Wednesday August 5, 5:50 pm Eastern Time
Company Press Release
SOURCE: CHS Electronics, Inc.
CHS Electronics Reports Profitability Gains and Strong Sales Growth in Second Quarter of 1998
* Net Income Rises 217% and Is 1.1% of Sales; EPS Up 29% * Sales Increase 87% as Inventory and Accounts Receivable DSO Remain Low * Comparable-Store Sales Rise 18% in Constant Currency
MIAMI, Fla., Aug. 5 /PRNewswire/ -- CHS Electronics, Inc. (Nasdaq: CHSE - news), a leading international distributor of microcomputer products, today reported net income of $20.3 million, or $0.36 per diluted share, on net sales of $1.8 billion in the second quarter of 1998.
This is a 217 percent increase over net income of $6.4 million, or $0.28 per diluted share, and an 87 percent increase over net sales of $947.0 million in last year's second quarter.
Operating income was $41.1 million in the second quarter of this year, a gain of 137 percent from $17.3 million in the second quarter of 1997. Gross profit increased by 87 percent, from $70.2 million in last year's second quarter to $130.9 million in this year's comparable period.
Claudio Osorio, chairman and chief executive officer, said these latest financial results reflect the excellence of CHS's asset management, which he described as ''by far the best in our industry.'' This is apparent in inventory of only 31 days' sales outstanding, and accounts receivable of only 34 DSO as of the end of this year's second quarter, he said, and also in exceptionally low inventory obsolescence and bad debt expense rates of 0.2 percent.
As of June 30, 1998 the company had cash on hand of $81.9 million. This was after setting aside cash for the acquisition of Metrologie International, which distributes computer hardware and software in France, the U.K. and Spain.
''Another important fact about last quarter is that we exceeded our sales goals in every geographic region around the world and in every product category except mass storage, where we had reported some softening of demand during the quarter,'' Mr. Osorio said. ''In July of this year, in the aftermath of price adjustments by manufacturers, our revenues from the sale of mass storage items were 10 percent above plan.''
Same-store sales -- those from continuing operations -- were 18 percent higher on a constant currency basis in this year's second quarter compared to a year earlier.
CHS Electronics' second quarter 1998 net, operating (before goodwill amortization) and gross margins -- 1.1, 2.6, and 7.4 percent respectively -- compare with 0.7, 1.9 and 7.4 percent a year earlier.
In this year's first six months, CHS Electronics had net income of $40.9 million, or $0.73 per diluted share, on net sales of $3.5 billion. This compares with net income of $13.1 million, or $0.57 per diluted share, on net sales of $1.8 billion a year earlier.
Operating income was $78.0 in this year's first half, compared with $32.0 million in the first six months of 1997.
CHS Electronics had a net currency gain of $1.3 million in this year's second quarter; last year's second quarter results included a comparable gain of $0.4 million. Net interest expense totaled $12 million in the quarter, compared with $8 million in this year's first quarter, as a result of the April 10 completion of a $200 million debt offering. The effective tax rate of 25 percent was in line with CHS's expectations. This tax rate did not include current or prior positive implications of recent changes in international tax rules.
Significant recent developments at CHS have included:
The July announcement of a definitive agreement for the purchase from Metro AG of Germany of four major subsidiaries (MAXDATA Computer GmbH, Peacock System GmbH, Vobis Assembly GmbH and Vobis Microcomputer AG) engaged in microcomputer assembly, distribution and retailing. This will strengthen CHS's leadership position in Germany and Europe and will attain the company's goals of developing a private label and reaching $12 billion in pro forma worldwide sales this year. The European community has given indications that the acquisition may be approved by the third week of August.
The completion effective July 1 of the Metrologie acquisition, which strengthens CHS's position as the leading distributor in France. Since then, Metrologie's headquarters has been closed, its gross margin has increased by a full percentage point, and its revenues have been more than 10 percent ahead of plan.
The conversion early in July of CHS Germany to JBA System 21, a Year 2000- and Euro currency-compliant, enterprise-wide suite of fully integrated applications providing financial, customer support and logistics solutions. The transition, which worked perfectly and was completed on schedule, is part of the program to standardize information systems throughout CHS's global network of distribution companies.
The July filing of an application to list CHS stock on the New York Stock Exchange. Trading on the NYSE is expected to begin in mid-August, giving the company greater access to capital markets, reducing volatility and providing investors with more efficient pricing.
Miami-based CHS Electronics, ranked number 320 on the latest Fortune 500 list of the largest U.S.-based industrial corporations with sales of $6.5 billion and net income of $76.1 million for the last four quarters, is a leading international, full-service distributor of microcomputers, peripherals and software products to more than 110,000 resellers in 45 countries in Europe, Latin America, Asia and Africa. Unlike other computer wholesalers, CHS Electronics distributes a limited product line for a limited number of leading computer manufacturers and does so only outside the United States. The company believes that its ''focused distribution'' enables it to respond more quickly to customers, provide better service, and reduce inventory and working capital requirements. CHS believes it is the largest microcomputer distributor in Latin America and Europe.
The forward-looking statements made above by CHS Electronics, including those dealing with the company's sales goals, the expected results of listing shares on the New York Stock Exchange, and European approval of the Metro AG acquisitions, are based on current expectations and may differ materially from actual results. Among factors that could cause actual results to differ materially are changes in business conditions, growth in the personal computer industry and the general economy; competition; changes in product mix; and the risk factors listed by CHS Electronics' reports filed with the Securities and Exchange Commission.
CHS ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
JUNE 30, DECEMBER 31,
1998 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $81,883 $68,806
Cash held in escrow 91,675 --
Accounts receivable:
Trade, less allowance for doubtful
accounts of $23,195 in 1998 and
$18,347 in 1997 696,613 659,757
Affiliates 38,850 24,604
735,463 684,361
Inventories 633,254 693,503
Prepaid expenses and other current assets 82,141 65,255
TOTAL CURRENT ASSETS 1,624,416 1,511,925
PROPERTY AND EQUIPMENT, NET 82,878 61,468
COST IN EXCESS OF ASSETS ACQUIRED, NET 507,472 381,830
OTHER ASSETS 38,293 13,599
$2,253,059 $1,968,822
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $422,411 $309,510
Accounts payable, trade 585,812 771,535
Accrued liabilities 89,958 83,309
Amounts due to sellers under
acquisition agreements 138,986 54,866
Income taxes payable 18,097 12,711
Deferred income taxes 9,255 1,223
TOTAL CURRENT LIABILITIES 1,264,519 1,233,154
LONG TERM DEBT 232,154 61,556
MINORITY INTEREST 6,922 6,348
SHAREHOLDERS' EQUITY:
Preferred stock, authorized 5,000,000
shares; 0 shares outstanding -- --
Common stock, authorized 100,000,000
shares at $.001 par value; 51,656,949
and 48,910,999 shares outstanding
at June 30, 1998 and
December 31, 1997, respectively 52 49
Additional paid-in capital 668,644 621,021
Retained earnings 105,979 65,115
Cumulative foreign currency
translation adjustment (25,211) (18,421)
TOTAL SHAREHOLDERS' EQUITY 749,464 667,764
$2,253,059 $1,968,822
CHS ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(Unaudited) (Unaudited)
1998 1997 1998 1997
Net sales $1,769,494 $946,955 $3,520,832 $1,824,058
Cost of goods sold 1,638,570 876,783 3,267,314 1,691,423
Gross profit 130,924 70,172 253,518 132,635
Operating expenses,
excluding goodwill
amortization 84,763 51,824 165,129 98,499
Operating income,
before goodwill
amortization 46,161 18,348 88,389 34,136
Goodwill amortization 5,069 1,022 10,417 2,184
Operating income 41,092 17,326 77,972 31,952
Other (income) expenses:
Interest income (4,360) (1,799) (6,999) (3,567)
Interest expense 16,904 8,018 27,467 14,634
12,544 6,219 20,468 11,067
Earnings before
income taxes and
minority interest
in subsidiaries 28,548 11,107 57,504 20,885
Income taxes 7,043 4,147 14,823 6,790
Minority interest in
subsidiaries 1,207 559 1,816 983
Net earnings $20,298 $6,401 $40,865 $13,111
Net earnings per
common share:
Basic $.40 $.29 $.81 $.59
Diluted $.36 $.28 $.73 $.57
Weighted average
shares outstanding:
Basic 51,181,897 22,090,518 50,457,789 22,064,829
Diluted 57,018,660 23,200,139 55,754,252 22,944,803
SOURCE: CHS Electronics, Inc.
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