CHS Electronics Inc – ‘8-K’ for 10/4/99

On:  Tuesday, 10/19/99   ·   For:  10/4/99   ·   Accession #:  950170-99-1558   ·   File #:  1-14341

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Current Report   —   Form 8-K
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 1: 8-K         Current Report                                         7     31K 

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE
 SECURITIES AND EXCHANGE ACT OF 1934

 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 4, 1999

 CHS ELECTRONICS, INC.
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

 FLORIDA
(STATE OR OTHER JURISDICTION OF INCORPORATION)

0-24244                                          87-0435376   
(COMMISSION FILE NUMBER)                       (IRS EMPLOYER IDENTIFICATION NO.)

CHS ELECTRONICS, INC.                                         
2000 N.W. 84TH AVENUE                                         
MIAMI, FLORIDA                                  33122   
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)                   (ZIP CODE)            

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 908-7200

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ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS.                                  

                CHS Electronics (the "Company") conducts operations in Spain
   through a number of subsidiaries, one of which is Memory Set S.A.
       ("Memory Set"), which it agreed to purchase in July 1998. The Company
        is in default under the purchase agreement because the Company has not
        paid the balance of the purchase price of approximately $74.4 million.
The Company believes the unpaid balance of the purchase price 
      represents approximately 91.5% of Memory Set and the amounts already
    paid represent approximately 8.5%. The Company agreed to submit to
      arbitration the issue of the portion of Memory Set which the Company
       will retain as a result of the cancellation of its purchase agreement
     for Memory Set. The Company may cure its default under the purchase
    agreement by paying the balance of the purchase price at any point
        prior to completion of the arbitration. During the first six months of
    1999, revenues attributable to Memory Set were $122.8 million. The
        Company will record an estimated loss of $20.0 million on the transfer
         and will treat its ongoing interest in Memory Set under the cost method
of accounting.                                                

                In addition, on October 4, 1999, the Company conveyed 80% of
  the shares of Arena Bilgisayar Sanayi Ve Ticaret A.S. and Armada
         Bilgisayar A.S., the Company's subsidiaries operating in Turkey, to the
       original owners in exchange for a release of the Company's obligation
 to pay the balance of the purchase price of approximately $42.7
       million. The sellers granted the Company an option to reacquire those
         interests at any time prior to October 4, 2000 or a 60-day period after
         the Company receives new cash investments of at least $200 million. The
        Company also conveyed all of its interest in ARC Espana Cartera, S.A.,
  another subsidiary operating in Spain, to the original owners in
       exchange for a release of the Company's obligation to pay the balance
        of the purchase price of approximately $29.3 million. During the first
six months of 1999, the revenues attributable to these three  
     subsidiaries totaled approximately $141.6 million. The Company will
      realize an aggregate loss on the sale of these three subsidiaries of
approximately $27.6 million.                                  

ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.    

(b)     Pro Forma                                           

            The unaudited pro forma condensed consolidated financial
   statements of CHS Electronics, Inc. for the indicated periods are
        attached hereto as Attachment 7(b) and are incorporated herein by this
reference.                                                    

(c)      Exhibits                                             

None                                                          

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the    
undersigned hereunto duly authorized.                                           

 CHS ELECTRONICS, INC.

Date: October 19, 1999        By: /S/ CRAIG TOLL                                
                                ----------------------------------------------
      Craig Toll
                                 Chief Financial Officer and Treasurer

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                                                                 ATTACHMENT 7(B)

CHS ELECTRONICS, INC.                                                           
PRO-FORMA CONDENSED CONSOLIDATED BALANCE SHEET                                  
(in thousands, except share data)                                               

                                                        [Enlarge/Download Table]

                                                                                     JUNE 30, 1999                               
                                                                                                     PRO FORMA                   
                                                       CONSOLIDATED      MEMORY SET     OTHERS      ADJUSTMENTS       PRO FORMA  
                                                        (UNAUDITED)     (UNAUDITED)   (UNAUDITED)   (UNAUDITED)      (UNAUDITED) 
                      ASSETS                                                                                                     
                                                                                                                                 
CURRENT ASSETS:                                                                                                                  
   Cash                                                  $   133,247   $      (861)  $    (5,589)   $        --      $   126,797 
   Accounts receivable:                                                                                                          
    Trade, less allowance for doubtful accounts                                                                                  
     of $53,260                                            1,116,909       (41,669)      (23,584)            --        1,051,656 
    Affiliates                                                 7,228            --            --             --            7,228 
                                                         -----------   -----------   -----------    -----------      ----------- 
                                                           1,124,137       (41,669)      (23,584)            --        1,058,884 

   Inventories                                               661,889       (16,398)      (21,433)            --          624,058 
   Prepaid expenses and other current assets                  90,631          (351)       (3,778)            --           86,502 
                                                         -----------   -----------   -----------    -----------      ----------- 
          TOTAL CURRENT ASSETS                             2,009,904       (59,279)      (54,384)            --        1,896,241 

PROPERTY AND EQUIPMENT, NET                                  120,107          (457)       (3,849)            --          115,801 
COST IN EXCESS OF ASSETS ACQUIRED, NET                       844,545            --            --       (140,554)(a)      703,991 
OTHER ASSETS                                                  63,365            (5)         (417)            --           62,943 
                                                         -----------   -----------   -----------    -----------      ----------- 
                                                         $ 3,037,921   $   (59,741)  $   (58,650)   $  (140,554)     $ 2,778,976 
                                                         ===========   ===========   ===========    ===========      =========== 
    LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                         
CURRENT LIABILITIES:                                                                                                             
   Notes payable                                         $   517,579   $   (17,755)  $    (4,467)   $        --      $   495,357 
   Accounts payable, trade                                   919,039       (13,665)      (24,975)            --          880,399 
   Accrued liabilities                                       106,403          (405)       (5,477)         6,066 (b)      106,587 
   Amounts due to sellers under acquisition agreements       299,003            --            --       (146,462)(c)      152,541 
   Income taxes payable                                        3,980        (4,196)         (312)            --             (528)
                                                         -----------   -----------   -----------    -----------      ----------- 
          TOTAL CURRENT LIABILITIES                        1,846,004       (36,021)      (35,231)      (140,396)       1,634,356 

LONG TERM DEBT                                               459,776           (26)       (2,182)            --          457,568 
MINORITY INTEREST                                             10,607            --            --             --           10,607 

SHAREHOLDERS' EQUITY:                                                                                                            
   Preferred stock, authorized 5,000,000 shares;                                                                                 
    0 shares outstanding                                          --            --            --             --               -- 
   Common stock, authorized 100,000,000 shares at                                                                                
    $.001 par value; 58,099,461 shares outstanding                58            --        (3,399)         3,399 (d)           58 
   Additional paid-in capital                                747,936       (13,651)       (6,350)        20,001 (d)      747,936 
   Retained earnings                                          21,872       (12,488)      (11,554)       (23,558)(e)      (25,728)
   Accumulated other comprehensive income                    (48,332)        2,445            66             --          (45,821)
                                                         -----------   -----------   -----------    -----------      ----------- 
          TOTAL SHAREHOLDERS' EQUITY                         721,534       (23,694)      (21,237)          (158)         676,445 
                                                         -----------   -----------   -----------    -----------      ----------- 
                                                         $ 3,037,921   $   (59,741)  $   (58,650)   $  (140,554)     $ 2,778,976 
                                                         ===========   ===========   ===========    ===========      =========== 

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CHS ELECTRONICS, INC.                                                           
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS                        
(in thousands, except share data)                                               

                                                        [Enlarge/Download Table]

                                                                   SIX MONTHS ENDED JUNE 30, 1999                         
                                                                                            PRO-FORMA                     
                                             CONSOLIDATED   MEMORY SET       OTHERS        ADJUSTMENTS        PRO-FORMA   
                                             (UNAUDITED)    (UNAUDITED)    (UNAUDITED)     (UNAUDITED)       (UNAUDITED)  

                                                                                                                          
Net sales                                   $  4,813,346   $   (122,806)   $   (141,627)   $         --      $  4,548,913 

Cost of goods sold                             4,542,936       (109,542)       (127,145)             --         4,306,249 
                                            ------------   ------------    ------------    ------------      ------------ 
   Gross profit                                  270,410        (13,264)        (14,482)             --           242,664 

Operating expenses:                                                                                                       
   Selling, general & administrative             308,116         (1,737)         (6,887)         (1,228)(a)       298,264 
   Restructuring & asset impairment               13,962             --              --              --            13,962 
                                            ------------   ------------    ------------    ------------      ------------ 
                                                 322,078         (1,737)         (6,887)         (1,228)          312,226 
                                            ------------   ------------    ------------    ------------      ------------ 
   Operating income (loss)                       (51,668)       (11,527)         (7,595)          1,228           (69,562)

Other (income) expenses:                                                                                                  
   Interest income                               (10,593)           189             286              --           (10,118)
   Interest expense                               51,920           (332)           (578)             --            51,010 
   Foreign currency (gain) loss                    1,780           (101)         (3,524)             --            (1,845)
                                            ------------   ------------    ------------    ------------      ------------ 
                                                  43,107           (244)         (3,816)             --            39,047 
                                            ------------   ------------    ------------    ------------      ------------ 
   Earnings (loss) before income taxes and                                                                                
    minority interest in subsidiaries            (94,775)       (11,283)         (3,779)          1,228          (108,609)

Income taxes (benefit)                            (5,995)        (3,949)           (284)             --           (10,228)
Minority interest in subsidiaries                    141             --              (4)             --               137 
                                            ------------   ------------    ------------    ------------      ------------ 
   Net earnings (loss)                      $    (88,921)  $     (7,334)   $     (3,491)   $      1,228      $    (98,518)
                                            ============   ============    ============    ============      ============ 
Net earnings (loss) per common share:                                                                                     
            Basic                           $      (1.57)                                                    $      (1.73)
                                            ============                                                     ============ 
            Diluted                         $      (1.57)                                                    $      (1.73)
                                            ============                                                     ============ 
Weighted average shares:                                                                                                  
            Basic                             56,819,441                                                       56,819,441 
                                            ============                                                     ============ 
            Diluted                           56,819,441                                                       56,819,441 
                                            ============                                                     ============ 

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CHS ELECTRONICS, INC.                                                           
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS                        
(in thousands, except share data)                                               

                                                        [Enlarge/Download Table]

                                                            YEAR ENDED DECEMBER 31, 1998                             
                                                                                       PRO-FORMA                     
                                        CONSOLIDATED    MEMORY SET       OTHERS       ADJUSTMENTS         PRO-FORMA  
                                                       (UNAUDITED)    (UNAUDITED)     (UNAUDITED)        (UNAUDITED) 

                                                                                                                     
Net sales                              $  8,545,773   $    (94,024)   $   (216,072)   $         --      $  8,235,677 

Cost of goods sold                        7,983,736        (84,318)       (195,225)             --         7,704,193 
                                       ------------   ------------    ------------    ------------      ------------ 
   Gross profit                             562,037         (9,706)        (20,847)             --           531,484 

Operating expenses                          428,335         (1,727)         (8,672)         (1,361)(a)       416,575 
                                       ------------   ------------    ------------    ------------      ------------ 
   Operating income                         133,702         (7,979)        (12,175)          1,361           114,909 

Other (income) expenses:                                                                                             
   Interest income                          (16,581)           186           1,219              --           (15,176)
   Interest expense                          71,373           (243)           (453)             --            70,677 
   Foreign currency (gain) loss               5,232              7          (3,131)             --             2,108 
                                       ------------   ------------    ------------    ------------      ------------ 
                                             60,024            (50)         (2,365)             --            57,609 
                                       ------------   ------------    ------------    ------------      ------------ 
   Earnings before income taxes and                                                                                  
    minority interest in subsidiaries        73,678         (7,929)         (9,810)          1,361            57,300 

Income taxes                                 23,871         (2,775)         (1,733)             --            19,363 
Minority interest in subsidiaries             4,129             --             (14)             --             4,115 
                                       ------------   ------------    ------------    ------------      ------------ 
   Net earnings                        $     45,678   $     (5,154)   $     (8,063)   $      1,361      $     33,822 
                                       ============   ============    ============    ============      ============ 
Net earnings per common share:                                                                                       
            Basic                      $       0.88                                                     $       0.66 
                                       ============                                                     ============ 
            Diluted                    $       0.82                                                     $       0.61 
                                       ============                                                     ============ 
Weighted average shares:                                                                                             
            Basic                        51,616,109                                                       51,616,109 
                                       ============                                                     ============ 
            Diluted                      55,917,007                                                       55,917,007 
                                       ============                                                     ============ 

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PRO FORMA ADJUSTMENTS                                                           

The preceding Pro-Forma Balance Sheets and Statements of Operations reflect the 
disposition of Memory Set and three other entities as if they had occurred on   
June 30, 1999 for the Balance Sheet and at the beginning of the respective      
periods for the Statements of Operations.                                       

BALANCE SHEET                                                                   

a. To record for the write-off of the goodwill related to the entities disposed 
of.                                                                       

b. To record additional costs to be incurred to complete the transactions.      

c. To reduce the amounts due to sellers related to the entities disposed of.    

d. To restore common stock and additional paid-in capital removed.              

e. To restore retained earnings removed of $24,042,000 and reflect the loss on  
the transactions of $47,600,000.                                          

STATEMENTS OF OPERATIONS                                                        

a. Represents add back of goodwill expense amortization for the period.         

Dates Referenced Herein   and   Documents Incorporated by Reference

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