<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 0-28488
MULTIPLE ZONES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1431894
(State of incorporation) (I.R.S. Employer
Identification Number)
707 SOUTH GRADY WAY
RENTON, WASHINGTON 98055-3233
(Address of principal executive offices) (Zip Code)
(206) 430-3000
(Registrant's telephone
number, including area code)
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 No X
--- ---
The number of shares of the registrant's Common Stock outstanding as of July 31,
1996, was 12,847,710.
<PAGE> 2
MULTIPLE ZONES INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
December 31, 1995 and June 30, 1996 . . . . . . . . . . . . 3
Consolidated Statements of Operations
Three and six months ended June 30, 1996 and 1995 . . . . . 4
Statements of Shareholders' Equity
Three months ended March 31, 1996 and June 30, 1996 . . . . 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995 . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE> 3
PART I. Financial Information
ITEM 1. Consolidated Financial Statements
MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
Balance Sheet
December 31, June 30, June 30,
1995 1996 1996
------------ ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,214,581 $ 522,909 $ 8,900,783
Receivables, net 23,111,478 33,952,473 33,952,473
Inventories, net 42,030,676 47,052,979 47,052,979
Prepaids 6,292,209 3,994,386 3,407,373
Deferred income taxes 695,060 961,732 961,732
------------- ------------- -------------
Total current assets 73,344,004 86,484,479 94,275,340
Property and equipment, net 4,518,555 5,338,869 5,338,869
Other assets 1,529,605 2,406,325 2,406,325
------------- ------------- -------------
Total assets $ 79,392,164 $ 94,229,673 $ 102,020,534
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank lines of credit $ 12,034,890 $ 20,533,843 $ 676,917
Accounts payable 46,594,671 46,370,262 46,780,576
Accrued liabilities and other 5,155,322 7,480,280 7,480,280
Current portion of capital lease obligations 722,558 696,392 696,392
Income taxes payable 1,086,223 981,873 981,873
------------- ------------- -------------
Total current liabilities 65,593,664 76,062,650 56,616,038
Capital lease obligations, net of current portion 1,664,553 1,377,067 1,377,067
Deferred income taxes 295,482 294,566 294,566
Other 401,940 346,979 346,979
------------- ------------- -------------
Total liabilities 67,955,639 78,081,262 58,634,650
------------- ------------- -------------
Minority interest 239,415 364,417 364,417
------------- ------------- -------------
Commitments and contingencies
Series B Redeemable Convertible Preferred Stock 6,461,096 6,920,358 --
------------- ------------- -------------
Shareholders' equity:
Common stock 2,750,000 2,750,000 36,907,831
Retained earnings 1,987,736 6,143,651 6,143,651
Foreign currency translation adjustment (1,722) (30,015) (30,015)
------------- ------------- -------------
Total shareholders' equity 4,736,014 8,863,636 43,021,467
------------- ------------- -------------
Total liabilities and shareholders' equity $ 79,392,164 $ 94,229,673 $ 102,020,534
============= ============= =============
</TABLE>
See accompanying notes.
3
<PAGE> 4
MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months For the three months
ended June 30, ended June 30,
------------------------------- -------------------------------
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 97,043,563 $ 212,337,824 $ 50,815,378 $ 111,410,791
Cost of sales 84,221,962 182,943,952 44,295,062 95,980,396
------------- ------------- ------------- -------------
Gross profit 12,821,601 29,393,872 6,520,316 15,430,395
Selling, general and administrative expenses 10,978,473 21,121,958 5,220,269 11,043,998
------------- ------------- ------------- -------------
Income from operations 1,843,128 8,271,914 1,300,047 4,386,397
------------- ------------- ------------- -------------
Other (income) expense:
Interest expense 451,301 1,016,373 282,558 512,345
Other income (40,610) (158,662) (11,967) (74,748)
Minority interest 41,959 127,634 15,651 79,535
------------- ------------- ------------- -------------
452,650 985,345 286,242 517,132
------------- ------------- ------------- -------------
Income before income taxes 1,390,478 7,286,569 1,013,805 3,869,265
Provision for income taxes 526,371 2,671,392 383,301 1,427,149
------------- ------------- ------------- -------------
Net Income $ 864,107 $ 4,615,177 $ 630,504 $ 2,442,116
============= ============= ============= =============
Primary earnings per share $ 0.09 $ 0.42 $ 0.06 $ 0.23
============= ============= ============= =============
Shares used in computation of
primary earnings per share 9,801,229 9,815,889 9,815,080 9,815,922
============= ============= ============= =============
Fully diluted earnings per share $ 0.09 $ 0.45 $ 0.06 $ 0.24
============= ============= ============= =============
Shares used in computation of
fully diluted earnings per share 10,112,476 10,238,669 10,150,411 10,238,832
============= ============= ============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 5
MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Foreign
Common Stock Currency
-------------------------- Retained Translation
Shares Amount Earnings Adjustment Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 9,374,999 $ 2,750,000 $ 1,987,736 $ (1,722) $ 4,736,014
Accretion of Series B
Preferred Stock (229,631) (229,631)
Net income 2,173,061 2,173,061
Translation adjustment 26,093 26,093
--------- ----------- ----------- -------- -----------
Balance at March 31, 1996 9,374,999 2,750,000 3,931,166 24,371 6,705,537
Accretion of Series B
Preferred Stock (229,631) (229,631)
Net income 2,442,116 2,442,116
Translation adjustment (54,386) (54,386)
--------- ----------- ----------- -------- -----------
Balance at June 30, 1996 9,374,999 $ 2,750,000 $ 6,143,651 $(30,015) $ 8,863,636
========= =========== =========== ======== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months
ended June 30,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 864,107 $ 4,615,177
Adjustments to reconcile net income to
net cash used in operating activities:
Allowance for doubtful accounts and returns (104,776) 432,960
Inventory valuation allowance 235,725 675,181
Depreciation and amortization 429,649 706,108
Deferred income taxes (13,719) (267,588)
Minority interest 41,959 (132,854)
Foreign currency translation adjustment 30,491 (28,293)
Changes in assets and liabilities:
Accounts receivable (6,806,741) (10,342,722)
Inventory (3,603,069) (5,330,053)
Prepaids and other assets (1,727,137) 2,261,289
Accounts payable 5,583,390 (4,013,279)
Accrued liabilities (1,402,226) 1,143,210
Income taxes payable 236,303 (189,094)
------------ ------------
Net cash used in operating activities (6,236,044) (10,469,958)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (546,771) (1,454,248)
------------ ------------
Net cash used in investing activities (546,771) (1,454,248)
------------ ------------
Cash flows from financing activities:
Borrowings under line of credit agreement 26,538,366 34,563,977
Payments under line of credit agreement (19,515,000) (26,065,024)
Net change in book overdrafts (200,380) 3,131,724
Payments on capital leases (254,429) (343,182)
Other 48,488 (54,961)
------------ ------------
Net cash provided by financing activities 6,617,045 11,232,534
------------ ------------
Net decrease in cash and cash equivalents (165,770) (691,672)
Cash and cash equivalents at beginning of period 513,789 1,214,581
------------ ------------
Cash and cash equivalents at end of period $ 348,019 $ 522,909
============ ============
</TABLE>
See accompanying notes.
6
<PAGE> 7
MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements and related notes thereto for the
three and six months periods ended June 30, 1996 are unaudited and reflect all
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 period. The results of operations for such interim periods are not
necessarily indicative of the results for the entire fiscal year ending December
31, 1996. These financial statements should be read in conjunction with the
audited financial statements and notes thereto contained in the Company's
Prospectus dated June 27, 1996.
2. INITIAL PUBLIC OFFERING
On July 2, 1996, the Company issued 2,200,000 shares of Common Stock at
$12.00 per share in an initial public offering. On July 12, 1996, an additional
330,000 shares were issued pursuant to the underwriters' over-allotment option.
The proceeds to the Company were $27,237,473, net of the underwriting discount
and other direct expenses of $3,122,527. The pro forma information presented on
the balance sheet has been adjusted to give effect to the conversion of all
outstanding shares of Series B Preferred Stock to 918,711 shares of Common Stock
upon consummation of the offering, sale of the 2,530,000 shares of Common Stock
and application of the net proceeds of the offering.
3. EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of
common and dilutive common equivalents outstanding during the period. Dilutive
common equivalents consist of stock options and warrants. The accretion relating
to the Series B Redeemable Convertible Preferred Stock ("Series B Preferred
Stock") is deducted from income only in the calculation of primary earnings per
share. Fully diluted earnings per share assumes the conversion of Series B
Preferred Stock to Common Stock. Common and common equivalent shares issued at
prices below the public offering price during the 12 months preceding the
offering date have been included in the calculation as if they were outstanding
for all periods presented. The calculation uses the treasury stock method in
determining the resulting incremental weighted average equivalent shares
outstanding.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
The matters described below contain forward-looking statements which involve
known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company or industry trends to differ
materially from those expressed or implied by such forward-looking statements.
The following discussion and analysis should be read in conjunction with the
Company's Prospectus dated June 27, 1996 filed with the Securities and Exchange
Commission.
General
Multiple Zones International, Inc. and its majority owned subsidiaries
(collectively the "Company") is a leading international direct marketer of
microcomputer hardware, software, peripherals and accessories through its two
flagship catalogues, The Mac Zone and The PC Zone. The Company began operations
in 1988 by advertising in national trade publications. Catalogue circulation
commenced with The Mac Zone in 1990, followed by The PC Zone in 1992.
International subsidiary operations and licensing activities commenced in 1992,
and outbound telemarketing operations, principally to business accounts, were
added in 1993. The Company distributed 18.6 million catalogues domestically in
the six months ended June 30, 1996, with additional circulation by its
subsidiaries and licensees through operations in 26 other countries worldwide.
The Company intends to distribute at least 40 million catalogues during 1996
which includes a significant increase in circulation beginning late in the third
quarter.
Results of Operations
The following tables present the Company's unaudited consolidated results of
operations, in dollars and as a percentage of net sales, and selected operating
data for the periods indicated. This information has been prepared by the
Company on a basis consistent with the Company's unaudited Consolidated
Financial Statements and, in the opinion of management, includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of the results of such periods.
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
-----------------------------------------------
1995 1996 1995 1996
(In thousands, except operating data)
<S> <C> <C> <C> <C>
Net sales $ 97,043 $212,338 $ 50,815 $111,411
Cost of sales 84,222 182,944 44,295 95,980
-------- -------- -------- --------
Gross profit 12,821 29,394 6,520 15,431
SG&A expenses 10,978 21,122 5,220 11,044
-------- -------- -------- --------
Income from operations 1,843 8,272 1,300 4,387
Other expense 453 986 287 518
-------- -------- -------- --------
Income before taxes 1,390 7,286 1,013 3,869
Provision for taxes 526 2,671 383 1,427
-------- -------- -------- --------
Net income $ 864 $ 4,615 $ 630 $ 2,442
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
-------------------------------------------------------------------
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Selected Operating Data:
Circulation 15,250,000 18,600,000 7,250,000 9,100,000
Number of Shipments 364,000 556,000 166,000 273,000
Average Order Size $ 260 $ 362 $ 296 $ 388
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 86.8% 86.2% 87.2% 86.1%
------------- ------------- ------------- -------------
Gross profit 13.2% 13.8% 12.8% 13.9%
SG&A expenses 11.3% 10.0% 10.2% 9.9%
------------- ------------- ------------- -------------
Income from operations 1.9% 3.8% 2.6% 4.0%
Other expense 0.5% 0.5% 0.6% 0.5%
------------- ------------- ------------- -------------
Income before taxes 1.4% 3.3% 2.0% 3.5%
Provision for taxes 0.5% 1.3% 0.8% 1.3%
------------- ------------- ------------- -------------
Net income 0.9% 2.0% 1.2% 2.2%
============= ============= ============= =============
</TABLE>
Comparison of the Three-Month Periods Ended June 30, 1996 and 1995
Net Sales. Net sales increased 119.3% to $111.4 million in the three months
ended June 30, 1996 from $50.8 million in the comparable period. The increase
resulted primarily from an increase in domestic hardware sales to 82.0% of gross
sales in the three months ended June 30, 1996 from 69.5% in the comparable
period. The increase in hardware sales contributed to a 31.1% increase between
periods in domestic average order size to $388 from $296. Also contributing to
the increase in net sales was an increase in orders due primarily to higher
catalogue circulation, which grew to 9.1 million in the three months ended June
30, 1996, an increase of 25.5% over the comparable period. International
subsidiary net sales in the three months ended June 30, 1996 were $13.5 million,
an increase of 145.5% over the comparable period primarily resulting from the
addition of subsidiaries in Austria, Germany and The Netherlands and sales
growth in the Company's operations in Denmark and France.
Gross Profit. Gross profit increased to $15.4 million in the three months ended
June 30, 1996 from $6.5 million in the comparable period, and increased between
periods to 13.9% from 12.8% of net sales. Gross profit dollars increased due to
higher sales volumes generated by increases in orders and average order size.
The increase in gross margin percentage resulted from growth in higher-margin
product offerings and improved recovery of domestic freight costs, partially
offset by increased sales of hardware products and sales to business accounts,
which generally carry a lower average gross margin percentage.
Selling, General and Administrative Expenses. SG&A expense increased to $11.0
million in the three months ended June 30, 1996 from $5.2 million in the
comparable period, but decreased between periods as a percentage of net sales to
9.9% from 10.2%. The dollar increase in SG&A expenses was primarily attributable
to an increase in transaction costs associated with higher sales volume, as well
as to increased administrative salaries. The decline in SG&A expenses as a
percentage of net sales resulted from the leveraging of SG&A expenses over a
larger sales base.
9
<PAGE> 10
Other Expense. Other expense increased to $518,000 in the three months ended
June 30, 1996 from $287,000 in the comparable period, primarily as a result of
higher interest expense related to higher levels of borrowing on the Company's
primary line of credit.
Income Taxes. Income tax expense increased in the three months ended June 30,
1996 to $1.4 million from $383,000 in the comparable prior period due to the
significant increase in profitability between periods.
Net Income. As a result of the above factors, net income increased to $2.4
million in the three months ended June 30, 1996 from $630,000 in the comparable
prior period.
Comparison of the Six Months Ended June 30, 1996 and 1995
Net Sales. Net sales increased 118.9% to $212.3 million in the six months ended
June 30, 1996 from $97.0 million in the comparable period. The increase resulted
primarily from an increase in hardware sales to 80.1% of gross sales in the six
months ended June 30, 1996 from 66.0% in the comparable period. The increase in
hardware sales contributed to a 39.2% increase between periods in average order
size to $362 from $260. Also contributing to the increase in net sales was an
increase in orders due primarily to higher catalogue circulation, which grew to
18.6 million in the six months ended June 30, 1996, an increase of 22.0% over
the comparable period. International subsidiary net sales in the six months
ended June 30, 1996 were $27.3 million, an increase of 155.1% over the
comparable period primarily resulting from the addition of subsidiaries in
Austria, Germany, Mexico and The Netherlands and sales growth in the Company's
operations in Denmark.
Gross Profit. Gross profit increased to $29.4 million in the six months ended
June 30, 1996 from $12.8 million in the comparable period, and increased between
periods to 13.8% from 13.2% of net sales. Gross profit dollars increased due to
higher sales volumes generated by increases in orders and average order size.
The increase in gross margin percentage resulted from growth in higher-margin
product offerings and improved recovery of domestic freight costs, partially
offset by increased sales of hardware products and sales to business accounts,
which generally carry a lower average gross margin percentage.
Selling, General and Administrative Expenses. SG&A expense increased to $21.1
million in the six months ended June 30, 1996 from $11.0 million in the
comparable period, but decreased between periods as a percentage of net sales to
10.0% from 11.3%. The dollar increase in SG&A expenses was primarily
attributable to an increase in transaction costs associated with higher sales
volume, as well as to increased administrative salaries, partially offset by a
decrease in net advertising expense. The decline in SG&A expenses as a
percentage of net sales resulted from a lower net advertising expense and the
leveraging of SG&A expenses over a larger sales base.
Other Expense. Other expense increased to $986,000 in the six months ended June
30, 1996 from $453,000 in the comparable period, primarily as a result of higher
interest expense related to higher levels of borrowing on the Company's primary
line of credit.
Income Taxes. Income tax expense increased in the six months ended June 30, 1996
to $2.7 million from $526,000 in the comparable prior period due to the
significant increase in profitability between periods.
Net Income. As a result of the above factors, net income increased to $4.6
million in the six months ended June 30, 1996 from $864,000 in the comparable
prior period.
SEASONALITY AND TRENDS
The Company believes that certain seasonal factors cause sales of microcomputer
software and hardware products through the direct marketing channel to be
somewhat stronger in the fourth and first calendar quarter than in the second
and third quarters. The fourth quarter tends to be stronger as manufacturers
make year-end introductions of new products and increase related marketing
activities, and as corporate
10
<PAGE> 11
purchasing activities increase at the end of the budgetary cycles. Sales in the
first quarter typically benefit from the fourth quarter sales as customers add
peripherals and additional memory products.
The market for microcomputer products is characterized by rapid change and
frequent introductions of new products and product enhancements. These changes
result in frequent price fluctuations. Typically, prices of microcomputers
initially increase with improvements in features, such as processing speed and
storage capacity, and subsequently decrease as manufacturers pass on savings
from lower-cost components and reduce their inventories of older models.
The Company's Apple Macintosh-compatible ("Mac") business was strong during the
first six months of 1996, growing 117.0% over the comparable 1995 period. Sales
of Mac products represented 71.9% and 72.8% of gross sales in the three months
and six months ended June 30, 1996, respectively, compared to 73.4% and 71.3% of
gross sales in the three and six months ended June 30, 1995, respectively. The
Company believes that the percentage of its sales represented by Mac products is
likely to decline gradually over time as a result of increasing acceptance of
the direct marketing channel by IBM-compatible ("PC") product manufacturers and
users, the Company's expanded focus on PC product sales, and its effort to
increase sales to business accounts which tend to be concentrated more heavily
on PC products. Apple Computer, Inc. has recently experienced a decline in CPU
sales, reflecting uncertainties in the Mac marketplace, as well as manufacturing
and product availability problems. Further decline in the demand for, or
availability of, Apple or other Mac products could have a material adverse
effect on the Company's future results of operations.
The Company intends to place larger inventory stocking orders, increase
participation in first-to-market, continue end-of-life-cycle purchase
opportunities and market more products on a private-label basis, all of which
increase the risk of inventory obsolescence. To reduce this risk, the Company
has agreements with many vendors containing provisions whereby vendors supply
price protection and product return privileges, subject to some limitations.
End-of-life-cycle products are typically acquired without return privileges.
The Company does not believe that inflation has had a material impact on its
results of operations. However, there can be no assurance that inflation will
not have such an effect in future periods.
LIQUIDITY AND CAPITAL RESOURCES
In July 1996, the Company completed an initial public offering of its Common
Stock resulting in net proceeds to the Company of $27.2 million. On July 2,
1996, the Company paid off bank debts totaling $20.8 million by using funds
generated by its initial public offering. The remaining proceeds have been
invested in cash equivalents and will be used for future operating cash needs.
As of June 30, 1996, the Company had total assets of $94.2 million, of which
$86.5 million were current assets. At June 30, 1996 and December 31, 1995 the
Company had cash and cash equivalents of $523,000 and $1.2 million,
respectively, and working capital of $10.4 million and $7.8 million,
respectively. Net cash used in operating activities was $10.5 million and $6.2
million for the six months ended June 30, 1996 and 1995, respectively. Cash
outflows in these periods were primarily due to higher accounts receivable
resulting from growing sales to business accounts, and to investment in
increased inventories necessary to support rapidly growing sales. In the six
months ended June 30, 1996 and in 1995 accounts receivable increased by $10.3
million and $6.8 million, respectively, and inventories increased by $5.3
million and $3.6 million, respectively.
Cash outlays for capital expenditures were $1.5 million and $547,000 in the six
months ended June 30, 1996 and 1995, respectively. In addition, the Company
incurred capital lease obligations during the six months ended June 30, 1996 and
1995 of $29,000 and $710,000, respectively. These expenditures were primarily
for information and telecommunication system enhancements, furniture and
equipment, and leasehold improvements. The Company estimates that its annualized
capital expenditures in 1996 will approximate $6.0 million, as it continues to
make other investments in its infrastructure to support its anticipated growth,
11
<PAGE> 12
including the relocation of its corporate headquarters and telemarketing
operations to a larger facility.
The Company has a revolving line of credit of $25.0 million from a commercial
bank collateralized by inventories and accounts receivable. At June 30, 1996,
there were borrowings outstanding under the facility of $19.9 million, in
addition to $3.4 million of unused letters of credit.
The net amount of vendor credit outstanding at June 30, 1996 was $46.4 million.
A portion of this vendor credit was drawn from a $25.0 million inventory
financing facility between the Company and a commercial lender, which provides
financing for and is collateralized by inventory purchased from certain
participating vendors. Outstanding advances under the facility totaled $12.1
million at June 30, 1996.
The Company believes that its existing available cash and cash equivalents,
operating cash flow and existing credit facilities will be sufficient to satisfy
its operating cash needs for at least the next 12 months. However, if working
capital or other capital requirements are greater than currently anticipated,
the Company could be required to seek additional funds through sales of equity,
debt or convertible securities or increased credit facilities. There can be no
assurance that additional financing will be available or that, if available, the
financing will be on terms favorable to the Company and its shareholders.
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of the historical information contained herein, the matters
described herein contain forward-looking statements that involve risk and
uncertainties including but not limited to variability of quarterly results,
reliance on vendor support and relationships, and dependence on sales of Mac
products. These and other risk factors are described generally in the Risk
Factors section of the Company's Prospectus dated June 27, 1996 filed with the
Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of earnings per share
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the Quarter ended June 30,
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:
MULTIPLE ZONES INTERNATIONAL, INC.
Dated: August 14, 1996 By:______________________________________
Victor Melfi Jr., Chief Executive Officer
Dated: August 14, 1996 By:______________________________________
Peter J. Biere, Chief Financial Officer
12
<PAGE> 1
Exhibit 11.1
Multiple Zones International, Inc.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
--------------------------- --------------------------
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 864,107 $ 4,615,177 $ 630,504 $ 2,442,116
Adjustment to net income for accretion of
Series B Convertible Preferred Stock (459,262) (229,631)
----------- ----------- ----------- -----------
Net income applicable to common stock $ 864,107 $ 4,155,915 $ 630,504 $ 2,212,485
equivalents =========== =========== =========== ===========
Shares used in calculating primary earnings per share:
Weighted average common shares
outstanding 7,500,000 7,500,000 7,500,000 7,500,000
Weighted average common shares giving
effect to conversion of Series A Preferred
Stock to Common Stock 1,875,000 1,875,000 1,875,000 1,875,000
Net effect of stock options and warrants granted
during the 12 months prior to the public offering
calculated using the treasury stock method and
treated as outstanding for the entire period 266,289 279,483 266,289 279,483
Weighted average stock options outstanding issued
prior to 12 months before this offering calculated
using the treasury stock method 159,940 161,374 173,791 161,373
Weighted average stock options outstanding issued
after the public offering calculating using the
treasury stock method 32 66
----------- ----------- ----------- -----------
Total shares 9,801,229 9,815,889 9,815,080 9,815,922
=========== =========== =========== ===========
Primary earnings per share $ 0.09 $ 0.42 $ 0.06 $ 0.23
=========== =========== =========== ===========
</TABLE>
<PAGE> 2
Exhibit 11.1
Multiple Zones International, Inc.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 864,107 $ 4,615,177 $ 630,504 $ 2,442,116
Shares used in calculating primary earnings per share:
Weighted average common shares
outstanding 7,500,000 7,500,000 7,500,000 7,500,000
Weighted average common shares giving
effect to conversion of Series A Preferred
Stock to Common Stock 1,875,000 1,875,000 1,875,000 1,875,000
Net effect of stock options and warrants granted
during the 12 months prior to the public offering
calculated using the treasury stock method and
treated as outstanding for the entire period 242,206 310,517 266,289 310,517
Weighted average Series B Convertible Preferred
stock issued during the 12 months prior to the
public offering calculated using the treasury stock
method and treated as outstanding for the entire
period 335,331 390,367 335,331 390,367
Weighted average stock options outstanding issued
prior to 12 months before this offering calculated
using the treasury stock method 159,939 162,625 173,791 162,626
Weighted average stock options outstanding issued
after the public offering calculating using the
treasury stock method 160 322
----------- ----------- ----------- -----------
Total shares 10,112,476 10,238,669 10,150,411 10,238,832
=========== =========== =========== ===========
Fully diluted earnings per share $ 0.09 $ 0.45 $ 0.06 $ 0.24
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 522,909
<SECURITIES> 0
<RECEIVABLES> 33,952,473
<ALLOWANCES> 0
<INVENTORY> 47,052,979
<CURRENT-ASSETS> 86,484,479
<PP&E> 5,338,869
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,229,673
<CURRENT-LIABILITIES> 76,062,650
<BONDS> 0
6,920,358
0
<COMMON> 2,750,000
<OTHER-SE> 6,113,636
<TOTAL-LIABILITY-AND-EQUITY> 94,229,673
<SALES> 212,337,824
<TOTAL-REVENUES> 212,337,824
<CGS> 182,943,952
<TOTAL-COSTS> 21,121,958
<OTHER-EXPENSES> (31,028)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,016,373
<INCOME-PRETAX> 7,286,569
<INCOME-TAX> 2,671,392
<INCOME-CONTINUING> 4,615,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,615,177
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.45
</TABLE>
