<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 15, 1998
-----------------
Miami Computer Supply Corporation
(Exact name of registrant as specified in its charter)
Ohio 000-21561 31-1001529
---- --------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4750 Hempstead Station Drive, Dayton, Ohio 45429
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 291-8282
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 15, 1998, Miami Computer Supply Corporation (the "Company"), through
a newly created wholly-owned subsidiary established for that purpose, closed its
acquisitions of the outstanding common stock of Dreher Business Products
Corporation ("DBPC") and Matrix Data Corporation ("MDC") in separate purchase
business combinations. Although separate legal entities, DBPC and MDC were,
prior to the acquisition, under common control of an affiliated shareholder
group. In the transaction, MDC merged with and into the Company's wholly-owned
subsidiary. The Company purchased all of the DBPC Common Stock and immediately
thereafter merged DBPC with and into the subsidiary, changing the subsidiary's
name to "Dreher Business Products Corporation". The aggregate underlying assets
acquired primarily included cash, accounts receivable, inventories and property
and equipment while the aggregate primary liabilities assumed included accounts
payable, accrued liabilities, debt and capital lease obligations related to the
ongoing business. The total purchase price (subject to adjustment for closing
date values) for the acquisitions comprised of $18,567,000 in cash, 483,767
shares of the Company's common stock with a market value of $9,000,000 and
related out-of-pocket expenses. In addition, prior to the closing, DBPC borrowed
$5,433,000 from a bank and distributed these funds to certain stockholders of
DBPC. The Company assumed this and other borrowings of DBPC as a part of the
acquisition. The cash portion of the purchase price and repayment of the DBPC
borrowings was funded from the Company's existing Credit Facility with PNC Bank,
N.A.
Other than these transactions, there was no prior material relationship between
the Company and DBPC, MDC or their stockholders.
DBPC and MDC are primarily engaged in distributing computer supplies to end
users and dealers located primarily in Ohio and the midwestern United States.
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS AND PRO FORMA DATA:
The unaudited combined financial statements of DBPC and MDC as of September 30,
1998 and for the nine months then ended, and the audited combined financial
statements of DBPC and MDC as of December 31, 1997 and for the year then ended
required by this Item are included herein on pages 3 through 12 of this Form
8-K.
The Unaudited Pro Forma Financial Information required by this Item is included
on pages 13 through 16 of this Form 8-K. The Unaudited Pro Forma Financial
Information assume that the acquisitions occurred, with respect to the September
30, 1998 balance sheet information, on September 30, 1998, and with respect to
the statement of operations information, at the beginning of the earliest period
presented.
The Unaudited Pro Forma Financial Information is not intended to be indicative
of the financial position or results of operations had the acquisitions actually
occurred on the dates indicated.
The unaudited pro forma balance sheet reflects the allocation of the purchase
price to the estimated fair value of the assets acquired and liabilities
assumed, with the residual being allocated to goodwill. While the Company will
undertake a more in depth evaluation of the fair value of the net assets
acquired, it is not expected to differ materially from the purchase price
allocation included herein.
The unaudited pro forma statements of operations reflect the effects of the
purchase allocation described above and the resultant amortization and
additional interest expense associated with the cash used to fund the
acquisitions, along with other adjustments directly attributable to the
transaction. The pro forma data reflects adjustments directly related to the
acquisitions, and does not include adjustments that may arise as a consequence
of the acquisitions, such as cost savings, improved efficiencies, etc.
Therefore, the pro forma data is not necessarily indicative of operating results
that would have occurred for the year ended December 31, 1997 or the nine months
ended September 30, 1998, or in future periods, had the acquisitions actually
occurred on January 1, 1997.
<TABLE>
<CAPTION>
Exhibits:
Exhibit No. Description
- ----------- -----------
<S> <C>
2 Stock Purchase and Sale Agreement and Plan of Reorganization
by and among Miami Computer Supply Corporation, MCSC Buckeye
Acquisition Corporation, Dreher Business Products
Corporation, Matrix Data Corporation and the Named
Stockholders dated November 19, 1998. (to be filed by
Amendment)
23 Consent of Independent Accountants
99(i) Press release issued by Miami Computer Supply Corporation on
November 20, 1998.
99(ii) Press release issued by Miami Computer Supply Corporation on
December 15, 1998
99(iii) Safe Harbor Under the Private Securities Litigation Reform
Act of 1995.
</TABLE>
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Miami Computer Supply Corporation
We have audited the accompanying combined balance sheet of Dreher Business
Products Corporation (as defined in Note 1, the "Company") as of December 31,
1997, and the related combined statements of income, shareholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Company as of
December 31, 1997, and the combined results of its operations and cash flows for
the year then ended in conformity with generally accepted accounting principles.
ZION, SMORAG AND ASSOCIATES
Cleveland, Ohio
October 29, 1998
3
<PAGE>
Dreher Business Products Corporation
Combined Balance Sheet
<TABLE>
<CAPTION>
September 30,
1998 December 31,
(Unaudited) 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 566,595 $ 79,550
Accounts receivable, net (Note 2) 10,991,470 10,409,441
Inventories 3,133,178 1,851,289
Prepaid expenses 168,004 94,712
------------ ------------
Total current assets 14,859,247 12,434,992
Property and equipment, net (Notes 3 and 5) 4,775,552 4,764,173
Other assets 114,999 114,656
------------ ------------
Total assets $ 19,749,798 $ 17,313,821
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,160,794 $ 4,779,299
Line of credit (Note 4) 575,000 1,750,000
Accrued liabilities 1,190,471 1,826,490
Current portion of capital lease obligation (Note 5) 22,489 20,934
------------ ------------
Total current liabilities 8,948,754 8,376,723
Capital lease obligation (Note 5) 4,045,712 4,062,780
------------ ------------
Total liabilities 12,994,466 12,439,503
------------ ------------
Shareholders' equity:
Common stock 50,750 49,750
Paid in capital 501,584 412,284
Retained earnings 6,532,564 4,718,450
Notes receivable - shareholder (Note 7) (280,700) (257,300)
Treasury stock (48,866) (48,866)
------------ ------------
Total shareholders' equity 6,755,332 4,874,318
------------ ------------
Total liabilities and shareholders' equity $ 19,749,798 $ 17,313,821
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Dreher Business Products Corporation
Combined Income Statement
<TABLE>
<CAPTION>
Nine months ended
September 30, Year ended
1998 1997 December 31,
(Unaudited) (Unaudited) 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 58,628,879 $ 50,710,889 $ 71,483,978
Cost of sales 47,484,226 41,353,457 57,241,759
------------ ------------ ------------
Gross profit 11,144,653 9,357,432 14,242,219
Selling, general and administrative expenses 8,535,129 7,659,238 12,802,896
------------ ------------ ------------
Income from operations 2,609,524 1,698,194 1,439,323
Other income and expense:
Interest expense (409,970) (308,318) (525,411)
Miscellaneous expense (20,014) (33,717) (39,381)
Interest income 13,424 21,712 28,678
------------ ------------ ------------
Net income $ 2,192,964 $ 1,377,871 $ 903,209
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Dreher Business Products Corporation
Combined Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Notes
Common Paid-in Retained Receivable- Treasury
Stock Capital Earnings Shareholder Stock Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 49,750 $ 412,284 $ 4,283,266 $ (290,500) $ (48,866) $ 4,405,934
Distributions - - (468,025) - - (468,025)
Payments on shareholder
receivables - - - 33,200 - 33,200
Net income - - 903,209 - - 903,209
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 49,750 412,284 4,718,450 (257,300) (48,866) 4,874,318
Issuance of common stock
(unaudited) 1,000 89,300 - (40,000) - 50,300
Distributions (unaudited) - - (378,850) - - (378,850)
Payments on shareholder
receivables (unaudited) - - - 16,600 - 16,600
Net income (unaudited) - - 2,192,964 - - 2,192,964
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30,
1998 (unaudited) $ 50,750 $ 501,584 $ 6,532,564 $ (280,700) $ (48,866) $ 6,755,332
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Dreher Business Products Corporation
Combined Statement of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
September 30, Year ended
1998 1997 December 31,
(Unaudited) (Unaudited) 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 2,192,964 $ 1,377,871 $ 903,209
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Depreciation and amortization 210,306 174,379 218,110
Changes in operating assets and liabilities:
Increase in accounts receivable (582,029) (594,650) (1,426,976)
(Increase) decrease in inventories (1,281,889) (636,303) 19,127
Increase in prepaid expenses (73,292) (125,838) (17,912)
(Increase) decrease in other assets (343) 16,423 (31,196)
Increase (decrease) in accounts payable 2,381,495 146,822 (555,379)
(Decrease) increase in accrued liabilities (636,019) (146,115) 527,587
----------- ----------- -----------
Net cash provided by (used in)
operating activities 2,211,193 212,589 (363,430)
----------- ----------- -----------
Cash flow from investing activities:
Purchases of property and equipment (221,685) (318,196) (437,921)
----------- ----------- -----------
Cash flow from financing activities:
Net (decrease) increase in line of credit (1,175,000) 550,000 1,300,000
Proceeds from issuance of common stock 50,300 - -
Payments received on notes receivable - shareholder 16,600 24,900 33,200
Principal payments on long-term debt - (73,154) (73,154)
(Decrease) increase in capital lease obligation (15,513) (20,724) 30,497
Distributions (378,850) (376,350) (468,025)
----------- ----------- -----------
Net cash (used in) provided by
financing activities (1,502,463) 104,672 822,518
----------- ----------- -----------
Net increase (decrease) in cash 487,045 (935) 21,167
Cash and cash equivalents at beginning of period 79,550 58,383 58,383
----------- ----------- -----------
Cash and cash equivalents at end of period $ 566,595 $ 57,448 $ 79,550
----------- ----------- -----------
Supplemental disclosures:
Interest paid $ 413,146 $ 308,044 $ 525,788
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Dreher Business Products Corporation
Notes to Combined Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL AND BASIS OF PRESENTATION
These combined financial statements for Dreher Business Products Corporation
("DBPC") include the accounts of DBPC and Matrix Data Corporation ("MDC")
(collectively, the "Company"). Although separate legal entities, DBPC and MDC
are under common control of an affiliated shareholder group. Thus, these
financial statements are presented on a combined basis. DBPC and MDC,
headquartered in Strongsville, Ohio, were incorporated in the State of Ohio and
began operations in 1964 and 1985, respectively. The Company is primarily
engaged in distributing computer supplies to end users and dealers located
primarily in Ohio and the midwestern United States. All significant intercompany
transactions have been eliminated.
CASH EQUIVALENTS
The Company considers short-term cash investments with original maturity dates
of less than three months to be cash equivalents.
REVENUE RECOGNITION
Substantially all revenues are recognized when products are shipped.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out (FIFO) method. Inventories consist primarily of
products held for resale.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation. Minor
maintenance and repairs are expensed as incurred; major renewals and betterments
are capitalized. Depreciation is provided using the straight-line method over
the estimated useful lives ranging from five to thirty years.
8
<PAGE>
COMMON STOCK
Common stock consists of the following at December 31, 1997:
<TABLE>
<CAPTION>
Shares Stated
Shares Issued and Value
Class A Common Authorized Outstanding Per Share Value
- -------------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C>
DBPC 500 500 $ 10 $ 5,000
MDC 75 75 1 75
Class B Common
- --------------
DBPC 4500 4400 10 44,000
MDC 675 675 1 675
-------
Total common stock $49,750
-------
-------
</TABLE>
Class B shares have no voting rights; other than this distinction, Class B
shares have all rights and privileges afforded Class A shares. Treasury stock
consists of 75 Class A shares of DBPC and is stated at cost.
INCOME TAXES
The Company has elected S Corporation status for federal income tax purposes.
Under this election, income and losses are passed through to the shareholders.
As such, no provision for federal income taxes is included in the financial
statements. State and local income taxes are not material.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments approximates fair
value.
CONCENTRATION OF CREDIT RISK
The Company provides credit in the normal course of business to customers
primarily in the midwestern United States, including a variety of governmental
entities. One customer accounted for 12% of net sales in the year ended December
31, 1997. The Company performs ongoing credit evaluations of its customers and
monitors its credit risk using procedures management considers appropriate in
the circumstances.
9
<PAGE>
INTERIM FINANCIAL INFORMATION
The interim financial information as of September 30, 1998 and for the nine
months ended September 30, 1998 and 1997 are unaudited and do not include all
disclosures required under generally accepted accounting principles for annual
financial statements. However, in the opinion of management, the interim
financial information includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the interim
financial information.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consists of the following at December 31, 1997:
<TABLE>
<S> <C>
Accounts receivable - trade $ 9,711,543
Amounts due from suppliers 892,102
Less: Allowance for doubtful accounts (194,204)
------------
$ 10,409,441
------------
------------
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1997:
<TABLE>
<S> <C>
Building and improvements $ 4,484,445
Furniture and fixtures 940,467
Leasehold improvements 32,982
Computer equipment 117,067
------------
5,574,961
Less: Accumulated depreciation (810,788)
------------
$ 4,764,173
------------
------------
</TABLE>
NOTE 4 - LINE OF CREDIT
DBPC had entered into a line of credit arrangement with a lending institution
which allowed for maximum borrowings of $3,000,000 through April 30, 1998. The
line of credit bore interest at the lesser of the prime rate (8.50% at December
31, 1997) or the LIBOR rate plus 1.50% (7.4375% at December 31, 1997). The note
was unsecured. Effective February 9, 1998, the prime rate borrowing option was
modified to prime minus 1.40%. Amounts outstanding under the line of credit
totaled $1,750,000 at December 31, 1997. Effective
10
<PAGE>
May 4, 1998, the line was extended to April 30, 1999 and the maximum borrowing
limit was increased to $5,000,000. All other terms of the facility remained
substantially unchanged.
NOTE 5 - LEASE ARRANGEMENTS AND RELATED PARTY TRANSACTIONS
The Company conducts its business from facilities leased from a Limited
Partnership controlled by certain shareholders of the Company under a capital
lease arrangement. The capital lease was recorded based on the estimated fair
value of the facilities and the present value of future minimum lease payments.
The lease, which expires on July 31, 2026, contains escalation clauses every
five years based upon inflation, the first effective January 1, 1998.
Amortization of property held under capital lease charged to depreciation
expense during the year ended December 31, 1997 totaled $115,167 and accumulated
depreciation totaled $319,375 at December 31, 1997.
The Company leases office equipment and remote office space under operating
leases expiring in various years through 2001. Rent expense for all operating
leases totaled $96,647 for the year ended December 31, 1997.
The present value of future minimum lease payments under capital leases and
lease obligations for operating leases at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Capital Operating
Lease Leases
----------- -----------
<S> <C> <C>
Year ending December 31:
1998 $ 528,000 $ 59,658
1999 528,000 32,700
2000 528,000 23,646
2001 528,000 3,440
2002 528,000 -
Thereafter 11,946,000 -
----------- -----------
Total lease payments 14,586,000 $ 119,444
-----------
-----------
Less amount representing interest 10,502,286
-----------
Present value of future minimum lease payments 4,083,714
Less current portion 20,934
-----------
Long-term capital lease obligation $ 4,062,780
-----------
-----------
</TABLE>
11
<PAGE>
NOTE 6 - RETIREMENT PLANS
The Company sponsors a qualified profit sharing retirement plan for all
employees. The employees become eligible for participation upon completion of
one year of full-time employment. Plan contributions are at the discretion of
the Board of Directors. In May 1995, the Company implemented a 401(k) retirement
plan for substantially all employees. Eligibility for participation in the plan
is one month of employment, and the Company matches 25% on the first 4% of the
employee's contribution. Profit sharing plan expense and matching 401(k)
contributions totaled $345,335 during the year ended December 31, 1997.
NOTE 7 - SHAREHOLDERS' AGREEMENT
The Company has entered into an agreement with certain of its shareholders
whereby, if they leave the employment of the Company or decide to sell shares,
the shares must first be offered for sale to the Company.
From time to time the Company sells shares of its common stock to key employees.
These sales are based upon the estimated fair value of the shares on the date of
sale and are paid for by the employees with cash, notes secured by the
underlying shares, or a combination thereof. Notes receivable arising from the
foregoing transactions bear interest at the prime rate and are classified as a
separate component of shareholders' equity in these financial statements.
12
<PAGE>
Miami Computer Supply Corporation
Unaudited Pro Forma Balance Sheet
(In thousands)
<TABLE>
<CAPTION>
Miami DBPC Combined
September 30, September 30, Pro Forma
1998 1998 Adjustments(1) Pro Forma
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1,661 $ 567 $ - $ 2,228
Accounts receivable 48,525 10,991 - 59,516
Inventory 30,480 3,133 - 33,613
Prepaid expenses 920 168 - 1,088
Deferred income tax assets 244 - - 244
-------- -------- -------- --------
Total current assets 81,830 14,859 - 96,689
Property, plant and equipment, net 7,942 4,776 - 12,718
Intangible assets 59,122 - 26,445 85,567
Other assets 1,866 115 - 1,981
-------- -------- -------- --------
Total assets $150,760 $ 19,750 $ 26,445 $196,955
-------- -------- -------- --------
-------- -------- -------- --------
Accounts payable $ 23,040 $ 7,161 $ - $ 30,201
Line of credit - 575 - 575
Accrued expenses 5,926 1,191 - 7,117
Current portion of long-term debt 132 22 - 154
-------- -------- -------- --------
Total current liabilities 29,098 8,949 - 38,047
Long-term debt 32,116 4,046 24,200 60,362
Deferred income taxes 83 - - 83
Stockholders' equity 89,463 6,755 2,245 98,463
-------- -------- -------- --------
Total liabilities and stockholders' equity $150,760 $ 19,750 $ 26,445 $196,955
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See notes to the Unaudited Pro Forma Information.
13
<PAGE>
Miami Computer Supply Corporation
Unaudited Pro Forma Statement of Operations
Year Ended December 31, 1997
(In thousands except share and per share data)
<TABLE>
<CAPTION>
Historical
------------------------------
DBPC Pro Forma
Miami Combined Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 107,486 $ 71,484 $ - $ 178,970
Cost of sales 88,190 57,242 - 145,432
----------- ----------- ----------- -----------
Gross profit 19,296 14,242 - 33,538
Selling, general and administrative expenses 15,440 12,803 661(2) 28,904
----------- ----------- ----------- -----------
Operating income 3,856 1,439 (661) 4,634
Interest expense (180) (525) (1,936)(3) (2,641)
Other income (expense) 43 (11) - 32
----------- ----------- ----------- -----------
Income before income taxes 3,719 903 (2,597) 2,025
Provision for income taxes 1,507 - (413)(4) 1,094
----------- ----------- ----------- -----------
Net income $ 2,212 $ 903 $ (2,184) $ 931
----------- ----------- ----------- -----------
Earnings per share of common stock - basic $ 0.39 $ 0.15
----------- -----------
Earnings per share of common stock - diluted $ 0.39 $ 0.15
----------- -----------
Average shares outstanding - basic 5,671,833 483,767(5) 6,155,600
----------- ----------- -----------
Average shares outstanding - diluted 5,722,440 483,767(5) 6,206,207
----------- ----------- -----------
</TABLE>
See notes to the Unaudited Pro Forma Information.
14
<PAGE>
Miami Computer Supply Corporation
Unaudited Pro Forma Statement of Operations
Nine Months Ended September 30, 1998
(In thousands except share and per share data)
<TABLE>
<CAPTION>
Historical
------------------------------
DBPC Pro Forma
Miami Combined Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 197,797 $ 58,629 $ - $ 256,426
Cost of sales 154,297 47,484 - 201,781
----------- ----------- ----------- -----------
Gross profit 43,500 11,145 - 54,645
Selling, general and administrative expenses 34,660 8,535 496(2) 43,691
----------- ----------- ----------- -----------
Operating income 8,840 2,610 (496) 10,954
Interest expense (1,593) (409) (1,452)(3) (3,454)
Other income (expense) 118 (8) - 110
----------- ----------- ----------- -----------
Income before income taxes 7,365 2,193 (1,948) 7,610
Provision for income taxes 3,260 - 296(4) 3,556
----------- ----------- ----------- -----------
Net income $ 4,105 $ 2,193 $ (2,244) $ 4,054
----------- ----------- ----------- -----------
Earnings per share of common stock - basic $ 0.46 $ 0.43
----------- -----------
Earnings per share of common stock - diluted $ 0.45 $ 0.42
----------- -----------
Average shares outstanding - basic 8,925,673 483,767(5) 9,409,440
----------- ----------- -----------
Average shares outstanding - diluted 9,129,690 483,767(5) 9,613,457
----------- ----------- -----------
</TABLE>
See notes to the Unaudited Pro Forma Information.
15
<PAGE>
Miami Computer Supply Corporation
Notes to Unaudited Pro Forma Financial Information
(In thousands)
1) The unaudited pro forma balance sheet has been adjusted to reflect:
a) The issuance of $9,000 of the Company's common stock, reduced by the
elimination of DBPC's shareholders' equity of $6,755,
b) Miami's use of $18,567 under its lending arrangements to fund the cash
portion of the purchase, the assumption of $5,433 of additional
borrowings incurred by DBPC, prior to closing, to fund distributions
to certain DPBC shareholders and transaction related expenses
estimated to be $200,
c) The allocation of the purchase price to the estimated fair value of
assets acquired and liabilities assumed with the remainder being
allocated to goodwill.
2) To reflect amortization of goodwill over an estimated useful life of 40
years.
3) To reflect increased interest expense based on Miami's use of its bank line
of credit as described in 1) b) above at 8% per annum.
4) To record an estimated income tax provision as if DBPC Combined were a C
Corporation and to reflect the tax benefit of increased interest expense,
all at an estimated effective rate of 40%.
5) To reflect the impact of the additional shares issued pursuant to the
transaction and the resultant impact on average shares outstanding.
6) The Unaudited Proforma Financial Information does not include projected
cost savings after combination.
16
<PAGE>
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 hereunto duly authorized.
MIAMI COMPUTER SUPPLY CORPORATION
Date:
------------------------
- ------------------------------
Ira H. Stanley
Vice President and Chief Financial Officer
17
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-65859) of
Miami Computer Supply Corporation of our report dated October 29, 1998 relating
to the combined financial statements of Dreher Business Products Corporation,
which appears in the Current Report on Form 8-K of Miami Computer Supply
Corporation dated December 30, 1998.
ZION, SMORAG AND ASSOCIATES
Cleveland, Ohio
December 30, 1998
<PAGE>
[LETTERHEAD]
FOR IMMEDIATE RELEASE
CONTACT: MICHAEL E. PEPPEL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
937-291-8045
[email protected]
MIAMI COMPUTER SUPPLY CORPORATION ANNOUNCES A SIGNED DEFINITIVE MERGER
AGREEMENT WITH DREHER BUSINESS PRODUCTS CORPORATION AND A CLOSED DEFINITIVE
AGREEMENT WITH J.O.S PROJECTION SYSTEMS, INC.
DAYTON, OH - NOVEMBER 20, 1998 - Miami Computer Supply Corporation (NASDAQ:
MCSC), a leading distributor of computer supplies and audio-visual presentation
products, today announced that it has signed a definitive merger agreement with
Dreher Business Products Corporation, an $80 million (annual revenues)
distributor of computer supplies, headquartered in Cleveland, Ohio.
The Company also announced that it has closed a definitive asset purchase
agreement with J.O.S. Projection Systems, Inc., a $3 million (annual revenues)
distributor of audio-visual presentation products, headquartered in Laguna
Niguel, California.
Michael E. Peppel, President and Chief Executive Officer of Miami
Computer Supply Corporation said, "The news of the merger with Dreher
Business Products will impress the industry since Dreher is one of the
premier independent business products distributors in the country. They
enhance and complement our offerings in computer supply and technology
products, presentation products and integration services. MCSC and Dreher
Business Products have been mutually respected competitors for over fifteen
years. The team of Joe Dreher, Neil Dreher, Jim Haskell and Mike Trebilcock
is one of the most respected and talented management teams in the country,
and we at MCSC are delighted to be on the same side of the fence after all
these years. The Dreher management has been an effective operator since 1964
when the company was founded. "
"We have been working on the substantial Axidata and Dreher transactions
for an extended period of time and look forward to their successful
completion. However, our number one focus as a company remains the execution
of our internal growth strategy and operating the most effective business
model in the industry. We will continue to integrate and leverage the
expertise of our merger partners. Once the merger with Dreher, and the
previously announced Axidata acquisition close, MCSC's revenue run rate will
exceed $500 million, and provide us with unprecedented momentum moving into
1999," added Peppel.
Neil Dreher, President of Dreher Business Products, Inc. said, "Over the
last few years, we've recognized the need to become part of something larger
and more dynamic. We owe it to our associates and our customers to build
synergies that will move to fuel business growth and improve the services we
provide. This merger gives us the ability to offer coast-to-coast coverage to
our growing account base. We're thrilled to be part of this new nationwide
team and look forward to contributing to this growing organization's future.
From consumables to integration we now offer a suite of services unmatched in
today's business products marketplace."
<PAGE>
Miami Computer Supply Corporation
Press Release
Page 2
Miami Computer Supply Corporation went public in November of 1996. Since
the IPO, Miami Computer Supply has increased the number of its sales personnel
from 53 to 308 and its annual sales from $107.4 million as of December 31, 1997
to a pro forma annualized 12 month run rate of over $320 million (not including
the Dreher and Axidata transactions).
Miami Computer Supply Corporation is a distributor of computer and office
automation supplies and accessories and audio-visual presentation products
throughout the United States and in certain foreign countries.
Miami Computer Supply Corporation distributes over 1,800 core products primarily
to middle market and smaller companies and to governmental, educational, and
institutional customers, including federal, state and local governmental
agencies, universities and hospitals and, to a lesser extent, to computer supply
dealers. The Company sells primarily nationally known, name-brand products
manufactured by approximately 500 original equipment manufacturers, including
Hewlett-Packard, Lexmark, Imation and Canon for computer supplies, and Sharp,
Epson, Sony and Proxima for audio-visual presentation products and Intel Team
Station video conferencing products. Additional information regarding the
Company can be obtained at http://www.mcsinet.com.
The matters discussed in this press release which are not historical
facts contain forward-looking information with respect to plans, projections or
future performance of the Company, the occurrence of which involve risks and
uncertainties which include, but are not limited to, general economic
conditions, industry trends, actions of competitors, the Company's ability to
manage its growth, factors relating to its acquisition/merger strategy, actions
of regulatory authorities, restrictions imposed by its debt arrangements,
dependence upon key personnel, dependence upon key suppliers, customer demand,
risks relating to international operations, dependence on its computer systems
and other factors. A complete description of those factors, as well as other
factors which could affect the Company's business, is set forth in the Company's
Form 10-K for the year ended December 31, 1997, and its Form 10-Q for the nine
months ended September 30, 1998.
-END-
<PAGE>
[LETTERHEAD]
FOR IMMEDIATE RELEASE
CONTACT: MICHAEL E. PEPPEL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
937-291-8045
[email protected]
MIAMI COMPUTER SUPPLY CORPORATION ANNOUNCES THE CLOSING OF THE DEFINITIVE
MERGER AGREEMENT WITH DREHER BUSINESS PRODUCTS CORPORATION
DAYTON, OH - DECEMBER 15, 1998 - Miami Computer Supply Corporation (NASDAQ:
MCSC), a leading distributor of computer supplies and audio-visual presentation
products, today announced that it has closed the definitive merger agreement
with Dreher Business Products Corporation, an $80 million (annual revenues)
distributor of computer supplies, headquartered in Cleveland, Ohio with offices
in Columbus and Cincinnati, Ohio and Pittsburgh, Pennsylvania.
Miami Computer Supply Corporation went public in November of 1996. Since
the IPO, Miami Computer Supply has increased the number of its sales personnel
from 53 to 308 and its annual sales from $107.4 million as of December 31, 1997
to a pro forma annualized 12 month run rate of over $550 million (including this
transaction).
Miami Computer Supply Corporation is a distributor of computer and
office automation supplies and accessories and audio-visual presentation
products throughout the United States and in certain foreign countries. Miami
Computer Supply Corporation distributes over 1,800 core products primarily to
middle market and smaller companies and to governmental, educational, and
institutional customers, including federal, state and local governmental
agencies, universities and hospitals and, to a lesser extent, to computer
supply dealers. The Company sells primarily nationally known, name-brand
products manufactured by approximately 500 original equipment manufacturers,
including Hewlett-Packard, Lexmark, Imation and Canon for computer supplies,
and Sharp, Epson, Sony and Proxima for audio-visual presentation products and
Intel Team Station video conferencing products. Additional information
regarding the Company can be obtained at http://www.mcsinet.com.
The matters discussed in this press release which are not historical
facts contain forward-looking information with respect to plans, projections or
future performance of the Company, the occurrence of which involve risks and
uncertainties which include, but are not limited to, general economic
conditions, industry trends, actions of competitors, the Company's ability to
manage its growth, factors relating to its acquisition/merger strategy,
<PAGE>
Dreher Press Release
December 15, 1998
Page 2
actions of regulatory authorities, restrictions imposed by its debt
arrangements, dependence upon key personnel, dependence upon key suppliers,
customer demand, risks relating to international operations, dependence on
its computer systems and other factors. A complete description of those
factors, as well as other factors which could affect the Company's business,
is set forth in the Company's Form 10-K for the year ended December 31, 1997,
and its Form 10-Q for the nine months ended September 30, 1998.
-END-
<PAGE>
EXHIBIT 99(iii)
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies, so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The Company desires to
take advantage of the "safe harbor" provisions of the Act. Certain information,
particularly information regarding future economic performance and finances and
plans and objectives of management, contained, or incorporated by reference, in
the Company's Current Report on Form 8-K is forward-looking. In some cases,
information regarding certain important factors that could cause actual results
to differ materially from any such forward-looking statement appear together
with such statement. Also, the following factors, in addition to other possible
factors not listed, could affect the Company's actual results and cause such
results to differ materially from those expressed in forward-looking statements.
HIGHLY COMPETITIVE INDUSTRY
The computer and office automation and audio-visual presentation product supply
industry is highly competitive. The Company competes with major full-service
office products distributors, other national and regional computer supply
distributors, office products superstores, direct mail order companies, and, to
a lesser extent, non-specialized retailers. Certain of the Company's
competitors, such as office products superstores and major full-service office
products distributors have substantially greater financial and other resources
and purchasing power than the Company. The Company believes that the computer
supply and audio-visual presentation industry will become more consolidated in
the future and consequently more competitive. Increasing competition will
result in greater price discounting which will continue to have a negative
impact on the industry's gross margins. There can be no assurance that the
Company will not encounter increased competition in the future, which could have
a material adverse effect on the Company's business.
DEPENDENCE ON CERTAIN KEY SUPPLIERS
Although the Company regularly carries products and accessories manufactured by
approximately 500 original equipment manufacturers, approximately 54.3% of the
Company's net sales for the nine months ended September 30, 1998 were derived
from products supplied by the Company's ten largest suppliers. In addition, the
Company's business is dependent upon terms provided by its key suppliers,
including pricing and related provisions, product availability and dealer
authorizations. While the Company considers its relationships with its key
suppliers, including Hewlett-Packard Company ("Hewlett-Packard"), Lexmark
International, Inc. ("Lexmark"), Canon Corporation
-1-
<PAGE>
("Canon") and Imation Corp. ("Imation") to be good, there can be no assurance
that these relationships will not be terminated or that such relationships will
continue as presently in effect. In addition, changes by one or more of such
key suppliers of their policies regarding distributors or volume discount
schedules or other marketing programs applicable to the Company may have a
material adverse effect on the Company's business. Certain distribution
agreements require the Company to make minimum annual purchases. Under its
distribution agreements with Hewlett-Packard, Lexmark and Imation, the Company
is required to make minimum annual purchases of $10.0 million, $250,000 and
$180,000, respectively.
RESTRICTIONS IMPOSED BY DEBT ARRANGEMENTS
The Company's outstanding indebtedness consists primarily of borrowings under
the $125.0 million secured revolving credit facility (the "Credit Facility")
provided by PNC Bank, N.A., National City Bank, Key Corporate Capital, Inc., NBD
Bank, N.A. and Starbank, N.A. (the "Bank"). The Credit Facility also requires
that the Company submit certain reports to the Bank, maintain proper books and
records and insurance coverage, and comply with applicable laws and regulations.
The Company has further agreed that it will not: (i) change the nature of its
business; (ii) acquire the property or assets of any person, other than
permitted acquisitions that comply with the financial covenants of the Credit
Facility; (iii) incur other indebtedness, except for certain capital leases up
to $10 million, certain guarantees and certain existing indebtedness; (iv) pay
cash dividends; or (v) violate certain financial covenants. These provisions
may constrain the Company's acquisition strategy, may delay, deter, or prevent a
takeover attempt that a shareholder might consider in its best interests and may
have an adverse effect on the market price of the Company's Common Stock.
ABILITY TO MANAGE GROWTH
The Company expects to experience rapid growth that will likely result in new
and increased responsibilities for management personnel and which will challenge
the Company's management, operating and financial systems and resources. To
compete effectively and manage future growth, if any, the Company will be
required to continue to implement and improve its operational, financial and
management information systems, procedures and internal controls on a timely
basis and to expand, train, motivate and manage its work force. There can be no
assurance that the Company's personnel, systems, procedures and controls will be
adequate to support the Company's future operations. Any failure to implement
and improve the Company's operational, financial and management systems or to
expand, train motivate or manage employees could have a material adverse effect
on the Company's operating results and financial condition.
DEPENDENCE ON COMPUTER SYSTEMS
The Company relies on its computer systems for financial accounting, order
processing and inventory control. Modifications to the Company's computer
systems and applications software will be necessary as the Company executes its
expansion plans and responds to customer needs, technological developments,
electronic commerce
-2-
<PAGE>
requirements and other factors. Such modifications may cause disruptions in the
operations of the Company, delay the schedule for implementing the integration
of newly acquired companies, or cost more to design, implement or operate than
currently budgeted. Such disruptions, delays or costs could have a material
adverse effect on the Company's operations and financial performance.
The Company does not currently have redundant computer systems or redundant
dedicated communication lines linking its computers to its warehouses, although
all data is stored on two separate hard drives on a continual basis. The
Company has taken precautions to protect itself from events that could interrupt
its operations, including back-up power supplies that allow the Company's
computer system to function in the event of a power outage, off-site storage of
back-up data, fire protection, physical security systems and an early warning
detection and fire extinguishing system. The occurrence of any of these events
could have a material adverse effect on the Company's operations and financial
performance.
FAILURE TO IMPLEMENT ACQUISITION STRATEGY
The Company's business strategy includes the acquisition of other computer and
office automation supply and audio-visual presentation products companies in the
U.S. and overseas. Competition for desirable new acquisitions in attractive
major metropolitan markets is expected to increase. No assurance can be given
that the Company will be able to find attractive acquisition candidates or that
such acquisitions can be effected at reasonable prices or in a timely manner, or
that once acquired, the Company will be able to profitably manage such
companies. The failure to complete acquisitions and continue the Company's
expansion could have a material adverse effect on its financial performance.
INTEGRATION OF ACQUISITIONS
The Company has acquired ten computer and office automation supply and five
audio-visual presentation products businesses in the past two years and intends
to actively pursue additional acquisitions. No assurance can be given that the
Company will be able to successfully integrate its future acquisitions with the
Company's existing systems and operations. The integration of acquired
businesses may also lead to the resignation of key employees of the acquired
companies and diversion of management attention from other ongoing business
concerns. The costs of integration could have an adverse effect on short-term
operating results. Any or all of these factors could have a material adverse
effect on the Company's operations in the future.
FINANCING FOR ACQUISITIONS; LEVERAGE
If acquisitions are consummated for cash, it is likely that the Company will
borrow the necessary funds and, accordingly, the Company may become highly
leveraged as a result thereof. If it becomes highly leveraged, the Company may
be more vulnerable to extended economic downturns and its flexibility in
responding to changing economic and
-3-
<PAGE>
industry conditions may be limited. The degree to which the Company is
leveraged could have important consequences to purchasers of the Common Stock,
including the impairment of the Company's ability to obtain additional financing
for working capital, capital expenditures, acquisitions and general corporate
purposes. The Company's ability to make principal and interest payments on its
current and future indebtedness and to repay its current and future indebtedness
at maturity will be dependent on the Company's future operating performance,
which is itself dependent on a number of factors, many of which are beyond the
Company's control, and may be dependent on the availability of borrowings under
the Credit Facility or other financings. A substantial portion of the Company's
current borrowing capacity under the Credit Facility could be consumed by
increased working capital needs, including future acquisitions.
POSSIBLE NEED FOR ADDITIONAL FINANCING TO IMPLEMENT ACQUISITION STRATEGY
No portion of the Company's working capital has been set aside for the specific
purpose of funding future acquisitions and, therefore, the Company may require
additional funds to implement its acquisition strategy. While the Company's
Credit Facility may be utilized to finance acquisitions, the amount which may be
drawn upon by the Company may be limited. Accordingly, the Company may require
additional debt or equity financing for future acquisitions. There can be no
assurance that the Company will be able to obtain additional debt or equity
financing on terms favorable to the Company, or at all, or if obtained, there
can be no assurance that such debt or equity financing will be sufficient for
the financing needs of the Company.
RISKS RELATING TO INTERNATIONAL ACQUISITIONS
Expansion into international markets may involve additional risks relating to
such things as currency exchange rates, new and different legal and regulatory
requirements, political and economic risks relating to the stability of foreign
governments and their trading relationship with the United States, difficulties
in staffing and managing foreign operations, differences in financial reporting,
differences in the manner in which different cultures do business, operating
difficulties and other factors.
Since the Company now has significant operations in Canada, its exposure to
fluctuations in exchange rates will be increased. Accordingly, no assurance can
be given that the Company's results of operations will not be adversely affected
in the future by fluctuations in foreign currency exchange rates. The Company
has, at times, entered into forward foreign currency exchange contracts in order
to hedge the Company's accounts receivable and accounts payable. In the future,
the Company may, from time to time, consider entering into other forward foreign
currency exchange contracts, although no assurances can be given that the
Company will do so, or will be able to do so, or that such arrangements will
adequately protect the Company from fluctuations in foreign currency exchange
rates.
-4-
