<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(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, 1998
OR
[ ] 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 000-21561
MIAMI COMPUTER SUPPLY CORPORATION
(Exact name of registrant as specified in its articles of incorporation)
OHIO 31-1001529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4750 HEMPSTEAD STATION DRIVE, DAYTON, OHIO 45429
(Address of principal executive offices)
(937) 291-8282
(Registrant's telephone number, including area code)
Indicate by check 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) had been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
At May 11, 1998, 8,123,964 shares of common stock, no par value per
share, of the registrant were outstanding.
<PAGE>
MIAMI COMPUTER SUPPLY CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statement of Operations........................ 3
Consolidated Balance Sheet.................................. 4
Consolidated Statement of Cash Flows........................ 5
Notes to Consolidated Financial Statements.................. 6-7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition............... 7-9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................... 10
Item 2. Changes in Securities................................ 10
Item 3. Default Upon Senior Securities....................... 10
Item 4. Submission of Matters to a Vote of Security Holders.. 10
Item 5. Other Information.................................... 10
Item 6. Exhibits and Reports on Form 8-K..................... 10
Signatures.................................................... 11
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MIAMI COMPUTER SUPPLY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
---------
1998 1997
---- ----
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . $55,164,405 $20,226,020
Cost of sales. . . . . . . . . . . . . . . 42,653,199 16,745,304
----------- -----------
Gross profit . . . . . . . . . . . . . . . 12,511,206 3,480,716
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 10,263,217 2,717,073
----------- -----------
Operating income . . . . . . . . . . . . . 2,247,989 763,643
Interest expense . . . . . . . . . . . . . (426,280) (871)
Other income . . . . . . . . . . . . . . . 124,220 12,121
----------- -----------
Income before income taxes . . . . . . . . 1,945,929 774,893
Provision for income taxes . . . . . . . . 860,000 313,832
----------- -----------
Net income . . . . . . . . . . . . . . . . $ 1,085,929 $ 461,061
----------- -----------
----------- -----------
Earnings per share of common stock-
basic and diluted. . . . . . . . . . . . $ 0.14 $ 0.09
----------- -----------
----------- -----------
Weighted average number of common
shares outstanding-basic . . . . . . . . 7,779,377 5,307,000
----------- -----------
----------- -----------
Weighted average number of common
shares outstanding-diluted . . . . . . . 7,941,116 5,341,850
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
MIAMI COMPUTER SUPPLY CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Assets
Current assets:
Cash . . . . . . . . . . . . . . . . . . $ 829,693 $ 1,662,420
Accounts receivable. . . . . . . . . . . 30,131,123 21,490,282
Inventories. . . . . . . . . . . . . . . 17,658,480 9,111,620
Prepaid expenses . . . . . . . . . . . . 592,910 314,060
Deferred income tax assets . . . . . . . 244,159 275,206
----------- -----------
Total current assets . . . . . . . . . 49,456,365 32,853,588
Property and equipment - net of
accumulated depreciation . . . . . . . . 4,102,168 1,885,131
Other assets:
Deposits . . . . . . . . . . . . . . . . 222,527 44,442
Cash surrender value officers' life
insurance. . . . . . . . . . . . . . . 535,721 729,303
Intangible assets. . . . . . . . . . . . 38,362,152 14,408,481
----------- -----------
Total assets . . . . . . . . . . . . . $92,678,933 $49,920,945
----------- -----------
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Line-of-credit . . . . . . . . . . . . . $ -- $ 8,040,313
Notes payable relating to business
combinations . . . . . . . . . . . . . -- 2,791,000
Accounts payable - trade . . . . . . . . 13,196,885 11,338,272
Accrued expenses, taxes and
withholdings . . . . . . . . . . . . . . 5,055,594 2,440,737
Current portion of long-term debt. . . . 302,823 55,467
----------- -----------
Total current liabilities. . . . . . . 18,555,302 24,665,789
Long-term debt . . . . . . . . . . . . . 33,757,942 112,615
Deferred income taxes. . . . . . . . . . 54,987 111,644
----------- -----------
Total liabilities. . . . . . . . . . . 52,368,231 24,890,048
----------- -----------
Stockholders' equity:
Preferred stock, no par value,
5,000,000 shares authorized; none
outstanding at March 31, 1998
and December 31, 1997. . . . . . . . . -- --
Common stock, no par value; 30,000,000
shares authorized, 8,123,964 shares
outstanding at March 31, 1998;
6,621,164 shares outstanding at
December 31, 1997. . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . 33,289,370 19,095,494
Retained earnings. . . . . . . . . . . . 7,036,332 5,950,403
Less - Treasury common stock, at
cost 1,800 shares. . . . . . . . . . (15,000) (15,000)
----------- -----------
Total stockholders' equity . . . . . 40,310,702 25,030,897
----------- -----------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . $92,678,933 $49,920,945
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
MIAMI COMPUTER SUPPLY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
<S> <C> <C>
Cash flows used in operating activities:
Net income . . . . . . . . . . . . . . . $ 1,085,929 $ 461,061
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization. . . . . . . 537,425 107,481
Changes in assets and liabilities net of
effects of acquisitions of businesses:
Accounts receivable. . . . . . . . . . . (2,930,577) (709,207)
Inventories. . . . . . . . . . . . . . . (1,278,746) (561,455)
Prepaid expenses . . . . . . . . . . . . (210,736) 267,554
Deposits . . . . . . . . . . . . . . . . (30,234) (8,092)
Accounts payable - trade . . . . . . . . (2,500,178) (910,358)
Accrued expenses, taxes and
withholdings . . . . . . . . . . . . . 1,313,204 1,588
----------- -----------
Cash used in operating activities. . . . (4,013,913) (1,351,428)
----------- -----------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . (624,612) (59,787)
Investment in cash surrender value
officers' life insurance . . . . . . . 193,582 --
Business combinations. . . . . . . . . . (14,364,211) --
Cash included in acquisitions. . . . . . 259,349 --
----------- -----------
Cash used in investing activities. . . . . (14,535,892) (59,787)
----------- -----------
Cash flows from financing activities:
Net borrowings under line-of-credit. . . 25,414,687 839,421
Increase in long-term debt . . . . . . . 371,809 --
Principal payments on long-term debt . . (21,714) (8,998)
Payment of debt acquired in business
combinations . . . . . . . . . . . . . (5,256,704) --
Payment of notes payable . . . . . . . . (2,791,000) --
Other. . . . . . . . . . . . . . . . . . -- (30,120)
----------- -----------
Cash provided by financing activities. . . 17,717,078 800,303
----------- -----------
Net decrease in cash . . . . . . . . . . . (832,727) (610,912)
Cash - beginning of period.. . . . . . . 1,662,420 780,875
----------- -----------
Cash - end of period . . . . . . . . . . $ 829,693 $ 169,963
----------- -----------
Supplemental cash flow information:
Cash paid for interest . . . . . . . . . $ 426,280 $ 871
Cash paid for income taxes . . . . . . . $ 411,239 $ 99,257
Common stock issued in business
combinations . . . . . . . . . . . . . $ 14,193,876 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
MIAMI COMPUTER SUPPLY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Rule 10-01 of SEC Regulation S-X. Consequently,
they do not include all the disclosures required under generally accepted
accounting principles for complete financial statements. However, in the
opinion of the management of Miami Computer Supply Corporation (the
"Company"), the consolidated financial statements presented herein contain
all adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the financial position, results of operations and cash
flows of the Company and its consolidated subsidiaries. For further
information regarding the Company's accounting policies and the basis of
presentation of the financial statements, refer to the consolidated financial
statements and notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
NOTE 2 - COMMON STOCK
On March 26, 1998, the Company declared a three for two stock split on
its common stock, which was payable on April 24, 1998. All share and per
share data contained herein has been restated to reflect the stock split.
NOTE 3 - ACQUISITIONS
The Company is engaged in an active acquisition program. From
April 1997 through December 1997, the Company acquired the stock or assets of
six (6) separate entities, Imperial Data Supply Corporation,("IDS"), Data
Associates, Inc. ("DA"), Force 4 Data Products, Inc. ("Force 4"), NTI Data
Products, Inc. ("NTI"), Britco, Inc. ("Britco"), and TBS Printware, Inc.
("TBS"), all in purchase business combinations. None of the acquired
entities, each of which is engaged in providing computer supply products,
were individually significant to the Company's consolidated financial
statements. Earnings of each of the acquired entities, have been recorded by
the Company beginning with the respective acquisition dates. The aggregate
purchase price of the acquired entities which totaled $17,821,903, was
comprised of cash, 1,314,164 shares of the Company's common stock with a fair
value of $10,746,245, notes payable due to sellers aggregating $2,791,000 due
in January, 1998, and related out of pocket expenses totaling $787,158. One
acquisition calls for contingent consideration of up to $2,200,000 if
certain operating results occur within the thirty-three month period
following the acquisition. The acquisition price has been allocated to the
estimated fair value of the assets acquired and the liabilities assumed, with
the residual being allocated to intangible assets (goodwill) which is being
amortized over a forty year life.
Effective January 1, 1998, the Company completed its acquisition of
Minnesota Western/Creative Office Products, Inc. ("MW") in a purchase
business combination. MW is engaged in designing, selling and distributing
audio visual equipment and supplies. The purchase price totaled $24,664,311
and was comprised of cash, 1,322,555 shares of the Company's common stock
with a fair value of $12,343,842 and related out of pocket expenses totaling
$320,469. The purchase price was allocated to the estimated fair values of
the assets acquired and liabilities assumed with the residual being allocated
to intangible assets (goodwill) which is being amortized over a forty year
life.
In as much as the result of operations of each of these acquired
entities is included in the results of operations for the three months ended
March 31, 1998, but none of them are included in the results of operations
for the three months ended March 31, 1997, the following pro forma
information reflects the impact of these transactions assuming they had
occurred on January 1, 1997:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997
--------------
<S> <C>
Net sales. . . . . . . . . . . . . . . . $49,091,229
Net income . . . . . . . . . . . . . . . 599,633
Earnings per share of common stock
basic and diluted. . . . . . . . . . . 0.08
</TABLE>
Effective March 1, 1998, the Company completed its acquisition of
Computer Showcase, Inc. ("CS") in a purchase business combination. CS is a
distributor of visual presentation systems and products. This acquisition
was not significant to the Company's consolidated financial statements.
6
<PAGE>
NOTE 4 - LONG TERM DEBT
As disclosed in the Company's consolidated financial statements included
in its Annual Report on Form 10-K, for the year ended December 31, 1997, in
January 1998, the Company entered into a new $50 million borrowing
arrangement permitting the Company to borrow funds for a three year period.
Accordingly, borrowings under the arrangement at March 31, 1998 have been
classified as long-term debt.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
information contained in the unaudited Consolidated Financial Statements and
Notes to Consolidated Financial Statements. The following information
contains "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act") and is subject to the
safe harbor created by that Act. The words "estimate," "project,"
"anticipate," "expect," "intend," "believe," "plans" and similar expressions
are intended to identify forward-looking statements. Because such
forward-looking statements involve risks and uncertainties, there are
important factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ materially include, but are not limited
to, changes in general economic and business conditions, the availability of
capital on acceptable terms, actions of competitors, and changes in business
strategies and other factors as discussed in Exhibit 99.
The Company intends to continue its aggressive acquisition strategy of
entering new markets domestically and internationally on an opportunistic
basis, to acquire computer and office automation supply and presentation
products distribution companies and to hire certain experienced sales
representatives in and outside of the Company's current market areas, some of
whom may be constrained from working in their present locations for a period
of time. The Company actively continues to evaluate other potential
acquisitions and to identify and have preliminary discussions and
negotiations with potential acquisition candidates. There can be no assurance
that any acquisition can or will be consummated on terms favorable to the
Company or that the Company will not need additional debt or equity financing
to continue its acquisition strategy.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
NET SALES. Net sales for the three months ended March 31, 1998 increased
by $34.9 million, or 172.7%, to $55.1 million from $20.2 million for the
three months ended March 31, 1997. Of the increase, sales to the Company's
core customer base increased 17.2%; the balance of the increase resulted from
the acquired entities.
GROSS PROFIT. Gross profit for the three months ended March 31, 1998
increased by $9.0 million, or 259.4% to $12.5 million from $3.5 million for
the three months ended March 31, 1997. Gross profit as a percentage of net
sales for the three months ended March 31, 1998 was 22.7% compared to 17.2%
for the three months ended March 31, 1997. The increase in the gross profit
percentage was due primarily to the result of the higher margins of MW, which
was acquired effective January 1, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended March 31, 1998 increased
by $7.5 million, to $10.3 million from $2.7 million for the three months
ended March 31, 1997. The majority of the increase resulted from the eight
acquisitions the Company has completed since March 31, 1997. As a percentage
of net sales, selling, general and administrative expenses were 18.6% for the
three months ended March 31, 1998 compared to 13.4% for the three months
ended March 31, 1997. This increase as a percentage of sales results
primarily from the results of MW, which has a higher selling, general and
administrative expense percentage, while maintaining a higher gross profit
percentage.
OPERATING INCOME. Operating income for the three months ended March 31,
1998 increased by $1.5 million to $2.2 million from $.7 million for the three
months ended March 31, 1997 for the reasons stated above. Operating margin
increased to 4.1% in 1998 compared to 3.8% in 1997.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
1998 increased by $425,409 to $426,280 from $871 for the three months ended
March 31, 1997 due primarily to the increased level of indebtedness during
1998, utilized to fund business combinations and the growth in working
capital.
PROVISION FOR INCOME TAXES. The provision for income taxes for the three
months ended March 31, 1998 increased $546,168 to $860,000 from $313,832 for
the three months ended March 31, 1997. The Company's effective tax rate was
44.2% for the three months ended March 31, 1998 and 40.5% for the three
months ended March 31, 1997. Increased amortization of goodwill, most of
which is not deductible for tax purposes, was the reason for the higher tax
rate during the 1998 three month period.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows used in operating activities totaled $4.0 million for the
first three months of 1998 compared to $1.4 million used by operating
activities during the first three months of 1997. The change in net cash
flows from operating activities in the first three months of 1998, compared
to the first three months of 1997, was due primarily to an increase in
accounts receivable and inventory and a reduction of trade accounts payable.
As a result of the above changes and the classification of borrowings under
the Credit Facility, working capital increased to $30.9 million at March 31,
1998 from $8.2 million at December 31, 1997.
Net cash used in investing activities was $14.5 million for the three
months ended March 31, 1998 versus $.1 million for the three months ended
March 31, 1997. The net cash used in investing activities primarily reflects
the acquisitions completed during the quarter. Net cash provided by
financing activities totaled $17.7 million for the three months ended March
31, 1998 compared with $.8 million for the three months ended March 31, 1997.
This increase was due primarily to increased borrowing levels.
Capital expenditures for the three months ended March 31, 1998 of
$624,612 were used primarily to upgrade the Company's management information
systems.
The Company believes that its cash on hand and borrowing capacity under
the Credit Facility (see below) will be sufficient to fund its ongoing
operations and budgeted capital expenditures for the next twelve months,
although actual capital needs may change, particularly in connection with
acquisitions which the Company may make in the future. The Company's
long-term requirements, including capital expenditures and acquisitions, are
expected to be financed by a combination of additional borrowings and other
sources of external financing as needed.
CREDIT FACILITY
On January 8, 1998, the Company revised its Credit Facility. The new
Credit Facility is a $50.0 million secured Credit Facility provided by
National City Bank (the "Bank") and two other banks. The Credit Facility
contains restrictive covenants which include, among other restrictions: (i)
the maintenance of certain financial ratios; (ii) restrictions on ( a ) the
purchase or sale of assets, ( b ) any merger, sale or consolidation activity,
( c ) loans, investments and guarantees made by the Company, ( d ) lease,
sale and leaseback transactions, and ( e ) capital expenditures; and (iii)
certain limitations on the incurrence of other indebtedness. In addition,
the Credit Facility is collateralized by substantially all of the Company's
assets.
Loans may be made at the Bank's prime rate (the "Prime Rate") or at
the defined published eurodollar rate plus a "eurodollar margin" which ranges
from 150 to 225 basis points ("Applicable Eurodollar Margin") based on the
Company's ratio of consolidated total indebtedness to consolidated earnings
before interest, taxes, depreciation and amortization (the "Debt/EBITDA
Ratio") ranging from greater than 2.75:1 (for which the Applicable
Eurodollar Margin would be the highest) to less than 2.0:1 (for which the
Applicable Eurodollar Margin would be the lowest). In addition, the Company
has agreed to pay a commitment fee of 25 basis points per annum, payable
quarterly, through March 31, 1998, and ranging from 20.0 to 37.5 basis points
thereafter, depending upon the Company's EBITDA Ratio for general and
revolving loans, and a letter of credit fee equal to the Applicable
Eurodollar Margin then in effect, plus a facing fee of 1/8 of 1% per annum on
the credit amount.
The indebtedness under the Credit Facility is secured by substantially
all of the assets of the Company, including accounts receivable, equipment
and inventory. In addition, the Credit Facility requires that the Company
maintain a net worth of $17.7 million and thereafter increasing by an amount
equal to 50.0% of the Company's net income and 90% of stock issued beginning
with the fourth quarter of 1997, maintain the ratio of total indebtedness to
earnings before interest, taxes, depreciation and amoritzation below 3.75,
and maintain a fixed change coverage ratio of at least 1.40. The Credit
Facility also contains certain other covenants. The Company was, at March 31,
1998 and is as of the date hereof, in compliance with all covenants.
Loans under the Credit Facility have a maturity date of December 29,
2000. All borrowings under the Credit Facility are classified as long-term
debt.
8
<PAGE>
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 1, 1997, the Company settled a lawsuit brought by
Corporate Express of the South, Inc. ("Corporate Express"). Corporate
Express sought damages in conjunction with the Company's hiring two salesmen
which were former Corporate Express employees. The settlement requires that
these two employees not contact certain Corporate Express customers for a
period of three and six months from the date of the settlement. This
agreement has been entered as a consent judgment in the civil court at
Greensboro, N.C.
The Company is, from time to time, involved in litigation in the
ordinary course of its business. As of the date of this Form 10-Q,
management does not believe that such litigation is material.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 29, 1998, the Company held its second Annual Shareholders
Meeting at its principal offices located at 4750 Hempstead Station Drive,
Dayton, Ohio 45429 at 10:30 a.m., Eastern time.
There were 8,123,964 shares of Common Stock of the Company which could
be voted at the Annual Meeting, and 5,984,697 shares were represented at such
meeting by the holders thereof in person or by proxy, which constituted a
quorum. Matters voted upon were as follows:
NOMINEES FOR BOARD OF DIRECTORS FOR A ONE-YEAR TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
Name For Withheld Not Voted
- - ---- --- -------- ---------
<S> <C> <C> <C>
a. Robert G. Hecht 5,743,722 240,975 -0-
b. Anthony W. Liberati 5,743,677 241,020 -0-
c. Harry F. Radcliffe 5,712,372 272,325 -0-
d. Thomas C. Winstel 5,981,322 3,375 -0-
e. Michael E. Peppel 5,981,322 3,375 -0-
</TABLE>
The shareholders also voted by ballot and by proxy to approve the 1998
Stock Option Plan and the result of the vote taken was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For Against Abstain Not Voted
--- ------- ------- ---------
5,482,365 12,717 4,290 485,325
</TABLE>
The shareholders also voted by ballot and by proxy to ratify the
appointment by the Board of Directors of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998, and the
result of the voted taken was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For Against Abstain Not Voted
--- ------- ------- ---------
5,689,703 291,983 3,012 -0-
</TABLE>
The said proposals were approved by the requisite number of the total
votes eligible to be cast and these matters have been adopted by the
stockholders of the Company.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
9
<PAGE>
99 Safe Harbor Under the Private Securities Litigation Reform Act of
1995
(b) Reports on Form 8-K
Retirement and Severance Agreement regarding Albert L. Schwarz on
Form 8-K dated January 2, 1998.
Acquisition and Disposition of Assets of TBS Printware Corporation
on Form 8-K dated January 15, 1998.
Acquisition and Disposition of Assets of Minnesota Western/Creative
Office Products, Inc. filed on Form 8-K dated January 15, 1998.
Amendment to Form 8-K (a) filed January 15, 1998.
10
<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 thereunto duly authorized.
MIAMI COMPUTER SUPPLY CORPORATION
(Registrant)
Date: May 15, 1998
By:
----------------------------
Ira H. Stanley
Vice President - Finance
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 829693 169963
<SECURITIES> 0 0
<RECEIVABLES> 30430415 9351864
<ALLOWANCES> 299292 6000
<INVENTORY> 17658480 6456293
<CURRENT-ASSETS> 49456365 16136512
<PP&E> 6899804 2166724
<DEPRECIATION> 2797636 1166409
<TOTAL-ASSETS> 92678933 18127802
<CURRENT-LIABILITIES> 18555302 5463711
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 40310702 12534104
<TOTAL-LIABILITY-AND-EQUITY> 92678933 18127802
<SALES> 55164405 20226020
<TOTAL-REVENUES> 55164405 20226020
<CGS> 42653199 16745304
<TOTAL-COSTS> 52916416 19462377
<OTHER-EXPENSES> 302060 (11250)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 426280 871
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EXHIBIT 99
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 references, in the Company's
Quarterly Report on Form 10-Q for three months ended March 31, 1998 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
projection 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 projection 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, 64.0% of the Company's net sales for the three months ended
March 31, 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 ("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 $50.0 million secured
revolving credit facility (the "Credit Facility") provided by National City
Bank, PNC Bank and Key Corporate Capital, Inc. (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) liquidate or dissolve its
affairs, merge, consolidate or acquire the property or assets of any person
except the acquisitions of Britco, TBS and Minnesota Western or other
acquisitions (provided that such acquisitions comply with the financial
covenants of the Credit Agreement), certain intercompany mergers, permitted
investments, permitted dispositions, capital expenditures and losses; (iii)
permit the issuance of any lien on the Company's property and assets secure
the repayment of the Credit Agreement; (iv) incur other indebtedness except
for certain capital leases up to $3.0 million, certain guaranties, and
existing indebtedness; (v) lend money or buy the securities of, or make an
investment in any person, hold any subsidiary, or become a party to any
partnership or joint venture except for cash, receivables, certain loans,
investments in wholly-owned subsidiaries, loans by subsidiaries, permitted
acquisitions, certain subordinated indebtedness or certain investments up to
$1.0 million; (vi) pay cash dividends or repurchase its capital stock; (vii)
violate certain financial covenants relating to debt coverage or; (viii)
engage in certain other transactions. 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
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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 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
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 six computer and office
automation supply businesses in the past five 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
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.
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Exchange Rate Fluctuations. Although the Company's operations are not
currently subject to material operational risks associated with fluctuations
in exchange rates, because the Company intends to expand the size and scope
of its international operations, 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.
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