<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from _______ to ______
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 or organization) Identification No.)
2555 West 190th Street
Torrance, California 90504
(address of principal executive offices)
(310) 354-5600
(Registrant's telephone number, including area code)
Indicated 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
There were 10,179,913 outstanding shares of COMMON STOCK at August 11, 1998.
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Creative Computers, Inc.
Index to Form 10-Q
PART I - FINANCIAL INFORMATION Page
----
Item 1 - Financial Statements (unaudited)
Consolidated Balance Sheet............................................ 3
Consolidated Statement of Operations.................................. 4
Consolidated Statement of Cash Flows.................................. 5
Condensed Notes to the Consolidated Financial Statements.............. 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 7
PART II - OTHER INFORMATION............................................ 11
SIGNATURE.............................................................. 11
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ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Creative Computers, Inc.
CONSOLIDATED BALANCE SHEET
(in thousands except share data)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
(unaudited)
-------------- ------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,492 $ 8,018
Accounts receivable, net of allowance for
doubtful accounts 35,871 42,455
Inventories 31,383 42,643
Prepaid expenses and other current assets 5,889 2,894
Income tax refund receivable 613 469
Deferred income taxes 7,952 2,484
-------- --------
Total current assets 95,200 98,963
Property, plant and equipment, net 15,030 16,868
Goodwill, net 12,061 15,141
Deferred income taxes 2,241 -
Other assets 378 182
-------- --------
$124,910 $131,154
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 59,031 $ 45,958
Accrued expenses and other current liabilities 11,314 13,275
Capital leases - current portion 143 207
Notes payable - current portion 5,236 9,979
-------- --------
Total current liabilities 75,724 69,419
Capital leases 94 148
Notes payable 159 348
Deferred income taxes 1,469 1,469
-------- --------
Total liabilities 77,446 71,384
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares
authorized; none issued and outstanding
Common stock, $.001 par value; 15,000,000 shares
authorized; 10,155,063 and 10,105,258 shares issued 10 10
Additional paid-in capital 57,063 56,772
Treasury stock, at cost; 15,000 shares (91) (91)
Retained earnings (accumulated deficit) (9,518) 3,079
-------- --------
Total stockholders' equity 47,464 59,770
-------- --------
$124,910 $131,154
======== ========
</TABLE>
See condensed notes to the consolidated financial statements.
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Creative Computers, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited, in thousands except per share data)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30 June 30
-------------------------- ------------------------
1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $149,934 $116,018 $314,068 $236,158
Cost of goods sold 131,436 101,182 279,314 205,874
Retail store closure inventory reserves - - 3,679 -
-------- -------- -------- --------
Gross profit 18,498 14,836 31,075 30,284
Selling, general and administrative expenses 18,012 13,852 44,389 28,138
Expenses related to retail store closures - - 6,773 -
-------- -------- -------- --------
Income (loss) from operations 486 984 (20,087) 2,146
Interest income (expense), net (132) 242 (219) 321
-------- -------- -------- --------
Income (loss) before income taxes 354 1,226 (20,306) 2,467
Income tax provision (benefit) 142 466 (7,709) 937
-------- -------- -------- --------
Net income (loss) $ 212 $ 760 $(12,597) $ 1,530
======== ======== ======== ========
Basic earnings (loss) per share $ 0.02 $ 0.08 $ (1.24) $ 0.16
======== ======== ======== ========
Diluted earnings (loss) per share $ 0.02 $ 0.08 $ (1.24) $ 0.16
======== ======== ======== ========
Basic weighted average number of
shares outstanding 10,152 9,792 10,133 9,792
======== ======== ======== ========
Diluted weighted average number of
shares outstanding 10,244 9,804 10,133 9,816
======== ======== ======== ========
</TABLE>
See condensed notes to the consolidated financial statements.
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Creative Computers, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
For the six months ended
June 30
------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(12,597) $ 1,530
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 4,580 1,042
Deferred income taxes (7,709) 281
Loss on write-off of assets 2,052 -
Loss on sale of equipment - 10
Changes in operating assets and liabilities:
Accounts receivable 6,584 (2,359)
Inventories 11,260 12,860
Prepaid expenses and other current assets (2,995) (612)
Other assets (196) (54)
Accounts payable 13,073 (14,753)
Accrued expenses and other current liabilities (1,961) 1,226
Income taxes receivable (144) 2,388
-------- --------
Total adjustments 24,544 29
-------- --------
Net cash provided by operating activities 11,947 1,559
Cash flows from investing activities:
Purchases of securities available for sale - (1,008)
Redemption of securities available for sale - 995
Proceeds from sale of equipment - 13
Acquisition of property, plant and equipment (1,714) (1,555)
-------- --------
Net cash used by investing activities (1,714) (1,555)
Cash flows from financing activities:
Payments under notes payable (4,932) (20)
Principal payments of obligations under capital leases (118) (122)
Proceeds from stock issued under stock option plans 291 1
-------- --------
Net cash used by financing activities (4,759) (141)
Net increase (decrease) in cash and cash equivalents 5,474 (137)
Cash and cash equivalents:
Beginning of the period 8,018 17,329
-------- --------
End of the period $ 13,492 $ 17,192
======== ========
</TABLE>
See condensed notes to the consolidated financial statements.
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Creative Computers, Inc.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
The consolidated interim financial statements include the accounts of
Creative Computers, Inc. (a Delaware corporation) and its wholly owned
subsidiaries (the "Company") and have been prepared, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such regulations. Although the Company believes that the disclosures herein
are adequate to make the information not misleading, these financial
statements should be read in conjunction with the audited financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K at December 31, 1997.
In the opinion of management, the accompanying financial statements contain
all adjustments necessary to present fairly the financial position of the
Company at June 30, 1998 and the results of operations and cash flows for
the three and six months ended June 30, 1998 and 1997. The results of
operations for the interim periods are not necessarily indicative of the
results of operations for the full year.
Certain reclassifications have been made to the 1997 financial statements
to conform them to the 1998 presentation.
2. Public Offering of uBid Common Stock
On July 2, 1998, uBid, Inc. ("uBid") a wholly-owned subsidiary of the
Company, filed a registration statement for an initial public offering
("IPO") of 1,580,000 shares of common stock. uBid also granted to the
underwriters an over-allotment option for up to 237,000 additional common
shares. The net proceeds after IPO expenses will be used for working
capital needs of uBid and repayment of advances made by the Company to
uBid. Upon completion of the IPO, the Company will own approximately 80
percent of the capital stock of uBid. Subject to certain conditions, the
Company intends to separate the companies by distributing its ownership in
uBid common stock to its shareholders through a tax-free spin-off in 1999.
3. Net Income (Loss) Per Share
During December 1997, the Company adopted Financial Accounting Standards
Board Statement No. 128, "Earnings per Share" (SFAS 128). SFAS 128
replaced the presentation of earnings per share reflected on the statement
of income with a dual presentation of Basic Earnings per Share (Basic EPS)
and Diluted Earnings per Share (Diluted EPS). Basic EPS excludes dilution
and is computed by dividing net income (loss) by the weighted average
number of shares outstanding during the reported periods. Diluted EPS
reflects the potential dilution that could occur under the treasury stock
method if stock options and other commitments to issue common stock were
exercised. Earnings (loss) per share have been restated for all periods
presented to reflect the adoption of SFAS 128. The Computation of Basic and
Diluted EPS is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1998 1997 1998 1997
--------- ------ --------- ------
<S> <C> <C> <C> <C>
(in thousands except per share data)
Net income (loss) $ 212 $ 760 $(12,597) $1,530
======= ====== ======== ======
Weighted average shares--Basic 10,152 9,792 10,133 9,792
Effect of dilutive stock options
and warrants 92 12 - 24
------- ------ -------- ------
Weighted average shares-Diluted 10,244 9,804 10,133 9,816
======= ====== ======== ======
Net earnings/(loss) per share-Basic $ 0.02 $ 0.08 $ (1.24) $ 0.16
======= ====== ======== ======
Net earnings/(loss) per share-Diluted $ 0.02 $ 0.08 $ (1.24) $ 0.16
======= ====== ======== ======
</TABLE>
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4. Retail Store Closures
In February 1998, the Company closed one retail store acquired from Elek-
Tek and on March 23, 1998, the Company announced the closure of six of its
seven remaining retail stores to allow the Company to focus on its core
competencies going forward. The closed retail stores generated 9% of the
Company's first-quarter sales, but had operating losses approaching $2.0
million for the quarter. The Company recorded a one-time pretax
restructuring charge of $10.5 million relating to exit costs associated
with the closing of retail operations. Recorded in selling, general and
administrative costs were $3.1 million write-off of goodwill, $1.9 million
write-off for fixed assets, $1.5 million reserve for lease exit costs, and
$0.3 million employee related severance costs. Recorded as cost of sales
were $3.7 million of reserves for store inventory. As of June 30, 1998,
$0.8 million of severance and lease exit costs had been paid. In addition,
during the first quarter of 1998, $7.0 million of pretax write-offs were
taken primarily relating to a more rapid decline in Mac sales during the
quarter and the effects on inventory and receivables of rapid price erosion
and other changes in the industry during the quarter. Creative's workforce
was also reduced by 250 employees.
5. Reporting of Comprehensive Income (Loss)
During the first quarter of 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 establishes standards for reporting and displaying of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general purpose financial statements.
Comprehensive income (loss) for the quarter ended June 30, 1998 and 1997
was equivalent to net income (loss) reported in the consolidated statement
of operations. The Company does not expect SFAS 130 to have a material
effect on future financial statements.
6. New Pronouncements
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS
No. 131 requires that companies disclose "operating segments" based on the
way management disaggregates the Company for making internal operating
decisions. The new disclosures will be effective for the Company's fiscal
year ending on December 31, 1998. Abbreviated quarterly disclosure will be
required beginning with the period ending March 31, 1999, with comparative
information required for the corresponding period in the prior fiscal year.
The Company is presently assessing the presentation and effect of SFAS No.
131 on the financial statements of the Company.
In February 1998 and June 1998, FASB issued Statement of Financial
Accounting Standards No. 132, "Employer's Disclosure about Pensions and
Other Postretirement Benefits" and Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," respectively. The Company presently does not have pension and
postretirement benefit plans nor does it conduct derivative instrument and
hedging activities. Thus, the Company does not expect these new standards
to have a material effect on its financial statements.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company began operations in May 1987 as a mail-order company and then opened
its first retail store in August 1987. The Company opened an additional store
in 1991 and two additional stores in 1993. During the fourth quarter of 1993,
the Company shifted its principal distribution and marketing focus from retail
showrooms to direct mail distribution and marketing. In March 1994, the Company
received authorization from Apple to offer a full retail line of Apple products
via direct mail. The Company distributed the first edition of its Mac Mall
catalog in April 1994, followed by PC Mall catalog in May 1995. The Company
also moved its distribution center during 1995 from Torrance, CA to a new
325,000 square foot facility in Memphis, TN, near Federal Express' major hub, to
enhance customer service.
During the third and fourth quarters of 1997, the Company acquired and
assimilated two marketers of personal computer hardware and software products,
ComputAbility, Inc. and Elek-Tek, Inc., in order to expand its presence in the
PC/WINTEL market and corporate sales channels. The Company formed a wholly-
owned subsidiary, uBid, during September 1997, to sell computer-related products
and consumer electronics through an auction format on the Internet. uBid
commenced its first auction during the last week of December 1997. The Company
also consolidated its
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headquarters and telemarketing operations into a 160,000 square foot facility in
a nearby location in Torrance, CA. The Company occupies approximately half of
the facility and will occupy the remaining space in phases over time.
During the first quarter of 1998, the Company closed seven out of eight retail
stores to focus its efforts on its catalog and corporate sales channels. As
discussed in Note 2, on July 2, 1998, uBid, a wholly-owned subsidiary, filed a
registration statement for an IPO. Subject to certain conditions, following the
IPO, the Company intends to separate the companies by distributing its remaining
80% ownership in uBid common stock to its stockholders through a tax-free spin-
off in 1999.
Net sales of the Company are primarily derived from the sale of personal
computer hardware, software, peripherals and accessories to individual
consumers, home offices, small businesses and large corporations through direct
response catalogs, dedicated inbound and outbound telemarketing sales
executives, a direct sales force, retail showrooms and advertising on the
Internet. The Company is dependent on sales of Apple computers and software and
peripheral products used with Apple computers. Products manufactured by Apple
represented approximately 16.0% of the Company's net sales for the quarter ended
June 30, 1998 as compared to 24.6% for the comparable quarter of 1997.
Year 2000
The Company continues to assess its exposure related to the impact of the Year
2000 date issue. The Year 2000 date issue arises from the fact that many
computer programs use only two digits to identify a year in a date field. The
Company's key financial and operational systems are being reviewed and, where
required, detailed plans are being developed and will be implemented on a
schedule intended to permit the Company's financial and operational systems to
continue to function properly. The Year 2000 date conversion effort is expected
to increase costs in 1998 and 1999. While final cost estimates are not
complete, management does not expect these costs will have a material adverse
impact on the Company's financial position, results of operations or cash flows.
However, the Company could be adversely impacted by the Year 2000 date issue if
the Company or its suppliers, customers and other businesses do not address this
issue successfully, including if the products the Company sells are not Year
2000 compatible, and depending upon the availability of insurance coverage for
lawsuits arising out of the Year 2000 date issue. Management continues to
assess these risks in order to reduce the impact on the Company.
Results of Operations
Three Months Ended June 30, 1998 Compared to the Three Months Ended June 30,
1997
Unless otherwise stated, all sales increase comparisons are results which
exclude the closed retail stores.
Net sales for the quarter ended June 30, 1998 were $149.9 million, a 40%
increase over last year's second quarter. Including net sales from the retail
stores, which closed in the first quarter of 1998, net sales from all operations
grew 29% from $116.0 million for the second quarter last year. Net sales for
the quarter from Elek-Tek, ComputAbility and uBid account for $39.4 million.
PC/WINTEL sales increased 121% from $38.8 million in last year's comparable
quarter to $85.9 million for the three months ended June 30, 1998. Increased
PC/WINTEL sales from acquisitions of Elek-Tek and ComputAbility accounted for
$30.9 million or 66% of the increase. Apple/Macintosh related product sales
declined 16% to $57.2 million for the three months ended June 30, 1998 as
compared with $68.4 million for the comparable period in the prior year.
PC/WINTEL sales comprised over 60% of total net sales for the second quarter in
1998 versus 35% for the same quarter last year.
Gross profit increased $3.7 million primarily due to increased sales. Gross
profit as a percent of net sales declined approximately 50 basis points from
12.8% last year to 12.3% this year due in part to a decline in Mac sales as a
percentage of total sales.
Selling, general and administrative expenses for the second quarter of 1998
increased $4.2 million compared with the same period last year. Excluding uBid,
the increase was $2.7 million. Selling, general and administrative expenses as
a percent of net sales declined from 11.9% in last year's second quarter to
11.6% this year without the investment in uBid.
Net interest expense for the three months ended June 30, 1998 was $132,000
compared to net interest income of $242,000 for the comparable quarter in 1997.
The net interest expense for 1998 resulted from debt incurred and cash invested
to acquire Elek-Tek, Inc. and ComputAbility, Inc. Net interest income for 1997
resulted from the investment of excess cash.
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Net income decreased by $548,000 to $212,000 for the three months ended June 30,
1998 from $760,000 for the same period last year. Excluding the Company's
investment in uBid, net income would have been $808,000, or $0.08 per share, in
the second quarter of 1998.
Six Months Ended June 30, 1998 Compared to the Six Months Ended June 30, 1997
Net sales from all operations (including the closed retail stores) increased by
$77.9 million or 33% to $314.1 million in the six months ended June 30, 1998
from $236.2 million in the six months ended June 30, 1997. Net sales for the
six-month period from Elek-Tek, ComputAbility and uBid account for $81.2
million. Net sales for the period increased primarily due to growth in PC/WINTEL
sales, which increased 139% and generated sales of $184.5 million for the six
months ended June 30, 1998 compared with $77.2 million for the six months ended
June 30, 1997. Increased PC/WINTEL sales from acquisitions of Elek-Tek and
ComputAbility accounted for $67.8 million or 63% of the increase.
Apple/Macintosh and related sales were $122.7 million for the six months ended
June 30, 1998 as compared with $159.0 million for the comparable period in the
prior year. Approximately 36.5 million catalogs were mailed during the six
months ended June 30, 1998, as compared with 30.9 million catalogs for the
comparable period in the prior year.
Gross profit increased by $791,000 to $31.1 million for the six months ended
June 30, 1998 from $30.3 million in the same period of 1997. Gross profit as a
percentage of net sales decreased to 12.1% for the six months of 1998, excluding
the write-offs in the first quarter, compared to 12.8% for the six months of
1997.
Selling, general and administrative expenses, excluding the one-time
restructuring charge related to the retail store closures, increased by $16.3
million to $44.4 million for the six months ended June 30, 1998 from $28.1
million for the comparable period in the prior year. Approximately $4.7 million
of the increase was associated with the write-offs mentioned in Note 4, $5.5
million was the result of increased sales, and the remainder was due to support
costs for higher levels of expected Mac sales that were not realized during the
first quarter and support costs for uBid.
Net interest expense for the six months ended June 30, 1998 was $219,000
compared to interest income of $321,000 for the comparable quarter in 1997. The
net interest expense for 1998 resulted from debt incurred and cash invested to
acquire Elek-Tek, Inc. and ComputAbility, Inc. Net interest income for 1997
resulted from the investment of excess cash.
As a result of the foregoing, the Company incurred a net loss of $12.6 million
or $1.24 per share, for the six months ended June 30, 1998 compared to net
income of $1.5 million, or $0.16 per share, for the same period last year.
Liquidity and Capital Resources
The Company's primary capital need has been funding the working capital
requirements created by its rapid growth in sales. Historically, the Company's
primary sources of financing have been from public offerings and borrowings from
its stockholders, private investors and financial institutions.
The Company has funded the startup and working capital requirements of uBid, its
wholly-owned subsidiary, with a net investment of $2.4 million through June 30,
1998. As discussed in Note 2, on July 2, 1998, uBid filed a registration
statement for an IPO. The net proceeds after IPO expenses will be used to repay
the advances made by the Company to uBid as well as future uBid working capital
needs. It is anticipated that the Company will not be advancing money to uBid
after the IPO.
As of June 30, 1998, the Company had cash, cash equivalents and short-term
investments of $13.5 million and working capital of $19.5 million. Inventories
declined to $31.4 million at June 30, 1998 from $42.7 million at December 31,
1997 as a result of continued efforts to improve inventory turns and one-time
charges and write-downs. Accounts receivable decreased to $35.9 million at June
30, 1998 from $42.5 million at December 31, 1997 due in part from the collection
of receivables purchased from the Elek-Tek acquisition. During the six months
ended June 30, 1998, the Company's capital expenditures were $1.7 million,
versus $1.6 million for the comparable period last year.
As of June 30, 1998, the Company had an existing credit facility consisting of
separate credit lines totaling $60 million. Part of the credit facility
functions in lieu of a vendor trade payable for inventory purchases, is included
in accounts payable, and does not bear interest if paid within terms specific to
each vendor. Part of the credit facility functions as a working capital line of
credit secured by and limited to a percent of and condition of inventory and
accounts receivable, and bears interest at prime. For 1998, the Company repaid
$4.9 million borrowed under this facility. As of June 30, 1998, the Company had
$5.2 million in borrowings under the credit facility. The overall credit
facility is secured by substantially
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all of the Company's assets and contains certain covenants that require the
Company to maintain a minimum level of tangible net worth and income and a
maximum leverage ratio.
The Company believes that current working capital, together with cash flows from
operations and available lines of credit, will be adequate to support the
Company's current operating plans through 1998. However, if the Company
requires additional funds, such as for acquisitions or expansion or to fund a
significant downturn in sales that causes continued losses, there are no
assurances that adequate financing will be available at acceptable terms.
In July 1996, the Company announced its plan to repurchase up to 1,000,000
shares of its Common Stock. The shares will be repurchased from time to time at
prevailing market prices, through open market or negotiated transactions,
depending upon market conditions. No limit was placed on the duration of the
repurchase program. There is no guarantee as to the exact number of shares that
the Company will repurchase. Subject to applicable securities laws, repurchases
may be made at such times and in such amounts as the Company's management deems
appropriate. The program can also be discontinued at any time management feels
additional purchases are not warranted. The Company will finance the repurchase
plan with existing working capital. As of June 30, 1998, the Company has
repurchased 15,000 shares under the program.
As part of its growth strategy, the Company may, in the future, acquire other
companies in the same or complementary lines of business. Any such acquisition
and the ensuing integration of the operations of the acquired company would
place additional demands on the Company's management and operating and financial
resources.
Inflation
Inflation has not had a material impact upon operating results, and the Company
does not expect it to have such an impact in the near future. There can be no
assurances, however, that the Company's business will not be so affected by
inflation.
Business Factors
Except for historical information, all of the statements, expectations and
assumptions contained in this report are forward-looking statements. The
realization of any or all of these expectations is subject to a number of risks
and uncertainties, and it is possible that the assumptions made by management
may not materialize. There can be no assurances that: the Company's closing of
seven retail stores, taking restructuring charges and reducing its workforce
will better position the Company going forward or favorably impact the Company's
balance sheet; the uBid IPO, or the distribution of the remaining uBid shares
held by the Company, will occur; the Company's uBid subsidiary will continue to
ramp up sales; the investment in the Company's uBid subsidiary will favorably
impact sales; the Company's promotions will favorably impact uBid sales; the
Company's uBid subsidiary will be profitable; the Company's Internet websites
will continue sales increases; the Company will be able to receive the expected
benefits from acquisitions; and the Company will not experience difficulties
integrating the operations of acquired companies; or that developments at Apple
will not have an impact on the Company's sales and earnings in the future. In
addition to the factors set forth above, other important factors that could
cause actual results to differ materially from expectations include competition
from other catalog and retail store resellers and price pressures related
thereto; uncertainties surrounding the supply of and demand for products
manufactured by and compatible with Apple Computer and clones thereof; reliance
on Apple Computer, IBM, Hewlett Packard, Compaq and other vendors; and risks due
to shifts in market demand and/or price erosion of owned inventory. This list
of risk factors is not intended to be exhaustive. Reference should also be made
to the risk factors set forth from time to time in the Company's SEC reports,
including but not limited to those set forth in the section entitled "Certain
Factors Affecting Future Results" in its Annual Report on Form 10-K for 1997.
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Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its 1998 Annual Meeting of Stockholders on July 24,
1998. At the Annual Meeting, the stockholders voted on the following
matters:
1. The reelection as directors of Frank F. Khulusi, Sam U. Khulusi,
Ahmed O. Alfi and Thomas Maloof, all of whom were reelected at the
Annual Meeting.
2. The ratification of the appointment of PricewaterhouseCoopers LLP
as independent auditors for the Company for the year ended December
31, 1998 (the Accountant's Proposal).
FOR AGAINST ABSTENTIONS
--- ------- -----------
Accountant's Proposal 9,107,384 0 0
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits--Exhibit 27--Financial Data Schedule
b. Reports on Form 8-K
The Company filed a Form 8-K in connection with the July 6, 1998
announcement that the Registrant intends to separate its Internet
auction subsidiary, uBid, Inc. from the Registrant's other
businesses and operations.
SIGNATURE
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.
CREATIVE COMPUTERS, INC.
Date: August 14, 1998 By /s/ Richard Finkbeiner
----------------------------------------
Richard Finkbeiner
Chief Financial Officer
(Duly Authorized Officer of the Registrant
and Principal Financial Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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0
0
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