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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 12B-25
Commission File Number ________
NOTIFICATION OF LATE FILING
(Check One): [X] Form 10-K [_] Form 11-K [_] Form 20-F
[_] Form 10-Q [_] Form N-SAR
For Period Ended: December 31, 1995
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[_] Transition Report on Form 10-K [_] Transition Report on Form 10-Q
[_] Transition Report on Form 20-F [_] Transition Report on Form N-SAR
[_] Transition Report on Form 11-K
For the Transition Period Ended:
Read attached instruction sheet before preparing form. Please print or
type.
Nothing in this form shall be construed to imply that the Commission has
verified any information contained herein.
If the notification relates to a portion of the filing checked above,
identify the Item(s) to which the notification relates:
PART I. REGISTRANT INFORMATION
Full name of registrant MERISEL, INC.
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Former name if applicable
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Address of principal executive office (Street and number)
200 Continental Boulevard
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City, State and Zip Code El Segundo, California 90245
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PART II. RULE 12B-25 (B) AND (C)
If the subject report could not be filed without unreasonable effort or
expense and the registrant seeks relief pursuant to Rule 12b-25(b), the
following should be completed. (Check appropriate box.)
[X] (a) The reasons described in reasonable detail in Part III of this form
could not be eliminated without unreasonable effort or expense;
[X] (b) The subject annual report, semi-annual report, transition report on
Form 10-K, 20-F, 11-K or Form N-SAR, or portion thereof will be filed on
or before the 15th calendar day following the prescribed due date; or the
subject quarterly report or transition report on Form 10-Q, or portion
thereof will be filed on or before the fifth calendar day following the
prescribed due date; and
[X] (c) The accountant's statement or other exhibit required by Rule 12b-
25(c) has been attached if applicable.
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PART III. NARRATIVE
State below in reasonable detail the reasons why Form 10-K, 11-K, 20-
F, 10-Q, N-SAR or the transition report portion thereof could not be filed
within the prescribed time period. (Attach extra sheets if needed.)
Merisel, Inc. (the "Company") is presently unable to file its Annual
Report on Form 10-K for the year ending December 31, 1995 for the reasons
described below.
As discussed in the press release dated April 1, 1996 (attached hereto
as Exhibit A), the Company incurred substantial net losses for the fourth
quarter and fiscal year ended December 31, 1995. Due to these losses, the
Company is in noncompliance with certain covenants under its senior lending and
other agreements. The Company is engaged in active negotiations with its lenders
to obtain waivers or amendments with respect to these agreements in the near
future, the outcome of which will determine whether the long-term debt evidenced
by such agreements will remain classified as long-term debt or whether all or
part of such debt will be accelerated. At present, the Company has reached
agreements in principle with representatives of its $150,000,000 Bank Revolving
Credit Facility and holders of its $100,000,000 8.58% Senior Notes regarding
amendments to the agreements governing such facilities. The contemplated
amendments would cure all covenant defaults under these agreements and would
provide that these facilities would remain in place for the rest of the year, if
the Company approximates its business plan for the remainder of 1996, which
calls for the curtailment of non-essential capital expenditures to maximize cash
flow. If successfully implemented, this plan will allow the Company to operate
without the need for additional sources of financing or any asset sales,
assuming no significant changes in payment terms to its vendors. The proposed
amendments are subject to formal credit approval by the respective institutions
and the Company's ability to satisfy several conditions, including negotiations
of amendments under certain other financing arrangements, preparation of
acceptable documentation and other conditions. The Company is confident that it
will be able to satisfy such conditions; however, there can be no assurance that
it will be able to do so or that negotiations with respect to other financing
arrangements will be successful or that the Company's financial performance will
approximate its business plan. Pending further resolution of these issues, the
Company's independent auditors, Deloitte & Touche LLP, have advised the Company
that they will not be able to deliver their final independent auditors' report
and thus the financial statements required to be filed in response to Item 8 of
Form 10-K. See the accountant's statement required by Rule 12b-25(c), attached
hereto as Exhibit B.
The Company believes that until it determines whether the above
referenced waivers or amendments can be obtained, the Company's responses to the
other disclosures required by Form 10-K would be incomplete or misleading
(including, without limitation, the Company's responses to Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Item 1, Business). Because the outcome of these negotiations will impact how
the Company conducts its business in the present fiscal year, any historical
descriptions of the operations of the business would be only partially complete
and it would be difficult for the Company to delineate its operating and other
financing requirements for the remainder of the fiscal year.
For the reasons set forth above, the Company's inability to file
timely its Annual Report on Form 10-K for the year ended December 31, 1995 could
not be eliminated by the Company without unreasonable effort or expense. The
Company intends to file the subject annual report on Form 10-K no later than the
fifteenth calendar day after the due date of the report.
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PART IV. OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification
James L. Brill (310) 615-3080
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(Name) (Area code) (Telephone number)
(2) Have all other periodic reports required under Section 13 or 15(d) of
the Securities Exchange Act of 1934 or Section 30 of the Investment Company Act
of 1940 during the preceding 12 months or for such shorter period that the
registrant was required to file such report(s) been filed? If the answer is no,
identify report(s). [X] Yes [_] No
(3) Is it anticipated that any significant change in results of operations
from the corresponding period for the last fiscal year will be reflected by the
earnings statements to be included in the subject report or portion thereof?
[X] Yes [_] No
If so: attach an explanation of the anticipated change, both narratively
and quantitatively, and, if appropriate, state the reasons why a reasonable
estimate of the results cannot be made.
See the press release, dated April 1, 1996, attached hereto as Exhibit A.
MERISEL, INC.
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(Name of registrant as specified in charter)
Has caused this notification to be signed on its behalf by the undersigned
thereunto duly authorized.
Date April 1, 1996 By /s/ James L. Brill
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James L. Brill
Senior Vice President and
Chief Financial Officer
Instruction. The form may be signed by an executive officer of the
registrant or by any other duly authorized representative. The name and
title of the person signing the form shall be typed or printed beneath the
signature. If the statement is signed on behalf of the registrant by an
authorized representative (other than an executive officer), evidence of
the representative's authority to sign on behalf of the registrant shall be
filed with the form.
ATTENTION
Intentional misstatements or omissions of fact constitute Federal criminal
violations (see 18 U.S.C. 1001).
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Exhibit A
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Contact: James L. Brill
Chief Financial Officer, (310) 615-1259
For Immediate Release
Susan T. Stillings
Director, Investor Relations, (310) 615-6868
MERISEL REPORTS FOURTH QUARTER AND FISCAL YEAR 1995 RESULTS
El Segundo, CA (April 1, 1996) -- Merisel, Inc. (NASDAQ:MSEL) announced today
its fourth quarter and fiscal year financial results for the year ended December
31, 1995. Merisel incurred a net loss of $38.2 million for the fourth quarter,
or $1.28 per share, before asset valuation impairment adjustments of $39.1
million. The total loss for the fourth quarter, including asset valuation
adjustments, was $77.3 million, or $2.59 per share, which compares to a net loss
of $2.5 million, or $0.08 per share, for the fourth quarter of 1994.
The fourth quarter 1995 net loss included $0.87 per share from supplier account
reconciliations and other audit adjustments and $0.18 per share related to
Merisel's Australian business, which has since been sold. The remaining $0.23
per share of the loss before asset valuation adjustments is a combination of
losses incurred at Merisel's European, Canadian and ComputerLand Franchise and
Aggregation Business operations, including $0.11 per share related to start-up
costs at Merisel's new European Distribution Center.
In addition, the Company recorded non-cash asset valuation adjustments in the
fourth quarter of $39.1 million, or $1.31 per share, for impairment to Merisel's
capitalized costs related to the Company's on-going operating system conversion
($0.52 per share) and goodwill associated with Merisel's ComputerLand Franchise
Business ($0.79 per share). The goodwill written down is specifically related to
impairment of the franchise business assets and is not related to Merisel's
Datago aggregation business, which was purchased in the same transaction in
January 1994.
"While the loss for the fourth quarter is large," said Dwight A. Steffensen,
Merisel's newly appointed chairman and chief executive officer, "it also shows
the new management team's commitment to taking a fresh look at all aspects of
our business to ensure the Company's stability. We have had to make hard choices
regarding the value of certain assets and have begun taking steps to reduce or
eliminate the costs associated with unprofitable areas of our operations. While
additional work needs to be done, we are already putting procedures in place to
address many of the problems associated with our fourth quarter losses."
Merisel's net loss for 1995, including all charges, was $83.9 million, or $2.82
per share, compared to 1994 earnings of $11.6 million, or $0.38 per share.
Sales for the year ended December 31, 1995 increased 19 percent to $6.0 billion,
from $5.0 billion in 1994. Sales for the fourth quarter of 1995 increased 11
percent to $1.6 billion, from $1.4 billion for the fourth quarter of 1994.
In Europe, with the exception of The Netherlands, Merisel's European
subsidiaries' annual operating income improved substantially from the previous
year. Merisel Europe, however, reported an overall operating loss for the fourth
quarter and fiscal year, which is primarily the result of losses associated with
opening Merisel's new European Distribution Center ("EDC") located in Helmond,
The Netherlands. The EDC was opened in August and soon afterward began shipping
to Merisel's German and Austrian customers.
Merisel Canada achieved an operating profit for the fourth quarter and
fiscal year prior to accounting for costs associated with converting its
operating system from a mainframe to a client/server based system in August
1995. Since early February, the Canadian operating system has been stabilized
and Merisel Canada believes it has recovered from any loss of sales due to
business interruptions that may have occurred early in the first quarter.
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Merisel's gross profit as a percentage of sales for 1995, before accounting for
the adjustments discussed herein, fell to 6.0 percent from 6.8 percent for 1994.
Operating expenses as a percentage of sales, before accounting for any
adjustments, for 1995 fell to 5.3 percent from 5.6 percent for 1994, partially
offsetting the decline in gross profit. After accounting for all charges,
Merisel's 1995 gross profit and operating expenses were 5.4 percent and 6.3
percent of sales, respectively. For the fourth quarter of 1995, Merisel's gross
profit and operating expenses as a percentage of sales, before accounting for
the adjustments discussed herein, were 5.6 percent and 5.2 percent,
respectively. After accounting for all adjustments, gross margin and operating
expenses were 3.5 percent and 9.0 percent of sales, respectively. For the
fourth quarter of 1994, gross profit and operating expenses as a percentage of
sales were 6.7 percent and 6.0 percent, respectively.
Of the loss for the fourth quarter, $0.68 per share was the result of charges
incurred to adjust trade accounts payable balances. In the course of business,
Merisel reconciles its accounts payable balances to statements provided by its
vendors. The charge taken in the fourth quarter is related to adjustments for
price protection, returns to vendors by Merisel, and inventory receipt related
issues, such as short-shipments. In order to prevent further supplier account
reconciliation losses, Merisel is implementing processes and procedures to
compensate for any current system deficiencies. Management has engaged
additional resources to assist in collecting a part of the charge that may be
determined to be recoverable.
Because of the magnitude of the loss reported for the fiscal year, Merisel is in
non-compliance with certain covenants under its senior lending and other
agreements. The Company has been in active discussions with its lenders to
amend these covenants to bring the Company into compliance, and is confident
that it will be able to obtain amendments or waivers with respect to these
agreements in the near future. While Merisel expects these negotiations to be
successful, there can be no assurance with respect to their outcome.
In connection with these negotiations, Merisel is requesting an extension of 15
days for the time to file its Annual Report on Form 10-K as permitted under the
federal securities laws. The purpose of the extension is to permit Merisel to
conclude negotiations with its lenders so that it can properly account for its
senior borrowings on its balance sheet and make other necessary changes to its
required disclosures based on the outcome of these negotiations.
Merisel has developed a business plan for the remainder of 1996 which, if
successfully implemented, will allow it to operate without the need for
additional sources of financing or any asset sales, assuming no significant
changes in payment terms to its vendors. In addition, the Company intends to
curtail non-essential capital expenditures during 1996 to maximize its cash
flow.
Merisel is also continuing to actively explore all of its strategic options with
the assistance of Merrill Lynch & Co. These options include a business
combination with, or sale to, a strategic partner who could provide the capital
necessary to enable continued growth of the Company, or a sale of significant
assets in geographic regions around the
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world, which would also enable Merisel to fund its remaining operations out of
existing cash flow or restructured borrowings.
Merisel, Inc. (NASDAQ:MSEL) is a worldwide leader in the distribution of
computer hardware and software products. The Company holds Fortune 500 status,
with 1995 sales of $6 billion. Merisel distributes a full line of
25,000 products to more than 65,000 resellers worldwide.
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Exhibit B
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March 29, 1996
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Re: Merisel, Inc. Form 12b-25
Dear Sirs/Madams:
We are independent accountants for Merisel, Inc. At December 31, 1995, Merisel,
Inc. has a $150,000,000 revolving credit facility with a bank group,
$100,000,000 of 8.58% senior notes due June 30, 1997, and $22,000,000 of
privately placed subordinated notes. The Company is in non-compliance with
certain covenants under these agreements and is currently in negotiations with
its lenders regarding amendments to the agreements.
The results of the negotiations will impact the balance sheet classification of
the debt as well as the financial statement disclosures. Accordingly, as these
negotiations are not complete, additional time is required for us to complete
our audit of the financial statements of Merisel, Inc. for the year ended
December 31, 1995.
Yours truly,
/s/ Deloitte & Touche LLP
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