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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) January 31, 1994
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MERISEL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
0-17156 95-4172359
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(Commission File Number) (IRS Employer Identification No.)
200 Continental Boulevard, El Segundo, California 90245-0984
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 615-3080
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N/A
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(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(B) PRO FORMA FINANCIAL INFORMATION.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the acquisition on January 31, 1994 (the "Acquisition") of
certain assets of the United States Franchise and Distribution Division (the
"F&D Division") of ComputerLand Corporation ("ComputerLand") by Merisel, Inc.
("Merisel") through a wholly-owned subsidiary, Merisel FAB, Inc. ("Merisel
FAB"). The Acquisition was accounted for under the purchase method. The
unaudited pro forma condensed combined financial statements also assume the
purchase by ComputerLand of 1,103,144 shares of Merisel common stock (the
"ComputerLand Shares"), which will occur if and when a registration statement
covering the resale of such shares is declared effective by the Securities and
Exchange Commission. It is presently anticipated that such a registration
statement will be filed by Merisel in March 1994. The pro forma condensed
combined statement of income for the year ended December 31, 1993 illustrates
the potential impact on the historical results of operations assuming that the
Acquisition and issuance of the ComputerLand Shares occurred as of January 1,
1993. The pro forma condensed combined balance sheet as of December 31, 1993
has been prepared assuming that the Acquisition and issuance of the
ComputerLand Shares occurred as of December 31, 1993.
The unaudited pro forma condensed combined financial statements have
been prepared based upon the historical financial statements of Merisel for the
year ended December 31, 1993 and the statement of revenues and operating
expenses of the F&D Division for the year ended September 30, 1993. Such
statements may not be indicative of the results that would have occurred if the
acquisition and issuance of common shares had been consummated on the indicated
dates, or of the operating results that may be achieved in the future.
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MERISEL, INC. AND COMPUTERLAND CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------
SALE OF
SHARES TO
HISTORICAL ACQUISITION COMPUTERLAND
MERISEL ADJUSTMENT ADJUSTMENTS COMBINED
---------- ----------- ------------ ----------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...$ 14 $ 1,850 $ 1,864
Accounts receivable--net.... 393,252 393,252
Inventories................. 442,392 442,392
Prepaid expenses and other
current assets............. 15,443 950 16,393
Deferred income tax
benefit.................... 8,942 8,942
------- ------- ---------
Total current assets...... 860,043 2,800 862,843
Property and equipment--net. 39,858 200 40,058
Cost in excess of net assets
acquired--net.............. 32,832 82,000 114,832
Other assets................ 3,550 3,550
------- ------ ---------
Total assets............. $936,283 $85,000 $1,021,283
======= ====== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........... $414,841 $20,000 $(20,000) $ 414,841
Accrued liabilities........ 26,811 26,811
Short-term bank debt....... 50,929 65,000 115,929
Income taxes payable....... 7,697 7,697
------- ------ ------ ---------
Total current liabilities. 500,278 85,000 (20,000) 565,278
Deferred income tax......... 1,787 1,787
Long-term debt.............. 186,500 186,500
Subordinated debt........... 22,000 22,000
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Total liabilities......... 710,565 85,000 (20,000) 775,565
------- ------ ------ ---------
Minority interest........... 1,861 1,861
------- ------ ------ ---------
Stockholders' equity:
Common stock............... 296 11 307
Additional paid-in capital. 140,775 19,989 160,764
Retained earnings.......... 91,512 91,512
Cumulative translation
adjustment................ (8,726) (8,726)
------- ------ ------ ---------
Total stockholders'
equity................... 223,857 20,000 243,857
------- ------ ------ ---------
Total liabilities and
stockholders' equity.... $936,283 $85,000 - $1,021,283
======= ====== ====== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
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MERISEL, INC. AND COMPUTERLAND CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- ---------------------------------------
SALE OF
F&D SHARES TO
MERISEL DIVISION ACQUISITION COMPUTERLAND
12/31/93 9/30/93 ADJUSTMENTS ADJUSTMENTS COMBINED
---------- ----------- ------------- -------------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales...................................... $3,085,851 $1,071,306 $4,157,157
Cost of sales.................................. 2,827,315 1,016,584 3,843,899
---------- ---------- ----------
Gross profit................................... 258,536 54,722 313,258
Selling, general & administrative expenses..... 187,152 38,135 $ 3,320 228,607
---------- ---------- -------- ----------
Income from operations......................... 71,384 $ 16,587 (3,320) 84,651
==========
Interest expense............................... 17,810 6,138 $ (800) 23,148
Other expense.................................. 2,722 2,722
---------- -------- ------- ----------
Income before income taxes..................... 50,852 (9,458) 800 58,781
Provision for income taxes..................... 20,413 2,852 320 23,585
---------- -------- ------- ----------
Net income..................................... $ 30,439 $(12,310) $ 480 35,196
========== ======== ======= ==========
Net income per share........................... $1.00 $1.12
========== ==========
Weighted average number of common shares
outstanding................................... 30,454 1,103 31,557
========== ====== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
financial statements
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Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
1. GENERAL
Acquisition Agreement and Services Agreement
The foregoing unaudited pro forma condensed combined financial statements
illustrate the effect of the acquisition (the "Acquisition") by Merisel, Inc.
(the "Company"), through a wholly-owned subsidiary, Merisel FAB, Inc. ("Merisel
FAB"), of certain assets (the "Assets") of the United States Franchise and
Distribution Division (the "F&D Division") of ComputerLand Corporation
("ComputerLand") pursuant to an Asset Purchase Agreement (the "Purchase
Agreement") dated January 31, 1994 among ComputerLand, Merisel FAB and the
Company. Pursuant to the terms of the Purchase Agreement, Merisel FAB paid
approximately $80 million in cash for the Assets at the closing of the
Acquisition. In addition, the Purchase Agreement provides for a payment by
Merisel FAB in 1996 of up to $30 million based upon the growth in the Company's
and Merisel FAB's sales of designated vendor products to specified customers
over the two-year period ending January 31, 1996; such additional contingent
amount is not reflected in the accompanying unaudited pro forma condensed
combined financial statements.
The F&D Division (and now Merisel FAB) is a distributor of computer systems
and related products from the leading micro-computer manufacturers to a network
comprised of two customer groups: "ComputerLand" franchisees with whom it acts
as a franchisor by licensing the "ComputerLand" name and provides both product
supply and various support services, and "Datago" affiliates, which are
independent dealers and value-added resellers that purchase products from
Merisel FAB on a cost-plus basis, but do not license the "ComputerLand" name.
In connection with its purchase of the F&D Division, Merisel FAB purchased
substantially all of the F&D Division's franchise and third-party reseller
agreements as well as substantially all of the rights in the United States to
ComputerLand's trademarks, tradenames, service marks, copyrights, patents and
logos. Merisel FAB did not purchase the order fulfillment systems, warehouse or
inventory used by the F&D Division; such assets were retained by ComputerLand.
The Company eventually intends to integrate these functions into its facilities
and systems.
For an interim two-year period, Merisel FAB and ComputerLand have entered
into a Distribution and Services Agreement dated as of January 31, 1994 (the
"Services Agreement") pursuant to which resellers will place product orders with
Merisel FAB through the order placement system operated by ComputerLand.
ComputerLand will continue to purchase and warehouse vendor products and fulfill
reseller orders for substantially all of the products offered by Merisel FAB.
Merisel FAB will purchase such products from ComputerLand and will pay
ComputerLand a service fee for performing these functions, which approximates
the historical allocated cost of such services.
Under the Services Agreement, Merisel FAB has received $20 million in
extended credit terms on its product purchases from ComputerLand. ComputerLand
has agreed to use this amount to purchase 1,103,144 shares of the Company's
common stock at a per share price of $18.13, if and when a registration
statement covering the resale of such shares is declared effective by the
Securities and Exchange Commission. It is presently anticipated that such a
registration statement will be filed by the Company in March 1994.
Historical Financial Information
Prior to its acquisition, the F&D Division was not an incorporated entity
and separate historical financial statements were not prepared; accordingly, no
such financial statements are readily available. The historical information
included herein was obtained from the F&D Division's statement of revenues and
operating expenses for the year ended September 30, 1993. Such statement
presents the revenues, direct expenses and general and administrative expenses
allocated from ComputerLand to the F&D Division. Selling, general and
administrative expenses include allocated expenses of $27,340,000, representing
costs of the distribution centers and general corporate functions and
administrative personnel. The expenses have been allocated to the F&D Division
based upon such factors as the ratio of the F&D Division's shipments to the
total shipments by ComputerLand and
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ComputerLand management's estimate of the time spent by shared employees of
ComputerLand on work related to the F&D Division. Interest income, interest
expense and income taxes were not allocated.
The statement of revenues and operating expenses, which includes
ComputerLand's allocated expenses, may not necessarily reflect the results of
operations that would have been obtained had the F&D Division been operated as a
separate, stand-alone entity for the period presented and may not be indicative
of future revenues and operating expenses of Merisel FAB.
2. PRO FORMA BALANCE SHEET ADJUSTMENTS RELATED TO THE ACQUISITION
The initial purchase price for the F&D Division consisted of approximately
$80 million in cash and $2 million in direct expenses. The purchase was funded
substantially by borrowings under a $65 million note to a bank due in January
1995 and a separate $16 million short-term note which was subsequently repaid in
February 1994 from the $20 million of extended credit terms granted to Merisel
FAB for product purchases from ComputerLand (the "ComputerLand Payable"). For
purposes of the pro forma balance sheet presentation, the ComputerLand Payable
is assumed to be outstanding as of the balance sheet date. Approximately
$950,000 in fees were incurred in connection with obtaining the notes payable to
the bank.
Under the purchase method of accounting, an allocation of the purchase price
to the Merisel FAB assets and liabilities is required to reflect fair values.
An allocation of the purchase price has not yet been performed; however, the
following sets forth certain preliminary allocations (all amounts in thousands):
<TABLE>
<S> <C>
Property and equipment.............................................................................. $ 200
Intangible assets--consisting of the purchase price over the
net assets acquired............................................................................... 82,000
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Preliminary estimated purchase allocation........................................................... $82,200
=======
</TABLE>
The composition of pro forma balance sheet adjustments is as follows (all
amounts in thousands):
<TABLE>
<S> <C>
a) Cash
Cash obtained from bank financing and the ComputerLand Payable
in excess of the purchase price, acquisition costs and bank fees............................. $ 1,850
-------
b) Other assets
Fees incurred in connection with obtaining bank notes......................................... $ 950
-------
c) Accounts payable
ComputerLand Payable.......................................................................... $20,000
-------
d) Short-term debt
Note payable to bank.......................................................................... $65,000
-------
</TABLE>
3. PRO FORMA BALANCE SHEET ADJUSTMENTS RELATED TO SALE OF COMPUTERLAND SHARES
The Company will issue to ComputerLand 1,103,144 shares of Merisel common
stock in exchange for the cancellation of the ComputerLand Payable. The
purchase of the ComputerLand Shares will occur if and when a registration
statement covering the resale of such shares is declared effective by the
Securities and Exchange Commission. As it is the Company's intent to file a
registration statement in March 1994 covering the resale of the ComputerLand
Shares, the exchange has been reflected in the foregoing unaudited pro forma
condensed balance sheet.
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4. PRO FORMA INCOME STATEMENT ADJUSTMENTS RELATED TO THE ACQUISITION
Unaudited pro forma income statement adjustments are as follows:
<TABLE>
<CAPTION>
In
a) Selling, general and administrative expenses thousands
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<S> <C>
Amortization of the excess of purchase price over net assets ($82 million / 25 years)..... $3,280
Depreciation of property and equipment ($200,000 / 5 years)............................... 40
----------
Total adjustment.......................................................................... $3,320
==========
<CAPTION>
b) Interest and other expenses
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<S> <C>
Interest expense on short-term debt ($65 million at expected average rate of 6.75%)....... $4,388
Interest expense on ComputerLand Payable ($20 million at an interest rate of 4%).......... 800
Amortization of bank fees................................................................. 950
----------
Total adjustment.......................................................................... $6,138
==========
NOTE: A fluctuation of 0.125% in the interest rate would result in an $81,000 change in
interest expense.
c) Provision for income taxes
--------------------------
Income taxes have been adjusted to reflect an estimated income tax rate of 40%, net of
pro forma adjustments applied to pretax income for the F&D Division.
</TABLE>
5. PRO FORMA INCOME STATEMENT ADJUSTMENTS RELATED TO THE SALE OF COMPUTERLAND
SHARES
<TABLE>
<CAPTION>
In
thousands
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<S> <C>
Reduction in interest expense from exchange of ComputerLand Payable ($20 million at 4%) $800
---------
</TABLE>
6. NET INCOME PER SHARE
The pro forma adjustments to weighted average shares represents the issuance
of 1,103,144 shares of common stock in exchange for the ComputerLand Payable.
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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.
MERISEL, INC.
By: /s/ JAMES L. BRILL
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James L. Brill
Senior Vice President-Finance and Chief
Financial Officer
Date: March 24, 1994
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