<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
----- 15(d) OF SECURITIES EXCHANGE ACT OF 1934
For the transition period ended
--------------------------
Commission File Number 0-28090
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DECISIONONE HOLDINGS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 13-3435409
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
50 East Swedesford Road, Frazer, Pennsylvania 19355
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 296-6000
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject of such
filing requirements for the past 90 days. Yes X No
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As of December 31, 1996 registrant had 27,721,249 shares of its Common Stock
outstanding.
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DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
FORM 10-Q FEBRUARY 14, 1997
CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets - 2
December 31, 1996 and June 30, 1996
(unaudited)
Condensed Consolidated Statements of 3
Operations - Three and Six Months Ended
December 31, 1996 and 1995 (unaudited)
Condensed Consolidated Statements of 4
Cash Flows - Six Months Ended
December 31, 1996 and 1995 (unaudited)
Notes to Condensed Consolidated 5-6
Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis 7-11
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 12
</TABLE>
<PAGE> 3
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1996 1996
------------------- -------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,309 $ 8,221
Accounts receivable, net of allowances of $11,276 and $9,580 117,718 92,650
Inventories, net of allowances of $11,865 and $19,537 31,058 30,130
Other 8,264 12,770
------------------- -------------------
Total current assets 165,349 143,771
Repairable Parts, Net of Accumulated Amortization of $165,701 and $105,462 180,518 154,970
Intangibles, Net of Accumulated Amortization of $30,232 and $19,625 190,449 164,659
Property, Plant and Equipment, Net of Accumulated Depreciation
of $32,983 and $22,936 34,615 32,430
Other 23,554 18,680
------------------- -------------------
Total Assets $ 594,485 $ 514,510
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,026 $ 2,321
Accounts payable and accrued expenses 83,809 89,564
Deferred revenues 59,665 38,485
Other 1,018 479
------------------- -------------------
Total current liabilities 146,518 130,849
Revolving Credit Loan and Long-term Debt 238,994 188,582
Other Liabilities 17,477 14,286
Shareholders' Equity:
Preferred stock, no par value; authorized 5,000,000 shares; none outstanding
Common stock, $.01 par value, authorized 100,000,000 shares;
issued and outstanding 27,721,249 and 27,340,288 shares 277 273
Additional paid-in capital 255,569 255,262
Accumulated deficit (63,107) (73,516)
Other (1,243) (1,226)
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Total Shareholders' Equity 191,496 180,793
------------------- -------------------
Total Liabilities and Shareholders' Equity $ 594,485 $ 514,510
=================== ===================
</TABLE>
See notes to condensed consolidated financial statements.
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DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- ---------------------------
1996 1995 1996 1995
----------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues $ 191,253 $ 149,703 $ 367,679 $ 196,494
Cost of Revenues 143,032 111,479 277,597 142,746
----------------- ------------- ----------- -------------
Gross Profit 48,221 38,224 90,082 53,748
Operating Expenses:
Selling, general and administrative expenses 30,381 28,533 54,650 34,216
Amortization of intangibles 5,552 3,799 10,471 5,745
----------------- ------------- ----------- -------------
Total Operating Expenses 35,933 32,332 65,121 39,961
----------------- ------------- ----------- -------------
Operating Income 12,288 5,892 24,961 13,787
Interest Expense, Net of Interest Income 3,747 4,840 7,015 5,419
----------------- ------------- ----------- -------------
Income Before Income Taxes 8,541 1,052 17,946 8,368
Provision for Income Taxes 3,587 414 7,537 3,344
----------------- ------------- ----------- -------------
Net Income $ 4,954 $ 638 $ 10,409 $ 5,024
================= ============= =========== =============
Per Common Share:
- -----------------
Net Income $ 0.17 $ 0.03 $ 0.35 $ 0.22
Weighted Average Number of Common Shares
and Equivalent Shares Outstanding 29,753 23,223 30,059 23,292
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
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1996 1995
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<S> <C> <C>
Operating Activities:
Net income $ 10,409 $ 5,024
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 46,000 20,473
Changes in assets and liabilities, net of effects of business acquisitions (35,422) (10,598)
---------------- -----------------
Net cash provided by operating activities 20,987 14,899
Investing Activities:
Business acquisitions (30,940) (273,725)
Capital expenditures, net of retirements (3,832) (2,178)
Repairable spare parts purchases (35,988) (12,155)
---------------- -----------------
Net cash used in investing activities (70,760) (288,058)
Financing Activities:
Proceeds from issuance of common stock 311 1,631
Proceeds from issuance of redeemable preferred stock - 31,392
Proceeds from issuance of subordinated debentures and warrants - 30,126
Proceeds from borrowings 50,253 255,000
Payments on borrowings - (47,110)
Principal payments under capital leases (686) -
---------------- -----------------
Net cash provided by financing activities 49,878 271,039
Effect of exchange rates on cash (17) (41)
---------------- -----------------
Net change in cash and cash equivalents 88 (2,161)
Cash and cash equivalents beginning of period 8,221 2,659
---------------- -----------------
Cash and cash equivalents end of period $ 8,309 $ 498
================ =================
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
DecisionOne Holdings Corp. and Subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and, therefore, do not include all information and footnotes necessary for
presentation of financial position, results of operations and cash flows
required by generally accepted accounting principles. The June 30, 1996
balance sheet was derived from the Company's audited consolidated financial
statements. The information furnished reflects all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair summary of the financial position, results of operations
and cash flows. The financial statements should be read in conjunction with
the audited historical consolidated financial statements of the Company and
notes thereto filed with the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996, as amended.
NOTE 2: INCOME PER COMMON SHARE
Pursuant to Securities and Exchange Commission Staff Accounting Bulletins,
primary income per share for the three and six month periods ended December 31,
1995, presented in connection with the Company's initial public offering of
common stock via its Registration Statement on Form S-1, as amended, dated
April 3, 1996 (the "Offering"), also includes amounts computed on options and
warrants issued within twelve months of the filing date as if they were
outstanding for all periods presented, even when the result is anti-dilutive,
using the treasury stock method and the Offering price. Additionally, the
computation of primary income per common share for the three and six month
periods ended December 31, 1995 includes the conversion of all shares of
preferred stock, which automatically converted to shares of common stock as of
the closing of the Offering, as if they were outstanding for all periods
presented, even when the result is anti-dilutive.
NOTE 3: BUSINESS ACQUISITION
On November 15, 1996, the Company acquired substantially all of the assets of
the U.S. computer service business (the "Business") of Memorex Telex
Corporation and certain of its affiliates (collectively, "Memorex Telex").
Memorex Telex had filed a petition in bankruptcy in the United States
Bankruptcy Court in the District of Delaware on October 15, 1996; the Court
approved the sale to the Company on November 1, 1996. The base purchase price
was $52,500,000, comprised of the assumption of certain liabilities under
contracts of the Business (the "Deferred Revenues"), which were
estimated at closing to be $26,015,000, and base cash consideration of
$26,485,000, excluding transaction and closing costs.
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<PAGE> 7
The purchase price is subject to further adjustment based upon the actual
amount of Deferred Revenues, the amount of revenues of the Business for the two
calendar months prior to closing, and the actual amount of inventory. The
estimated fair market values of certain assets acquired, as well as liabilities
assumed, are also subject to further adjustment as additional information
becomes available to the Company.
The primary source of funds used for the acquisition was the Company's
revolving credit facility, which was increased from $225 million to $300
million on November 13, 1996.
NOTE 4: EMPLOYEE SEVERANCE AND EXIT COSTS
In the second quarter of fiscal 1997, in connection with the Memorex Telex
acquisition, the Company recorded a $3.4 million pre-tax charge for estimated
future employee severance costs, and a $0.9 million pre-tax charge for
unutilized lease/contract losses ("exit costs"), primarily associated with
duplicate facilities to be closed. The $3.4 million charge, recorded in
accordance with Statement of Financial Accounting Standards No. 112 ("SFAS
112"), Employers' Accounting for Postemployment Benefits, reflects the
actuarially-determined benefit costs for the separation of employees who are
entitled to benefits under pre-existing separation pay plans. These costs are
included in selling, general and administrative expenses in the accompanying
unaudited condensed consolidated statements of operations for the three and six
month periods ended December 31, 1996. For further information regarding the
Memorex Telex acquisition, see Note 3.
In the second quarter of fiscal 1996, in connection with the acquisition of
Bell Atlantic Business Systems Services ("BABSS"), the Company recorded pre-tax
charges for exit costs of $6.9 million, and estimated future employee severance
costs of $0.1 million. During the fourth quarter of fiscal 1996, the Company
reversed $3.4 million of these employee severance and exit cost liabilities.
The reversal was primarily the result of the Company's ability to utilize and
sublease various facilities identified in the original $7.0 million combined
liability. Such information was unknown to the Company when the original
liability was recorded.
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<PAGE> 8
ITEM 2.
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED DECEMBER 31, 1996
This report contains, in addition to historical information, statements by the
Company with regard to its expectations as to financial results and other
aspects of its business that involve risks and uncertainties and may constitute
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements include statements regarding
certain risks associated with the Company's practice of entering into interest
rate swap agreements in an effort to minimize interest exposure and the
sufficiency of the Company's liquidity and capital resources. Although the
Company makes such statements based on assumptions which it believes to be
reasonable and management's current expectations, such statements are subject to
a number of risks and uncertainties and there can be no assurance that actual
results will not differ materially from those described in such statements.
Factors that may cause such a difference include, but are not limited to, those
identified under "Risk Factors" in the Company's Annual Report on Form 10-K for
the year ended June 30, 1996, as amended.
OVERVIEW:
Since the beginning of fiscal 1993, when the Company decided to focus
principally on its current core business of providing computer maintenance and
technology support services, DecisionOne has experienced significant growth,
primarily through acquisition of complementary businesses as well as through
growth in its existing business. The most significant of these business
acquisitions was that of Bell Atlantic Business Systems Services ("BABSS"),
which was acquired in October, 1995. Since the Company's initial public
offering (the "Offering") in April, 1996, the Company has continued its growth
through strategic acquisitions. The most significant of these acquisitions was
the acquisition of the U.S. computer service business of Memorex Telex
Corporation ("Memorex Telex") in November, 1996. These acquisitions, which have
been accounted for as purchase transactions, are included in the accompanying
unaudited Condensed Consolidated Financial Statements from the dates of
acquisition.
Reported net income for the three and six months ended December 31, 1996 was
$5.0 million, or $.17 per share, and $10.4 million, or $.35 per share,
respectively, compared to $0.6 million, or $.03 per share and $5.0 million, or
$.22 per share for the same periods a year ago. Net income, excluding charges
for employee severance and unutilized lease/contract losses in both periods,
was $7.4 million, or $.25 per share, for the quarter ended December 31, 1996
compared to $4.8 million, or $.21 per share, for the same period in fiscal
1996. Net income, excluding these charges, was $12.9 million, or $.43 per
share, for the six months ended
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<PAGE> 9
December 31, 1996 compared to $9.2 million, or $.40 per share, for the same
period in fiscal 1996. The following discussion of results of operations is
presented for the Company for the fiscal quarters ended December 31, 1996 and
1995, and for the six month periods then ended.
RESULTS OF OPERATIONS:
Revenues: Revenues for the three months ended December 31, 1996 increased by
$41.6 million, or 27.8%, to $191.3 million as compared to revenues for the same
period a year earlier of $149.7 million. This increase is attributable
primarily to the BABSS acquisition, which occurred on October 20, 1995, and to
a lesser degree, to the acquisition of Memorex Telex, which occurred on
November 15, 1996.
For the six months ended December 31, 1996, revenues increased to $367.7
million, as compared to revenues of $196.5 million for the same six month
period in the prior fiscal year. This 87.1% increase was due primarily to the
BABSS acquisition.
Gross Profit: Gross profit increased to $48.2 million from $38.2 million for
the second quarter of the prior fiscal year, an increase of $10.0 million, or
26.2%. This increase is due principally to the BABSS acquisition during the
second quarter of fiscal 1996, and to a lesser degree, to the Memorex Telex
acquisition during the second quarter of fiscal 1997. For the six month
periods ended December 31, 1996 and 1995, gross profit equaled $90.1 million
and $53.7 million, respectively, with this 67.8% increase attributable mainly
to the BABSS acquisition.
As a percentage of revenues, gross profit for the quarters ended December 31,
1996 and December 31, 1995 was 25.2% and 25.5%, respectively. For the six
month periods ended December 31, 1996 and 1995, gross profit as a percentage of
revenues was 24.5% and 27.4%, respectively. These decreases reflect the
change in mix of the Company's services resulting from the BABSS acquisition,
as higher-margin revenue contracts for servicing proprietary systems (i.e.
systems that can only be serviced by a limited number of service providers),
which represented approximately 30% of total revenues prior to the BABSS
acquisition, currently account for a significantly smaller portion of total
revenues. The impact of this service mix-related decrease in gross profits
versus the prior year second quarter was largely offset by improved gross
profits achieved during the second quarter of fiscal 1997 on the Company's
current customer base.
Selling, General and Administrative Expenses: Selling, general and
administrative ("SG&A") expenses increased by $1.9 million, or 6.7%, to $30.4
million for the three months ended December 31, 1996 from $28.5 million for the
three months ended December 31, 1995. Included in SG&A expenses for each of
these respective quarters were charges for estimated future employee severance
costs and unutilized lease/contract losses. For the quarters ended December
31, 1996 and 1995, these charges totaled $4.3 million and $7.0 million,
resulting from the Memorex Telex and BABSS acquisitions, respectively (see Note
4 to the accompanying unaudited Condensed Consolidated Financial Statements for
further information). Excluding these charges, SG&A expenses for the three
months ended December 31, 1996 increased by 21.4%, to $26.1 million compared to
the three month period
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<PAGE> 10
a year earlier of $21.5 million, reflecting operating growth attributable
primarily to the BABSS and Memorex Telex acquisitions.
Exclusive of these charges, SG&A expenses for the six months ended December 31,
1996 increased by $23.2 million, or 85.3%, to $50.4 million as compared to
$27.2 million for the same period in the prior fiscal year. This increase was
due primarily to the acquisition of BABSS in October, 1995.
As a percentage of revenues, SG&A expenses (exclusive of employee severance and
unutilized lease/contract loss charges) decreased to 13.6% for the quarter
ended December 31, 1996 as compared to 14.4% for the quarter ended December 31,
1995. Similarly, SG&A expenses as a percentage of revenue decreased to 13.7%
for the six months ended December 31, 1996, from 13.8% for the six months ended
December 31, 1995. These decreases reflect the Company's achievement of
efficiency gains through operational growth.
Amortization of Intangibles: Amortization of intangible assets increased by
$1.8 million, or 47.4%, from $3.8 million for the three months ended December
31, 1995 to $5.6 million for the three months ended December 31, 1996. This
increase is attributable principally to the amortization of intangibles,
primarily goodwill, arising from the acquisition of BABSS in October, 1995 and
Memorex Telex in November, 1996.
For the six months ended December 31, 1996, amortization of intangible assets
increased to $10.5 million as compared to $5.7 million for the same six-month
period a year earlier, reflecting a $4.8 million, or 84.2%, increase associated
principally with the amortization of intangibles resulting from the BABSS
acquisition.
Interest Expense: Interest expense, net of interest income, for the three
months ended December 31, 1996 decreased by $1.1 million, or 22.9%, to $3.7
million as compared to $4.8 million for the three months ended December 31,
1995. This decrease was primarily attributable to the Company's reduced
average borrowing rate on long-term indebtedness, which equaled 6.4% and 9.0%,
respectively, for the corresponding periods. The decrease in the average
borrowing rate resulted from the Company's conversion of its existing credit
facility to its current Revolving Credit Facility in April, 1996 (see
"Liquidity and Capital Resources" for further information). This interest
rate-related decrease was partially offset by substantially higher average
outstanding borrowings in the quarter ended December 31, 1996 than in the same
quarter of the prior year, most of which was required to fund the acquisitions
of BABSS and Memorex Telex.
Interest expense, net of interest income, for the six months ended December 31,
1996 increased by $1.6 million, or 29.6%, to $7.0 million from $5.4 million for
the six months ended December 31, 1995. This increase was due primarily to the
Company's substantially higher average outstanding borrowings during the six
months ended December 31, 1996, principally due to the funding of the October,
1995 BABSS acquisition and the November, 1996 Memorex Telex acquisition. As
noted previously, the decrease in the Company's average borrowing rate for the
six months ended December 31, 1996, compared to the same period a year earlier,
partially offset the aforementioned impact of higher average borrowings.
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Provision for Income Taxes: The Company's income tax provisions for the three
and six month periods ended December 31, 1996 reflect an estimated effective
income tax rate of approximately 42%, while the effective income tax rate for
the three and six month periods ended December 31, 1995 was approximately 40%.
This slight increase in the Company's anticipated effective income tax rate is
due primarily to the prior-year impact of certain non-recurring foreign income
tax benefits relating to net operating loss carryforwards.
As of June 30, 1996, the Company had tax net operating loss (NOL) carryforwards
of approximately $38.1 million and $15.2 million, for Federal and state income
tax purposes, respectively, which are scheduled to expire between 1997 and 2009.
The Company also had minimum tax credits of approximately $1.2 million as of
June 30, 1996, with no applicable expiration period. These carryforwards and
credits may be utilized, as applicable, to reduce future taxable income. The
Offering resulted in an "ownership change" pursuant to Section 382 of the
Internal Revenue Code, which in turn results in the limitation on the usage of
these carryforwards and credits during any future period to approximately $20
million per annum. See Note 11 to the Company's Consolidated Financial
Statements for the year ended June 30, 1996, included in its Annual Report on
Form 10-K, as amended, dated September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES:
Financing: Historically, the Company's principal sources of capital have been
borrowings from banks (primarily to finance acquisitions), financing from
principal stockholders through debt and equity securities, and cash flow from
operations. In April, 1996, the Company significantly improved its liquidity
and capital structure through i.) the Offering, which raised approximately
$106 million by the issuance of 6.3 million shares of common stock, and ii.)
the restructuring of the Company's revolving credit debt, each of which is more
fully discussed below.
The Company used the proceeds of the Offering to repay approximately $70 million
of its existing 1995 Term Loan as well as to repay the then-existing balance of
its subordinated notes of approximately $30 million. Further, in connection
with the Offering, the Company's mandatorily-redeemable Series A, B and C
Preferred Stock were automatically converted to common stock.
Subsequent to the Offering, the Company converted the remaining balance of its
1995 Term Loan and its then-existing $30 million revolving credit facility into
a new $225 million, unsecured variable rate revolving credit facility (the
"Facility"). During November, 1996, in connection with the acquisition of
Memorex Telex, the Company's lender approved a $75 million increase to the
Facility, raising the total loan commitment to $300 million (see Note 3 to the
accompanying unaudited Condensed Consolidated Financial Statements). The
Facility enables the Company to borrow up to $300 million in the form of
revolving credit loans with a maturity date of April 26, 2001 for all principal
borrowed. The interest rate
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<PAGE> 12
applicable to the Facility varies, at the Company's option, based upon LIBOR
(plus an applicable margin not to exceed 1%) or the prime rate. As of December
31, 1996, the applicable interest rate was LIBOR plus .75%, for an effective
rate of approximately 6.5%, and available borrowings under the Facility were
$58.0 million. New borrowings under the Facility were approximately $35.2
million and $50.3 million for the three and six month periods ended December 31,
1996, respectively.
The Company also has attempted to minimize its interest exposure by entering
into two interest rate swap agreements with major financial institutions.
Although it may be exposed to losses in the event of nonperformance by
counterparties, the Company does not expect such losses, if any, to be
material.
Cash Flow and Leverage: For the quarter ended December 31, 1996, the
Company's cash flow from operating activities equaled $14.3 million. Operating
cash flow was $21.0 million for the first six months of fiscal 1996. These
operating funds, together with borrowings under the Facility, provided the
required capital to fund the Company's capital expenditures, totaling
approximately $20.8 million and $39.9 million for the three and six month
periods ended December 31, 1996, respectively, as well as the acquisition of
complementary businesses for approximately $29.3 million and $30.9 million for
the same respective periods.
Consistent with prior operating periods, the majority of the Company's capital
expenditures consist of purchases of repairable spare parts needed to meet the
service requirements of customers under computer maintenance contracts. These
spare parts are generally purchased from original equipment manufacturers and
other third parties. As of December 31, 1996, the Company had no material
commitments for purchases of spare parts or for capital expenditures other than
those in the ordinary course of business.
The most significant of the Company's business acquisitions during the six
months ended December 31, 1996 was the Memorex Telex acquisition on November
15, 1996. The base purchase price was $52.5 million, comprised of the
Company's assumption of $26.0 million of liabilities under acquired customer
maintenance contracts, and $26.5 million in cash, before certain potential
adjustments and transaction costs, which was paid at closing.
As of December 31, 1996, the Company maintained working capital of
approximately $18.8 million and a current ratio (current assets to current
liabilities) of approximately 1.13 to 1. These calculations exclude the
Company's investment in repairable spare part inventories, which are classified
as non-current assets in the accompanying unaudited Condensed Consolidated
Balance Sheet as of December 31, 1996. As of December 31, 1996, the Company's
debt-to-equity ratio was approximately 1.2 to 1.
The Company believes that its operations will generate cash which, together
with cash availability under the Facility, will be sufficient to meet its
working capital requirements, requirements for the purchase of repairable
spare parts and other capital expenditures, and debt service requirements for
the foreseeable future. Expansion of the Company's business through
acquisitions, however, may require additional funds. While the Company will
seek such financing as may be required to fund any future acquisitions, there
can be no assurance that such financing will be available on reasonable terms.
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<PAGE> 13
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on
December 5, 1996. At the meeting, the stockholders of
the Company (i) ratified the appointment of Deloitte &
Touche LLP as auditors for the Company for the fiscal
year ending June 30, 1997, with 24,909,832 votes cast for
ratification, 2,314 votes against and 1,260 votes
withheld; (ii) approved the Amended and Restated
DecisionOne Holdings Corp. Stock Option and Restricted
Stock Purchase Plan (the "Plan"), including an increase
in shares authorized under the Plan from 3,350,000 shares
to 5,350,000 shares, with 21,998,113 votes for approval,
1,996,291 against, and 2,950 votes withheld; and (iii)
elected the following to the Board of Directors of the
Company:
<TABLE>
<CAPTION>
Votes Votes
For Withheld
---------- --------
<S> <C> <C>
Kenneth Draeger 24,884,156 29,250
Bruce K. Anderson 24,884,376 29,030
Michael C. Brooks 24,884,626 28,780
Thomas E. McInerney 24,884,576 28,830
Arthur F. Weinbach 24,884,656 28,750
</TABLE>
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description of Documents
11 Computation of net income per share
27 Financial data schedule
(b) Reports on Form 8-K:
A Current Report on Form 8-K, dated December 3, 1996,
was filed regarding i.) the Company's acquisition of
the U.S. computer service business of Memorex Telex
Corporation and certain of its affiliates (collectively,
"Memorex Telex") on November 15, 1996, and ii.) the
increase in the Company's credit facility from $225
million to $300 million in connection with the Memorex
Telex acquisition.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DecisionOne Holdings Corp.
/s/ Thomas J. Fitzpatrick
--------------------------------------------------------
Thomas J. Fitzpatrick
Duly Authorized and Chief Financial Officer
DATE: February 14, 1997
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<PAGE> 1
EXHIBIT 11
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
(UNAUDITED) COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
-------------------------- ---------------------------
1996 1995 1996 1995
----------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Net Income $4,954 $638 $10,409 $5,024
========= ========= ========= ==========
Primary Income Per Share:
Weighted average number of common shares:
Shares outstanding, beginning of period 27,468 8,936 27,340 8,936
Average number of shares related to common
stock equivalents 2,097 1,872 2,549 1,989
Average number of shares issued for
employee stock options exercised 188 97 170 49
Shares related to SAB 83 1,046 1,046
Shares from automatic conversion of redeemable
preferred stock related to SAB 64 11,272 11,272
--------- --------- ---------- ---------
Total weighted average common
and common equivalent shares outstanding 29,753 23,223 30,059 23,292
========= ========= ========== =========
Net income per common share $0.17 $0.03 $0.35 $0.22
========= ========= ========== =========
Fully Diluted Income Per Share:
Weighted average number of common shares:
Shares outstanding, beginning of period 27,468 8,936 27,340 8,936
Average number of shares related to common
stock equivalents 2,367 1,922 2,508 2,039
Average number of shares issued for
employee stock options exercised 188 97 170 49
Shares related to SAB 83 1,046 1,046
Shares from automatic conversion of redeemable
preferred stock related to SAB 64 11,272 11,272
---------- --------- --------- ---------
Total weighted average common
and common equivalent shares outstanding 30,023 23,273 30,018 23,342
========== ========= ========= =========
Net income per common share $0.17 $0.03 $0.35 $0.22
========== ========= ========= =========
</TABLE>
Note to Exhibit:
Fully diluted earnings per share calculation is presented in accordance with
Regulation S-K item 601 (b)(11), although not required by Paragraph 40 of
Accounting Principles Board Opinion No. 15 because it is either anti-dilutive,
or results in additional dilution of less than 3%, for the periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Financial Statements of DecisionOne Holdings Corporation
and Subsidiaries at and for the six months ended December 31, 1996 (unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,309
<SECURITIES> 0
<RECEIVABLES> 128,994
<ALLOWANCES> 11,276
<INVENTORY> 31,058
<CURRENT-ASSETS> 165,349
<PP&E> 67,598
<DEPRECIATION> 32,983
<TOTAL-ASSETS> 594,485
<CURRENT-LIABILITIES> 146,518
<BONDS> 0
0
0
<COMMON> 277
<OTHER-SE> 191,219
<TOTAL-LIABILITY-AND-EQUITY> 594,485
<SALES> 367,679
<TOTAL-REVENUES> 367,679
<CGS> 277,597
<TOTAL-COSTS> 277,597
<OTHER-EXPENSES> 63,732
<LOSS-PROVISION> 1,389
<INTEREST-EXPENSE> 7,015
<INCOME-PRETAX> 17,946
<INCOME-TAX> 7,537
<INCOME-CONTINUING> 10,409
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,409
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
