RESTATED - SEE "INTRODUCTORY NOTE"
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1992 COMMISSION FILE NUMBER: 0-20730
------------------
MICRO WAREHOUSE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------
DELAWARE 06-1192793
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
535 CONNECTICUT AVENUE, NORWALK, CONNECTICUT 06854
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
------------------
(203) 899-4000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(TITLE OF CLASS)
------------------
Page 1 of ____
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Indicate by check mark 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) has been subject of such
filing requirements for the past 90 days. Yes X No _.
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to the Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant computed by reference to the closing sales price as reported on the
Nasdaq National Market on March 11, 1993 was approximately $77,840,625.00. In
determining the market value of the voting stock held by non-affiliates, shares
of Common Stock beneficially owned by each executive officer, director and
holder of more than 10% of the outstanding shares of Common Stock have been
excluded. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
Common Stock outstanding as of March 11, 1993: 11,277,500
DOCUMENTS INCORPORATED BY REFERENCE:
Pursuant to General Instruction G(2) to this form, the information
required by Part II (Items 5, 6, 7 and 8) hereof is incorporated by reference
from the registrant's Annual Report to Stockholders for the Fiscal Year ended
December 31, 1992.
Pursuant to General Instruction G(3) to this form, the information required
by Part III (Items 10, 11, 12, and 13) hereof is incorporated by reference from
the registrant's definitive Proxy Statement for its Annual Meeting of
Stockholders scheduled to be held on June 5, 1993.
2
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
INTRODUCTORY NOTE
THE INFORMATION CONTAINED HEREIN HAS BEEN RESTATED IN FEBRUARY 1997 TO REFLECT
ADJUSTMENTS RESULTING FROM THE DISCOVERY OF ERRORS IN THE COMPANY'S ACCOUNTING
PROCEDURES (SEE NOTE 2 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS). IN
ADDITION, ALL SHARE AND PER SHARE INFORMATION HAS BEEN RESTATED TO REFLECT A
TWO-FOR-ONE STOCK SPLIT IN APRIL 1994 (SEE NOTE 12 OF NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS). UNLESS OTHERWISE STATED, HOWEVER, ALL OTHER INFORMATION
CONTAINED HEREIN IS AS OF DECEMBER 31, 1992 AND IS SUBJECT TO UPDATING AND
SUPPLEMENTING AS PROVIDED IN THE COMPANY'S PERIODIC REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION SUBSEQUENT TO SUCH DATE.
ITEM 6
Micro Warehouse, Inc.
1992 Financial Statements
SELECTED FINANCIAL INFORMATION
For the Years Ended December 31,
(in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------
(Restated)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $269,634 $163,603 $123,673 $52,560 $18,378
Cost of goods sold 218,219 132,153 101,741 43,377 16,529
- --------------------------------------------------------------------------------------------------------------
Gross profit 51,415 31,450 21,932 9,183 1,849
Selling, general and administrative expenses 39,732 24,174 19,014 8,935 1,915
Special incentive compensation 8,775 2,229 798 207 0
- --------------------------------------------------------------------------------------------------------------
Income (loss) from operations 2,908 5,047 2,120 41 (66)
Interest expense, net 1,264 722 590 177 119
- --------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ 1,644 $ 4,325 $ 1,530 $ (136) $ (185)
==============================================================================================================
<CAPTION>
Pro Forma Data (unaudited):
<S> <C> <C>
Income before income taxes $ 10,419 $ 6,554
Income taxes 4,550 2,751
- -----------------------------------------------------------------------
Net income $ 5,869 $ 3,803
=======================================================================
Net income per share $0.33 $0.22
=======================================================================
Weighted average number of shares
outstanding 17,854 17,565
- -----------------------------------------------------------------------
<CAPTION>
Selected Ratios:
<S> <C> <C> <C> <C> <C>
Gross margin 19.1% 19.2% 17.7% 17.5% 10.1%
Operating margin (before special incentive) 4.3% 4.4% 2.3% 0.5% (0.3%)
Current ratio 4.1 1.3 1.3 1.4 1.7
Balance Sheet Data (at December 31):
Working capital $ 54,413 $ 6,411 $ 3,800 $ 2,656 $ 1,577
Total assets 78,612 31,620 19,453 10,850 4,353
Long-term debt, excluding current portion 1,362 6,754 3,186 4,841 2,738
</TABLE>
3
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
<TABLE>
<S> <C> <C> <C> <C> <C>
Stockholders' equity (deficit) $ 59,548 $ 2,667 $ 2,644 $ (933) $ (798)
</TABLE>
4
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Micro Warehouse markets brand name Macintosh, and IBM compatible (PC) computer
products primarily through two catalogs, MacWAREHOUSE and MicroWAREHOUSE. In
1989, the Company instituted a business-to-business outbound telemarketing
program. Building on its successful experience with its MacWAREHOUSE catalog,
the Company developed its first MicroWAREHOUSE catalog which addressed the PC
(DOS) computer user. During 1991, the Company also commenced direct marketing
operations in the United Kingdom and in 1992 started operations in France and
Germany.
The Company has experienced significant growth in its customer list, catalog
mailings, sales and operating profitability since its inception. During this
period, the number of customers grew to 1,012,000 and the number of catalogs
distributed reached 19,000,000 in 1992. The Company has been able to achieve an
annual compound growth rate in revenues of 96% since 1988 by taking advantage of
opportunities associated with the computer market and in the growth of direct
marketing.
Results of Operations
The table below sets forth certain items expressed as a percent of net sales,
for the three years ended December 31, 1992.
Year Ended December 31,
1992 1991 1990
(Restated)
- --------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0%
Cost of sales 80.9 80.8 82.3
- --------------------------------------------------------------------------------
Gross profit 19.1 19.2 17.7
- --------------------------------------------------------------------------------
Selling, general and
administrative expenses 14.7 14.8 15.4
Special incentive
compensation 3.3 1.4 .6
- --------------------------------------------------------------------------------
Income from operations 1.1 3.0 1.7
Interest expense .5 .4 .5
- --------------------------------------------------------------------------------
Income before taxes .6 2.6 1.2
- --------------------------------------------------------------------------------
Year Ended December 31, 1992 Compared to Year Ended December 31, 1991
Net sales increased by $106.0 million or 65% to $269.6 million for the year
ended December 31, 1992 from $163.6 million in 1991. In 1992, the Company
increased its total catalog circulation by 75% to approximately 19 million, and
as of year-end had approximately 1,012,000 customers, up from 689,000 at
December 31, 1991. The increase in average order size to $231 from $215 also
contributed to the Company's sales performance.
The majority of the increase in net sales for 1992 was due to an increase of 56%
in the Company's Macintosh business which rose to $219.4 million. This increase
was primarily attributable to growth in the Company's customer base, a 56%
increase in the circulation of its
5
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
MacWAREHOUSE catalog and the increase in international sales. Sales of the
Company's PC products, which are marketed through the MicroWAREHOUSE catalog,
increased by 108% to $50.2 million and now represent approximately 19% of the
total business, up from 15% last year. The Company's business sales program,
combining outbound telemarketing and catalog mailings to selected corporate
accounts, increased by 88% over 1991 levels and represents approximately 32% of
total sales.
International sales increased to slightly over 3% of net sales amounting to $9.1
million, up from a nominal amount in 1991. During the year, the Company
increased its catalog circulation in the United Kingdom and introduced local
language catalogs in France during September and in Germany during December.
Gross profit decreased to 19.1% of net sales from 19.2% in 1991. The decrease in
gross margins was attributable to a decrease in the PC business gross margins
coupled with an increase in the PC business as a percent of total sales.
Offsetting this decrease was an increase in international sales at higher
margins and a decrease in freight out costs.
Selling, general and administrative expenses ("S, G & A") increased to $39.7
million for 1992 up from $24.2 million in 1991 and decreased to 14.7% of sales
from 14.8% in 1991. This decrease, as a percent of sales, would have been
greater as productivity gains were significantly offset by costs associated with
the start up of direct marketing operations in France and Germany. Without the
European start up costs, S, G & A expenses would have been 14.4% of net sales
for the year.
Special incentive compensation increased to $8.8 million from $2.2 million in
1991. For the year ended December 31, 1992, this item represented the value of
the shares of common stock transferred to a co-founder and issued to an officer
of the Company in consideration for the termination of the incentive portions of
their agreements with the Company. For all other periods, this item represented
amounts paid to a consultant and co-founder under his agreement, which amounts
were based on the Company's profitability.
Interest expense increased to $1.3 million up from $.7 million in 1991 primarily
due to higher borrowings, prior to the initial public offering, to finance the
Company's growth, offset in part by lower interest rates.
The Company has made pro forma adjustments to the historical results of
operations in order to make the presentations more meaningful. These adjustments
were to eliminate the amounts of special incentive compensation and to compute
the income taxes which would have been recorded had the Company been a C
corporation for all periods. These adjustments are more fully explained and
quantified in note 10 to the consolidated financial statements.
On a pro forma basis, net income increased to $5.9 million, or $0.33 per share,
up from $3.8 million, or $0.22 per share, in 1991.
Year Ended December 31, 1991 Compared to Year Ended December 31, 1990
Net sales for 1991 increased 32% to $163.6 million from the net sales level of
$123.7 million in 1990. The increase was primarily attributable to the growth in
business-to-business sales which resulted from an increase in the number of
catalogs mailed to the Company's business customers and in the number of
telemarketing representatives committed to the outbound telemarketing program.
The increased circulation resulted from the growth in the customer base and
increased frequency in catalog mailings. The increase in net sales was also due
to an increase in the average order size to $215 in 1991 from $208 in 1990.
6
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Gross profit as a percent of net sales increased to 19.2% from 17.7% in 1990.
The Company was able to reduce its shipping costs and through economies of scale
achieved a reduction in its product cost. This increase in gross profit was
partially offset by the increase in business-to-business sales and sales from
the MicroWAREHOUSE catalog which are at slightly lower margins than consumer
sales and MacWAREHOUSE sales, respectively. Profit margins for both product
catalogs, however, improved over the prior year's levels. Additionally, the
Company experienced a shift in its product mix with memory expansion products
and networking products increasing as a percent of net sales. These products
typically have higher margins than other products sold by the Company.
Selling, general and administrative expenses decreased as a percent of sales to
14.8% in 1991 from 15.4% in 1990. Higher sales and promotional expenses were
significantly offset by higher advertising allowances and incentives paid by its
vendors. Fulfillment expenses and overhead were relatively unchanged between the
two years as a percent of sales. A reduction in bad debt expense was offset by
higher computer costs as the Company expanded its systems capabilities.
Interest expense increased to $722,000 from $590,000 in 1990 due to higher
borrowings offset in part by lower interest rates.
Liquidity and Capital Resources
In December 1992, the Company completed an initial public offering in which
6,555,000 shares were sold at a price of $9 per share. As a result of the
offering, the Company has reduced its short and long-term debt, increased its
cash and short term investments to $18.6 million and increased its stockholders'
equity to $59.5 million. The Company intends to use its increased liquidity to
fund its working capital requirements as well as to expand its activity in
Europe. Inventories increased to $22.6 million from $13.0 million in 1991. The
increase is attributable to the sales increase as the Company has maintained its
inventory turn levels. Accounts receivable have increased to $23.6 million from
$11.7 million in 1991. As a percent of sales, the receivables have increased due
to the fact that open account sales have increased as a result of the outbound
business-to-business telemarketing activity. As a result of the above activity,
the Company's current ratio has improved from 1.3:1 to 4.1:1.
Capital expenditures for 1992 were $3.6 million primarily for computer systems
and distribution equipment both in the United States and in Europe. The Company
expects that it will require additional capital expenditures for computer
systems and distribution equipment primarily to support its growth and move to a
consolidated warehouse in Wilmington, Ohio.
The Company's primary capital needs will be to fund the working capital
requirements necessitated by the sales growth. The Company's primary source of
financing will be from its currently available cash together with the internal
generation of cash. At December 31, 1992, the Company had an existing credit
facility which provides for a revolving credit line of up to $20 million for
working capital purposes. No amounts were borrowed under this facility as of
December 31, 1992.
Impact of Inflation and Seasonality
The Company's results are subject to quarterly variations, although in the
opinion of management, these variations are not significant.
7
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Sales growth tends to be stronger in the first and last quarters of the year
with the two middle quarters typically slower. The high growth quarters are
reflective of holiday buying as well as a customer receptiveness to prospecting.
The slower quarters are impacted by the summer months and a slowdown in buying
from schools and universities. Inflation has not had a material effect on the
operations of the Company.
Outlook
The Company anticipates continued growth in the installed base of personal
computers both in business and in the home. This growth along with the Company's
strategy to expand internationally and to identify growth market opportunities
for specialty catalogs should be enough to continue to increase the Company's
sales and earnings in the future. Since the end of the year, the Company has
introduced a specialty catalog titled Data Comm WAREHOUSE which is targeted to
the data communications and networking markets. The Company believes that this
is a $35 billion market which is growing at a rate of 19% per annum.
During the first quarter of 1993, the Company commenced the consolidation of its
distribution operations in Wilmington, Ohio. This will allow the Company to gain
both operating and shipping efficiencies.
8
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
ITEM 8
Micro Warehouse, Inc.
CONSOLIDATED BALANCE SHEETS
December 31, 1992 and 1991
(in thousands)
<TABLE>
<CAPTION>
1992 1991
(Restated)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,613 $ 1,722
Short term investments 3,006 --
Accounts receivable, net of allowance for doubtful accounts
($1,099 and $888 at December 31, 1992 and 1991, respectively) (note 4) 23,568 11,689
Inventories (note 4) 22,611 12,960
Prepaid expenses (principally catalog costs) and other current assets 3,963 1,875
Due from stockholders 804 --
Due from affiliates, net 538 364
Deferred taxes (note 8) 2,012 --
- -----------------------------------------------------------------------------------------------------
Total current assets 72,115 28,610
- -----------------------------------------------------------------------------------------------------
Property, plant and equipment, net (notes 3 and 4) 6,014 2,955
Deposits and other assets 483 55
- -----------------------------------------------------------------------------------------------------
Total assets $ 78,612 $31,620
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable-- trade $ 11,521 $13,156
Accrued expenses 2,957 601
Notes payable, bank (note 4) -- 4,707
Deferred revenue 2,415 1,759
Current portion of:
Notes payable, stockholders (note 4) -- 860
Notes payable, consultant (notes 4 and 7) -- 768
Equipment obligations (note 4) 809 348
- -----------------------------------------------------------------------------------------------------
Total current liabilities 17,702 22,199
Long=term portion of:
Notes payable, stockholders (note 4) -- 3,520
Notes payable, consultant (notes 4 and 7) -- 2,530
Equipment obligations (note 4) 1,362 704
- -----------------------------------------------------------------------------------------------------
Total liabilities 19,064 28,953
- -----------------------------------------------------------------------------------------------------
Commitments (note 6)
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized-- 100 shares; none issued -- --
Common stock, $.01 par value:
Authorized -- 50,000 shares; issued and outstanding; 22,556
and 15,600 shares at December 31, 1992 and 1991, respectively 226 156
Additional paid=in capital 56,210 2,026
Retained earnings 3,373 485
Cumulative translation adjustment (261) --
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 59,548 2,667
- -----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 78,612 $31,620
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
9
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Micro Warehouse, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1992, 1991 and 1990
(in thousands, except per share data)
<TABLE>
<CAPTION>
1992 1991 1990
(Restated)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 269,634 $ 163,603 $123,673
Costs of goods sold 218,219 132,153 101,741
- ----------------------------------------------------------------------------------------------
Gross profit 51,415 31,450 21,932
Selling, general and administrative expenses 39,732 24,174 19,014
Special incentive compensation (note 7) 8,775 2,229 798
- ----------------------------------------------------------------------------------------------
Income from operations before interest expense
and income taxes 2,908 5,047 2,120
Interest expense 1,264 722 590
- ----------------------------------------------------------------------------------------------
Income before income taxes 1,644 4,325 1,530
Income taxes (note 8) (1,512) 68 133
- ----------------------------------------------------------------------------------------------
Net income $ 3,156 $ 4,257 $ 1,397
==============================================================================================
Pro forma data (unaudited) (note 10):
Historical income before income taxes as above $ 1,644 $ 4,325
Pro forma adjustment==
Special incentive compensation 8,775 2,229
- --------------------------------------------------------------------------------
Pro forma income before income taxes 10,419 6,554
- --------------------------------------------------------------------------------
Provision for income taxes:
Historical 1,512 (68)
Pro forma=incremental to historical taxes (6,062) (2,683)
- --------------------------------------------------------------------------------
Total taxes (4,550) (2,751)
- --------------------------------------------------------------------------------
Net income $ 5,869 $ 3,803
================================================================================
Net income per share $ .33 $ .22
================================================================================
Weighted average number of shares outstanding 17,854 17,565
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Micro Warehouse, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
December 31, 1992, 1991 and 1990
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Retained Cumulative
--------------- Paid-In Earnings Translation
Shares Amount Capital (Deficit) Adjustment Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1989 15,600 $156 $ (155) $ (935) $ -- $ (934)
Stockholder loan
contributed to capital -- -- 2,181 -- -- 2,181
Net income -- -- -- 1,397 -- 1,397
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1990 15,600 156 2,026 462 -- 2,644
Net income -- -- -- 4,257 -- 4,257
Distribution of
S corporation earnings -- -- -- (4,234) -- (4,234)
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 15,600 156 2,026 485 -- 2,667
Cumulative UK deficit at
December 31, 1991 -- -- -- (296) -- (296)
Value of common stock issued
as incentive compensation 400 4 8,771 -- -- 8,775
Distribution of S corporation
earnings and paid-in capital -- -- (2,181) (5,883) -- (8,064)
Transfer to additional paid-in
capital of cumulative losses
through date of Subchapter S
revocation -- -- (5,911) 5,911 -- --
Common stock offering (note 5) 6,556 66 53,505 -- -- 53,571
Net income -- -- -- 3,156 -- 3,156
Foreign currency
translation adjustment -- -- -- -- (261) (261)
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1992 (Restated) 22,556 $226 $ 56,210 $ 3,373 $(261) $ 59,548
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Micro Warehouse, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Representing Increases (Decreases) in Cash and Cash Equivalents
Years Ended December 31, 1992, 1991 and 1990
(in thousands)
<TABLE>
<CAPTION>
1992 1991 1990
(Restated)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,156 $ 4,257 $ 1,397
- ---------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
(used) provided by operating
activities:
Depreciation and amortization 1,941 1,120 728
Accrued interest included in loans payable
to consultant and stockholders -- 108 214
Value of common stock issued as incentive compensation 8,775 -- --
Accrued consulting fee included in loan payable
to consultant -- 2,128 798
Deferred taxes (2,012) -- --
Changes in assets and liabilities:
Accounts receivable, net (11,879) (3,631) (4,740)
Inventories (9,651) (5,367) (2,168)
Prepaid expenses and other current assets (2,088) (625) (807)
Due from affiliate (174) (184) (1,767)
Deposits and other assets (475) 5 2
Accounts payable-- trade (1,635) 4,999 5,293
Accrued expenses 2,356 (699) (1,585)
Deferred income 656 1,260 332
- ---------------------------------------------------------------------------------------------------------
Total adjustments (14,186) (886) (3,700)
- ---------------------------------------------------------------------------------------------------------
Net cash (used) provided by operating activities (11,030) 3,371 (2,303)
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of short-term investments (3,006) -- --
Acquisition of property, plant and equipment (3,600) (1,397) (1,249)
- ---------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (6,606) (1,397) (1,249)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Distribution of S corporation earnings -- (4,234) --
Net line of credit borrowings (repayments) (4,707) 1,252 2,960
Net proceeds from issuance of common stock 53,571 -- --
Borrowings from (payments to) stockholders (13,248) 3,065 1,074
Payments of loan payable, consultant (3,298) (250) --
Principal payments of obligations under capital leases (530) (427) (173)
- ---------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 31,788 (594) 3,861
- ---------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (261) -- --
- ---------------------------------------------------------------------------------------------------------
Net change in cash 13,891 1,380 309
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 1,722 342 33
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 15,613 $ 1,722 $ 342
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Micro Warehouse, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1992, 1991 and 1990
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business and Basis of Presentation
Micro Warehouse, Inc. (the Company) is a direct response retailer of
microcomputer software and peripheral products for users of Apple Macintosh and
IBM-compatible personal computers. The Company's customers are located primarily
in the United States, although the Company has recently begun operations in
Europe. No customer accounted for 10% or more of sales in any period.
Effective June 2, 1992, Micro Warehouse International, Inc. (MWI) was
established as an affiliate to operate full service telemarketing and
distribution centers in the United Kingdom, France and Germany. Prior to the
formation of MWI, the Company sold products to an affiliated entity in the
United Kingdom (UK Affiliate) for resale into the European Economic Community.
On June 30, 1992, the capital of MWI was contributed to Micro Warehouse in a
transaction that has been accounted for in a manner similar to a pooling of
interests. The financial statements as of and for the year ended December 31,
1992 include the consolidated amounts of the Company and MWI after elimination
of all significant intercompany transactions. Periods prior to 1992 have not
been restated because total assets, sales and net income (loss) of the UK
Affiliate were insignificant in comparison to related amounts for the Company.
(b) Cash Equivalents
All highly liquid investments with initial maturities of three months or less
are considered cash equivalents.
(c) Short-Term Investments
Short-term investments consist primarily of highly liquid tax exempt mutual
funds with maturities of less than one year. Dividend income is accrued as
earned. The investments are carried at cost which equal the market value at
December 31, 1992.
(d) Inventories
Inventories (all finished goods) consist of software packages and peripheral
equipment, and are stated at cost (determined under the first-in, first-out cost
method) or market, whichever is lower.
(e) Prepaid Catalog Costs and Deferred Revenue
The Company produces and distributes catalogs monthly, the costs of which are
deferred and charged to expense over the period that each catalog remains the
most current selling vehicle (generally one to three months). Vendors have the
ability to place advertisements in the catalogs for which the Company receives
advertising allowances and incentives. These revenues are recognized on the same
basis as the catalog costs.
13
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
(f) Property, Plant and Equipment
Property, plant and equipment (including equipment acquired under capital
leases) are stated at cost and are depreciated using accelerated methods over
the estimated useful lives of the assets, as follows:
Computer equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements Life of lease -- 7 years
Machinery and equipment 5 years
(g) Income Taxes
Through June 29, 1992, the Company elected to be taxed as an S corporation for
Federal (and certain states) income tax reporting purposes. Under this election,
the individual stockholders were deemed to have received a pro rata distribution
of the Federal (or state) taxable income of the Company (whether or not an
actual cash distribution was made), which is included on their personal tax
returns. Accordingly, there was no Federal income tax provision for the periods
prior to June 30, 1992. The provisions for income taxes prior to June 30, 1992
are for state income taxes payable to states which do not recognize S
corporation status.
Effective June 30, 1992, the Company revoked its S corporation election and
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109) to determine the impact of the deferred taxes as a
result of the C corporation assuming the tax position of the (terminated) S
corporation (see note 8). SFAS 109 requires that deferred income taxes be
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities.
(h) Revenue Recognition
Revenue on product sales is recognized at the time of shipment. A reserve for
product returns is established based upon historical trends.
(i) Pro Forma Net Income Per Share
Net income per share is usually based on the weighted average number of common
and common equivalent shares outstanding during each period, after retroactive
adjustment for stock splits . However, pursuant to certain rules of the
Securities and Exchange Commission, for periods prior to an initial public
offering of common stock (IPO), the calculation also includes (i) shares of
common stock issued within one year of the IPO and (ii) where repayment of
indebtedness to stockholders incurred as a result of S corporation distributions
is made from proceeds from the IPO, the number of shares required to be sold in
the offering to generate the proceeds for the repayment. Following is an
analysis of the components of the shares used to compute pro forma net income
per share:
14
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
1992 1991
- --------------------------------------------------------------------------------
Shares outstanding as of December 31, 1990 15,600,000 15,600,000
Shares issued within one year of the IPO 400,000 400,000
Required number of shares to be sold (at the public
offering price of $9 a share) in the public
offering to generate proceeds for repayments
of indebtedness payments to S corporation
shareholders and a consultant 1,474,958 1,565,000
Weighted average number of shares
outstanding related to the IPO 377,136 --
Incremental shares related to stock options 1,738 --
- --------------------------------------------------------------------------------
17,853,832 17,565,000
================================================================================
(j) Foreign Currency Translation
Assets and liabilities of MWI are translated into U.S. dollars at the exchange
rate in effect at the balance sheet date and revenues and expenses are
translated at average rates in effect during the period. The resultant
translation adjustment is reflected as a separate component of stockholders'
equity on the balance sheet.
(k) Unaudited Pro Forma and Condensed Quarterly Data
In the opinion of management, the unaudited pro forma and condensed quarterly
financial data in note 11 reflect all adjustments (consisting of recurring
accruals and pro forma adjustments described in note 10) which are necessary to
a fair statement of the results of operations for the periods presented.
(2) RESTATEMENT OF PRIOR PERIOD RESULTS
The Company has restated previously issued financial results for each of the
quarters and for the full year ended December 31, 1992. The restated financial
results reflect errors in its accounting procedures primarily related to accrued
inventory liabilities and trade payables. The following summarizes the impact of
the restatement (in thousands):
Cost of goods sold
As previously reported $217,078
As restated 218,219
Gross profit
As previously reported $52,556
As restated 51,415
Selling, general and administrative expenses
As previously reported $39,021
As restated 39,732
Income from operations
As previously reported $4,760
As restated 2,908
Net income - historical
15
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
As previously reported $ 211
As restated(a) 3,156
Net income - pro forma
As previously reported $ 6,945
As restated 5,869
Net income per share - pro forma
As previously reported $ 0.39
As restated 0.33
Accounts payable - trade
As previously reported $ 9,669
As restated 11,521
Retained earnings
As previously reported $ 3,671
As restated 3,373
(a) After an increase of $4,047 to implement SFAS 109 (see
note 8).
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of (in thousands):
1992 1991
- -----------------------------------------------------------------------
Computer equipment $7,445 $3,785
Furniture and fixtures 832 949
Leasehold improvements 651 137
Machinery and equipment 1,052 156
- -----------------------------------------------------------------------
9,980 5,027
Less accumulated depreciation
and amortization 3,966 2,072
- -----------------------------------------------------------------------
$6,014 $2,955
=======================================================================
(4) INDEBTEDNESS
(a) Notes Payable, Bank
The following is a summary of the significant terms related to notes payable,
bank:
1992 1991
- --------------------------------------------------------------------------
Total line of credit available $20,000,000 $9,500,000
Payment terms On demand On demand
Interest rate Prime plus 1% or Prime plus
LIBOR plus 2.5% 1.25%
Prime rate 6.0% 6.5%
LIBOR rate 3.125% --
Collateral Accounts Accounts
receivable receivable
and inventory and inventory
(b) Equipment Obligations
The Company is obligated under notes for computer equipment expiring in various
years through 1996. Interest is at various rates ranging from 8% -- 14% a year.
16
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
At December 31, 1992 future minimum lease payments are as follows (in
thousands):
1993 $ 994
1994 804
1995 486
1996 222
- -----------------------------------------------------------------------
Total minimum lease payments 2,506
Less amounts representing interest 335
- -----------------------------------------------------------------------
Present value of net minimum lease payments 2,171
Less current maturities 809
- -----------------------------------------------------------------------
Long-term portion $1,362
=======================================================================
(c) Notes Payable, Stockholders
The balance due to stockholders bore interest at the rate of 8% and was
subordinated to the bank debt. This amount was repaid with a portion of the
proceeds of the IPO.
(d) Notes Payable, Consultant
The note bore interest at 8% and was also subordinated to the bank debt. This
amount was repaid with a portion of the proceeds of the IPO.
(5) STOCKHOLDERS' EQUITY
(a) Reorganization and Recapitalization
On October 2, 1992, the Company was reorganized in Delaware by merger into Micro
Warehouse, Inc., a newly formed Delaware corporation, in which 50,000,000 shares
of common stock and 100,000 shares of preferred stock were authorized. The 400
shares of common stock of the Company outstanding prior to the merger were
converted into 16,000,000 shares of common stock in the newly formed Delaware
corporation. The accompanying financial statements have been retroactively
adjusted to give effect to this transaction.
(b) Initial Public Offering
On December 10, 1992 the Company issued 6,555,000 shares of common stock, which
includes 855,000 shares issued pursuant to the underwriters over-allotment
option, at $9 a share in an initial public offering (IPO). The proceeds to the
Company net of the underwriting discount ($4,129,650) and other direct expenses
($1,294,000) was $53,571,350.
(c) 1992 Stock Option Plan
On October 1, 1992, the Board of Directors and stockholders of the Company
approved the 1992 Stock Option Plan of the Company, which provides for the grant
of stock options to officers and key employees of, and consultants to, the
Company and its subsidiaries. Under the 1992 Stock Option Plan, the Company may
grant options that are intended to qualify as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 A of the Internal
Revenue Code of 1986, as amended (the "Code"), or options not intended to
qualify as Incentive Stock Options ("Nonstatutory Stock Options"). Incentive
Stock Options may not be granted to consultants to the Company who are not also
employees of the Company. A total of up to
17
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
1,000,000 shares of Common Stock may be issued upon the exercise of options
granted under the 1992 Stock Option Plan.
The 1992 Stock Option Plan is administered by the Board of Directors. Subject to
the provisions of the 1992 Stock Option Plan, the Board has the authority to
select the employees to whom options are granted and determine the terms of each
option, including (i) the number of shares of common stock covered by the
option; (ii) when the option becomes exercisable; (iii) the option exercise
price, which must be at least 100%, with respect to Incentive Stock Options, and
at least 85%, with respect to Nonstatutory Stock Options, of the fair market
value of the common stock as of the date of grant, and (iv) the duration of the
option (which may not exceed ten years). All options are nontransferable other
than by will or the laws of descent and distribution.
On December 9, 1992, the Company granted a total of 119,950 options under the
1992 Stock Option Plan to 75 employees of the Company. All such options are
exercisable at $9 a share (the IPO price) and vest at various times from
December 1993 through December 1997. As of December 31, 1992, no options were
granted to any executive officer of the Company. Additionally, the principal
three officers/stockholders have agreed with the Company not to receive options
under the 1992 Stock Option Plan.
(6) COMMITMENTS (INCLUDING THOSE WITH RELATED PARTIES)
(a) Leases
The Company rents some of its office facilities and receives office and
administrative services from affiliates.
The Company also occupies office and warehouse space under various operating
leases with independent parties which provide for minimum annual rentals and
escalations based on increases in real estate taxes and other operating
expenses.
Minimum annual rentals as of December 31, 1992 are as follows (in thousands):
Related
Total Party
- --------------------------------------------------------------------------------
1993 $1,182 $ 312
1994 1,067 312
1995 887 312
1996 789 312
1997 590 312
1998 and after 262 --
- --------------------------------------------------------------------------------
Total $4,777 $1,560
================================================================================
Rent expense was as follows (in thousands):
Rent Expense Administrative
------------------- Services Total
Related Related Related
Total Party Party Party
- --------------------------------------------------------------------------------
Year ended
December 31, 1992 $869 $190 $147 $337
18
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Year ended
December 31, 1991 $343 $114 $548 $662
Year ended
December 31, 1990 $255 $ 79 $527 $606
The Company has an agreement (as amended-- see note 7) with a consultant through
December 1996 providing for annual compensation of $100,000.
(b) 401(k) Savings Plan
Effective July 1, 1992, the Company adopted a 401(k) Savings Plan which covers
substantially all full-time employees who meet the plan's eligibility
requirements. Participants may make tax deferred contributions of up to 10% of
annual compensation (subject to other limitations specified by the Internal
Revenue Code) and the Company will make a 25% matching contribution for amounts
which do not exceed 6% of participant's annual compensation. The Company may
also make discretionary profit sharing contributions to the Plan. During 1992,
the Company incurred approximately $59,000 of expense related to the 401(k)
matching component of this plan.
(7) SPECIAL INCENTIVE COMPENSATION
Effective January 1, 1989, the Company entered into an agreement for marketing
services with a consultant which required (in addition to a fixed annual fee) a
special incentive payment equal to one-third of the Company's profits before
taxes. The agreement had no specific term.
An employment agreement with an executive officer entered into in August 1991
required the Company to accrue as additional incentive compensation the vested
value of phantom stock up to a maximum of 2.5% of the common shares outstanding
based on a formula.
As of January 1, 1992, the foregoing incentive arrangements were terminated. As
of that date, the consultant received an irrevocable right to receive a 30%
interest in the Company through a transfer of shares by the existing
stockholders and the executive officer received a 2.5% equity interest through
the issuance of previously unissued shares of common stock. In order to
determine the amount to be recorded as compensation expense as of the
termination date, the Company engaged an independent appraiser to estimate the
fair market value per share of its common stock.
(8) INCOME TAXES
(a) Termination of S Corporation Status
As a result of the Company terminating its S corporation status on June 30,
1992, the C corporation assumed the tax bases of the assets and liabilities of
the (terminated) S corporation. As described in note 1, the Company adopted SFAS
109 in order to determine the impact of this event on the consolidated balance
sheet as of that date.
Based on (a) historical record of pro forma earnings, (b) the unusual nature and
amount of additional incentive compensation and (c) estimates of taxable income
expected for the six months ending December 31, 1992 and the year ending
December 31, 1993, management determined that no valuation allowance was
required to be established against the initial deferred tax asset of $4,047,000
that was recorded at June 30, 1992. Components of this deferred tax asset,
19
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
based on an effective tax rate of 42%, relate to (in thousands):
20
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
Initial December 31, 1992
(Restated)
- --------------------------------------------------------------------------------
Value of additional
incentive compensation $3,402 $ 866
Valuation reserves:
Accounts receivable 446 451
Inventory 113 178
Refunds payable -- 158
Other 18 76
Required capitalization of
additional costs into inventory
for tax reporting purposes 68 283
Foreign tax loss carryforwards -- 298
Valuation allowance -- (298)
- --------------------------------------------------------------------------------
$4,047 $ 2,012
- --------------------------------------------------------------------------------
(b) Provision for Income Taxes
For the year ended December 31, 1991 and 1990 the provision for income taxes
relates to states which do not recognize subchapter S corporations.
Included in the provision for income taxes for the year ended December 31, 1992
is a combination of taxes for the six months then ended (period for which the
Company was a C corporation) and the full year (see preceding paragraph).
December 31, 1992 (Restated)
----------------------------
(in thousands) Current Deferred Total
- --------------------------------------------------------------------------------
Federal $ -- $(1,439) $(1,439)
State 500 (573) (73)
- --------------------------------------------------------------------------------
$ 500 $(2,012) $(1,512)
(9) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(in thousands) 1992 1991 1990
- --------------------------------------------------------------------------------
Cash paid during the year for:
Interest $1,276 $673 $ 291
Income taxes 258 287 --
Non-cash investing and
financing activities:
Equipment acquired under
capital lease obligations 1,649 709 259
Stockholder loan contributed to
paid-in capital -- -- 2,181
(10) PRO FORMA ADJUSTMENTS (UNAUDITED)
The following pro forma adjustments have been made to the historical results of
operations to make the presentations more meaningful in relation to future
periods:
(a) Elimination of amounts of special incentive compensation - see note 7. The
amounts for periods prior to 1992 represent the incentive portion of a
consultant's contract which was
21
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
eliminated effective January 1, 1992. The amount in the year ended December 31,
1992 represents the value of common stock transferred to the consultant (by the
existing stockholders) and issued to an employee (by the Company) to terminate
the incentive portion (based on income before taxes) of their respective
agreements. The value was based on an independent appraisal of the Company's
common stock at January 1, 1992.
(b) Computation of income taxes which would have been recorded had the Company
been a C corporation for all periods and after eliminating the compensation in
(a).
The combined historical and pro forma provisions for income tax expense were
as follows:
<TABLE>
<CAPTION>
(in thousands) Federal State Total
- ----------------------------------------------------------------------------------------------------------------
Current Deferred Current Deferred Current Deferred Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 (Restated):
Historical $ -- $(1,439) $ 500 $(573) $ 500 $(2,012) $(1,512)
Pro forma adjustment 3,415 1,271 870 506 4,285 1,777 6,062
- ----------------------------------------------------------------------------------------------------------------
Pro forma $3,415 $ (168) $1,370 $ (67) $4,785 $ (235) $ 4,550
- ----------------------------------------------------------------------------------------------------------------
Effective tax rate based on pro forma income before taxes 44%
<CAPTION>
1991:
Historical $ -- $ -- $ 68 $ -- $ 68 $ -- $ 68
Pro forma adjustment 2,195 (231) 812 (93) 3,007 (324) 2,683
- ---------------------------------------------------------------------------------------------------------------
Pro forma $2,195 $(231) $880 $(93) $3,075 $(324) $2,751
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Effective tax rate based on pro forma income before taxes 42%
Substantially all of the differences between the effective tax rates above and
the statutory federal rate of 34% relate to state and foreign taxes, net of
federal benefit.
(11) QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 1992 and
1991:
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands, except per share amounts) Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992 (Restated):
Net sales $58,113 $61,592 $66,917 $83,012
Gross profit $10,883 $11,432 $12,064 $17,036
Pro forma net income $ 1,440 $ 1,261 $ 1,275 $ 1,893
Pro forma net income per share $ .08 $ .07 $ .07 $ .10
Weighted average number of shares outstanding 17,565 17,565 17,565 18,710
1991:
Net sales $36,882 $38,310 $40,713 $47,698
Gross profit $ 6,587 $ 7,536 $ 7,958 $ 9,369
Pro forma net income $ 609 $ 703 $ 1,152 $ 1,339
Pro forma net income per share $ .03 $ .04 $ .07 $ .08
Weighted average number of shares outstanding 17,565 17,565 17,565 17,565
</TABLE>
The four quarterly amounts of net income per share in 1992 do not equal amounts
for the year due to rounding.
22
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
(12) SUBSEQUENT EVENTS
(a) Stock Split
All share and per share data included herein have been adjusted for the effects
of a two-for-one stock split which occurred in April 1994.
(b) Offerings of Common Stock
During 1993, 1994 and 1995, the Company sold 7,600,000 shares of common stock in
four follow-on public offerings which yielded net proceeds of $175,466,000.
Funds were used for acquisitions (see (c) below) and working capital.
(c) Acquisitions
During 1993, 1994, 1995 and 1996, the Company acquired 21 businesses (18
foreign; 3 domestic) in transactions accounted for as purchases. The aggregate
purchase price was $86,324,000, of which $73,128,500 was paid in cash and the
balance represented the fair value of 561,000 shares of common stock issued to
the former owners. Aggregate goodwill was $71,219,000. In 1996, the Company
wrote off all the remaining goodwill ($6,000,000) related to those
Macintosh-only businesses acquired.
On January 25, 1996, the Company acquired Inmac Corp. through an exchange of
3,033,682 of its shares for all of Inmac's 10,816,836 shares in a transaction
accounted for as a pooling of interests. In connection therewith, the Company
recorded (i) $21,200,000 of restructuring charges, primarily for personnel and
facilities matters; (ii) $6,113,000 for merger costs; and (iii) an extraordinary
charge of $1,600,000 (net of tax benefit of $1,100,000) related to a mandatory
prepayment to extinguish certain Inmac indebtedness.
Under pooling of interests accounting, all of the Company's consolidated
financial statements as of and for periods prior to the acquisition of Inmac are
generally required to be restated as though the merger took place at the
beginning of the earliest period presented. Since the nature of this amendment
of the Company's Form 10-K relates to historical information, the consolidated
financial statements included herein have not been restated for the Inmac
acquisition.
(d) Legal Proceedings
During October, November and December 1996, the Company and certain of its
directors and officers were named as defendants in eleven lawsuits brought in
the United States District Court for the District of Connecticut by parties
which seek to represent classes of stockholders who purchased shares of the
Company's common stock during different periods between January 1994 and
September 1996, or exchanged shares in a merger transaction completed in January
1996. These lawsuits advance claims under various provisions of the federal
securities laws and the common law and assert that various misleading
disclosures were made concerning the Company's financial performance and
condition and other related circumstances during the periods described and seek
unspecified monetary damages and, in certain instances, rescission. The lawsuits
followed and are predicated upon the Company's announcements in September and
October 1996 that it intended to restate certain prior financial statements. The
matters are all at an initial stage. Neither the Company nor the other
defendants have responded to any of them.
In December 1996 and January 1997, the Company and certain of its directors and
officers were named as defendants in two largely identical lawsuits brought in
the Superior Court of Santa Clara County, San Jose, California. The lawsuits
arise out of the stock merger between the Company and Inmac Corp. on January 25,
1996. The claims and defendants are generally similar to those being asserted in
the various class actions described above. Neither the Company nor the other
defendants have responded to either of them.
In November 1996, a shareholder derivative action was filed in the United States
District Court for the District of Connecticut, purportedly on behalf of, and
for recovery by, the Company, which is named as a nominal defendant. The
complaint charges certain directors and officers with violation of fiduciary
duties in
23
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
selling Company stock while in possession of non-public information and in
causing or permitting the exposure of the Company to damage, such as through the
class litigation described above, attributable to the same circumstances that
are the subject of the class litigation. The Company and the individual
defendants have filed a Motion to Dismiss the Complaint which is pending before
the Court.
The plaintiffs in these lawsuits seek unspecified compensatory damages, other
relief, legal fees and litigation costs. The Company is unable to predict the
outcome or the potential financial impact of this litigation, and, accordingly
has made no provision therefor in the consolidated financial statements.
In addition, the staff of the Securities and Exchange Commission is conducting
an informal inquiry into the events that underlie the Company's announced
intention to restate certain prior period financial statements. The Company is
cooperating with the staff in its investigation.
24
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Micro Warehouse, Inc.:
We have audited the accompanying consolidated balance sheets of Micro Warehouse,
Inc. as of December 31, 1992 (as restated, see note 2) and 1991 and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years then ended (1992 restated, see note 2). These consolidated financial
statements are the responsibility of the Company'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 the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Micro Warehouse,
Inc. as of December 31, 1992 and 1991, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Stamford, CT
January 31, 1997
25
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Micro Warehouse, Inc.:
We have audited the accompanying statements of income, stockholders' equity, and
cash flows of Micro Warehouse, Inc. for the year ended December 31, 1990. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and the cash flows of Micro
Warehouse, Inc. for the year ended December 31, 1990, in conformity with
generally accepted accounting principles.
Anchin, Block & Anchin LLP
New York, New York
April 2, 1991
26
<PAGE>
RESTATED - SEE "INTRODUCTORY NOTE"
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MICRO WAREHOUSE, INC.
By /s/ Linwood A. Lacy, Jr.
-------------------------------------
Linwood A. Lacy, Jr.
President, Chief Executive Officer,
Acting Chief Financial Officer and
Acting Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K/A for the year ended December 31, 1992 has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ Peter Godfrey Chairman of the Board February 6, 1997
- --------------------------
Peter Godfrey
/s/ Linwood A. Lacy, Jr. President, Chief Executive Officer, February 6, 1997
- -------------------------- Acting Chief Financial Officer,
Linwood A. Lacy, Jr. Acting Chief Accounting Officer
and Director
(Principal Executive Officer and
Principal Financial Officer)
/s/ Felix Dennis Director February 6, 1997
- --------------------------
Felix Dennis
/s/ Frederick H. Fruitman Director February 6, 1997
- --------------------------
Frederick H. Fruitman
/s/ Melvin R. Seiler Executive Vice President, Chief February 6, 1997
- -------------------------- Operating Officer and Director
Melvin R. Seiler
/s/ Joseph M. Walsh Director February 6, 1997
- --------------------------
Joseph M. Walsh
27
