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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
MAY 23, 1996 (MAY 13, 1996)
Date of Report (Date of earliest event reported)
SOFTWARE SPECTRUM, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-19349 75-1878002
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2140 MERRITT DRIVE
GARLAND, TEXAS 75041
(Address of principal executive offices, including zip code)
(214)840-6600
(Registrant's telephone number, including area code)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION,
AND EXHIBITS
Since it was impractical to file with the Form 8-K filing the
financial statements and pro forma financial information
required with respect to the acquisition of certain operating
assets of Egghead Inc. by Items 7(a) and 7(b), such financial
statements and pro forma financial information are being filed
herewith.
(a) Financial Statements of Business Acquired
Egghead Inc.'s financial statements for the corporate,
governmental and education ("CG&E") division filed as part of
this report are listed on the Index to Historical and Pro
forma Financial Information as Exhibit 99.4 of this report.
(b) Pro Forma Financial Information
Pro forma financial statements filed as part of this report
are listed on the Index to Historical and Pro Forma Financial
Information on page 4 of this report.
(c) Exhibits
2.1 (i) Asset Purchase Agreement, dated as of March
23, 1996, by and among Software Spectrum,
Inc., Egghead, Inc. and DJ&J Software
Corporation, with exhibits (except for
Exhibit 4.8 - Largest 200 Customers and the
schedules, which are not being field
herewith) (incorporated by reference to the
Company's Current Report on Form 8-K dated
March 26, 1996).
(ii) Index of Exhibits and Schedules to Asset
Purchase Agreement (incorporated by reference
to the Company's Current Report on Form 8-K
dated March 26, 1996).
(iii) First Amendment to Asset Purchase Agreement
dated March 23, 1996 by and among Software
Spectrum, Inc., Egghead, Inc. and DJ&J
Software Corporation entered into on May 13,
1996 (incorporated by reference to the
Company's Current Report on Form 8-K dated
May 23, 1996).
23 Consent of Arthur Andersen LLP, Independent
Public Accountants
99.1 Press Release issued by the Company on March
25, 1996 (incorporated by reference to the
Company's Current Report on Form 8-K dated
March 26, 1996).
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99.2 Press Release issued by the Company on May
13, 1996 (incorporated by reference to the
Company's Current Report on Form 8-K dated
May 23, 1996).
99.3 Credit Agreement dated as of May 3, 1996,
among Software Spectrum, Inc., certain banks
and Texas Commerce Bank National Association,
as Agent (including Exhibits) (incorporated
by reference to the Company's Current Report
on Form 8-K dated May 23, 1996).
99.4 Financial Statements of the CG&E Division of
Egghead Inc. as of March 30, 1996 and April
1, 1995 and for the two years ended March 30,
1996, including Report of Independent Public
Accountants.
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SOFTWARE SPECTRUM, INC.
INDEX TO HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Exhibit No.
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ITEM 7.(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Financial Statements of the CG&E Division of
Egghead Inc. as of March 30, 1996 and April 1, 1995
and for the two years ended March 30, 1996, including
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.4
Page No.
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ITEM 7.(b) PRO FORMA FINANCIAL INFORMATION
Summary Information Related to the Unaudited Pro Forma
Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
Unaudited Pro Forma Condensed Balance Sheet
as of March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
Notes to Unaudited Pro Forma Condensed Balance Sheet
as of March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7
Unaudited Pro Forma Condensed Statement of
Earnings for the year ended March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8
Notes to Unaudited Pro Forma Condensed Statement of
Earnings for the year ended March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 9
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma condensed financial statements (the "Pro
Forma Financial Statements") consist of (i) the unaudited pro forma condensed
balance sheet of Software Spectrum, Inc. and Subsidiaries (the "Company") as of
March 31, 1996 that gives effect to the acquisition of the Corporate,
Government and Education Division of Egghead, Inc. ("CGE") as if it had
occurred at that date and (ii) the unaudited pro forma condensed statement of
earnings of the Company for the year ended March 31, 1996 that gives effect to
the CGE acquisition as if it had occurred on April 1, 1995.
The pro forma adjustments included in the Pro Forma Financial Statements
are based upon available information and certain assumptions that the Company
believes are reasonable. The pro forma adjustments do not include the effect on
earnings of transition costs incurred in connection with the CGE acquisition
which are not expected to have a continuing impact on the Company. The CGE
acquisition has been accounted for using the purchase method of accounting.
Allocation of the purchase price has been determined based upon preliminary
estimates of fair value and is subject to change. Differences between the
amounts included in the pro forma condensed balance sheet and the final
allocations of the purchase price are not expected to have a material effect on
the Pro Forma Financial Statements.
The Pro Forma Financial Statements are presented for illustrative purposes
only and are not necessarily indicative of the operating results that would
have occurred if the CGE acquisition had been consummated as of the dates
reflected herein, nor are they necessarily indicative of the future operating
results or financial position of the Company. These Pro Forma Financial
Statements should be read in conjunction with the historical financial
statements of the Company included in the Company's 1996 Annual Report on Form
10-K and the historical financial statements of CGE included herein.
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
CORPORATE,
GOVERNMENT
AND EDUCATION
SOFTWARE DIVISION OF PRO FORMA PRO FORMA
SPECTRUM, INC. EGGHEAD, INC. ADJUSTMENTS COMBINED
------------- ------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 28,123 $ -- $ (16,653)(1) $ 17,523
6,053 (2)
Short term investments 8,407 -- -- 8,407
Trade accounts receivable, net 73,875 61,735 (61,735)(2) 73,875
Inventories 12,937 9,307 (9,307)(2) 18,937
6,000 (3)
Prepaid expenses 10,092 -- -- 10,092
Other current assets 2,435 753 (753)(2) 2,435
------------ ------------ ------------ ------------
Total current assets 135,869 71,795 (76,395) 131,269
Furniture, equipment and leasehold improvements, net 9,167 1,687 (700)(2) 10,154
Intangibles and other assets 5,144 40 45,626 (1) 50,810
------------ ------------ ------------ ------------
$ 150,180 $ 73,522 $ (31,469) $ 192,233
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 61,231 $ 29,495 $ (24,641)(2) $ 72,085
6,000 (3)
Other current liabilities 13,718 4,012 (2,813)(2) 14,917
------------ ------------ ------------ ------------
Total current liabilities 74,949 33,507 (21,454) 87,002
Long-term debt 1,868 -- 30,000 (1) 31,868
Shareholders' equity 73,363 40,015 (40,015)(2) 73,363
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$ 150,180 $ 73,522 $ (31,469) $ 192,233
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See notes to pro forma condensed balance sheet.
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
The pro forma condensed balance sheet reflects the following assumptions and
adjustments:
(1) The pro forma adjustments give effect to the consummation of the CGE
acquisition by the Company. Total consideration for the CGE acquisition,
including transaction costs of approximately $1,600,000, was approximately
$46,600,000. Excess cash and cash equivalents and long-term debt were used
to fund the CGE acquisition.
(2) Assets not purchased and liabilities not assumed by the Company have been
eliminated. CGE liabilities not eliminated in the pro forma adjustments
correspond to cash prorations made in connection with the CGE acquisition.
(3) In connection with a fulfillment agreement between the Company and
Egghead, Inc. ("Egghead"), the Company has agreed to purchase certain
inventory from Egghead in September 1996. The Company expects to purchase
approximately $6,000,000 of inventory in connection with this obligation.
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
CORPORATE,
GOVERNMENT
SOFTWARE AND EDUCATION
SPECTRUM, DIVISION OF PRO FORMA PRO FORMA
INC. EGGHEAD, INC. ADJUSTMENTS COMBINED
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Net sales $ 398,501 $ 363,338 $ -- $ 761,839
Cost of sales 344,063 326,667 (5,000)(2) 664,430
700 (3)
(2,000)(4)
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Gross margin 54,438 36,671 6,300 97,409
Selling, general and administrative expenses 41,459(1) 38,848 4,100 (2) 74,507
(3,100)(5)
(6,800)(6)
Depreciation and amortization 2,816(1) 3,369 900 (2) 6,585
(3,000)(7)
2,500 (8)
------------ ------------ ------------ ------------
Operating income (loss) 10,163 (5,546) 11,700 16,317
Interest income (expense), net 1,122 (410) (2,800)(9) (2,088)
------------ ------------ ------------ ------------
Income (loss) before income taxes 11,285 (5,956) 8,900 14,229
Federal and state income tax expense (benefit) 3,919 (2,305) 3,500 (10) 5,114
------------ ------------ ------------ ------------
Net income (loss) $ 7,366 $ (3,651) $ 5,400 $ 9,115
============ ============ ============ ============
Earnings per share $ 1.73 $ 2.14
============ ============
Weighted average shares outstanding 4,260 4,260
============ ============
See notes to pro forma condensed statement of earnings.
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1996
(UNAUDITED)
The pro forma condensed statement of earnings reflects the following
assumptions and adjustments:
(1) The Company's depreciation and amortization expenses have been separately
identified for the pro forma presentation.
(2) Certain costs incurred by CGE have been reclassified to conform to the
Company's presentation.
(3) CGE's recognition of aged inventory credits has been adjusted to conform
to the Company's accounting policy.
(4) CGE's historical financial incentives from vendors have been adjusted to
conform to the Company's existing arrangements with vendors.
(5) Facility and equipment costs have been adjusted to approximate expected
facility and equipment costs based on executed leases and related
agreements.
(6) Compensation and related employment costs of certain former CGE personnel
not hired by the Company have been eliminated.
(7) Depreciation expense has been adjusted to approximate depreciation on the
combined capital assets of the Company.
(8) Amortization has been recorded on the excess of the purchase price over
net assets acquired over 20 years and on debt acquisition costs over the
term of the loan.
(9) Interest expense on debt incurred and interest income for cash expended by
the Company in connection with the acquisition have been recorded and
reduced, respectively.
(10) The tax effect of pro forma adjustments has been recorded.
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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.
SOFTWARE SPECTRUM, INC
Dated: July 25, 1996 By: /s/Deborah A. Nugent
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Deborah A. Nugent
Vice President of Finance
(Principal Financial and
Accounting Officer)
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2.1 (i) Asset Purchase Agreement, dated as of March 23, 1996,
by and among Software Spectrum, Inc., Egghead, Inc.
and DJ&J Software Corporation, with exhibits (except
for Exhibit 4.8 - Largest 200 Customers and the
schedules, which are not being field herewith)
(incorporated by reference to the Company's Current
Report on Form 8-K dated March 26, 1996).
(ii) Index of Exhibits and Schedules to Asset Purchase
Agreement (incorporated by reference to the Company's
Current Report on Form 8-K dated March 26, 1996).
(iii) First Amendment to Asset Purchase Agreement dated
March 23, 1996 by and among Software Spectrum, Inc.,
Egghead, Inc. and DJ&J Software Corporation entered
into on May 13, 1996 (incorporated by reference to
the Company's Current Report on Form 8-K dated May
23, 1996).
23 Consent of Arthur Andersen LLP, Independent Public
Accountants
99.1 Press Release issued by the Company on March 25, 1996
(incorporated by reference to the Company's Current
Report on Form 8-K dated March 26, 1996).
99.2 Press Release issued by the Company on May 13, 1996
(incorporated by reference to the Company's Current
Report on Form 8-K dated May 23, 1996).
99.3 Credit Agreement dated as of May 3, 1996, among
Software Spectrum, Inc., certain banks and Texas
Commerce Bank National Association, as Agent
(including Exhibits) (incorporated by reference to
the Company's Current Report on Form 8-K dated May
23, 1996).
99.4 Financial Statements of the CG&E Division of Egghead
Inc. as of March 30, 1996 and April 1, 1995 and for
the two years ended March 30, 1996, including Report
of Independent Public Accountants.
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