UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-24244
CHS ELECTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 87-0436376
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2153 NW 86TH AVENUE
MIAMI, FL 33122
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(305) 716-8273
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SHARES OF COMMON STOCK OUTSTANDING
AS OF AUGUST 9, 1996: 12,174,460
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 to such
filing requirements for the past 90 days. Yes [X] No [ ].
<PAGE>
CHS ELECTRONICS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS 3
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS 4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW 5-6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-11
PART II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
2
<PAGE>
<TABLE>
<CAPTION>
CHS ELECTRONICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share data)
JUNE 30, DECEMBER 31,
1996 1995
------------- -------------
(restated)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $19,291 $11,171
Accounts receivable:
Trade, less allowance for doubtful accounts
of $5,560 in 1996 and $4,388 in 1995 127,623 112,501
Affiliates 612 843
-------- --------
128,235 113,344
Inventories, net of obsolescence reserves 130,478 102,159
Deferred tax asset 456 456
Prepaids and other current assets 14,953 9,824
--------- --------
TOTAL CURRENT ASSETS 293,413 236,954
PROPERTY AND EQUIPMENT, NET 12,253 9,126
COST IN EXCESS OF ASSETS ACQUIRED, NET 17,922 17,305
OTHER ASSETS 3,987 2,419
--------- --------
$327,575 $265,804
========= ========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $43,869 $46,438
Accounts payable, trade 152,194 165,494
Accrued liabilities 26,694 14,242
Income taxes payable 727 937
-------- --------
TOTAL CURRENT LIABILITIES 223,484 227,111
LONG TERM DEBT 18,253 8,801
MINORITY INTEREST 2,504 --
SHAREHOLDERS' EQUITY:
Preferred stock, authorized 5,000,000 shares; 0 shares
issued and outstanding -- --
Common stock, authorized 100,000,000 shares at $.001 par value;
12,174,073 and 7,582,534 shares issued and outstanding at
June 30, 1996 and December 31, 1995, respectively 12 8
Additional paid-in capital 76,250 24,976
Retained earnings 8,273 4,558
Cumulative foreign currency translation adjustment (1,201) 350
-------- --------
Total Shareholders' Equity 83,334 29,892
-------- --------
$327,575 $265,804
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<CAPTION>
CHS ELECTRONICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(in thousands, except share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
----------- ------------ ----------- -----------
(restated) (restated)
<S> <C> <C> <C> <C>
Net sales (including sales to affiliates
of $0, $4,053, $0, $19,153
respectively $316,506 $175,328 $619,501 $380,163
Cost of goods sold 292,742 161,929 573,192 351,853
--------- --------- --------- ---------
Gross profit 23,764 13,399 46,309 28,310
Operating expenses 18,725 10,940 36,578 23,059
--------- --------- --------- ---------
Operating income 5,039 2,459 9,731 5,251
Other income (expense)
Interest income 863 160 1,476 665
Interest expense (2,564) (1,260) (4,504) (2,508)
--------- --------- --------- ---------
(1,701) (1,100) (3,028) (1,843)
Earnings before income taxes and
minority interest 3,338 1,359 6,703 3,408
Income tax expense (1,090) (409) (2,148) (791)
Minority interest in subsidiaries (522) ( -) (840) ( -)
---------- ------------ ------------ -------------
Net earnings $1,726 $950 $3,715 $2,617
========= ======== ========= =========
Net earnings per common share:
Primary $.21 $.14 $.45 $.38
---- ---- ---- ----
Fully Diluted $.19 $.14 $.42 $.38
---- ---- ---- ----
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
4
<PAGE>
<TABLE>
<CAPTION>
CHS ELECTRONICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands, except share data)
SIX MONTHS ENDED
JUNE 30,
1996 1995
--------- ---------
(reinstated)
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows provided by (used in) operating activities:
Net earnings $ 3,715 $ 2,617
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,842 1,181
Deferred compensation amortized -- 138
Minority interest 840 --
Changes in assets and liabilities excluding effects of acquisitions:
Accounts receivable-trade, net (2,089) 4,084
Acounts receivable-affiliates, net 231 1,280
Inventories (17,768) (969)
Prepaids and other current assets (5,052) (1,271)
Accounts payable (31,827) (9,062)
Accrued liabilities and income taxes 5,641 (3,343)
--------- ---------
Net cash (used in) operating activities: (44,467) (5,345)
Cash flows (used in) investing activities:
Purchase of fixed assets (3,358) (2,170)
Acquisitions, net of cash acquired (579) --
--------- ---------
Net cash (used in) investing activities: (3,937) (2,170)
Cash flows from financing activities:
Proceeds from public offering 50,632 --
Net borrowings from banks 6,361 7,137
Proceeds from affiliate notes -- 36
--------- ---------
Net cash provided by financing activities: 56,993 7,173
Effect of exchange rate changes on cash (469) (365)
--------- ---------
INCREASE IN CASH 8,120 (707)
Cash at beginning of period 11,171 8,368
--------- ---------
Cash at end of period $19,291 $7,661
========= =========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CHS ELECTRONICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands, except share data)
(continued)
SIX MONTHS ENDED
JUNE 30,
Supplemental disclosure of cashflow information: 1996 1995
------------ ----------
(restated)
<S> <C> <C>
Cash paid during the period for:
Interest $4,058 $1,388
Income Taxes $1,510 $ 743
Non cash investing and financing activities:
These statements of cash flows do not include non-cash investing and financing
transactions associated with the common stock issued for various acquisitions.
The components of the transactions in each period are as follows:
Six Months Ended
June 30,
1996 1995
-------- ---------
(restated)
Fair value of assets acquired including cash acquired $7,284 -
Less: Common stock or other consideration issued 2,515 -
------- --------
Liabilities assumed $4,769 -
======= ========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
6
<PAGE>
CHS ELECTRONICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto for the fiscal year ended December 31, 1995 included in the
Company's Annual Report on Form 10-K.
The consolidated condensed financial statements were prepared from the books
and records of the Company without audit or verification. In the opinion of
management, all adjustments, which are of a normal recurring nature, and
necessary to present fairly the financial position, results of operations and
cash flows for all the periods presented have been made. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the operating results for the full fiscal year.
2. ACQUISITIONS
In March 1996, the Company acquired six companies from Comtrad for the reduction
of indebtedness of $7.8 million. These acquisitions have been accounted for as
an exchange between entities under common control in a manner similar to a
pooling of interests. Accordingly, these acquisitions have been included in the
accompanying financial statements from the date acquired by Comtrad. As a
result, financial statements for 1995 have been restated.
Companies in Bulgaria, Croatia, Lithuania and Romania were started by Comtrad
in 1993 and 1994 for a minimal investment and have had insignificant operations.
They are treated as if Comtrad acquired them on December 31, 1994. Sixty five
percent of a company in Slovakia was acquired in early 1994 for a minimal
investment and 1994 results were insignificant. The remaining 35% was acquired
by Comtrad for a contingent payment in CHS shares to be based on 1996 results.
This acquisition has been recorded as of December 31, 1994 based on the cost of
the 65% interest acquired with the remaining cost to be recorded as goodwill
when known. The acquisition in Brazil was in November 1994 for Comtrad common
shares valued at $762,000. The acquisition was recorded as of December 31, 1994
at this value, resulting in goodwill of $2,508,000.
In February 1996, the Company acquired 51% of an unaffiliated company in
Hungary for consideration based on the acquired company's results in 1996. The
consideration is 51% of the book value of equity at December 31, 1996 plus a
multiple times 51% of 1996 net earnings. Based on a history of profitable
operations, the acquisition was initially recorded at 51% of the book value on
January 31, 1996 utilizing the purchase method of accounting. An adjustment to
purchase price will be made when the amount of contingent consideration is
known.
In April 1996 the Company acquired 100% of an unaffiliated company in
Switzerland for consideration based on the acquired company's results in 1996.
The consideration is a multiple of 1996 net earnings but not less than $1.7
million. The acquisition was initially recorded at $1,700,000 utilizing the
purchase method of accounting. An adjustment to purchase price will be made
when the amount of contingent consideration is known.
Presented below is pro forma operating data showing selected operating results
as if the companies acquired and accounted for by purchase method in 1996 were
acquired on January 1, 1995. Pro forma adjustments were made to include goodwill
amortization in both six month periods as if the contingent payments were
determined based on 1995 actual results for CHS Hungary and CHS Switzerland. Due
to contingent payments not being determinable as of June 30, 1996, there is no
goodwill amortization included in the actual 1996 results. Pro forma net
earnings per share is based on the net earnings divided by the actual weighted
average number of shares plus the contingent shares that would have been issued
in the acquisitions in Switzerland and Hungary. Such contingent shares are
determined by applying the acquisition formula to 1995 actual earnings and
using the share price at December 31, 1995.
7
<PAGE>
CHS ELECTRONICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
2. ACQUISITIONS (CONTINUED)
SIX MONTHS ENDED
JUNE 30,
(IN THOUSANDS EXCEPT PER SHARE DATA)
1996 1995
-------------- ---------
Sales $644,841 $427,801
Net Earnings 3,547 3,756
Net Earnings Per Share $.35 $.43
3. NET EARNINGS PER SHARE
Net earnings per share is computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents (common
stock options) outstanding during the year, unless such inclusion is
antidilutive. The weighted average number of shares was 8,696,343 and 6,945,814
for the three month periods ended June 30, 1996 and 1995, respectively and
8,277,012 and 6,953,533 for the six month periods ended June 30, 1996 and 1995,
respectively. The weighted average number of shares of 8,696,343and 8,277,012
used in the computation of fully diluted earnings per share for the three and
six months ended June 30, 1996 assumes the contingent shares related to the
acquisition of 51% of a company in Hungary and the acquisition of a company in
Switzerland were issued based on the acquisition formula applied to the earnings
of the acquired company in the interim period. The weighted average shares are
significantly less than the current outstanding shares due to the consummation
of the public offering in late June 1996.
4. LONG TERM DEBT
The Company's long-term debt at June 30, 1996 consists principally of the amount
due at that date $(15,762,000) under CHS Promark's revolving credit agreement.
Amounts outstanding are due February 1999. The agreement provides for advances
and letters of credit based upon eligible accounts receivable and inventory up
to a maximum of $20 million. Interest is at the Prime rate of the lender plus
1.5% or LIBOR plus 3.75% at borrower's option. CHS Promark's assets, including
accounts receivable and inventory, are pledged as collateral. The agreement
provides that the interest rates will increase .75% if $3 million is not
invested into CHS Promark by July 1996, which was done in June 1996. The
agreement also limits the liability of CHS Promark to pay dividends to the
Company to 50% of CHS Promark's net income.
5. COMMON STOCK OFFERING
In June 1996 the Company sold, through a public offering, 4,591,539 shares of
its common stock at a price of $12 per share. Net proceeds of the offering was
$50,632,000. In the offering selling shareholders also sold 1,733,461 shares.
The Company has granted to the representative of the underwriters a warrant to
purchase 300,000 shares of the Company's stock for a four year period commencing
June 1997 at varying prices above the offering price.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's net sales and net earnings have grown substantially during the
past several years, in large part due to acquisitions. In 1996 the Company made
acquisitions from unrelated parties as shown below. Also in March 1996 the
Company acquired six entities from Comtrad, then a majority owner of the
Company, which were recorded in a manner similar to a pooling of interests.
Accordingly, these acquisitions have been included in the Company's financial
statements from the date the entity was acquired by Comtrad. The Company
recorded the cost of such acquisitions from Comtrad at Comtrad's cost basis.
The Company recorded goodwill with respect to these acquisitions if Comtrad
recorded goodwill when it purchased the subject entity. Such goodwill is being
amortized over 20 years. The following table sets forth the service areas of
the operations acquired, the date of the acquisition by Comtrad (which is
generally the date the results of operations were initially included in the
Company's financial statements) and the Company acquisition date for
acquisitions in the six months ended June 30, 1996.
CHS DIRECT ACQUISITIONS
CHS ACQUISITION
SUBSIDIARY SERVICE AREA DATE
- ---------- ------------ ----
CHS Hungary(1) Hungary February 1996
CHS Peru(2) Peru March 1996
CHS Switzerland Switzerland April 1996
CHS Ecuador(3) Ecuador June 1996
CHS Russia Russia June 1996
(1) The Company owns 51% of CHS Hungary.
(2) The Company owns 60% of CHS Peru.
(3) The Company owns 51% of CHS Ecuador
<TABLE>
<CAPTION>
CHS ACQUISITIONS FROM COMTRAD
COMTRAD ACQUISITION CHS ACQUISITION
SUBSIDIARY SERVICE AREA DATE DATE
------------ ---- ----
<S> <C> <C> <C>
CHS Brazil Brazil November 1994 March 1996
CHS Slovakia Slovakia January 1994 March 1996
CHS Baltic Lithuania, Lativia and Estonia June 1994 March 1996
CHS Bulgaria Bulgaria September 1994 March 1996
CHS Romania Romania September 1994 March 1996
CHS Croatia Croatia September 1994 March 1996
</TABLE>
RESULTS OF OPERATIONS
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
NET SALES. Net sales increased $141.2 million, or 80.5%, from $175.3 million in
second quarter 1995 to $316.5 million in second quarter 1996 due principally to
acquisitions and to a lesser extent internal growth. Of the increase in net
sales, subsidiaries acquired in late 1995 or 1996 contributed $81.5 million. Net
sales of subsidiaries consolidated for both 1995 and 1996 grew $59.7 million or
34.0%. This growth is attributed to increased consumer demand for microcomputer
products offered by the Company and the expansion of sales by the company's
subsidiaries to include a full range of products.
9
<PAGE>
GROSS PROFIT. Gross profit increased $10.4 million, or 77.4%, from $13.4
million in second quarter 1995 to $23.8 million in second quarter 1996 due
principally to acquisitions and to a lesser extent internal growth. Gross
profit for subsidiaries included in the consolidation for both 1995 and 1996
increased $3.2 million or 24.3%. Newly acquired companies contributed $7.2
million of gross profit.
Gross margin decreased from 7.6% in second quarter 1995 to 7.5% in second
quarter 1996. The decrease was due to lower gross margins from subsidiaries
located in Western Europe. The Company attributes the decrease in gross margin
to competitive pressures in this region. The Company expects that gross margins
may decline in 1996 due to such competitive pricing pressures.
OPERATING EXPENSES. Operating expenses as a percentage of net sales declined
from 6.2% in the second quarter of 1995 to 5.9% in second quarter of 1996. The
decline was due to efficiencies gained through increased volume and the
Company's efforts to control costs.
NET INTEREST EXPENSE. Net interest expense increased $0.6 million, or 54.6%,
from $1.1 million in second quarter 1995 to $1.7 million in second quarter 1996.
The increase in interest expense is directly related to the increase in average
loan amounts outstanding.
INCOME TAX EXPENSE. Income taxes as a percentage of earnings before income taxes
increased from 30.0% in second quarter 1995 to 32.7% in second quarter 1996.
The Company does not believe this change is significant. The Company expects to
have an effective tax rate lower than the statutory United States tax rate in
1996 principally due to its ability to use remaining net operating loss carry
forwards from certain subsidiaries.
SIX MONTHS 1996 COMPARED TO SIX MONTHS 1995
NET SALES. Net sales increased $239.3 million, or 63.0%, from $380.2 million in
the first six months of 1995 to $619.5 million in the first six months of 1996
due principally to acquisitions and to a lesser extent internal growth. Of the
increase in net sales, subsidiaries acquired in late 1995 or 1996 contributed
$147.8 million. Net sales of subsidiaries consolidated for both 1995 and 1996,
grew $91.6 million or 24.1%. This growth is attributed to increased consumer
demand for microcomputer products offered by the Company and the expansion of
sales by the company's subsidiaries to include a full range of products.
GROSS PROFIT. Gross profit increased $18.0 million, or 63.6%, from $28.3
million the in first six months of 1995 to $46.3 million in the first six
months of 1996 due principally to acquisitions and to a lesser extent internal
growth. Gross profit for subsidiaries included in the consolidation for both
1995 and 1996 increased in proportion to sales. Gross profit from such
subsidiaries grew $5.4 million or 19.1%. Newly acquired companies contributed
$12.6 million of gross profit.
Gross margin increased from 7.4% in the first six months of 1995 to 7.5% in the
first six months of 1996. The increase was due to higher gross margins from
subsidiaries acquired in late 1995 and 1996. The Company attributes the
increase in gross margin to higher gross margins in the geographical areas of
the newly acquired companies (specifically Finland, Hungary and Sweden, among
others). The Company expects that gross margins may decline in 1996 due to
competitive pricing pressures.
OPERATING EXPENSES. Operating expenses as a percentage of net sales decreased
from 6.1% for the first six months of 1995 to 5.9% in the first six months of
1996. The decline was due to efficiencies gained through increased volume and
the Company's effort to control costs. Operating expenses for both periods
include the results of foreign currency transactions. Such results were
$137,000 loss and $328,000 gain for 1996 and 1995 respectively.
NET INTEREST EXPENSE. Net interest expense increased $1.2 million, or 64.3%,
from $1.8 million in the first six months of 1995 to $3.0 million in the first
six months of 1996. The increase in interest expense is directly related to the
increase in average loan amounts outstanding.
INCOME TAX EXPENSE. Income taxes as a percentage of earnings before income
taxes increased from 23.2% in the first six months of 1995 to 32.0% in the
first six months of 1996. The increase in the Company's net effective tax rate
is
10
<PAGE>
attributed to the utilization of net operating loss carryforwards in first
quarter 1995, especially from CHS England. Such net operating loss carryforwards
of CHS England were totally utilized in 1995. The Company expects to have an
effective tax rate lower than the statutory United States tax rate in 1996
principally due to its ability to use remaining net operating loss carry
forwards from certain subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities in the six months ended June 30, 1996 and
1995 was $44.4 and $5.3 million respectively, due principally to increases in
inventory, and other current assets and decreases in accounts payable. In 1996,
while inventory and other current assets increased due to sales increases,
accounts payable decreased due to the use of funds from the public offering to
take advantage of early payment discounts from vendors. Net cash used in
investing activities in the first six months of 1996 and 1995 was $3.9 and $2.2
million respectively, due principally to investments in fixed assets. Net cash
provided by financing activities in the first six months of 1996 and 1995 was
$57.0 and $7.2 million respectively, due principally in 1996 to proceeds of the
public offering and in both years to borrowings under new debt agreements and
increased borrowings under other agreements.
On July 10, 1995, the Company entered into a credit agreement providing for a
$20 million line of credit. Both the Company and CHS Finance, S.A. ("CHS
Finance"), a subsidiary of the Company formed under the laws of Switzerland may
borrow under this line of credit. Each advance under the line is due on the
earlier of demand or 180 days after the advance and bears interest, at the
election of the Company, at either LIBOR plus 2% or the prime rate of the
lender plus 2%. The line matured June 30, 1996 and was repaid.
On February 5, 1996, CHS Promark entered into a Loan and Security Agreement
providing for revolving credit advances and the issuance of letters of credit
against eligible accounts receivable and inventory up to a maximum of $20
million. Amounts outstanding bear interest, at the election of the borrower, at
the prime rate of the lender plus 1.5% or 3-3/4% above LIBOR; provided, however,
that unless the Company's pending public offering is successfully completed and
$3 million of the proceeds are invested in CHS Promark, the interest rates will
increase to prime plus 2.25% and LIBOR plus 4.5% on July 1, 1996. The additional
investment in CHS Promark was completed in June 1996. The agreement limits the
ability of CHS Promark to pay dividends to the Company to 50% of net income
after taxes. The agreement matures in February, 1999 and is secured by a lien
on essentially all of CHS Promark's assets. The Company has guaranteed this
indebtedness.
On March 29, 1996, CHS Finance entered into a one year revolving credit
agreement pursuant to which $18 million may be borrowed by certain of the
Company's Western European subsidiaries to finance purchases of Hewlett Packard
products for which customer orders have been received. Borrowings under the line
may be in Pounds, Deutschmarks, French Francs, Belgian Francs or Dollars.
Amounts borrowed bear interest at LIBOR plus 1 3/4%. The Company has guaranteed
the indebtedness of CHS Finance under the agreement. The loan is secured by a
lien on the accounts into which payments from customers for the products
financed are deposited. In addition, the Company has provided to the bank an
insurance policy protecting it against the risk of the Company's insolvency.
There was no amount outstanding under the line at June 30, 1996.
The Company's principal need for additional cash in 1996 will be for the
purchase of additional inventory to support growth and to take greater
advantage of available cash discounts offered by certain of the Company's
vendors for early payment. The Company is seeking additional cash for this
purpose through its existing bank credit lines and through additional credit
facilities, but management can give no assurance that financing will be
available on terms acceptable to the Company. If for any reason this financing
is not available, it could adversely affect the growth of the Company.
The Company derives all of its operating income and cash flow from its
subsidiaries and relies on payments from, and intercompany borrowings with, its
subsidiaries to generate the funds necessary to meet its obligations. In
certain countries, exchange controls may limit the ability of the Company's
subsidiaries to make payments to the Company. Restrictions in financing or
credit arrangements may also limit such payments. Claims of creditors of the
Company's subsidiaries will generally have priority as to the assets and cash
flow of such subsidiaries over the claims of the Company or its shareholders.
11
<PAGE>
PART II
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
On May 9, 1996 a report on Form 8-KA was filed to update form 8-K filed on
February 21, 1996 in respect to the acquisition of a Company in Hungary.
On April 26, 1996 a report on form 8-K was filed to report the acquisition of a
Company in Switzerland on March 29, 1996, effective April 1, 1996.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHS ELECTRONICS, INC.
(Registrant)
8/9/96 BY /S/ ANTONIO BOCCALANDRO
Date --------------------------
ANTONIO BOCCALANDRO
Secretary
8/9/96 BY /S/ CRAIG S. TOLL
Date --------------------------
CRAIG S. TOLL
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 19,291
<SECURITIES> 0
<RECEIVABLES> 128,235
<ALLOWANCES> 5,560
<INVENTORY> 130,478
<CURRENT-ASSETS> 293,413
<PP&E> 12,253
<DEPRECIATION> 0
<TOTAL-ASSETS> 327,575
<CURRENT-LIABILITIES> 223,484
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 83,322
<TOTAL-LIABILITY-AND-EQUITY> 327,575
<SALES> 619,501
<TOTAL-REVENUES> 619,501
<CGS> 573,192
<TOTAL-COSTS> 36,578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,028
<INCOME-PRETAX> 6,703
<INCOME-TAX> 2,148
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,715
<EPS-PRIMARY> .45
<EPS-DILUTED> .42
</TABLE>
