined that the "more likely than not" criterion is satisfied. 9 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JUNE 30, 2002 (Unaudited) NOTE G - LONG-TERM DEBT The Company's credit facility was amended as of June 26, 2002. As part of this amendment, the line of credit facility was reduced from $75 million to $60 million which will better match the Company's borrowing requirements. NOTE H - GOODWILL A third party valuation consultant was engaged to assist the Company in preparing valuations on certain business units of the Company for the purpose of evaluating the impact of the adoption of SFAS 142. Based primarily on a report dated May 13, 2002 from the valuation consultant and the Company's internal analysis, as of January 1, 2002, there is no impairment of the net goodwill which is associated with acquisitions the Company made in prior periods. Beginning January 1, 2002, amortization of the excess of cost over net assets acquired (goodwill) ceased. The following table shows a reconciliation of net income adjusted for goodwill amortization and related loss per share information:
Three months ended Six months ended June 30, June 30, (in thousands) (in thousands) ----------------------------------------------------------- 2002 2001 2002 2001 --------- ---------- ---------- ---------- Reported net loss $ (5,603) $ (11,852) $ (12,140) $ (12,122) Add: Goodwill amortization, net of income tax - 210 - 420 --------- ---------- ---------- ---------- Adjusted net loss $ (5,603) $ (11,642) $ (12,140) $ (11,702) ========= ========== ========== ========== Adjusted basic and diluted loss per share $ (0.87) $ (1.82) $ (1.89) $ (1.83) ========= ========== =========== ==========
10 REPTRON ELECTRONICS, INC Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ---------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- This document contains certain forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Act of 1934, as amended. Factors that could cause actual results to differ materially include the following: business conditions and growth in Reptron's industry and in the general economy; competitive factors; risks due to shifts in market demand; the ability of Reptron to complete and integrate acquisitions; and the risk factors listed from time to time in Reptron's reports filed with the Securities and Exchange Commission as well as assumptions regarding the foregoing. The words "believe", "estimate", "expect", "intend", "anticipate", "plan" and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Reptron undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements. RESULTS OF OPERATIONS Net Sales. Total second quarter net sales decreased $20.5 million, or 20.7%, from $99.3 million in the second quarter of 2001 to $78.8 million in the second quarter of 2002. Total net sales for the first half of 2002 decreased $71.7 million, or 30.7% from $233.6 million in the first half of 2001 to $161.9 million in the first half of 2002. Electronic Component Distribution ("ECD") second quarter net sales decreased $24.5 million, or 40.6%, from $60.2 million in the second quarter of 2001 to $35.8 million in the second quarter of 2002. Approximately $22.2 million of this decrease was from the franchise distribution business which sells electronic components primarily to original equipment manufacturers ("OEM"). Approximately $2.3 million of the total decrease was from the memory module business which primarily sells DRAM modules through retail stores. Management believes that these decreases resulted primarily from the continuation of the industry-wide slowdown in the sales volume and price reductions of electronic components experienced in the United States in 2001 and continuing into the first half of 2002. Sales of semiconductors, passive components and electromechanical components accounted for 81.1%, 8.1% and 10.8%, respectively, of second quarter 2002 ECD net sales and 81.0%, 10.1% and 8.9%, respectively, of second quarter 2001 ECD net sales. Sales generated from the top four ECD vendors accounted for approximately $14.8 million, or 41.4% of second quarter 2002 ECD net sales, as compared with approximately $28.9 million or 46.5% of second quarter 2001 ECD net sales. ECD net sales decreased $55.5 million, or 40.0%, from $138.6 million in the first half of 2001 to $83.1 million in the first half of 2002. The franchise distribution business decreased by approximately $59.1 million which was partially offset by an increase in sales from the memory module business of approximately $3.6 million. The decrease in franchise distribution sales was driven primarily by factors stated above. The increase in sales of memory modules in the first half of 2002 was primarily the result of strong sales to a new significant customer in the first quarter of 2002. Sales of semiconductors, passive components and electromechanical components accounted for 84.0%, 6.7% and 9.3%, respectively, of first half 2002 ECD net sales, and 80.5%, 10.7% and 8.8%, respectively, of first half 2001 ECD net sales. Sales generated from the top four ECD vendors accounted for approximately $30.4 million, or 36.5% of first half 2002 ECD net sales, as compared with approximately $64.7 million or 45.5% of first half 2001 ECD net sales. Electronic Manufacturing Services ("EMS") net sales increased $3.9 million, or 10.0%, from $39.1 million in the second quarter of 2001 to $43.0 million in the second quarter of 2002. Sales of governmental equipment accounted for approximately $6.6 million of the sales increase experienced in the second quarter of 2002 and was partially offset by a decrease in semiconductor equipment sales of approximately $2.9 million. EMS continues to experience decreased demands from within the semiconductor equipment and telecommunications customer base as these industry segments have declined significantly within the past two years. EMS transacted business with approximately 50 customers in the second quarter of 2002. The three largest EMS customers accounted for approximately 23.8%, 7.2% and 6.3%, respectively, of second quarter 2002 EMS net sales (13.0%, 3.9% and 3.4%, respectively, of total Company second quarter 2002 net sales) as compared to 15.6%, 11.4% and 9.5%, respectively, of second quarter 2001 EMS net sales (6.1%, 4.5% and 3.7%, respectively, of total Company second quarter 2001 net sales). 11 EMS net sales decreased $16.2 million, or 17.1%, from $95.0 million in the first half of 2001 to $78.8 million in the first half of 2002. This decrease is primarily attributable to decreased demand from established EMS customers due to continued deterioration of the electronic manufacturing industrial segment. Additionally, sales to the semiconductor equipment industry declined significantly due to the severe downturn in this segment. The sales decrease was partially offset from new sales of governmental equipment to a previously established EMS customer of approximately $9.1 million during the first half of 2002. EMS transacted business with approximately 50 customers in the first half of 2002. The three largest EMS customers accounted for approximately 20.9%, 6.8%, and 6.7%, respectively, of first half 2002 EMS net sales (10.2%, 3.3% and 3.3%, respectively, of total Company first half 2002 net sales) as compared to 12.3%, 10.6% and 6.2%, respectively, of first half 2001 EMS net sales (5.0%, 4.3% and 2.5%, respectively, of total Company first half 2001 net sales). The table which follows summarizes EMS sales by industry segment:
Three Months Six Months Three Months Six Months Ending Ending Ending Ending Industry Segment June 30, 2002 June 30, 2002 June 30, 2001 June 30, 2001 - ---------------------------------- ------------------ ----------------- ------------------ ----------------- Medical Equipment 25% 23% 26% 23% Governmental Equipment 15% 12% 0% 0% Industrial/Instrumentation 14% 15% 19% 19% Banking 12% 13% 19% 15% Telecommunications 10% 13% 10% 13% Semiconductor Equipment 5% 4% 13% 17% Office Products 5% 7% 5% 4% All Others 14% 13% 8% 9%
Gross Profit. Total second quarter gross profit increased $8.1 million, or 356.9%, from $2.3 million in the second quarter of 2001 to $10.3 million in the second quarter of 2002. This increase is the result of a non-cash inventory writedown charge of $12.0 million recorded during the second quarter of 2001. Without considering this writedown in 2001, second quarter 2002 gross profit declined $1.9 million, or 15.6%, due to a 20.7% net sales decline in the second quarter of 2002. Total gross profit margin was 13.1% in the second quarter of 2002 and 12.5% in the first half of 2002 as compared to 2.3% in the second quarter of 2001 and 10.2% in the first half of 2001 (14.4% and 15.4% excluding the inventory writedown, respectively). Total gross profit decreased $3.7 million, or 15.5%, from $23.9 million in the first half of 2001 to $20.2 million in the first half of 2002. ECD second quarter gross profit increased $5.1 million, or 678.9%, from $758,000 in the second quarter of 2001 to $5.9 million in the second quarter of 2002. This increase is the result of a non-cash inventory writedown charge of $10.0 million recorded during the second quarter of 2001 to reflect the rapid decline in market pricing for electronic components and as a result of distributor supplier lines terminated by Reptron. This charge was included in cost of sales and caused gross profit margin to decline from 17.9% to 1.3% in the second quarter of 2001 and from 18.2% to 11.0% for the first six months of 2001. The gross profit margin was 16.5% in the second quarter of 2002 and 15.9% in the first half of 2002. The decrease in gross profit margin from the comparable periods in the prior year, excluding the effect of the inventory writedown charge, is due to a greater portion of ECD sales being generated from sales from the memory module business which typically have a lower gross profit margin than sales from other electronic components. Sales from the memory module business increased as a percentage of total ECD net sales from 14.0% in the second quarter of 2001 and 12.7% in the first six months of 2001 to 17.2% in the second quarter of 2002 and 25.6% in the first six months of 2002. EMS gross profit increased $2.9 million, or 194.9%, from $1.5 million in the second quarter of 2001 to $4.4 million in the second quarter of 2002. This increase is primarily the result of a non-cash inventory writedown charge of $2.0 million recorded during the second quarter of 2001 as a result of excess components due to significant reductions in customer demands and decline in pricing of electronic components. This charge was included in cost of sales and caused gross profit margin to decline from 9.0% to 3.9% in the second quarter of 2001 and from 11.3% to 9.2% for the first six months of 2001. The gross profit margin was 10.3% in the second quarter of 2002 and 8.7% in the first half of 2002. EMS first half gross profit decreased $1.7 million, or 19.7% from $8.7 million in 2001 to $7.0 million in 2002. The variances in gross profit and gross profit margin from the prior year periods, excluding the inventory charge, is primarily attributable to the corresponding variance in the absorption rate of fixed manufacturing costs at the given sales levels. 12 Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased $4.6 million, or 24.8%, from $18.6 million in the second quarter of 2001 to $14.0 million in the second quarter of 2002. Selling, general and administrative expenses, as a percentage of net sales decreased from 18.7% in the second quarter of 2001 to 17.4% in the second quarter of 2002. For the first six months of 2002, selling, general and administrative expenses decreased $9.1 million or 24.4% from $37.3 million in the first half of 2001 to $28.2 million in the first half of 2002. Selling, general and administrative expenses as a percentage of net sales increased from 16.0% in the first half of 2001 to 17.4% in the first half of 2002. The overall decrease in SG&A expenses is primarily attributable to cost cutting measures implemented during the second half of 2001 and the first half of 2002. The employee base declined by 176 employees from 1,730 in the second quarter of 2001 to 1,554 in the second quarter of 2002 which represents a 10% reduction in overall workforce, resulting in a corresponding reduction in selling, general and administrative expenses. Interest Expense. Net interest expense decreased approximately $850,000, or 30.3%, from $2.8 million in the second quarter of 2001 to $2.0 million in the second quarter of 2002. Net interest expense decreased $1.8 million, or 30.4%, from $5.9 million in the first half of 2001 to $4.1 million in the first half of 2002. The decrease is primarily attributed to the decrease in average outstanding debt of $34.5 million, from $158.4 million during the first half of 2001 to $123.9 million during the first half of 2002, and a decrease in our overall average interest rate from 7.4% during the first half of 2001 to 6.6% during the first half of 2002. Income Taxes. During the three month period ended June 30, 2002, we incurred losses before income taxes of $5.6 million. As a result, we recognized a deferred tax asset and an offsetting valuation allowance of $2.2 million, resulting in no income tax benefit. Realization of the tax loss carryforwards are contingent upon future taxable earnings in the appropriate jurisdiction. Each carryforward item is reviewed for expected utilization, using a "more likely than not" approach, based on the character of the carryforward item (credit, loss, etc.), the associated taxing jurisdiction (federal or state), the relevant history for the particular item, the applicable expiration dates, and identified actions under our control in realizing the associated carryforward benefits. We assess the available positive and negative evidence surrounding the recoverability of the deferred tax assets and apply judgment in estimating the amount of valuation allowance necessary under the circumstances. We continue to assess and evaluate strategies that will enable the carryforward, or a greater portion thereof, to be utilized, and will reduce the valuation allowance appropriately for each item at such time when it is determined that the "more likely than not" criterion is satisfied. LIQUIDITY AND CAPITAL RESOURCES We primarily finance our operations through subordinated notes, bank credit lines, operating cash flows, capital equipment leases, and short-term financing through supplier credit lines. Net cash provided by or used in operating activities has historically been driven by net income (loss) levels combined with fluctuations in inventory, accounts receivable and accounts payable. Operating activities for the first half of 2002 provided cash of approximately $19.6 million. This increase in cash flow resulted primarily from decreases in accounts receivable of $5.3 million, inventory of $8.4 million, and income taxes receivable of $7.0 million, and an increase in accounts payable of $9.2 million. These items were partially offset by an increase in accrued expenses of $1.5 million. Days sales in accounts receivable were approximately 56 and 60 days as of June 30, 2002 and 2001, respectively. Annualized inventory turns for the first half of 2001 were approximately 4.1 turns, as compared to 3.5 turns for the same period in 2001, excluding the 2001 inventory writedown. Capital expenditures totaled approximately $1.4 million in the first half of 2002. These capital expenditures were primarily for the conversion of available floor space in our Tampa, Florida manufacturing facility into office space for our distribution division's support staff and corporate headquarters. These expenditures were funded by the working capital line of credit. Five lenders have made available to Reptron a $60 million revolving credit facility (the "Credit Agreement") through January 8, 2004. Borrowings under the Credit Agreement are collateralized by all inventory, accounts receivable, equipment and general intangibles. The Credit Agreement limits the amount of capital expenditures and prohibits the payment of dividends thereby restricting the distribution of retained earnings. At June 30, 2002, we were in compliance with the earnings covenant contained in the Credit Agreement with our lenders. There can be no assurance that we will be in compliance in the future with the earnings covenant contained in the Credit Agreement, or be able to obtain waivers of non-compliance from our lenders. 13 Management believes that credit facilities currently available will be sufficient to meet the capital expenditures and working capital needs of our operations as presently conducted. However, future liquidity and cash requirements will depend on a wide range of factors, including the level of business in existing operations, expansion of facilities and available credit provided by our lenders and suppliers. In particular, management is considering various alternatives related to the payment of approximately $76.3 million of our 6.75% Convertible Subordinated Notes ("Convertible Notes"), which will become due in August 2004. If the Convertible Notes are not converted into our common stock, we will be required to repay the indebtedness or make other arrangements to refinance the Convertible Notes. If we fail to do so, it will result in a default of the Convertible Notes, which would have a material adverse effect on our business and financial condition. While there can be no assurance that such financing will be available in amounts and on acceptable terms, management believes that such financing would likely be available on acceptable terms. NEW ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all business combinations completed after June 30, 2001. SFAS 142 is effective for the year beginning January 1, 2002, however, certain provisions of that Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. A third party valuation consultant was engaged to assist in preparing valuations on certain business units of Reptron for the purpose of evaluating the impact of the adoption of SFAS 142. Based primarily on a report dated May 13, 2002 from the valuation consultant and our internal analysis, as of January 1, 2002, there is no impairment of the net goodwill associated with acquisitions we made in prior periods. Beginning January 1, 2002, we ceased amortization of the excess of cost over net assets acquired (goodwill). This amortization expense was approximately $0.7 million in the six month period ended June 30, 2001. In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. We do not believe that the adoption of this pronouncement will have a material effect on our financial position or results of operations. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. The provisions of the statement were adopted by the Company as of January 1, 2002. The adoption of this pronouncement did not have a significant impact on the Company's financial position or results of operations. Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- While we had no holdings of derivative financial or commodity instruments at June 30, 2002, Reptron is exposed to financial market risks, including changes in interest rates. A majority of our borrowings bear a fixed interest rate. However, borrowings under our bank Credit Facility bear interest at a variable rate based on the prime interest rate. 14 REPTRON ELECTRONICS, INC. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of the Security Holders The annual Meeting of the Shareholders of Reptron was held on June 24, 2002. Mr. Michael L. Musto was elected director of Reptron for a three year term with 6,116,962 shares voting in favor, zero shares against and 26,709 shares abstaining. Mr. William U. Parfet was elected director of Reptron for a three year term with 6,138,071 voting in favor, zero shares against and 5,600 shares abstaining. Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10.1 Seventh Amendment To Revolving Credit And Security Agreement Dated January 8, 1999. 99.1 Certification Pursuant to 18 U.S.C.ss.1350. b. Reports on Form 8-K None 15 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 14, 2002 ------------------- REPTRON ELECTRONICS, INC. ---------------------------------------- (Registrant) By: /s/ Paul J. Plante ---------------------------------------- Paul J. Plante, President and Chief Operating Officer(Principal Financial and Accounting Officer) 16 EX-10.1 3 dex101.txt AMEND TO CREDIT AND SEVERANCE AGREEMENT SEVENTH AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT This SEVENTH AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT (this "Amendment") is made and entered into on June 26, 2002, by and among REPTRON ELECTRONICS, INC., a corporation organized under the laws of the State of Florida ("Reptron"); LAKE SUPERIOR MERGER CORPORATION, a corporation organized under the laws of the State of Florida ("Superior"); HIBBING ELECTRONICS CORPORATION, a corporation organized under the laws of the State of Minnesota ("Hibbing"; Reptron, Superior and Hibbing, each a "Borrower" and collectively "Borrowers"); the various financial institutions listed on the signature pages hereof and their respective successors and permitted assigns which become "Lenders"; and PNC BANK, NATIONAL ASSOCIATION, a national association ("PNC"), as collateral and administrative agent for Lenders (PNC, together with its successors in such capacity, the "Agent"). Recitals: Agent, Lenders and Borrowers are parties to a certain Revolving Credit and Security Agreement dated January 8, 1999 (as amended at any time, the "Credit Agreement") pursuant to which Lenders have made certain revolving credit loans and other extensions of credit to Borrowers. The parties desire to amend the Credit Agreement as hereinafter set forth. NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Definitions. All capitalized terms used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such terms in the Credit Agreement. 2. Amendments to Credit Agreement. Subject to the satisfaction of the condition precedent set forth in Section 5 hereof, the Credit Agreement is hereby amended as follows: a. By inserting the following definition of "Applicable Letter of Credit Margin" to Section 1.2 of the Credit in proper alphabetical order: -1- "Applicable Letter of Credit Margin" shall mean the percentage set forth below for the period corresponding thereto: Period Percentage June 26, 2002 through June 30, 2002 3.00% July 1, 2002 through July 31, 2002 3.25% August 1, 2002 through August 31, 2002 3.50% September 1, 2002 through September 30, 2002 3.75% October 1, 2002 and thereafter 4.00% b. By deleting the definitions of "Applicable Facility Fee Percentage," "Applicable Margin," "EBITDA," "Inventory Sublimit Amount," "Maximum Revolving Advance Amount," and "Required Undrawn Availability" from Section 1.2 of the Credit Agreement and inserting the following in lieu thereof: "Applicable Facility Fee Percentage" shall mean one-half of one percent (0.50%) per annum). "Applicable Margin" shall mean the percentage set forth below for the period corresponding thereto: Period Percentage June 26, 2002 through June 30, 2002 1.00% July 1, 2002 through July 31, 2002 1.25% August 1, 2002 through August 31, 2002 1.50% September 1, 2002 through September 30, 2002 1.75% October 1, 2002 and thereafter 2.00% "EBITDA" shall mean for any period the sum, for Borrowers on a consolidated basis, of (i) Earnings Before Interest and Taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) for the Fiscal Quarter ending June 30, 2002, any and all cash income tax refunds actually received. "Inventory Sublimit Amount" shall mean the amount set forth below for the period corresponding thereto: Period Amount June 26, 2002 through June 30, 2002 $29,750,000 July 1, 2002 through September 30, 2002 $28,750,000 October 1, 2002 and thereafter $27,750,000 -2- "Maximum Revolving Advance Amount" shall mean the amount set forth below for the period corresponding thereto: Period Amount June 26, 2002 through August 30, 2002 $60,000,000 August 31, 2002 through November 29, 2002 $55,000,000 November 30, 2002 and thereafter $50,000,000 "Required Undrawn Availability" shall mean $3,000,000. c. By deleting Section 2.1(a)(y)(ii) of the Credit Agreement and inserting the following in lieu thereof: (ii) up to the lesser of (A) thirty-one percent (31%), subject to the provisions of Section 2.1(b) hereof ("Inventory Advance Rate"), of the Value of the Eligible Inventory (the Receivables Advance Rate and the Inventory Advance Rate shall be referred to collectively, as the "Advance Rates"), or (B) the lesser of (1) the Inventory Sublimit Amount or (2) eighty percent (80%) (or such lesser percentage as Agent may in its reasonable credit judgment determine from time to time) of the net orderly liquidation value of Eligible Inventory (as determined from time to time based upon appraisals acceptable to Agent), minus d. By deleting Section 3.10 in its entirety and inserting the following in lieu thereof: 3.10 Letter of Credit Fees. Borrowers shall pay (x) to Agent, for the benefit of Lenders, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by an percentage equal to the Applicable Letter of Credit Margin per annum, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable monthly in arrears on the first day of each month and on the last day of the Term and (y) to the Issuer, any and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection with any Letter of Credit, including in connection with the opening, amendment or renewal of any such Letter of Credit and any acceptances created thereunder and shall reimburse Agent for any and all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the "Letter of Credit Fees"). All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or proration upon the termination of this Agreement for any reason. Any such charge in effect at the time of a particular transaction shall be -3- the charge for that transaction, notwithstanding any subsequent change in the Issuer's prevailing charges for that type of transaction. All Letter of Credit Fees payable hereunder shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or proration upon the termination of this Agreement for any reason. e. By deleting Section 6.5 in its entirety and inserting the following in lieu thereof: 6.5 Reserved. f. By deleting Sections 6.10 and 6.11 in their entirety and inserting the following in lieu thereof: 6.10 Undrawn Availability. Maintain Undrawn Availability at all times of at least the Required Undrawn Availability, including both prior to and immediately after any Advance. 6.11 Minimum EBITDA. Maintain EBITDA of at least the amount shown below the period corresponding thereto: Period Amount Fiscal Quarter ending June 30, 2002 $ 5,198,000 Fiscal Quarter ending September 30, 2002 $ 1,532,800 Two Fiscal Quarters ending December 31, 2002 $ 4,929,600 Three Fiscal Quarters ending March 31, 2003 $ 8,326,400 Four Fiscal Quarters ending on June 30, 2003 and on the last day of each Fiscal Quarter thereafter $11,732,200 6.12 Inventory Appraisal. Borrowers shall retain an independent third-party appraiser, acceptable to Agent, to conduct an updated appraisal of the Inventory of each Borrower and all books and records in connection therewith, which shall be in scope and content satisfactory to Agent and the Required Lenders, and Borrowers shall cause such appraisal to be initiated before September 1, 2002. Such appraisal shall be at the expense of the Borrowers. g. By deleting Exhibit E in its entirety: 3. Ratification and Reaffirmation. Each Borrower hereby ratifies and reaffirms the Obligations, each of the Loan Documents and all of such Borrower's covenants, duties, indebtedness and liabilities under the Loan Documents. -4- 4. Limited Waiver of Default. Certain Events of Default have occurred and exist under the Credit Agreement as a result of Borrowers' breach of Section 6.11 of the Credit Agreement for the Fiscal Quarter ending March 31, 2002 by failing to maintain the minimum required EBITDA (the "Designated Default"). Borrowers represent and warrant that the Designated Default is the only Default or Event of Default that exists under the Credit Agreement and the Other Documents as of the date hereof. Subject to the satisfaction of the condition precedent set forth in Section 5 hereof, Agent and Lenders hereby waive the Designated Default in existence on the date hereof. In no event shall such waiver be deemed to constitute a waiver of (a) any Default or Event of Default other than the Designated Default in existence on the date of this Amendment or (b) each Borrower's obligation to comply with all of the terms and conditions of the Credit Agreement and the Other Documents from and after the date hereof. Notwithstanding any prior, temporary mutual disregard of the terms of any contracts between the parties, each Borrower hereby agrees that it shall be required strictly to comply with all of the terms of the Loan Documents on and after the date hereof. 5. Condition Precedent. The effectiveness of the amendments contained in Section 2 hereof and the limited waiver contained in Section 4 hereof are subject to the Borrowers having paid to Agent, for the ratable benefit of the Lenders executing this Amendment, an amendment fee of $181,378.44. 6. Additional Covenants. To induce Agent and Lenders to enter into this Amendment, Borrowers covenants and agree to pay to Agent, for the ratable benefit of the Lenders executing this Amendment, (a) an additional amendment fee of $150,000 in immediately available funds on August 31, 2002, if (i) Borrowers have not previously delivered an Acceptable Commitment Letter or (ii) Borrowers have not repaid all of the Obligations and terminated the Credit Agreement within sixty (60) days of delivering such Acceptable Commitment Letter, and (b) an additional amendment fee of $300,000 in immediately available funds on November 30, 2002, if Borrowers have not previously repaid all of the Obligations and terminated the Credit Agreement. As used herein, the term "Acceptable Commitment Letter" shall mean a commitment letter from a financial institution acceptable to Agent, in its sole discretion, and properly accepted by Borrowers providing for the extension of loans and other credit to Borrowers in an amount sufficient to repay, in full, all Obligations and containing such other terms and conditions as are acceptable to Agent, in its sole discretion. 7. Acknowledgments and Stipulations. Each Borrower acknowledges and stipulates that the Credit Agreement and the Other Documents executed by such Borrower are legal, valid and binding obligations of such Borrower that are enforceable against such Borrower in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by each Borrower); the security interests and liens granted by Borrowers in favor of Agent are duly perfected, first priority security interests and liens, except as permitted under the Credit Agreement; and unpaid principal amount of Advances as of the close of business on June 20, 2002, totaled $34,865,416.24. -5- 8. Eurodollar Rate Loans. Notwithstanding any provision of the Credit Agreement to the contrary, after the date hereof (a) no outstanding Advance, or any part thereof, may be converted into or continued as a Eurodollar Rate Loan, and (b) each existing Eurodollar Rate Loan shall be converted into a Domestic Rate Loan on the last day of the Interest Period for such Eurodollar Rate Loan. 9. Letters of Credit. Notwithstanding any provision of the Credit Agreement to the contrary, after the date hereof Borrowers shall not be entitled to obtain, and Agent shall have no obligation to issue, any additional Letters of Credit. 10. Revolving Credit Notes. In connection with the reduction of the Maximum Revolving Advance Amount under the Credit Agreement from $75,000,000 to $50,000,000 pursuant to this Amendment, the Borrowers are not being required to execute and deliver new Revolving Credit Notes to each the Lenders as a matter of convenience to the Borrowers. Notwithstanding that the aggregate amount of the existing Revolving Credit Notes exceeds the Maximum Revolving Advance Amount in effect from time to time pursuant to this Agreement, Borrowers acknowledge and agree that they shall not be entitled to obtain any Advances in excess of the Maximum Revolving Advance Amount in effect under the Credit Agreement at any time. 11. Representations and Warranties. Borrowers represent and warrant to Agent and Lenders, to induce Agent and Lenders to enter into this Amendment, that no Default or Event of Default exists on the date hereof other than the Designated Default; the execution, delivery and performance of this Amendment have been duly authorized by all requisite corporate action on the part of Borrowers and this Amendment has been duly executed and delivered by Borrowers; and all of the representations and warranties made by Borrowers in the Credit Agreement are true and correct on and as of the date hereof. 12. Breach of Amendment. This Amendment shall be part of the Credit Agreement and a breach of any of any representation, warranty or covenant herein shall constitute an Event of Default. 13. Expenses of Agent and Lenders. Each Borrower agrees to pay, on demand, all costs and expenses incurred by Agent and Lenders in connection with the preparation, negotiation and execution of this Amendment and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of Agent's and Lenders' legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby. 14. Effectiveness; Governing Law. This Amendment shall be effective upon acceptance by Agent and Lenders (notice of which acceptance is hereby waived), whereupon the same shall be governed by and construed in accordance with the internal laws of the State of Georgia. -6- 15. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 16. No Novation, etc. Except as otherwise expressly provided in this Amendment, nothing herein shall be deemed to amend or modify any provision of the Credit Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This Amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Credit Agreement as herein modified shall continue in full force and effect. 17. Counterparts; Telecopied Signatures. This Amendment may be executed in any number of counterparts and by different parties to this Amendment on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto. 18. Further Assurances. Each Borrower agrees to take such further actions as Lender shall reasonably request from time to time in connection herewith to evidence or give effect to the amendments set forth herein or any of the transactions contemplated hereby. 19. Section Titles. Section titles and references used in this Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto. 20. Release of Claims. To induce Agent and Lenders to enter into this Amendment, each Borrower hereby releases, acquits and forever discharges Agent, Lenders, and all officers, directors, agents, employees, successors and assigns of Agent and Lenders, from any and all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that such Borrower now has or ever had against Agent or any Lender arising under or in connection with any of the Loan Documents or otherwise. Each Borrower represents and warrants to Agent and Lenders that such Borrower has not transferred or assigned to any Person any claim that such Borrower ever had or claimed to have against Agent or any Lender. -7- 21. Waiver of Jury Trial. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal in, and delivered by their respective duly authorized officers on the date first written above. REPTRON ELECTRONICS, INC. By:_________________________________ Name:______________________________ Title:_____________________________ [CORPORATE SEAL ] LAKE SUPERIOR MERGER CORPORATION By:_________________________________ Name:______________________________ Title:_____________________________ [CORPORATE SEAL ] -8- HIBBING ELECTRONICS CORPORATION By:____________________________ Name:_________________________ Title:________________________ [CORPORATE SEAL] Accepted and agreed to: ---------------------- PNC BANK, NATIONAL ASSOCIATION, as a Lender and as Agent By:____________________________ Name:_________________________ Title:________________________ BANK OF AMERICA, N.A. f/k/a NationsBank, N.A. , as a Lender By:____________________________ Name:_________________________ Title:________________________ FIRSTAR BANK, N.A., as a Lender By:____________________________ Name:_________________________ Title:________________________ IBM CREDIT CORPORATION, as a Lender By:____________________________ Name:_________________________ -9- Title:___________________________ COMERICA BANK, as a Lender By:______________________________ Name:___________________________ Title:__________________________ -10- EX-99.1 4 dex991.txt CERTIFICATION Exhibit 99.1 Certification Pursuant to 18 U.S.C.ss.1350 In connection with the filing with the United States Securities and Exchange Commission of Reptron Electronics, Inc.'s (the "Company") Quarterly Report on Form 10-Q for the period ended June 30, 2002 (the "Report"), the undersigned, the Chief Executive Officer and the Chief Financial Officer of the Company, hereby certify (i) in our capacities as officers of the Company, (ii) to each of our own respective actual knowledge, and (iii) solely for the purpose of compliance with 18 U.S.C. ss.1350, that: (1) the Report fully complies with the requirements ofss.13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. The above certification is given as of the date of the Report and is limited to the periods covered by the Report. The above certification is made severally and not jointly. IN WITNESS WHEREOF, the undersigned have executed this Certificate on August 12, 2002. REPTRON ELECTRONICS, INC. By: /s/ Michael L. Muste ------------------------------------ Chief Executive Officer By: /s/ Paul J. Plante ------------------------------------ Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----