-----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, K8qYPiFPYCtyU68aiKgShcaxW6Zv6oOHWAoJbu3pTfOeGcQzfmLr02XlVcaLWrjj fg3MPqiMMe+maLP7rh6y+w== 0000912057-95-009766.txt : 19951119 0000912057-95-009766.hdr.sgml : 19951119 ACCESSION NUMBER: 0000912057-95-009766 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 95590540 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 10Q 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 September 30, 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 November 7, 1995 Common Stock, $.50 par value 6,588,941 Page 1 of 12 INDEX STERLING ELECTRONICS CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed consolidated statements of financial position September 30, 1995 and April 1, 1995 Condensed consolidated statements of income - thirteen weeks and twenty-six weeks ended September 30, 1995 and October 1, 1994 Condensed consolidated statements of cash flows - twenty-six weeks ended September 30, 1995 and October 1, 1994 Notes to condensed consolidated financial statements - September 30, 1995 Item 2. Management's Discussion and Analysis of the Results of Operations Page 2 of 12 STERLING ELECTRONICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, April 1, ASSETS 1995 1995 ------------ --------------- Restated-Note D Current assets Cash $ 3,141,273 $ 3,110,397 Receivables-net of reserve for doubtful accounts 45,294,929 34,594,615 Inventory 51,618,775 36,968,153 Other current assets 587,425 320,043 Net assets of discontinued operations - Note D 0 1,812,546 ------------ ----------- Total current assets 100,642,402 76,805,754 Property & equipment-net of depreciation 5,974,813 5,055,234 Goodwill, net of amortization 4,192,168 1,757,107 Other assets 3,623,238 2,729,925 ------------ ----------- $114,432,621 $86,348,020 ------------ ----------- ------------ ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Trade accounts payable & accrued expenses $33,751,790 $29,540,584 Current portion - long term obligations 296,699 303,233 ------------ ----------- Total current liabilities 34,048,489 29,843,817 Long-term obligations - net of amounts due within one year 31,643,232 12,950,129 Postemployment benefits and other non-current liabilities 4,197,785 4,057,205 Shareholders' Equity Common stock, $.50 par value 3,346,899 3,343,005 Additional paid-in capital 16,804,112 16,410,284 Retained earnings 24,795,905 20,535,094 ------------ ----------- 44,946,916 40,288,383 Less treasury stock, at cost 403,801 791,514 ------------ ----------- 44,543,115 39,496,869 ------------ ----------- $114,432,621 $86,348,020 ------------ ----------- ------------ -----------
Page 3 of 12 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF INCOME THIRTEEN WEEKS ENDED SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
1995 1994 ----------- --------------- Restated-Note D Net sales $80,383,000 $57,538,640 Cost of sales 63,179,966 44,639,975 Selling, administrative and other operating expenses 12,601,875 9,673,338 ----------- ----------- 75,781,841 54,313,313 Income from operations 4,601,159 3,225,327 Interest expense 379,884 315,904 ----------- ----------- Income before income taxes and minority interests 4,221,275 2,909,423 Income taxes 1,699,000 1,180,000 ----------- ----------- Income from continuing operations $2,522,275 $1,729,423 Discontinued operations Income (loss) from operations less applicable income taxes of $411,000 and $0 respectively (546,483) 2,487 Loss on disposal (12,000) 0 ----------- ----------- Net income $1,963,792 $1,731,910 ----------- ----------- ----------- ----------- Income per common share and common share equivalents: Primary Income from continuing operations $0.37 $0.26 Income (loss) from discontinued operations (0.08) 0.00 ----------- ----------- 0.29 0.26 ----------- ----------- ----------- ----------- Fully diluted Income from continuing operations $0.37 $0.26 Income (loss) from discontinued operations (0.08) 0 ----------- ----------- $0.29 $0.26 ----------- ----------- ----------- ----------- Number of common shares and common share equivalents used in computing per share amounts Primary 6,808,238 6,655,475 Fully diluted 6,816,192 6,660,690
Page 4 of 12 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF INCOME TWENTY-SIX WEEKS ENDED SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
1995 1994 ----------- --------------- Restated-Note D Net sales $150,805,501 $113,803,926 Cost of sales 118,479,279 88,083,096 Selling, administrative and other operating expenses 23,680,083 19,140,652 ------------ ------------ 142,159,362 107,223,748 Income from operations 8,646,139 6,580,178 Interest expense 642,952 592,079 ------------ ------------ Income before income taxes and minority interests 8,003,187 5,988,099 Income taxes 3,208,000 2,426,000 ------------ ------------ Income from continuing operations $4,795,187 $3,562,099 Discontinued operations Income (loss) from operations less applicable income taxes of $393,000 and $13,000 respectively (522,374) 25,047 Loss on disposal (12,000) 0 ------------ ------------ Net income 4,260,813 3,587,146 ------------ ------------ ------------ ------------ Income per common share and common share equivalents: Primary Income from continuing operations $0.71 $0.54 Income (loss) from discontinued operations (0.08) 0.00 ------------ ------------ $0.63 $0.54 ------------ ------------ ------------ ------------ Fully diluted Income from continuing operations $0.71 $0.54 Income (loss) from discontinued operations (0.08) 0 ------------ ------------ $0.63 $0.54 ------------ ------------ ------------ ------------ Number of common shares and common share equivalents used in computing per share amounts Primary 6,757,917 6,642,982 Fully diluted 6,783,545 6,646,060
Page 5 of 12 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS TWENTY-SIX WEEKS ENDED SEPTEMBER 30, 1995 AND OCTOBER 1, 1994
1995 1994 ----------- --------------- Restated-Note D OPERATING ACTIVITIES Net income $4,260,813 $3,587,144 Adjustments needed to reconcile net income to net cash provided by operating activities: Depreciation and amortization 579,860 458,778 Provision for losses on accounts receivable 667,980 311,798 ------------ ------------ 5,508,653 4,357,720 Changes in operating assets and liabilities (Increase) decrease in accounts receivable (8,722,354) 140,723 (Increase) in inventories (10,358,651) (4,203,656) (Increase) decrease in other current assets 727,040 (216,533) Increase decrease in accounts payable and accrued expenses 1,050,391 (3,830,987) Increase (decrease) in post employment benefits and other non-current liabilities 106,522 (21,744) ------------ ----------- Net cash used in operating activities (11,688,399) (3,774,477) INVESTING ACTIVITIES Purchases of property and equipment (1,289,050) (1,008,572) Acquisition of DGW Electronics Corporation (5,807,745) 0 (Increase) in other assets (33,659) (61,807) ------------ ----------- Net cash used in investing activities (7,130,454) (1,070,379) FINANCING ACTIVITIES Proceeds from borrowings under revolving line of credit 47,307,710 20,657,749 Repayments of borrowings under revolving line of credit (28,467,787) (16,657,749) ------------ ----------- Net change in revolving line of credit 18,839,923 4,000,000 Principal payments on long-term debt, capital lease obligations and other (153,354) (120,677) Proceeds from excercise of stock options 163,160 0 ------------ ----------- Net cash provided by financing activities 18,849,729 3,879,323 Decrease in cash and cash equivalents 30,876 (965,533) Cash and cash equivalents at beginning of period 3,110,397 2,859,647 ------------ ----------- Cash and cash equivalents at end of period $3,141,273 $1,894,114 ------------ ----------- ------------ -----------
During fiscal 1996 and 1995 the Company issued $622,000 and $600,000, respectively, of common stock under the Company's Incentive Bonus Plan Page 6 of 12 STERLING ELECTRONICS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 Note A - Accounting Policies 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 September 30, 1995 and the results of operations for the thirteen and twenty-six weeks then ended. The results of operations for the thirteen and twenty-six weeks ended September 30, 1995 are not necessarily indicative of the results to be expected for the full year. Note B - Long-term Debt Long-term debt as of September 30, 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- $31,000,000 1998 Capitalized lease obligations 122,687 198,196 1996-2000 Equipment loans 174,012 445,036 1999-2001 ------- ---------- $296,699 $31,643,232
Note C - Acquisition of Canadian Subsidiary The Company completed the acquisition of DGW Electronics Corporation ("DWG") on August 22, 1995. DGW is a distributor of electronic parts with five locations in Canada. The operating results of DGW are included with those of the Company from the date of the acquisition forward. Sales of DGW from August 22, 1995 through September 30, 1995 were approximately $2.7 million. Page 7 of 12 Note D - Sale of Phaostron Instruments The Company completed the sale of its Phaostron Instruments subsidiary in September 1995. The operating results, assets and liabilities of Phaostron have been classified as discontinued operations for all periods presented. Previously reported amounts have been restated to conform to this presentation. Phaostron Instruments accounted for 1%, 2% and 4%, respectively, of total Company sales in fiscal years 1995, 1994 and 1993. Page 8 of 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS TWENTY-SIX WEEKS ENDED SEPTEMBER 30, 1995 COMPARED TO TWENTY-SIX WEEKS ENDED OCTOBER 1, 1994. NET SALES - Consolidated net sales for the current twenty-six week period were 35% ahead of sales for the twenty-six week period a year ago. Sales increased 24% for passive/electromechanical components, 19% for connector products and 44% for semiconductor products, compared to the twenty-six week period a year ago. GROSS MARGIN - Sterling's consolidated gross margin for the twenty-six weeks declined to 21.4% from 22.6% for the twenty-six weeks a year ago stemming principally from competitive pressures and semiconductor sales increasing more rapidly than sales of higher margin passive and connector products. SELLING AND ADMINISTRATIVE COSTS - Consolidated operating expenses declined to 15.7% of sales compared to 16.8% of sales for the twenty- six 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 $2,066,000, a 31% improvement over the previous fiscal year. INTEREST EXPENSE - The 9% increase in interest expense is the result of the $3.7 million increase from the comparable period in average indebtedness under the revolving credit line partially offset by the effect of slightly lower interest rates. THIRTEEN WEEKS ENDED SEPTEMBER 30, 1995 COMPARED TO THIRTEEN WEEKS ENDED OCTOBER 1, 1994. NET SALES - Consolidated net sales for the current thirteen week period were 40% ahead of sales for the thirteen week period a year ago. Sales increased 29% for passive/electromechanical components, 18% for connector products and 57% for semiconductor products, compared to the thirteen week period a year ago. GROSS MARGIN - Sterling's consolidated gross margin for the thirteen weeks declined to 21.4% from 22.4% for the thirteen weeks a year ago stemming principally from competitive pressures and semiconductor sales increasing more rapidly than sales of higher margin passive and connector products. SELLING AND ADMINISTRATIVE COSTS - Consolidated operating expenses declined to 15.7% of sales compared to 16.8% of sales for the thirteen Page 9 of 12 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 $1,376,000, a 43% improvement over the previous fiscal year. INTEREST EXPENSE - The 20% increase in interest expense is the result of the $5.5 million increase from the comparable period in average indebtedness under the revolving credit line partially offset by the effect of slightly lower interest rates. LIQUIDITY AND CAPITAL RESOURCES Since the beginning of the current fiscal year, Sterling has invested $19.1 million in receivables and inventory to support higher sales volume. In connection with this increased investment, the Company increased its borrowings under the bank line by $18.8 million. A secondary use of funds was the $5.8 million used to acquire DGW Electronics Corporation in Canada. Another use of funds has been capital expenditures of $1.3 million, principally for new computer hardware and software. The expenditures in excess of th $18.8 million increase in borrowings under the bank line 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. 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. Working capital was $66.6 million at September 30, 1995 compared to $47.0 million at April 1, 1995. The current ratio was 3.0 compared to 2.6 at the beginning of the year. Working capital continues to increase, reflected principally in higher receivables and inventory required to support higher sales, partially offset by increased accounts payable and accrued expenses. The ratio of long-term debt to total capital was 42% at September 30, 1995 compared to 25% at the beginning of the year. Page 10 of 12 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 September 30, 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: NOVEMBER 10, 1995 Mac McConnell - ------------------------- --------------------------------- Mac McConnell, Vice-President Chief Financial Officer Page 11 of 12 EX-11 2 EXHIBIT 11 STERLING ELECTRONICS CORPORATION (11) - Statement Re: COMPUTATION OF PER SHARE EARNINGS
Thirteen weeks ended Twenty-six weeks ended ------------------------------ ----------------------------- September 30, October 1, September 30, October 1, 1995 1994 1995 1994 PRIMARY Average shares outstanding 6,607,656 6,532,260 6,581,489 6,516,770 Net effect of dilutive stock options- based on the treasury stock method using average market price 200,582 123,215 176,428 126,212 ---------- ---------- ---------- ---------- Total 6,808,238 6,655,475 6,757,917 6,642,982 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income applicable to common stock Income from continuing operations $2,522,275 $1,729,423 $4,795,187 $3,562,099 Income (loss) from discontinued operations (558,483) 2,487 (534,374) 25,047 ---------- ---------- ---------- ---------- $1,963,792 $1,731,910 $4,260,813 $3,587,146 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Per share amount Income from continuing operations $0.37 $0.26 $0.71 $0.54 Income (loss) from discontinued operations (0.08) 0.00 (0.08) 0.00 ---------- ---------- ---------- ---------- $0.29 $0.26 $0.63 $0.54 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- FULLY DILUTED Average shares outstanding 6,607,656 6,532,260 6,581,489 6,516,770 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 208,536 128,430 202,056 129,290 ---------- ---------- ---------- ---------- Total 6,816,192 6,660,690 6,783,545 6,646,060 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income applicable to common stock Income from continuing operations $2,522,275 $1,729,423 $4,795,187 $3,562,099 Income (loss) from discontinued operations (558,483) 2,487 (534,374) 25,047 ---------- ---------- ---------- ---------- $1,963,792 $1,731,910 $4,260,813 $3,587,146 Per share amount Income from continuing operations $0.37 $0.26 $0.71 $0.54 Income (loss) from discontinued operations (0.08) 0.00 (0.08) 0.00 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $0.29 $0.26 $0.63 $0.54 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Page 12 of 12 EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS MAR-30-1996 APR-02-1995 SEP-30-1995 3,141,273 0 46,668,744 1,373,815 51,618,775 100,642,402 10,151,190 4,176,377 114,432,621 34,048,489 31,643,232 3,346,899 0 0 41,196,216 114,432,621 150,805,501 150,850,501 118,479,279 142,159,362 0 579,860 642,952 8,003,187 3,208,000 4,795,187 (534,374) 0 0 4,260,813 0.63 0.63
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