0000912057-95-006576.txt : 19950816 0000912057-95-006576.hdr.sgml : 19950816 ACCESSION NUMBER: 0000912057-95-006576 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950815 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING ELECTRONICS CORP CENTRAL INDEX KEY: 0000094136 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 741261194 STATE OF INCORPORATION: NV FISCAL YEAR END: 0330 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05522 FILM NUMBER: 95564070 BUSINESS ADDRESS: STREET 1: 4201 SOUTHWEST FWY CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 7136279800 MAIL ADDRESS: STREET 1: P O BOX 1229 CITY: HOUSTON STATE: TX ZIP: 77251-1229 FORMER COMPANY: FORMER CONFORMED NAME: STERLING ELECTRONICS INC DATE OF NAME CHANGE: 19680718 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended July 1, 1995 Commission File No.: 1-5522 STERLING ELECTRONICS CORPORATION (Exact name of registrant as specified in its charter) NEVADA 74-1261194 (State or other jurisdiction of (I.R. S. Employer Identification No.) incorporation or organization) 4201 SOUTHWEST FREEWAY, HOUSTON, TEXAS 77027 (Address of principal executive office) (Zip Code) Registrant's area code and telephone number: (713) 627-9800 Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period by this report. CLASS OUTSTANDING AT AUGUST 2, 1995 ---------------------------- ----------------------------- Common Stock, $.50 par value 6,607,885 Page 1 of 10 INDEX STERLING ELECTRONICS CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed consolidated statements of financial position July 1, 1995 and April 1, 1995 Condensed consolidated statements of income - thirteen weeks ended July 1, 1995 and July 2, 1994 Condensed consolidated statements of cash flows - thirteen weeks ended July 1, 1995 and July 2, 1994 Notes to condensed consolidated financial statements - July 1, 1995 Item 2. Management's Discussion and Analysis of the Results of Operations Page 2 of 10 STERLING ELECTRONICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JULY 1, APRIL 1, 1995 1995 ----------- ----------- ASSETS Current assets Cash $ 1,876,942 $ 3,148,290 Receivables-net of reserve for doubtful accounts 38,095,250 34,958,561 Inventories Finished goods 45,346,886 36,968,153 Raw materials and work in process 1,826,148 1,764,580 ----------- ----------- Total inventories 47,173,034 38,732,733 Other current assets 526,290 363,907 ----------- ----------- Total current assets 87,671,516 77,203,491 Property & equipment-net of depreciation 5,296,669 5,112,435 Goodwill, net of amortization 1,741,834 1,757,107 Other assets 2,795,071 2,751,619 ----------- ----------- $97,505,090 $86,824,652 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Trade accounts payable & accrued expenses $32,128,600 $29,757,332 Current portion - long term obligations 296,002 303,233 Income taxes 1,319,966 0 ----------- ----------- Total current liabilities 33,744,568 30,060,565 Long-term obligations - net of amounts due within one year 16,933,505 12,950,129 Postemployment benefits and other non-current liabilities 3,868,909 3,832,994 Minority interest in consolidated subsidiaries 474,342 484,095 Shareholders' Equity Common stock, $.50 par value 3,346,899 3,343,005 Additional paid-in capital 16,804,853 16,410,284 Retained earnings 22,832,216 20,535,094 ----------- ----------- 42,983,968 40,288,383 Less treasury stock, at cost 500,202 791,514 ----------- ----------- 42,483,766 39,496,869 ----------- ----------- $97,505,090 $86,824,652 =========== ===========
Page 3 of 10 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF INCOME THIRTEEN WEEKS ENDED JULY 1, 1995 AND JULY 2, 1994
1995 1994 ----------- ----------- Net sales $71,228,851 $57,130,436 Cost of sales 55,888,384 44,087,909 Selling, administrative and other operating expenses 11,263,031 9,626,577 ----------- ----------- 67,151,415 53,714,486 Income from operations 4,077,436 3,415,950 Interest expense 263,068 276,175 ----------- ----------- Income before income taxes and minority interests 3,814,368 3,139,775 Income taxes 1,527,000 1,259,000 Minority interests in earnings of consolidated subsidiaries (9,753) 25,539 ----------- ----------- Net income $ 2,297,121 $ 1,855,236 =========== =========== Income per common share and common share equivalents: Primary $.34 $.28 Fully diluted $.34 $.28 Number of common shares and common share equivalent used in computing per share amounts Primary 6,707,596 6,630,488 Fully diluted 6,750,898 6,630,488
Page 4 of 10 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS THIRTEEN WEEKS ENDED JULY 1, 1995 AND JULY 2, 1994
1995 1994 ------------ ------------ OPERATING ACTIVITIES Net income $ 2,297,122 $ 1,855,234 Adjustments needed to reconcile net income to net cash provided by operating activities: Depreciation and amortization 302,485 177,368 Provision for losses on accounts receivable 235,219 283,121 Minority interests (9,753) 25,539 ------------ ------------ 2,825,073 2,341,262 Changes in operating assets and liabilities (Increase) decrease in accounts receivable (3,371,980) 2,096 (Increase) in inventories (8,440,301) (5,375,769) (Increase) in other current assets (162,383) (229,609) Increase in accounts payable and accrued expenses 4,313,509 925,453 Increase (decrease) in post employment benefits and other non-current liabilities 35,915 (29,883) ------------ ------------ Net cash used in operating activities (4,800,095) (2,366,450) INVESTING ACTIVITIES Purchases of property and equipment (462,245) (432,242) (Increase) decrease in other assets (52,653) 47,234 ------------ ------------ Net cash used in investing activities (514,898) (385,008) FINANCING ACTIVITIES Proceeds from borrowings under revolving line of credit 21,526,562 12,412,801 Repayments of borrowings under revolving line of credit (17,462,805) (10,412,801) ------------ ------------ Net change in revolving line of credit 4,063,757 2,000,000 Principal payments on long-term debt, capital lease obligations and other (87,612) (82,029) Decrease in treasury stock 67,500 0 ------------ ------------ Net cash provided by financing activities 4,043,645 1,917,971 Decrease in cash and cash equivalents (1,271,348) (833,487) Cash and cash equivalents at beginning of period 3,148,290 2,914,290 ------------ ------------ Cash and cash equivalents at end of period $ 1,876,942 $ 2,080,803 ============ ============
Page 5 of 10 STERLING ELECTRONICS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JULY 1, 1995 The accompanying unaudited condensed consolidated financial statements include the accounts of Sterling Electronics Corporation and its majority-owned subsidiaries after elimination of all significant intercompany accounts and transactions. In the opinion of the company, the unaudited condensed consolidated financial statements contain all the adjustments (consisting of only normal accruals) necessary to present fairly the financial position as of July 1, 1995 and the results of operations for the thirteen weeks then ended. The results of operations for the thirteen weeks ended July 1, 1995 are not necessarily indicative of the results to be expected for the full year. Long-term debt as of July 1, 1995 and the amounts due within one year are as follows:
AMOUNTS DUE LONG-TERM MATURING IN DESCRIPTION WITHIN ONE YEAR PORTION FISCAL YEAR ----------- --------------- ---------- ------------ Revolving credit line $ -0- $16,223,834 1998 Capitalized lease obligations 122,494 224,423 1996-2000 Equipment loans 173,508 485,248 1999-2001 -------- ----------- $296,002 $16,933,505
Page 6 of 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS THIRTEEN WEEKS ENDED JULY 1, 1995 COMPARED TO THIRTEEN WEEKS ENDED JULY 2, 1994. NET SALES - Consolidated net sales for the current thirteen week period were 25% ahead of sales for the thirteen week period a year ago. This increase is the result of increases in semiconductor revenues (up 31%), connector revenues (up 20%) and passive/electromechanical revenues (up 19%). GROSS MARGIN - Sterling's consolidated gross margin for the thirteen weeks declined to 21.5% from 22.8% for the thirteen weeks a year ago stemming principally from competitive pressures on semiconductor pricing and semiconductor sales increasing more rapidly than sales of higher margin passive and connector products. SELLING AND ADMINISTRATIVE COSTS - Consolidated operating expenses declined to 15.8% of sales compared to 16.9% of sales for the thirteen weeks a year ago. This improvement resulted from economies of scale from sales growth (fixed costs were spread over an increasing sales base) coupled with continuing cost controls. OPERATING INCOME - As a result of gross margin dollars increasing more rapidly than operating expenses, operating income increased $661,000, a 19% improvement over the previous fiscal year. INTEREST EXPENSE - The 5% decrease in interest expense is the result of the $1.9 million increase from the comparable period in average indebtedness under the revolving credit line reduced by the effect of lower effective interest rates for the Company. LIQUIDITY AND CAPITAL RESOURCES Since the beginning of the current fiscal year, Sterling has invested $11.8 million in increased receivables and inventory to support higher sales volume. In connection with this increased investment, the Company increased its borrowings under the bank line by $4.1 million. A secondary use of funds has been capital expenditures of $460,000, principally for new computer hardware and software. These expenditures were financed by cash flow from operations. The Company's needs for additional investment in receivables and inventories is expected to continue in connection with anticipated sales growth and geographic expansion. Page 7 of 10 Management believes that internal generation of cash flow (net income plus non-cash items such as depreciation and amortization), available equipment financing,funds available under the bank credit line, plus possible increases in the bank credit line will be sufficient to meet liquidity needs over the next two fiscal years. The Company is currently in process of increasing the $25 million line of credit to $35 million. Working capital was $54.3 million at July 1, 1995 compared to $47.5 million at April 1, 1995. The current ratio was 2.6, the same as at the beginning of the year. Working capital continues to increase, reflected principally in higher inventory and receivables required to support higher sales, partially offset by increased accounts payable and accrued expenses. The ratio of long-term debt to equity was 40% at July 1, 1995 compared to 33% at the beginning of the year. Page 8 of 10 OTHER INFORMATION ITEM 1 THROUGH ITEM 5 The Company was not required to report on Items 1 through 5. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibit is included herein: (11) Statement re: computation of earnings per share (b) Reports of Form 8-K -- There were no reports on Form 8-K filed during the thirteen weeks ended July 1, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STERLING ELECTRONICS CORPORATION DATE: August 14, 1995 Mac McConnell ---------------------- -------------------------------- Mac McConnell, Vice-President Chief Financial Officer Page 9 of 10 EX-11 2 EXHIBIT 11 (EXHIBIT 11) STERLING ELECTRONICS CORPORATION (11) - Statement Re: COMPUTATION OF PER SHARE EARNINGS
THIRTEEN WEEKS ENDED ---------------------------- JULY 1, 1995 JULY 2, 1994 ------------ ------------ PRIMARY Average shares outstanding 6,555,322 6,501,279 Net effect of dilutive stock options- based on the treasury stock method using average market price 152,274 129,209 ---------- ---------- Total 6,707,596 6,630,488 ========== ========== Net income applicable to common stock $2,297,121 $1,855,236 ========== ========== Per share amount $.34 $.28 ========== ========== FULLY DILUTED Average shares outstanding 6,555,322 6,501,279 Net effect of dilutive stock options- based on the treasury stock method using the end of period market price, if higher than average market price 195,576 129,209 ---------- ---------- Total 6,750,898 6,630,488 ========== ========== Net income applicable to common stock $2,297,121 $1,855,236 ========== ========== Per share amount $.34 $.28 ========== ==========
EX-27 3 EXHIBIT 27
5 This schedule contains summary financial information extracted from the Form 10-Q for the quarter ended July 1, 1995 and is qualified in its entirety by reference to such financial statements. 3-MOS MAR-30-1996 APR-02-1995 JUL-01-1995 1,876,942 0 39,002,563 907,313 41,173,034 87,671,516 10,170,045 4,873,376 97,505,090 33,744,568 16,933,505 3,346,899 0 0 39,136,867 97,505,090 71,228,851 71,228,851 55,888,384 67,151,415 0 235,219 263,068 3,814,368 1,527,000 2,297,121 0 0 0 2,297,121 .34 .34