-----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, RXNIfWpEOOxJHyiXap1faSx1y7bO/OHVwdACs8v0ePJFcz86eZze/pdrbF3vyiCJ +R4wPswm8w5z8qMa190EEw== 0000950129-96-001711.txt : 19960812 0000950129-96-001711.hdr.sgml : 19960812 ACCESSION NUMBER: 0000950129-96-001711 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960809 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: 96606555 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 STERLING ELECTRONICS CORPORATION - DATED 06/29/96 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10Q QUARTERLY REORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 29, 1996 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 IRS 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 July 22, 1996 - ---------------------------- ---------------------------- Common Stock, $.50 par value 6,835,591 1 2 INDEX STERLING ELECTRONICS CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed consolidated statements of financial position June 29, 1996 and March 30, 1996 Condensed consolidated statements of income - thirteen weeks ended June 29, 1996 and July 1, 1995 Condensed consolidated statements of cash flows - thirteen weeks ended June 29, 1996 and July 1, 1995 Notes to condensed consolidated financial statements - June 29, 1996 Item 2. Management's Discussion and Analysis of the Results of Operations 2 3 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, March 30, 1996 1996 ------------------ ----------------- ASSETS Current Assets Cash $ 4,677,968 $ 4,376,818 Receivables-net of reserve for doubtful accounts 42,018,187 50,083,042 Inventory 53,836,467 56,759,383 Other current assets 826,270 645,569 ------------------ ----------------- 101,358,892 111,864,812 Property and equipment - net of depreciation 7,285,214 6,908,833 Goodwill, net of amortization 4,111,048 4,141,322 Other assets 4,425,824 3,923,233 ------------------ ----------------- $ 117,180,978 $ 126,838,200 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Trade accounts payable and accrued expenses $ 36,245,928 $ 39,378,115 Current portion - long term obligations 277,600 290,498 Income taxes 1,906,117 805,020 ------------------ ----------------- 38,429,645 40,473,633 Long-term obligations - net of amounts due within one year 23,455,263 33,719,186 Postemployment benefits and other non-current liabilities 4,232,400 4,192,029 Shareholders' Equity Foreign currency translation adjustment (125) (125) Common stock, $.50 par value 3,519,784 3,517,211 Additional paid-in capital 22,298,270 22,053,742 Retained earnings 27,374,575 24,983,760 ------------------ ----------------- 53,192,504 50,554,588 ------------------ ----------------- Less treasury stock, at cost 2,128,834 2,101,236 ------------------ ----------------- 51,063,670 48,453,352 ------------------ ----------------- $ 117,180,978 $ 126,838,200 ================== =================
3 4 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENT OF INCOME THIRTEEN WEEKS ENDED JUNE 29, 1996 AND JULY 1, 1995
1996 1995 -------------- ---------------- Net sales $ 82,122,830 $ 70,422,501 Cost of sales 63,965,326 55,301,313 Selling, administrative and other operating expenses 13,640,695 11,076,158 -------------- ---------------- 77,606,021 66,377,471 Income from operations 4,516,809 4,045,030 Interest expense 517,993 263,068 -------------- ---------------- Income before income taxes 3,998,816 3,781,962 Income taxes 1,608,000 1,509,000 -------------- ---------------- 2,390,816 2,272,962 Income from discontinued operations - 24,159 -------------- ---------------- $ 2,390,816 $ 2,297,121 ============== ================ Income per common share and common share equivalents: Primary Income from continuing operations $ 0.34 $ 0.32 Income from discontinued operations - - -------------- ---------------- $ 0.34 $ 0.32 ============== ================ Fully diluted Income from continuing operations $ 0.34 $ 0.32 Income from discontinued operations - - -------------- ---------------- $ 0.34 $ 0.32 ============== ================ Number of common shares and common share equivalents used in computing per share amounts Primary 7,048,088 7,042,976 Fully diluted 7,048,088 7,088,443
4 5 STERLING ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS THIRTEEN WEEKS ENDED JUNE 29, 1996 AND JULY 1, 1995
1996 1995 -------------- -------------- OPERATING ACTIVITIES Net income $ 2,390,815 $ 2,297,122 Adjustments needed to reconcile net income to net cash provided by operating acitivities: Depreciation and amortization 439,102 281,948 Provision for losses on accounts receivable 331,477 234,019 -------------- -------------- 3,161,394 2,813,089 Changes in operating assets and liabilities (Increase) decrease in accounts receivable 7,733,378 (3,337,330) (Increase) decrease in inventories 2,922,916 (8,378,733) Decrease in prepaid and other current assets (899,651) (258,874) Increase (decrease) in accounts payable and accrued expenses (1,090,575) 4,319,559 Increase in postemployment benefits and other non-current liabilities 40,371 50,699 -------------- -------------- Net cash (used) provided by operating activities 11,867,833 (4,791,590) INVESTING ACTIVITIES Purchase of property and equipment (776,008) (459,809) Increase (decrease) in other assets 207,158 (52,653) -------------- -------------- Net cash (used) provided in investing activities (568,850) (512,462) FINANCING ACTIVITIES Proceeds from borrowings under revolver 4,836,313 21,526,562 Repayments of borrowings under revolver (30,030,166) (17,462,805) -------------- -------------- Net increase (decrease) in revolving line of credit (25,193,853) 4,063,757 Proceeds from long term borrowings 15,000,000 - Principal payments on other long term debt (82,968) (87,612) Issuance of common stock under option plans 169,904 67,500 Purchases of treasury stock (890,916) - -------------- -------------- Net cash provided (used) by financing activities (10,997,833) 4,043,645 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 301,150 (1,260,407) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,376,818 3,110,397 -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,677,968 $ 1,849,990 ============== ==============
5 6 STERLING ELECTRONICS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 29, 1996 The accompanying unaudited condensed consolidated financial statements include the accounts of Sterling Electronics Corporation (the "Company") 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 June 29, 1996 and the results of operations for the thirteen weeks then ended. The results of operations for the thirteen weeks ended June 29, 1996 are not necessarily indicative of the results to be expected for the full year. Long-term debt as of June 29, 1996 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 $ 8,000,000 1999 Senior note 0 15,000,000 2007 Capitalized lease obligations 102,038 133,912 1996-2000 Equipment loans 175,562 321,351 1999-2001 -------- ----------- $277,600 $23,455,263
On April 15, 1996 the Company borrowed $15 million from an insurance company under a ten year agreement with a fixed interest rate of 6.45%. The loan agreement requires semiannual interest payments with seven equal annual principal payments of $2,143,000 commencing on April 15, 2000. Proceeds from this loan were used to reduce amounts borrowed under the revolving credit line. 6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS Thirteen Weeks Ended June 29, 1996 Compared to Thirteen Weeks Ended July 1, 1995 Net Sales - Consolidated net sales for the current thirteen week period were 17% ahead of sales for thirteen week period a year ago. This increase is the result of increases in semi-conductor revenues (up 11% ), connector revenues (up 28%) and passive/electro-mechanical revenues (up 18%). Gross Margin - Sterling's consolidated gross margin for the thirteen weeks improved to 22.1% from 21.5% for the thirteen weeks a year ago stemming principally from improved gross margins on semiconductor sales and sales of higher margin passive and connector products increasing more rapidly than semiconductor sales. Selling and Administrative Costs - Consolidated operating expenses increased to 16.6% of sales compared to 15.7% of sales for the thirteen weeks a year ago. The majority of the dollar increase is due to increased sales personnel and sales support related costs - commissions, salaries, travel and fringe benefits, including the costs associated with the recently established team of field application engineers. Additionally, the Company operated six more sales locations (Portland, Calgary, Vancouver, Ottawa, Toronto and Montreal) during the current thirteen week period compared to a year ago. Various other operating expenses including management information systems, telephone and warehouse expenses also increased. Interest Expense - The 97% increase in interest expense is the result of the $15 million increase from the comparable period in average indebtedness plus the effect of the 6.45% interest rate on the $15 million senior note entered into on April 15, 1996 being higher than the rates on borrowings during the comparable period. Liquidity and Capital Resources - Since the beginning of the current fiscal year, Sterling has reduced receivables and inventory by approximately $10.7 million. In connection with this reduced investment, the Company reduced its borrowings by approximately $10.3 million. A use of funds has been capital expenditures of approximately $800,000, principally for new computer hardware and software. These expenditures were financed by cash flow from operations. On April 15, 1996 the Company borrowed $15 million at a fixed interest rate of 6.45% from an insurance company under a ten year agreement with a seven year average maturity. Proceeds from this loan were used to reduce amounts borrowed under the bank credit line. 7 8 Working capital was $62.9 million at June 29, 1996 compared to $71.4 million at March 30, 1996. The current ratio was 2.6 compared to 2.8 at the beginning of the year. Working capital declined as a result of reduced inventory and receivables required to support a lower sales backlog, partially offset by decreased accounts payable and accrued expenses. Even though inventories have decreased, average annualized inventory turnover for the current period was 4.6, down from 5.4 for fiscal 1996. The ratio of long-term debt to total capitalization was 31% at June 29, 1996 compared to 41% at the beginning of the year. At June 29, 1996 the Company had $32 million in available credit under the $40 million bank credit line which matures on February 16, 1999. 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. On June 5, 1996, the Company agreed to lease a 181,000 square foot warehouse to be constructed adjacent to the Dallas/Fort Worth International Airport. The lease term is ten years with monthly rental payments of approximately $82,000, plus the Company is responsible for all property taxes, insurance and maintenance. The Company intends to purchase and/or lease $4 million to $6 million of material handling equipment, computer equipment and material management software for this warehouse and distribution center. The Company intends to consolidate the distribution operations of its three existing regional distribution centers into this new state-of-the-art facility during the fourth quarter of fiscal 1997 and the first quarter of fiscal 1998. Management believes that the capital resources described above should be adequate to fund the cost of this consolidation and the operation of the new distribution center. 8 9 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 June 29, 1996 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 /s/ Mac McConnell -------------------------------- Mac McConnell, Vice-President Chief Financial Officer 9 10 EXHIBIT INDEX (11) Statement re: computation of earnings per share (27) Financial Data Schedule EX-11 2 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 STERLING ELECTRONICS CORPORATION (11)- Statement Re: COMPUTATION OF PER SHARE EARNINGS
Thirteen weeks ended -------------------------------------- June 29, 1996 July 1, 1995 PRIMARY Average shares outstanding 6,887,532 6,883,088 Net effect of dilutive stock options- based on the treasury stock method using average market price 160,556 159,888 ------------- ------------- Total 7,048,088 7,042,976 Net income applicable to common stock Income from continuing operations $ 2,390,816 $ 2,272,962 Income from discontinued operations - 24,159 ------------- ------------- $ 2,390,816 $ 2,297,121 ============= ============= Per share amount Income from continuing operations $ 0.34 $ 0.32 Income from discontinued operations - - ------------- ------------- $ 0.34 $ 0.32 ============= ============= FULLY DILUTED Average shares outstanding 6,887,532 6,883,088 Net effect of dilutive stock options- based on the treasury stock method using average market price 160,556 205,355 ------------- ------------- Total 7,048,088 7,088,443 Net income applicable to common stock Income from continuing operations $ 2,390,816 $ 2,272,962 Income from discontinued operations - 24,159 ------------- ------------- $ 2,390,816 $ 2,297,121 ============= ============= Per share amount Income from continuing operations $ 0.34 $ 0.32 Income from discontinued operations - - ------------- ------------- $ 0.34 $ 0.32 ============= =============
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE QUARTER ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 3-MOS MAR-29-1997 MAR-31-1996 JUN-29-1996 4,667,968 0 43,398,305 1,380,118 53,836,467 101,358,892 12,455,063 5,169,849 117,180,978 38,429,645 23,455,263 3,519,784 0 0 47,543,886 117,180,978 82,122,830 82,122,830 63,965,326 77,606,021 0 331,477 517,993 3,998,816 1,608,000 2,390,816 0 0 0 2,390,816 .34 .34
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