SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 4, 1999
CHS ELECTRONICS, INC.
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-24244 87-0435376
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
CHS ELECTRONICS, INC.
2000 N.W. 84TH AVENUE
MIAMI, FLORIDA 33122
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 908-7200
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
CHS Electronics (the "Company") conducts operations in Spain
through a number of subsidiaries, one of which is Memory Set S.A.
("Memory Set"), which it agreed to purchase in July 1998. The Company
is in default under the purchase agreement because the Company has not
paid the balance of the purchase price of approximately $74.4 million.
The Company believes the unpaid balance of the purchase price
represents approximately 91.5% of Memory Set and the amounts already
paid represent approximately 8.5%. The Company agreed to submit to
arbitration the issue of the portion of Memory Set which the Company
will retain as a result of the cancellation of its purchase agreement
for Memory Set. The Company may cure its default under the purchase
agreement by paying the balance of the purchase price at any point
prior to completion of the arbitration. During the first six months of
1999, revenues attributable to Memory Set were $122.8 million. The
Company will record an estimated loss of $20.0 million on the transfer
and will treat its ongoing interest in Memory Set under the cost method
of accounting.
In addition, on October 4, 1999, the Company conveyed 80% of
the shares of Arena Bilgisayar Sanayi Ve Ticaret A.S. and Armada
Bilgisayar A.S., the Company's subsidiaries operating in Turkey, to the
original owners in exchange for a release of the Company's obligation
to pay the balance of the purchase price of approximately $42.7
million. The sellers granted the Company an option to reacquire those
interests at any time prior to October 4, 2000 or a 60-day period after
the Company receives new cash investments of at least $200 million. The
Company also conveyed all of its interest in ARC Espana Cartera, S.A.,
another subsidiary operating in Spain, to the original owners in
exchange for a release of the Company's obligation to pay the balance
of the purchase price of approximately $29.3 million. During the first
six months of 1999, the revenues attributable to these three
subsidiaries totaled approximately $141.6 million. The Company will
realize an aggregate loss on the sale of these three subsidiaries of
approximately $27.6 million.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma
The unaudited pro forma condensed consolidated financial
statements of CHS Electronics, Inc. for the indicated periods are
attached hereto as Attachment 7(b) and are incorporated herein by this
reference.
(c) Exhibits
None
<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 hereunto duly authorized.
CHS ELECTRONICS, INC.
Date: October 19, 1999 By: /S/ CRAIG TOLL
----------------------------------------------
Craig Toll
Chief Financial Officer and Treasurer
<PAGE>
ATTACHMENT 7(B)
CHS ELECTRONICS, INC.
PRO-FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, 1999
PRO FORMA
CONSOLIDATED MEMORY SET OTHERS ADJUSTMENTS PRO FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 133,247 $ (861) $ (5,589) $ -- $ 126,797
Accounts receivable:
Trade, less allowance for doubtful accounts
of $53,260 1,116,909 (41,669) (23,584) -- 1,051,656
Affiliates 7,228 -- -- -- 7,228
----------- ----------- ----------- ----------- -----------
1,124,137 (41,669) (23,584) -- 1,058,884
Inventories 661,889 (16,398) (21,433) -- 624,058
Prepaid expenses and other current assets 90,631 (351) (3,778) -- 86,502
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS 2,009,904 (59,279) (54,384) -- 1,896,241
PROPERTY AND EQUIPMENT, NET 120,107 (457) (3,849) -- 115,801
COST IN EXCESS OF ASSETS ACQUIRED, NET 844,545 -- -- (140,554)(a) 703,991
OTHER ASSETS 63,365 (5) (417) -- 62,943
----------- ----------- ----------- ----------- -----------
$ 3,037,921 $ (59,741) $ (58,650) $ (140,554) $ 2,778,976
=========== =========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 517,579 $ (17,755) $ (4,467) $ -- $ 495,357
Accounts payable, trade 919,039 (13,665) (24,975) -- 880,399
Accrued liabilities 106,403 (405) (5,477) 6,066 (b) 106,587
Amounts due to sellers under acquisition agreements 299,003 -- -- (146,462)(c) 152,541
Income taxes payable 3,980 (4,196) (312) -- (528)
----------- ----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES 1,846,004 (36,021) (35,231) (140,396) 1,634,356
LONG TERM DEBT 459,776 (26) (2,182) -- 457,568
MINORITY INTEREST 10,607 -- -- -- 10,607
SHAREHOLDERS' EQUITY:
Preferred stock, authorized 5,000,000 shares;
0 shares outstanding -- -- -- -- --
Common stock, authorized 100,000,000 shares at
$.001 par value; 58,099,461 shares outstanding 58 -- (3,399) 3,399 (d) 58
Additional paid-in capital 747,936 (13,651) (6,350) 20,001 (d) 747,936
Retained earnings 21,872 (12,488) (11,554) (23,558)(e) (25,728)
Accumulated other comprehensive income (48,332) 2,445 66 -- (45,821)
----------- ----------- ----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 721,534 (23,694) (21,237) (158) 676,445
----------- ----------- ----------- ----------- -----------
$ 3,037,921 $ (59,741) $ (58,650) $ (140,554) $ 2,778,976
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
CHS ELECTRONICS, INC.
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
PRO-FORMA
CONSOLIDATED MEMORY SET OTHERS ADJUSTMENTS PRO-FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales $ 4,813,346 $ (122,806) $ (141,627) $ -- $ 4,548,913
Cost of goods sold 4,542,936 (109,542) (127,145) -- 4,306,249
------------ ------------ ------------ ------------ ------------
Gross profit 270,410 (13,264) (14,482) -- 242,664
Operating expenses:
Selling, general & administrative 308,116 (1,737) (6,887) (1,228)(a) 298,264
Restructuring & asset impairment 13,962 -- -- -- 13,962
------------ ------------ ------------ ------------ ------------
322,078 (1,737) (6,887) (1,228) 312,226
------------ ------------ ------------ ------------ ------------
Operating income (loss) (51,668) (11,527) (7,595) 1,228 (69,562)
Other (income) expenses:
Interest income (10,593) 189 286 -- (10,118)
Interest expense 51,920 (332) (578) -- 51,010
Foreign currency (gain) loss 1,780 (101) (3,524) -- (1,845)
------------ ------------ ------------ ------------ ------------
43,107 (244) (3,816) -- 39,047
------------ ------------ ------------ ------------ ------------
Earnings (loss) before income taxes and
minority interest in subsidiaries (94,775) (11,283) (3,779) 1,228 (108,609)
Income taxes (benefit) (5,995) (3,949) (284) -- (10,228)
Minority interest in subsidiaries 141 -- (4) -- 137
------------ ------------ ------------ ------------ ------------
Net earnings (loss) $ (88,921) $ (7,334) $ (3,491) $ 1,228 $ (98,518)
============ ============ ============ ============ ============
Net earnings (loss) per common share:
Basic $ (1.57) $ (1.73)
============ ============
Diluted $ (1.57) $ (1.73)
============ ============
Weighted average shares:
Basic 56,819,441 56,819,441
============ ============
Diluted 56,819,441 56,819,441
============ ============
</TABLE>
<PAGE>
CHS ELECTRONICS, INC.
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
PRO-FORMA
CONSOLIDATED MEMORY SET OTHERS ADJUSTMENTS PRO-FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales $ 8,545,773 $ (94,024) $ (216,072) $ -- $ 8,235,677
Cost of goods sold 7,983,736 (84,318) (195,225) -- 7,704,193
------------ ------------ ------------ ------------ ------------
Gross profit 562,037 (9,706) (20,847) -- 531,484
Operating expenses 428,335 (1,727) (8,672) (1,361)(a) 416,575
------------ ------------ ------------ ------------ ------------
Operating income 133,702 (7,979) (12,175) 1,361 114,909
Other (income) expenses:
Interest income (16,581) 186 1,219 -- (15,176)
Interest expense 71,373 (243) (453) -- 70,677
Foreign currency (gain) loss 5,232 7 (3,131) -- 2,108
------------ ------------ ------------ ------------ ------------
60,024 (50) (2,365) -- 57,609
------------ ------------ ------------ ------------ ------------
Earnings before income taxes and
minority interest in subsidiaries 73,678 (7,929) (9,810) 1,361 57,300
Income taxes 23,871 (2,775) (1,733) -- 19,363
Minority interest in subsidiaries 4,129 -- (14) -- 4,115
------------ ------------ ------------ ------------ ------------
Net earnings $ 45,678 $ (5,154) $ (8,063) $ 1,361 $ 33,822
============ ============ ============ ============ ============
Net earnings per common share:
Basic $ 0.88 $ 0.66
============ ============
Diluted $ 0.82 $ 0.61
============ ============
Weighted average shares:
Basic 51,616,109 51,616,109
============ ============
Diluted 55,917,007 55,917,007
============ ============
</TABLE>
<PAGE>
PRO FORMA ADJUSTMENTS
The preceding Pro-Forma Balance Sheets and Statements of Operations reflect the
disposition of Memory Set and three other entities as if they had occurred on
June 30, 1999 for the Balance Sheet and at the beginning of the respective
periods for the Statements of Operations.
BALANCE SHEET
a. To record for the write-off of the goodwill related to the entities disposed
of.
b. To record additional costs to be incurred to complete the transactions.
c. To reduce the amounts due to sellers related to the entities disposed of.
d. To restore common stock and additional paid-in capital removed.
e. To restore retained earnings removed of $24,042,000 and reflect the loss on
the transactions of $47,600,000.
STATEMENTS OF OPERATIONS
a. Represents add back of goodwill expense amortization for the period.
