-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hue59xL/SIcSEOsNEB33ZyMjCjbv265unWzo5OiVx658r2vd06VojhC3UhwCo+wX zcgFcH1EnrFizDYFXgU9OA== 0001017062-97-002310.txt : 19971230 0001017062-97-002310.hdr.sgml : 19971230 ACCESSION NUMBER: 0001017062-97-002310 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971015 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971229 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CREATIVE COMPUTERS INC CENTRAL INDEX KEY: 0000937941 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 954518700 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-25790 FILM NUMBER: 97745516 BUSINESS ADDRESS: STREET 1: 2645 MARICOPA ST CITY: TORRENCE STATE: CA ZIP: 90503 BUSINESS PHONE: 3107874500 MAIL ADDRESS: STREET 1: 2645 MARICOPA ST CITY: TORRENCE STATE: CA ZIP: 90503 8-K/A 1 FORM 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 or 15 (d) OR THE SECURTIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OR EARLIEST EVENT REPORTED): OCTOBER 15, 1997 COMMISSION FILE NUMBER: 0-25790 CREATIVE COMPUTERS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-4518700 (STATE OR OTHER JURISDICTION (I.R.S. Employer OF INCORPORATION) Identification No.) 2555 W. 190TH STREET, TORRANCE, CALIFORNIA 90504 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 354-5600 Item 2. Acquisition or Disposition of Assets (a) On October 15, 1997, Creative Computers, Inc., a Delaware corporation, acquired substantially all of the assets of Elek-Tek, Inc., a Delaware corporation, located at 7350 North Linder Avenue, Skokie, Illinois 60077, for a purchase price of $29.4 million pursuant to an Asset Purchase Agreement dated September 17, 1997, as amended. The sale of assets was accomplished pursuant to section 363 of the U.S. Bankruptcy Code. Such assets consisted primarily of accounts receivable, inventory, property, plant and equipment, general intangibles and customer lists and the businesses associated with mail order, direct sales and retail activities. The Company intends to use these assets for similar purposes except where business integration and restructuring limit their utility. (b) The acquisition will be accounted for as a purchase. The Company borrowed $20.7 million of the purchase price from Deutsche Financial Services Corporation, and the remaining $8.7 million was paid in cash. Elek-Tek, Inc. will operate as a wholly-owned subsidiary of Creative Computers, Inc. The description of the acquisition is qualified by reference to the Asset Purchase Agreement dated as of September 17, 1997 as amended by the Bankruptcy Court Order dated October 9, 1997 (exhibit 10.1 hereto) and press release dated October 15, 1997 (exhibit 99.1 hereto). Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Business Acquired. The financial statements for Elek-Tek, Inc. listed below have been previously filed with the Commission by Elek-Tek, Inc. under file number 000-22064 and are incorporated herein by reference. Fiscal Year Report of Independent Accountants. Balance Sheets as of December 31, 1996 and December 31, 1995. Statements of Operations for the years ended December 31, 1996, December 31, 1995 and December 31, 1994. Statements of Stockholders' Equity for the years ended December 31, 1996, December 31, 1995 and December 31, 1994. Statements of Cash Flows for the years ended December 31, 1996, December 31, 1995 and December 31, 1994. Notes to Financial Statements. Interim Unaudited Condensed Balance Sheets as of March 31, 1997 and June 30, 1997. Unaudited Condensed Statements of Operations for the three and six months ended March 31, 1997 and June 30, 1997. Unaudited Condensed Statements of Cash flows for the three and six months ended March 31, 1997 and June 30, 1997. Unaudited notes to Condensed Financial Statements. (b) Pro forma financial information. The unaudited pro forma data presented in the unaudited pro forma combined financial statements are included in order to illustrate the effect on the Company's financial statements of the acquisition of substantially all of the assets of Elek-Tek, Inc. as described in Item 2. The unaudited pro forma combined balance sheet at September 30, 1997 present adjustments as if, at such date, the Company had acquired Elek-Tek, Inc.'s assets. The unaudited pro forma statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996 present the effect of the acquisition of Elek-Tek, Inc.'s assets as if the transaction had occurred at the beginning of both periods. The historical financial information of Elek-Tek, Inc. used in the Company's pro forma statement of operations for the nine-month period ended September 30, 1997 includes Elek-Tek, Inc.'s historical interim unaudited financial information for the six-month period ended June 30, 1997 (the last Form 10- Q filed for Elek-Tek, Inc.) and the three months ended December 31, 1996. Accordingly, the historical results of operations for Elek-Tek, Inc. for the three-month period ended December 31, 1996 have been included in both the pro forma statement of operations for the Company's nine-month period ended September 30, 1997 and the year ended December 31, 1996. Elek-Tek's unaudited revenues and loss for the three months ended December 31, 1996 were $84.9 million and $4.0 million, respectively. The unaudited pro forma combined financial statements reflect the Company's allocation of the purchase price of approximately $29.4 million to the acquired assets of Elek-Tek, Inc. based upon the Company's current estimate of their relative value. The final allocation of the purchase price may vary as additional information is obtained and, accordingly, the ultimate allocation may differ from those used herein. The unaudited pro forma combined statements of operations are not indicative of the results that would have been reported had such events actually occurred on the date specified, nor are they indicative of the Company's future results. For example, Elek-Tek, Inc. closed four retail stores in August and September, 1997. Immediately after the acquisition, the Company consolidated the headquarters and warehouse operations into their own functions in Torrance, CA and Memphis, TN, thereby reducing these expenses. These events will have a significant impact on the Company going forward but is not reflected historically. UNAUDITED PRO FORMA COMBINED BALANCE SHEET September 30, 1997 (in thousands, except share data)
Pro Forma Company Company Adjustments for Pro Forma as Reported Elek-Tek Acquisition Combined ------------ -------------------- ------------ Assets Current assets: Cash and cash equivalents $ 21,553 $(8,735) (1) $ 12,818 Accounts receivable, net of allowance for doubtful accounts 24,465 15,630 (2) 40,095 Inventories 44,759 8,189 (2) 52,948 Other current assets 8,558 - 8,558 -------- ------- -------- Total current assets 99,335 15,084 (2) 114,419 Property, plant and equipment, net 11,455 3,062 (2) 14,517 Goodwill, net 6,693 2,445 (2) 9,138 Other assets 268 109 (2) 377 -------- ------- -------- $117,751 $20,700 (2) $138,451 ======== ======= ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 47,533 $ $ 47,533 Accrued expenses and other current liabilities 10,436 10,436 -------- ------- -------- Total current liabilities 57,969 - 57,969 Capital leases 214 214 Notes payable 383 20,700 (1) 21,083 Deferred income taxes 658 658 -------- ------- -------- Total liabilities 59,224 20,700 79,924 Stockholders' equity: Common stock, $.001 par value; 15,000,000 shares authorized; 10,081,434 issued 10 10 Preferred stock Additional paid in capital 56,530 56,530 Treasury stock, at cost (91) (91) Retained earnings 2,078 2,078 -------- ------- -------- Total stockholders' equity 58,527 - 58,527 -------- ------- -------- $117,751 $20,700 $138,451 ======== ======= ========
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET (1) Reflects the purchase of substantially all the assets of Elek-Tek, Inc. for $29.4 million, $20.7 million borrowed from Deutsche Financial Services and the remaining $8.7 million paid in cash. (2) Reflects the preliminary allocation of $29.4 million total consideration paid for the acquisition of Elek-Tek, Inc. as follows: $13.1 million for accounts receivable; $8.2 for inventories; $3.1 million for property, plant and equipment; $.1 million for other assets; and $2.4 million for goodwill. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS Nine Months Ended September 30, 1997 (in thousands, except per share amounts)
Pro Forma Company Company Elek-Tek Adjustments Pro Forma as Reported as Reported (2) for 1997 (1) Combined ------------ --------------- ------------ --------- Net sales $368,394 $217,762 $ $586,156 Cost of goods sold 321,208 192,010 513,218 -------- -------- ------- -------- Gross profit 47,186 25,752 72,938 Selling, general and administrative expenses 42,592 29,625 (1,444) (3) 70,773 -------- -------- ------- -------- Income (loss) from operations 4,594 (3,873) 1,444 2,165 Other (income) expense (272) (272) Interest expense (income), net (473) 2,100 (421) (4) 1,206 -------- -------- ------- -------- Income (loss) before income taxes 5,067 (5,701) 1,865 1,231 Income tax provision (benefit) 1,943 1,852 739 (5) 4,534 -------- -------- ------- -------- Net income (loss) $ 3,124 $ (7,553) $ 1,126 $ (3,303) ======== ======== ======= ======== Earnings (loss) per share $0.32 $(0.34) ======== ======== Weighted average number of shares outstanding 9,901 9,826 ======== ========
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (1) Reflects adjustments for the 1997 transactions as if they had taken place on January 1, 1997. (2) Reflects nine months activity calculated using six months ended June 30, 1997 plus three months ended December 31, 1996. (3) Adjustments for depreciation and amortization expense are the net expense difference between historical and the preliminary allocation of consideration as follows: (i) goodwill of approximately $2.4 million over a period of 25 years, and (ii) property plant and equipment of approximately $3.1 million over an average period of 15 years. (4) Reflects the adjustments for acquisition financing in October 1997 as follows:
Nine Months Ended September 30, 1997 ------------------ (in thousands) Interest expense on: $20.7 million Business Credit and Security Agreement at 8.5% ("prime") $1,320 Forgone investment earnings on $8.7 million on short term investments at 5.5% 359 ------ Interest expense as adjusted $1,679 Historical interest expense 2,100 ------ Adjustment necessary to reduce interest expense $ 421 ======
(5) To reflect the income tax effect of pro forma adjustments. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS Twelve Months Ended December 31, 1996 (in thousands, except per share amounts)
Pro Forma Company Company Elek-Tek Adjustments Pro Forma as Reported as Reported (2) for 1996 (1) Combined ------------ --------------- ------------ ---------- Net sales $444,971 $333,498 $ $778,469 Cost of goods sold 395,000 298,236 693,236 -------- -------- ------- -------- Gross profit 49,971 35,262 85,233 Selling, general and administrative expenses 60,585 46,038 (1,925) (3) 104,698 -------- -------- ------- -------- Income (loss) from operations (10,614) (10,776) 1,925 (18,465) Other expense 0 (341) (341) Interest (income), net (593) 2,454 (215) (4) 1,646 -------- -------- ------- -------- Income (loss) before income taxes (10,021) (12,889) 2,140 (20,770) Income tax provision (benefit) (3,972) (2,326) 849 (5) (5,449) -------- -------- ------- -------- Net income (loss) $ (6,049) $(10,563) $ 1,291 $(15,321) ======== ======== ======= ======== Earnings (loss) per share $(0.62) $(1.57) ======== ======== Weighted average number of shares outstanding 9,767 9,767 ======== ========
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (1) Reflects adjustments for the 1997 transactions as if they had taken place on January 1, 1996. (2) Reflects the 1996 historic operating results of Elek-Tek, Inc. (3) Adjustments for depreciation and amortization expense are the net expense difference between historical and the preliminary allocation of consideration as follows: (i) goodwill of approximately $2.4 million over a period of 25 years, and (ii) property plant and equipment of approximately $3.1 million over an average period of 15 years. (4) Reflects the adjustments for acquisition financing in October 1997 as follows:
Year Ended December 31, 1996 ----------------- (in thousands) Interest expense on: $20.7 million Business Credit and Security Agreement at 8.5% ("prime") $1,760 Forgone investment earnings on $8.7 million on short term investments at 5.5% 479 ------ Interest expense as adjusted $2,239 Historical interest expense 2,454 ------ Adjustment necessary to reduce interest expense $ 215 ======
(5) To reflect the income tax effect of pro forma adjustments. (c) Other Exhibits 10.1 Asset Purchase Agreement dated September 17, 1997 between Creative Computers, Inc. and Elek-Tek, Inc. 10.2 Business Credit and Security Agreement dated October 14, 1997 between Deutsche Financial Services Corporation and Elek-Tek Acquisition Corp. 10.3 Business Credit and Security Agreement dated October 14, 1997 between Deutsche Financial Services Corporation and Creative Computers, Inc. 99.1 Press release dated October 15, 1997. SIGNATURES Pursuant to requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CREATIVE COMPUTERS, INC. Date: December 26, 1997 By /s/ Richard Finkbeiner Richard Finkbeiner Chief Financial Officer (Duly Authorized Officer of the Registrant and Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----