<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 1994 Commission File Number 0-14371
- ------------------------------------------- ------------------------------
COMPUCOM SYSTEMS, INC.
================================================================================
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 38-2363156
- ---------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10100 N. CENTRAL EXPRESSWAY, DALLAS, TX 75231
- ---------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 265-3600
------------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
------------------------
Securities registered pursuant to Section 12(g) of the Act:
</TABLE>
COMMON STOCK, $.01 PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class)
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 to such filing
requirements for the past 90 days.
Yes X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [__]
The aggregate market value of the Common Stock, $.01 par value, held by non-
affiliates (based on the closing price on NASDAQ) on March 17, 1995 was
approximately $36.8 million. For purposes of determining this amount only,
Registrant has defined affiliates as including (a) the executive officers named
in Part III of this 10-K report, (b) all directors of Registrant, and (c) each
stockholder that has informed Registrant by March 17, 1995 that it is the
beneficial owner of 10% or more of the outstanding common stock of Registrant.
The number of shares of the Registrant's Common Stock outstanding as of March
17, 1995 was 33,987,764 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement relative to the May 25, 1995 annual
meeting of stockholders of registrant, to be filed within 120 days after the end
of the year covered by this report on Form 10-K, are incorporated by reference
into Items 10, 11, 12 and 13 (Part III) of this Report. Such Proxy Statement,
except for the parts therein which have been specifically incorporated by
reference, shall not be deemed "filed" for the purposes of this report on Form
10-K.
================================================================================
This amendment to the Annual Report on Form 10-K/A is being filed to incorporate
an additional note to the financial statements (Note 10) and to renumber Note 10
and Note 11 to Note 11 and Note 12, respectively.
<PAGE>
Independent Auditors' Report
----------------------------
The Stockholders and Board of Directors
CompuCom Systems, Inc.:
We have audited the accompanying consolidated balance sheets of CompuCom
Systems, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1994. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CompuCom
Systems, Inc. and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Dallas, Texas
February 8, 1995
F-2
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Assets 1994 1993
------ ------------ ------------
<S> <C> <C>
Current assets: $ 4,076 $ 3,941
Cash
Receivables less allowance for doubtful accounts 233,589 207,721
of $1,942 in 1994 and $1,872 in 1993 155,561 124,282
Inventories 2,145 1,705
------------ ------------
Other 395,371 337,649
Total current assets
Property and equipment:
Land, building and improvements 5,842 5,703
Furniture, fixtures and other equipment 15,302 12,592
Leasehold improvements 2,414 1,770
------------ ------------
23,558 20,065
Less accumulated depreciation and amortization (7,648) (5,225)
------------ ------------
Net property and equipment 15,910 14,840
Cost in excess of fair value of tangible net assets
purchased, less accumulated amortization 12,498 10,274
Other assets 5,752 2,308
------------ ------------
$ 429,531 $ 365,071
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable $ 154,342 $ 150,914
Accrued liabilities 37,623 29,746
------------ ------------
Total current liabilities 191,965 180,660
Long-term debt 118,974 107,316
Deferred income taxes 6,010 3,485
Convertible subordinated notes 18,214 17,880
Stockholders' equity:
Series B preferred stock, $10 stated value. Authorized 3,000,000
shares; issued and outstanding 2,000,000 in 1994. 20,000
Common stock, $.01 par value. Authorized 70,000,000
shares; issued and outstanding 33,694,764 shares
in 1994 and 31,331,245 shares in 1993 337 313
Additional paid-in capital 28,164 23,984
Retained earnings from July 1, 1987 45,867 31,433
------------ ------------
Total stockholders' equity 94,368 55,730
------------ ------------
$ 429,531 $ 365,071
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
COMPUCOM SYSTEMS,INC.AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1994, 1993 and 1992
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -----------
<S> <C> <C> <C>
Net revenues $ 1,255,813 $ 1,015,482 $ 713,035
Cost of revenues 1,085,012 870,773 608,316
------------- ------------- -----------
Gross margin 170,801 144,709 104,719
Expenses:
Selling 97,915 82,205 58,843
General and administrative 32,487 30,696 23,743
Interest 11,346 8,722 7,507
Depreciation and amortization 4,621 4,178 2,912
------------- ------------- -----------
146,369 125,801 93,005
------------- ------------- -----------
Earnings before income taxes 24,432 18,908 11,714
Income taxes 9,773 7,469 4,451
------------- ------------- -----------
Net earnings $ 14,659 $ 11,439 $ 7,263
============= ============= ===========
Earnings per common share:
Primary $.40 $.34 $.23
Fully diluted $.34 $.29 $.22
Average common shares outstanding:
Primary 35,714 33,888 30,876
Fully diluted 44,123 42,958 33,651
</TABLE>
See accompaying notes to consolidated financial statements.
F-4
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1994, 1993 and 1992
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Total
--------------------------- ------------------------- Paid-in Retained Stockholders'
Shares Amount Shares Amount Capital Earnings Equity
------------- ------------ ------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1991 243,750 $ 2,438 29,131,929 $ 291 $ 20,041 $ 12,731 $ 35,501
Retirement of preferred stock (243,750) (2,438) (2,438)
Issuance of common stock 83,850 1 209 210
Exercise of common stock warrants 200,000 2 298 300
Exercise of options 527,250 6 760 766
Net earnings 7,263 7,263
------------- ------------ ------------- ---------- ---------- ----------- -------------
Balances at December 31, 1992 29,943,029 300 21,308 19,994 41,602
Issuance of common stock 430,000 4 1,249 1,253
Exercise of convertible notes/common 566,666 5 1,094 1,099
stock warrants
Exercise of options 391,550 4 333 337
Net earnings 11,439 11,439
------------- ------------ ------------- ---------- ---------- ----------- -------------
Balances at December 31, 1993 31,331,245 313 23,984 31,433 55,730
Issuance of preferred stock 2,000,000 20,000 20,000
Issuance of common stock 335,665 3 1,197 1,200
Exercise of common stock warrants 1,426,666 14 2,213 2,227
Exercise of options 601,188 7 770 777
Preferred stock dividend (225) (225)
Net earnings 14,659 14,659
------------- ------------ ------------- ---------- ---------- ----------- -------------
Balances at December 31, 1994 2,000,000 $ 20,000 33,694,764 $ 337 $ 28,164 $ 45,867 $ 94,368
============= ============ ============= ========== ========== =========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
COMPUCOM SYSTEMS,INC.AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1994,1993,and 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 14,659 $ 11,439 $ 7,263
Adjustments to reconcile net earnings
to net cash provided by (used in) operating
activities:
Depreciation and amortization 4,621 4,178 2,912
Deferred income taxes 2,525 1,667 3,720
Original issue discount 140
Changes in assets and liabilites:
Receivables (25,546) (82,375) (11,027)
Inventories (34,207) (25,159) (1,415)
Other current assets (145) 75 (851)
Accounts payable 4,899 45,387 2,160
Accrued liabilites and other 7,127 14,638 942
---------- ----------- ----------
Net cash provided by (used in)
operating activities (26,067) (30,150) 3,844
---------- ----------- ----------
Cash flows from investigating activities:
Capital expenditures, net (5,018) (6,584) (7,408)
Net assets of businesses acquired (2,741) (457)
---------- ----------- ----------
Net cash used in investing activities (7,759) (6,584) (7,865)
---------- ----------- ----------
Cash flows from financing activities:
Net borrowings (repayments) under bank
credit facility 11,332 37,031 (9,990)
Issuance of convertible subordinated
notes, net of debt issue costs 17,754
Issuance (retirement) of preferred stock 20,000 (1,179)
Retirement of suborniated debentures (4,115)
Issuance of common stock 2,854 351 349
Preferred stock dividend (225)
---------- ----------- ----------
Net cash provided by financial
acitivities 33,961 37,382 2,819
---------- ----------- ----------
Net increase (decrease) in cash 135 648 (1,202)
Cash at beginning of year 3,941 3,293 4,495
---------- ----------- ----------
Cash at end of year $ 4,076 $ 3,941 $ 3,293
========== =========== ==========
</TABLE>
See accompying notes to consolidated financial statements.
F-6
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994
(1) Summary of Significant Accounting Policies
------------------------------------------
Description of Business
-----------------------
CompuCom Systems, Inc. and subsidiaries (the "Company") is
a personal computer ("PC") services integration company that
provides services to corporate customers ranging from product
procurement and configuration to network integration and support
through sales and service locations nationwide.
Principles of Consolidation
---------------------------
The consolidated financial statements include the
financial statements of the Company and its subsidiaries. All
significant intercompany balances and transactions have been
eliminated.
Inventories
-----------
Inventories are stated at the lower of average cost or
market. Substantially all inventories are finished goods.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized over the
lesser of the estimated useful lives of the assets or the remaining
term of the lease using the straight-line method.
Cost in Excess of Fair Value of Tangible Net Assets Purchased
-------------------------------------------------------------
Cost in excess of fair value of tangible net assets
purchased represents goodwill and customer lists and is amortized
using the straight-line method over a 7 or 10 year period.
Accumulated amortization at December 31, 1994 and 1993 was
$5,142,000 and $3,551,000, respectively. Assessment of the carrying
amount of goodwill is made when changing facts and circumstances
indicate that the carrying value of goodwill or other assets may be
impaired using forecasted undiscounted cash flows.
Revenue Recognition
-------------------
Product revenues are recognized upon shipment with
provisions made for anticipated returns, which historically have
been immaterial. Service revenues are recognized when the service
is rendered.
Vendor Programs
---------------
The Company receives volume rebates from certain
manufacturers related to sales of certain products which are
recorded when earned as a reduction of cost of goods sold. The
Company also receives manufacturer reimbursements for certain
training, promotional and marketing activities, which are recorded
as earned as a reduction of general and administrative expense.
F-7
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Earnings Per Common Share
-------------------------
Primary earnings per common share is based on net earnings
after preferred stock dividend requirements, if any, and the
weighted average number of common shares outstanding during each
year, including stock options and warrants considered to be
dilutive common stock equivalents. Fully diluted earnings per
common share assumes full conversion of all convertible securities
into common stock at the later of the beginning of the year or date
of issuance, and includes the add-back of related interest and/or
dividends.
Restructuring
-------------
In connection with the redirection of the Company and the
effective discontinuation of its previous business activities, the
accumulated deficit as of July 1, 1987 was reclassified as a
reduction of additional paid-in capital to better reflect the
financial position and new operating focus of the Company. Retained
earnings represent the cumulative net earnings of the Company since
July 1, 1987, less dividends.
Income Taxes
------------
The Company uses the asset and liability method of
accounting for income taxes. Under this method, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases.
(2) Long-term Debt
--------------
During March 1994, the Company executed an amendment to the August
1993 Financing and Security Agreement increasing the availability under
the Company's bank revolving credit facility ("Credit Facility") from
$125 million to $150 million. The new facility provides for a fixed rate
of interest of 7.18% on $60 million of the outstanding principal balance.
In addition, for the remainder of the unpaid principal, the Company has
the option to elect the London Interbank Offered Rate ("LIBOR") plus
2.75% per annum, subject to certain limitations, and/or an interest rate
of 0.5% above the prime rate per annum. Total borrowings are based on
certain limits, as defined, and are secured by substantially all the
assets of the Company. The Credit Facility subjects the Company to
certain restrictions and covenants related to, among others, tangible net
worth, debt to tangible net worth, net earnings, and limits the amount
available for capital expenditures and dividends. All unpaid principal
borrowed and unpaid accrued interest thereon, under the Credit Facility,
are due March 1997. The Company is currently negotiating with its bank
group to increase the Credit Facility in early 1995.
The Company's highest level of borrowing was $132 million and
$114.6 million in 1994 and 1993, respectively. The outstanding balance on
the bank credit facility at December 31, 1994 is $115.2 million.
A $3.9 million mortgage term loan on the corporate headquarters
building in Dallas, Texas is payable in monthly installments of $32,500
plus interest at 8.1%.
The Company paid interest of $10,905,000, $8,302,000 and
$7,633,000, and the weighted average interest rate on the bank credit
facility was approximately 7.3%, 7.2% and 7.5%, in 1994, 1993, and 1992,
respectively.
F-8
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Convertible Subordinated Notes
------------------------------
In 1992, the Company issued $18,500,000 of 9% Convertible
Subordinated Notes ("Notes") due in 2002. The Notes are convertible into
8,409,000 shares of the Company's common stock at $2.20 per share and are
carried net of unamortized debt issue costs. If not converted, payment in
five equal annual installments of $3.7 million, commencing in 1998, is
required. The Notes subject the Company to certain restrictions and
covenants related to, among others, tangible net worth, and certain
ratios relating to operating cash flow and incurrence of additional debt.
In addition, the Note Agreement provides for mandatory prepayment upon a
change of control of the Company, as defined. Under certain conditions,
the Company may prepay all or any part of the Notes on or after September
15, 1995 without prepayment penalties.
(4) Income Taxes
------------
The provision for income taxes is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal $ 6,437 $ 4,849 $ 400
State 655 953 331
Deferred 2,681 1,667 3,720
----------- ----------- -----------
$ 9,773 $ 7,469 $ 4,451
=========== =========== ===========
</TABLE>
Total income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rate of 35% in 1994 and 1993, and 34% in 1992
to earnings before income taxes as a result of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense $ 8,551 $ 6,618 $ 3,983
State taxes, net of U.S. Federal
income tax benfit 426 619 218
Other, net 796 232 250
---------- ---------- ---------
$ 9,773 $ 7,469 $ 4,451
========== ========== =========
</TABLE>
F-9
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Total tax expense for the years ended December 31, 1994, 1993 and 1992 was
allocatd as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Current tax expense $ 7,092 $ 5,802 $ 731
Deferred tax expense
Acquired tax benefit 183 1,118 2,733
Other 2,498 549 987
----------- ----------- -----------
9,773 7,469 4,451
----------- ----------- -----------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1994 and 1993 are presented below (in thousands).
<TABLE>
<CAPTION>
1994 1993
------------- ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards and acquired tax benefits $ 33 $ 1,902
Inventories, principally due to additional costs inventoried
for tax purposes and reserves 2,064 2,167
Accounts receivable, principally due to allowance for
doubtful accounts 679 646
Other 816 914
------------- ------------
Total gross deferred tax assets 3,592 5,629
Less valuation allowance 1,067
------------- ------------
Net deferred tax assets 3,592 4,562
------------- ------------
Deferred tax liabilities:
Tax net operating losses in excess of financial 7,976 6,812
Other 1,626 1,235
------------- ------------
Total gross deferred tax liabilities 9,602 8,047
------------- ------------
Net deferred tax liability $ 6,010 $ 3,485
============= ============
</TABLE>
The valuation allowance of $1,067,000 at December 31, 1993 is no longer
required as a result of the 1994 utilization of net operating losses for tax
purposes.
There were $9,934,000, $3,040,000 and $478,000 of income taxes paid in
1994, 1993 and 1992, respectively, net of refunds. Taxes payable at December 31,
1994 was approximately $857,000.
F-10
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Preferred Stock
---------------
The Company has authorized three million shares of preferred stock,
stated value $10. In 1994, Safeguard Scientifics, Inc., ("Safeguard")
entered into an agreement to purchase from the Company $20,000,000
(2,000,000 shares) of its Series B Cumulative Convertible Preferred Stock
("Series B Shares"). The Series B Shares are convertible into shares of
Common Stock based on a conversion price of $6.77 per share subject to
anti-dilutive adjustments. The Series B Shares are entitled to a 6% per
annum cumulative dividend payable out of legally available funds. The
Series B Shares are entitled to one vote for each share of Common Stock
into which such Series B Shares may be converted, except that in the
election of directors (as long as Safeguard owns at least 40% of the
Company's then outstanding voting securities, excluding the Series B
Shares), the Series B Shares will be entitled to five votes for each
share of Common Stock into which the Series B Shares may be converted. As
of December 31, 1994 there were $225,000 of undeclared, unpaid dividends
related to the Series B Shares.
(6) Stock Options and Warrants
--------------------------
The Company maintains three stock option plans covering certain key
employees and outside directors. The 1983 Stock Option Plan and the 1984
Non-Qualified Stock Option Plan expired by their terms in May 1993 and
January 1994, respectively. Therefore, the Company adopted a 1993 Stock
Option Plan under which the Company may grant qualified or non-qualified
stock options. To the extent allowable, all grants are incentive stock
options. All options granted under the plans to date have been at prices
which have been equal to the fair market value at the date of grant.
Generally, options vest five years after the date of grant and expire ten
years after the date of grant.
At December 31, 1994, the Company has reserved 4,728,000 shares of
its common stock for issuance under its stock option plans. There are
161,000 shares available for future grant under the 1993 Stock Option
Plan. The Company plans to increase the number of shares available for
future grant under the 1993 Stock Option Plan by 3,000,000 shares in
1995, subject to approval by shareholders.
A summary of the status of the Company's stock option plans
follows:
<TABLE>
<CAPTION>
Shares Price Range
------------ -----------
<S> <C> <C>
Outstanding at December 31, 1992 4,051,000 $ .50-2.81
Granted 1,481,000 2.25-3.13
Exercised (549,000) 1.00-2.81
Canceled (69,000) 1.00-2.81
------------
Outstanding at December 31, 1993 4,914,000 $ .50-3.13
Granted 612,000 3.94-4.75
Exercised (981,000) .50-3.38
Canceled (128,000) 1.00-4.13
------------
Outstanding at December 31, 1994 4,417,000 $ .50-4.75
============
Exercisable at December 31, 1994 2,773,000 $ .50-3.13
============
</TABLE>
F-11
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under the Stock Option Plan for Directors, 100,000 shares have been
reserved for issuance, subject to stockholder approval of the plan.
Options to non-employee directors are required to be granted at fair
market value with an initial 10,000 share grant upon election to the
Board. Subsequent service grants will be awarded to all non-employee
directors in accordance with formulas based upon years of service. Under
this plan, 10,000 options have been granted at an exercise price of $4.75
per share, of which none were exercisable at December 31, 1994. Options
under this plan vest 25% each year commencing on the first anniversary of
the grant date and expire after 10 years.
In conjunction with certain subordinated debentures issued in 1991,
and repaid in 1992, warrants were issued to acquire approximately 1.4
million shares of common stock at a purchase price of $1.50 per share,
exercisable through April 1996. During 1994, approximately 1,177,000 of
these warrants were exercised, leaving approximately 128,000 of the
warrants remaining. In connection with an acquisition in 1987, the
Company issued warrants to the seller to purchase 250,000 shares of
common stock at $1.50 per share, which were subsequently exercised in
February 1994.
(7) Related Party Transactions
--------------------------
In 1994, the Company sold the majority of its interest in a
subsidiary, PC Parts Express, Inc. ("PCPE") to a venture capital company
primarily owned by a former officer and director of the Company, in
exchange for cash, a secured note receivable, and warrants to purchase
additional PCPE common stock. Separately, the Company sold substantially
all of the assets with respect to its network training business to this
same venture capital company in exchange for a secured note receivable
and royalty agreement.
Included in other assets at December 31, 1994 is a $1,181,250
secured term note receivable from an officer and director of the Company.
Interest on the note accrues at the rate of 6% per annum and is payable
annually beginning January 1, 1996. Principal is payable in two annual
installments of $590,625 each on August 31, 1996 and August 31, 1997.
Included in other assets at December 31, 1994 is a $600,000 secured
term note receivable from a former officer and director of the Company.
The outstanding principal balance and accrued interest at the prime rate
was paid in February 1995.
Safeguard owns approximately 63% of the Company's common stock as
of December 31, 1994. The Company pays Safeguard a fee for providing
certain administrative, legal and financial services to the Company.
General and administrative expenses include charges from Safeguard of
$600,000 in 1994, 1993 and 1992.
(8) Leases
------
The Company has noncancelable operating leases for facilities and
equipment which expire at various dates from 1995 to 2004. Total rental
expense for operating leases was $4,804,000, $5,430,000 and $5,161,000 in
1994, 1993 and 1992, respectively. Future minimum lease payments under
noncancelable operating leases as of December 31, 1994 are $4,594,000 -
1995; $4,392,000 - 1996; $3,729,000 - 1997; $2,828,000 - 1998; $1,928,
000 - 1999; and $2,696,000 - thereafter.
(9) Savings Plan
------------
The Company has a contributory 401(k) Plan for its employees and
matches one-half of the first 4% and one-fourth of the next 2% of
employee compensation, and employer participation is subject to certain
vesting requirements. Amounts expensed relating to the Plan were
$597,000, $501,000 and $372,000 in 1994, 1993 and 1992, respectively. In
addition, the Company also expensed $215,000 in common stock
contributions to the Plan during 1992. The 80,000 shares of common stock
contributed for 1992 were made in the subsequent year.
F-12
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Investments
-----------
In January 1994, the Company sold the majority of its interest in a
subsidiary, PC Parts Express, Inc., which subsequently changed its name
to PC Service Source ("PCSS"). In April 1994, PCSS completed an initial
public offering. After this transaction, the Company's ownership of PCSS
common stock was approximately 24%. The PCSS common stock owned by the
Company is unregistered and the sale of the stock is subject to certain
restrictions. The Company owned approximately 23% of the outstanding
common shares of PCSS at year end and accounts for this investment using
the equity method. At December 31, 1994, the Company's carrying value of
the PCSS stock was $1,735,000 and the market value was approximately
$8,200,000. In addition, the Company owns warrants for the purchase of
250,000 shares of PCSS common stock at an exercise price of $2.25.
(11) Contingencies
-------------
The Company is involved in various claims and legal actions arising
in the ordinary course of business with enterprises in both the public
and private sector. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
the Company's consolidated financial position.
(12) Quarterly Financial Data (Unaudited)
------------------------------------
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
(in thousands, except per share amounts)
1994
----
<S> <C> <C> <C> <C>
Net revenues $ 280,857 $ 306,625 $ 306,654 $ 361,677
Gross margin 36,141 40,613 43,503 50,544
Net earnings 2,765 3,259 3,271 5,364
Earnings per common share
Primary .08 .09 .09 .15
Fully diluted .07 .08 .08 .12
1993
----
Net revenues $ 200,856 $ 239,707 $ 256,507 $ 318,412
Gross margin 29,530 34,538 36,890 43,751
Net earnings 1,859 2,602 2,838 4,140
Earnings per common share
Primary .06 .08 .08 .12
Fully Diluted .05 .07 .07 .10
</TABLE>
Earnings per common share calculations are based on the weighted average
number of shares outstanding in each period. Therefore, the sum of the
quarters does not necessarily equal the year to date earnings per common
share.
F-13
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balanced at
Beginning of Costs and End of
Description Period Expenses Deductions Period
- ----------------------------- ------------------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Trade receivables-
Allowance for doubtful accounts
1992 $ 1,532 858 787 $ 1,603
1993 $ 1,603 767 498 $ 1,872
1994 $ 1,872 963 893 $ 1,942
</TABLE>
F-14
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to Annual Report on Form 10-K/A to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated: April 13, 1994 CompuCom Systems, Inc.
By:__________________________
Robert J. Boutin
Senior Vice President
Chief Financial Officer
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CompuCom Systems, Inc.:
We consent to incorporation by reference in the Registration Statements
(No. 33-2304, No. 33-30175, No. 33-30056, No. 33-39914, No. 33- 43275 and
No. 33-76382) on Form S-8 and the Registration Statements (No. 33-43367, No.
33- 47002, No. 33- 78746 and No. 33- 78756) on Form S-3 of CompuCom Systems,
Inc. of our report dated February 8, 1995, related to the consolidated balance
sheets of CompuCom Systems, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of operations, stockholders'
equity, and cash flows and related schedule for each of the years in the three-
year period ended December 31, 1994, which report appears in the December 31,
1994 annual report on Form 10-K of CompuCom Systems, Inc.
KPMG PEAT MARWICK LLP
Dallas, Texas
April 12, 1995
