<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
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 10, 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 7. FINANCIAL STATEMENTS AND EXHIBITS
The purpose of the filing of this Form 8-K/A is to provide the audited
financial statements of certain assets and certain liabilities of the
computer supply business (the "Division") of Axidata Inc., a wholly-owned
subsidiary of Abitibi Consolidated, Inc. ("ACI") required by this Item
relating to the Registrant's acquisition of the Division. The pro forma data
called for by this Item is also included. The Form 8-K relating to the
acquisition was filed with the Securities and Exchange Commission on
December 16, 1998.
On December 10, 1998, Miami Computer Supply Corporation ("MCSC"), through a
newly created wholly-owned Canadian subsidiary established for that purpose,
closed its acquisition of certain assets and certain liabilities of the
Division. In addition, MCSC loaned ACI Cdn$31,602,000, an amount equal to the
net accounts receivable of the Division. ACI has agreed to permit MCSC to
reduce this loan using customer payments of these receivables. At the end of
a 120 day period after closing, ACI will assume any unpaid receivables and
pay MCSC the amount of any unpaid receivables. The assets acquired primarily
included inventories and property and equipment while the primary liabilities
assumed included accounts payable and accrued liabilities related to the
Division. The initial purchase price for the acquisition was Cdn$28,223,000
in cash and related out-of-pocket expenses. The purchase price was funded
from the Company's lending arrangement with PNC Bank, N.A.
Subsequently, on December 31, 1998, pursuant to the Asset Purchase Agreement,
an additional payment of Cdn$7.6 million was made by MCSC to ACI to reflect
the final determination of the net assets acquired.
FINANCIAL STATEMENTS AND PRO FORMA DATA:
The audited financial statements of the Division as of November 30, 1998 and
December 31, 1997 and for the eleven months ended November 30, 1998 and the
year ended December 31, 1997, respectively, required by this Item are included
herein on pages 4 through 13 of this Form 8-K/A.
The Unaudited Pro Forma Financial Information required by this Item is
included on pages 14 through 17 of this Form 8-K/A. The Unaudited Pro Forma
Financial Information assume that the acquisition 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
each of the periods 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 MCSC 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.
2
<PAGE>
The unaudited pro forma statements of operations reflect the effects of the
purchase allocation described above and the resultant amortization of
goodwill and additional interest expense associated with the cash used to
fund the acquisition, along with other adjustments directly attributable to
the transaction. The pro forma data reflects adjustments directly related to
the acquisition, and does not include adjustments that may arise as a
consequence of the acquisition, 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
acquisition actually occurred on January 1, 1997.
EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------------------------
<S> <C>
23 Consent of Chartered Accountants
99 Safe Harbor Under the Private Securities Litigation
Reform Act of 1995
</TABLE>
3
<PAGE>
[LETTERHEAD]
Auditors' Report
To the Directors of
Miami Computer Supply Corporation
We have audited the balance sheets of THE COMPUTER SUPPLIES BUSINESS OF
AXIDATA INC. as at November 30, 1998 and December 31, 1997 and the statements
of income and changes in financial position for the eleven months ended
November 30, 1998 and the year ended December 31, 1997. These financial
statements are the responsibility of the division's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the division as at November 30, 1998 and
December 31, 1997 and the results of its operations and its cash flows for
the eleven months ended November 30, 1998 and the year ended December 31,
1997 in accordance with Canadian generally accepted accounting principles.
PRICEWATERHOUSE COOPERS LLP
CHARTERED ACCOUNTANTS
January 29, 1999
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA, INC.
BALANCE SHEETS
(IN THOUSANDS OF CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Accounts receivable
Trade - less allowance for doubtful accounts of $396
(December 31, 1997 - $337) $29,184 $25,137
Other 2,367 2,281
Inventories (note 2) 18,847 15,563
Prepaid expenses 485 712
---------------------------------------
50,883 43,693
CAPITAL ASSETS (note 3) 6,254 7,177
---------------------------------------
$57,137 $50,870
---------------------------------------
---------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable $12,222 $11,255
Accrued liabilities 1,432 1,819
---------------------------------------
13,654 13,074
DEFERRED INCOME TAXES 590 590
---------------------------------------
14,244 13,664
DIVISIONAL EQUITY (note 4) 42,893 37,206
---------------------------------------
$57,137 $50,870
---------------------------------------
---------------------------------------
</TABLE>
5
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA, INC.
Statements of Income
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
SALES $226,483 $181,528
COST OF GOODS SOLD 202,761 159,278
---------------------------------------
GROSS PROFIT 23,722 22,250
---------------------------------------
OPERATING EXPENSES
Selling and administrative (note 7) 9,622 12,399
Warehouse and distribution 3,658 3,921
Freight 2,724 2,468
Bad debts 309 171
Other 369 288
---------------------------------------
16,682 19,247
---------------------------------------
OPERATING INCOME BEFORE EMPLOYEE SEVERANCE COSTS 7,040 3,003
EMPLOYEE SEVERANCE COSTS (978) -
---------------------------------------
OPERATING INCOME 6,062 3,003
LOSS ON SALE OF ACCOUNTS RECEIVABLE (note 5) - (208)
INTEREST (note 4) (891) (710)
---------------------------------------
INCOME BEFORE INCOME TAXES 5,171 2,085
---------------------------------------
PROVISION FOR INCOME TAXES (note 6)
Current 2,370 1,000
Deferred - 100
---------------------------------------
2,370 1,100
---------------------------------------
NET INCOME FOR THE PERIOD $ 2,801 $ 985
---------------------------------------
---------------------------------------
</TABLE>
6
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA, INC.
Statements of Changes in Financial Position
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income for the period $ 2,801 $ 985
Items not affecting cash
Amortization of capital assets 1,367 1,436
Deferred income taxes - 100
Net change in non-cash working capital balances (6,610) (10,350)
----------------------------------------
(2,442) (7,829)
CASH USED IN INVESTING ACTIVITIES
Purchase of capital assets (444) (1,610)
CASH PROVIDED BY FINANCING ACTIVITIES
Advances from ACI and the Company - net (note 4) 2,886 9,439
----------------------------------------
INCREASE IN CASH DURING THE PERIOD AND CASH AT END OF PERIOD $ - $ -
----------------------------------------
----------------------------------------
</TABLE>
7
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA INC.
Notes to Financial Statements
NOVEMBER 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The operations of the Computer Supplies Business (the Division) were owned
by Abitibi-Consolidated Inc. (ACI) through its wholly-owned subsidiary
Axidata Inc. (the Company) prior to the sale to Miami Computer Supply
Corporation (MCSC) on December 10, 1998. Under the purchase and sale
agreement, MCSC purchased the inventories, prepaid expenses, capital
assets and business of the Division and assumed the accounts payable and
accrued liabilities. The Division is a distributor of computer
consumables, peripherals and accessories. The Division's customers are
primarily located in eastern Canada and include specialized computer
supplies dealers, value added computer resellers and office products
distributors and retailers.
These special purpose financial statements have been prepared to enable
the purchaser to meet certain U.S. regulatory filing requirements.
INVENTORIES
Inventories are valued at the lower of cost and net realizable value with
cost determined on a first-in, first-out basis.
CAPITAL ASSETS
Capital assets are recorded at cost less accumulated amortization.
Straight-line amortization is used to amortize capital assets over their
estimated useful lives. The rates used are as follows:
<TABLE>
<S> <C>
Computer software and equipment 4 - 10 years
Office furniture and equipment 4 years
Machinery and equipment 10 - 25 years
Leasehold improvements 4 - 10 years
</TABLE>
INCOME TAXES
The Division follows the deferred method of accounting for income taxes.
Income tax provisions are based on accounting income and deferred taxes
relate to timing differences in recognizing income and expenses for
accounting and tax purposes. New recommendations of The Canadian Institute
of Chartered Accountants in connection with income taxes were announced in
the fall of 1997 and must be adopted by the year 2000. The impact of this
change in accounting for income taxes would be similar to the adjustments
disclosed in note 9(b) of these financial statements.
FOREIGN EXCHANGE
Monetary assets and liabilities arising from transactions denominated in a
foreign currency are translated at the rate of exchange prevailing at
period-end. Revenues and expenses are translated at prevailing market
rates at the date of the transactions.
8
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA INC.
Notes to Financial Statements
NOVEMBER 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
REVENUE RECOGNITION
Revenues are recognized at the time of shipment of products.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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
disclosures on 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.
FINANCIAL INSTRUMENTS
The recorded values of the Division's financial instruments, which include
accounts receivable and accounts payable and accrued liabilities,
approximate market value. In the opinion of management, the Division does
not have any significant concentration of credit risk. Concentration of
credit risk with respect to accounts receivable is limited due to the
number of customers and channels to and through which the Division's
products are sold.
2 INVENTORIES
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
Raw materials $ 1,196 $ 1,681
Finished goods 17,651 13,882
------------------------------------
$18,847 $15,563
------------------------------------
------------------------------------
</TABLE>
3 CAPITAL ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, 1998
---------------------------------------
ACCUMULATED
COST AMORTIZATION NET
<S> <C> <C> <C>
Computer software and equipment $ 3,355 $1,650 $1,705
Office furniture and equipment 876 598 278
Machinery and equipment 5,298 1,389 3,909
Leasehold improvements 525 163 362
---------------------------------------
$10,054 $3,800 $6,254
---------------------------------------
---------------------------------------
</TABLE>
9
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA INC.
Notes to Financial Statements
NOVEMBER 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------
ACCUMULATED
COST AMORTIZATION NET
<S> <C> <C> <C>
Computer software and equipment $2,933 $ 951 $1,982
Office furniture and equipment 859 479 380
Machinery and equipment 5,297 915 4,382
Leasehold improvements 521 88 433
--------------------------------------
$9,610 $2,433 $7,177
--------------------------------------
--------------------------------------
</TABLE>
4 DIVISIONAL EQUITY
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
Opening divisional equity $37,206 $26,782
Net income 2,801 985
Net advances from ACI and the Company 2,886 9,439
------------------------------------
Closing divisional equity $42,893 $37,206
------------------------------------
------------------------------------
</TABLE>
Included in divisional equity is an allocation of ACI debt of $11,000
(December 31, 1997 - $22,050) bearing interest at the Canadian bankers'
acceptance rate plus 3/8% (1997 - 1%) per annum which has no fixed terms
of repayment. The remaining ACI and Company balances are non-interest
bearing with no fixed terms of repayment. The non-interest bearing
advances averaged $12,500 (1997 - $8,700). Interest expense on ACI debt
amounted to $891 for the period ended November 30, 1998 (December 31,
1997 - $641).
The Division sold inventory in the amount of approximately $11,000
(December 31, 1997 - $10,000) to affiliated companies during the period.
5 SALE OF ACCOUNTS RECEIVABLE
Under ongoing agreements with major banks, accounts receivable were sold
to two of ACI's wholly owned subsidiary companies beginning in late 1996.
These affiliated companies then sold the receivables, with minimal
recourse to the banks. The Company acted as a service agent and
administered the collection of the accounts receivable. The program was
discontinued in early 1997.
10
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA INC.
Notes to Financial Statements
NOVEMBER 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
6 INCOME TAXES
The Division's income taxes are filed as part of the Company's tax
filings. Income taxes are calculated on the basis that the Division was a
separate taxable entity. Earnings have been charged with income taxes
relating to reported profits and the income taxes allocated are recorded
through advances from ACI. The combined statutory federal and provincial
income tax rate is 41% and may be reconciled to the Division's effective
tax rate as follows:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
Income before income taxes for the period $5,171 $2,085
Provision for income taxes $2,370 $1,100
Effective income tax rate 46% 53%
Reconciliation to statutory tax rate
Combined federal/provincial income tax rate 41% 41%
Non-deductible capital asset amortization 2 5
Canadian Large Corporations Tax 2 5
Other 1 2
----------------------------------------
46% 53%
----------------------------------------
----------------------------------------
</TABLE>
7 ALLOCATION OF EXPENSES
Selling and administrative expenses of the Division are allocated costs
and were allocated by the Company between its various business units based
on activity levels and the use of personnel using management's best
estimates. Total selling and administrative expenses of the Company in
periods ended November 30, 1998 and December 31, 1997 were $13,970 and
$18,985, respectively.
Included in selling, general and administrative expenses are ACI
administrative charges related primarily to executive administration,
legal, treasury and internal audit services of $55 and $300, respectively,
for the periods ended November 30, 1998 and December 31, 1997. In the
opinion of management, these costs have been allocated on a reasonable and
consistent basis.
11
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA INC.
Notes to Financial Statements
NOVEMBER 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
8 COMMITMENTS AND CONTINGENCIES
Approximate commitments under contractual obligations are summarized as
follows:
<TABLE>
<CAPTION>
2004 AND
1999 2000 2001 2002 2003 THEREAFTER
<S> <C> <C> <C> <C> <C> <C>
Leases on premises $748 $664 $585 $572 $572 $2,297
Leases on equipment 589 157 38 11 11 -
</TABLE>
The Division carries products and accessories purchased from numerous
suppliers and approximately 60% of the Division's net sales in the periods
ended November 30, 1998 and December 31, 1997 were derived from products
purchased from the Division's five largest suppliers.
The Division has one significant customer with sales for the periods ended
November 30, 1998 and December 31, 1997 approximating 15% of the
Division's sales.
UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the year 2000 issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
12
<PAGE>
THE COMPUTER SUPPLIES BUSINESS OF AXIDATA INC.
Notes to Financial Statements
NOVEMBER 30, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(in thousands of Canadian dollars)
9 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada. United States
generally accepted accounting principles (U.S. GAAP) differ in the
following material respects:
RECONCILIATION TO U.S. GAAP
<TABLE>
<CAPTION>
NOVEMBER 30, 1998 DECEMBER 31, 1997
------------------------------- ---------------------------------
NET DIVISIONAL NET DIVISIONAL
INCOME EQUITY INCOME EQUITY
<S> <C> <C> <C> <C>
Canadian GAAP $2,801 $42,893 $985 $37,206
Goodwill adjustment (a) (183) 3,703 (200) 3,886
Deferred income tax adjustment (b) 94 (777) 103 (871)
--------------------------------------------------------------------
U.S. GAAP $2,712 $45,819 $ 888 $40,221
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
a) Under U.S. GAAP, the acquisition price paid by ACI for certain
businesses would be "pushed down" and adjusted in the financial
statements of the Division. Goodwill of approximately $4,000 would
have been recorded on the 1996 acquisition of Tenex Data Corporation.
The goodwill balances at November 30, 1998 and December 31, 1997
would have been $3,703 and $3,886, respectively. The goodwill balance
does not have an income tax base and the related amortization expense
is a permanent difference for tax purposes and is being amortized on
a straight-line basis over 20 years.
b) Under FAS 109, the asset and liability method of accounting for
income taxes is used. Deferred taxes on the balance sheet at
November 30, 1998 and December 31, 1997 would have been increased by
$777 and $871, respectively, under U.S. GAAP.
13
<PAGE>
Miami Computer Supply Corporation
Unaudited Pro Forma Balance Sheet
(In thousands of U.S. dollars)
<TABLE>
<CAPTION>
MCSC Division
September 30, November 30, U.S. GAAP Pro Forma
1998 1998 (1) Adjustments (1) Adjustments (2) Pro Forma
------------- ------------ --------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,661 $ - $ - $ - $ 1,661
Accounts receivable 48,525 20,593 - - 69,118
Inventory 30,480 12,301 - - 42,781
Prepaid expenses 920 317 - - 1,237
Deferred income tax assets 244 - - - 244
------------- ------------ --------------- --------------- ---------
Total current assets 81,830 33,211 - - 115,041
Property, plant and equipment, net 7,942 4,083 - - 12,025
Intangible assets 59,122 - 2,417 13,409 74,948
Other assets 1,866 - - - 1,866
------------- ------------ --------------- --------------- ---------
Total assets $150,760 $37,294 $2,417 $ 13,409 $203,880
------------- ------------ --------------- --------------- ---------
------------- ------------ --------------- --------------- ---------
Accounts payable $ 23,040 $ 7,977 $ - $ - $ 31,017
Accrued expenses 5,926 935 - - 6,861
Current portion of long-term debt 132 - - - 132
------------- ------------ --------------- --------------- ---------
Total current liabilities 29,098 8,912 - - 38,010
Long-term debt 32,116 - - 44,208 76,324
Deferred income taxes 83 385 (385) - 83
Stockholders' equity 89,463 27,997 2,802 (30,799) 89,463
------------- ------------ --------------- --------------- ---------
Total liabilities and stockholders' equity $150,760 $37,294 $2,417 $ 13,409 $203,880
------------- ------------ --------------- --------------- ---------
------------- ------------ --------------- --------------- ---------
</TABLE>
See notes to the Unaudited Pro Forma Information.
14
<PAGE>
<TABLE>
Miami Computer Supply Corporation
Unaudited Pro Forma Statement of Operations
Year Ended December 31, 1997
(In thousands of U.S. dollars except share and per share data)
<CAPTION>
Historical
-------------------------- Pro Forma
MCSC Division (1) Adjustments Pro Forma
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 107,486 $130,700 $ - $ 238,186
Cost of sales 88,190 114,680 - 202,870
---------- ------------ ----------- ----------
Gross profit 19,296 16,020 - 35,316
Selling, general and administrative expenses 15,440 14,008 396 (3) 29,844
---------- ------------ ----------- ----------
Operating income 3,856 2,012 (396) 5,472
Interest expense (180) (511) 3,537 (4) (4,228)
Other income (expense) 43 - - 43
---------- ------------ ----------- ----------
Income before income taxes 3,719 1,501 (3,933) 1,287
Provision for income taxes 1,507 792 (1,648)(5) 651
---------- ------------ ----------- ----------
Net income $ 2,212 $ 709 $(2,285) $ 636
---------- ------------ ----------- ----------
---------- ------------ ----------- ----------
Earnings per share of common stock - basic $ .39 $ .11
---------- ----------
---------- ----------
Earnings per share of common stock - diluted $ .39 $ .11
---------- ----------
---------- ----------
Average shares outstanding - basic 5,671,833 5,671,833
---------- ----------
---------- ----------
Average shares outstanding - diluted 5,722,440 5,722,440
---------- ----------
---------- ----------
</TABLE>
See notes to the Unaudited Pro Forma Information.
15
<PAGE>
<TABLE>
Miami Computer Supply Corporation
Unaudited Pro Forma Statement of Operations
Nine Months Ended September 30, 1998
(In thousands of U.S. dollars except share and per share data)
<CAPTION>
Historical - Nine Months Ended
---------------------------------------
MCSC Division Pro Forma
September 30, 1998 November 30, 1998 Adjustments Pro Forma
------------------ ----------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 197,797 $129,670 $ - $ 327,467
Cost of sales 154,297 116,383 - 270,680
------------------ ----------------- ----------- ----------
Gross profit 43,500 13,287 - 56,787
Selling, general and administrative expenses 34,660 9,871 297 (3) 44,828
------------------ ----------------- ----------- ----------
Operating income 8,840 3,416 (297) 11,959
Interest expense (1,593) (495) 2,487 (4) (4,575)
Other income (expense) 118 - - 118
------------------ ----------------- ----------- ----------
Income before income taxes 7,365 2,921 (2,784) 7,502
Provision for income taxes 3,260 1,337 (1,164)(5) 3,433
------------------ ----------------- ----------- ----------
Net income $ 4,105 $ 1,584 $(1,620) $ 4,069
------------------ ----------------- ----------- ----------
------------------ ----------------- ----------- ----------
Earnings per share of common stock - basic $ .46 $ .46
------------------ ----------
------------------ ----------
Earnings per share of common stock - diluted $ .45 $ .45
------------------ ----------
------------------ ----------
Average shares outstanding - basic 8,925,673 8,925,673
------------------ ----------
------------------ ----------
Average shares outstanding - diluted 9,129,690 9,129,690
------------------ ----------
------------------ ----------
</TABLE>
See notes to the Unaudited Pro Forma Information.
16
<PAGE>
Miami Computer Supply Corporation
Notes to Unaudited Pro Forma Financial Information
(In thousands of U.S. dollars)
1) Information with respect to the Division was derived from the historical
financial statements of the Division and was converted to U.S. dollars
using the current Canadian to U.S. dollar exchange rate as of November 30,
1998 for balance sheet data and the average Canadian to U.S. dollar
exchange rate for the year ended December 31, 1997 and the nine months
ended November 30, 1998, respectively, for statement of operations data.
U.S. GAAP adjustments reflect, with respect to the balance sheet data,
(a) goodwill associated with ACI's previous acquisition of a portion of the
Division and (b) elimination of deferred income taxes inasmuch as this
transaction was an asset purchase and no book/tax basis differences existed
at the acquisition date. The effect of the U.S. GAAP adjustments on
statement of operations data is included in the pro forma adjustments
described below.
2) The unaudited pro forma balance sheet has been adjusted to reflect:
a) The elimination of the Division's divisional equity.
b) MCSC's use of borrowed funds under its current lending arrangements
to fund the purchase and transaction related expenses.
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.
3) To reflect amortization of goodwill over an estimated useful life of
40 years.
4) To reflect increased interest expense based on MCSC's use of its bank line
of credit to fund the transaction at 8.0% per annum for the year ended
December 31, 1997 and 7.5% per annum for the nine months ended
September 30, 1998, respectively.
5) To reflect the income tax benefit from goodwill amortization (to the extent
it is tax deductible under Canadian law) and interest expense, as shown in
the table below:
<TABLE>
<CAPTION>
Tax expense (benefit)
-----------------------------
Year Nine months
ended ended
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Goodwill amortization $ (127) $ (95)
Interest expense (1,521) (1,069)
------------ -------------
$(1,648) $(1,164)
------------ -------------
------------ -------------
</TABLE>
17
<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: February 24, 1999
------------------------------------
/s/ Ira H. Stanley
- ------------------------------------------
Ira H. Stanley
Vice President and Chief Financial Officer
18
<PAGE>
EXHIBIT 23
CONSENT OF CHARTERED 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)
and the Registration Statements on Form S-8 (Nos. 333-56499, 333-53699,
333-66641, 333-42291 and 333-42285) of Miami Computer Supply Corporation of
our report dated January 29, 1999 relating to the financial statements of
certain assets and certain liabilities of the computer supply business of
Axidata, Inc., which appears in the Current Report on Form 8-K/A of Miami
Computer Supply Corporation dated February 24, 1999.
PRICEWATERHOUSECOOPERS LLP
Toronto, Ontario
February 24, 1999
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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. Miami Computer Supply Corporation ("MCSC") 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 MCSC's Current Report on Form 8-K/A 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 MCSC'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
industry is highly competitive. MCSC 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 MCSC'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 MCSC. MCSC believes that the computer supply and
audio-visual presentation product 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 MCSC
will not encounter increased competition in the future, which could have a
material adverse effect on MCSC's business.
DEPENDENCE ON CERTAIN KEY SUPPLIERS
Although MCSC regularly carries products and accessories manufactured by
approximately 500 original equipment manufacturers, approximately 54.3% of
MCSC's net sales for the nine months ended September 30, 1998 were derived
from products supplied by MCSC's ten largest suppliers. In addition, MCSC's
business is dependent upon terms provided by its key suppliers, including
pricing and related provisions, product availability and dealer authorizations.
While MCSC considers its relationships with its key suppliers, including
Hewlett-Packard Company ("Hewlett-Packard"), Lexmark International, Inc.
("Lexmark"), Canon Corporation
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("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 MCSC may have a
material adverse effect on MCSC's business. Certain distribution agreements
require MCSC to make minimum annual purchases. Under its distribution
agreements with Hewlett-Packard, Lexmark and Imation, MCSC is required to
make minimum annual purchases of $10.0 million, $250,000 and $180,000,
respectively.
RESTRICTIONS IMPOSED BY DEBT ARRANGEMENTS
MCSC'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. (the "Bank"), National City Bank, Key Corporate
Capital, Inc., NBD Bank, N.A. and Firstar, N.A.. The Credit Facility also
requires that MCSC submit certain reports to the Bank, maintain proper books
and records and insurance coverage, and comply with applicable laws and
regulations. MCSC 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 MCSC'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
MCSC's Common Stock.
ABILITY TO MANAGE GROWTH
MCSC expects to experience rapid growth that will likely result in new and
increased responsibilities for management personnel and which will challenge
MCSC's management, operating and financial systems and resources. To compete
effectively and manage future growth, if any, MCSC 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 MCSC's personnel, systems, procedures and controls will be
adequate to support MCSC's future operations. Any failure to implement and
improve MCSC's operational, financial and management systems or to expand,
train, motivate or manage employees could have a material adverse effect on
MCSC's operating results and financial condition.
DEPENDENCE ON COMPUTER SYSTEMS
MCSC relies on its computer systems for financial accounting, order processing
and inventory control. Modifications to MCSC's computer systems and
applications software will be necessary as MCSC anticipates Year 2000 issues,
executes its expansion plans and responds to customer needs, technological
developments, electronic commerce
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requirements and other factors. Such modifications may cause disruptions in
the operations of MCSC, 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 MCSC's operations and financial performance.
MCSC 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.
MCSC has taken precautions to protect itself from events that could interrupt
its operations, including a Year 200 analysis, back-up power supplies that
allow MCSC'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 MCSC's
operations and financial performance.
FAILURE TO IMPLEMENT ACQUISITION STRATEGY
MCSC'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 MCSC 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, MCSC will be able to profitably manage such
companies. The failure to complete acquisitions and continue MCSC's expansion
could have a material adverse effect on its financial performance.
INTEGRATION OF ACQUISITIONS
MCSC 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 MCSC will be able to successfully integrate its future acquisitions with
MCSC'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 MCSC's operations in the future.
FINANCING FOR ACQUISITIONS; LEVERAGE
If acquisitions are consummated for cash, it is likely that MCSC will borrow
the necessary funds and, accordingly, MCSC may become highly leveraged as a
result thereof. If it becomes highly leveraged, MCSC may be more vulnerable
to extended economic downturns and its flexibility in responding to changing
economic and
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industry conditions may be limited. The degree to which MCSC is leveraged
could have important consequences to purchasers of the Common Stock,
including the impairment of MCSC's ability to obtain additional financing for
working capital, capital expenditures, acquisitions and general corporate
purposes. MCSC'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 MCSC's future operating
performance, which is itself dependent on a number of factors, many of which
are beyond MCSC's control, and may be dependent on the availability of
borrowings under the Credit Facility or other financings. A substantial
portion of MCSC'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 MCSC's working capital has been set aside for the specific
purpose of funding future acquisitions and, therefore, MCSC may require
additional funds to implement its acquisition strategy. While MCSC's Credit
Facility may be utilized to finance acquisitions, the amount which may be
drawn upon by MCSC may be limited. Accordingly, the Company may require
additional debt or equity financing for future acquisitions. There can be no
assurance that MCSC will be able to obtain additional debt or equity
financing on terms favorable to MCSC, 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 MCSC.
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 MCSC now has significant operations in Canada, its exposure to
fluctuations in exchange rates will be increased. Accordingly, no assurance
can be given that MCSC's results of operations will not be adversely affected
in the future by fluctuations in foreign currency exchange rates. MCSC has,
at times, entered into forward foreign currency exchange contracts in order
to hedge MCSC's accounts receivable and accounts payable. In the future, MCSC
may, from time to time, consider entering into other forward foreign currency
exchange contracts, although no assurances can be given that MCSC will do so,
or will be able to do so, or that such arrangements will adequately protect
MCSC from fluctuations in foreign currency exchange rates.
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