SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __________ to
__________
Commission file number 0-17156
A. Full title of the plan and address of the plan, if different from that of
the issuer named below: Merisel, Inc. 401(k)Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office: Merisel, Inc. 200 Continental Blvd.,
El Segundo, California 90245
Merisel, Inc.
401(k) Retirement Savings Plan
Financial Statements as of and for the Years Ended December 31, 1999 and
1998, Supplemental Schedules for the Year Ended December 31, 1999 and
Independent Auditors' Report
MERISEL, INC.
401(k) RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits as of December 31, 1999
and 1998 2
Statements of Changes in Net Assets Available for Plan Benefits for the
Years Ended December 31, 1999 and 1998 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULES:
Schedule of Assets Held for Investment Purposes as of December 31, 1999 8
Schedule of Reportable Transactions for the Year Ended December 31, 1999 9
INDEPENDENT AUDITORS' REPORT
Merisel, Inc.
401(k) Retirement Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Merisel, Inc. 401(k) Retirement Savings Plan as of December 31,
1999 and 1998, and the related statements of changes in net assets available for
plan benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1999 and 1998, and the changes in net assets available for plan
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of (1) assets
held for investment purposes as of December 31, 1999, and (2) reportable
transactions for the year ended December 31, 1999, are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Deloitte & Touche, LLP
Los Angeles, California
June 16, 2000
MERISEL, INC.
401(k) RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------
1999 1998
ASSETS:
Investments (Notes 2 and 3):
Participant directed $ 18,690,302 $ 13,400,749
Nonparticipant directed (Note 4) 1,020,032 745,509
Participant loans 636,697 333,747
--------- --------
Total investments 20,347,031 14,480,005
Accounts receivable - employer and employee contribution (Note 1) 1,403,162 889,321
----------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 21,750,193 $ 15,369,326
============ ============
See accompanying notes to financial statements.
MERISEL, INC.
401(k) RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------
1999 1998
ADDITIONS TO NET ASSETS:
Investment income (Notes 1 and 3):
Net appreciation in fair value of investments $ 2,061,182 $ 1,604,705
Interest income 111,891 103,521
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Total investment income 2,173,073 1,708,226
---------- ----------
Contributions (Note 1):
Employee 4,015,924 2,707,206
Employer 1,252,524 902,671
Rollover 292,872 74,880
----------- ----------
Total contributions 5,561,320 3,684,757
----------- ----------
Total additions 7,734,393 5,392,983
----------- ----------
DEDUCTIONS TO NET ASSETS (Note 1):
Benefits paid to participants 1,296,441 2,454,340
Contract administrator fees 57,085 19,650
----------- ----------
Total deductions 1,353,526 2,473,990
----------- ----------
INCREASE IN NET ASSETS 6,380,867 2,918,993
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
BEGINNING OF YEAR 15,369,326 12,450,333
------------ -----------
END OF YEAR $ 21,750,193 $ 15,369,326
============ ============
See accompanying notes to financial statements.
MERISEL, INC.
401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1. PLAN DESCRIPTION AND RELATED INFORMATION
General - The Merisel, Inc. 401(k) Retirement Savings Plan (the "Plan") is
a qualified defined contribution plan established to provide retirement
benefits to Merisel, Inc. (the "Company" or the "Plan Sponsor") employees.
The following description of the Plan provides only general information.
Participants should refer to the plan agreement for a more complete
description of the Plan's provisions.
Risk and Uncertainties - In 1999, the Plan Sponsor incurred a net loss
of $61.2 million, increasing its accumulated deficit to $179.7 million. The
financial condition was further deteriorated during the quarter ended March
31, 2000 as the Plan Sponsor incurred a net loss $20.4 million, increasing
its accumulated deficit to $193.1 million. Effective December 1999, the
Plan Sponsor announced a restructuring plan that would combine its United
States and Canadian distribution businesses, and would reduce its planned
workforce. In connection with the restructuring, the Plan Sponsor has
developed a business plan, which, if successfully implemented, will provide
sufficient cash flow to support its operations throughout 2000 and
ultimately return the Company to profitability. If the Company is unable to
successfully implement its business plan it could have a material impact on
the Company's ability to continue as a going concern. By virtue of the
Company being the Plan Sponsor, such a material impact could also impact
the Plan's ability to continue as a going concern.
Contributions, Participant Accounts, and Vesting - Under provisions of the
Plan, all full-time employees of the Company who have completed 30 days of
service and are at least 21 years of age are eligible to participate in
the Plan. Total annual participant contributions are limited to the lesser
of $10,000 or 15 percent of the participant's pretax annual compensation.
Participants may also make rollover contributions from other qualified
plans. The amount of the Company matching contributions is determined by
the Board of Directors.
Each participant's account is credited with the participant's contribution
and an allocation of the Company's contribution and plan earnings.
Participant contributions are invested in any of ten available investment
funds or Company common stock, as directed by the participant. Company
contributions are invested as directed by the Company. Plan earnings are
allocated to participants based upon participant account balances.
Forfeitures of terminated participants' nonvested accounts are used to
reduce future Company contributions.
Participants are immediately vested in their voluntary contributions plus
actual earnings thereon. Vesting in the Company's contributions is based
on years of continuous service. A participant is fully vested after four
years of credited service.
Payments of Benefits - A participant's plan benefits will be distributed
at retirement, death, disability or termination of employment. The
participant or beneficiary may elect to receive such benefits in an
annuity or lump-sum payment. Benefits payable to terminated participants
are not reflected in the accompanying financial statements. Net assets
available for plan benefits included $9,309 and $13,371 for participants
who are no longer employed by the Company as of December 31, 1999 and
1998, respectively.
Termination - Although it has not expressed any intent to do so, the
Company has the right to terminate the Plan subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA"). In the
event of termination, participants would become 100 percent vested in
their employer contributions.
Tax Status - The Internal Revenue Service ("IRS") has determined and
informed the Company by letter that the Plan is qualified under Section
401 of the Internal Revenue Code ("IRC") and therefore is not subject to
tax under present income tax law. Although the Plan has been amended since
receiving the determination letter, the plan administrator and the Plan's
tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
Management believes that the Plan is designed and currently being operated
within the applicable requirements of the IRC.
Administrative Expenses - Administrative expenses are allocated to plan
participants on a pro rata basis based on individual account values.
Participant Loans - Participants may borrow from their fund accounts a
minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50
percent of the participant's vested account balance. The term of
participant loans may not exceed five years, except where the proceeds of
the loan are used to purchase the principal residence of the participant.
The loans bear interest at the rate of two percent above the prime rate as
published in the Wall Street Journal on the day the loan is made.
Related Party Transactions - Certain plan investments are shares of funds
managed by CIGNA Retirement & Investment Services. CIGNA Retirement &
Investment Services is the trustee as defined by the Plan, and therefore,
these transactions qualify as party-in-interest. Fees paid by the Plan for
the investment management services amounted to $57,085 for the year ended
December 31, 1999 and $19,650 for the year ended December 31, 1998.
Reclassifications - In September 1999, Statement of Position ("SOP") 99-3,
"Accounting for and Reporting of Certain Defined Contribution Benefit Plan
Investments and Other Disclosure Matters," was issued. The SOP, among
other items, eliminates the previous requirements for a defined
contribution plan to present plan investment by general or fund type for
participant-directed investments. As a result, certain reclassifications
were made to the 1998 financial statements to conform to the 1999
financial statements presentation.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting - The accompanying financial statements have been
prepared using the accrual basis of accounting.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and changes therein, and disclosure of contingent assets and
liabilities. Actual results may differ from estimates.
Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value. Shares of registered investment companies and the
Company stock are valued at quoted market prices. Investments in pooled
separate accounts are recorded at fair value, as determined by the unit
value as reported by the Connecticut General Life Insurance Company.
Investments in the CIGNA Guaranteed Income Fund are non-fully benefit
responsive guaranteed investment contracts which are recorded at fair
value. Participant loans are valued at cost, which approximates fair
value. Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis.
3. INVESTMENT INFORMATION BY FUND
The following presents investments that represent 5 percent or more of the
Plan's net assets:
December 31,
------------------------------------
1999 1998
CIGNA Guaranteed Income Fund $2,638,322 $1,814,472
CIGNA Large Company Stock Index Fund 3,179,810 2,147,005
Fidelity Advisor Growth Opportunities Fund 3,379,777 3,011,517
Fidelity Advisor Equity Growth Account 5,408,428 3,470,611
CIGNA Lifetime 30 Fund 1,179,606 850,163
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
in value by $2,173,073 as follows:
Investment funds $ 2,765,085
Common stock (703,678)
Investment contracts 111,666
-------------
$ 2,173,073
=============
4. NONPARTICIPANT - DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant directed investments
is as follows:
December 31,
----------------------------------
1999 1998
Net Assets:
Merisel, Inc. common stock $ 1,020,032 $ 745,509
=========== =========
Year Ended
December 31,
1999
Increase in net assets:
Contributions $ 1,170,787
Net depreciation (703,678)
Benefits paid to participants (163,184)
Fund transfers 21,755
Contract administrator fees (40,475)
Other (10,682)
----------------
$ 274,523
=================
5. GUARANTEED INVESTMENT CONTRACTS
The Plan participates in contracts with Connecticut General Life Insurance
Company via investments in the CIGNA Guaranteed Income Fund. General Life
Insurance Company commingles the assets of the CIGNA Guaranteed Income
Fund with other assets. The contracts are non-fully benefit responsive,
with average yields of 5.45 percent and 5.70 percent, with interest rates
of 5.45 percent and 5.70 percent for 1999 and 1998, respectively, and
estimated fair values of $2,638,322 at December 31, 1999 and $1,814,472 at
December 31, 1998.
6. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
December 31,
---------------------------------------
1999 1998
Net assets available for benefits per the financial statements $ 21,750,193 $ 15,369,326
Accounts receivable - employer and employee contribution (1,403,162) (889,321)
------------- -------------
Net assets available for benefits per the Form 5500 $ 20,347,031 $ 14,480,005
============ ============
MERISEL, INC.
401 (k) RETIREMENT SAVINGS PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
DECEMBER 31, 1999
(a) (b) (c) (d) (e)
Description of Investment,
Identity of Issue, Including Maturity Date,
Borrower, Lessor or Interest Rate, Collateral Fair
Similar Party and Par or Maturity Value Cost Value
* Connecticut General Life Cash Transaction Account (GST) $ 8,812 $ 8,812
Insurance Company
* Connecticut General Life CIGNA Guaranteed Income Fund 2,638,322 2,638,322
Insurance Company
* Connecticut General Life CIGNA Large Company Stock Index 2,060,455 3,179,810
Insurance Company Fund
* Connecticut General Life Fidelity Advisor Growth Opportunities 2,357,872 3,379,777
Insurance Company Fund
* Connecticut General Life Fidelity Advisor Equity Growth Account 2,885,386 5,408,428
Insurance Company
* Connecticut General Life CIGNA Lifetime 20 Fund 672,143 943,685
Insurance Company
* Connecticut General Life CIGNA Lifetime 30 Fund 817,183 1,179,606
Insurance Company
* Connecticut General Life CIGNA Lifetime 40 Fund 514,882 738,907
Insurance Company
* Connecticut General Life CIGNA Lifetime 50 Fund 402,901 566,171
Insurance Company
* Merisel, Inc. Merisel, Inc. Common Stock 1,975,529 1,020,032
* Connecticut General Life Janus Worldwide Account 498,787 632,509
Insurance Company
* Connecticut General Life CIGNA Foreign Stock 12,543 14,275
Insurance Company Bank of Ireland Asset Management
* Participant loans Loans to participants, maturities up - 636,697
to 10 years, 9.5%-11.0% interest
* Indicates an identified person known to be a party-in-interest.
MERISEL, INC.
401(k) RETIREMENT SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1999
(a) (b) (c) (d) (g) (h) (i)
Current Value Net
Purchase Selling Cost on Transaction Gain
Identity of Party Involved Description of Asset Price Price of Asset Date (Loss)
Merisel, Inc. Common stock $ 869,419 Not applicable $ 869,419 $ 869,419 $ -
Merisel, Inc. Common stock Not applicable $ 145,290 243,250 145,290 (97,960)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: June 30, 2000 Merisel, Inc. 401(k) Retirement Savings Plan
--------------------------------------------
(Name of plan)
By:/s/ Timothy N. Jenson
Executive Vice President