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 July 28, 1996 or
- --------
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
- --------
Commission file number 0-15995
MICROAGE, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0321346
(State of incorporation) (I. R. S. Employer
Identification No.)
2400 South MicroAge Way
Tempe, AZ 85282
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 366-2000
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 and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the registrant's Common Stock (par value $.01 per share)
outstanding at September 5, 1996 was 14,531,187.
<PAGE>
INDEX
MICROAGE, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -- July 28, 1996 and October 29,
1995.
Consolidated statements of income -- Quarters ended July 28,
1996 and July 30, 1995; 39 weeks ended July 28, 1996 and July
30, 1995.
Consolidated statements of cash flows -- 39 weeks ended July 28,
1996 and July 30, 1995.
Notes to consolidated financial statements -- July 28, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
MICROAGE, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
<TABLE>
<CAPTION>
Assets
July 28, October 29,
1996 1995
------------------- -------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,281 $ 13,700
Accounts and notes receivable, net 240,763 183,286
Inventory, net 287,784 297,742
Other 12,108 13,006
----------------- -----------------
Total current assets 553,936 507,734
Property and equipment, net 48,091 45,689
Intangible assets, net 10,816 11,201
Other 8,836 7,939
----------------- -----------------
Total assets $ 621,679 $ 572,563
================= =================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 417,346 $ 379,897
Accrued liabilities 19,339 13,968
Current portion of long-term obligations 1,906 2,908
Other 1,908 3,258
----------------- -----------------
Total current liabilities 440,499 400,031
Long-term obligations 2,953 4,079
Stockholders' equity:
Preferred stock, par value $1.00 per share;
Shares authorized: 5,000,000
Issued and outstanding: none -- --
Common stock, par value $.01 per share;
Shares authorized: 40,000,000
Issued: July 28, 1996 14,618,573
October 29, 1995 14,459,847 146 145
Additional paid-in capital 123,549 122,399
Retained earnings 57,585 49,539
Loan to ESOT (329) (768)
Note receivable - stock purchase agreement (2,000) (2,000)
Treasury stock, at cost;
Shares: July 28, 1996 97,028
October 29, 1995 115,443 (724) (862)
----------------- -----------------
Total stockholders' equity 178,227 168,453
----------------- -----------------
Total liabilities and stockholders' equity $ 621,679 $ 572,563
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters ended 39 weeks ended
--------------------------------- ----------------------------------
July 28, July 30, July 28, July 30,
1996 1995 1996 1995
-------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenue $ 842,674 $ 759,082 $ 2,486,640 $ 2,176,861
Cost of sales 797,904 720,324 2,357,358 2,064,580
-------------- --------------- ---------------- ----------------
Gross profit 44,770 38,758 129,282 112,281
Operating expenses 36,054 33,480 105,107 89,734
-------------- --------------- ---------------- ----------------
Operating income 8,716 5,278 24,175 22,547
Other expenses - net 2,555 3,911 10,097 11,947
-------------- --------------- ---------------- ----------------
Income before income taxes 6,161 1,367 14,078 10,600
Provision for income taxes 2,610 705 6,032 4,635
-------------- --------------- ---------------- ----------------
Net income $ 3,551 $ 662 $ 8,046 $ 5,965
============== =============== ================ ================
Net income per common share $ 0.24 $ 0.05 $ 0.55 $ 0.42
============== =============== ================ ================
Weighted average common and
common equivalent
shares outstanding 15,034 14,424 14,669 14,315
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
39 weeks ended
--------------------------------
July 28, July 30,
1996 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,046 $ 5,965
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 14,333 10,962
Provision for losses on accounts and notes receivable 4,893 3,820
Changes in assets and liabilities, net of business acquisitions:
Accounts and notes receivable (62,370) 18,303
Inventory 9,508 (12,595)
Other current assets 898 (323)
Other assets (718) (2,462)
Accounts payable 37,449 1,717
Accrued liabilities 5,371 (1,431)
Other liabilities (1,350) 291
-------------- -------------
Net cash provided by operating activities 16,060 24,247
Cash flows from investing activities:
Purchases of property and equipment (15,019) (18,308)
Purchases of businesses and investments
in unconsolidated companies - (2,550)
-------------- -------------
Net cash used in investing activities (15,019) (20,858)
Cash flows from financing activities:
Amounts received from ESOT 439 477
Proceeds from issuance of stock - stock option and
employee stock purchase plans 1,146 846
Principal payments on long-term obligations (3,045) (1,701)
-------------- -------------
Net cash used in financing activities (1,460) (378)
-------------- -------------
Net increase (decrease) in cash and cash equivalents (419) 3,011
Cash and cash equivalents at beginning of period 13,700 11,074
-------------- -------------
Cash and cash equivalents at end of period $ 13,281 $ 14,085
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of MicroAge, Inc.
(the "Company") 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 statement of results for the periods
have been included. Operating results for the 39 weeks ended July 28, 1996 are
not necessarily indicative of the results that may be expected for the year
ending November 3, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended October 29, 1995.
NOTE B - OTHER EXPENSES - NET
Other expenses - net consists of the following:
Quarters ended 39 weeks ended
---------------------- ----------------------
July 28, July 30, July 28, July 30,
1996 1995 1996 1995
---------- ----------- ---------- ----------
Interest expense (income) $ (71) $ 690 $ 990 $ 2,916
Expenses from sales of
accounts receivable 2,283 2,810 8,284 7,573
Other 343 411 823 1,458
---------- ----------- ---------- ----------
$ 2,555 $ 3,911 $ 10,097 $ 11,947
========== =========== ========== ==========
NOTE C - LITIGATION
On July 14 through July 19, 1994, seven class action complaints were filed in
the United States District Court for the District of Arizona against the
Company, certain of its officers and directors, and, in three of the lawsuits,
one of the underwriters of the Company's June 16, 1994 public offering of common
stock. On December 5, 1994, the court consolidated the seven actions into a
single action. On February 16, 1995, plaintiffs filed and served an amended,
consolidated complaint against the Company, certain officers and directors of
the Company, and three of the underwriters of the Company's June 16, 1994 public
offering of common stock ("the Complaint"). The Complaint purports to be brought
on behalf of a class of purchasers of the Company's common stock during the
period April 13, 1994 through July 14, 1994. The complaint alleges, among other
things, that the Company violated federal securities laws by making misleading
public statements and omitting material facts regarding the Company's operations
and financial results, which the plaintiffs contend to have artificially
inflated the price of the Company's common stock during the alleged class
period. The complaint seeks unspecified compensatory damages as well as fees and
costs. On April 28, 1995, the Company filed a motion to dismiss the Complaint in
its entirety. On March 25, 1996, the court dismissed the majority of the
allegations contained in the Complaint. An agreement in principle has since been
reached to settle the litigation, subject to reducing the settlement terms to
writing and obtaining court approval thereof. The Company's contribution to the
proposed settlement, after the contributions of the Company's director's and
officer's insurers, will not be material to the Company's financial position or
results of operations.
5
<PAGE>
NOTE D - STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 - ACCOUNTING FOR
STOCK-BASED COMPENSATION
The accounting requirements are effective for transactions entered into in
fiscal years beginning after December 15, 1995. The disclosure requirements are
effective for fiscal years beginning after December 31, 1995. Pro forma
disclosures required for entities that elect to continue to measure compensation
cost using APB Opinion No. 25 must include the effects of all awards granted in
fiscal years that begin after December 15, 1994. This Statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This Statement defines the fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees. The Company expects to implement the disclosure provisions
of SFAS 123 for its fiscal year ending November 2, 1997.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, for the indicated periods, data as percentages
of total revenue:
<TABLE>
<CAPTION>
Quarter ended 39 weeks ended
-------------------------------------------------------- -----------------------------
July 28, April 28, Jan. 28, Oct.29, July 30, July 28, July 30,
1996 1996 1996 1995 1995 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue (in thousands) $842,674 $863,648 $780,318 $764,239 $759,082 $2,486,640 $ 2,176,861
Cost of sales 94.7 % 94.8 % 94.9 % 94.8 % 94.9 % 94.8 % 94.8 %
--------- --------- --------- -------- --------- ------------ ------------
Gross profit 5.3 5.2 5.1 5.2 5.1 5.2 5.2
Operating and other expenses
Operating expenses 4.3 4.1 4.4 4.8 4.4 4.2 4.1
Restructuring and other
one-time charges - - - 1.2 - - -
--------- --------- --------- -------- --------- ------------ ------------
Total 4.3 4.1 4.4 6.0 4.4 4.2 4.1
--------- --------- --------- -------- --------- ------------ ------------
Operating income (expense) 1.0 1.1 0.8 (0.8) 0.7 1.0 1.0
Other expenses - net 0.3 0.5 0.4 0.5 0.5 0.4 0.5
--------- --------- --------- -------- --------- ------------ ------------
Income (loss) before income 0.7 0.6 0.4 (1.2) 0.2 0.6 0.5
taxes
Provision for income taxes 0.3 0.3 0.2 (0.5) 0.1 0.2 0.2
--------- --------- --------- -------- --------- ------------ ------------
Net income (loss) 0.4 % 0.3 % 0.2 % (0.8) % 0.1 % 0.3 % 0.3 %
========= ========= ========= ======== ========= ============ ============
</TABLE>
Total Revenue. Total revenue increased $83.6 million, or 11%, to $842.7 million
for the quarter ended July 28, 1996 as compared to the quarter ended July 30,
1995. This revenue increase included a $77.7 million, or 17%, increase in
distribution business revenue and a $24.2 million, or 8%, increase in systems
integration business revenue.
Total revenue increased $309.8 million, or 14%, to $2.5 billion for the 39 weeks
ended July 28, 1996 as compared to the 39 weeks ended July 30, 1995. This
revenue increase included a $230.3 million, or 18%, increase in distribution
business revenue and a $138.0 million, or 16%, increase in systems integration
business revenue.
The revenue increase was primarily due to sales to resellers added since July
30, 1995, the Company's focus on large account sales, increased demand for the
Company's major vendors' products and the Company's addition of new product
lines. The increase was partially offset by a decrease in revenue due to the
sale of the Company's memory distribution business in the fourth quarter of
fiscal year 1995.
Gross Profit Percentage. The Company's gross profit percentage was 5.3% for the
quarter ended July 28, 1996, compared to 5.2% for the quarter ended April 28,
1996 and 5.1% for the quarter ended July 30, 1995. The gross profit percentage
was 5.2% for the 39 weeks ended July 28, 1996 and for the 39 weeks ended July
30, 1995.
7
<PAGE>
Future gross profit percentages may be affected by market pressures, the
introduction of new Company programs, changes in revenue mix, the Company's
utilization of early payment discount opportunities, vendor pricing actions and
other competitive and economic factors. See also "Potential Fluctuations in
Operating Results" below.
Operating Expenses. Operating expenses increased $2.6 million to $36.0 million
for the quarter ended July 28, 1996, as compared to the quarter ended July 30,
1995. The $2.6 million increase was primarily a result of increased revenue
between the two periods, as expenses as a percentage of revenue were 4.3% and
4.4% for the quarters ended July 28, 1996 and July 30, 1995, respectively.
Operating expenses increased from $89.7 million, or 4.1% of revenue, for the 39
weeks ended July 30, 1995 to $105.1 million, or 4.2% of revenue, for the 39
weeks ended July 28, 1996. The primary factor in the $15.4 million increase was
the Company's revenue increase between the two periods. If expenses as a
percentage of revenue had remained constant between the periods, expenses would
have increased by approximately $13.0 million. The remainder of the increase was
primarily due to increased depreciation and facilities expansion. The increased
depreciation resulted from expenditures for automation initiatives and
facilities expansion.
Other Expenses - Net. Other expenses - net decreased to $2.6 million for the
quarter ended July 28, 1996 from $3.9 million for the quarter ended July 30,
1995. Other expenses - net decreased to $10.1 million for the 39 weeks ended
July 28, 1996 from $11.9 million for the 39 weeks ended July 30, 1995. These
decreases were primarily due to a decrease in net financing costs as a result of
lower average borrowings required to finance inventory balances.
If the Company is successful in achieving revenue growth, its working capital
requirements and related financing costs are likely to increase. In addition, if
the Company utilizes early payment discount opportunities with vendors,
financing costs and gross profit will increase.
Marketing Development Funds. The Company receives funds from certain vendors
which are earned through marketing programs, meeting established purchasing
objectives or meeting other objectives determined by the vendor. There can be no
assurance that these programs will be continued by the vendors. A substantial
reduction in the vendor funds available to the Company would have an adverse
effect on the Company's results of operations.
Potential Fluctuations in Operating Results
The Company's operating results may vary significantly from quarter to quarter
depending on certain factors, including, but not limited to, demand for the
Company's information technology products and services, product availability,
competitive conditions, and general economic conditions. In particular, the
Company's operating results are sensitive to changes in the mix of product and
service revenues, product margins, inventory adjustments and interest rates.
Although the Company attempts to control its expense levels, these levels are
based, in part, on anticipated revenues. Therefore, the Company may not be able
to control spending in a timely manner to compensate for any unexpected revenue
shortfall. As a result, quarterly period-to-period comparisons of the Company's
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance.
8
<PAGE>
Liquidity and Capital Resources
The Company has financed its growth and cash needs to date primarily through
working capital financing facilities, bank credit lines, common stock offerings
and cash generated from operations. The primary uses of cash have been to fund
increases in inventory and accounts receivable resulting from increased sales.
If the Company is successful in achieving revenue growth, its working capital
requirements are likely to increase.
In order to establish or solidify its presence in strategic markets or in
response to competitive pressures, the Company may make acquisitions of, or
investments in, reseller locations. These acquisitions or investments may be
made utilizing cash, stock or a combination of cash and stock.
For the 39 weeks ended July 28, 1996, $16.0 million of cash was provided by
operating activities. Net cash provided by operating activities included net
income, before certain non-cash items, of $27.3 million, an increase in accounts
payable of $37.4 million, a decrease in inventory of $9.5 million and an
increase in accrued liabilities of $5.4 million, offset by an increase in
accounts receivable of $62.4 million and a decrease in other liabilities of $1.4
million.
The number of days cost of sales in ending inventory decreased from 37 days at
October 29, 1995 to 32 days at July 28, 1996. This decrease in inventory days
was primarily due to a focus on controlling inventory levels and supply
constraints from certain of the Company's suppliers. The Company anticipates the
number of days cost of sales in ending inventory will increase but should remain
at or below historical levels. The number of days cost of sales in ending
accounts payable remained constant at 47 days at October 29, 1995 and July 28,
1996. The number of days sales in ending accounts receivable increased from 22
days at October 29, 1995 to 26 days at July 28, 1996. The receivables days
adjusted for receivables sold under a financing facility (see discussion below)
were 40 days at July 28, 1996 compared to 36 days at October 29, 1995.
For the 39 weeks ended July 28, 1996, $15.0 million was used in investing
activities for the purchase of property and equipment, and net cash of $1.5
million used in financing activities consisted primarily of principal payments
on long-term obligations.
The Company maintains a primary financing agreement (the "Agreement") with a
financing facility of $400 million. The Agreement includes two major components:
an accounts receivable facility (the "A/R Facility") and an inventory facility
(the "Inventory Facility"). The Agreement expires in August 1997.
Under the A/R Facility, the Company has the right to sell certain accounts
receivable from time to time, on a limited recourse basis, up to an aggregate
amount of $250 million sold at any given time. At July 28, 1996, the net amount
of sold accounts receivable was $136 million, and the effective funding rate was
LIBOR plus 1.85%.
The Inventory Facility provides for borrowings up to $150 million. Within the
Inventory Facility, the Company has a line of credit for the purchase of
inventory from selected product suppliers ("Inventory Line of Credit") of $50
million and a line of credit for general working capital requirements
("Supplemental Line of Credit") of $100 million. Payments for products purchased
under the Inventory Line of Credit vary depending upon the product supplier, but
generally are due between 45 and 60 days from the date of the advance. No
interest or finance charges are payable on the Inventory Line of Credit if
payments are made when due. At July 28, 1996, the Company had $8 million
outstanding under the Inventory Line of Credit (included in accounts payable in
the accompanying Balance Sheet), and had no amounts outstanding under the
Supplemental Line of Credit.
Of the $400 million of financing capacity represented by the Agreement, $256
million was unused as of July 28, 1996. Utilization of the unused $256 million
is dependent upon the Company's collateral availability at the time the funds
would be needed.
9
<PAGE>
Borrowings under the Agreement are secured by substantially all of the Company's
assets, and the Agreement contains certain restrictive covenants, including
working capital and tangible net worth requirements, and ratios of debt to
tangible net worth and current assets to current liabilities. At July 28, 1996,
the Company was in compliance with these covenants.
The Company also maintains trade credit arrangements with its vendors and other
creditors to finance product purchases. Several major vendors maintain security
interests in their products sold to the Company.
The unavailability of a significant portion of, or the loss of, the Agreement or
trade credit from vendors would have a material adverse effect on the Company.
Inflation
The Company believes that inflation has generally not had a material impact on
its operations.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note C of Notes to Consolidated Financial Statements (Unaudited) for
information regarding a consolidated class action lawsuit against the Company,
its directors, certain of its officers, and three of the underwriters of the
Company's June 16, 1994 public offering of Common Stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Second Amendment to MicroAge, Inc.
Retirement Savings and Employee Stock
Ownership Plan dated March 14, 1996
11.1 Primary EPS Detail Calculation
11.2 Fully Diluted EPS Detail Calculation
27 Financial Data Schedule
(b) The Company did not file any Reports on Form
8-K during the quarter ended July 28, 1996.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10.1 Second Amendment to MicroAge, Inc. Retirement Savings
and Employee Stock Ownership Plan dated March 14,
1996
11.1 Primary EPS Detail Calculation
11.2 Fully Diluted EPS Detail Calculation
27 Financial Data Schedule
<PAGE>
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.
MICROAGE, INC.
(Registrant)
Date: September 11, 1996 By: /s/ Jeffrey D. McKeever
----------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
Date: September 11, 1996 By: /s/ James R. Daniel
----------------------------
James R. Daniel
Senior Vice President, Chief
Financial Officer and Treasurer
Exhibit 10.1
SECOND AMENDMENT TO
MICROAGE, INC. RETIREMENT SAVINGS AND
EMPLOYEE STOCK OWNERSHIP PLAN
THIS AMENDMENT, made and entered into this 14th day of March,
1996, by MICROAGE, INC., a Delaware corporation (hereinafter referred to as the
"Employer").
WITNESSETH:
WHEREAS, the Employer has heretofore entered into an
employees' retirement savings plan effective July 1, 1988, as amended to add a
stock bonus plan which included an employee stock ownership plan effective May
1, 1989, as amended, and the most recent Amendment and Restatement thereof dated
December 30, 1994, and a First Amendment thereto dated May 10, 1995 (the
"Plan"); and
WHEREAS, the Employer has reserved the right to amend said
Plan in whole or in part; and
NOW, THEREFORE, in consideration of the foregoing premises and
mutual covenants hereinafter contained, the Employer and Trustee hereby agree as
follows:
1. Section 2.27(i) of the Plan is hereby amended by adding the
following:
"This Plan uses the Total Payment Release Rule."
2. Section 2.47 of the Plan is hereby amended by adding the
following thereto:
"If release is determined with reference to principal payments
only, the following three additional rules apply:
(a) The loan must provide for annual payments of
principal and interest at a cumulative rate that is not less rapid at
any time than level annual payments of such amounts for 10 years.
(b) Interest included in any payment is disregarded
only to the extent that it would be determined to be interest under
standard loan amortization tables.
(c) Exempt Loan status will not be applicable from
the time that, by reason of a renewal, extension, or refinancing, the
sum of the expired duration of the Exempt Loan, the renewal period, the
extension period, and the duration of a new Exempt Loan exceeds 10
years."
3. Section 2.66 of the Plan is hereby amended to add the
<PAGE>
following:
"Notwithstanding anything in the Plan to the contrary, a
Participant shall be credited with two full Years of Service for
purposes of vesting provided that he completes at least 1,000 Hours of
Service in the vesting computation period under the Plan before the
Plan Year changed and also during the first vesting computation period
established after the Plan Year changed which shall begin before the
last day of the preceding vesting computation period, i.e., if a
Participant completes at least 1,000 Hours of Service during the twelve
month period beginning July 1, 1994 and ending June 30, 1995 and also
during the new twelve month period beginning October 30, 1994 and
ending October 29, 1995, he shall be credited with two Years of Service
for vesting purposes."
4 . Section 4.02 of the Plan is hereby amended to add the
following thereto:
"(iv) In the event of a distribution of Excess Contributions
to a Participant to meet the ADP test, any Matching Contribution
allocated to such Participant which was based on Elective Deferrals
prior to their being distributed as an Excess Contribution will be
forfeited"
5. Section 4.02(c)(ii)(A) of the Plan is hereby amended by
adding the following thereto:
"(7) An Elective Deferral will be taken into
account under the ADP test of Section
401(k)(3)(A) of the Code for a Plan Year
only if it relates to Compensation that
either would have been received by the
Employee in the Plan Year (but for the
deferral election) or is attributable to
services performed by the Employee in the
Plan Year and would have been received by
the Employee within 2-1/2 months after the
close of the Plan Year (but for the deferral
election).
(8) An Elective Deferral will be taken into
account under the ADP test for a Plan Year
only if it is allocated to the Employee as
of a date within that Plan Year. For this
purpose, an Elective Deferral is considered
allocated as of a date within a Plan Year if
the allocation is not contingent on
participation or performance of services
after such date and the Elective Deferral is
actually paid to the Trust no later than 12
months after the Plan Year to which
<PAGE>
the Elective Deferral relates.
(9) The allocations under the ESOP portion of
the Plan may not be combined with
allocations under the non-ESOP portion of
the Plan in order to satisfy the
requirements of Code Section 401(k)."
6. Section 4.04(b) of the Plan is hereby amended to add the
following thereto:
"(ix) The allocations under the ESOP portion of the Plan may
not be combined with allocations under the non-ESOP portion of the Plan
in order to satisfy the requirements of Code Section 401(m)."
7. Section 4.04(b)(ii) is amended in its entirety as follows:
"(ii) In the event that this Plan satisfies the
requirements of Sections 401(a)(4) and
410(b) of the Code only if aggregated with
one or more other plans, or if one or more
other plans satisfy the requirements of
Sections 401(a)(4) and 410(b) of the Code
only if aggregated with this Plan, then this
Section shall be applied by determining the
Contribution Percentage of Employees as if
all such plans were a single Plan. For Plan
Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy
Section 401(m) of the Code only if they have
the same Plan Year and if the aggregated
Plans also satisfy Section 401(a)(4) and
410(b) of the Code as though they were a
single plan."
3 8. Section 4.04(d) of the Plan is amended by adding the
following thereto:
"(iv) The amount of Excess Aggregate Contributions to be
distributed to a Highly Compensated Employee shall be determined using
the same leveling method described in Section 4.02(d)(iii) of the
Plan."
9. Section 4.09(d) of the Plan is amended to read as follows:
"(d) For purposes of this Section, the term 'Compensation'
shall have the meaning defined in Section 5.07(a)(iii) of the Plan
subject to the OBRA '93 annual compensation limit."
10. Section 4.09 of the Plan is amended to add the following:
"(g) Elective Deferrals made on behalf of Non-Key Employees may
<PAGE>
not be treated as Employer Contributions for purposes of providing the
required Top Heavy Minimum Contribution. However, for the purpose of
determining the percentage at which contributions and forfeitures are
made for the Key Employee with the highest contribution rate, Elective
Deferrals on behalf of Key Employees are taken into account."
11. Section 5.02(c) of the Plan is amended by adding the
following thereto:
"If more than one class of Qualifying Employer Securities
subject to the Exempt Loan provisions have been allocated to a
Participant's Account, the Plan must forfeit the same proportion of
each such class. Qualifying Employer Securities may be forfeited only
after other assets."
12. The first sentence of the second paragraph of Section
6.04(c) of the Plan is hereby amended to read as follows:
"Notwithstanding the foregoing, the consent of the Participant
shall not be required to the extent that a distribution is required to
satisfy Section 401(a)(9) or Section 415 of the Code."
13. Section 6.06(a) of the Plan is hereby amended to read as
follows:
"If Securities acquired with the proceeds of an Exempt Loan
available for distribution consist of more than one class, the
Participant must receive substantially the same proportion of each such
class."
14. The following shall be added as the first paragraph to
Section 6.11(b) of the Plan:
"Amounts attributable to Elective Deferrals may not be
distributed earlier than upon one of the following events:
(i) The Participant's retirement, death,
disability or separation from service;
(ii) The termination of the Plan without
establishment or maintenance of another
defined contribution plan [other than an
ESOP or Simplified Employee Pension Plan
("SEP")];
(iii) In the case of a profit-sharing or stock
bonus plan, the Participant's attainment of
age 59-1/2, or the Participant's financial
hardship;
(iv) The sale or other disposition by the
Employer to an unrelated corporation of
substantially all of the assets used in a
trade or business, but only with
<PAGE>
respect to Employees who continue employment
with the acquiring corporation and the
acquiring corporation does not maintain the
Plan after the disposition; and
(v) The sale or other disposition by the
Employer of its interest in a subsidiary to
an unrelated entity but only with respect to
Employees who continue employment with the
subsidiary and the acquiring entity does not
maintain the Plan after the disposition.
Paragraphs (ii), (iv) and (v), above, apply only if
the distribution is in the form of a lump sum.
Paragraphs (iv) and (v), above, apply if the
transferor corporation continues to maintain the
Plan."
15. Section 9.07(b) of the Plan is hereby amended to read as
follows:
"(b Debt-financed Stock. During the term of a transaction that
provokes Debt-financed Stock status for any Trust assets, those assets
may be collateral for or otherwise secure an Exempt Loan, but only if
the transaction provides for releasing the Debt-financed Stock from
encumbrance as Exempt Loan principal is paid, using the Total Payment
Release Rule."
16. Section 13.06 of the Plan is amended to read as follows:
"13.06 Treatment of Unallocated Shares. In the case of shares
of Common Stock of the Employer (which is not debt-financed Stock) that
are held by the Trustee and which have not been allocated to the
Accounts of Participants ('unallocated stock'), the Trustee shall sell,
offer to sell, exchange or otherwise dispose of only that number of
such unencumbered shares that bears the same ratio to the total of all
such shares as the number of shares in the Accounts for which the
Trustee has received valid instructions from Participants to sell,
offer to sell, exchange or otherwise dispose of bears to the total
number of shares in the Accounts. The proceeds of a disposition of such
unallocated stock shall be held by the Trustee subject to the
provisions of the Trust Agreement, the Plan and any applicable Loan
Agreement."
17. Section 15.02 of the Plan is hereby amended by adding the
following thereto:
"(f) For purposes of this Plan and the Related Employers that
adopt the Plan, Contributions made to the Plan shall be made available
to all Participants of the Plan."
<PAGE>
18. Except as otherwise indicated, the Effective Date of this
Amendment shall be January 1, 1995.
19. Except as hereinabove amended, all of the terms and
conditions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, MICROAGE, INC., as Employer, has signed or
caused these presents to be signed by its duly qualified officers respectively
authorized to do so the date first above written.
MICROAGE, INC., a Delaware
corporation
ATTEST: By \s\ Jeffrey D. McKeever
------------------------------
Jeffrey D. McKeever
Chairman of the Board
\s\ Alan Hald "Employer"
- --------------------
Alan Hald
Secretary
EXHIBIT 11.1
MICROAGE, INC.
PRIMARY EPS DETAIL CALCULATION
<TABLE>
<CAPTION>
39 weeks ended
---------------------------------------
July 28, July 30,
1996 1995
----------------- -----------------
<S> <C> <C>
Common stock
- -----------------------------------
Weighted average common shares 14,372,204 14,103,883
Common stock equivalents
- -----------------------------------
Weighted average warrants and options 296,368 210,651
----------------- -----------------
Total weighted average common and
common equivalent shares outstanding 14,668,572 14,314,534
================= =================
Net income available for EPS $ 8,046,000 $ 5,965,000
Primary EPS $ 0.55 $ 0.42
</TABLE>
EXHIBIT 11.2
MICROAGE, INC.
FULLY DILUTED EPS DETAIL CALCULATION
<TABLE>
<CAPTION>
39 weeks ended
---------------------------------------
July 28, July 30,
1996 1995
----------------- -----------------
<S> <C> <C>
Net income available for primary EPS $ 8,046,000 $ 5,965,000
================= =================
Shares: per primary EPS 14,668,572 14,314,534
additional shares issuable 328,460 128,674
----------------- -----------------
14,997,032 14,443,208
================= =================
Fully diluted EPS $ 0.54 $ 0.41
================= =================
</TABLE>
Note: Since fully diluted EPS affects primary EPS by less than 3%, it is not
disclosed in the financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Consolidated Balance Sheets (Unaudited) as of July
28, 1996 and October 29, 1995 and the Consolidated Statements
of Income (Unaudited) for the quarters and 39 weeks ended July
28, 1996 and July 30, 1995 contained in the Form 10-Q for the
quarterly and 39 week periods ended July 28, 1996, and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-03-1996
<PERIOD-START> APR-29-1996
<PERIOD-END> JUL-28-1996
<EXCHANGE-RATE> 1
<CASH> 13,281
<SECURITIES> 0
<RECEIVABLES> 253,909
<ALLOWANCES> (13,146)
<INVENTORY> 287,784
<CURRENT-ASSETS> 553,936
<PP&E> 102,936
<DEPRECIATION> (54,845)
<TOTAL-ASSETS> 621,679
<CURRENT-LIABILITIES> 440,499
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 178,081
<TOTAL-LIABILITY-AND-EQUITY> 621,679
<SALES> 842,674
<TOTAL-REVENUES> 842,674
<CGS> 797,904
<TOTAL-COSTS> 797,904
<OTHER-EXPENSES> 36,054
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (71)
<INCOME-PRETAX> 6,161
<INCOME-TAX> 2,610
<INCOME-CONTINUING> 3,551
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,551
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
