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: August 29, 1997
SAVOIR TECHNOLOGY GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-11560 94-2414428
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
254 EAST HACIENDA AVENUE, CAMPBELL, CA 95008
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(Address of principal executive offices) (Zip Code)
(408) 379-0177
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(Registrant's telephone number,
including area code)
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This Current Report on Form 8-K is being amended to revise the pro-forma
financial statements which are exhibits hereto, to eliminate certain prior
adjustments in order to reflect events which occurred subsequent to the date of
the original filing.
Item 5. OTHER EVENTS.
On August 29, 1997, Western Micro Technology, Inc. (the "Registrant")
issued the press release attached hereto as Exhibit 99.1 and incorporated by
reference. The press release related to the Company's announcement that it had
signed an amendment, attached hereto as Exhibit 2.1 and incorporated by
reference (the "Amendment"), with the stockholders of Star Management Services,
Inc. ("Star") to extend the closing date of the proposed acquisition by the
Registrant of the outstanding capital stock of Star (the "Acquisition") as set
forth in the Stock Purchase Agreement dated as of June 4, 1997 (filed as Exhibit
2.1 to Amendment No. 2 of the Registrant's Current Report on Form 8-K filed on
July 16, 1997) as amended by the letter agreement dated July 22, 1997 (together
the "Amended Purchase Agreement") from August 31, 1997 to September 5, 1997.
The Amendment further provides, among other things, that: (1) while
maintaining the effectiveness of the agreement, the Registrant pay an additional
$500,000 to satisfy the total termination fee of $1,000,000 that it would have
owed pursuant to the Amended Purchase Agreement; (2) if the Acquisition is
completed by September 5, $500,000 of the termination fee shall be credited
toward the payment of the purchase price; (3) the non-solicitation provisions
set forth in Section 6.2(e) of the Amended Purchase Agreement shall not apply to
any negotiations between Star and Arrow Electronics, Inc. or any affiliate or
subsidiary thereof; (4) certain payment terms of the cash and stock provided to
stockholders of Star under the Amended Purchase Agreement shall be modified as
described more fully therein; and (5) Registrant shall transfer all rights to
the name "Business Partner Solutions" to Star.
On September 5, 1997, the Company signed a second amendment, attached
hereto as Exhibit 2.2 and incorporated by reference (the "Second Amendment")
with the stockholders of Star to extend the closing date of the Acquisition from
September 5, 1997 to September 30, 1997. The Second Amendment further provides
that: (1) Registrant agrees to have all of the funds necessary to consummate the
contemplated transactions held in escrow on or before September 23, 1997; (2)
certain payment terms of the cash and stock provided to stockholders of Star
under the Amended Purchase Agreement shall be modified as described more fully
therein; and (3) Registrant's shares issued or issuable upon the exercise of any
warrants by Carlton Joseph Mertens II shall not be included for purposes of
calculating the 20% threshold set forth in section 2.9 of the Amended Purchase
Agreement.
The following table sets forth selected unaudited pro forma combined
financial information of the Company and Star at the dates and for the fiscal
year ended December 31, 1996 and six-month period ended June 30, 1997. The pro
forma information contained herein supersedes in their entirety the pro forma
information contained in Amendment No. 1 and Amendment No. 2 to the Registrant's
Current Report on Form 8-K
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dated June 18, 1997 and July 16, 1997, respectively and in the Registrant's
Current Report on Form 8-K dated July 23, 1997. The pro forma information is
presented for informational purposes only, and is not necessarily indicative of
the operating results or financial position that would have occurred if the Star
Acquisition had been consummated at the beginning of the periods presented, nor
is it necessarily indicative of the future operating results or financial
position. The parties intend that the Star Acquisition will be accounted for as
a purchase in accordance with Accounting Principles Board Opinion Number 16. For
pro forma purposes, the Star financial data covers the approximate comparable
financial reporting periods used by the Company (see footnote 1 below).
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<TABLE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
<CAPTION>
Year Ended December 31, 1996 (1) Six Months Ended June 30, 1997 (1)
Western Pro Forma Pro Forma Western Pro Forma Pro Forma
Micro Star Adjustments Combined Micro Star Adjustments Combined
-------- ------- ----------- -------- ------- ------- ----------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales(A)................ $131,697 $76,495 $ -- $208,192 $ 75,836 $42,398 $ -- $118,234
Cost of goods sold.......... 114,389 66,383 -- 180,772 63,274 36,982 -- 100,256
-------- ------- -------- -------- ------- ------- -------- --------
Gross profit................ 17,308 10,112 -- 27,420 12,562 5,416 -- 17,978
Selling, general and
administrative expenses,
including amortization.. 14,123 7,217 2,617 (2) 21,645 10,603 3,772 1,309 (2) 15,106
(2,312)(3) (578)(3)
----------- --------- -------- ----------- --------- ---------- -------- ---------
Operating income............ 3,185 2,895 (305) 5,775 1,959 1,644 (731) 2,872
--------- ------- -------- --------- ------- -------- -------- ---------
Interest expense............ 978 81 4,071 (4) 5,130 928 -- 2,036 (4) 2,964
Other expense (income)...... (407) -- -- (407) (231) -- -- (231)
Income tax expense.......... 276 963 (818)(5) 421 312 -- (256)(5) 56
--------- -------- -------- --------- -------- ------- --------- ---------
Net income.................. $ 2,338 $ 1,851 $ (3,558) $ 631 $ 950 $ 1,644 $ (2,511) $ 83
========= ======= ======== ========= ======== ======= ========= =========
Net income per share:
-- Primary............... $ 0.51 $ -- $ -- $ 0.13 $ 0.19 $ -- $ -- $ 0.02
-- Fully diluted......... 0.50 -- -- 0.12 0.19 -- -- 0.02
Number of shares used in per
share calculations:
-- Primary............... 4,510 -- 460 (6) 4,970 5,080 -- 460 (6) 5,540
-- Fully diluted......... 4,663 -- 460 5,123 5,106 -- 460 5,566
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</TABLE>
(1) For purposes of the pro forma combined data, Star's financial data for its
fiscal year ended October 31, 1996 and its fiscal six months ended April 30,
1997 have been combined with the Company's financial data for the fiscal
year ended December 31, 1996 and the six months ended June 30, 1997,
respectively.
(2) Increase in amortization of goodwill and other intangibles associated with
the Star Acquisition.
(3) Reduction in Star's executive compensation to reflect Star Acquisition.
(4) Increase in interest expense associated in connection with the placement of
15.7 million of subordinated debt to be incurred to finance the Star
Acquisition, $10.0 million overadvance (senior secured note), and $6.5
million original principal amount of notes proposed to be issued to the
selling stockholders in the Star Acquisition ("Seller Notes").
(5) Tax adjustment to reflect 40% overall tax rate applicable to pro forma
results.
(6) Issuance of restricted Common Stock as consideration in proposed Star
Acquisition.
(A) The pro forma amounts do not include adjustments for sales that would have
occurred between the distribution business of Star and the end-user business
if the spin-off of the end-user business had occurred at the beginning of
each period presented. The Company has assigned no value to the agreement
with IBM associated with the acquisition because: (i) the terms of the
agreement can be changed by IBM with 30 days written notice; (ii) IBM may
terminate the agreement upon 90 days written notice; (iii) the agreement is
non-exclusive and provides for no franchise rights; (iv) IBM may withdraw
its products or services at any time under the agreement; and (v) IBM may
assign the agreement and any outstanding orders to any other IBM related
company at any time. If the IRA Agreement had been in effect since the
beginning of the fiscal year 1996 (in lieu of direct sales), net sales would
have amounted to an estimated $246,914,000 and $139,138,000 for the fiscal
year ended December 31, 1996, and six months ended June 30, 1997,
respectively. Estimated cost of goods sold for these periods would have been
$216,145,000 and $120,221,000, respectively. The difference from historical
net revenue amounts is due to the elimination of sales related to product
lines not acquired by the Company and the effect of discounted selling
prices under the IRA Agreement, while the difference in cost of goods sold
is due solely to the exclusion of costs related to product lines not
acquired (principally Hewlett-Packard products).
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<TABLE>
UNAUDITED PRO FORMA BALANCE SHEET DATA AT JUNE 30, 1997(1)
<CAPTION>
Western Pro Forma Pro Forma
Micro Star Adjustments Combined
-------- ------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Working capital..................... 7,997 4,390 (24,107)(2) (11,720)
Net trade accounts receivable....... 36,869 8,297 45,166
Inventories......................... 19,542 5,597 25,139
Total assets........................ 69,407 20,673 50,385 (3) 140,465
Long-term debt...................... 662 -- 23,453 (4) 24,115
Stockholders' equity................ 19,051 5,079 2,825 (5) 26,955
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</TABLE>
(1) For purposes of the pro forma combined data, Star's financial data at April
30, 1997 have been combined with the Company's financial data at June 30,
1997.
(2) Increase in short-term borrowings under new Revolver of $13,543,000,
increase in current portion of long-term debt of $4,649,000 to reflect
amortization of overadvance facility and $3,377,000 to reflect discounted
current portion of Seller Notes and an increase in accrued expenses of
$2,538,000 to reflect Star Acquisition costs. (Excludes the $1,000,000
adjustment of accounts receivable reflected in the initial 8-K filing which
was based solely on an analysis of Star's customer losses and related
collection exposures due to IBM's policy of permitting Star customers to
change distributors in the event of an acquisition, as well as the prior
$500,000 adjustment of inventory which was based solely on an analysis of
expected Star inventory obsolescence associated with the potential vendor
realignment. These adjustments were subsequently determined to be
unnecessary based on actual experience of the Company.)
(3) Increase in goodwill and other intangibles.
(4) Increase in overadvance of $5,351,000, in Seller Notes of $3,102,000, and in
subordinated debt of $15,000,000.
(5) Issuance of $4,169,900 in restricted Common Stock to Seller at closing and
increase of $1,875,000 attributable to warrants which the Company believes
it will be required to issue in connection with the placement of the
subordinated debt to be incurred to finance the Star Acquisition, net of a
$3,219,000 reduction to reflect a transfer of $2,500,000 net assets at
closing.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Exhibits.
*2.1 Amendment to Stock Purchase Agreement by and among
Harvey E. Najim, Carlton Joseph Mertens II and
Western Micro Technology, Inc. dated August 29,
1997.
*2.2 Second Amendment to Stock Purchase Agreement by and
among Harvey E. Najim, Carlton Joseph Mertens II and
Western Micro Technology, Inc. dated September 5,
1997.
*99.1 Press Release dated August 29, 1997.
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*Filed previously.
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SIGNATURE
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.
Dated: February 16, 1998
SAVOIR TECHNOLOGY GROUP, INC.
By /s/ James W. Dorst
--------------------------------
James W. Dorst
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
*2.1 Amendment to Stock Purchase Agreement by
and among Harvey Najim, Carlton Joseph
Mertens II and Western Micro Technology,
Inc. dated August 29, 1997.
*2.2 Second Amendment to Stock Purchase
Agreement by and among Harvey Najim,
Carlton Joseph Mertens II and Western Micro
Technology, Inc. dated September 5, 1997.
*99.1 Press Release dated August 29, 1997.
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*Filed previously.
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