<PAGE> 1
United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 28, 1997
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 0-21677
PROSOURCE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 65-0335019
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1500 San Remo Avenue, 3rd Floor, Coral Gables, FL 33146
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305)740-1000
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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT AUGUST 4, 1997
<S> <C>
Class A Common Stock, $.01 par value 3,400,500 shares
Class B Common Stock, $.01 par value 5,923,456 shares
</TABLE>
<PAGE> 2
PROSOURCE, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets -
June 28, 1997 and December 28, 1996........................ 3
Condensed Consolidated Statements of Operations -
For the periods ended June 28, 1997 and June 29, 1996...... 4
Condensed Consolidated Statements of Cash Flows -
For the periods ended June 28, 1997 and June 29, 1996...... 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 8
PART II. Other Information
Item 1. Legal Proceedings.......................................... 12
Item 4. Submission of Matters to a Vote of Security Holders........ 12
Item 5. Other Information.......................................... 12
Item 6. Exhibits and Reports on Form 8-K........................... 13
</TABLE>
2
<PAGE> 3
PROSOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 28,
1997 1996
--------- ---------
(UNAUDITED) *
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,998 $ 2,763
Accounts receivable, net 210,392 219,340
Inventories 140,165 144,040
Prepaid expenses and other current assets 23,880 21,234
--------- ---------
Total current assets 391,435 387,377
Property and equipment, net 59,533 49,637
Intangible assets, net 41,136 42,135
Other assets 23,949 27,522
--------- ---------
Total assets $ 516,053 $ 506,671
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 220,802 $ 257,854
Accrued liabilities 35,151 42,475
Current portion of long-term senior debt -- 1,500
--------- ---------
Total current liabilities 255,953 301,829
Long-term senior debt, less current portion 179,800 111,084
Subordinated notes payable 500 500
Other noncurrent liabilities 7,789 14,743
--------- ---------
Total liabilities 444,042 428,156
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value -- --
Class A Common Stock, $.01 par value 34 34
Class B Common Stock, $.01 par value 59 60
Additional paid-in capital 104,747 105,256
Accumulated deficit (32,857) (26,901)
Accumulated foreign currency translation adjustments 28 66
--------- ---------
Total stockholders' equity 72,011 78,515
--------- ---------
Total liabilities and stockholders' equity $ 516,053 $ 506,671
========= =========
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
PROSOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------------------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1997 1996 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 970,783 $ 1,045,406 $ 1,987,845 $ 2,014,074
Cost of sales 894,632 963,482 1,831,036 1,859,000
--------- ----------- ----------- -----------
Gross profit 76,151 81,924 156,809 155,074
Operating expenses 73,618 76,279 151,716 149,758
Loss on impairment of
long-lived assets -- -- -- 15,733
Restructuring charges -- -- -- 10,866
--------- ----------- ----------- -----------
Earnings (loss) from operations 2,533 5,645 5,093 (21,283)
Interest expense (2,958) (4,106) (5,558) (8,152)
Interest income 527 440 1,012 866
--------- ----------- ----------- -----------
Earnings (loss) before income taxes
and extraordinary charge 102 1,979 547 (28,569)
Income tax (provision) benefit (44) (736) (241) 10,612
--------- ----------- ----------- -----------
Earnings (loss) before extraordinary
charge 58 1,243 306 (17,957)
Extraordinary charge, net of income
tax benefit of $4,073 in 1997 -- -- (6,262) --
--------- ----------- ----------- -----------
Net earnings (loss) $ 58 $ 1,243 $ (5,956) $ (17,957)
========= =========== =========== ===========
Net earnings (loss) per share:
Earnings (loss) before extraordinary
charge $ .01 $ .23 $ .03 $ (3.39)
Net earnings (loss) $ .01 $ .23 $ (.64) $ (3.39)
Weighted average number of
shares outstanding 9,327 5,369 9,367 5,301
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE> 5
PROSOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-------------------------
JUNE 28, JUNE 29,
1997 1996
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,956) $(17,957)
--------- --------
Depreciation and amortization of property and equipment 4,470 3,443
Amortization of intangible assets and deferred debt-issuance costs 1,194 1,881
Other adjustments to reconcile net loss to net cash used in
operating activities 7,086 723
Changes in operating assets and liabilities (40,567) 9,461
--------- --------
Net cash used in operating activities (33,773) (2,449)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,544) (8,041)
Proceeds from sale of property and equipment 355 --
--------- --------
Net cash used in investing activities (14,189) (8,041)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing from new long-term senior debt 179,800 --
Net borrowing (repayment) of former long-term senior debt (112,584) 11,082
Repayment of long-term debt to Onex -- (615)
Fees incurred in conjunction with long-term senior debt (4,471) --
Proceeds from issuance of common stock to Onex -- 615
Payments to acquire and retire treasury stock (510) (164)
--------- --------
Net cash provided by financing activities 62,235 10,918
--------- --------
Effect of exchange rate changes on cash (38) (3)
--------- --------
Net increase in cash and cash equivalents 14,235 425
Cash and cash equivalents at beginning of period 2,763 2,325
--------- --------
Cash and cash equivalents at end of period $ 16,998 $ 2,750
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest to Onex $ - $ 1,904
Interest to others $ 5,519 $ 7,326
Income taxes, net of refunds $ 328 $ 123
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In February 1996, Onex converted an $800 convertible subordinated note into 80
shares of the Company's Class B common stock.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
PROSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen and twenty-six weeks ended
June 28, 1997 are not necessarily indicative of the results that may be expected
for the fiscal year ended December 27, 1997 due, in part, to seasonal
fluctuations in the Company's business, the potential addition or loss of
customers, and changes in economic conditions. These condensed consolidated
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report for the
fiscal year ended December 28, 1996.
(2) EXTRAORDINARY CHARGE
In March 1997, the Company entered into five-year loan agreements aggregating
$225 million with a financial institution to replace its existing credit
facility. The agreements, which consist of a $150 million accounts receivable
securitization facility and a $75 million inventory revolving-credit facility,
provide the Company with greater financial flexibility as well as a lower cost
of borrowing. The accounts receivable securitization facility bears interest, at
the Company's option, of the prime rate or one-or-two month LIBOR plus 0.55%.
The interest rate on the inventory facility is, at the Company's option, either
prime plus up to 1% or LIBOR plus 0.75% to 2%, dependent on certain financial
ratios. The Company is required to comply with various covenants in connection
with these agreements and borrowings are subject to calculations based on
receivables and inventory. The credit facilities are secured by liens on
substantially all of the Company's assets and contain various restrictions on,
among other things, the Company's ability to pay dividends and dispose of
assets.
ProSource Receivables Corporation ("PRC"), a subsidiary within the
consolidated group, is the legal borrower for the accounts receivable
securitization facility. The creditor for this facility has security interests
in PRC's assets (consisting primarily of accounts receivable) and is entitled to
be satisfied by such assets prior to equity holders.
In connection with the early extinguishment of the previous credit facility,
the Company recorded a pre-tax extraordinary charge of $10.3 million ($6.3 net
of tax or $.67 per share) in the first quarter of 1997. This charge reflected
the write-off of deferred financing costs of $6.3 million, prepayment penalties
of $2.7 million and $1.3 million in costs associated with the termination of
interest-rate protection agreements.
(3) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share", which
simplifies the standards for computing earnings per share ("EPS") and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income
6
<PAGE> 7
PROSOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(3) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
statement and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. The Company will adopt Statement No. 128 in the fourth quarter of
fiscal 1997 and does not believe the effect of this adoption will have a
material impact on EPS reported during periods prior to that date.
(4) CONTINGENCIES
The Company and its subsidiaries are parties to various legal actions arising
in the ordinary course of business. Management believes that the outcome of such
cases will not have a material adverse effect on the consolidated results of
operations or the financial position of the Company.
7
<PAGE> 8
PROSOURCE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components of
the Company's condensed consolidated statements of operations expressed as a
percentage of net sales.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------- -----------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of sales 92.16 92.16 92.11 92.30
------- ------- ------- -------
Gross profit 7.84 7.84 7.89 7.70
Operating expenses 7.58 7.30 7.63 7.44
Loss on impairment of long-lived assets -- -- -- .78
Restructuring charges -- -- -- .54
------- ------- ------- -------
Earnings (loss) from operations .26 .54 .26 (1.06)
Interest expense, net (.25) (.35) (.23) (.36)
------- ------- ------- -------
Earnings (loss) before income taxes
and extraordinary charge .01 .19 .03 (1.42)
Income tax (provision) benefit (.00) (.07) (.01) .53
------- ------- ------- -------
Earnings (loss) before extraordinary
charge .01 .12 .02 (.89)
Extraordinary charge, net -- -- (.32) --
------- ------- ------- -------
Net earnings (loss) .01% .12% (.30)% (.89)%
======= ======= ======= =======
</TABLE>
8
<PAGE> 9
PROSOURCE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
RESULTS OF OPERATIONS
In the following comparisons of the results of operations, the three and six
month periods ended June 28, 1997 and June 29, 1996 are referred to as 1997 and
1996, respectively.
THREE MONTHS ENDED JUNE 28, 1997 COMPARED TO THREE MONTHS ENDED JUNE 29, 1996
Net sales decreased 7.1% to $970.8 million in 1997 from $1.0 billion in 1996.
The Company's sales during 1997 were adversely affected by the termination of
its distribution contract with Arby's effective April 1, 1997. Sales to the
remaining customer base in 1997 increased 3.6% over 1996.
Gross profit declined 7.0%, to $76.2 million in 1997 from $81.9 million in
1996 as a result of the decrease in net sales. As a percentage, gross profit
remained constant at 7.8% in 1997 when compared to 1996.
Operating expenses decreased $2.7 million, or 3.5%, to $73.6 million in 1997
from $76.3 million in 1996. As a percentage of net sales, operating expenses
increased in 1997 to 7.6% from 7.3% in 1996. The increased percentage is
primarily caused by costs associated with the loss of the Arby's business.
Operating expenses in 1997 were also impacted by additional costs incurred in
connection with an attempted acquisition and increased expenses related to truck
maintenance. The Company has entered into a new fleet leasing and maintenance
agreement with Penske, to begin in the third quarter of 1997, which will
replace Ryder in most locations.
Net interest expense decreased 33.7% from $3.7 million (.35% of net sales) in
1996 to $2.4 million (.25% of net sales) in 1997 due mainly to the prepayment of
indebtedness in November 1996 with the proceeds of the Company's initial public
offering. In March 1997, the Company replaced its existing credit line agreement
with two agreements from another financial institution. The new agreements
provide the Company with a lower borrowing rate and account for a portion of the
decline in interest expense realized during 1997.
The effective income tax rates for 1997 and 1996 were 43.1% and 37.2%,
respectively. Such rates reflect the annual anticipated effective rates for the
respective fiscal years.
Overall, the Company generated net earnings of $58,000 ($.01 per share) in
1997 compared to $1.2 million ($.23 per share) in 1996. The decline in net
earnings in 1997 when compared to 1996 is the result of a lower gross profit
(resulting primarily from the Arby's contract termination) which was partially
mitigated by decreases in operating and interest expenses.
9
<PAGE> 10
PROSOURCE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
Net sales decreased $26.2 million, or 1.3%, to $1.988 billion in 1997 from
$2.014 billion in 1996. The decline in net sales experienced during the second
quarter resulting from the termination of the Arby's distribution contract
outweighed the 4.0% increase in sales with other customers realized during the
six month period.
Gross profit increased 1.1% to $156.8 million in 1997 from $155.1 million in
1996. The gross profit percent increased to 7.9% in 1997 from 7.7% in 1996 as a
result of slightly improved margins.
Operating expenses increased 1.3% to $151.7 million (7.6% of net sales) in
1997 from $149.8 million (7.4% of net sales) in 1996. The $2.7 million (3.5%)
decrease in operating expenses achieved in the second quarter of 1997 was less
than the $4.6 million (6.3%) increase over the prior-year period reported for
the first quarter of 1997. The savings realized in the second quarter were
adversely impacted by a number of factors previously discussed in the comparison
of the three months ended June 28, 1997 and June 29, 1996.
Net interest expense decreased $2.7 million (or 37.6%) from $7.3 million in
1996 to $4.5 million in 1997. The lower interest for 1997 is due to the same
reasons as cited in the comparison of the three months ended June 28, 1997 and
June 29, 1996.
The effective income tax rates for 1997 and 1996 were 44.1% and 37.1%,
respectively. Such rates reflect the annual anticipated effective rates for the
respective fiscal years.
For 1997, the Company's earnings before extraordinary charge totaled $306,000
($.03 per share) compared to a loss of $18.0 million ($3.39 per share) in 1996.
The operating results for 1996 included a loss on impairment of long-lived
assets of $15.7 million and restructuring charges of $10.9 million, both of
which were related to the Company's plan to consolidate and integrate its
corporate and distribution network operations. Excluding these non-recurring
items, the 1996 net loss was $1.2 million ($.23 per share). The improvement in
operations for 1997 is the result of a $1.7 million increase in gross profit
combined with a $2.7 million decrease in net interest expense which exceeds the
$2.0 million increase in operating expenses.
The extraordinary charge of $6.3 million, net of income tax benefit, in 1997
is related to the early extinguishment of the Company's credit facility in March
1997. This charge reflects the write-off of deferred financing costs, prepayment
penalties and costs associated with the termination of interest rate protection
agreements.
Restaurants owned or franchised by Burger King Corporation collectively
accounted for 44.2% and 40.0% of the Company's sales in 1997 and 1996,
respectively. In addition, sales to Darden Restaurants, Inc. (owner of Red
Lobster and Olive Garden restaurants) accounted for 22.0% and 22.1% of the
Company's sales for 1997 and 1996, respectively.
10
<PAGE> 11
PROSOURCE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company meets its liquidity needs through cash provided by operations,
normal vendor trade credit terms, operating leases and borrowings under its
credit facilities.
The Company borrowed $62.2 million during the period from December 28, 1996
to June 28, 1997 to fund its operating and investing activities and increased
its cash and cash equivalents by $14.2 million. In addition, the Company paid
$4.5 million in fees associated with the early extinguishment of its previous
facility in March, 1997. Approximately $0.5 million was used to acquire and
retire treasury stock.
Net cash of $33.8 million was used in operating activities during the
six-month period. Included in this usage are $11.7 million of non-recurring
payments for acquisition, contract termination and restructuring related items.
The Company used $14.2 million in investing activities during the first six
months of 1997. This is comprised of capital expenditures (primarily of $6.7
million for the distribution network and $4.8 million for computer system
upgrades). The Company anticipates capital expenditures of approximately $30
million in 1997, connected primarily with the implementation of its new
distribution network, including the expansion of warehousing facilities to
accommodate expected growth, and for continued investment in computer systems.
There can be no assurance that capital expenditures will not be higher than
currently anticipated. The Company intends to finance such capital expenditures
with cash provided by operations and borrowings under its credit facilities.
CREDIT FACILITIES
In March 1997, the Company entered into five-year loan agreements aggregating
$225 million with a financial institution to replace its existing credit
facility. The agreements consist of a $150 million accounts receivable
securitization facility and a $75 million inventory revolving-credit facility.
The accounts receivable securitization facility bears interest, at the Company's
option, of the prime rate or one-or-two month LIBOR plus 0.55%. The interest
rate on the inventory facility is, at the Company's option, either prime plus up
to 1% or LIBOR plus 0.75% to 2%, dependent on certain financial ratios. The
Company is required to comply with various covenants in connection with these
agreements and borrowings are subject to calculations based on receivables and
inventory. The credit facilities are secured by liens on substantially all of
the Company's assets and contain various restrictions on, among other things,
the Company's ability to pay dividends and dispose of assets.
The Company is a holding company with no independent operations or assets
other than investment in its operating subsidiaries, and, as such, is dependent
on its operating subsidiaries to obtain cash flow. The Company's loan agreements
include certain restrictive covenants which limit the flow of funds from the
Company's subsidiaries to the parent company. Such covenants are not expected to
have a material effect on the ability of the parent to meet its cash
obligations.
The Company believes that the combination of cash flow generated from
operations and borrowings available under its credit facilities are sufficient
to satisfy its anticipated working capital needs for at least 12 months.
Management may determine that it is necessary or desirable to obtain financing
for growth through additional bank borrowings or the issuance of new debt or
equity securities.
11
<PAGE> 12
PROSOURCE, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are parties to various legal
actions arising in the ordinary course of business. Management
believes that the outcome of such cases will not have a material
adverse effect on the consolidated results of operations or the
financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
During the Company's Annual Meeting, held on April 29, 1997, the
stockholders of 7,489,855 shares (1,779,499 Class A and 5,710,356
Class B common shares), which represented 80.3% of issued and
outstanding shares, voted on the following matters:
(I) to elect David R. Parker, Thomas C. Highland, Daniel J. Adzia,
Gerald W. Schwartz, Anthony R. Melman, Michael Carpenter, Anthony
Munk, C. Lee Johnson and R. Geoffrey P. Styles to serve as directors
of the Company until the 1998 Annual Meeting of Stockholders by
58,858,159 (94.0%) votes cast for the proposal in favor and 24,900
(.04%) votes withheld;
(II) to approve the Company's 1997 Director's Stock Option Plan by
58,556,776 (93.5%) votes cast for the proposal in favor, 56,900
(.09%) votes against and 76,200 (.12%) votes abstained;
(III) to approve the Company's 1997 Employee Stock Purchase Plan by
56,660,026 (90.5%) votes cast for the proposal in favor, 4,600
(.01%) votes against and 25,250 (.04%) votes abstained; and
(IV) to ratify the appointment of KPMG Peat Marwick LLP to serve as
the Company's auditors for the fiscal year ending December 27, 1997
by 58,806,409 (93.9%) votes cast for the proposal in favor, 2,150
(.00%) votes against and 74,500 (.12%) votes abstained.
Each share of the Company's Class A Common Stock is entitled to one
vote and each share of the Company's Class B Common Stock is
entitled to ten votes.
Item 5. Other Information
Forward Looking Statements
This quarterly report contains certain forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of
1934. Actual results could differ materially from those projected in
such forward looking statements. Results are affected by economic
trends in the quick service and casual dining segments of the
restaurant industry, competitive conditions in the foodservice
industry, adverse developments affecting the largest chains serviced
by the Company or a decision by a major customer to revoke its
approval of the Company as a distributor, developments such as
unforeseen costs and expenses, inflation and complications arising
from the complexity of the Company's new distribution network, and
the Company's continued ability to make acquisitions of businesses
on satisfactory terms.
12
<PAGE> 13
PROSOURCE, INC.
PART II. OTHER INFORMATION (CONTINUED)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated By-Laws of the Company, as amended
by Amendment No. 1 thereto.
4.1 Amended and Restated ProSource, Inc. 1997 Employee Stock
Purchase Plan
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
fiscal quarter ended June 28, 1997.
13
<PAGE> 14
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.
PROSOURCE, INC.
Date: August 11, 1997 /s/ William F. Evans
--------------------------------------
William F. Evans
Executive Vice President, Chief Financial Officer
Date: August 11, 1997 /s/ Marcelino Iturrey
--------------------------------------
Marcelino Iturrey
Vice President-Controller, Chief Accounting Officer
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
3.1 Amended and Restated By-Laws of the Company, as amended by Amendment No. 1
thereto
4.1 Amended and Restated ProSource, Inc. 1997 Employee Stock
Purchase Plan
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
</TABLE>
15
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
BY-LAWS
of
PROSOURCE, INC.
1. MEETINGS OF STOCKHOLDERS.
1.1 Annual Meeting. The annual meeting of stockholders shall be held
on or prior to the first Thursday in May of each year, or as soon thereafter as
practicable, and shall be held at a place and time determined by the board of
directors (the "Board").
1.2 Special Meetings. Special meetings of the stockholders may be
called by resolution of the Board and shall be called by the chairman of the
board, chief executive officer or secretary upon the written request (stating
the purpose or purposes of the meeting) of a majority of the directors then in
office. Only business related to the purposes set forth in the notice of the
meeting may be transacted at a special meeting.
1.3 Place and Time of Meetings. Meetings of the stockholders may be
held in or outside Delaware at the place and time specified by the Board or the
directors or stockholders requesting the meeting.
1.4 Notice of Meetings; Waiver of Notice. Written notice of each
meeting of stockholders shall be given to each stockholder entitled to vote at
the meeting, except that (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given except when required
under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be
given, personally or by mail, not less than 10 nor more than 60 days before the
meeting and shall state the time and place of the meeting, and unless it is the
annual meeting, shall state at whose direction or request the meeting is called
and the purposes for which it is called. If mailed, notice shall be considered
given when mailed to a stockholder at his address on the corporation's records.
The attendance of any stockholder at a meeting, without protesting at the
beginning of the meeting that the meeting is not lawfully called or convened,
shall constitute a waiver of notice by him.
1.5 Quorum. At any meeting of stockholders, the presence in person
or by proxy of the holders of a majority of the outstanding shares entitled to
vote shall constitute a quorum for the transaction of any business except as
otherwise provided by law or by the certificate of incorporation, as amended
from time to time (the "Certificate of Incorporation") of the corporation. When
a specified item of business requires a vote by a class or series (if the
<PAGE> 2
corporation shall then have outstanding shares of more than one class or series)
voting as a class, the holders of a majority of the outstanding shares of such
class or series shall constitute a quorum (as to such class or series) for the
transaction of such item of business. In the absence of a quorum a majority in
voting interest of those present or, if no stockholders are present, any officer
entitled to preside at or to act as secretary of the meeting, may adjourn the
meeting until a quorum is present. At any adjourned meeting at which a quorum is
present any action may be taken which might have been taken at the meeting as
originally called. No notice of an adjourned meeting need be given if the time
and place are announced at the meeting at which the adjournment is taken except
that, if adjournment is for more than thirty days or if, after the adjournment,
a new record date is fixed for the meeting, notice of the adjourned meeting
shall be given pursuant to Section 1.4.
1.6 Voting; Proxies. Except as otherwise provided by law or by the
Certificate of Incorporation and subject to Section 5.3 hereof, every
stockholder shall at every meeting of the stockholders be entitled to one (1)
vote in person or by proxy for each share of the corporation's Class A Common
Stock, par value $0.01 per share, held by such stockholder. Except as otherwise
provided by the law or by the Certificate of Incorporation and subject to
Section 5.3, every stockholder shall at every meeting of the stockholders be
entitled to ten (10) votes in person or by proxy for each share of the
corporation's Class B Common Stock, par value $0.01 per share, held by such
stockholder. Corporate action to be taken by stockholder vote, other than the
election of directors, shall be authorized by a majority of the votes cast at a
meeting of stockholders, except as otherwise provided by law or by Section 1.8
of these by-laws. Directors shall be elected in the manner provided in Section
2.1 of these by-laws. Voting need not be by ballot unless requested by a
stockholder at the meeting or ordered by the chairman of the meeting; however,
all elections of directors shall be by written ballot, unless otherwise provided
in the Certificate of Incorporation. Each stockholder entitled to vote at any
meeting of stockholders or to express consent to or dissent from corporate
action in writing without a meeting may authorize another person to act for him
by proxy. Every proxy must be signed by the stockholder or his attorney-in-fact.
No proxy shall be valid after three years from its date unless it provides
otherwise.
1.7 List of Stockholders. Not less than 10 days prior to the date of
any meeting of stockholders, the secretary of the corporation shall prepare a
complete list of stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in his name. For a period of not less than 10 days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept either (a) at a place within the city where
the meeting is to be held, if that place shall have been specified in the notice
of the meeting, or (b) if not so specified, at the place where the meeting is to
be held. The list shall also be available for inspection by stockholders at the
time and place of the meeting.
2
<PAGE> 3
1.8 Action by Consent Without a Meeting. No action required or
permitted to be taken at any meeting of stockholders may be taken by written
consent without a meeting.
2. BOARD OF DIRECTORS.
2.1 Number, Qualification, Election and Term of Directors. The
business of the corporation shall be managed by the Board, which shall consist
of four directors, or such other number of directors as may be fixed from time
to time by resolution of the Board or by the stockholders; provided that no
decrease may shorten the term of any incumbent director. Directors shall be
elected at each annual meeting of stockholders by a plurality of the votes cast
and shall hold office until the next annual meeting of stockholders and until
the election and qualification of their respective successors, subject to the
provisions of Section 2.9.
2.2 Quorum and Manner of Acting. A majority of the Board shall
constitute a quorum for the transaction of business at any meeting, except as
provided in Section 2.10 of these by-laws. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of the
vote if there is a quorum, unless otherwise provided by law or these by-laws. In
the absence of a quorum a majority of the directors present may adjourn any
meeting from time to time until a quorum is present.
2.3 Place of Meetings. Meetings of the Board may be held in or
outside Delaware.
2.4 Annual and Regular Meetings. Annual meetings of the Board, for
the election of officers and consideration of other matters, shall be held
either (a) without notice immediately after the annual meeting of stockholders
and at the same place or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in Section 2.6 of these by-laws. Regular
meetings of the Board may be held without notice at such times and places as the
Board determines. If the day fixed for a regular meeting is a legal holiday, the
meeting shall be held on the next business day.
2.5 Special Meetings. Special meetings of the Board may be called by
the chairman of the board, the president or by a majority of the directors. Only
business related to the purposes set forth in the notice of meeting may be
transacted at a special meeting.
2.6 Notice of Meetings; Waiver of Notice. Notice of the time and
place of each special meeting of the Board, and of each annual meeting not held
immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to him at his residence or usual
place of business at least three days before the meeting, or by delivering or
telephoning or telecopying it to him at least two days before the meeting.
Notice of a special meeting shall also state the purpose or purposes for which
the meeting is called. Notice need not be given to any director who submits a
signed waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the trans-
3
<PAGE> 4
action of any business because the meeting was not lawfully called or convened.
Notice of any adjourned meeting need not be given, other than by announcement at
the meeting at which the adjournment is taken.
2.7 Board or Committee Action Without a Meeting. Any action required
or permitted to be taken by the Board or by any committee of the Board may be
taken without a meeting if all of the members of the Board or of the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and the written consents by the members of the Board or the committee
shall be filed with the minutes of the proceeding of the Board or of the
committee.
2.8 Participation in Board or Committee Meetings by Conference
Telephone. Any or all members of the Board or of any committee of the Board may
participate in a meeting of the Board or of the committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.
2.9 Resignation and Removal of Directors. Any director may resign at
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any or all of the directors may be removed at
any time, either with or without cause, by vote of the stockholders.
2.10 Vacancies. Any vacancy in the Board, including one created by
an increase in the number of directors, may be filled for the unexpired term by
a majority vote of the remaining directors, though less than a quorum.
2.11 Compensation. Directors shall receive such compensation as the
Board determines, together with reimbursement of their reasonable expenses in
connection with the performance of their duties. A director may also be paid for
serving the corporation, its affiliates or subsidiaries in other capacities.
3. COMMITTEES.
3.1 Executive Committee. The Board, by resolution adopted by a
majority of the Board, may designate an Executive Committee of one or more
directors which shall have all the powers and authority of the Board, except as
otherwise provided in the resolution, Section 141(c) of the Delaware General
Corporation Law, or any other applicable law. The members of the Executive
Committee shall serve at the pleasure of the Board. All action of the Executive
Committee shall be reported to the Board at its next meeting.
4
<PAGE> 5
3.2 Other Committees. The Board, by resolution adopted by a majority
of the Board, may designate other committees of directors of one or more
directors, which shall serve at the Board's pleasure and have such powers and
duties as the Board determines.
3.3 Rules Applicable to Committees. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of a committee, the member or members present at
a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of a committee shall be reported to
the Board at its next meeting. Each committee shall adopt rules of procedure and
shall meet as provided by those rules or by resolutions of the Board.
4. OFFICERS.
4.1 Number; Security. The executive officers of the corporation
shall be the chairman of the board, the president and a secretary. The Board may
also elect one or more vice chairmen, vice presidents, a treasurer and such
other officers or assistant officers as the Board may from time to time deem
advisable. Any two or more offices may be held by the same person. Unless
otherwise required by law, the Board shall not be required to fill a vacancy in
an executive office. The Board may require any officer, agent or employee to
give security for the faithful performance of his duties.
4.2 Election; Term of Office. The executive officers of the
corporation shall be elected annually by the Board, and each such officer shall
hold office until the next annual meeting of the Board and until the election of
his successor, subject to the provisions of Section 4.4.
4.3 Subordinate Officers. The Board may appoint subordinate officers
(including assistant secretaries and assistant treasurers), agents or employees,
each of whom shall hold office for such period and have such powers and duties
as the Board determines. The Board may delegate to any executive officer or to
any committee the power to appoint and define the powers and duties of any
subordinate officers, agents or employees.
4.4 Resignation and Removal of Officers. Any officer may resign at
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any officer appointed by the Board or appointed
by an executive officer or by a committee may be removed by the Board either
with or without cause, and in the case of an officer appointed by an executive
officer or by a committee, by the officer or committee who appointed him or by
the president.
5
<PAGE> 6
4.5 Vacancies. A vacancy in any office may be filled for the
unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws
for election or appointment to the office.
4.6 Chairman of the Board. The chairman of the board shall preside
at all meetings of the Board and of the stockholders and shall have such powers
and duties as the Board assigns to him.
4.7 The President. The president shall be the chief executive
officer and the chief operating officer of the corporation. Subject to the
control of the Board, he shall have general supervision over the business of the
corporation and shall have such other powers and duties as presidents of
corporations usually have or as the Board assigns to him.
4.8 Vice Presidents. The vice presidents, if any, shall have such
powers and duties as the Board or the president assigns to him.
4.9 The Treasurer. The treasurer, if any, shall be in charge of the
corporation's books and accounts. Subject to the control of the Board, he shall
have such other powers and duties as the Board or the president assigns to him.
4.10 The Secretary. The secretary shall be the secretary of, and
keep the minutes of, all meetings of the Board and of the stockholders, shall be
responsible for giving notice of all meetings of stockholders and of the Board,
and shall keep the seal and, when authorized by the Board, apply it to any
instrument requiring it. Subject to the control of the Board, he shall have such
powers and duties as the Board or the president assigns to him. In the absence
of the secretary from any meeting, the minutes shall be kept by the person
appointed for that purpose by the presiding officer.
4.11 Salaries. The Board may fix the officers' salaries, if any, or
it may authorize the president to fix the salary of any other officer.
5. SHARES.
5.1 Certificates. The corporation's shares shall be represented by
certificates in the form approved by the Board. Each certificate shall be signed
by the chairman of the board, the president or a vice president and by the
secretary or an assistant secretary, or the treasurer or an assistant treasurer,
and shall be sealed with the corporation's seal or a facsimile of the seal.
Any or all of the signatures on the certificate may be a facsimile.
5.2 Transfers. Shares shall be transferable only on the
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.
6
<PAGE> 7
5.3 Determination of Stockholders of Record. The Board may fix, in
advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than 60 or less than 10 days
before the date of the meeting or more than 60 days before any other action.
6. MISCELLANEOUS.
6.1 Seal. The Board shall adopt a corporate seal, which shall be in
the form of a circle and shall bear the corporation's name and the year and
state in which it was incorporated.
6.2 Fiscal Year. The Board may determine the corporation's fiscal
year from time to time. Until changed by the Board, the corporation's fiscal
year shall be the 52- or 53- week period ending on the last Saturday of each
calendar year.
6.3 Voting of Shares in Other Corporations. Shares in other
corporations which are held by the corporation may be represented and voted by
the chairman of the board, the president or a vice president of this corporation
or by proxy or proxies appointed by one of them. The Board may, however, appoint
some other person to vote the shares.
6.4 Amendments. By-laws may be amended, repealed or adopted by the
stockholders or by a majority of the Board, but any by-law adopted by the Board
may be amended or repealed by the stockholders.
7
<PAGE> 8
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED BY-LAWS
OF
PROSOURCE, INC.
The first sentence of Section 1.5 of the Amended and Restated
By-Laws of ProSource, Inc. is hereby amended to read in its entirety as follows:
At any meeting of stockholders, the presence in person or by
proxy of a majority of the votes entitled to be cast by the
holders of all outstanding shares entitled to vote shall
constitute a quorum for the transaction of any business except
as otherwise provided by law or by the certificate of
incorporation, as amended from time to time (the "Certificate
of Incorporation") of the corporation.
<PAGE> 1
Exhibit 4.1
AMENDED AND RESTATED
PROSOURCE, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
Section 1. Establishment and Purpose
1.1 Establishment. ProSource, Inc., a Delaware corporation (hereinafter
called "ProSource" or the "Company"), hereby establishes a stock purchase plan
for employees as described herein, which shall be known as the PROSOURCE, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN (the "Plan").
1.2 Purpose. The purpose of the Plan is to provide eligible employees the
opportunity to purchase the Company's common stock at a favorable price by means
of payroll deductions. It is intended that the Plan qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code") and all provisions hereof shall be construed in a manner to so
comply.
Section 2. Definitions
2.1 Definitions. Whenever used hereinafter, the following terms shall have
the meanings set forth below:
(a) "Affiliate" means any corporation, a majority of the voting stock
of which is directly or indirectly owned by ProSource, and which has been
authorized by the Board to participate in the Plan.
(b) "Base Earnings" means a Participant's regular rate of pay and
does not include overtime pay, bonuses, or amounts payable under employee
benefit plans.
(c) "Board" means the Board of Directors of ProSource.
(d) "Committee" means the Equity Compensation Committee of the Board.
(e) "Eligible Employee", with respect to any Plan Year, means an
employee (including officers and directors who are also employees) of
ProSource or any Affiliate who have been employed by the Company or an
Affiliate continuously for at least three months prior to July 1 of such
Plan Year, other than those employees whose customary employment is 20
hours or less per week or not more than five months during any calendar
year.
(f) "Fair Market Value" of a share of Stock means the average closing
price of shares of the Stock for the five trading days immediately
preceding the applicable date on (i) the New York Stock Exchange, if the
Stock is then listed on such exchange, (ii) if the Stock is not listed on
the New York Stock Exchange, on the principal national stock exchange on
which the Stock is then listed or (iii) if not listed on any national
exchange, as reported by NASDAQ. If the Stock is not then listed on any
<PAGE> 2
national stock exchange or reported by NASDAQ, then the Fair Market Value
shall be determined in any reasonable manner approved by the Committee.
(g) "Participant" means an Eligible Employee who has elected to
participate in the Plan pursuant to Section 4.1.
(h) "Plan Year" means the twelve-month period beginning each July 1.
(i) "Stock" means the Class A Common Stock of ProSource, par value
$.01 per share.
Section 3. Stock Subject to the Plan
3.1 Number. The total number of shares of Stock to be offered for sale
under this Plan shall not exceed 300,000 shares in the aggregate. These shares
may consist, in whole or in part, of authorized but unissued Stock or treasury
Stock not reserved for any other purpose.
3.2 Adjustment in Capitalization. In the event of any merger,
reorganization, consolidation, recapitalization, stock dividend, stock split,
extraordinary distribution with respect to Stock or other change in corporate
structure affecting the Stock, the Committee may make such substitution or
adjustments in the aggregate number and kind of shares reserved for issuance
under the Plan and the price payable therefor and/or such other substitution or
adjustments in the shares reserved for issuance under the Plan as it may
determine to be appropriate in its sole discretion; provided, however that the
number of shares of Stock issuable under the Plan shall always be a whole
number.
Section 4. Participation
4.1 Participation. Any employee who is an Eligible Employee on June 1, 1997
may elect to become a Participant as of July 1, 1997. Any employee who is an
Eligible Employee on June 1 of any subsequent year, may elect to become a
Participant as of the first day of the next Plan Year. Any election to
participate shall be made in the form and at the time provided in rules adopted
by the Committee from time to time. Notwithstanding anything herein to the
contrary, in no event shall an Eligible Employee be granted the right to
purchase Stock under the Plan if after the purchase such Eligible Employee would
own capital stock of ProSource possessing 5% or more of the total combined
voting power or value of all classes of capital stock of ProSource. Also, an
Eligible Employee may not become or remain a Participant at any time when such
Eligible Employee owns capital stock possessing 5% or more of the total combined
voting power or value of all classes of capital stock of ProSource. For purposes
of this subsection, the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of an individual, and capital stock which an
employee may purchase under outstanding options shall be treated as capital
stock owned by the employee.
<PAGE> 3
Section 5. Purchase of Stock
5.1 Contributions for Purchase of Stock. At the time an Eligible Employee
elects to become a Participant in the Plan, such Eligible Employee shall elect
to contribute to the Plan by authorizing payroll deductions in an amount (in
increments of 1%) not less than 1%, and not more than 15%, of Base Earnings.
Unless otherwise elected by the Participant, the rate of withholding such
Participant has elected will remain in effect for subsequent Plan Years. A
Participant at any time may reduce the rate of withholding or discontinue
withholding entirely. A Participant may not increase the rate of withholding
except in connection with an election with respect to a subsequent Plan Year. If
a Participant elects to discontinue withholding, he or she may resume
withholding only as of the first day of any subsequent Plan Year. Any election
or direction under this section shall be made in writing in the form and
pursuant to rules adopted by the Committee from time to time, and shall become
effective at a time specified by the Committee.
5.2 Disposition of Contributions. Amounts withheld pursuant to Section 5.1
shall be held by a Participant's employer until used to purchase Stock, except
that:
(a) A Participant who elects to discontinue withholding may elect at
any time to withdraw all or any part of the amounts previously withheld.
Any such withdrawal shall be paid to the Participant by his or her employer
in cash, with interest, if any, on such amounts.
(b) Any portion of the amounts withheld which is not paid to the
Participant in cash pursuant to this Section shall be automatically applied
to purchase Stock under Section 5.3.
(c) Any withdrawal election under this Section shall be made in
writing in the form and pursuant to rules adopted by the Committee from
time to time.
5.3 Purchases of Stock. Amounts withheld from a Participant's pay during
the Plan Year (except any amounts refunded to such Participant in cash under
Section 5.2) shall be used to purchase Stock (at the applicable time as set
forth in the next sentence) from ProSource for a price equal to 85% of the Fair
Market Value of a share of Stock on the first business day of such Plan Year.
Purchases of Stock with respect to any Plan Year shall be made annually (as of
June 30 of such Plan Year), semi-annually (as of December 31 and June 30 of such
Plan Year) or quarterly (as of September 30, December 31, March 31 and June 30
of such Plan Year), in the discretion of the Committee. In the event that any
day on which purchases of Stock are to be made is not a business day, such
purchases shall be made as of the immediately preceding business day.
Whole or fractional shares may be purchased.
5.4 Privileges of a Stockholder. A Participant shall not have stockholder
privileges with respect to any Stock until the date of issuance of such Stock.
5.5 Limitation on Stock Purchases. As required by Section 423 of the Code,
no Participant may purchase Stock under the Plan and all other employee stock
purchase plans of ProSource (including any parent or subsidiary corporation, to
the extent provided in Section 423) at a rate in excess of $25,000 in Fair
Market Value of such Stock (determined as of the first Business Day of the Plan
Year with respect to which Stock is granted) for each calendar year in which any
such right to purchase Stock granted to such Participant
<PAGE> 4
is outstanding at any time. If a Participant is not entitled to purchase Stock
under any other such plan during a Plan Year, the total number of shares
purchased under this Plan for the Participant with respect to that Plan Year may
not exceed $25,000 divided by the Fair Market Value of a share of Stock on the
first day of such Plan Year.
Section 6. Termination of Employment
6.1 Termination of Employment. No shares of Stock may be purchased by a
Participant pursuant to this Plan with respect to a Plan Year if his or her
employment terminates for any reason prior to the end of such Plan Year. Any
amount withheld from the pay of a Participant during the Plan Year in which his
or her employment terminates shall be paid to such Participant in cash, with
interest, if any, on such amount promptly after such Participant's termination
of employment. If a Participant's death occurs at any time during a Plan Year,
any amount withheld from the pay of such Participant shall be paid to the
Participant's personal representative in cash, with interest, if any, on such
amount and no portion thereof shall be applied to purchase Stock under the Plan.
Section 7. Rights of Employees; Participants
7.1 Employment. Nothing in this Plan shall interfere with or limit in any
way the right of ProSource or any Affiliate to terminate any employee's,
Eligible Employee's, or Participant's employment at any time, nor confer upon
any such person any right to continue in the employ of ProSource or any of its
Affiliates.
7.2 Nontransferability. No right or interest of any Participant in the Plan
shall be assignable or transferable, or subject to any lien, directly or
indirectly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge, or bankruptcy. Any attempted assignment,
transfer, pledge or other disposition of any rights under the Plan shall be null
and void, and shall automatically terminate all rights of a participant under
the Plan.
Section 8. Administration
8.1 The Committee. (a) The Plan shall be administered by the Committee.
(b) The Committee is vested with full authority to make, administer,
and interpret such equitable rules and regulations regarding the Plan as it may
deem advisable. The Committee's determination as to the interpretation and
operation of the Plan, or any right granted under it, shall be final and
conclusive, unless otherwise determined by the Board. No member of the Board or
the Committee shall be liable for any action or determination made in good faith
by such member with respect to the Plan or any option granted under it.
(c) Prior to the commencement of any Plan Year, the Committee may
prescribe rules to apply to such Plan Year including, but not limited to,
setting forth a limit on the aggregate number of shares of Stock which may be
purchased under the Plan during the Plan Year, and the method for reducing
Participants' elections if such limit would otherwise be exceeded.
<PAGE> 5
(d) The Committee may act by a majority vote at a meeting of the
Committee or by a document signed by all of the members of the Committee.
Section 9. Amendment, Modification and
Termination of Plan
9.1 Amendment, Modification, and Termination of the Plan. The Board or the
Committee, at any time may terminate, and at any time and from time to time and
in any respect, may amend or modify the Plan, provided, however, that no such
action of the Board, or the Committee, without approval of the stockholders of
ProSource, may: Increase the total amount of Stock which may be offered under
the Plan, except as provided in Section 3.2 of the Plan; withdraw the
administration of the Plan from the Committee; or permit any person, while a
member of the Committee, to be eligible to participate in the Plan.
Section 10. Requirements of Law
10.1 Requirements of Law. The issuance of Stock and the payroll deductions
pursuant to this Plan shall be subject to all applicable laws, rules, and
regulations, and shares of Stock shall not be issued nor cash payments made
except upon approval of proper government agencies of stock exchanges as may be
required.
10.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware,
without regard to the conflicts of law provisions thereof.
Section 11. Effective Date of the Plan
11.1 Effective Date. Subject to approval by the stockholders of ProSource,
the Plan shall be effective as of July 1, 1997.
11.2 Duration of the Plan. Unless the Board terminates the Plan earlier,
the Plan shall remain in effect until the earlier of the date upon which all
Stock subject to it shall be distributed pursuant to the Plan and June 30, 2002.
<PAGE> 1
Exhibit 11.1
PROSOURCE, INC.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------- -----------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1997 1996 1997 1996
------ ------ ------- --------
<S> <C> <C> <C> <C>
Net earnings (loss) applicable to common
stock $ 58 $1,243 $(5,956) $(17,957)
====== ====== ======= ========
Weighted average common shares
outstanding during the period 9,324 5,321 9,331 5,301
Add:
Common equivalent shares determined using
the "Treasury Stock" method representing
shares issuable upon exercise of stock
options, warrants and shares issuable under
contractual agreements, except during
periods in which they would be antidilutive 3 48 36 --
------ ------ ------- --------
Weighted average number of shares used in
calculation of primary earnings per share 9,327 5,369 9,367 5,301
====== ====== ======= ========
Primary earnings per common share $ .01 $ .23 $ (.64) $ (3.39)
====== ====== ======= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PROSOURCE, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-27-1997 DEC-28-1996
<PERIOD-END> JUN-28-1997 DEC-28-1996
<CASH> 16,998,000 2,763,000
<SECURITIES> 0 0
<RECEIVABLES> 213,433,000 221,674,000
<ALLOWANCES> 3,041,000 2,334,000
<INVENTORY> 140,165,000 144,040,000
<CURRENT-ASSETS> 391,435,000 387,377,000
<PP&E> 85,416,000 77,131,000
<DEPRECIATION> 25,883,000 27,494,000
<TOTAL-ASSETS> 516,053,000 506,671,000
<CURRENT-LIABILITIES> 255,953,000 301,829,000
<BONDS> 180,300,000 113,084,000
0 0
0 0
<COMMON> 93,000 94,000
<OTHER-SE> 71,918,000 78,421,000
<TOTAL-LIABILITY-AND-EQUITY> 516,053,000 506,671,000
<SALES> 1,987,845,000 4,125,054,000
<TOTAL-REVENUES> 1,987,845,000 4,125,054,000
<CGS> 1,831,036,000 3,806,811,000
<TOTAL-COSTS> 1,831,036,000 3,806,811,000
<OTHER-EXPENSES> 151,716,000 345,494,000
<LOSS-PROVISION> 804,000 1,682,000
<INTEREST-EXPENSE> 5,558,000 14,824,000
<INCOME-PRETAX> 547,000 (40,381,000)
<INCOME-TAX> (241,000) 15,410,000
<INCOME-CONTINUING> 306,000 (24,971,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (6,262,000) 610,000
<CHANGES> 0 0
<NET-INCOME> (5,956,000) (24,361,000)
<EPS-PRIMARY> (.64) (4.19)
<EPS-DILUTED> (.64) (4.19)
</TABLE>
