Filed Pursuant to Rule 424(b)(3)
File No. 333-35613
PROSPECTUS
609,779 Shares
MicroAge, Inc.
Common Stock
This Prospectus relates to the offer and sale by Paul W. Rajewski,
Richard D. Rajewski, and David Balfour ("Selling Stockholders") of an aggregate
of 609,779 shares of the Common Stock, $0.01 par value per share (the "Common
Stock"), of MicroAge, Inc., a Delaware corporation (the "Company"). The Company
will not receive any portion of the proceeds from the sale of the Common Stock
offered hereby. The Company's Common Stock is traded on Nasdaq National Market
under the symbol "MICA." On September 17, 1997, the closing sale price for the
Common Stock, as reported by Nasdaq National Market, was $28 per share.
The Selling Stockholders may from time to time effect sales of Common
Stock in ordinary broker's transactions on Nasdaq National Market, at the price
prevailing at the time of such sales, at prices relating to such prevailing
market prices, or at negotiated prices. It is anticipated that any
broker-dealers participating in such sales of securities will receive the usual
and customary selling commissions. The net proceeds to the Selling Stockholders
will be the proceeds received by them upon such sales, less brokerage
commissions. All expenses of registration incurred in connection with this
offering are being borne by the Company. The brokerage and other expenses of
sale incurred by the Selling Stockholders will be borne by the Selling
Stockholders. See "Plan of Distribution" and "Selling Stockholders."
-------------------------------
See "Risk Factors" on page 3 for a discussion of certain factors that
should be considered by prospective purchasers of the Common Stock offered
hereby.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
September 18, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy statements, and other information filed by the Company with the Commission
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
its regional offices located at 7 World Trade Center, 13th Floor, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding registrants, such as the Company, that file
electronically with the Commission. In addition, the Company's Common Stock is
traded on Nasdaq National Market. Reports, proxy statements, and other
information filed by the Company are also available for inspection at the
offices of Nasdaq National Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement on Form
S-3 (the "Registration Statement") that the Company has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained in the Registration Statement and the
exhibits thereto and reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Common Stock offered hereby. Statements contained in this Prospectus as to the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete and, in each
instance, reference is made to the copy of such document as so filed. Each such
statement is qualified in its entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by the Company with the
Commission and are hereby incorporated by reference in this Prospectus: (i) the
Annual Report of the Company on Form 10-K for the fiscal year ended November 3,
1996, (ii) the Quarterly Report of the Company on Form 10-Q for the fiscal
quarter ended February 2, 1997, (iii) the Quarterly Report of the Company on
Form 10-Q for the fiscal quarter ended May 4, 1997, and (iv) the Quarterly
Report of the Company on Form 10-Q for the fiscal quarter ended August 3, 1997.
All other documents and reports filed by the Company with the Commission
pursuant to Sections 13, 14, or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of this offering of the Common
Stock shall be deemed to be incorporated by reference in this Prospectus and to
be made a part hereof from their respective dates of filing.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will cause to be furnished without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in the document
which this Prospectus incorporates). Requests should be directed to Investor
Relations, MicroAge, Inc., 2400 South MicroAge Way, Tempe, Arizona 85282;
telephone: (602) 366-2414.
2
<PAGE>
RISK FACTORS
The purchase of the Common Stock offered hereby involves substantial
risk. The following matters, including those mentioned elsewhere, should be
considered carefully by a prospective investor in evaluating a purchase of the
Common Stock.
Intense Competition
The computer reseller industry is characterized by intense competition,
based primarily on product availability, price, speed of delivery, credit
availability, ability to tailor specific solutions to customer needs, quality
and breadth of product lines, service and post-sale support, and quality of
customer training. In addition, the Company faces competition in the recruitment
and retention of franchised and non-franchised resellers. The Company and its
reseller locations compete for sales with numerous other computer resellers,
including (i) master resellers; (ii) direct resellers; (iii) wholesalers
(resellers that do not sell to end-users); (iv) vendors that sell directly to
large purchasers; and (v) parties that implement other sales methods, such as
direct mail, computer "superstores," and mass merchandisers. There can be no
assurance that the Company will not lose market share, or that it will not be
forced in the future to reduce its prices in response to the actions of its
competitors and thereby experience a reduction in its gross margins.
Narrow Margins
The Company has experienced low operating and gross profit margins
caused by intense price competition within its industry. The Company has
partially offset the effect of the low margins by achieving increased revenue
and reduced operating expenses as a percentage of revenue; however, there can be
no assurance that the Company will maintain or increase revenue or further
reduce expenses (as a percentage of revenue) in the future. Future operating and
gross profit margins may be adversely affected by market pressures, the
introduction of new Company initiatives, changes in revenue mix, the Company's
utilization of early payment discount opportunities, vendor pricing actions, and
other competitive and economic pressures.
3
<PAGE>
Dependence on Supplier Incentive Funds
The Company receives funds from certain suppliers which are earned
through marketing programs or meeting purchasing, sales, or other objectives
established by the supplier. There can be no assurance that these programs will
be continued by the suppliers. A substantial reduction in the supplier funds
available to the Company would have a material adverse effect on the Company's
business, financial condition, and results of operations.
Product Supply; Dependence on Key Vendors
The computer reseller industry continues to experience product supply
shortages and customer order backlogs due to the inability of certain
manufacturers to supply certain products. In addition, certain vendors have
initiated new channels of distribution that increase competition for the
available product supply. There can be no assurance that vendors will be able to
maintain an adequate supply of products to fulfill all of the Company's customer
orders on a timely basis. Although the Company has not historically encountered
such conditions, the failure to obtain adequate product supplies, if competitors
were able to obtain them, could have a material adverse effect on the Company's
business, financial condition, and results of operations.
Three vendors of the Company each represented more than 10% of total
product sales for the fiscal year ended November 3, 1996. They were COMPAQ
Computer Corporation ("COMPAQ"), Hewlett-Packard Company ("Hewlett-Packard"),
and International Business Machines Corporation ("IBM"). In fiscal 1996, sales
of products from COMPAQ, Hewlett-Packard, and IBM represented 22%, 20%, and 14%,
respectively, of the Company's total product sales. During the 39 weeks ended
August 3, 1997, sales of products from COMPAQ, Hewlett-Packard, and IBM
represented 24%, 20%, and 14%, respectively, of the Company's total product
sales. During fiscal 1996 and the 39 weeks ended August 3, 1997, sales of these
three manufacturers' products represented approximately 56% and 58%,
respectively, of the Company's revenue from product sales.
The Company's agreements with these vendors generally are renewed
periodically and permit termination by the vendor without cause, generally upon
30 to 90 days' notice, depending on the vendor. In addition, the Company's
business is dependent upon price and related terms and product availability
provided by its key vendors. Although the Company considers its relationships
with COMPAQ, Hewlett-Packard, and IBM to be good, there can be no assurance that
these relationships will continue as presently in effect or that changes by one
or more of these key vendors in their volume discount schedules or other
marketing programs would not adversely affect the Company. Termination or
nonrenewal of the Company's agreements with COMPAQ, Hewlett-Packard, or IBM
would have a material adverse effect on the Company's business, financial
condition, and results of operations.
4
<PAGE>
Potential Fluctuations in Quarterly 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, new product introductions, the amount of
supplier incentive funds received by the Company (see "Dependence on Supplier
Incentive Funds" above), 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. In addition, although the Company's
financial performance has not exhibited significant seasonality in the past, the
Company and the computer industry in general tend to follow a sales pattern with
peaks occurring near the end of the calendar year, due primarily to special
vendor promotions and year-end business purchases.
Risk of Declines in Inventory Value
The Company's business is subject to the risk that the value of its
inventory will be adversely affected by price reductions by suppliers or by
technological changes affecting the usefulness or desirability of the products
comprising the inventory. It is the policy of most suppliers of the Company's
products to protect distributors such as the Company, who purchase directly from
such suppliers, from the loss in value of inventory due to technological change
or the supplier's price reductions. Under the terms of many of the Company's
distribution agreements, suppliers will credit the Company for inventory losses
resulting from the supplier's price reductions if the Company complies with
certain conditions. In addition, under many of the Company's agreements, the
Company has the right to return for credit or exchange for other products a
portion of the inventory items purchased, within a designated period of time.
Since the Company can return only a portion of its inventory, the Company could
be forced to liquidate nonreturnable aged inventory at prices below the
Company's cost. A supplier who elects to terminate a distribution agreement may
repurchase from the distributor the supplier's products carried in the
distributor's inventory. The industry practices discussed above are sometimes
not embodied in written agreements and do not protect the Company in all cases
from declines in inventory value. No assurance can be given that such practices
will continue, that unforeseen new product developments will not materially
adversely affect the Company, or that the Company will be able to successfully
manage its existing and future inventories. The Company establishes reserves for
estimated losses due to obsolete inventory in the normal course of business.
Historically, the Company has not experienced losses due to obsolete inventory
materially in excess of established inventory reserves. However, significant
declines in inventory value in excess of established inventory reserves could
have a material adverse affect on the Company's business, financial condition,
or results of operations.
5
<PAGE>
No Assurance of Successful Acquisitions
The Company has acquired, and intends to acquire, local or regional
resellers to expand the Company's service offerings and its reach into certain
geographic areas. As a result, the Company is continually evaluating potential
acquisition opportunities, which may be material in size and scope. Any
acquisitions by the Company may result in potentially dilutive issuances of
equity securities, the incurrence of additional debt, and amortization of
expenses related to goodwill and intangible assets, all of which could adversely
effect the Company's profitability. Acquisitions involve numerous risks, such as
the diversion of the attention of the Company's management from other business
concerns, the entrance of the Company into markets in which it has had no or
only limited experience, the integration of the acquired companies' management
information systems with those of the Company, and the potential loss of key
employees of the acquired companies, all of which could have a material adverse
effect on the Company's business, financial condition, or results of operations.
Capital Intensive Nature of Business
The Company's business requires significant levels of capital to
finance accounts receivable and product inventory that is not financed by trade
creditors. 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 continued revenue
growth, its working capital requirements will continue to increase.
The Company maintains three primary financing agreements (the
"Financing Agreements") with an aggregate borrowing capacity of $675 million.
The Financing Agreements expire in August 2000, but any of the Financing
Agreements may be terminated 90 days after either party gives the other party
notice of termination. At August 3, 1997, the Company had approximately $380
million outstanding under the Financing Agreements. Of the $675 million of
borrowing capacity represented by the Financing Agreements, $295 million was
unused as of August 3, 1997. Utilization of the unused $295 million is dependent
upon, among other things, the Company's collateral availability at the time the
funds would be needed.
Borrowings under the Financing Agreements are secured by substantially
all of the Company's assets, and the Financing Agreements contain 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 August 3, 1997, the Company was in compliance with these
covenants.
The unavailability of a significant portion of, or the loss of, the
Financing Agreements or trade credit from vendors would have a material adverse
effect on the Company's business, financial condition, and results of
operations. There can be no assurance that the Company will be able to borrow
adequate amounts on terms acceptable to the Company.
6
<PAGE>
Dependence on Information Systems
The Company depends on a variety of information systems for its
operations, particularly its centralized information processing system which
supports, among other things, inventory management, order processing, shipping,
receiving, and accounting. Although the Company has not in the past experienced
significant failures or down time of its centralized information processing
system or any of its other information systems, any such failure or significant
down time could prevent the Company from taking customer orders, printing
product pick-lists, and/or shipping product and could prevent customers from
accessing price and product availability information from the Company. In such
event, the Company could be at a severe disadvantage in determining appropriate
product pricing or the adequacy of inventory levels or in reacting to rapidly
changing market conditions. A failure of the Company's information systems which
impacts any of these functions could have a material adverse effect on the
Company's business, financial condition, or results of operations. In addition,
the inability of the Company to attract and retain the highly-skilled personnel
required to implement, maintain, and operate its centralized information
processing system and the Company's other information systems could have a
material adverse effect on the Company's business, financial condition, or
results of operations. In order to react to changing market conditions, the
Company must continuously expand and improve its centralized information
processing system and its other information systems. There can be no assurance
that the Company's information systems will not fail, that the Company will be
able to attract and retain qualified personnel necessary for the operation of
such systems, or that the Company will be able to expand and improve its
information systems.
Dependence on Independent Shipping Companies
The Company relies almost entirely on arrangements with independent
shipping companies for the delivery of its products. Products are shipped from
suppliers to the Company through a variety of independent common carriers.
Currently, United Parcel Service ("UPS") delivers a majority of the Company's
products to its reseller customers. The termination of the Company's
arrangements with UPS or other independent shipping companies, or the failure or
inability of one or more of these independent shipping companies to deliver
products from suppliers to the Company, or products from the Company to its
reseller customers or their end-user customers could have a material adverse
effect on the Company's business, financial condition, or results of operations.
For instance, an employee work stoppage or slow-down at one or more of these
independent shipping companies could materially impair that shipping company's
ability to perform the services required by the Company. The Company anticipates
that the recent UPS strike could impact its fourth quarter results by
approximately $.03 to $.05 per share. There can be no assurance that the
services of any of these independent shipping companies will continue to be
available to the Company on terms as favorable as those currently available or
that these companies will choose or be able to perform their required shipping
services for the Company.
7
<PAGE>
Rapid Technological Change
The Company's industry is subject to rapid technological change, new
and enhanced product specification requirements, and evolving industry
standards. These changes may cause inventory and stock to decline substantially
in value or to become obsolete. In addition, suppliers may give the Company
limited or no access to new products being introduced. Although the Company
believes that it has adequate price protection and other arrangements with its
suppliers to avoid bearing the costs associated with these changes, no assurance
can be given that future technological or other changes will not have a material
adverse effect on the Company's business, financial condition, or results of
operations. See "Risk of Declines in Inventory Value."
Possible Volatility of Stock Price
The market price of the Common Stock could be subject to wide
fluctuations in response to quarterly variations in the Company's results of
operations, changes in earnings estimates by research analysts, conditions in
the computer industry, or general market or economic conditions, among other
factors. In addition, in recent years the stock market has experienced
significant price and volume fluctuations. These fluctuations have had a
substantial effect on the market prices of many technology companies, often
unrelated to the operating performance of the specific companies. Such market
fluctuations could materially adversely affect the market price for the Common
Stock.
Disclosure Regarding Forward-Looking Statements
Certain statements contained in this Prospectus, including all
documents incorporated herein by reference, may be forward-looking statements
within the meaning of The Private Securities Litigation Reform Act of 1995.
These forward-looking statements may include projections of revenue and net
income and issues that may affect revenue or net income; projections of capital
expenditures; plans for future operations; financing needs or plans; plans
relating to the Company's products and services; and assumptions relating to the
foregoing. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking statements. Statements in this Prospectus,
including those set forth above, describe factors, among others, that could
contribute to or cause such differences.
USE OF PROCEEDS
All 609,779 shares of Common Stock offered hereby are being offered by
the Selling Stockholders. The Company will not receive any proceeds from the
sale of Common Stock by the Selling Stockholders.
8
<PAGE>
SELLING STOCKHOLDERS
On September 10, 1997, a subsidiary of the Company merged with and into
Access Microsystems, Inc. ("Access") pursuant to an Agreement and Plan of
Reorganization, dated September 9, 1997 (the "Agreement"). Prior to the merger,
Access was one of the Company's reseller locations and purchased the Company's
products for resale to its customers. At the time of the merger, the Selling
Stockholders owned all of the issued and outstanding shares of the capital stock
of Access. As a result of the merger, Access became a wholly-owned subsidiary of
the Company and the Selling Stockholders' shares of Access common stock were
automatically canceled and extinguished and were converted into 609,779 shares
of the Company's Common Stock. Under the Agreement, the Company is required to
register for public sale those shares of Common Stock issued to the Selling
Stockholders. This Prospectus is a part of the Registration Statement filed by
the Company in order to satisfy this requirement. In addition, in connection
with the Agreement, the Company entered into an Employment Agreement with Paul
W. Rajewski, a Selling Stockholder, pursuant to which he is paid an annual base
salary of $72,000, plus bonus.
The following table provides certain information with respect to the
Common Stock owned by the Selling Stockholders as of the date hereof.
<TABLE>
<CAPTION>
No. of Shares
of Common Percentage of No. of Shares of Percentage of
Stock Owned Common Stock No. of Shares Common Stock Common Stock
Prior to the Owned Prior to of Common Owned After Owned After the
Selling Stockholder Offering Offering(1) Stock Offered the Offering(2) Offering(2)
- ------------------- ----------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Paul W. Rajewski 518,712 2.99% 518,312 400 0%
Richard D. Rajewski 60,978 0.35% 60,978 0 0%
David Balfour 30,689 0.18% 30,489 200 0%
------ ----- ------ --- --
610,379 3.52% 609,779 600 0%
</TABLE>
- ----------
(1) Includes all shares of Common Stock beneficially owned by the Selling
Stockholders as a percentage of the 17,359,612 shares of Common Stock
outstanding at September 8, 1997, as adjusted to give effect to the
609,779 shares of Common Stock issued to the Selling Stockholders on
September 10, 1997.
(2) Assumes that Selling Stockholders dispose of all the shares of Common
Stock covered by this Prospectus and do not acquire any additional
shares of Common Stock.
PLAN OF DISTRIBUTION
This Prospectus relates to the sale of 609,779 shares of Common Stock
by the Selling Stockholders. The Selling Stockholders may from time to time
effect sales of Common Stock in ordinary broker's transactions on Nasdaq
National Market, at the price prevailing at the time of such sales, at prices
relating to such prevailing market prices, or at negotiated prices. It is
anticipated that any broker-dealers participating in such sales of securities
will receive the usual and customary selling commissions.
9
<PAGE>
The Company will pay all of the expenses incident to the registration
of the Common Stock offered hereby, other than commissions and selling expenses
with respect to the Common Stock being sold by the Selling Stockholders.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Snell & Wilmer L.L.P., One Arizona Center, Phoenix, Arizona
85004.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Annual Report on Form 10-K for the fiscal year ended
November 3, 1996, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of such firm as
experts in auditing and accounting.
10
<PAGE>
===================================== =====================================
- ------------------------------------- -------------------------------------
No dealer, salesperson, or
other person has been authorized in
connection with this offering to give
any information or to make any MicroAge, Inc
representations other than those
contained in this Prospectus and, if
given or made, such information or
representations must not be relied 609,779
upon as having been authorized by the
Company. Neither the delivery of this
Prospectus nor any sale made Shares
hereunder shall, under any
circumstances, create any implication of
that there has been no change in the
affairs of the Company since the date Common Stock
hereof or that the information
contained herein is correct as of any
date subsequent to the date hereof.
This Prospectus does not constitute
an offer of the securities offered
hereby by anyone in any jurisdiction
in which it is unlawful to make such
offer of solicitation.
--------------------------
TABLE OF CONTENTS
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.....................2
Information Incorporated by Reference.....2
Risk Factors..............................3
Use of Proceeds...........................8
Selling Stockholders......................9
Plan of Distribution......................9
Legal Matters............................10
Experts..................................10
</TABLE>
--------------------------
PROSPECTUS
--------------------------
September 18, 1997
===================================== =====================================
- ------------------------------------- -------------------------------------
