<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 MARCH 31, 1998 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 May 8,
1998 was 46,150,320 shares.
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
Item 1. Condensed Consolidated Balance Sheets
March 31, 1998 (unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Operations
Three months ended March 31, 1998 and 1997 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997 (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 6. Exhibits and Reports on Form 8-K 12
2
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------ -----------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash $ 4,422 $ 4,456
Receivables 166,905 177,141
Inventories 232,480 197,958
Other 3,198 2,880
------------------ -----------------
Total current assets 407,005 382,435
Property and equipment, net 64,922 63,359
Cost in excess of fair value of tangible net assets
purchased, less accumulated amortization 16,798 13,569
Other 4,379 3,227
------------------ -----------------
$ 493,104 $ 462,590
================== =================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 118,022 $ 72,475
Accrued liabilities 61,744 71,791
Convertible subordinated notes 3,000 3,000
------------------ -----------------
Total current liabilities 182,766 147,266
Long-term debt 88,200 97,400
Deferred income taxes 7,532 7,198
Other 650 526
Shareholders' equity:
Preferred stock 15,000 15,000
Common stock 461 461
Additional paid-in capital 65,900 65,762
Retained earnings 132,595 128,977
------------------ -----------------
Total shareholders' equity 213,956 210,200
------------------ -----------------
$ 493,104 $ 462,590
================== =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three months ended March 31, 1998 and 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31,
1998 1997
-------------- --------------
(unaudited)
<S> <C> <C>
Revenue:
Product $ 376,778 $ 375,605
Service 57,128 53,728
Other 3,846 2,556
-------------- --------------
Total revenue 437,752 431,889
-------------- --------------
Cost of revenue:
Product 332,898 336,673
Service 38,758 34,366
Other 1,931 1,372
-------------- --------------
Total cost of revenue 373,587 372,411
-------------- --------------
Gross margin 64,165 59,478
Operating expenses:
Selling 21,130 20,459
Service 14,665 10,771
General and administrative 14,880 14,292
Depreciation and amortization 3,330 2,591
-------------- --------------
Total operating expenses 54,005 48,113
-------------- --------------
Earnings from operations 10,160 11,365
Financing expenses 3,755 3,245
-------------- --------------
Earnings before income taxes 6,405 8,120
Income taxes 2,562 3,248
-------------- --------------
Net earnings $ 3,843 $ 4,872
============== ==============
Earnings per common share:
Basic $ .08 $ .10
Diluted $ .08 $ .10
Average common shares outstanding:
Basic 46,133 45,326
Diluted 50,182 49,748
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,843 $ 4,872
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,330 2,591
Deferred income taxes 334 (179)
Changes in assets and liabilities:
Receivables 10,236 67,422
Inventories (34,522) 41,166
Other current assets (318) (9)
Accounts payable 45,547 (75,979)
Accrued liabilities and other (11,075) (5,480)
--------------- ---------------
Net cash provided by operating activities 17,375 34,404
--------------- ---------------
Cash flows from investing activities:
Capital expenditures, net (4,099) (4,084)
Business acquisitions, net of cash acquired (4,023)
--------------- ---------------
Net cash (used in) investing activities (8,122) (4,084)
--------------- ---------------
Cash flows from financing activities:
Net bank credit facility and other borrowings (9,200) (31,835)
Issuance of common stock 138 1,671
Preferred stock dividend (225) (225)
--------------- ---------------
Net cash (used in) financing activities (9,287) (30,389)
--------------- ---------------
Net decrease in cash (34) (69)
Cash at beginning of period 4,456 4,320
--------------- ---------------
Cash at end of period $ 4,422 $ 4,251
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1998
(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 1997 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) Earnings per share
------------------
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 and specifies the computation, presentation, and disclosure
requirements for earnings per share. Basic earnings per common share is
based on net earnings after preferred stock dividends requirements, if any,
and the weighted-average number of common shares outstanding during each
period. Diluted earnings per common share assumes conversion of dilutive
convertible securities into common stock at the later of the beginning of the
period or date of issuance and includes the add-back of related interest
expense and/or dividends, as required. Prior period earnings per share have
been restated to conform to Statement 128. SFAS No. 128 also requires a
reconciliation of the numerators and denominators of the basic and diluted
per share computations as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months ended March 31, 1998
-------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------------- --------------- ---------------
<S> <C> <C> <C>
Net earnings $ 3,843
Less: Preferred stock dividends (225)
Basic earnings per share
- ------------------------
Income available to common shareholders 3,618 46,133 $ .08
Effect of dilutive securities
- -----------------------------
Stock options 1,446
Convertible preferred stock 225 2,216
Convertible debt 23 387
---------------- ---------------
Diluted earnings per share
- --------------------------
Income available to common shareholders + assumed conversions 3,866 50,182 $ .08
================ =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1997
-------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------------- --------------- ---------------
<S> <C> <C> <C>
Net earnings $4,872
Less: Preferred stock dividends (225)
Basic earnings per share
- ------------------------
Income available to common shareholders 4,647 45,326 $ .10
Effect of dilutive securities
- -----------------------------
Stock options 1,819
Convertible preferred stock 225 2,216
Convertible debt 23 387
---------------- ---------------
Diluted earnings per share
- --------------------------
Income available to common shareholders + assumed conversions 4,895 49,748 $ .10
================ =============== ===============
</TABLE>
The Company has excluded 230,867 and 132,111 shares from its calculations of
diluted earnings per share for the three months ended March 31, 1998 and March
31, 1997, respectively, as they are considered anti-dilutive.
(4) Reclassifications
-----------------
Certain amounts in the 1997 consolidated financial statements have been
reclassified to conform to the 1998 presentation.
6
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
March 31, 1998
Results of Operations
The following table shows the Company's total revenue, gross margin and
gross margin percentage by revenue source. Operating expenses, interest, income
taxes and net earnings are shown as a percentage of total net revenue for the
three months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
March 31,
1998 1997
------------------------------------
($ in thousands)
<S> <C> <C>
Revenue:
Product $ 376,778 $ 375,605
Service 57,128 53,728
Other 3,846 2,556
====================================
Total revenue 437,752 $ 431,889
====================================
Gross margin:
Product $ 43,880 $ 38,932
Service 18,370 19,362
Other 1,915 1,184
====================================
Total gross margin $ 64,165 $ 59,478
====================================
Gross margin percentage:
Product 11.6% 10.4%
Service 32.2% 36.0%
Other 49.8% 46.3%
------------------------------------
Total gross margin percentage 14.7% 13.8%
------------------------------------
Operating expenses:
Selling 4.8% 4.7%
Service 3.4% 2.5%
General and administrative 3.4% 3.3%
Depreciation and amortization 0.8% 0.6%
------------------------------------
Total operating expenses 12.4% 11.1%
------------------------------------
Operating earnings 2.3% 2.7%
Financing expenses 0.8% 0.8%
------------------------------------
Earnings before income taxes 1.5% 1.9%
Income taxes 0.6% 0.8%
------------------------------------
Net earnings 0.9% 1.1%
====================================
</TABLE>
(Continued)
7
<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, increased to $376.8 million
for the first quarter of 1998, compared to $375.6 million for the same period in
1997. The increase in product revenue is due to an increase in the number of
desktop, laptop, and server units sold, partially offset by a decrease in the
average unit sales price as compared to the same period in 1997.
Product gross margin as a percentage of product net revenues for the first
quarter of 1998 was 11.6%, compared to 10.4% for the same period in 1997. This
increase is due in part to a change in the mix of products sold, and an increase
in the amount of manufacturer sponsored incentives which also lowered the
average cost of units sold. Future product margins will be influenced by
competitive pressures from other resellers in the industry, direct marketers,
manufacturers' pricing strategies, the Company's ability to successfully manage
the channel assembly programs of its major vendors, and the level of low-margin
sales. The Company's integration of acquired companies in 1998 and thereafter
could also affect future product 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 first quarter of 1998 increased 6% to $57.1 million
compared to $53.7 million for the same period in 1997. Service revenue is
primarily derived from LAN/WAN projects, consulting, asset tracking, network
management, help desk, field engineering, procurement, configuration,
distribution, and software management. Service revenue reflects revenue
generated by the actual performance of specific services and does not include
product sales associated with service projects. The increase in service revenue
is due to increases in both configuration and field engineering, partially
offset by a decrease in systems engineering revenue. Service gross margin as a
percentage of service net revenue was 32.2% for the first quarter of 1998 as
compared to 36.0% for the same period in 1997. The decrease was primarily caused
by lower than anticipated systems engineering revenue as well as lower
utilization of the Company's service personnel due to their completion of
additional training and certification programs.
Operating expenses increased $5.9 million for the first quarter of 1998 as
compared to the same period in 1997. As a percentage of net revenue, operating
expenses for the first quarter of 1998 increased to 12.4% compared to 11.1% for
the same period in 1997. This increase was principally the result of increases
in service operating expenses as the Company continued investments in its
service business through additional training of engineers and the hiring of
additional support personnel.
(Continued)
8
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Selling expense, as a percentage of net revenues, increased for the first
quarter of 1998 when compared to the same period in 1997, primarily as a result
of the hiring of additional sales representatives. Service expense increased as
a percentage of net revenues and in absolute dollars as service has become a
slightly larger part of the Company's business when compared to the same period
in 1997. As a percentage of service revenue, service expense has increased in
part due to efforts by the Company to standardize certain service support
functions that will enable the Company to more tightly couple its service
deliverables. This effort resulted in duplication of costs in some areas during
the transition period.
General and administrative expense, as a percentage of net revenue,
increased to 3.4% during the first quarter of 1998 as compared to 3.3% for the
same period in 1997. This increase was primarily due to the Company's hiring of
approximately 90 college graduates as part of its ongoing campus recruiting
program. The campus recruits completed training and certification programs
before being recently added to the Company's billable workforce. 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 in absolute dollars and as
a percentage of net revenue for the first quarter of 1998 as compared to the
same period in 1997. The increases mainly reflect depreciation associated with:
1) upgrading the Company's hardware and software at the Company's headquarters
and branch locations; 2) increased furniture and fixtures to support headcount
additions; and 3) the Company's corporate headquarters and operations campus,
which was placed in service during the third quarter of 1997.
Financing expense increased for the first quarter of 1998 as compared to
the same period in 1997, primarily due to higher borrowings as the Company took
advantage of early-pay discounts offered by its larger vendors. The Company's
effective interest rate was 6.5% during the first quarter of 1998 and in the
first quarter of 1997.
As a result of the factors discussed above, net earnings for the first
quarter of 1998 decreased 21% to $3.8 million as compared to the same period in
1997. 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 on
providing technical service and support to customers, demand for product,
competition, manufacturer product availability and pricing changes, effective
utilization of vendor programs, the Company's ability to successfully manage the
implementation and operation of the channel assembly programs of its major
suppliers, the Company's ability to adequately integrate recent and potential
future acquisitions, as well as the Company's control of operating expenses.
(Continued)
9
<PAGE>
COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
- -------------------------------
Working capital at March 31, 1998 was $224 million compared to $235 million
at December 31, 1997. The slight decrease is primarily due to an increase in
accounts payable, partially offset by an increase in inventory.
The Company's working capital requirements are generally funded through
financing arrangements and internally generated funds. As of March 31, 1998,
the Company's financing arrangements consist of a $175 million Securitization
Facility, a $125 million working capital facility and a $25 million real estate
loan (collectively, the "Credit Agreements"). The term of the Credit
Agreements is five years. The Company is currently evaluating other permanent
financing options for the real estate loan. The Company is also currently in the
process of expanding its financing arrangements to fund planned future
acquisitions.
The Company's 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. Capital expenditures were
approximately $4.1 million during the first quarter of 1998, and $4.0 million
during the first quarter of 1997. The majority of the 1998 expenditures were
related to the upgrading of Company hardware and software located at both
headquarters and branch locations. The majority of the $4.0 million in 1997 was
for facility improvements to prepare the Company's headquarters and operations
campus for occupancy.
On April 10, 1998, the Company announced it had signed definitive
agreements with Computer Integration Corporation ("CIC") and holders of
approximately 55% of CIC's common stock under which CompuCom would acquire CIC
in a cash for stock transaction. Under the terms of the agreements, CompuCom
will pay a total of $17.25 million, of which $15.3 million would be used to
purchase all of CIC's outstanding preferred stock and common stock. Of the $15.3
million, approximately $2.75 million (or $0.196 per share) was deposited in an
interest-bearing escrow fund. Any amount remaining in the escrow fund after the
payment of certain potential post-closing adjustments will be paid to CIC's
common stockholders approximately one year after closing. The acquisition was
completed on May 13, 1998.
On April 10, 1998, the Company announced it had signed a definitive
agreement with Dataflex Corporation ("Dataflex") under which CompuCom would
acquire Dataflex in a cash for stock transaction. Under the terms of the
agreement, CompuCom would pay a total of $25,482,000 to purchase all of
Dataflex's outstanding common stock. The acquisition is expected to be completed
in the second quarter.
This document contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 regarding revenues,
margins, operating expenses, earnings, growth rates, acquisitions 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.
10
<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. 1 to CompuCom Systems, Inc., 401(k) Matched
Savings Plan, effective January 1, 1998 (exhibits omitted)
10.2 Amendment No. 2 to CompuCom Systems, Inc., 401(k) Matched
Savings Plan, effective January 26, 1998 (exhibits omitted)
10.3 IBM Credit Corporation agreement with CompuCom Systems,
Inc., to extend the terms of the Agreement for Inventory
Financing to September 21, 1998 (exhibits omitted)
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 March 31, 1998.
11
<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: May 14, 1998 /s/ Edward Anderson
-------------------------------------
Edward Anderson,
President and Chief Executive Officer
DATE: May 14, 1998 /s/ M. Lazane Smith
-------------------------------------
M. Lazane Smith,
Senior Vice President, Finance and
Chief Financial Officer
12
<PAGE>
EXHIBIT 10.1
AMENDMENT ONE TO
COMPUCOM SYSTEMS, INC.
401(k) MATCHED SAVINGS PLAN
WHEREAS, effective January 1, 1998, CompuCom Systems, Inc. ("the
Company") established the CompuCom Systems, Inc. 401(k) Matched Savings Plan
(the "Plan") for the benefit of employees of the Company and its affiliated
entities; and
WHEREAS, the Company amended and restated the Plan in its entirety,
effective as of May 1, 1996; and
WHEREAS, the Company wants to amend the Plan, effective on January 1,
1998, to change the definition of Contribution Period from each Plan Year to
each calendar quarter, for the purpose of making Matching Contributions to the
Plan and to eliminate the 1,000 Hours of Service eligibility requirement for
Matching Contributions; and
NOW, THEREFORE, pursuant to its authority under Section 19.1 of the
Plan, the Company amends the Plan, effective January 1, 1998, as follows:
1. Existing Section 6.1 is deleted in its entirety, and the following is
substituted in its place:
"6.1 Contribution Period
Prior to January 1, 1998, the Contribution Period for all Employer
Contributions under the Plan was each Plan Year. Effective January 1,
1998, the Contribution Period for Matching Contributions under the Plan
shall be each calendar quarter, and the Contribution Period for Profit-
Sharing Contributions and Qualified Nonelective Contributions under the
Plan shall continue to be each Plan Year."
2. Existing Section 6.10 is deleted in its entirety, and the following is
substituted in its place:
"6.10 Eligibility to Participate in Allocation
Each Employee shall be eligible to participate in the allocation of
Employer Contributions beginning on the date he becomes, or again
becomes, an Eligible
<PAGE>
Employee in accordance with the provisions of Article III.
Notwithstanding the foregoing, no person shall be eligible to
participate in the allocation of regular Profit Sharing Contributions
for a Contribution Period unless (i) he is employed by an Employer or a
Related Company on the last day of the Contribution Period and (ii) he
has completed at least 1,000 Hours of Service during the Plan Year;
provided, however, that the foregoing provisions shall not apply to a
person who terminates employment during the Plan year on or after his
Normal Retirement Date or because of death or physical or mental
disability such that he can no longer continue in the service of his
Employer and is eligible to receive either (a) a disability benefit
under the terms of the Social Security Act or (b) a benefit under his
Employer's long term disability plan.
Effective January 1, 1998, all of the provisions in the preceding
paragraph are applicable to the allocation of Matching Contributions
with the exception of the 1,000 Hours of Service requirement. If the
Plan would not otherwise meet the minimum coverage requirements of
Section 410(b) of the Code in any Plan year, the group of Employees
eligible to participate in the allocation of Matching Contributions
should be expanded to include the minimum number of Employees who are
not employed by an Employer or a Related Company on the last day of the
Contribution Period that is necessary to meet the minimum coverage
requirements."
IN WITNESS WHEREOF, COMPUCOM SYSTEMS, INC. has caused this instrument to
be executed by its duly authorized officer on this 16th day of October, 1997.
COMPUCOM SYSTEMS, INC.
BY: /s/ M. LAZANE SMITH
--------------------------------
ITS: SR VP Finance, CFO
-------------------------------
<PAGE>
EXHIBIT 10.2
AMENDMENT TWO TO
COMPUCOM SYSTEMS, INC.
401(k) MATCHED SAVINGS PLAN
WHEREAS, effective January 1, 1988, CompuCom Systems, Inc. (the
"Company") established the CompuCom Systems, Inc. 401(k) Matched Savings Plan
(the "Plan") for the benefit of employees of the Company and its affiliated
entities; and
WHEREAS, the Company amended and restated the Plan in its entirety,
effective as of May 1, 1996 and adopted Amendment One to the Plan, effective on
January 1, 1998; and
WHEREAS, the Company acquired ECC II Corporation on January 26, 1998
("Acquisition Date") and desires to amend the Plan to grant past service credit
to those persons employed by ECC II Corporation who became employees of the
Company effective as of the Acquisition Date; and
NOW, THEREFORE, pursuant to its authority under Section 19.1 of the
Plan, the Company amends the Plan, effective January 26, 1998, as follows:
1. Effective January 26, 1998, the existing definition of "Predecessor
Employer" in Section 1.1 is deleted in its entirety, and the following
is substituted in its place:
"A "Predecessor Employer" means ComputerFactory, Photo & Sound,
Microsolutions, Allersion, NCG, IMS, Trellis, Apex, Benchmark and Dr.
Micro and such other entities as determined by the Sponsor's Board of
Directors. Effective January 26, 1998, ECC II Incorporated is added as a
Predecessor Employer under the Plan only for those individuals who were
employed by ECC II Incorporated on January 25, 1998, and who became
employees of the Employer on January 26, 1998."
<PAGE>
IN WITNESS WHEREOF, COMPUCOM SYSTEMS, INC. has caused this instrument to
be executed by its duly authorized officer on this 19th day of February, 1998.
---- --------
COMPUCOM SYSTEMS, INC.
By: /s/ M. LAZANE SMITH
-----------------------
Its: Sr. VP Finance/CFO
-----------------------
<PAGE>
EXHIBIT 10.3
[LOGO AND LETTER OF IBM CREDIT CORPORATION APPEARS HERE]
April 22, 1998
Compucom Systems, Inc.
Mr. Daniel Celoni
Vice President, Finance
7171 Forest Lane
Dallas, TX 75230
Reference: Agreement for Inventory Financing, dated September 20, 1996 (the
"Agreement")
Dear Dan,
IBM Credit Corporation ("IBM Credit") is pleased to offer Compucom Systems, Inc.
("Compucom") an extension of the terms of the Agreement for the period specified
below.
Please indicate your acceptance of this extension of the Termination Date (as
defined in the Agreement) from December 21, 1997 to September 21, 1998 by
signing this letter, where indicated, and returning it to IBM Credit on or
before May 22, 1998.
Compucom acknowledges that the Agreement has been in full force and effect for
the period December 21, 1997 through and including the date that this letter is
executed by both IBM Credit and Compucom.
Except as specifically modified by this letter, the terms and conditions of the
Agreement shall remain in full force and effect.
IBM Credit wants to provide Compucom with quality financial services as an
enhancement to Compucom's business activities. IBM Credit therefore appreciates
this opportunity to respond to Compucom's financing needs.
Sincerely, Acknowledged and Agreed to:
IBM CREDIT CORPORATION *COMPUCOM SYSTEMS, INC.
By: [ILLEGIBLE] By: /s/ DANIEL CELONI
------------------------- --------------------------
Title: AOM - Credit Title: VP - Finance
---------------------- -----------------------
Date: April 22, 1998 Date: April 24, 1998
----------------------- ------------------------
*Please read in conjunction with
Amendment for Inventory
Financing made as of December
16, 1997 by and between CompuCom
Systems Inc. and IBM Credit
Corporation DC 4/24/98.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,422
<SECURITIES> 0
<RECEIVABLES> 169,642
<ALLOWANCES> 2,737
<INVENTORY> 232,480
<CURRENT-ASSETS> 407,005
<PP&E> 91,001
<DEPRECIATION> 26,079
<TOTAL-ASSETS> 493,104
<CURRENT-LIABILITIES> 183,416
<BONDS> 88,200
0
15,000
<COMMON> 461
<OTHER-SE> 198,495
<TOTAL-LIABILITY-AND-EQUITY> 493,104
<SALES> 376,778
<TOTAL-REVENUES> 437,752
<CGS> 332,898
<TOTAL-COSTS> 373,587
<OTHER-EXPENSES> 54,005
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,755
<INCOME-PRETAX> 6,405
<INCOME-TAX> 2,562
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,843
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
