<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 or 15 (d) OR THE SECURTIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OR EARLIEST EVENT REPORTED): OCTOBER 15, 1997
COMMISSION FILE NUMBER: 0-25790
CREATIVE COMPUTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4518700
(STATE OR OTHER JURISDICTION (I.R.S. Employer
OF INCORPORATION) Identification No.)
2555 W. 190TH STREET, TORRANCE, CALIFORNIA 90504
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 354-5600
<PAGE>
Item 2. Acquisition or Disposition of Assets
(a) On October 15, 1997, Creative Computers, Inc., a Delaware corporation,
acquired substantially all of the assets of Elek-Tek, Inc., a Delaware
corporation, located at 7350 North Linder Avenue, Skokie, Illinois 60077,
for a purchase price of $29.4 million pursuant to an Asset Purchase
Agreement dated September 17, 1997, as amended. The sale of assets was
accomplished pursuant to section 363 of the U.S. Bankruptcy Code. Such
assets consisted primarily of accounts receivable, inventory, property,
plant and equipment, general intangibles and customer lists and the
businesses associated with mail order, direct sales and retail activities.
The Company intends to use these assets for similar purposes except where
business integration and restructuring limit their utility.
(b) The acquisition will be accounted for as a purchase. The Company borrowed
$20.7 million of the purchase price from Deutsche Financial Services
Corporation, and the remaining $8.7 million was paid in cash. Elek-Tek,
Inc. will operate as a wholly-owned subsidiary of Creative Computers, Inc.
The description of the acquisition is qualified by reference to the Asset
Purchase Agreement dated as of September 17, 1997 as amended by the
Bankruptcy Court Order dated October 9, 1997 (exhibit 10.1 hereto) and
press release dated October 15, 1997 (exhibit 99.1 hereto).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The financial statements for Elek-Tek, Inc. listed below have been
previously filed with the Commission by Elek-Tek, Inc. under file number
000-22064 and are incorporated herein by reference.
Fiscal Year
Report of Independent Accountants.
Balance Sheets as of December 31, 1996 and December 31, 1995.
Statements of Operations for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994.
Statements of Stockholders' Equity for the years ended December 31,
1996, December 31, 1995 and December 31, 1994.
Statements of Cash Flows for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994.
Notes to Financial Statements.
Interim
Unaudited Condensed Balance Sheets as of March 31, 1997 and June 30,
1997.
Unaudited Condensed Statements of Operations for the three and six
months ended March 31, 1997 and June 30, 1997.
Unaudited Condensed Statements of Cash flows for the three and six
months ended March 31, 1997 and June 30, 1997.
Unaudited notes to Condensed Financial Statements.
(b) Pro forma financial information.
The unaudited pro forma data presented in the unaudited pro forma combined
financial statements are included in order to illustrate the effect on the
Company's financial statements of the acquisition of substantially all of
the assets of Elek-Tek, Inc. as described in Item 2.
The unaudited pro forma combined balance sheet at September 30, 1997
present adjustments as if, at such date, the Company had acquired Elek-Tek,
Inc.'s assets. The unaudited pro forma statements of operations for the
nine months ended September 30, 1997 and the year ended December 31, 1996
present the effect of the acquisition of Elek-Tek, Inc.'s assets as if the
transaction had occurred at the beginning of both periods. The historical
financial information of Elek-Tek, Inc. used in the Company's pro forma
statement of operations for the nine-month period ended September 30, 1997
includes Elek-Tek, Inc.'s historical interim unaudited financial
information for the six-month period ended June 30, 1997 (the last Form 10-
Q filed for Elek-Tek, Inc.) and the three months ended December 31, 1996.
Accordingly, the historical results of operations for Elek-Tek, Inc. for
the three-month period ended December 31, 1996 have been included in both
the pro forma statement of operations for the Company's nine-month period
ended September 30, 1997 and the year ended December 31, 1996. Elek-Tek's
unaudited revenues and loss for the three months ended December 31, 1996
were $84.9 million and $4.0 million, respectively.
The unaudited pro forma combined financial statements reflect the Company's
allocation of the purchase price of approximately $29.4 million to the
acquired assets of Elek-Tek, Inc. based upon the Company's current estimate
of their relative value. The final allocation of the purchase price may
vary as additional information is obtained and, accordingly, the ultimate
allocation may differ from those used herein. The unaudited pro forma
combined statements of operations are not indicative of the results that
would have been reported had such events actually occurred on the date
specified, nor are they indicative of the Company's future results. For
example, Elek-Tek, Inc. closed four retail stores in August and September,
1997. Immediately after the acquisition, the Company consolidated the
headquarters and warehouse operations into their own functions in Torrance,
CA and Memphis, TN, thereby reducing these expenses. These events will have
a significant impact on the Company going forward but is not reflected
historically.
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
September 30, 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma Company
Company Adjustments for Pro Forma
as Reported Elek-Tek Acquisition Combined
------------ -------------------- ------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 21,553 $(8,735) (1) $ 12,818
Accounts receivable, net of allowance for
doubtful accounts 24,465 15,630 (2) 40,095
Inventories 44,759 8,189 (2) 52,948
Other current assets 8,558 - 8,558
-------- ------- --------
Total current assets 99,335 15,084 (2) 114,419
Property, plant and equipment, net 11,455 3,062 (2) 14,517
Goodwill, net 6,693 2,445 (2) 9,138
Other assets 268 109 (2) 377
-------- ------- --------
$117,751 $20,700 (2) $138,451
======== ======= ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 47,533 $ $ 47,533
Accrued expenses and other current
liabilities 10,436 10,436
-------- ------- --------
Total current liabilities 57,969 - 57,969
Capital leases 214 214
Notes payable 383 20,700 (1) 21,083
Deferred income taxes 658 658
-------- ------- --------
Total liabilities 59,224 20,700 79,924
Stockholders' equity:
Common stock, $.001 par value; 15,000,000
shares authorized; 10,081,434 issued 10 10
Preferred stock
Additional paid in capital 56,530 56,530
Treasury stock, at cost (91) (91)
Retained earnings 2,078 2,078
-------- ------- --------
Total stockholders' equity 58,527 - 58,527
-------- ------- --------
$117,751 $20,700 $138,451
======== ======= ========
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) Reflects the purchase of substantially all the assets of Elek-Tek, Inc. for
$29.4 million, $20.7 million borrowed from Deutsche Financial Services and
the remaining $8.7 million paid in cash.
(2) Reflects the preliminary allocation of $29.4 million total consideration
paid for the acquisition of Elek-Tek, Inc. as follows: $13.1 million for
accounts receivable; $8.2 for inventories; $3.1 million for property, plant
and equipment; $.1 million for other assets; and $2.4 million for goodwill.
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Company
Company Elek-Tek Adjustments Pro Forma
as Reported as Reported (2) for 1997 (1) Combined
------------ --------------- ------------ ---------
<S> <C> <C> <C> <C>
Net sales $368,394 $217,762 $ $586,156
Cost of goods sold 321,208 192,010 513,218
-------- -------- ------- --------
Gross profit 47,186 25,752 72,938
Selling, general and administrative expenses 42,592 29,625 (1,444) (3) 70,773
-------- -------- ------- --------
Income (loss) from operations 4,594 (3,873) 1,444 2,165
Other (income) expense (272) (272)
Interest expense (income), net (473) 2,100 (421) (4) 1,206
-------- -------- ------- --------
Income (loss) before income taxes 5,067 (5,701) 1,865 1,231
Income tax provision (benefit) 1,943 1,852 739 (5) 4,534
-------- -------- ------- --------
Net income (loss) $ 3,124 $ (7,553) $ 1,126 $ (3,303)
======== ======== ======= ========
Earnings (loss) per share $0.32 $(0.34)
======== ========
Weighted average number of
shares outstanding 9,901 9,826
======== ========
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) Reflects adjustments for the 1997 transactions as if they had taken place
on January 1, 1997.
(2) Reflects nine months activity calculated using six months ended June 30,
1997 plus three months ended December 31, 1996.
(3) Adjustments for depreciation and amortization expense are the net expense
difference between historical and the preliminary allocation of
consideration as follows: (i) goodwill of approximately $2.4 million over
a period of 25 years, and (ii) property plant and equipment of
approximately $3.1 million over an average period of 15 years.
(4) Reflects the adjustments for acquisition financing in October 1997 as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
------------------
(in thousands)
<S> <C>
Interest expense on:
$20.7 million Business Credit and Security Agreement at 8.5% ("prime") $1,320
Forgone investment earnings on $8.7 million on short term investments at 5.5% 359
------
Interest expense as adjusted $1,679
Historical interest expense 2,100
------
Adjustment necessary to reduce interest expense $ 421
======
</TABLE>
(5) To reflect the income tax effect of pro forma adjustments.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Twelve Months Ended December 31, 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Company
Company Elek-Tek Adjustments Pro Forma
as Reported as Reported (2) for 1996 (1) Combined
------------ --------------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales $444,971 $333,498 $ $778,469
Cost of goods sold 395,000 298,236 693,236
-------- -------- ------- --------
Gross profit 49,971 35,262 85,233
Selling, general and administrative
expenses 60,585 46,038 (1,925) (3) 104,698
-------- -------- ------- --------
Income (loss) from operations (10,614) (10,776) 1,925 (18,465)
Other expense 0 (341) (341)
Interest (income), net (593) 2,454 (215) (4) 1,646
-------- -------- ------- --------
Income (loss) before income taxes (10,021) (12,889) 2,140 (20,770)
Income tax provision (benefit) (3,972) (2,326) 849 (5) (5,449)
-------- -------- ------- --------
Net income (loss) $ (6,049) $(10,563) $ 1,291 $(15,321)
======== ======== ======= ========
Earnings (loss) per share $(0.62) $(1.57)
======== ========
Weighted average number of
shares outstanding 9,767 9,767
======== ========
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) Reflects adjustments for the 1997 transactions as if they had taken place
on January 1, 1996.
(2) Reflects the 1996 historic operating results of Elek-Tek, Inc.
(3) Adjustments for depreciation and amortization expense are the net expense
difference between historical and the preliminary allocation of
consideration as follows: (i) goodwill of approximately $2.4 million over
a period of 25 years, and (ii) property plant and equipment of
approximately $3.1 million over an average period of 15 years.
(4) Reflects the adjustments for acquisition financing in October 1997 as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31, 1996
-----------------
(in thousands)
<S> <C>
Interest expense on:
$20.7 million Business Credit and Security Agreement at 8.5% ("prime") $1,760
Forgone investment earnings on $8.7 million on short term investments at 5.5% 479
------
Interest expense as adjusted $2,239
Historical interest expense 2,454
------
Adjustment necessary to reduce interest expense $ 215
======
</TABLE>
(5) To reflect the income tax effect of pro forma adjustments.
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(c) Other
Exhibits
10.1 Asset Purchase Agreement dated September 17, 1997 between Creative
Computers, Inc. and Elek-Tek, Inc.
10.2 Business Credit and Security Agreement dated October 14, 1997 between
Deutsche Financial Services Corporation and Elek-Tek Acquisition
Corp.
10.3 Business Credit and Security Agreement dated October 14, 1997 between
Deutsche Financial Services Corporation and Creative Computers, Inc.
99.1 Press release dated October 15, 1997.
SIGNATURES
Pursuant to 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.
CREATIVE COMPUTERS, INC.
Date: December 26, 1997 By /s/ Richard Finkbeiner
Richard Finkbeiner
Chief Financial Officer
(Duly Authorized Officer of the
Registrant and Principal Financial Officer)
