<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the three months ended JUNE 30, 1997 COMMISSION FILE NUMBER 0-14371
- ---------------------------------------- -------------------------------
COMPUCOM SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 38-2363156
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7171 FOREST LANE, DALLAS, TX 75230
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 856-3600
----------------------
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
----- -----
The number of shares of the Registrant's common stock outstanding as of August
12, 1997 was 45,845,322 shares.
- -------------------------------------------------------------------------------
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Condensed Consolidated Balance Sheets
June 30, 1997 (unaudited) and December 31, 1996 3
Condensed Consolidated Statements of Operations
Three and six months ended June 30, 1997 and 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
- -------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ -------------
(unaudited)
Assets
------
<S> <C> <C>
Current assets:
Cash $ 4,250 $ 4,320
Receivables, less allowance for doubtful
accounts of $2,479 and $2,274 respectively 204,918 377,598
Inventories 226,095 233,464
Other 3,649 3,508
--------- ---------
Total current assets 438,912 618,890
Property and equipment, net 62,600 54,308
Cost in excess of fair value of tangible
net assets purchased, less accumulated
amortization 15,053 16,513
Other assets 4,262 3,274
--------- ---------
$ 520,827 $ 692,985
========= =========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 146,930 $ 217,424
Accrued liabilities 57,285 59,342
--------- ---------
Total current liabilities 204,215 276,766
Long-term debt 122,644 236,450
Deferred income taxes 5,719 5,671
Convertible subordinated notes 3,000 3,000
Shareholders' equity:
Preferred stock 15,000 15,000
Common stock 455 449
Additional paid-in-capital 62,709 60,966
Retained earnings from July 1, 1987 107,085 94,683
--------- ---------
Total shareholders' equity 185,249 171,098
--------- ---------
$ 520,827 $ 692,985
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share amount)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue
Product $ 428,353 $ 467,817 $ 803,958 $ 845,800
Service 59,715 38,760 113,443 71,697
Other 3,152 2,178 5,708 4,592
--------- --------- --------- ---------
Total Revenue 491,220 508,755 923,109 922,089
--------- --------- --------- ---------
Cost of revenue
Product 387,254 420,744 723,927 760,558
Service 37,571 27,130 71,937 47,830
Other 1,433 1,590 2,805 3,159
--------- --------- --------- ---------
Total cost of revenue 426,258 449,464 798,669 811,547
--------- --------- --------- ---------
Gross margin 64,962 59,291 124,440 110,542
Operating expenses
Selling 19,055 19,010 39,513 36,766
Service 11,142 9,826 21,914 17,975
General and administrative 15,388 13,129 29,680 24,083
Depreciation and amortization 2,652 2,000 5,243 3,854
--------- --------- --------- ---------
Total operating expenses 48,237 43,965 96,350 82,678
--------- --------- --------- ---------
Earnings from operations 16,725 15,326 28,090 27,864
Financing expenses 3,425 3,507 6,670 6,442
Nonrecurring gain (8,738) (8,738)
--------- --------- --------- ---------
Earnings before income taxes 13,300 20,557 21,420 30,160
Income taxes 5,320 8,223 8,568 12,064
--------- --------- --------- ---------
Net earnings $ 7,980 $ 12,334 $ 12,852 $ 18,096
========= ========= ========= =========
Earnings per common share
Primary $.16 $.25 $.26 $.37
Fully diluted $.16 $.25 $.26 $.36
Average common shares outstanding
Primary 47,071 47,497 47,118 47,250
Fully diluted 49,712 50,099 49,722 50,061
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 12,852 $ 18,096
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,243 3,854
Deferred income taxes 48 3
Gain on sale of stock (8,738)
Changes in assets and liabilities:
Receivables 173,009 (62,675)
Inventories 7,369 (15,535)
Other current assets (141) (216)
Accounts payable (70,494) 13,757
Accrued liabilities and other (3,358) (1,320)
-------- --------
Net cash provided by (used in) operating activities: 124,528 (52,774)
-------- --------
Cash flows from investing activities:
Capital expenditures, net (12,091) (5,874)
Business acquisitions, net of cash acquired (5,442)
Proceeds from sale of stock 11,368
-------- --------
Net cash provided by (used in investing activities) (12,091) 52
-------- --------
Cash flows from financing activities:
Net bank credit facility and other borrowings (repayments) (113,806) 52,214
Issuance of common stock 1,749 982
Preferred stock dividend (450) (450)
-------- --------
Net cash provided by (used in) financing activities (112,507) 52,746
-------- --------
Net increase (decrease) in cash (70) 24
Cash at beginning of period 4,320 4,249
-------- --------
Cash at end of period $ 4,250 $ 4,273
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1997
(1) General
-------
These condensed interim consolidated financial statements should be read
in conjunction with the consolidated financial statements and the summary
of significant accounting policies and notes thereto included in the 1996
Annual Report on Form 10-K for CompuCom Systems, Inc. and subsidiaries (the
Company). The information furnished is unaudited but reflects all
adjustments consisting only of normal recurring accruals which are, in the
opinion of management, necessary to present a fair statement of the results
for these interim periods. Interim results are not necessarily indicative
of results expected for the full year.
(2) Contingencies
-------------
The Company is involved in various claims and legal actions arising in
the ordinary course of business. 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 and results of operations, taken
as a whole.
(3) New Accounting Pronouncement
----------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(Statement 128). Statement 128 supersedes APB Opinion No. 15, Earnings Per
Share (APB 15) and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held
common stock or potential common stock. Statement 128 replaces the
presentation of primary EPS and fully diluted EPS with a presentation of
basic EPS and diluted EPS. Statement 128 is effective for financial
statements for both interim and annual periods ending after December 15,
1997. Adoption of Statement 128 during the three and six months ended June
30, 1997 would have had an impact on EPS as summarized below:
<TABLE>
<CAPTION>
APB 15 Statement 128
------ -------------
EPS EPS
Primary Fully Diluted Basic Diluted
------- ------------- ----- -------
<S> <C> <C> <C> <C> <C>
2Q97 $ 0.16 $ 0.16 2Q97 $ 0.17 $ 0.16
1997 YTD $ 0.26 $ 0.26 1997 YTD $ 0.28 $ 0.26
2Q96 $ 0.25 $ 0.25 2Q96 $ 0.27 $ 0.25
1996 YTD $ 0.37 $ 0.36 1996 YTD $ 0.40 $ 0.36
</TABLE>
(Continued)
6
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1997
(4) Sale of Accounts Receivable
---------------------------
Under the terms of a $100 million accounts receivable securitization
facility ("Securitization Facility"), the Company sells, on a revolving
basis, an interest in a portion of its accounts receivable ("receivables").
During the second quarter, the Company's Securitization Facility was
amended such that the sale, on a revolving basis, of a portion of its
receivables is required to be accounted for as a sale of receivables in
accordance with Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". The Company is retained as servicer of the
receivables; however, the cost of servicing is not material. The gross
proceeds resulting from the sale of receivables totaled $98.5 million which
are included in net cash provided by operating activities in the Condensed
Consolidated Statements of Cash Flows. These proceeds were used to pay down
long-term debt. Discounts associated with the sale of receivables totaling
$1.5 million are included in Financing Expenses in the Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 1997.
(5) Financing Expenses
------------------
Financing expenses consist of interest incurred on borrowings under the
Company's financing arrangements and discounts on the sale of receivables.
(6) Reclassification
----------------
Certain amounts in the 1996 condensed consolidated financial statements
have been reclassified to conform with the 1997 presentation, the most
significant of which is the separation of selling and service expenses into
separate line items in the operating expenses section of the Condensed
Consolidated Statement of Operations.
7
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
June 30, 1997
Results of Operations
- ---------------------
The following table shows the Company's total revenue, gross margin and gross
margin percentage by revenue source. Operating expenses, financing expenses,
nonrecurring gain, income taxes and net earning are shown as a percentage of
total revenue, for the three and six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue
Product $ 428,353 $ 467,817 $ 803,958 $ 845,800
Service 59,715 38,760 113,443 71,697
Other 3,152 2,178 5,708 4,592
--------- --------- --------- ---------
Total Revenue 491,220 508,755 923,109 922,089
--------- --------- --------- ---------
Gross margin:
Product 41,099 47,073 80,031 85,242
Service 22,144 11,630 41,506 23,867
Other 1,719 588 2,903 1,433
--------- --------- --------- ---------
Total gross margin 64,962 59,291 124,440 110,542
Gross margin percentage
Product 9.6% 10.1% 10.0% 10.1%
Service 37.1% 30.0% 36.6% 33.3%
Other 54.5% 27.0% 50.9% 31.2%
--------- --------- --------- ---------
Total gross margin 13.2% 11.6% 13.5% 12.0%
Operating expenses
Selling 3.9% 3.7% 4.3% 4.0%
Service 2.3% 1.9% 2.4% 2.0%
General and administrative 3.1% 2.6% 3.2% 2.6%
Depreciation and amortization 0.5% 0.4% 0.6% 0.4%
--------- --------- --------- ---------
Total operating expenses 9.8% 8.6% 10.5% 9.0%
--------- --------- --------- ---------
Earnings from operations 3.4% 3.0% 3.0% 3.0%
Financing expenses 0.7% 0.7% 0.7% 0.7%
Nonrecurring gain (1.7%) (1.0%)
--------- --------- --------- ---------
Earnings before income taxes 2.7% 4.0% 2.3% 3.3%
Income taxes 1.1% 1.6% 0.9% 1.3%
--------- --------- --------- ---------
Net earnings 1.6% 2.4% 1.4% 2.0%
========= ========= ========= =========
</TABLE>
8
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Product revenue, which is primarily derived from the sale of distributed
desktop computer products to corporate customers, was $428.4 million for the
second quarter of 1997, and $804.0 million for the six months ended June 30,
1997. This represents a decline of 8.4% and 4.9% respectively from the same
periods in 1996. The Company shipped more desktop, laptop, and server units
relative to comparable 1996 periods. However, due to certain manufacturer price
reductions, these units carried a lower average sales price, hence contributing
to the slight product revenue decline. Also, the Company believes the product
revenue decline has been the result of an overall industry-wide demand softness
caused by a delay in corporate customers upgrading to Pentium Pro technology, as
well as an increase in direct marketers' market share.
Product gross margin as a percentage of product net revenues for the second
quarter of 1997 and for the six months ended June 30, 1997 was 9.6% and 10.0%
respectively. This compares to product gross margins of 10.1% for both periods
in 1996. The decreases noted from 1996 to 1997 are mainly due to intense
competition from other resellers and direct marketers. Future product margins
will be influenced by manufacturers' pricing strategies together with
competitive pressures from other resellers in the industry and direct marketers
as well as the level of sales to some of the Company's larger customers, which
typically have lower margins. The Company participates in certain manufacturer-
sponsored programs designed to increase sales of specific products. These
programs, excluding volume incentive programs and specific product rebates
offered by certain manufacturers, are not material when compared to the
Company's overall financial results. Due to the short order fulfillment cycle,
the Company's backlog is not considered to be a meaningful indicator of future
business prospects.
Service revenue for the three and six months ended June 30, 1997 increased
54% and 58%, respectively, from the same periods in 1996 to $59.7 million and
$113.4 million. Service revenue is primarily derived from systems integration
services, including field engineering, product configuration, and LAN/WAN
projects. LAN/WAN projects include consulting, network management, and help
desk services. Service revenue reflects revenue generated by the actual
performance of specific services and does not include product sales associated
with service projects. The increases in service revenue can be attributed to the
Company's continued focus on growing this portion of the business through the
hiring of additional service personnel and to growth in the Company's higher-end
service offerings. Also contributing to the revenue growth in service has been
the increase in unit volume of products sold such as desktops and laptops, many
of which create demand for services such as configuration and installation.
Service gross margin as a percentage of service net revenue for the three and
six months ended June 30, 1997 was 37.1% and 36.6%, respectively as compared to
30.0% and 33.3% for the same periods in 1996. The increase in service margins
was primarily caused by improved utilization of the Company's service personnel
and better management of spare parts used in the service business.
(Continued)
9
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Total operating expenses for the three and six months ended June 30, 1997
increased $4.3 million and $13.7 million, respectively, from the comparable
periods in 1996. The increase was mainly caused by large increases in both
service operating expenses, which increased 13.4% and 21.9%, respectively, and
general and administrative expense, which increased 17.2% and 23.2%,
respectively for the three and six months ended June 30, 1997 as compared to the
comparable periods in 1996. The increases noted are mainly attributable to the
Company's growth in its service business, which includes among other things the
recruiting and training of service personnel, and information systems
enhancements. However, the Company's focus on controlling expenses resulted in
total operating expenses remaining essentially flat from the first quarter of
1997 to the second quarter of 1997.
Selling expense and service expense have increased for the three and six
months ended June 30, 1997 when compared to the same periods in the prior year.
These increases can both be attributed to the growth in service revenue. The
increase in selling expense is primarily due to the higher commission rate paid
on services as compared to product sales. The increase in service expense can
be attributed to the growth in service revenue, as service revenue has become a
larger percentage of the Company's total net revenue. For the three and six
months ended June 30, 1997 service revenue as a percentage of total net revenue
was 12.1% and 12.3%, respectively, as compared to 7.6% and 7.8%, respectively,
for the comparable periods of the prior year. However, the Company has focused
on controlling expenses and has shown a decrease in service expense as a
percentage of service revenue for the three and six months ended June 30, 1997
as compared to the same periods of the prior year.
General and administrative expense, as a percentage of net revenue,
increased for the three and six months ended June 30, 1997 to 3.1% and 3.2% as
compared to 2.6% for both periods of the prior year. The increases reflect the
Company's continued investment in information system resources required to
broaden the Company's electronic commerce capabilities, as well as the decline
in revenues in 1997 compared to the prior year. The Company's operating
expenses are reported net of reimbursements by certain manufacturers for
specific training, promotional and marketing programs. These reimbursements
offset the expenses incurred by the Company.
Depreciation and amortization expense increased for the three and six
months ended June 30, 1997 in absolute dollars and as a percentage of net
revenue when compared to the same periods in 1996. The increases reflect
amortization expense associated with facility improvements and depreciation on
the following: warehouse equipment for the Company's new eastern distribution
facility, enhancements to the Company's information systems, and furniture and
fixtures required to support business activity. The Company has substantially
completed the refurbishment of and relocation to its new corporate headquarters
and operations campus and will commence depreciation during the third quarter of
1997.
Financing expenses remained flat as a percentage of net revenue for both
the three and six months ended June 30, 1997 as compared to the same periods in
1996. In absolute dollars, financing expenses decreased slightly for the three
months ended June 30, 1997, primarily due to a lower effective interest rate.
For the six months ended June 30, 1997, financing expenses increased slightly in
absolute dollars when compared to the comparable period of the prior year, due
to increased borrowings used to take advantage of prompt-pay discounts offered
by certain manufacturers, partially offset by a lower effective interest rate.
The Company's effective interest rate during the three and six months ended June
30, 1997 was 6.8% and 6.7%, respectively, as compared to 7.1% and 7.3 %,
respectively, in the same periods of 1996.
During the second quarter of 1996, the Company participated in the
secondary stock offering of PC Service Source, Inc. resulting in an after tax,
nonrecurring gain on the sale of securities of $5.2 million.
(Continued)
10
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
As a result of the factors noted above, net earnings, excluding the
nonrecurring gain, for the three months ended June 30, 1997 increased to $8.0
million from $7.1 million in the same period of the prior year, and for the six
months ended June 30, 1997 remained flat at $12.9 million as compared to the
same period of the prior year. The earnings per share impact of the
nonrecurring gain was $.11 and $.10 on a fully diluted basis for the three and
six months ended June 30, 1996, respectively. Future improved profitability
will depend on the Company's ability to retain and hire quality service
personnel while effectively managing the utilization of such personnel. It will
also depend on increased focus in providing technical service and support to
customers, product demand, competition, manufacturer product availability and
pricing changes, effective utilization of vendor programs as well as the
Company's control of operating expenses.
Liquidity and Capital Resources
- -------------------------------
Working capital at June 30, 1997 was $235 million compared to $342 million
at December 31, 1996. The decrease is primarily due to the off-balance-sheet
financing entered into by the Company in which effectively $100 million of
accounts receivable were sold and the proceeds used to pay down long-term debt.
This also contributed to the Company's working capital ratio slightly decreasing
from 2.2 to 2.1.
The Company's capital asset requirements are generally funded through
financing arrangements, internally generated funds or leasing sources. The
Company's financing arrangements consist of a $200 million working capital
facility, the $100 million Securitization Facility, and a $25 million real
estate loan. The Company is currently evaluating other permanent financing
options for the $25 million real estate loan. The business is not capital asset
intensive, and capital expenditures in any year normally would not be
significant in relation to the overall financial position of the Company. The
Company is continuing to refurbish and update its new headquarters and
operations campus and currently anticipates the completed consolidation of its
headquarters and operations to the new site during the second half of 1997.
After that consolidation is complete, the Company expects to sell the
headquarters facility it currently owns and occupies. Capital expenditures were
approximately $8.0 million during the second quarter of 1997 and $12.0 million
for the six months ended June 30, 1997. These expenditures were primarily
related to preparing the Company's new headquarters and operations campus for
full occupancy. The Company expects capital expenditures to return to more
normal levels after the ongoing refurbishment of its new headquarters and
operations campus has been completed.
This document contains "forward-looking statements" regarding revenues,
margins, operating expenses, earnings, growth rates and certain business trends
that are subject to risks and uncertainties that could cause actual results to
differ materially from the results described herein. Recipients of this
document are cautioned to consider these risks and uncertainties and to not
place undue reliance on these forward-looking statements.
11
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Company held its Annual Meeting of Shareholders on May 14, 1997. At
the meeting, the shareholders voted in favor of electing as directors the ten
nominees named in the Proxy Statement dated April 9, 1997, and for an amendment
to the Company's 1993 Stock Option Plan. The number of votes cast for, against
or withheld, as well as, the number of abstentions and broker nonvotes were as
follows:
Election of Directors:
For Withheld
--- --------
Charles A. Root 52,293,237 459,487
Edward R. Anderson 52,296,587 456,137
Daniel F. Brown 52,292,787 459,937
Donald R. Caldwell 51,993,602 759,122
Michael J. Emmi 52,297,437 455,287
Richard F. Ford 51,928,350 824,374
Delbert W. Johnson 52,287,137 465,587
John D. Loewenberg 52,297,237 455,487
Warren V. Musser 52,289,577 463,147
Edward N. Patrone 52,295,600 457,124
Proposal to Amend the Company's 1993 Stock Option Plan:
For Against Abstain Broker Nonvotes
--- ------- ------- ---------------
42,110,984 1,403,939 326,195 -
12
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
--------
Exhibit
No. Description
------- -----------
10.1 Amendment No. 4 to Transfer and Administration Agreement,
dated as of April 1, 1997, among CSI Funding, Inc.,
CompuCom Systems, Inc., Enterprise Funding Corporation and
NationsBank, N.A. (exhibits omitted)
10.2 Amendment No. 2 to Receivables Purchase Agreement, dated
as of April 1, 1997, among CSI Funding, Inc., CompuCom
Systems, Inc., Enterprise Funding Corporation and
NationsBank, N.A. (exhibits omitted)
11 Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed by the Registrant during the
three months ended June 30, 1997.
13
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
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.
COMPUCOM SYSTEMS, INC.
--------------------------------------
(Registrant)
DATE: August 14, 1997 /s/ Edward Anderson
--------------------------------------
Edward Anderson,
President and Chief Executive Officer
DATE: August 14, 1997 /s/ M. Lazane Smith
---------------------------------------
M. Lazane Smith,
Senior Vice President, Finance and
Chief Financial Officer
<PAGE>
EXHIBIT 10.1
AMENDMENT NO. 4 TO TRANSFER AND ADMINISTRATION AGREEMENT
AMENDMENT NO. 4 (this "Amendment"), dated as of April 1, 1997, TO
---------
TRANSFER AND ADMINISTRATION AGREEMENT dated as of April 1, 1996, as amended as
of September 25, 1996, December 5, 1996 and February 1, 1997, by and among CSI
FUNDING INC., a Delaware corporation, as transferor (hereinafter, together with
its successors and assigns in such capacity, called the "Transferor"), COMPUCOM
----------
SYSTEMS, INC., a Delaware corporation, as collection agent (hereinafter,
together with its successors and assigns in such capacity, called the
"Collection Agent"), ENTERPRISE FUNDING CORPORATION, a Delaware corporation
- -----------------
(hereinafter, together with its successors and assigns, called the "Company")
-------
and NATIONSBANK, N.A., a national banking association, as agent for the benefit
of the Company and the Bank Investors (hereinafter, together with its successors
and assigns in such capacity, called the "Agent").
-----
W I T N E S S E T H :
--------------------
WHEREAS, the Transferor, the Collection Agent, the Company and the
Agent have entered into a Transfer and Administration Agreement, dated as of
April 1, 1996 (such agreement, as amended to the date hereof, the "Agreement");
---------
WHEREAS, the parties hereto have entered into a certain letter
agreement, dated March 25, 1997, a copy of which is attached hereto as Exhibit
A, the terms of which the parties hereto desire to incorporate into this
Amendment; and
WHEREAS, the parties hereto wish to amend the Agreement as hereinafter
provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, the terms
-------------
used herein shall have the
<PAGE>
meanings assigned to such terms in, or incorporated by reference into, the
Agreement.
SECTION 2. Amendments to Agreement. The Agreement is hereby
-----------------------
amended, effective on the Effective Date, as follows:
(a) Section 2.13 shall be deleted in its entirety; and
(b) Section 2(f) of Amendment No. 1, dated as of September 25, 1996,
to the Agreement, shall be amended by deleting the words "Pursuant to the terms
of Section 5.1(j)" and by replacing them with the words "Pursuant to the terms
of Section 5.2(j)".
(c) The definition of "Commitment Termination Date" in Section 1.1
shall be deleted in its entirety and replaced with the following definition,
effective as of March 25, 1997:
"Commitment Termination Date" means December 31, 1997, or such
---------------------------
later date to which the Commitment Termination Date may be extended by the
Transferor, the Agent and the Bank Investors.
SECTION 3. Effectiveness. This Amendment shall become effective
-------------
on April 1, 1997 (the "Effective Date").
--------------
SECTION 4. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment.
SECTION 5. Consents; Binding Effect. The execution and delivery by
------------------------
the Company, the Transferor, the Collection Agent and the Agent of this
Amendment shall constitute the written consent of each of them to this
Amendment. This Amendment shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns.
2
<PAGE>
SECTION 6. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
SECTION 7. Severability of Provisions. Any provision of this
--------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8. Captions. The captions in this Amendment are for
--------
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 9. Agreement to Remain in Full Force and Effect. Except as
--------------------------------------------
amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified, adopted and confirmed in all respects. This Amendment shall be
deemed to be an amendment to the Agreement. All references in the Agreement to
"this Agreement", "hereunder", "hereof", "herein", or words of like import, and
all references to the Agreement in any other agreement or document shall
hereafter be deemed to refer to the Agreement as amended hereby.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
4 to Transfer and Administration Agreement to be executed as of the date and
year first above written.
ENTERPRISE FUNDING CORPORATION,
as Company
By /s/ STEWART L. CUTLER
------------------------------------
Name: Stewart L. Cutler
Title: Vice President
CSI FUNDING INC., as Transferor
By /s/ DAN LANE
------------------------------------
Name: Dan Lane
Title: Vice President
COMPUCOM SYSTEMS, INC.,
as Collection Agent
By /s/ DANIEL CELONI
------------------------------------
Name: Daniel Celoni
Title: Treasurer
NATIONSBANK, N.A., as Agent
and as Bank Investor
By: /s/ STAN MEIHAUS
-----------------------------------
Name: Stan Meihaus
Title: Vice President
4
<PAGE>
EXHIBIT A
[NATIONSBANK LETTERHEAD APPEARS HERE]
March 25, 1997
Mr. Dan Lane
Vice President and Secretary
CSI Funding, Inc.
10100 North Central Expressway
Dallas, Texas 75231
Dear Mr. Lane:
This letter is to confirm our agreement to amend the Transfer and Administration
Agreement (the"TAA") dated April 1, 1996 (as amended from time to time), and the
Receivables Purchase Agreement (the "RPA"), dated April 1, 1996 (as amended from
time to time), by and among Enterprise Funding Corporation. NationsBank, N.A.,
CSI Funding, Inc., and CompuCom Systems, Inc. Capitalized terms used herein are
defined in either the TAA or the RPA.
The TAA is amended as follows:
1) The existing definition of "Commitment Termination Date" in the TAA
is deleted, and a new definition inserted as follows:
"Commitment Termination Date" means December 31, 1997, or such later
-----------------------------
date to which the Commitment Termination Date may be extended by the
Transferor, the Agent and the Bank Investors.
2) Section 2(1) of Amendment #1 to the TAA, dated as of September 25,
1996, is amended by deleting the phrase "Pursuant to the terms of
Section 5.1(j)..." and replacing such term with "Pursuant to the
terms of Section 5.2(j)."
The RPA is amended as follows:
1) "Inventory Financing Agreements" is inserted as a Definition, as
follows:
"Inventory Financing Agreements" means those agreements
--------------------------------
specifically referenced in Section 5.1(j).
The Transferor and CompuCom hereby represent and warrant that the
representations and warranties set forth in Section 3.1 of the TAA (as amended)
are true and correct as of the date hereof (except those representations and
warranties set forth threin which specifically relate to an earlier date). All
other terms and conditions of the TAA and the RPA not amended by this letter
agreement shall remain unchanged and in full force and effect.
<PAGE>
If this letter correctly sets forth our agreement, please sign the enclosed
duplicate originals and return to:
Stan Meihaus
Vice President
NationsBank Structured Finance
NationsBank Corporate Center, 10th Floor
100 North Tryon St.
Charlotte, NC 28255
Sincerely,
NATIONSBANK, N.A., as
Administrative Agent and
Collateral Agent
/s/ Stan Meihaus
- ----------------------------
By: Stan Meihaus
-------------------------
Title: Vice President
----------------------
ENTERPRISE FUNDING CORPORATION
/s/ Stewart L. Cutler
- ----------------------------
By: Stewart L. Cutler
-------------------------
Title: Vice President
----------------------
CSI FUNDING, INC.
/s/ Patrick D. Lane
- ---------------------------
By: Patrick D. Lane
------------------------
Title: Vice President
---------------------
COMPUCOM SYSTEMS, INC.
/s/ Daniel Celoni
- ---------------------------
By: Daniel Celoni
------------------------
Title: Treasurer
---------------------
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT NO. 2 (this "Amendment"), dated as of April 1, 1997, TO
---------
RECEIVABLES PURCHASE AGREEMENT dated as of April 1, 1996, as amended by
Amendment No. 1 thereto dated as of September 25, 1996, between CSI FUNDING
INC., a Delaware corporation (hereinafter, together with its successors and
assigns, called the "Purchaser") and COMPUCOM SYSTEMS, INC., a Delaware
---------
corporation (hereinafter, together with its successors and assigns, called the
"Seller").
- -------
W I T N E S S E T H :
--------------------
WHEREAS, the Purchaser and the Seller have entered into a Receivables
Purchase Agreement, dated as of April 1, 1996 (such agreement, as amended to the
date hereof, the "Agreement");
---------
WHEREAS, the parties hereto have entered into a certain letter
agreement, dated March 25, 1997, a copy of which is attached hereto as Exhibit
A, the terms of which the parties hereto desire to incorporate into this
Amendment; and
WHEREAS, the parties hereto wish to amend the Agreement as
hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, the terms
-------------
used herein shall have the meanings assigned to such terms in, or incorporated
by reference into, the Agreement.
SECTION 2. Amendments to Agreement. The Agreement is hereby amended,
-----------------------
effective on the Effective Date, by inserting the following defined term in
Section 1.1 of the Agreement in alphabetical order:
<PAGE>
"Inventory Financing Agreements" shall mean those agreements
------------------------------
specifically referenced in Section 5.1(j).
SECTION 3. Effectiveness. This Amendment shall become effective
-------------
on April 1, 1997 (the "Effective Date").
--------------
SECTION 4. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment.
SECTION 5. Consents; Binding Effect. The execution and delivery by
------------------------
the Seller and the Purchaser of this Amendment shall constitute the written
consent of each of them to this Amendment. This Amendment shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
SECTION 6. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
SECTION 7. Severability of Provisions. Any provision of this
--------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8. Captions. The captions in this Amendment are for
--------
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 9. Agreement to Remain in Full Force and Effect. Except as
--------------------------------------------
amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified, adopted and confirmed in all respects. This Amendment shall be
deemed to be an amendment to the Agreement. All references in the Agreement to
"this
2
<PAGE>
Agreement", "hereunder", "hereof", "herein", or words of like import, and
all references to the Agreement in any other agreement or document shall
hereafter be deemed to refer to the Agreement as amended hereby.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to Receivables Purchase Agreement to be executed as of the date and year first
above written.
CSI FUNDING INC., as Purchaser
By /s/ DAN LANE
-------------------------------------------
Name: Dan Lane
Title: Vice President
COMPUCOM SYSTEMS, INC.,
as Seller
By /s/ DANIEL CELONI
-------------------------------------------
Name: Daniel Celoni
Title: Treasurer
Acknowledged and agreed as of
the date first above written:
ENTERPRISE FUNDING CORPORATION
By: /s/ STEWART L. CUTLER
----------------------------
Name: Stewart L. Cutler
Title:
NATIONSBANK, N.A.
By: /s/ STAN MEIHAUS
----------------------------
Name: Stan Meihaus
Title: Vice President
4
<PAGE>
[NATIONSBANK LETTERHEAD APPEARS HERE]
March 25, 1997
[LOGO OF NATIONSBANK APPEARS HERE]
Mr. Dan Lane
Vice President and Secretary
CSI Funding, Inc.
10100 North Central Expressway
Dallas, TX 75231
Dear Mr. Lane:
This letter is to confirm our agreement to amend the Transfer and Administration
Agreement (the "TAA") dated April 1, 1996 (as amended from time to time), and
the Receivables Purchase Agreement (the "RPA"), dated April 1, 1996 (as amended
from time to time, by and among Enterprise Funding Corporation, NationsBank,
N.A., CSI Funding, Inc., and CompuCom Systems, Inc. Capitalized terms used
herein are defined in either the TAA or the RPA.
The TAA is amended as follows:
1) The existing definition of "Commitment Termination Date" in the TAA
is deleted, and a new definition inserted as follows:
"Commitment Termination Date" means December 31, 1997, or such later
-----------------------------
date to which the Commitment Termination Date may be extended by the
Transferor, the Agent and the Bank Investors.
2) Section 2(1) of Amendment #1 to the TAA, dated as of September 25,
1996, is amended by deleting the phrase "Pursuant to the terms of
Section 5.1(j)..." and replacing such term with "Pursuant to the
terms of Section 5.2(j)."
The RPA is amended as follows:
1) "Inventory Financing Agreements" is inserted as a Definition, as
follows:
"Inventory Financing Agreements" means those agreements specifically
--------------------------------
referenced in Section 5.1(j).
The Transferor and CompuCom hereby represent and warrant that the
representations and warranties set forth in Section 3.1 of the TAA (as amended)
are true and correct as of the date hereof (except those representations and
warranties set forth therein which specifically relate to an earlier date). All
other terms and conditions of the TAA and the RPA not amended by this letter
agreement shall remain unchanged and in full force and effect.
<PAGE>
If this letter correctly sets forth our agreement, please sign the enclosed
duplicate originals and return to:
Stan Meihaus
Vice President
NationsBank Structured Finance
NationsBank Corporate Center, 10th Floor
100 North Tryon St.
Charlotte, NC 28255
Sincerely,
NationsBank, N.A., as
Administrative Agent and
Collateral Agent
/s/ Stan Meihaus
- --------------------------------------
By: Stan Meihaus
----------------------------------
Title: Vice President
-------------------------------
ENTERPRISE FUNDING CORPORATION
/s/ Stewart L. Cutler
- ---------------------------------------
By: Stewart L. Cutler
-----------------------------------
Title: Vice President
--------------------------------
CSI FUNDING, INC.
/s/ Patrick D. Lane
- ---------------------------------------
By: Patrick D. Lane
-----------------------------------
Title: Vice President
--------------------------------
COMPUCOM SYSTEMS, INC.
/s/ Daniel Celoni
- ----------------------------------------
By: Daniel Celoni
------------------------------------
Title: Treasurer
---------------------------------
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Exhibit 11 - Computation of Per Share Earnings
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- ----------------
1997 1996 1997 1996
--------- --------- ------- --------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
- ---------------------------------
Net earnings $ 7,980 $12,334 $12,852 $18,096
Preferred dividend (225) (225) (450) (450)
------- ------- ------- -------
$ 7,755 $12,109 $12,402 $17,646
======= ======= ======= =======
Average common shares outstanding 45,554 44,604 45,441 44,439
Average common share equivalents 1,517 2,893 1,677 2,811
------- ------- ------- -------
Average number of common shares and
common share equivalents outstanding 47,071 47,497 47,118 47,250
======= ======= ======= =======
Primary earnings per common share $ .16 $ .25 $ .26 $ .37
======= ======= ======= =======
FULLY DILUTED EARNINGS PER COMMON SHARE
- ---------------------------------------
Primary net earnings $ 7,980 $12,334 $12,852 $18,096
Interest expense, net of income tax
expense 23 23 46 46
------- ------- ------- -------
$ 8,003 $12,357 $12,898 $18,142
Average common shares outstanding 45,554 44,604 45,441 44,439
Average common share equivalents 1,555 2,892 1,678 3,019
Additional shares issuable 2,603 2,603 2,603 2,603
------- ------- ------- -------
Average number of common shares
assuming full dilution 49,712 50,099 49,722 50,061
======= ======= ======= =======
Fully diluted earnings per common share $ .16 $ .25 $ .26 $ .36
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 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> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,250
<SECURITIES> 0
<RECEIVABLES> 207,397
<ALLOWANCES> 2,479
<INVENTORY> 226,095
<CURRENT-ASSETS> 438,912
<PP&E> 83,171
<DEPRECIATION> 20,571
<TOTAL-ASSETS> 520,827
<CURRENT-LIABILITIES> 204,215
<BONDS> 125,644
0
15,000
<COMMON> 455
<OTHER-SE> 169,794
<TOTAL-LIABILITY-AND-EQUITY> 520,827
<SALES> 803,958
<TOTAL-REVENUES> 923,109
<CGS> 723,927
<TOTAL-COSTS> 798,669
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,670
<INCOME-PRETAX> 21,420
<INCOME-TAX> 8,568
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,852
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
