10-Q 1 d10q.txt FORM 10-Q 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 March 31, 2001 ( ) 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 ----- ------- 6,396,696 shares of common stock issued and outstanding as of May 11, 2001. ------------ REPTRON ELECTRONICS, INC. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations -- Three months ended March 31, 2001 and March 31, 2000 3 Consolidated Balance Sheets -- March 31, 2001 and December 31, 2000 4 Consolidated Statement of Shareholders' Equity -- Three months ended March 31, 2001 and year ended December 31, 2000 5 Consolidated Statements of Cash Flows -- Three months ended March 31, 2001 and March 31, 2000 6 Notes to Consolidated Financial Statements -- March 31, 2001 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
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 March 31, (Unaudited) ------------------------------ 2001 2000 --------------- ------------- Net sales $ 134,230 $ 122,993 Cost of goods sold 112,603 103,294 --------------- ------------- Gross profit 21,627 19,699 Selling, general and administrative expenses 18,749 16,574 --------------- ------------- Operating income 2,878 3,125 Interest expense, net 3,067 2,359 --------------- ------------- Earnings (loss) before income taxes (189) 766 Income tax provision 81 378 --------------- ------------- Net earnings (loss) $ (270) $ 388 ================ ============= Net earnings (loss) per common share - basic $ (0.04) $ 0.06 ================ ============= Weighted average common shares outstanding - basic 6,371,903 6,172,442 =============== ============= Net earnings (loss) per common share - diluted $ (0.04) $ 0.06 ================ ============= Weighted average common stock equivalent shares outstanding - diluted 6,371,903 6,609,057 =============== =============
The accompanying notes are an integral part of these financial statements 3 REPTRON ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS
(Unaudited) March 31, December 31, 2001 2000 ------ ----- CURRENT ASSETS Cash and cash equivalents $ 678 $ 3,049 Accounts receivable - trade, net 85,417 100,311 Inventories, net 119,749 124,695 Prepaid expenses and other current assets 1,964 2,298 Deferred tax benefits 232 62 ----------- ------------- Total current assets 208,040 230,415 PROPERTY, PLANT & EQUIPMENT - AT COST, NET 32,838 33,051 EXCESS OF COST OVER NET ASSETS ACQUIRED, NET 31,123 31,473 OTHER ASSETS 2,823 2,528 ----------- ------------- TOTAL ASSETS $ 274,824 $ 297,467 =========== ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 52,811 $ 65,199 Current portion of long-term obligations 2,476 2,476 Accrued expenses 9,647 11,941 Income taxes payable 216 1,230 ----------- ------------- Total current liabilities 65,150 80,846 NOTE PAYABLE TO BANK 74,298 80,270 LONG-TERM OBLIGATIONS, less current portion 81,772 82,576 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, 6,376,757 and 6,359,257 shares, respectively 64 64 Additional paid-in capital 22,961 22,862 Retained earnings 30,579 30,849 ----------- ------------- TOTAL SHAREHOLDERS' EQUITY 53,604 53,775 ----------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 274,824 $ 297,467 =========== =============
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 Total Shares Par Paid-In Retained Shareholders' Outstanding Value Capital Earnings Equity ----------- ----- --------- -------- ---------------- Balance at December 31, 1999 6,167,119 $62 $ 21,740 $25,158 $46,960 Exercise of stock options 192,138 2 1,122 - 1,124 Net earnings - - - 5,691 5,691 --------- --- -------- ------- ------- Balance at December 31, 2000 6,359,257 64 22,862 30,849 53,775 Exercise of stock options (Unaudited) 17,500 - 99 - 99 Net (loss) (Unaudited) - - - (270) (270) --------- --- -------- ------- ------- Balance at March 31, 2001 (Unaudited) 6,376,757 $64 $ 22,961 $30,579 $53,604 ========= == ======== ======= =======
The accompanying notes are an integral part of this financial statement 5 REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three months ended March 31, (Unaudited) -------------------------- 2001 2000 ------------ ----------- Increase (decrease) in cash and cash equivalents: Cash flows from operating activities: Net earnings (loss) $ (270) $ 388 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,623 2,549 Deferred income taxes (170) - Change in assets and liabilities: Accounts receivable - trade 14,894 (7,282) Inventories 4,946 (9,806) Prepaid expenses and other assets 334 (1,655) Other assets (480) (91) Accounts payable - trade (12,388) 1,752 Accrued expenses (2,294) (15) Income taxes payable (1,014) 147 ---------- ---------- Net cash provided by (used in) operating activities 6,181 (14,013) Cash flows from investing activities: Purchases of property, plant and equipment (1,875) (2,667) ---------- ----------- Net cash used in investing activities (1,875) (2,667) ---------- ----------- Cash flows from financing activities: Net proceeds (payments) on notes payable to bank (5,972) 14,323 Proceeds from long-term obligations - 4,000 Payments on long-term obligations (804) (856) Proceeds from exercise of stock options 99 94 ---------- ---------- Net cash provided by (used in) financing activities (6,677) 17,561 ---------- ---------- Net increase (decrease) in cash and cash equivalents (2,371) 881 Cash and cash equivalents at beginning of period 3,049 108 ---------- ---------- Cash and cash equivalents at end of period $ 678 $ 989 ========== ========== Supplemental cash flow information: Interest paid $ 4,500 $ 3,321 ========== ========== Income taxes paid $ 1,265 $ 261 ========== ==========
The accompanying notes are an integral part of these financial statements 6 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (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 generally accepted accounting principles for complete financial statements. The consolidated financial statements as of March 31, 2001 and for the three months ended March 31, 2001 and March 31, 2000 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 months ended March 31, 2001 are not necessarily indicative of results that may be expected for the year ending December 31, 2001. 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 2000 Form 10-K. NOTE B -- INVENTORIES Inventories consist of the following (in thousands): March 31, December 31, 2001 2000 ------------- -------------- Electronic Component Distribution: Inventories $ 80,920 $ 85,943 Electronic Manufacturing Services: Work in process 10,980 13,101 Raw Materials 27,849 25,651 --------- --------- $ 119,749 $ 124,695 ========= ========= 7 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) MARCH 31, 2001 (Unaudited) NOTE C-- 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. Reptron's Electronic Component Distribution customers are in diverse industries' including robotics, telecommunications, computers and computer peripherals, consumer electronics, healthcare, industrial controls and contract manufacturing. Reptron's 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, Reptron Manufacturing Services provides display design engineering, systems integration and turnkey manufacturing services. The following table shows net sales and gross profit by industry segments for the three months ended March 31, 2001 and March 31, 2000. Three months ended March 31, (in thousands) -------------------------- 2001 2000 ------ ------ Net Sales Electronic Component Distribution $ 78,348 $ 71,817 Electronic Manufacturing Services 55,882 51,176 --------- ----------- $ 134,230 $ 122,993 ========= =========== Gross Profit Electronic Component Distribution $ 14,442 $ 13,262 Electronic Manufacturing Services 7,185 6,437 --------- ----------- $ 21,627 $ 19,699 ========= =========== NOTE D-- EARNINGS PER SHARE The following table sets forth the computation of basic and diluted net earnings (loss) per common share:
Three months ended March 31, (in thousands) -------------------------- 2001 2000 ------ ----- Numerator: Net earnings (loss) (in thousands) $ (270) $ 388 ========== ========== Denominator: For basic earnings (loss) per share - Weighted average shares 6,371,903 6,172,442 Effect of dilutive securities: Employee stock options - 436,615 ---------- ---------- For diluted earnings (loss) per share 6,371,903 6,609,057 ========== ========== Net earnings (loss) per common share - basic $ (0.04) $ 0.06 ========== ========== Net earnings (loss) per common share - diluted $ (0.04) $ 0.06 ========== ==========
8 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 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 first quarter net sales increased $11.2 million, or 9% from $123.0 million in the first quarter of 2000 to $134.2 million in the first quarter of 2001. Electronic Component Distribution ("ECD") 2001 first quarter net sales increased $6.5 million, or 9% from $71.8 million for the first quarter of 2000 as compared to $78.3 million in the first quarter of 2001. This increase in sales resulted primarily from investments in personnel and other infrastructure which aided growth. Sales of semiconductors, passive components and electromechanical components accounted for 80%, 11% and 9%, respectively, of ECD 2001 first quarter net sales, and 66%, 27% and 7%, respectively, of the ECD's 2000 first quarter net sales. ECD sales generated from the top four vendors accounted for approximately $36.0 million, or 45% of the ECD 2001 first quarter net sales, as compared with approximately $26.0 million or 37% of ECD 2000 first quarter net sales. Electronic Manufacturing Services ("EMS") net sales increased $4.7 million, or 9%, from $51.2 million in the first quarter of 2000 to $55.9 million in the first quarter of 2001. EMS transacted business with approximately 80 customers in the first quarter of 2001. The largest three customers represented approximately 15%, 10% and 7%, respectively, of first quarter 2001 net sales (6%, 4% and 3%, respectively of total Company first quarter net sales) as compared to 14%, 8%, and 5%, respectively, of first quarter 2000 net sales (6%, 3% and 2% respectively, of total Company first quarter 2000 net sales). Sales by industry segment were: semiconductor equipment 22%; medical equipment 22%; industrial/instrumentation 20%; telecommunications 16%; banking 13%; and all other 7%. Gross Profit. Total 2001 first quarter gross profit increased $1.9 million, or 10%, from $19.7 million in the first quarter of 2000 to $21.6 million in the first quarter of 2001. The gross profit percentage of the Company was 16.1% in the first quarter of 2001 and 16.0% in the first quarter of 2000. ECD gross profit increased $1.1 million, or 9%, from $13.3 million in the first quarter of 2000 to $14.4 million in the first quarter of 2001. The gross margin was 18.4% in the first quarter of 2001 and 18.5% in the first quarter of 2000. The gross profit in dollars increased proportionally to the growth in ECD sales. 9 EMS gross profit increased $0.8 million, or 12%, from $6.4 million in the first quarter of 2000 to $7.2 million in the first quarter of 2001. Gross margin was 12.9% in the first quarter of 2001 and 12.6% in the first quarter of 2000. This increase in gross margin is primarily attributable to fixed factory overhead absorption at higher sales levels. Selling, General, and Administrative Expenses. Selling, general and administrative ("SG&A") expenses increased $2.1 million, or 13%, from $16.6 million in the first quarter of 2000 to $18.7 million in the first quarter of 2001. The increase in SG&A expense is primarily attributable to increased sales personnel at existing branch offices, the opening of seven new branch offices and the start-up costs of opening a new distribution center in Reno, Nevada. Interest Expense. Net interest expense increased $0.7 million, or 30%, from $2.4 million in the first quarter of 2000 to $3.1 million in the first quarter of 2001. The increase in net interest expense resulted primarily from an increase in average outstanding debt of $33.4 million from $128.5 million during the first quarter of 2000 to $161.9 million during the first quarter of 2001. In addition, the overall average interest rate increased from 7.3% during the first quarter of 2000 to 7.6% during the first quarter of 2001. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Reptron primarily finances its 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 quarter of 2001 provided cash of approximately $6 million. This increase in cash flow resulted primarily from decreases in accounts receivable of $15 million and inventories of $5 million. These items were partially offset by decreases in accounts payable of $12 million, accrued expenses of $2 million, and income taxes payable of $1 million. Days sales in accounts receivable as of March 31, 2001 were approximately 63 days. Annualized inventory turns for the first quarter of 2001 were approximately 3.7 times. Capital expenditures totaled approximately $2 million in the first quarter of 2001. These capital expenditures were primarily for the acquisition of manufacturing equipment and building improvements. These purchases were funded by the working capital credit facility. Reptron believes that available credit facilities will be sufficient to meet the capital expenditures and working capital needs of operations as they are presently conducted. However, future cash flow and cash requirements will depend on a wide range of factors, including the level of business in existing operations, expansion of facilities, and possible acquisitions. While there can be no assurance that such financing will be available in amounts and on acceptable terms, Reptron believes that such financing would likely be available on acceptable terms. Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- While Reptron had no holdings of derivative financial or commodity instruments at March 31, 2001, Reptron is exposed to financial market risks, including changes in interest rates. Approximately half of Reptron's borrowings bear a fixed interest rate. Borrowings under Reptron's credit agreement with a bank bears interest at a variable rate based on the prime rate and the London Interbank Offered Rate. 10 REPTRON ELECTRONICS, INC. PART II. OTHER INFORMATION 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 three months ended March 31, 2001. 11 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: May 11, 2001 --------------- REPTRON ELECTRONICS, INC. (Registrant) By: /s/ Michael Branca -------------------------------- Michael Branca, Chief Financial Officer (Principal Financial and Accounting Officer) 12