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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, 2003
( ) 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
13700 Reptron Boulevard, 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
-----
As of May 20, 2003, there were 6,417,196 shares of the Registrant's Common Stock
issued and outstanding.
REPTRON ELECTRONICS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations -- Three months ended
March 31, 2003 and March 31, 2002 3
Consolidated Balance Sheets -- March 31, 2003 and December 31, 2002 4
Consolidated Statement of Shareholders' Equity (Deficit) -- Three months ended
March 31, 2003 and year ended December 31, 2002 5
Consolidated Statements of Cash Flows -- Three months ended
March 31, 2003 and March 31, 2002 6
Notes to Consolidated Financial Statements -- March 31, 2003 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
Item 4. Controls and Procedures 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
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)
--------------------------
2003 2002
---- ----
Net sales $ 45,164 $ 50,852
Cost of goods sold 40,265 46,813
----------- -----------
Gross profit 4,899 4,039
Selling, general and administrative expenses 5,636 6,620
----------- -----------
Operating loss (737) (2,581)
Interest expense, net 1,656 1,762
----------- -----------
Loss from continuing operations before income taxes (2,393) (4,343)
Income tax provision -- --
----------- -----------
Loss from continuing operations (2,393) (4,343)
Discontinued operations (Note B)
Loss from operations of discontinued Reptron Distribution
(including loss on disposal of $1,789 in 2003) (17,223) (2,195)
Income tax benefit -- --
----------- -----------
Loss on discontinued operations (17,223) (2,195)
----------- -----------
Net loss $ (19,616) $ (6,538)
=========== ===========
Net loss from continuing operations per common share - basic and diluted $ (0.37) $ (0.68)
Net loss from discontinued operation per common share - basic and diluted $ (2.68) $ (0.34)
----------- -----------
Net loss per common share - basic and diluted $ (3.05) $ (1.02)
=========== ===========
Weighted average common shares outstanding - basic and diluted 6,417,196 6,413,640
=========== ===========
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,
2003 2002
---- ----
CURRENT ASSETS
Cash and cash equivalents $ 479 $ 370
Accounts receivable - trade, net 37,234 41,743
Inventories, net 24,462 26,746
Assets held for sale 12,771 28,832
Prepaid expenses and other current assets 2,019 1,909
--------- ---------
Total current assets 76,965 99,600
PROPERTY, PLANT & EQUIPMENT - AT COST, NET 22,436 23,377
GOODWILL, NET 26,779 30,073
DEFERRED INCOME TAX 2,442 2,449
OTHER ASSETS 1,752 1,475
--------- ---------
TOTAL ASSETS $ 130,374 $ 156,974
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable - trade $ 19,033 $ 19,045
Note payable to bank 31,273 33,606
6 3/4% Convertible Subordinated Notes 76,315 --
Current portion of long-term obligations 880 1,080
Liabilities held for sale 4,105 7,948
Accrued expenses 8,385 8,860
--------- ---------
Total current liabilities 139,991 70,539
LONG-TERM OBLIGATIONS, less current portion 3,971 80,407
SHAREHOLDERS' EQUITY (DEFICIT)
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 6,417,196 shares, respectively 64 64
Additional paid-in capital 23,146 23,146
Retained deficit (36,798) (17,182)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (13,588) 6,028
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 130,374 $ 156,974
========= =========
The accompanying notes are an integral part of these financial statements
4
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data)
Common Stock Additional Total
----------------
Retained Shareholders'
Shares Par Paid-In Earnings Equity
Outstanding Value Capital (Deficit) (Deficit)
----------- ----- --------- --------- ----------
Balance at December 31, 2001 6,397,196 $64 $ 23,083 $ 9,025 $ 32,172
Exercise of stock options 20,000 - 63 - 63
Net loss - - - (26,207) (26,207)
---------- --- --------- --------- ----------
Balance at December 31, 2002 6,417,196 64 23,146 (17,182) 6,028
Net loss (Unaudited) - - - (19,616) (19,616)
---------- --- --------- --------- ----------
Balance at March 31, 2003 (Unaudited) 6,417,196 $64 $ 23,146 $ (36,798) $ (13,588)
========== === ========= ========= ==========
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)
----------------------
2003 2002
--------- ---------
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net loss $ (19,616) $ (6,538)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, amortization, and goodwill impairment 5,008 2,023
Deferred income taxes 7 --
Non-cash charges associated with discontinued operations 12,789 --
Change in assets and liabilities:
Accounts receivable - trade 4,509 109
Inventories 2,284 3,210
Prepaid expenses and other current assets (110) 248
Other assets 570 (64)
Assets held for sale 2,319 --
Liabilities held for sale (3,843) --
Accounts payable - trade (12) 5,189
Accrued expenses (475) (1,074)
Income taxes receivable -- 147
--------- ---------
Net cash provided by operating activities 3,430 3,250
Cash flows from investing activities:
Purchases of property, plant and equipment (667) (223)
--------- ---------
Net cash used in investing activities (667) (223)
--------- ---------
Cash flows from financing activities:
Net payments on notes payable to bank (2,333) (2,749)
Payments on long-term obligations (321) (397)
Proceeds from exercise of stock options -- 63
--------- ---------
Net cash used in financing activities (2,654) (3,083)
-------- ---------
Net decrease in cash and cash equivalents 109 (56)
Cash and cash equivalents at beginning of period 370 197
--------- ---------
Cash and cash equivalents at end of period $ 479 $ 141
========= =========
Supplemental cash flow information:
Interest $ 628 $ 3,433
========= =========
Income taxes $ -- $ 22
========= =========
The accompanying notes are an integral part of these financial statements
6
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(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 March 31, 2003 and for the three months
ended March 31, 2003 and March 31, 2002 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, 2003 are not necessarily
indicative of results that may be expected for the year ending December 31,
2003. 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 2002 Form 10-K which was filed in April 2003.
NOTE B - DISCONTINUED OPERATIONS
The Company's Electronic Component Distribution ("ECD") segment incurred losses
of approximately $20 million for the year ended December 31, 2002. Despite cost
cutting measures implemented during the second half of 2001 and throughout 2002,
the Company has continued to incur losses in this segment. As a result, the
Company has decided to exit the component distribution business either through a
sale of the business or by discontinuance of its operations. Management is in
the process of negotiating a sale of this division and as of March 31, 2003
believed that a sale was probable during the second quarter of 2003.
Accordingly, the results of this division have been reported as a discontinued
operation as of March 31, 2003.
Management believes that as part of a sale the Company will retain ownership of
the trade accounts receivable and that it is likely that the Company will remain
responsible for substantially all of the accrued liabilities along with future
liabilities associated with lease terminations and employee severance payments,
as required. Assets and liabilities held for sale at March 31, 2003 consist
primarily of inventory of approximately $12.5 million and accounts payable of
approximately $4.1 million, respectively. Assets held for sale at December 31,
2002 consisted primarily of inventory of approximately $26.6 million , property
and equipment of approximately $1.7 million and, liabilities held for sale at
December 31, 2002 consisted primarily of accounts payable of $7.9 million.
Revenue for the ECD division was $22.4 million and $32.3 million for the three
months ending March 31, 2003 and 2002, respectively. The ECD division's loss
before income taxes was $3.7 million in the first quarter of 2002 and $15.4
million in the first quarter of 2003. Included in the pre-tax loss in the first
quarter of 2003 is an impairment writedown of $3.3 million of goodwill and an
$11.0 million writedown of inventory. The inventory writedown was determined
with consideration given to the expected sale proceeds associated with the
discontinued operations. The goodwill impairment was also recognized in response
to the near term expectations established by the board of directors in March
2003 to either sell or otherwise discontinue these operations. As a result, the
long-term turnaround previously estimated by management for this segment was no
longer feasible and recovery of these assets was not expected in the near term.
Also included in the pre-tax loss in the first quarter of 2003 and 2002 is
interest expense of $0.3 million and $0.4 million, respectively, that was
allocated to the electronic component distribution business. The basis for this
allocation considered interest expense which can reasonably be expected to be
avoided through the collection of the distribution division's trade receivables,
proceeds from the sales of assets held for sale, and subsequent payment on our
working capital credit facility.
7
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
NOTE C -- RECENT ACCOUNTING PRONOUNCEMENTS
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. The adoption of this standard did not have a
significant effect on operations or financial position.
In June 2002, the FASB issued Statement 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement requires entities to recognize
costs associated with exit or disposal activities when liabilities are incurred
rather than when the entity commits to an exit or disposal plan, as currently
required. Examples of costs covered by this guidance include one-time employee
termination benefits, costs to terminate contracts other than capital leases,
costs to consolidate facilities or relocate employees, and certain other exit or
disposal activities. This statement is effective for fiscal years beginning
after December 31, 2002, and will impact any exit or disposal activities the
Company initiates after that date.
In April 2002, the FASB issued Statement 145, Rescission of FASB Statements 4,
44, and 64, Amendment of FASB Statement 13, and Technical Corrections (SFAS
145). Among other provisions, SFAS 145 rescinds FASB Statement 4, Reporting
Gains and Losses from Extinguishment of Debt. Accordingly, gains or losses from
extinguishment of debt should not be reported as extraordinary items unless the
extinguishment qualifies as an extraordinary item under the criteria of
Accounting Principles Board Opinion 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB
30). Gains or losses from extinguishment of debt, which do not meet the criteria
of APB 30, should be reclassified to income from continuing operations in all
prior periods presented. The provisions of SFAS 145 will be effective for fiscal
years beginning after May 15, 2002.
In December 2002, the FASB issued Statement 148 (SFAS 148), Accounting for
Stock-Based Compensation -- Transition and Disclosure: an amendment of FASB
Statement 123 (SFAS 123), to provide alternative transition methods for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in annual financial statements
about the method of accounting for stock-based employee compensation and the pro
forma effect on reported results of applying the fair value based method for
entities that use the intrinsic value method of accounting. The pro forma effect
disclosures are also required to be prominently disclosed in interim period
financial statements. This statement is effective for financial statements for
fiscal years ending after December 15, 2002 and is effective for financial
reports containing condensed financial statements for interim periods beginning
after December 15, 2002, with earlier application permitted. The Company does
not plan a change to the fair value based method of accounting for stock-based
employee compensation and has included the disclosure requirements of SFAS 148
in the accompanying financial statements.
NOTE D -- OPERATIONAL MATTERS
The consolidated financial statements have been prepared assuming the Company
will continue as a going concern. The Company has incurred losses of
approximately $22 million and $26 million for the years ended December 31, 2001
and 2002, respectively, and, has defaulted on two significant debt obligations.
In response to the aforementioned losses, the Company has committed to a plan to
either sell or otherwise discontinue the operations of the ECD division, as
further discussed in Note B above. Management believes that the discontinuance
of the ECD division will significantly reduce the Company's losses and that
focus on its remaining EMS business, along with the efforts to restructure the
outstanding Convertible Notes and obtain waivers of default on the Credit
Agreement, as discussed further in Note H, will restore the Company to
profitability. As a result of the items noted above, which conditions existed as
of December 31, 2002, the Report of Independent Certified Public Accountants for
the year ended December 31, 2002 indicated that there was substantial doubt
regarding the Company's ability to continue as a going concern.
8
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2003
(Unaudited)
NOTE E -- INVENTORIES
Inventories consist of the following (in thousands):
March 31, December 31,
2003 2002
----------- ------------
Reptron Computer Products:
Inventories $ 670 $ 599
Electronic Manufacturing Services:
Work in process 7,868 8,529
Raw Materials 15,924 17,618
----------- -----------
$ 24,462 $ 26,746
=========== ===========
NOTE F -- FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Reptron Electronics, Inc. has two segments: Electronic Manufacturing Services
and Reptron Computer Products . The Electronic Manufacturing Services segment
manufactures electronic products (including display solutions) according to
customer design for a select number of customers throughout the country
representing a diverse range of industries. Reptron Computer Products division
primarily sells computer memory modules to retail stores.
The following table shows net sales and gross profit by industry segments for
the three months ended March 31, 2003 and March 31, 2002.
Three months ended
March 31,
(in thousands)
--------------------------
2003 2002
------ ------
Net Sales
Reptron Computer Products $ 10,640 $ 15,074
Electronic Manufacturing Services 34,524 35,778
--------- ---------
$ 45,164 $ 50,852
========= =========
Gross Profit
Reptron Computer Products $ 597 $ 1,499
Electronic Manufacturing Services 4,302 2,540
--------- ---------
$ 4,899 $ 4,039
========= =========
Goodwill, Gross
Reptron Computer Products $ -- $ --
Electronic Manufacturing Services 30,140 30,140
--------- ---------
$ 30,140 $ 30,140
========= =========
Goodwill, net of accumulated amortization
Reptron Computer Products $ -- $ --
Electronic Manufacturing Services 26,779 26,779
--------- ---------
$ 26,779 $ 26,779
========= =========
9
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2003
(Unaudited)
NOTE G -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net loss per
common share:
Three months ended
March 31,
(in thousands)
-------------------------------
2003 2002
---- ----
Numerator:
Net loss (in thousands) $ (19,616) $ (6,538)
============= ===========
Denominator:
For basic loss per share - Weighted average shares 6,417,196 6,413,640
Effect of dilutive securities:
Employee stock options -- --
------------- -----------
For diluted loss per share 6,417,196 6,413,640
============= ===========
Net loss per common share - basic $ (3.05) $ (1.02)
============= ===========
Net loss per common share - diluted $ (3.05) $ (1.02)
============= ===========
For the three month periods ended March 31, 2003 and 2002, 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 earnings per share
for all periods because the conversion price of $28.50 exceeded the average
market price of the common stock. Therefore, the effect would be anti-dilutive.
NOTE H - LONG-TERM DEBT
Credit Agreement
Three lenders have made available to us a $60 million revolving credit facility
(the "Credit Agreement") through October 10, 2005. The Credit Agreement contains
certain covenants including a minimum quarterly measure of earnings before
interest, taxes, depreciation and amortization ("EBITDA") as defined by the
Credit Agreement. The Company was not in compliance with the minimum quarterly
EBITDA covenant as of December 31, 2002 and March 31, 2003. Additionally,
management believes that it will not meet the EBITDA covenants required under
the Credit Agreement for at least the calendar quarter ending June 30, 2003.
Additionally, Reptron is in default of the Credit Agreement as a result of its
default of the Convertible Notes (see below). As a result of these defaults, our
lenders could make demand for immediate repayment of all outstanding advances
under the Credit Agreement and exercise their rights as a secured lender as
provided under the Credit Agreement. Additionally, some of the advance ratios
provided under the Credit Agreement have been made more restrictive, thereby
reducing the Company's liquidity. Notwithstanding the lender's right to make
demand for immediate and full repayment of all outstanding advances under the
Credit Agreement, the lenders continue to provide financing under the Credit
Agreement. Management is working with the lenders to develop arrangements for
the lenders to waive these defaults under the Credit Agreement as well as
negotiating an amendment to the Credit Agreement directed toward reducing the
EBITDA covenants required in future calendar quarters. There is no assurance
that the Company will receive the necessary waivers and adjustments to these
covenants. If the lenders were to terminate the Credit Agreement, for any
reason, or substantially reduce the amount available under the Credit Agreement,
it is unlikely that the Company would be able to continue its operations without
the benefit of protection under the United States Bankruptcy laws, all of which
would have a material adverse effect on its business and financial condition.
10
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2003
(Unaudited)
NOTE H - LONG-TERM DEBT - Continued
Convertible Notes
As of March 31, 2003, there was approximately $76.3 million of 6 3/4%
Convertible Subordinated Notes (the "Convertible Notes") outstanding. The
Convertible Notes pay interest semi-annually on February 1 and August 1. The
holders of the Convertible Notes have the right to convert any portion of the
principal amount of the outstanding Convertible Notes, at the date of
conversion, into shares of our common stock at any time prior to the close of
business on August 1, 2004, at a conversion rate of 35.0877 shares of common
stock per $1,000 principal amount of the Convertible Notes (equivalent to a
conversion price of approximately $28.50 per share). There is no requirement
that the holders of the Convertible Notes convert on or before August 1, 2004.
Additionally, the Company has the right to require the redemption of the
Convertible Notes under certain circumstances. Management believes it is
extremely unlikely that the Convertible Notes will be either converted or
redeemed given the Company's financial condition and the trading price for its
stock.
The Company failed to make the February 1, 2003 interest payment due to holders
of the Convertible Notes. Reptron does not have adequate liquidity to make this
interest payment and cannot determine when, if ever it will have the ability to
do so. Because the Company was unable to cure this default on or before March 5,
2003, under identified conditions described in the Notes and under that certain
Trust Indenture between Reptron and Reliance Trust Company (the predecessor to
the current trustee, US Bank), dated August 5, 1997 pursuant to which the Notes
were issued, the outstanding principal indebtedness of the Convertible Notes can
be currently accelerated and become immediately due and payable.
Certain holders of the Convertible Notes have formed an ad-hoc committee to
discuss possible alternatives in the restructuring of the indebtedness and terms
of repayment of the restructured debt under the Convertible Notes. The ad-hoc
committee represents approximately 56% of the total outstanding principal due
under the Convertible Notes. The ad-hoc committee has retained legal counsel and
the Company has engaged a consulting firm to assist in the negotiations of this
restructuring with the ad-hoc committee. If the Company fails to reach an
agreement, it is likely that the holders of the Convertible Notes will make
demand for payment of the defaulted interest and accelerate and make demand for
full and immediate repayment of the outstanding principal amount due under the
Convertible Notes, all of which would have a material adverse effect on the
Company's business and financial condition. The Company does not have sufficient
liquidity to satisfy such demands. In such event, it is probable that the
Company would seek protection under the United States Bankruptcy laws.
NOTE I - INCOME TAXES
During the three month period ended March 31, 2003, the Company incurred losses
before income taxes of $19.6 million. As a result, Reptron recognized a deferred
tax asset and an offsetting valuation allowance of approximately $7.8 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
reduce the valuation allowance appropriately for each item at such time when it
is determined that the "more likely than not" criterion is satisfied.
11
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2003
(Unaudited)
NOTE J - STOCK BASED COMPENSATION
The Company follows SFAS No. 123, which establishes a fair value based method of
accounting for stock-based employee compensation plans; however, the Company has
elected to account for its employee stock compensation plans using the intrinsic
value method under Accounting Principles Board Opinion No. 25 with pro forma
disclosures of net earnings and earnings per share, as if the fair value based
method of accounting defined in SFAS No. 123 had been applied.
Had compensation cost for the Company's stock option plan been determined on the
fair value at the grant dates for stock-based employee compensation arrangements
consistent with the method required by SFAS No. 123, the Company's net income
and net income per common share would have been the pro forma amounts indicated
below:
Three months ended
March 31,
(in thousands)
------------------------
2003 2002
------ -----
Net earnings (loss), as reported $ (19,616) $ (6,538)
Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects - -
Deduct: Total stock -based employee compensation
expense determined under fair value based method
for awards granted, modified, or settled, net of
related tax effects 30 24
---------- ---------
Pro forma net income $ (19,646) $ (6,562)
========== =========
Net loss per common share - basic:
As reported $ (3.05) $ (1.02)
Pro forma $ (3.06) $ (1.02)
Net loss per common share - diluted:
As reported $ (3.05) $ (1.02)
Pro forma $ (3.06) $ (1.02)
12
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.
DISCONTINUED OPERATIONS
The Company's Electronic Component Distribution ("ECD") segment
incurred losses of approximately $20 million for the year ended December 31,
2002. Despite cost cutting measures implemented during the second half of 2001
and throughout 2002, the Company has continued to incur losses in this segment.
As a result, the Company has decided to exit the component distribution business
either through a sale of the business or by discontinuance of its operations.
Management is in the process of negotiating a sale of this division and as of
March 31, 2003 believed that a sale was probable during the second quarter of
2003. Accordingly, the results of this division have been reported as a
discontinued operation as of March 31, 2003.
Management believes that as part of a sale the Company will retain
ownership of the trade accounts receivable and that it is likely that the
Company will remain responsible for substantially all of the accrued liabilities
along with future liabilities associated with lease terminations and employee
severance payments, as required. Assets and liabilities held for sale at March
31, 2003 consist primarily of inventory of approximately $12.5 million and
accounts payable of approximately $4.1 million, respectively. Assets held for
sale at December 31, 2002 consisted primarily of inventory of approximately
$26.6 million , property and equipment of approximately $1.7 million and,
liabilities held for sale at December 31, 2002 consisted primarily of accounts
payable of $7.9 million.
Revenue for the ECD division was $22.4 million and $32.3 million for
the three months ending March 31, 2003 and 2002, respectively. The ECD
division's loss before income taxes was $3.7 million in the first quarter of
2002 and $15.4 million in the first quarter of 2003. Included in the pre-tax
loss in the first quarter of 2003 is an impairment writedown of $3.3 million of
goodwill and an $11.0 million writedown of inventory. The inventory writedown
was determined with consideration given to the expected sale proceeds associated
with the discontinued operations. The goodwill impairment was also recognized in
response to the near term expectations established by the board of directors in
March 2003 to either sell or otherwise discontinue these operations. As a
result, the long-term turnaround previously estimated by management for this
segment was no longer feasible and recovery of these assets was not expected in
the near term. Also included in the pre-tax loss in the first quarter of 2003
and 2002 is interest expense of $0.3 million and $0.4 million, respectively,
that was allocated to the electronic component distribution business. The basis
for this allocation considered interest expense which can reasonably be expected
to be avoided through the collection of our distribution division's trade
receivables, proceeds from the sales of assets held for sale, and subsequent
payment on our working capital credit facility.
13
RESULTS OF OPERATIONS
Net Sales. Total first quarter net sales decreased $5.7 million, or
11.2% from $50.9 million in the first quarter of 2002 to $45.2 million in the
first quarter of 2003.
Reptron Computer Products ("CP") 2003 first quarter net sales decreased
$4.4 million, or 29.4% from $15.1 million for the first quarter of 2002 to $10.6
million in the first quarter of 2003. Management believes that this decrease
resulted primarily from industry-wide price decreases of memory module
components during 2003 as compared to the first quarter of 2002.
Electronic Manufacturing Services ("EMS") net sales decreased $1.3
million, or 3.5%, from $35.8 million in the first quarter of 2002 to $34.5
million in the first quarter of 2003. This decrease is primarily attributable to
decreased demand within the telecommunications and governmental products
customer base of EMS. EMS transacted business with approximately 50 customers in
the first quarter of 2003. The largest three customers represented approximately
14.3%, 11.6% and 7.6%, respectively, of first quarter 2003 EMS net sales (11.0%,
8.9% and 5.8%, respectively of total Company first quarter 2003 net sales) as
compared to 17.5%, 9.1%, and 6.2%, respectively, of first quarter 2002 EMS net
sales (12.3%, 6.4% and 4.3% respectively, of total Company first quarter 2002
net sales). Sales by industry segment for the first quarter of 2003 were:
semiconductor equipment 7.4%; medical equipment 37.9%;
industrial/instrumentation 14.9%; telecommunications 10.1%; banking 12.4%;
government 2.0%; office products 4.2%; and all other 11.1%.
Gross Profit. Total 2003 first quarter gross profit increased $0.9
million, or 21.3%, from $4.0 million in the first quarter of 2002 to $4.9
million in the first quarter of 2003. The gross profit percentage of the Company
was 10.9% in the first quarter of 2003 and 7.9% in the first quarter of 2002.
CP gross profit decreased $0.9 million, or 60.2%, from $1.5 million in
the first quarter of 2002 to $0.6 million in the first quarter of 2003. The
gross margin was 5.6% in the first quarter of 2003 and 9.9% in the first quarter
of 2002. CP gross profit margin declined primarily because retail prices of
memory modules decreased faster than the wholesale prices charged by our
vendors.
EMS gross profit increased $1.8 million, or 69.3%, from $2.5 million in
the first quarter of 2002 to $4.3 million in the first quarter of 2003. Gross
margin was 12.5% in the first quarter of 2003 and 7.1% in the first quarter of
2002. The increase in gross profit dollars and gross profit margin from prior
periods is primarily attributable to more efficient materials procurement and
more favorable pricing from our customers in the first quarter of 2003 as
compared to the first quarter of 2002.
Selling, General, and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses decreased $1.0 million, or 14.9%, from $6.6
million in the first quarter of 2002 to $5.6 million in the first quarter of
2003. These expenses, as a percentage of net sales, decreased from 13.0% in the
first quarter of 2002 to 12.5% in the first quarter of 2003. The decrease in
SG&A expense measured in dollars and as a percentage of sales is primarily
attributable to cost cutting measures implemented subsequent to the first
quarter of 2002. The employee base declined by approximately 140 employees from
approximately 1,212 in the first quarter of 2002 to approximately 1,072 in the
first quarter of 2003 which represents an 11.6% reduction in overall workforce,
resulting in a corresponding reduction in selling, general & administrative
expenses. Selling, general and administrative expenses in the first quarter of
2003 and 2002 include the corporate overhead that has historically been
allocated to our electronic component distribution division which is currently
reported as a discontinued operation. Management expects additional reduction of
these costs in future periods as our operation of the distribution division is
concluded.
Interest Expense. Net interest expense decreased $0.1 million, or 6.0%,
from $1.8 million in the first quarter of 2002 to $1.7 million in the first
quarter of 2003. This decrease in net interest expense is the result of the
combination of a decrease in average outstanding debt of $17.4 million from
$131.1 million in the first quarter of 2002 to $113.8 million in the first
quarter of 2003, and an increase in average interest rates from 6.5% in the
first quarter of 2002 to 6.7% in the first quarter of 2003. Interest expense of
$0.3 million and $0.4 million was allocated to the discontinued operations of
our electronic component distribution business. The basis for this allocation
was interest expense which can reasonably be expected to be avoided through the
collection of our distribution division's trade receivables and subsequent
payment on our working capital credit facility. Interest expense of
approximately $1.3 million related to our Convertible Notes has been fully
accrued and expensed in the first quarter of 2003. Management cannot be certain
when, if ever, the Company will have the ability to pay the accrued interest on
these Convertible Notes.
14
Income Taxes. During the three month period ended March 31, 2003, we
incurred losses before income taxes of $19.6 million. As a result, we recognized
a deferred tax asset and an offsetting valuation allowance of $7.8 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 judgement 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
provided by net income (loss) levels combined with fluctuations in inventory,
accounts receivable and accounts payable. Operating activities for the first
quarter of 2003 provided cash of approximately $3.4 million. This cash flow
resulted primarily from decreases in accounts receivable of $4.5 million and
inventories of $2.3 million, and a decrease in accounts payable, excluding the
reclassification effect of our distribution division as a discontinued
operation, of $3.9 million. Days sales in accounts receivable were approximately
58 and 51 days as of March 31, 2002 and 2003, respectively. Annualized inventory
turns were approximately 4.0 and 5.0 times for the first quarter of 2002 and
2003, respectively.
Capital expenditures totaled approximately $0.7 million in the first
quarter of 2003. These capital expenditures were primarily for the acquisition
of equipment and building improvements. These purchases were funded by the
working capital credit facility.
Credit Agreement. Three lenders have made available to us a $60 million
revolving credit facility (the "Credit Agreement") through October 10, 2005.
Borrowings under the Credit Agreement are collateralized by substantially all
assets of Reptron including inventory, accounts receivable, equipment and
general intangibles and certain of our real property. The Credit Agreement
limits the amount of capital expenditures and prohibits the payment of dividends
without the lender's consent. Amounts outstanding under the Credit Agreement
were approximately $31.3 million as of March 31, 2003.
The Credit Agreement contains certain covenants including a minimum
quarterly measure of earnings before interest, taxes, depreciation and
amortization ("EBITDA") as defined by the Credit Agreement. Reptron was not in
compliance with the minimum quarterly EBITDA covenant as of December 31, 2002
and March 31, 2003. Additionally, management believes that Reptron will not meet
the EBITDA covenants required under the Credit Agreement for at least the
calendar quarter ending June 30, 2003. Additionally, we are in default of the
Credit Agreement as a result of our default of the Convertible Notes (see
below). As a result of these defaults, our lenders could make demand for
immediate repayment of all outstanding advances under the Credit Agreement and
exercise their rights as a secured lender as provided under the Credit
Agreement. Additionally, some of the advance ratios provided under our Credit
Agreement have been made more restrictive, thereby reducing our liquidity.
Notwithstanding our lender's right to make demand for immediate and full
repayment of all outstanding advances under the Credit Agreement, our lenders
continue to provide us financing under the Credit Agreement. Management is
working with our lenders to develop arrangements for our lenders to waive these
defaults under the Credit Agreement as well as negotiating an amendment to the
Credit Agreement directed toward reducing the EBITDA covenants required in
future calendar quarters. We cannot assure you that we will receive the
necessary waivers and adjustments to these covenants. If our lenders were to
terminate the Credit Agreement, for any reason, or substantially reduce the
amount available under the Credit Agreement, it is unlikely that we would be
able to continue our operations without the benefit of protection under the
United States Bankruptcy laws, all of which would have a material adverse effect
on our business and financial condition.
15
Convertible Notes. As of March 31, 2003, there was outstanding
approximately $76.3 million of Convertible Notes. The holders of the Convertible
Notes have the right to convert any portion of the principal amount of the
outstanding Convertible Notes, at the date of conversion, into shares of our
common stock at any time prior to the close of business on August 1, 2004, at a
conversion rate of 35.0877 shares of common stock per $1,000 principal amount of
the Convertible Notes (equivalent to a conversion price of approximately $28.50
per share). There is no requirement that the holders of the Convertible Notes
convert on or before August 1, 2004. Additionally, the Company has the right to
require the redemption of the Convertible Notes under certain circumstances. We
believe it is extremely unlikely that the Convertible Notes will be either
converted or redeemed given the Company's financial condition and the trading
price for its stock.
The Company failed to make the February 1, 2003 interest payment due to
holders of the Convertible Notes. Reptron does not have adequate liquidity to
make this interest payment and we cannot determine when, if ever we will have
the ability to do so. Because we were unable to cure this default on or before
March 5, 2003, under identified conditions described in the Notes and under that
certain Trust Indenture between Reptron and Reliance Trust Company (the
predecessor to the current trustee, US Bank), dated August 5, 1997 pursuant to
which the Notes were issued, the outstanding principal indebtedness of the
Convertible Notes can be currently accelerated and become immediately due and
payable.
Certain holders of the Convertible Notes have formed an ad-hoc committee to
discuss possible alternatives regarding in the restructuring of the indebtedness
and terms of repayment of the restructured debt under the Convertible Notes. The
ad-hoc committee represents approximately 56% of the total outstanding principal
due under the Convertible Notes. The ad-hoc committee has retained legal counsel
and we have engaged a consulting firm to assist in the negotiations of this
restructuring with the ad-hoc committee. If we fail to reach an agreement, it is
likely that the holders of the Convertible Notes will make demand for payment of
the defaulted interest and accelerate and make demand for full and immediate
repayment of the outstanding principal amount due under the Convertible Note,
all of which would have a material adverse effect on our business and financial
condition. We do not have sufficient liquidity to satisfy such demands. In such
event, it is probable that we would seek protection under the United States
Bankruptcy laws.
Future liquidity and cash requirements will depend on a wide range of
factors including the level of business in existing operations, credit lines
extended by trade suppliers, the need for expansion of manufacturing operations
in foreign countries (especially China) and capital expenditure requirements.
The ability to meet future liquidity requirements will depend upon the
successful negotiation of waivers of the defaults under our Credit Agreement,
renegotiating our Credit Agreement to reduce the future quarterly EBITDA
requirements, as well as restructuring the indebtedness represented by the
Convertible Notes. There can be no assurance of successful completion of any of
these items. Additionally, there can be no assurance that our vendors will not
reduce credit limits currently extended to us or shorten the time for payment of
credit extended, that the lenders under our Credit Agreement will continue to
provide financing in light of the existing defaults under the Credit Agreement
or that the indebtedness under the Convertible Notes will not be accelerated and
become immediately due and payable. Accordingly, there can be no assurance that
Reptron will be able to meet its working capital needs for any future period. As
a result of the items noted above, which conditions existed as of December 31,
2002 the Report of Independent Certified Public Accountants for the year ended
December 31, 2002 indicated that there was substantial doubt regarding our
ability to continue as a going concern.
Critical Accounting Policies
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires the Company to make
significant estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses during the reporting period and related
disclosure of contingent assets and liabilities. These estimates and assumptions
are based upon the Company's continuous evaluation of historical results and
anticipated future events. Actual results may differ from these estimates under
different assumptions or conditions.
The Securities and Exchange Commission (the "SEC") defines critical
accounting polices as those that are, in management's view, most important to
the portrayal of the Company's financial condition and results of operations and
those that require significant judgments and estimates. The Company believes the
following critical accounting policies involve the more significant judgments
and estimates used in the preparation of its consolidated financial statements:
16
Valuation of Receivables. The Company maintains an allowance for doubtful
accounts for estimated losses resulting from customer defaults. The Company
performs ongoing credit evaluations of its customers considering among other
things, the customers' payment history and current ability to pay. A provision
for uncollectible amounts is adjusted based on these evaluations and historical
experience. If the financial condition of a customer were to deteriorate,
resulting in an impairment of that customer's ability to make payments to the
Company, additional reserves may be required.
Valuation of Inventories. Inventories are recorded at the lower of cost or
estimated market value. Cost is determined using the first-in, first-out and
average cost methods. The Company's inventories are comprised, in part, of high
technology components sold to rapidly changing and competitive markets whereby
such inventories may be subject to early technological obsolescence.
The Company evaluates inventories for excess, obsolescence or other factors
that may render inventories unmarketable at normal margins. Write-downs are
recorded so that inventories reflect the approximate net realizable value and
take into consideration the Company's contractual provisions with its customers
and suppliers governing price protection, stock rotation and return privileges
relating to obsolescence. Because of the large number of transactions and the
complexity of managing the process around price protections and stock rotations,
estimates are made regarding adjustments to the carrying amount of inventories.
Additionally, assumptions about future demand, market conditions and decisions
to discontinue certain product lines can impact the decision to write down
inventories. If assumptions about future demand change or actual market
conditions are less favorable than those projected by management, additional
write-downs of inventories may be required. In any case, actual amounts could be
different from those estimated.
Goodwill. In assessing the Company's goodwill for impairment in accordance
with the Financial Accounting Standards Board's ("FASB") Statement of Financial
Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible
Assets," the Company is required to assess the valuation of its reporting units,
which involves making significant assumptions about the future cash flows and
overall performance of its reporting units. Should these assumptions or the
structure of the reporting units change in the future based upon market
conditions or changes in business strategy, the Company may be required to
record additional impairment charges to its goodwill.
Deferred Income Taxes. The carrying value of the Company's deferred income
tax assets is dependent upon the Company's ability to generate sufficient future
taxable income in certain tax jurisdictions. Should the Company determine that
it would not be able to realize all or part of its deferred tax assets in the
future, an adjustment to the deferred tax assets would be expensed in the period
such determination was made. The Company presently records a valuation allowance
to reduce its deferred tax assets to the amount that is more likely than not
expected to be realized. While the Company has considered future taxable income
and ongoing prudent and feasible tax planning strategies in assessing the need
for the valuation allowance, in the event that the Company were to determine
that it would be able to realize its deferred tax assets in the future in excess
of its net recorded amount (including the valuation allowance), an adjustment to
the deferred tax asset would increase income in the period such determination
was made.
Contingencies. The Company is the subject of various threatened or pending
legal actions and contingencies in the normal course of conduction its business.
The Company provides for costs related to these matters when a loss is probable
and the amount can be reasonably estimated. The Company assesses the likelihood
of adverse judgements or outcomes to these matters, as well as the range of
potential losses. A determination of the reserves required, if any, is made
after careful analysis. The required reserves may change in the future due to
new developments.
Value of Asset Group - Discontinued Operations. The Company has reported
its Electronic Component Distribution division as a discontinued operation to be
disposed of by a sale. As of March 31, 2003, assets held for sale consist
primarily of inventory of approximately $12.5 million and liabilities held for
sale consist primarily of accounts payable of approximately $4.1 million. The
Company reported a loss from discontinued operations of $17.2 million in the
first quarter of 2003. These amounts are based, in part, on expected terms of a
sale of the division. If the terms of an actual sale differ from these
estimates, an adjustment to the loss from discontinued operations may be
required.
17
NEW ACCOUNTING PRONOUNCEMENTS
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. The adoption of this standard did not have a
significant effect on operations or financial position.
In June 2002, the FASB issued Statement 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement requires entities to
recognize costs associated with exit or disposal activities when liabilities are
incurred rather than when the entity commits to an exit or disposal plan, as
currently required. Examples of costs covered by this guidance include one-time
employee termination benefits, costs to terminate contracts other than capital
leases, costs to consolidate facilities or relocate employees, and certain other
exit or disposal activities. This statement is effective for fiscal years
beginning after December 31, 2002, and will impact any exit or disposal
activities the Company initiates after that date.
In April 2002, the FASB issued Statement 145, Rescission of FASB Statements
4, 44, and 64, Amendment of FASB Statement 13, and Technical Corrections (SFAS
145). Among other provisions, SFAS 145 rescinds FASB Statement 4, Reporting
Gains and Losses from Extinguishment of Debt. Accordingly, gains or losses from
extinguishment of debt should not be reported as extraordinary items unless the
extinguishment qualifies as an extraordinary item under the criteria of
Accounting Principles Board Opinion 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB
30). Gains or losses from extinguishment of debt, which do not meet the criteria
of APB 30, should be reclassified to income from continuing operations in all
prior periods presented. The provisions of SFAS 145 will be effective for fiscal
years beginning after May 15, 2002.
In December 2002, the FASB issued Statement 148 (SFAS 148), Accounting for
Stock-Based Compensation -- Transition and Disclosure: an amendment of FASB
Statement 123 (SFAS 123), to provide alternative transition methods for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in annual financial statements
about the method of accounting for stock-based employee compensation and the pro
forma effect on reported results of applying the fair value based method for
entities that use the intrinsic value method of accounting. The pro forma effect
disclosures are also required to be prominently disclosed in interim period
financial statements. This statement is effective for financial statements for
fiscal years ending after December 15, 2002 and is effective for financial
reports containing condensed financial statements for interim periods beginning
after December 15, 2002, with earlier application permitted. The Company does
not plan a change to the fair value based method of accounting for stock-based
employee compensation and has included the disclosure requirements of SFAS 148
in the accompanying financial statements.
18
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
While we had no holdings of derivative financial or commodity
instruments at March 31, 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 bears interest
at a variable rate based on the prime rate.
Item 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation as of a date within 90 days of the filing of this Form
10-Q, that its disclosure controls and procedures (as defined in Rules 13a-14
and 15d-14 under the Securities Exchange Act of 1934) are effective. There have
been no significant changes in internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
19
REPTRON ELECTRONICS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
99.1 Certification Pursuant to 18 U.S.C. (S)1350.
99.2 Certification Pursuant to 18 U.S.C. (S)1350.
b. Reports on Form 8-K
None
20
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 20, 2003
REPTRON ELECTRONICS, INC.
(Registrant)
By: /s/ Paul J. Plante
--------------------------------
Paul J. Plante, President and Chief
Operating Officer
(Principal Financial and Accounting Officer)
21
CERTIFICATIONS
I, Michael L. Musto, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reptron Electronics,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date May 20, 2003 /s/ Michael L. Musto
------------------ -----------------------------------------
Michael L. Musto, Chief Executive Officer
22
CERTIFICATIONS
I, Paul J. Plante, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reptron Electronics,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date May 20, 2003 /s/ Paul J. Plante
--------------- -----------------------------------------------------
Paul J. Plante, President and Chief Operating Officer
(Principal Accounting Officer)
23