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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 7, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CDW COMPUTER CENTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
ILLINOIS 5961 36-3310735
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
200 NORTH MILWAUKEE AVENUE
VERNON HILLS, ILLINOIS 60061
(847) 465-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL P. KRASNY
CHIEF EXECUTIVE OFFICER
CDW COMPUTER CENTERS, INC.
200 NORTH MILWAUKEE AVENUE
VERNON HILLS, ILLINOIS 60061
(847) 465-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
ALAN B. PATZIK, ESQ.
STEVEN M. PREBISH, ESQ.
PATZIK, FRANK & SAMOTNY LTD.
150 SOUTH WACKER DRIVE
SUITE 900
CHICAGO, ILLINOIS 60606
(312) 551-8300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE: At such time or from time
to time after this Registration Statement has become effective as the selling
shareholders shall determine.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number on the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM OFFERING MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO PRICE PER AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED(1) SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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Shares of Common Stock, $.01 par value per 734,150
share.................................... shares $70.94 $52,080,601 $13,750
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(1) This figure represents shares granted under the MPK Restricted Stock Plan
established in 1993 by the Registrant's Chairman and Chief Executive Officer
out of his own shareholdings. Pursuant to Rule 416 under the Securities Act
of 1933, there are registered hereunder such indeterminate number of
additional shares as may be granted under the MPK Restricted Stock Plan as a
result of stock splits or stock dividends.
(2) This figure is an estimate solely for purposes of determining the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933.
The estimate is based on the average of the high ($73) and low ($68.875)
prices as reported in the consolidated reporting system on December 1, 1999.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
PROSPECTUS SUBJECT TO COMPLETION DATED DECEMBER 6, 1999
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
CDW COMPUTER
CENTERS, INC.
[CDW LOGO] [CDW LOGO]
734,150 SHARES
COMMON STOCK
We have prepared this Prospectus to enable some of our co-workers to offer
and sell shares of our Common Stock which they received under a plan established
by Michael P. Krasny, our Chairman and Chief Executive Officer. The plan, called
the MPK Restricted Stock Plan, was established in 1993 by Mr. Krasny out of his
personal shareholdings in the Company. We have identified the selling
shareholders on page 13 of this Prospectus. All of the net proceeds will be paid
to the selling shareholders.
Our Common Stock is traded in the over-the-counter market and quoted on The
Nasdaq National Market under the symbol CDWC. The closing sale price of our
Common Stock on December 6, 1999 as reported by Nasdaq was $73.44 per share. We
have included quarterly price information for our Common Stock under "Price
Range of Common Stock" on page 12 of this Prospectus.
See "Risk Factors" on page 5 to read about factors that you should consider
before buying shares of our Common Stock.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Price to public......................................... $73.78 $54,165,587
Brokerage commission.................................... $0.06 $44,049
Proceeds to the selling shareholders.................... $73.72 $54,121,538
</TABLE>
------------------------
We estimated the "price to public" and "brokerage commission" figures solely for
reporting purposes. The "price to public" figures are based on the average
trading prices for our Common Stock on December 6, 1999. The actual price will
vary because the shares offered under this Prospectus vest over the next four
years and the selling shareholders may sell the shares at different times. The
selling shareholders are responsible for paying brokers' commissions.
<PAGE> 3
SUMMARY
The following summary highlights selected information from this Prospectus
and the documents incorporated by reference in this Prospectus. It does not
contain all of the information that is important to you. You should carefully
read this entire Prospectus and the documents incorporated by reference in this
Prospectus before making an investment in the Common Stock. The terms "we," "us"
and "our" as used in this Prospectus refer to CDW Computer Centers, Inc. (the
"Company") and its operating subsidiaries, collectively.
OUR COMPANY
CDW Computer Centers, Inc. is a leading direct marketer of over 50,000
computer and related products, including hardware and peripherals, software,
networking products and accessories. We offer brand name computer products from
Apple, Compaq, Canon, Epson, Hewlett-Packard, IBM, Intel, Lotus, Microsoft, NEC,
Novell, Toshiba and 3Com, among others.
Our high volume, cost-efficient operation, supported by our proprietary
information technology systems, enables us to offer our products at competitive
prices with value-added service. We emphasize customer service and technical
support, including custom configuration capability. We employ experienced
telemarketing account managers and certified software and hardware technicians
who are knowledgeable about our customers' needs and our products.
BUSINESS OPERATIONS
We distribute our products primarily through direct marketing to end-users
within the United States. In particular, we target our marketing efforts towards
current and prospective commercial customers with a focus on business,
government, educational, institutional and home office users. We believe that
these entities and persons have a high level of product knowledge and are most
likely to purchase sophisticated systems and products through our direct
marketing format. We efficiently market the CDW brand name and our products and
services through our branding campaign, various direct marketing techniques and
www.cdw.com, our Web site. Our direct marketing techniques include catalog
mailing programs, telemarketing and national advertising in computer magazines.
Our proprietary information technology systems and innovative use of database
management techniques allow us to identify potential customers and develop
productive, cost-effective direct marketing and database marketing strategies
for existing and potential customers.
We extend credit to business, government and institutional customers under
certain circumstances based upon their financial strength. Typically, we grant
such customers net 30 day credit terms. The balance of our sales are made
primarily through credit cards and for cash-on-delivery. As of April 1999, we
also provide leasing services to our customers through a 50-percent owned joint
venture. See "Recent Developments" on page 3.
Our combined corporate office, sales center, distribution facility and
retail show room is located at 200 North Milwaukee Avenue, Vernon Hills,
Illinois 60061 and our telephone number is (847) 465-6000. Our Internet address
is http://www.cdw.com. Our web site is not a part of this Prospectus.
We also operate a sales office in Buffalo Grove, Illinois, a retail
showroom in Chicago, Illinois and a government sales office in Chantilly,
Virginia. In addition, we recently announced plans to open another sales office
this spring in downtown Chicago, Illinois. See "Recent Developments" on page 3.
BUSINESS STRATEGY
Our goal is to provide complete computing solutions to our customers and
enhance our position as a leading direct marketer of brand name computer
hardware and peripherals, software, networking products and accessories in the
United States. We focus on maintaining a low cost operating model to generate
repeat sales and attract new sales by offering quality products at competitive
prices, with outstanding
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service such as same-day shipping, custom configuration and after-sale technical
support. The key elements of our business strategy are as follows:
- Provide personalized service and expertise through highly trained and
knowledgeable account managers;
- Emphasize the CDW advantage through outstanding customer service and
technical support;
- Offer competitive pricing for a diverse offering of brand name products;
- Use our proprietary information technology systems and database
management techniques to qualify potential customers and develop
productive direct marketing and database marketing strategies for
existing and potential customers;
- Enhance purchases by offering customized solutions, including add-on
products and custom configurations; and
- Increase the number of our account managers, while enhancing their
development and productivity through extensive and continuous training.
RECENT DEVELOPMENTS
In order to attract and retain more account managers and service more
commercial accounts, we recently announced plans to open another sales office in
Chicago, Illinois. The two-floor office space totaling approximately 72,000
square feet will accommodate more than 500 account managers. We believe this new
sales office will enhance our ability to attract and retain account managers
because the downtown location is a desirable work environment. We plan to expand
our current 744-member salesforce to 800 by year-end and to approximately 1,050
to 1,150 by the end of 2000. However, our ability to attract and retain
additional account managers and expand our salesforce generally may be hampered
by the tight labor market which presently exists. We hope to overcome these
labor market conditions by offering career development opportunities, high
earnings potential, excellent benefits and a fun and challenging work
environment.
In April 1999, we formed a joint venture with First Portland Corporation
("FirstCorp") to provide captive leasing services to our customers. FirstCorp is
a full-service leasing organization that has provided leasing solutions to our
customers for more than three years. FirstCorp provides leasing management
services to the joint venture. We contributed $100,000 and have committed to
loan up to an additional $10 million to the joint venture on a secured basis to
fund new leases initiated by the joint venture. The net earnings of the joint
venture are allocated 50-percent to us and 50-percent to FirstCorp.
THE OFFERING
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Shares Offered by the Selling Shareholders.......... 734,150(1)
Use of Proceeds..................................... All of the net proceeds will be paid to
the selling shareholders. We will not
receive any proceeds from the offering.
See "Use of Proceeds."
Nasdaq National Market Symbol....................... CDWC
</TABLE>
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(1) The shares of Common Stock offered by the selling shareholders constitute
shares granted under the MPK Restricted Stock Plan. This plan was
established in 1993 by Michael P. Krasny, our Chairman and Chief Executive
Officer, out of his own shareholdings. The shares are presently issued and
outstanding, but vest in the selling shareholders in equal 25% installments
on January 1, 2000, 2001, 2002 and 2003. See "Selling Shareholders" on page
13 and "Plan of Distribution" on page 15.
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3
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SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
The information in the following table is based on historical financial
information contained in this Prospectus and contained in our prior filings with
the Securities and Exchange Commission ("SEC"), including our report on Form
10-Q for the period ended September 30, 1999. The following financial
information should be read in conjunction with the historical financial
information, including the notes that accompany such financial information.
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
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TWELVE MONTHS NINE MONTHS ENDED
ENDED DECEMBER 31, SEPTEMBER 30,
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1994 1995 1996 1997 1998 1998 1999
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INCOME STATEMENT DATA:
Net sales........................... $413,270 $628,721 $927,895 $1,276,929 $1,733,489 $1,256,256 $1,819,972
Cost of sales....................... 359,274 548,568 805,413 1,106,124 1,513,314 1,096,539 1,591,705
-------- -------- -------- ---------- ---------- ---------- ----------
Gross profit........................ 53,996 80,153 122,482 170,805 220,175 159,717 228,267
Selling and administrative
expenses.......................... 34,617 49,175 64,879 90,315 115,537 84,350 118,423
Exit charge(1)...................... -- -- 4,000 -- -- -- --
-------- -------- -------- ---------- ---------- ---------- ----------
Income from operations.............. 19,379 30,978 53,603 80,490 104,638 75,367 109,844
Other income (expense), net......... 511 2,020 3,281 4,018 4,373 3,277 3,049
-------- -------- -------- ---------- ---------- ---------- ----------
Income before income taxes.......... 19,890 32,998 56,884 84,508 109,011 78,644 112,893
Income tax provision................ 7,777 12,939 22,484 33,507 43,170 31,145 44,706
-------- -------- -------- ---------- ---------- ---------- ----------
Net income.......................... $ 12,113 $ 20,059 $ 34,400 $ 51,001 $ 65,841 $ 47,499 $ 68,187
======== ======== ======== ========== ========== ========== ==========
Net income per share(2)
Basic........................... $ 0.30 $ 0.48 $ 0.80 $ 1.18 $ 1.53 $ 1.10 $ 1.58
Diluted......................... $ 0.30 $ 0.48 $ 0.79 $ 1.17 $ 1.51 $ 1.09 $ 1.55
Weighted average number of common
and common equivalent shares
outstanding(2)
Basic........................... 40,006 42,052 43,050 43,050 43,062 43,086 43,104
Diluted......................... 40,006 42,160 43,570 43,408 43,504 43,404 43,972
SELECTED OPERATING DATA:
Average invoice size................ $ 590 $ 630 $ 704 $ 704 $ 780 $ 775 $ 901
Number of invoices (in thousands)... 700 998 1,318 1,814 3,367 1,731 2,128
Customers serviced (in thousands)... 274 374 462 575 634 499 469
Net sales per co-worker (in
thousands)........................ $ 1,223 $ 1,364 $ 1,459 $ 1,490 $ 1,392 $ 1,377 $ 1,433
Inventory turnover.................. 22.2 21.7 23.4 21.4 24.0 25.0 28.0
Accounts receivable -- days sales
outstanding....................... 20.7 21.8 22.6 25.0 32.2 29.5 36.4
</TABLE>
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<CAPTION>
DECEMBER 31, SEPTEMBER 30,
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1994 1995 1996 1997 1998 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Working capital.................. $ 49,217 $ 99,127 $123,614 $ 167,421 $ 228,730 $ 208,720 $ 306,831
Total assets..................... 77,860 132,929 198,830 269,641 341,821 318,584 480,843
Total debt and capitalized lease
obligations.................... -- -- -- -- -- -- --
Total shareholders' equity....... 55,843 106,161 141,622 199,866 270,763 250,024 352,465
</TABLE>
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(1) This charge relates to a $4,000,000 pre-tax, non-recurring charge for
estimated costs to vacate and sublease our leased facility in Buffalo Grove,
Illinois. We vacated the Buffalo Grove facility and moved to our new
facility in Vernon Hills, Illinois in the third quarter of 1997.
(2) All share and per share amounts have been restated for our two-for-one stock
split dated May 19, 1999.
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RISK FACTORS
In addition to the other information contained in this Prospectus or
incorporated in this Prospectus by reference, you should carefully consider the
following factors before making an investment in the Common Stock offered by the
selling shareholders.
WE MAY BE UNABLE TO SUSTAIN OUR RAPID GROWTH
Since our formation in June 1984, we have experienced rapid growth. We
intend to pursue the continuation of this growth through the following:
- further developing our marketing programs;
- hiring additional account managers, technical support personnel and
operations personnel; and
- investing in additional facilities and systems.
However, we cannot be certain that our growth rate will continue at a rapid
pace even if we effectively implement these programs and initiatives.
Furthermore, our success will, in part, depend upon our ability to manage our
growth effectively. There are many external factors which could affect our
business and growth. These factors include:
- the spending pattern of existing and prospective customers;
- the cyclical nature of capital expenditures of businesses;
- new competitors and new forms of competition;
- the successful development of new technology and products by developers
and manufacturers;
- the impact of the Year 2000 (or "Y2K") transition for our vendors and
customers; and
- other general economic trends.
As a result, future revenue and profit increases could occur at moderating
rates. There can be no assurance that our rapid growth will continue in the
future.
THE SUCCESS OF OUR BUSINESS DEPENDS ON THE CONTINUING DEVELOPMENT, MAINTENANCE
AND OPERATION OF OUR INFORMATION TECHNOLOGY SYSTEM
Our success is dependent on the accuracy and proper utilization of our
information technology systems, including our business application systems,
Internet servers and applications and telephone system. The quality and our
utilization of the information generated by our information technology systems
affects, among other things, our ability:
- to manage our inventory and accounts receivable;
- to purchase, sell, ship and invoice our products efficiently and on a
timely basis; and
- to maintain our cost-efficient operating model.
We recognize the need to continually upgrade our information technology
systems to most effectively manage our operations and customer data base. In
that regard, we anticipate that we will, from time to time, require software and
hardware upgrades for our present information technology systems. We believe
that our present information technology systems, coupled with ongoing
enhancements, are sufficient to sustain our present operations and our
anticipated growth for the foreseeable future. However, our business will be
harmed if we are unable to continue to develop and maintain the adequacy of our
information technology systems, or if they fail.
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We do not currently have redundant computer or telephone systems and any
interruption in such systems could also harm our operations. In conjunction with
our new facility in downtown Chicago, Illinois, we plan to implement redundant
computer and telephone systems.
OUR SALES ARE DEPENDENT ON THE CONTINUED DEVELOPMENT OF NEW TECHNOLOGIES AND
PRODUCTS
The computer industry has evolved as a result of the development of new
technologies which are translated by manufacturers into new products and
applications. We have been and will continue to be dependent on the continued
development of new technologies and products by our vendors, as well as the
acceptance of such technologies and products by end-users. A decrease in the
rate of development of new technologies and new products by manufacturers, or
the lack of acceptance of such technologies and products by end-users, could
have a material adverse effect on our growth prospects and results of
operations.
OUR BUSINESS DEPENDS ON OUR VENDORS AND THE AVAILABILITY OF OUR PRODUCTS
We purchase products for resale both directly from manufacturers and
indirectly through distributors and other sources. We are generally authorized
by manufacturers to sell via direct marketing all or some of the products
offered by the manufacturer. Our authorization with each manufacturer is
generally subject to specific terms and conditions regarding such things as
product return privileges, price protection policies, purchase discounts and
vendor incentive programs such as purchase rebates and cooperative advertising
reimbursements. From time to time, vendors may change these terms and
conditions. The implementation of such changes could have a negative impact on
us. Additionally, some products are subject to manufacturer allocation, which
limits the number of units of such products available to resellers, including
us. Our business and results of operations may be adversely affected if the
terms and conditions of our authorizations are significantly modified or if the
manufacturer terminates our authorization. In addition, the relocation of key
distributors utilized in our just-in-time purchasing model could adversely
impact our results of operations.
Sales of Compaq, Hewlett Packard, IBM, Microsoft and Toshiba products
comprise a substantial portion of our sales. The loss of any of these vendors or
other vendors could have an adverse effect on us.
Vendors currently provide us with trade credit as well as substantial
incentives in the form of discounts, rebates, credits, and cooperative
advertising reimbursements. A reduction in, discontinuance of, or significant
delay in receiving trade credit or incentives could adversely affect our
profitability and cash flow.
OUR RATE OF SALES GROWTH AND OUR OPERATING RESULTS COULD BE ADVERSELY AFFECTED
IF WE ARE NOT ABLE TO EXPAND AND RETAIN OUR ACCOUNT MANAGERS
Our statistics show that the level of sales achieved by our account
managers increases with the number of months of experience they have with us.
New account managers generally require several years of experience before they
generate the same level of sales as our more seasoned account managers. If the
turnover rate of account managers leaving our organization increases from
historical levels or if the sales volumes achieved by our account managers do
not increase with experience, our level of sales growth could be negatively
affected.
SUBSTANTIAL COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE
The microcomputer products industry is highly competitive. We compete with
a large number and variety of resellers of computer and related products,
including the following:
- Traditional computer retailers;
- Computer superstores, such as Comp USA;
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- Consumer electronic and office supply superstores, such as Best Buy,
Circuit City, Office Depot, Office Max and Staples;
- Mass merchandisers, such as Wal-Mart and Sears;
- National direct marketers, such as Creative Computers, Insight
Enterprises, MicroWarehouse, Multiple Zones and PC Connection;
- Value-added resellers;
- Manufacturers who sell direct to end-users, such as Dell, Gateway and
Micron;
- Corporate resellers, such as CompuCom and Inacom; and
- Internet resellers, such as Buy.com, Siberian Outpost and Value America.
In addition, as a result of improving technology, some software
manufacturers have developed and may continue to develop sales methods that
allow customers to download software programs and packages directly onto the
customer's system through the use of modem telecommunications. Due to the
proliferation of commerce on the Internet, our existing competitors have grown,
and may continue to grow, at a rapid pace. New competitors may find it easier to
commence operations, thereby increasing the number of available sources of
supply for our customers.
Several of our current and potential competitors are larger and have
substantially greater resources than we do. Additionally, several competitors in
the Internet reselling and direct marketing industries have raised capital in
the public markets through initial and subsequent public offerings. The
increased visibility of these companies and their access to the capital markets
may improve their market position and their ability to compete with us.
We believe that competition may increase in the future, which could require
us to reduce prices, increase advertising expenditures or take other actions
which may have an adverse effect on our operating results. In particular,
decreasing prices of computers and related products, resulting from competition
and technological changes, requires us to sell a greater number of products to
achieve the same level of net sales and gross profit. If such trend continues
and if we are unable to attract new customers and sell increased quantities of
products, our sales and earnings growth rates could be adversely affected.
WE ARE EXPOSED TO INVENTORY RISKS
We are exposed to inventory risks as a result of the rapid technological
changes that affect the market and pricing for the products we sell. We seek to
minimize our inventory exposure through a variety of inventory management
procedures and policies, including vendor price protection and product return
programs. However, if we are unable to continue our practices, if there are
unforeseen product developments, or if vendors change their terms and
conditions, our operations will be adversely affected.
We periodically take advantage of cost savings associated with certain
opportunistic bulk inventory purchases. Such opportunistic bulk purchases could
increase our exposure to inventory obsolescence. Additionally, if such
opportunistic bulk purchases are not available in the future, it could have a
negative impact on our sales growth and gross profit.
YEAR 2000 ISSUES MAY HARM OUR BUSINESS.
The Year 2000 (or "Y2K") issue is the result of computer programs being
written using two digits rather than four digits to define the applicable year.
Any of our computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
We have established a Year 2000 project designed to make all our hardware
and software systems Year 2000 compliant by December 31, 1999. Substantially all
phases of the project as they relate to our
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internal systems were completed as of March 31, 1999. However, we will test all
of our internal systems a second time to ensure that those systems are properly
converted. Otherwise, we plan to focus our efforts for the remainder of 1999 on
the external portion of the project, which focuses on assessing the Year 2000
readiness of companies on which we rely and the potential impact on our
operations. We expect to complete this portion of the project prior to December
31, 1999. Given the current information, we do not anticipate that Year 2000
project costs will have a material impact on us.
Nevertheless, the failure to correct an internal Year 2000 issue could
result in an interruption in, or a failure of, our normal business activities
and operations. Also, if a company on which we rely fails to be Year 2000
compliant, or if a conversion by another company is not compatible with our
systems, it could have an adverse impact on our business activities and
operations.
In addition, since our business is based entirely on selling computer and
related products, any perceived Year 2000 threat may cause our customers to
decrease or stop their purchases of our products until the Year 2000 threat has
diminished. This could result in lower sales levels during the fourth quarter of
1999 and the first quarter of 2000. Furthermore, if Year 2000 issues cause
problems for our customers, those customers may refrain from new purchases of
computer products until they have fixed their problems. This also could
negatively impact our sales in the periods after January 1, 2000.
Due to the general uncertainty inherent in the Year 2000 issue, including
the uncertainty of the Year 2000 readiness of companies on which we rely, we are
not able to determine at this time whether the consequences of Year 2000
failures will have a material impact on our results of operations and financial
conditions.
OUR FUTURE OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
We may experience significant variations in our future quarterly results of
operations. These fluctuations may result from many factors, including the
condition of the computer industry in general, shifts in demand and pricing for
hardware and software products, and the introduction of new products or
upgrades. Our operating results are also highly dependent upon our level of
gross profit as a percentage of net sales. Our gross profit fluctuates due to
numerous factors, including our pricing strategies, market conditions and other
factors, which may be outside of our control. Such factors include:
- changes in prices from suppliers;
- the availability of price protection rebate and incentive programs from
suppliers;
- general market and competitive conditions;
- the relative mix of products sold during the period; and
- the availability of opportunistic purchases.
THE VOLATILITY OF THE UNITED STATES STOCK MARKET, AND THE TECHNOLOGY SECTOR IN
PARTICULAR, MAY AFFECT THE MARKET PRICE OF THE COMMON STOCK
The technology sector of the United States stock markets has experienced
substantial volatility in recent periods. Numerous conditions which impact the
technology sector or the stock market in general could adversely affect the
market price of the Common Stock, regardless of whether or not such conditions
relate to or reflect upon our operating performance.
A NATURAL DISASTER OR OTHER ADVERSE OCCURRENCE AT OUR PRIMARY FACILITY COULD
DAMAGE OUR BUSINESS
Historically, we have operated our business from a primary facility which
is a combined sales, corporate office, warehouse and showroom facility. Although
we have other sales office locations and have current plans to open another
sales office in Chicago, Illinois, substantially all of our corporate functions
and distribution facilities are located in Vernon Hills, Illinois. As a result,
a natural disaster or other such adverse occurrence at our primary facility in
Vernon Hills, Illinois could negatively impact our business.
8
<PAGE> 10
WE ARE HIGHLY DEPENDENT ON OUR KEY PERSONNEL
Our success depends to a significant extent upon the efforts and abilities
of our senior management team, particularly those executive officers who also
serve as directors. Each of our executive officers who serves as a director is
subject to an employment agreement. Further, we have various programs in place
to motivate, reward and retain our management team, including annual incentive
plans, restricted stock plans and stock option plans. However, the loss of
service of one or more of these persons could have an adverse effect on our
business. Our success and plans for future growth will also depend on our
ability to hire, train and retain skilled co-workers in all areas of our
business.
WE COULD INCUR INCREASED COSTS IF WE DO NOT CONTINUE TO SUBLEASE OUR VACATED
BUFFALO GROVE FACILITY
In July 1997, we relocated our primary facility to Vernon Hills, Illinois
and vacated our Buffalo Grove, Illinois facility. We recorded a $4.0 million
pre-tax, non-recurring charge to operating results for exit costs in the first
quarter of 1996. The exit costs consist primarily of our estimated cost to
sublease the vacated facility (including holding costs), the estimated costs of
restoring the building to its original condition, and certain asset write-offs
resulting from the relocation.
We reopened the office portion of the Buffalo Grove facility during the
fourth quarter of 1998 as a telemarketing facility. We sublet the warehouse and
showroom portions of the Buffalo Grove facility to a third party for the period
from June 15, 1999 through the end of the lease term on December 31, 2003.
However, the third party sublessee recently filed a Chapter 11 petition for
reorganization under the bankruptcy laws. In the event the sublessee does not
affirm the sublease or is unable to complete the lease term, the remaining exit
liability of $2.3 million as of September 30, 1999 may not be adequate to cover
our actual costs. Any excess costs would reduce our operating results.
MICHAEL P. KRASNY INFLUENCES ALL FUNDAMENTAL MATTERS AFFECTING US
Following the offering, Michael P. Krasny, our Chairman and Chief Executive
Officer, and trusts and entities controlled by Mr. Krasny and created for the
benefit of Mr. Krasny's family and certain of our co-workers will possess up to
51.18% of the total combined voting power of the outstanding Common Stock.
Accordingly, Mr. Krasny will be able to determine the outcome of all corporate
decisions, effect all corporate transactions (including mergers, consolidations
and the sale of all or substantially all of our assets), or prevent or cause a
change in control in the Company without the consent of the other holders of the
Common Stock.
In order to maintain and motivate our workforce, in 1993 Mr. Krasny granted
out of his personal holdings restricted stock and options to acquire Common
Stock to certain co-workers. Mr. Krasny accomplished this by establishing the
MPK Restricted Stock Plan and the MPK Stock Option Plan. After giving effect to
the vesting of the restricted stock granted under the MPK Restricted Stock Plan,
and the exercise of all of the options issued under the MPK Stock Option Plan,
Mr. Krasny will own up to approximately 39.12% of the issued and outstanding
shares of Common Stock. In addition, we have adopted stock option plans pursuant
to which we are authorized to issue up to 8,269,902 shares of Common Stock. As
of November 30, 1999, 274,221 shares have been issued pursuant to the exercise
of stock options under these plans. As of November 30, 1999, there are stock
option grants outstanding for 6,014,854 shares under these plans.
Mr. Krasny controls approximately 22.5 million shares of our Common Stock,
personally and through the MPK Restricted Stock Plan and the MPK Stock Option
Plan. These shares may be sold in the public market from time to time by either
Mr. Krasny or the participants under the plans. While these shares are presently
"restricted shares" for purposes of the Securities Act of 1933, these shares may
nevertheless be sold in the future, subject to the volume limitations imposed by
Rule 144 under the Securities Act of 1933. Also, we may decide to file a
registration statement (including the one in which this Prospectus was included)
enabling the holders of these shares (including Mr. Krasny or the plans'
participants) to sell the shares in the public market. If a substantial number
of these shares are sold in the public market, it could adversely affect the
prevailing market price of our Common Stock.
9
<PAGE> 11
SHIPPING, POSTAGE AND PAPER COSTS COULD INCREASE OUR OPERATING EXPENSES
We ship our products to customers generally by Airborne, FedEx, RPS, United
Parcel Service and other overnight delivery and surface services. We generally
invoice customers for shipping and handling charges. If we are unable to pass on
to our customers future increases in the cost of commercial delivery services,
our operating results will be adversely affected. Additionally, strikes or other
service interruptions by such shippers could adversely affect our ability to
market or deliver product on a timely basis.
We incur substantial paper and postage costs related to our marketing
activities. These costs are partially offset by cooperative advertising rebates
from vendors. However, any increases in postal or paper costs, or decreases in
cooperative advertising rebates, could have an adverse effect on our operating
results.
STATE SALES TAX COLLECTION OBLIGATIONS COULD INCREASE OUR ADMINISTRATIVE
EXPENSES
We currently collect sales/use tax only on sales of products to non-exempt
residents of the State of Illinois. Various states have sought to require the
collection of state sales/use taxes on the sale of products shipped to the
taxing state's residents by mail order companies. The United States Supreme
Court has ruled that no state, absent Congressional legislation, may impose tax
collection obligations on an out-of-state mail order company whose only contacts
with the taxing state are the distribution of catalogs and other advertisement
materials through the mail and the delivery of purchased goods by U.S. mail or
interstate common carriers.
Due to the proliferation of Internet sales and other factors, certain
states may also attempt to impose tax collection obligations on Internet
commerce vendors, such as us. We cannot predict the level of contact, including
Internet activities, with any state which would give rise to future or past tax
collection obligations within the parameters of the Supreme Court cases.
Although a few state court cases have imposed tax collection obligations on
certain out-of-state companies, we believe our operations are different from the
operations of the companies in those cases and thus do not give rise to tax
collection obligations.
Additionally, in the past several years, certain legislation has been
introduced on several occasions in the United States Congress which, if passed,
would impose state sales/use tax collection obligations on out-of-state mail
order companies such as us, whose sales to residents of the taxing state exceed
$100,000 per year in the aggregate. Our mail order sales to such states
currently exceed this level.
If Congress enacts legislation that permits states to impose tax collection
obligations on out-of-state mail order companies like us, or we are deemed to
have a physical presence in one or more states, additional tax and collection
obligations may be imposed on us. This would likely result in additional costs
and administrative expenses to us, and price increases to the customers, and
could reduce demand for our products, any or all of which would adversely affect
our operating results.
WE ARE EXPOSED TO THE RISKS OF A GLOBAL MARKET
A portion of our products are either produced in, or have major components
produced in, the Asia Pacific region. While we do not have business
relationships with companies located in the region directly, we do engage in
U.S. Dollar denominated transactions with U.S. divisions and subsidiaries of
these companies. As a result, we may be indirectly affected by risks associated
with international events, including economic and labor conditions, political
instability, tariffs and taxes, availability of products and currency
fluctuations in the U.S. Dollar versus the regional currencies.
Countries in the Asia Pacific region, including Japan, have experienced
weaknesses in their currency, banking and equity markets from time to time.
These weaknesses could adversely affect the supply and price of products and
components and ultimately, our results of operations.
10
<PAGE> 12
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and the information incorporated by reference in this
Prospectus include "forward looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934
(the "Exchange Act"). We intend that the forward-looking statements be covered
by the safe harbor provisions for forward-looking statements in these sections.
In some cases, you can identify these statements by our use of forward-looking
words such as "may," "will," "should," "anticipate," "estimate," "expect,"
"plan," "believe," "predict," "potential" or "intend." You should be aware that
these statements only reflect our expectations. Actual events or results may
differ substantially from our expectations. Important factors that could cause
our actual results to be materially different from our expectations include
those discussed in this Prospectus under the caption "Risk Factors." We
undertake no obligations to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
USE OF PROCEEDS
Neither we nor Mr. Krasny will receive any of the proceeds from the sale of
the Common Stock by the selling shareholders. All of the net proceeds will be
paid to the selling shareholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION
OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
LIMITATIONS OF DIRECTOR LIABILITY
Section 2.10(b)(3) of the Illinois Business Corporation Act permits
corporations to limit or eliminate the personal liability of directors to
corporations and their shareholders for monetary damages for breach of
directors' fiduciary duty of care. Our articles of incorporation limit the
liability of our directors to us or our shareholders to the full extent provided
by the law. Specifically, our directors are not personally liable for monetary
damages to us or our shareholders for breach of the director's fiduciary duty as
a director, except for liability for:
- any breach of the director's duty of loyalty to us or our shareholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 9.10 of the Illinois Business
Corporation Act; and
- any transaction from which the director derived an improper personal
benefit.
These provisions in our articles of incorporation do not eliminate a
director's duty of care and do not affect the availability of equitable remedies
such as an action to enjoin or rescind a transaction involving a breach of
fiduciary duty. Further, these provisions probably would not bar claims against
a director for violation of the federal securities laws, since the SEC has
informed us that such a limitation of a director's liability is against public
policy.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 8.75 of the Illinois Corporation Act permits corporations to
indemnify directors, officers, employees and agents against any expense,
liability or loss to which they may become subject, or which they may incur as a
result of being or having been a director, officer, employee or agent of the
corporation. In reliance on this statutory provision, our bylaws provide that we
are required to indemnify our directors, officers, employees and agents to the
maximum extent permitted by law. In addition, we are required to advance or
reimburse directors and officers for expenses incurred by them relating to
indemnifiable claims. We also maintain directors' and officers' liability
insurance, which covers liabilities under the federal securities laws.
11
<PAGE> 13
DIVIDEND POLICY
We have not declared or paid cash dividends on our Common Stock. We
currently intend to retain all of our earnings, if any, for use in our business
and do not anticipate paying any cash dividends in the foreseeable future. The
payment of any future dividends will be at the discretion of our board of
directors and will depend upon a number of factors, including future results of
operations, financial condition, capital requirements, general business
conditions and other factors that our board of directors may deem relevant.
PRICE RANGE OF COMMON STOCK
The following table shows for the period indicated the high and low sales
prices for our Common Stock (as adjusted for stock splits) for the periods
indicated as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
PRICE RANGE
--------------------------------------
QUARTER ENDED HIGH LOW
------------- ---- ---
<S> <C> <C> <C> <C>
March 31, 1997............................................. $35 $21 7/16
June 30, 1997.............................................. 28 7/8 19 13/16
September 30, 1997......................................... 39 26 1/2
December 31, 1997.......................................... 34 7/8 21 13/32
March 31, 1998............................................. 35 3/8 23 3/4
June 30, 1998.............................................. 30 3/4 19 1/8
September 30, 1998......................................... 27 1/2 18
December 31, 1998.......................................... 51 15/16 21 5/8
March 31, 1999............................................. 61 5/8 30 31/32
June 30, 1999.............................................. 50 1/8 27 15/16
September 30, 1999......................................... 56 3/8 42 1/2
December 31, 1999 (through December 6, 1999)............... 74 1/2 47
</TABLE>
On December 6, 1999, the last reported sale price of our Common Stock was
$73.44 per share.
12
<PAGE> 14
SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our Common Stock by the selling shareholders as of November 30,
1999.
<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING(3)
------------------------- NUMBER OF ----------------------
NUMBER OF SHARES BEING NUMBER OF
NAME SHARES(1) PERCENT OFFERED(2) SHARES PERCENT
---- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Sylvia Alantzas...................... 4,322 * 86 4,236 *
Charlene Alvarez..................... 3,464 * 1,364 2,100 *
John Arata........................... 17,989 * 15,048 2,941 *
Linda Bahde.......................... 25,062 * 23,652(4) 1,410 *
Louis Baigorria...................... 2,745 * 32 2,713 *
Margaret Belrose..................... 6,537 * 3,288(4) 3,249 *
Diane Bierman........................ 18,757 * 17,070(4) 1,687 *
Marybrigid Brindley.................. 9,336 * 3,870 5,466 *
Daniel Callen(5)..................... 48,966 * 35,450(8) 13,516 *
Elmer Camposagrado................... 8,430 * 6,272 2,158 *
Donna Carlson........................ 6,788 * 4,370 2,418 *
Fernando Chuw........................ 15,825 * 12,140 3,685 *
Loise-Caryl Colson................... 2,112 * 332 1,780 *
Patricia Comenduley.................. 1,831 * 562 1,269 *
Carlton Connor....................... 10,972 * 7,820 3,152 *
Laura Cowen.......................... 5,578 * 3,866 1,712 *
Dennis Dadas......................... 27,757 * 23,264 4,493 *
Linda Detweiler...................... 17,558 * 14,318 3,240 *
Michael Dubiel....................... 19,348 * 12,726 6,622 *
Douglas Eckrote(6)................... 47,689 * 37,502(8) 10,187 *
Mauro Figueroa....................... 4,280 * 2,794 1,486 *
Kathryn Fleischman................... 4,997 * 2,398 2,599 *
Kenneth Ford......................... 13,878.. * 7,676 6,202 *
Ivonne Franco........................ 1,905 * 608 1,297 *
Brian Gilliam........................ 35,618 * 28,966 6,652 *
James Grass.......................... 1,772 * 156(4) 1,616 *
Tania Gruettner...................... 133 * 66(4) 67 *
Juney Guaura......................... 2,061 * 702 1,359 *
Maurice Hamilton..................... 42,314 * 37,502 4,812 *
Susan Handchetz...................... 1,802 * 486 1,316 *
Jason Housinger...................... 2,762 * 14 2,748 *
Mary Isenberg........................ 13,255 * 10,350 2,905 *
Jeffrey Jorgensen.................... 27,157 * 20,102 7,055 *
Lawrence Kirsch...................... 46,189 * 37,502 8,687 *
Paul Kozak(7)........................ 48,489 * 37,502(8) 10,987 *
Kimberly Krotky...................... 3,997 * 1,274 2,723 *
Mark Kuffel.......................... 4,876 * 1,444 3,432 *
Craig Langer......................... 7,158 * 896 6,262 *
David Larson......................... 1,341 * 42(4) 1,299 *
Tammy Ley............................ 10,355 * 8,306 2,049 *
Kenny Lin............................ 2,971 * 1,584 1,387 *
Cynthia Moss......................... 17,845 * 11,768 6,077 *
Cynthia Moyes........................ 1,881 * 584 1,297 *
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING(3)
------------------------- NUMBER OF ----------------------
NUMBER OF SHARES BEING NUMBER OF
NAME SHARES(1) PERCENT OFFERED(2) SHARES PERCENT
---- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
M. Angela Nickel..................... 5,755 * 4,144 1,611 *
Edwin Nieves......................... 6,505 * 4,838 1,667 *
Wendy Nikitenko...................... 17,263 * 14,378 2,885 *
Tirso Olivares....................... 2,584 * 90 2,494 *
Diana Onofre......................... 1,711 * 436 1,275 *
Kathleen O'Sullivan.................. 16,474 * 12,884 3,590 *
Alan Pietrusiewicz................... 4,890 * 1,952 2,938 *
Donna Pietrusiewicz.................. 4,361 * 3,078(4) 1,283 *
Erwin Piril.......................... 3,026 * 1,624 1,402 *
Tina Rachuy.......................... 8,869 * 7,042 1,827 *
Ricardo Roman........................ 14,129 * 11,844 2,285 *
Christina Rother..................... 9,115 * 5,702 3,413 *
Lauren Rusk.......................... 5,163 * 3,590 1,573 *
Kathleen Sacco....................... 18,292 * 12,204 6,088 *
Joseph Santander..................... 10,211 * 4,414 5,797 *
Enrique Santizo...................... 9,236 * 7,348 1,888 *
Brett Schmidt........................ 3,747 * 378 3,369 *
Andrew Schneeweis.................... 4,417 * 2,520 1,897 *
Kimberly Schnitker................... 14,596 * 5,634(4) 8,962 *
John Schorsch........................ 4,803 * 2,156 2,647 *
Timothy Sheahen...................... 4,682 * 2,146 2,536 *
Mark Sheffer......................... 42,435 * 37,502 4,933 *
Daniel Sitowski...................... 13,591 * 9,950 3,641 *
Cheryl Smith......................... 5,023 * 3,356 1,667 *
Benjamin Solliday.................... 3,203 * 1,034 2,169 *
Cathleen Sporer...................... 27,491 * 23,642 3,849 *
Steve Staines........................ 5,840 * 4,180 1,660 *
Maria Sullivan....................... 5,568 * 6(4) 5,562 *
Kurt Swanson......................... 2,040 * 386 1,654 *
Elizabeth Tegtmeyer.................. 15,151 * 9,062 6,089 *
Bryan Testin......................... 30,884 * 26,258 4,626 *
Chi Ming Tong........................ 7,258 * 4,824 2,434 *
Matt Troka........................... 3,354 * 42(4) 3,312 *
Donald Trunnell...................... 42,914 * 37,502 5,412 *
Jodi Uhler........................... 13,729 * 11,492 2,237 *
Ricardo Vasquez...................... 26,064 * 15,602 10,462 *
Roderick Walker...................... 3,000 * 242 2,758 *
Alan Weiss........................... 10,125 * 4,212 5,913 *
Neil Youngblood...................... 3,198 * 702 2,496 *
</TABLE>
- -------------------------
* Less than 1%.
(1) These figures are comprised of three components: (i) shares of our Common
Stock which are owned as of November 30, 1999; (ii) shares of our Common
Stock reserved under options which either had already vested or vest within
60 days of November 30, 1999; and (iii) shares of our Common Stock granted
under the MPK Restricted Stock Plan which are being offered pursuant to
this Prospectus, even though not all of these shares may be vested yet.
14
<PAGE> 16
(2) These figures represent shares of Common Stock granted to the selling
shareholders under the MPK Restricted Stock Plan which are anticipated to
be sold pursuant to this Prospectus. Except as otherwise noted, these
shares will vest in equal 25% installments on January 1, 2000, 2001, 2002
and 2003.
(3) This assumes that all shares offered by the selling shareholders under this
Prospectus are sold and that no other transactions are effected by the
selling shareholders.
(4) The selling shareholder is 100% vested in these shares.
(5) Mr. Callen is an officer holding the position of Vice President -- Business
Development. During 1997 and 1998, Mr. Callen served as our Vice
President -- Finance, our principal accounting officer.
(6) Mr. Eckrote is an executive officer holding the position of Vice
President -- Operations.
(7) Mr. Kozak is an executive officer holding the position of Vice
President -- Purchasing.
(8) Because an officer holds these shares, he can only sell them during our
mandatory trading windows (a period of 45 days beginning 3 full days from
the date we release our quarterly earnings). Therefore, we have extended
the vesting dates for these shares so that they will vest in equal 25%
installments on the first day of the first open trading window following
January 1, 2000, 2001, 2002 and 2003.
PLAN OF DISTRIBUTION
The shares of Common Stock offered pursuant to this Prospectus were granted
to the selling shareholders under the MPK Restricted Stock Plan. The MPK
Restricted Stock Plan was established by Michael P. Krasny, our Chairman and
Chief Executive Officer, out of his own shareholdings. The shares are
"restricted shares," subject to vesting in the selling shareholders pursuant to
the terms of the MPK Restricted Stock Plan. Except as noted in the table under
"SELLING SHAREHOLDERS" above, the shares of Common Stock offered by the selling
shareholders under this Prospectus will vest in equal 25% installments on
January 1, 2000, 2001, 2002 and 2003. The total shares that vest in each year
will be 223,292 shares in 2000, 170,300 shares in 2001, 170,258 shares in 2002
and 170,300 shares in 2003, assuming that all of the selling shareholders
continue to be our co-workers during each such year. In the event a selling
shareholder's employment with us does not continue for reasons other than death
or disability, he or she will forfeit any unvested shares and such shares will
revert back to Mr. Krasny and not be available for sale pursuant to this
Prospectus.
When the Registration Statement of which this Prospectus is a part becomes
effective, the selling shareholders will be entitled to sell the shares of
Common Stock as they vest in such shares. A selling shareholder may sell such
shares in which he or she is vested at any time during each quarter within our
mandated trading window (a period of 45 days beginning 3 full days from the date
we release our quarterly earnings), provided that the selling shareholder is not
then in possession of material, nonpublic information. However, due to the fact
that the selling shareholders will incur federal income tax withholding
obligations when their shares vest each January 1st, we will open a trading
window on the first business day of each year to allow them (other than
officers) to participate in a block sale of these shares. The selling
shareholders who elect to participate in these block sales will be permitted to
sell up to 100% of the shares which vest on each January 1st, but will be
required to sell at least 39% of those shares to cover their tax obligations. We
intend to engage a broker to facilitate these block sales by the selling
shareholders. The selling shareholders will be required to pay any applicable
commissions of this broker if they elect to participate in these block sales.
Otherwise, the selling shareholders may sell the shares of Common Stock
from time to time in one or more transactions (which may include block
transactions, ordinary brokered transactions, transactions in which brokers
solicit purchase and transactions directly with the market makers) on the Nasdaq
National Market. The selling shareholders may sell the shares of Common Stock in
negotiated transactions or otherwise at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Brokers and dealers engaged by the selling shareholders may receive
commissions or discounts from the selling shareholders. The selling shareholders
are responsible for any commissions,
15
<PAGE> 17
discounts or fees of brokers, dealers or agents, and any transfer taxes
applicable to the shares sold by the selling shareholders pursuant to this
Prospectus.
There is no assurance that the selling shareholder will sell any of the
Common Stock offered pursuant to this Prospectus.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered by the selling
shareholders is being passed upon for us by Patzik, Frank & Samotny Ltd.,
Chicago, Illinois.
EXPERTS
Our financial statements incorporated in this Prospectus by reference to
our Annual Report on Form 10-K for the year ended December 31, 1998 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on their authority as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus is part of a Registration Statement that we filed with the
SEC. The Registration Statement, including the attached exhibits, contains
additional information about us and our Common Stock. The rules and regulations
of the SEC allow us to omit some of the information included in the Registration
Statement from this Prospectus. In addition, we file reports, proxy statements
and other information with the SEC under the Exchange Act. You may read and copy
any of this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60612-2511
</TABLE>
You may obtain information on the operation of the SEC's Public Reference
Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet web site that contains reports, proxy
statements and other information regarding issuers, like us, that file
electronically with the SEC. The address of the that site is http://www.sec.gov.
The SEC file number for our documents filed under the Exchange Act is 0-21796.
The SEC allows us to "incorporate by reference" information into this
Prospectus. This means we can disclose important information to you by referring
you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this Prospectus, except
for any such information that is superseded by information included directly in
this document.
This Prospectus incorporates by reference the documents listed below that
we have previously filed or will file with the SEC:
- Our Annual Report on Form 10-K for the year ended December 31, 1998;
- Our Quarterly Report on Form 10-Q for the quarter ended March 30, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended September 30,
1999;
- Our Notice of Annual Meeting of Shareholders and Proxy Statement dated
May 18, 1999;
16
<PAGE> 18
- The description of our Common Stock contained in our Registration
Statement of Form 8-A filed May 19, 1993 registering our Common Stock
under Section 12(g) of the Exchange Act; and
- All documents filed with the SEC by us under Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Prospectus and
before the offering is terminated, are considered to be part of this
Prospectus, effective as of the date these documents are filed.
In the event of conflicting information in these documents, you should
consider the information in the latest filed document to be correct.
You can obtain any of the documents listed above from the SEC, through the
SEC's web site at the address described above, or directly from us, by
requesting them in writing or by telephone at the following address:
CDW Computer Center, Inc.
200 North Milwaukee Avenue
Vernon Hills, Illinois 60061
Attn: Investor Relations
(847) 465-6000
We will provide a copy of any of these documents without charge, excluding
any exhibits unless the exhibit is specifically listed as an exhibit to the
Registration Statement of which this Prospectus is a part.
17
<PAGE> 19
- -------------------------------------------------------
- -------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO REPRESENT ANYTHING
NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED
INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO SELL ONLY THE
SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE
IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT
ONLY AS OF ITS DATE.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................. 2
Risk Factors............................. 5
Cautionary Note Regarding Forward-Looking
Statements............................. 11
Use of Proceeds.......................... 11
Limitation of Liability and
Indemnification of Directors, Officers,
Employees and Agents................... 11
Dividend Policy.......................... 12
Price Range of Common Stock.............. 12
Selling Shareholders..................... 13
Plan of Distribution..................... 15
Validity of Common Stock................. 16
Experts.................................. 16
Where You Can Find More Information...... 16
</TABLE>
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
[CDW LOGO]
CDW COMPUTER CENTERS, INC.
734,150 SHARES
COMMON STOCK
------------------------
PROSPECTUS
DECEMBER 6, 1999
------------------------
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $13,750
Printing Expenses........................................... 7,500+
Legal Fees and Expenses..................................... 35,000+
Accounting Fees and Expenses................................ 5,000+
Transfer Agent Fees and Expenses............................ 5,000+
Miscellaneous............................................... 3,750+
-------
Total..................................................... $70,000
=======
</TABLE>
- -------------------------
+ Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The indemnification provisions applicable to the directors of the Company
are set out in Articles Nine and Ten of the Articles of Incorporation and
Article VII of the By-Laws, respectively, as follows:
ARTICLES OF INCORPORATION:
Ninth: The Corporation shall, to the full extent permitted by Section 8.75
of the Illinois Business Corporation Act, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
Tenth: No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of his fiduciary
duty as a director; provided, that nothing herein shall be construed to
eliminate or limit the liability of a director; (a) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (b) for acts
or omissions not in good faith or involving intentional misconduct or knowing
violation of law, (c) under Section 8.65 of the Illinois Business Corporation
Act, as amended, or (d) for any transaction from which the director derived an
improper personal benefit.
BYLAWS:
ARTICLE VII
INDEMNIFICATION OF
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment or settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. The corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or
S-1
<PAGE> 21
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application, that despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
SECTION 3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
SECTION 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceedings, or (b) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (c)
by the Stockholders.
SECTION 5. Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding, as authorized by the Board of Directors in
the specific case, upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation authorized in this Article.
SECTION 6. The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any contract, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
SECTION 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
5 Opinion of Patzik, Frank & Samotny Ltd. re: validity of
Common Stock
23(a) Consent of PricewaterhouseCoopers LLP Independent
Accountants
23(b) Consent of Patzik, Frank & Samotny Ltd. (included in Exhibit
5)
24 Power of Attorney (included on page S-4)
</TABLE>
S-2
<PAGE> 22
(b) FINANCIAL STATEMENT SCHEDULE
None.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the actual bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers,
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(d) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
S-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Village of Vernon Hills, State of Illinois, on December
6, 1999.
CDW COMPUTER CENTERS, INC.
By: /s/ MICHAEL P. KRASNY
------------------------------------
Michael P. Krasny,
Chief Executive Officer and
Secretary
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Michael P. Krasny and Gregory C. Zeman
and each of them acting alone, his true and lawful attorneys-in-fact or agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on its behalf by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL P. KRASNY Chairman of the Board, Chief December 6, 1999
- --------------------------------------------- Executive Officer and Secretary
Michael P. Krasny (Principal Executive Officer)
/s/ GREGORY C. ZEMAN President and Director December 6, 1999
- ---------------------------------------------
Gregory C. Zeman
/s/ DANIEL B. KASS Vice President-Sales December 6, 1999
- --------------------------------------------- and Director
Daniel B. Kass
/s/ MICHELLE L. COLLINS Director December 6, 1999
- ---------------------------------------------
Michelle L. Collins
/s/ JOSEPH LEVY, JR. Director December 6, 1999
- ---------------------------------------------
Joseph Levy, Jr.
/s/ CASEY COWELL Director December 6, 1999
- ---------------------------------------------
Casey Cowell
Director
- ---------------------------------------------
Donald P. Jacobs
/s/ HARRY J. HARCZAK, JR. Chief Financial Officer December 6, 1999
- --------------------------------------------- and Treasurer
Harry J. Harczak, Jr. (Principal Financial Officer)
/s/ SANDRA M. ROUHSELANG Controller December 6, 1999
- --------------------------------------------- and Chief Accounting Officer
Sandra M. Rouhselang (Principal Accounting Officer)
</TABLE>
S-4
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------- ----------------------- ------------
<C> <C> <S> <C>
5 -- Opinion of Patzik, Frank & Samotny Ltd. re: validity of
Common Stock
23(a) -- Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23(b) -- Consent of Patzik, Frank & Samotny Ltd. (included in Exhibit
5)
24 -- Power of Attorney (included on page S-4)
</TABLE>
<PAGE> 1
EXHIBIT 5
[PATZIK, FRANK & SAMOTNY LTD. LETTERHEAD]
December 7, 1999
Board of Directors
CDW Computer Centers, Inc.
200 North Milwaukee Avenue
Vernon Hills, Illinois 60061
Re: CDW COMPUTER CENTERS, INC. REGISTRATION STATEMENT ON FORM S-3
Gentlemen:
We have acted as special counsel to CDW Computer Centers, Inc., an Illinois
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement"), together with
Exhibits, filed with the Securities and Exchange Commission (the "Commission")
on December 7, 1999, relating to the registration of an offering by the
Company's employees who are beneficiaries under the MPK Restricted Stock Plan of
up to 734,150 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"). We have reviewed such records, documents and matters of
law as we have considered relevant for the purpose of delivering this opinion.
In making our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as certified or
photostatic copies.
Based upon the foregoing, the shares of Common Stock, when sold in the
manner contemplated in the Registration Statement, will be legally issued, fully
paid and nonassessable.
We do not find it necessary for the purpose of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the sale of the Common Stock.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
<PAGE> 2
[PATZIK, FRANK & SAMOTNY LTD. LETTERHEAD]
Board of Directors
December 7, 1999
Page 2
We hereby consent to the inclusion in the Registration Statement of this
opinion and to the references to our firm under the caption "Validity of Common
Stock" in the prospectus filed with the Registration Statement.
Very truly yours,
Patzik, Frank & Samotny Ltd.
PATZIK, FRANK & SAMOTNY LTD.
CIB/jc
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our reports dated January 21, 1999 relating to the
consolidated financial statements and financial statement schedule, which
appear in CDW Computer Centers, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1998. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
December 6, 1999
