FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission File Number 1-5620
------------------ ------
SAFEGUARD SCIENTIFICS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1609753
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 The Safeguard Building, 435 Devon Park Drive Wayne, PA 19087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 293-0600
--------------
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 and 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
-------
Number of shares outstanding as of November 9, 1995
Common Stock 14,649,032
SAFEGUARD SCIENTIFICS, INC.
QUARTERLY REPORT FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1 - Financial Statements:
Consolidated Balance Sheets -
September 30, 1995 (unaudited) and December 31, 1994 3
Consolidated Statements of Operations (unaudited) -
Three and Nine Months Ended September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows (unaudited) -
Nine Months Ended September 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
<TABLE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED BALANCE SHEETS
(000 omitted)
<CAPTION>
September 30 December 31
ASSETS 1995 1994
------------ ------------
(UNAUDITED)
Current Assets
<S> <C> <C>
Cash $ 6,404 $ 7,860
Receivables less allowances
($2,655 - 1995; $6,466 - 1994) 244,118 276,034
Inventories 173,166 160,380
Other current assets 5,374 5,832
--------- ---------
Total current assets 429,062 450,106
Property, Plant and Equipment 77,119 79,569
Less accumulated depreciation
and amortization (34,541) (36,014)
--------- ---------
42,578 43,555
Commercial Real Estate 25,727 25,538
Less accumulated depreciation (7,790) (7,105)
--------- ---------
17,937 18,433
Other Assets
Investments 90,792 66,310
Notes and other receivables 6,822 5,554
Excess of cost over net assets of
businesses acquired 22,342 22,187
Other 14,890 11,010
--------- ---------
134,846 105,061
--------- ---------
$624,423 $617,155
========= =========
</TABLE>
<TABLE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED BALANCE SHEETS
(000 omitted except shares)
<CAPTION>
September 30 December 31
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
------------ ------------
(UNAUDITED)
Current Liabilities
<S> <C> <C>
Current commercial real estate debt $ 3,108 $ 3,120
Current debt obligations 8,716 14,041
Accounts payable 166,550 168,431
Accrued expenses 53,991 63,284
Taxes on income 30 374
--------- ---------
Total current liabilities 232,395 249,250
Long-Term Debt 186,789 201,393
Commercial Real Estate Debt 17,427 17,594
Deferred Taxes 12,744 7,336
Other Liabilities 891 969
Minority Interest 38,493 30,066
Shareholders' Equity
Common stock, par value $.10 a share
Authorized -20,000,000 shares
Issued -16,399,671 shares 1,640 1,093
Additional paid-in capital 24,789 25,669
Retained earnings 104,787 91,780
Treasury stock, at cost
1,770,975 shares-1995 (10,798)
2,174,394 shares-1994 (13,228)
Net unrealized appreciation on investments 15,266 5,233
--------- ---------
135,684 110,547
--------- ---------
$624,423 $617,155
========= =========
</TABLE>
<TABLE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000 omitted except per share data)
<CAPTION>
Three Months Ended
September 30
------------------------
1995 1994
--------- ----------
Revenues (UNAUDITED)
Information Technology
<C> <C> <C>
Microcomputer Systems $347,899 $306,654
Information Solutions 10,005 10,870
Workstation and Security Systems 16,795
--------- ---------
357,904 334,319
Metal Finishing 7,768 8,077
Commercial Real Estate 673 970
--------- ---------
Net Sales 366,345 343,366
Gains on sales of securities, net 6,020 8,473
Other income 1,841 736
--------- ---------
Total Revenues 374,206 352,575
Costs and Expenses
Cost of sales 298,474 284,941
Selling 37,150 30,777
General and administrative 18,979 17,388
Depreciation and amortization 4,148 4,265
Interest 4,882 4,680
Income from equity investments (146) (579)
--------- ---------
Total Costs and Expenses 363,487 341,472
--------- ---------
Earnings Before Minority Interest
and Taxes 10,719 11,103
Minority interest (2,877) (1,373)
--------- ---------
Earnings Before Taxes On Income 7,842 9,730
Provision for taxes on income 3,137 2,161
--------- ---------
Net Earnings $ 4,705 $ 7,569
========= =========
Earnings Per Share
Primary $ .29 $ .51
Fully Diluted .27 .49
Average Common Shares Outstanding
Primary 15,422 14,687
Fully Diluted 15,477 14,723
</TABLE>
<TABLE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000 omitted except per share data)
<CAPTION>
Nine Months Ended
September 30
--------------------------
1995 1994
----------- -----------
Revenues (UNAUDITED)
Information Technology
<S> <C> <C>
Microcomputer Systems $1,022,096 $ 894,136
Information Solutions 31,017 44,224
Workstation and Security Systems 50,191
----------- -----------
1,053,113 988,551
Metal Finishing 25,235 22,618
Commercial Real Estate 1,728 3,041
----------- -----------
Net Sales 1,080,076 1,014,210
Gains on sales of securities, net 12,619 15,337
Other income 6,890 2,898
----------- -----------
Total Revenues 1,099,585 1,032,445
Costs and Expenses
Cost of sales 883,477 840,061
Selling 104,612 89,458
General and administrative 56,310 53,017
Depreciation and amortization 12,321 12,584
Interest 14,996 12,434
Income from equity investments (1,712) (952)
----------- -----------
Total Costs and Expenses 1,070,004 1,006,602
----------- -----------
Earnings Before Minority Interest
and Taxes 29,581 25,843
Minority interest (7,904) (4,092)
----------- -----------
Earnings Before Taxes On Income 21,677 21,751
Provision for taxes on income 8,670 7,091
----------- -----------
Net Earnings $ 13,007 $ 14,660
=========== ===========
Earnings Per Share
Primary $ .82 $ .97
Fully Diluted .74 .92
Average Common Shares Outstanding
Primary 15,298 14,693
Fully Diluted 15,436 14,706
</TABLE>
<TABLE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 omitted)
<CAPTION> Nine Months Ended
September 30
1995 1994
------------ ------------
Operating Activities (UNAUDITED)
<S> <C> <C>
Net earnings $ 13,007 $ 14,660
Adjustments to reconcile net earnings to
cash from operating activities
Depreciation and amortization 12,321 12,584
Deferred income taxes 2,073 2,866
Income from equity investments (1,712) (952)
Gains on sales of securities, net (12,619) (15,337)
Minority interest, net 4,743 2,439
--------- ---------
17,813 16,260
Cash provided (used) by changes in working
capital items
Receivables 11,237 9,885
Inventories (16,511) (36,961)
Other current assets (1,334) 989
Accounts payable and accrued expenses 4,670 (5,671)
Taxes on income (344) (4,078)
--------- ---------
(2,282) (35,836)
--------- ---------
Cash provided (used) by operating activities 15,531 (19,576)
Proceeds from sales of securities, net 15,873 15,837
--------- ---------
Cash provided (used) by operating activities
and sales of securities, net 31,404 (3,739)
Other Investing Activities
Investments and notes acquired, net (11,678) (7,883)
Expenditures for property, plant & equipment (8,154) (8,427)
Business acquisitions, net of cash acquired (2,874) (500)
Other, net (6,673) (4,625)
--------- ---------
Cash (used) by other investing activities (29,379) (21,435)
Financing Activities
Net borrowings (repayments) on revolving
credit facilities (13,996) 11,775
Repayments on term debt (5,655) (4,083)
Borrowings on term debt 12,650 14,548
Stock issued by subsidiaries 1,424 2,704
Repurchase of common stock (33) (551)
Stock options exercised 2,129 1,060
--------- ---------
Cash provided (used) by financing activities (3,481) 25,453
--------- ---------
Increase (Decrease) in Cash (1,456) 279
Cash - beginning of year 7,860 9,796
--------- ---------
Cash - End of Period $ 6,404 $ 10,075
========== =========
</TABLE>
SAFEGUARD SCIENTIFICS, INC.
Notes to Consolidated Financial Statements
September 30, 1995
1. The accompanying unaudited interim consolidated financial statements
were prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. The Summary of Accounting Policies and Notes to
Consolidated Financial Statements included in the 1994 Form 10-K
should be read in conjunction with the accompanying statements. These
statements include all adjustments (consisting only of normal
recurring adjustments) which the Company believes are necessary for a
fair presentation of the statements. The interim operating results
are not necessarily indicative of the results for a full year.
2. The Company has contributed a portion of its ownership in CenterCore
to the company, sold a significant portion of its remaining interest
in CenterCore to CenterCore's management and provided $3 million in
advances and standby letters of credit to address CenterCore's
funding requirements. Anticipated obligations of the Company with
respect to CenterCore were provided for in 1994. CenterCore is not
included in the consolidated financial statements effective January
1, 1995 due to the Company's reduced ownership.
3. In August 1995, the Company's credit facility was renegotiated to
increase the availability from $75 million to $100 million and reduce
the interest rate on LIBOR based borrowings by .5%. All other
significant terms of the facility remained the same.
In April 1995, CompuCom's credit facility was renegotiated to
increase the availability from $150 million to $175 million. All
other significant terms of the facility remained the same.
4. All share and per share data have been retroactively adjusted to
reflect the three-for-two split of the Company's common shares
effective August 31, 1995.
5. On September 25, 1995, CompuCom called for the redemption of $18.5
million of 9% Convertible Subordinated Notes due September 24, 2002
(the "Notes"). Subsequently, on October 25, 1995, the Notes were
converted into 8.4 million shares of CompuCom's Common Stock in
accordance with their conversion feature. The effect on the Company
was to decrease the Company's ownership of the Common Stock of
CompuCom from 62% to 50%. The Company continues to hold a 63% voting
interest in CompuCom as a result of voting rights associated with the
Company's ownership of CompuCom's Series B Cumulative Convertible
Preferred Stock.
SAFEGUARD SCIENTIFICS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Net sales for the quarter and nine months ended September 30, 1995
increased to $366.3 million and $1.08 billion from $343.4 million and $1.01
billion for the same periods in 1994, respectively. Net earnings for the
quarter ended September 30, 1995 were $4.7 million or $.29 per share
compared to $7.6 million or $.51 per share for the same period in 1994.
Net earnings for the nine months ended September 30, 1995 were $13.0
million or $.82 per share compared to $14.7 million or $.97 per share for
the same period in 1994. Net earnings for the third quarter of 1994 were
enhanced by significantly higher securities gains and a lower effective tax
rate. Pre-tax operating earnings before security gains and minority
interest for the third quarter and first nine months of 1995 increased 79%
and 61%, respectively, over the comparable period of 1994.
Comparison of the nine months ended September 30, 1995 results to the
same period in 1994 is impacted by the third quarter 1994 rights offering
of stock in Coherent Communications to shareholders of the Company which
reduced Safeguard's ownership in Coherent to below 50%. In the third
quarter of 1994, the Company began using the equity method of accounting
for its remaining investment in Coherent. In addition, during late 1994
into 1995, the Company initiated actions that resulted in Safeguard holding
a minority ownership position in CenterCore. As a result, CenterCore is
not included in the Company's consolidated financial statements beginning
January 1, 1995. During the quarter and nine months ended September 30,
1994, CenterCore incurred pre-tax operating losses of $1.7 million and
$4.2 million, respectively.
The net sales increase for the quarter ended September 30, 1995
reflects the 13% increase in sales at CompuCom Systems, Inc. partially
offset by reduced sales due to the disposition of CenterCore. The higher
sales at CompuCom are a result of the continued demand by corporate
customers for personal computers, as well as CompuCom's strategy of
expanding its enterprise network integration capabilities through internal
growth and acquisitions. In addition, the Company believes the increase in
net sales can be attributed to corporate customers continuing to
consolidate their outsourcing and outtasking needs. CompuCom's third
quarter net sales reflect an increase in service revenue of approximately
80% over the third quarter of 1994 and approximately 8% over the second
quarter of 1995, and include revenue from several small strategic
acquisitions in the service arena which occurred in late 1994 and early
1995. Although net sales continued to exceed prior year, CompuCom
experienced a slight decline in net sales when compared to the second
quarter of 1995, which the Company believes can be attributed to corporate
customers' delays in upgrading personal computers while evaluating the
impact of Pentium/Windows95. Corporate demand for the remainder of 1995
and the first part of 1996 will be influenced by the timing of both the
acceptance of and transition to Windows95.
CompuCom's sales growth, coupled with the sale or disposition of the
two companies previously mentioned, resulted in CompuCom sales representing
95% of total sales for the nine months ended September 30, 1995 compared to
89% for the same period in 1994. As a result of the relative significance
of CompuCom in the consolidated results, fluctuations in other business
units have tended to have a minimal impact. CompuCom's third quarter
earnings increased 48% from 1994. This earnings increase was partially
offset by lower earnings in the Company's metal finishing and information
solution subsidiaries.
The October 25, 1995, conversion of CompuCom's 9% Convertible
Subordinated Notes will result in annual after-tax interest savings to
CompuCom of approximately $1 million. In addition, the Company's ownership
of the Common Stock of CompuCom will decrease from approximately 62% to 50%
which will result in an increased future allocation of CompuCom's net earnings
to minority interest in the Company's consolidated financial statements.
The Company continues to hold a 63% voting interest in CompuCom as a result
of voting rights associated with the Company's ownership of CompuCom's
Series B Cumulative Convertible Stock.
The Company's most significant equity investments, Coherent
Communications and Cambridge Technology Partners continued their strong
performance in the third quarter of 1995. Coherent's net earnings
increased 69% compared to 1994 on a 35% sales increase. Sales of its echo
cancellers and related products were particularly strong in Europe, Asia
and North America.
Cambridge's sales and earnings increased 68% and 62%, respectively,
in the third quarter of 1995 compared to the comparable quarter of 1994.
The company continues to see increased demand for its services in the U.S.
and Europe. It has established itself as a global force in the
client/server application market by successfully applying its business
methodology globally, gaining international acceptance of its unique fixed-
time/fixed-price model and client-centered approach. Cambridge also
recently announced two acquisitions. The Systems Consulting Group provides
Cambridge with enhanced capabilities in package implementation and
integration. Axiom Management Consulting, Inc. is a management consulting
firm that focuses on "business renewal", and will enhance Cambridge's
process re-engineering services by providing critical mass in the
management consulting area.
Safeguard's latest rights offering, USDATA Corporation, recently
announced operating results in line with expectations. USDATA reported net
income for the quarter of $113,000, or $.01 a share, compared to $863,000,
or $.07 a share in 1994. The operating results reflect USDATA's strategy
to make substantial investments in product development, sales channel
expansion and marketing promotions to drive accelerated sales activity.
USDATA expects to see greater return on its investments in infrastructure
over the next several quarters. Growth in its higher margin software
revenues also should yield improved profitability in future quarters.
The 1994 results included pre-tax securities gains of $8.5 million,
primarily from the sale of Safeguard's holdings in Coherent Communications
in a rights offering to Safeguard shareholders, compared to pre-tax gains
of $6 million in 1995. Security gains of varying magnitudes have been
realized in recent years; prior gains are not necessarily indicative of
gains which may be realized in the future.
Gross margin increased at CompuCom for the third quarter, when
compared to the same quarter in 1994, principally due to the increase in
service-related activity resulting from CompuCom's continued emphasis on
the growth of the service business, partially offset by lower product
margins. As service sales increase at a rate greater than product sales,
overall gross margin is favorably impacted due to service margin as a
percentage of service net sales being higher than product margin. Product
margins were down slightly from the third quarter of 1994 as well as the
previous quarter of 1995 and reflect increased pricing competition in the
computer reseller marketplace. Future product margins will be influenced
by manufacturers' pricing strategies together with competitive pressures.
Overall gross margin will be enhanced to the extent CompuCom is able to
increase service sales through internal growth and acquisitions. CompuCom
participates in certain manufacturer-sponsored programs designed to
increase sales of specific products. These programs, excluding volume
rebates and specific product rebates offered by certain manufacturers, are
not material when compared to CompuCom's overall financial results.
The increase in selling expense both as a percentage of net sales and
in absolute dollars reflects expenses associated with the overall service
sales growth at CompuCom, including its recent acquisitions, as well as
costs related to the planned development of an infrastructure necessary to
manage and expand the service business. These increases were partially
offset by continued improvement in product sales productivity at CompuCom.
General and administrative expenses stayed relatively flat as a
percentage of sales. In absolute dollars, general and administrative
expenses increased primarily due to CompuCom's investment in information
system resources required to enhance customer satisfaction, particularly in
the service segment, and other discretionary spending necessary to meet
CompuCom's objectives. CompuCom'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 CompuCom.
Interest expense increased by $2.5 million for the nine months ended
September 30, 1995, primarily as a result of higher average interest rates,
increased borrowing levels at CompuCom to fund working capital requirements
and increased borrowings at the Company for new business opportunities.
For the quarter ended September 30, 1995, interest expense remained
relatively flat with the prior year. CompuCom is pursuing alternatives to
reduce its cost of funds and the Company has reduced its cost of funds.
The third quarter 1994 effective tax rate was lower than the third
quarter 1995 effective tax rate due to the Coherent rights offering in
1994. In prior periods, the Company amortized goodwill relating to
Coherent, which, at that time was not tax deductible. With the sale of a
portion of the Coherent stock, a pro rata portion of the previously
expensed goodwill became currently tax deductible which reduced the
effective tax rate in 1994.
Liquidity and Capital Resources
The Company, CompuCom and Premier each maintain separate, independent
bank credit facilities with several banks. CompuCom's credit facility is
non-recourse to the Company, and prohibits the payment of common stock
dividends while the credit lines remain outstanding.
During August 1995 the Company increased total availability under its
credit facility to $100 million from $75 million and reduced the interest
rate on the LIBOR based borrowings under the facility by .5%. Borrowings
at September 30, 1995 were $43.5 million leaving an availability of $56.5
million. The Company also periodically generates cash from the sale of
publicly traded equity securities which it holds. The Company's bank credit
facility is secured by its publicly traded equity securities, including
CompuCom. The value of these securities significantly exceeds the total
availability under the bank credit facility.
In March 1995, the Company transferred three commercial real estate
properties to the lender in full satisfaction of the related debt.
The Company expects its future corporate liquidity to be generated
through internal cash flow, the sale, as required, of selected minority-
owned, publicly traded securities and increased availability under the
credit facility. These sources should be sufficient to fund the Company's
cash requirements through 1996.
During recent years, CompuCom has utilized equity financing,
operating earnings, its bank credit facility and long-term subordinated
notes to fund its significant revenue growth and related operating asset
requirements. CompuCom maintains a satisfactory relationship with several
banks. In April 1995, CompuCom increased its bank revolving credit
facility from $150 million to $175 million to support its growth.
The credit facility is subject to certain collateral restrictions and
matures in March 1997. At September 30, 1995, approximately $99 million of
this facility was outstanding, with an additional $76 million available for
borrowing. In addition, at September 30, 1995, CompuCom had outstanding
$18.5 million of 9% Convertible Subordinated Notes ("Notes") issued in
1992. The Notes, convertible into 8.4 million shares of CompuCom's common
stock, were due in September 2002. On September 25, 1995, CompuCom called
for redemption the entire principal balance of the Notes. The shares were
converted on October 25, 1995, resulting in a decrease in CompuCom's long-
term debt and a corresponding increase in stockholders' equity. In an
effort to assist the holders of these shares to sell in the public market
all or a portion of the converted shares, CompuCom filed a registration
statement with the Securities and Exchange Commission for an underwritten
public offering of approximately 4.8 million of these shares. The public
offering commenced October 26, 1995 and resulted in the sale of all the
shares offered. CompuCom received no proceeds from the sale.
In 1995, Premier Solutions Ltd. entered into a $4.5 million
Master Demand Note, of which $3.3 million was outstanding at September 30,
1995. The note is a demand note payable within five days of notice, bears
interest at Prime plus .5% and is secured by substantially all of Premier's
assets.
The business is not capital asset intensive, and capital expenditures
in any year normally would not be significant in relation to total assets.
Capital asset requirements are generally funded through internally
generated funds, the bank credit facility or other financing sources.
There are no material capital asset purchase commitments at September 30,
1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
10.1 Amendment to Second Amended and Restated Loan and
Security Agreement dated August 3, 1995 between
Safeguard Scientifics, Inc. and Safeguard
Scientifics (Delaware), Inc. and Midlantic Bank,
N.A.
11 Computation of Per Share Earnings
27 Financial Data Schedule (electronic filing only)
(b) No reports on Form 8-K have been filed by the Registrant
during the quarter ended September 30, 1995.
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.
SAFEGUARD SCIENTIFICS, INC.
(Registrant)
Date: November 14, 1995 /s/ Warren V. Musser
--------------------------------------
Warren V. Musser,
Chairman,
President and Chief Executive Officer
Date: November 14, 1995 /s/ Gerald M. Wilk
--------------------------------------
Gerald M. Wilk
Vice President
(Principal Financial and
Principal Accounting Officer)
AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT made this 3rd day of August, 1995 between SAFEGUARD
SCIENTIFICS, INC. and SAFEGUARD SCIENTIFICS (DELAWARE) INC. ("Borrower")
and MIDLANTIC BANK, N.A. ("Bank").
BACKGROUND
The parties are parties to that certain Second Amended and Restated
Loan and Security Agreement dated February 1, 1995 (as amended to date,
the "Loan Agreement"), and desire hereby to further amend the same as
herein set forth. Capitalized terms used herein which are not defined
herein shall have the meaning given thereto in the Loan Agreement.
NOW, THEREFORE, the parties hereto, INTENDING TO BE LEGALLY BOUND,
agree as follows:
1. Modifications.
a) Effective August 3, 1995, the "Revolving Loan Commitment"
shall be increased to $100,000,000, as the same may be reduced
pursuant to Section 2.2 of the Loan Agreement.
b) Effective for all LIBOR Rate advances made on or after
August 3, 1995, each reference in Section 2.8(c)(A)(ii) of the Loan
Agreement to "2.25 percentage points" shall be changed to "1.75
percentage points".
c) Effective August 3, 1995, the definition of "Collateral
Coverage Base" as set forth in Section 1.1 of the Loan Agreement is
hereby revised to read as follows:
"'Collateral Coverage Base' - a dollar amount equal to the
following percentages of the value of the Collateral Coverage
Securities, in no event, however, to exceed the lesser of (i) as to
Collateral Coverage Securities which constitute "margin stock"
pursuant to Regulation U of the Board of Governors of the Federal
Reserve System, 12 C.F.R. 221 et seq. ("Regulation U"), 50% (or the
then maximum "loan value" for margin stock pursuant to Regulation U)
of the value of such Collateral Coverage Securities, and (ii) the
following dollar maximum specified for each type of Collateral
Coverage Securities:
Securities % Maximum $
---------- --- ---------
CompuCom 33.33% $25 Million
Cambridge 40% $40 Million
Novell 50% N/A
Sybase 50% N/A
Coherent 40% $35 Million
Tangram 25% $5 Million
Gandalf 25% $5 Million"
d) Effective August 3, 1995, Section 2.17 of the Loan Agreement
is restated in its entirety to read as follows:
"SECTION 2.17 Participations. Borrowers acknowledge that
67.50% of the Revolving Loan (and each cash advance and letter of
credit made or issued thereunder) is being and is intended hereafter
to be funded by Meridian Bank, First Bank, National Association and
PNC Bank, National Association (each a "Participant") as participants
of Bank in the Loan, all as more fully set forth in that certain
Amended and Restated Participation Agreement dated as of February 1,
1995 (as amended from time-to-time, the "Participation Agreement").
In this regard, Borrowers agree that:
(A) Bank may from time-to-time provide financial and other
information concerning the Borrowers to each Participant and, with
Borrowers' prior consent, to any other prospective participant, and
(B) Should any Participant default under its obligations to Bank
to fund any portion of its participation in the Loan, or should the
participation of any Participant be terminated by Bank at either
Borrower's request (to the extent Bank has the right to do so under
its arrangements with such Participant), Bank will have no obligation
to fund (including by issuance of letters of credit) any Loan to the
extent of such Participant's share thereof."
2. Reaffirmation. Borrower hereby reaffirms and confirms all of
its obligations and liabilities under the Loan Agreement and all
documents executed in connection therewith, agrees that the same remain
unchanged (except as amended pursuant to this Amendment) and in full
force and effect and that Borrower is indebted to Bank under the terms
thereof without defense, set-off, recoupment, charge, discount, claim or
counterclaim of any kind.
IN WITNESS WHEREOF, the undersigned have executed this Amendment
the day and year first above written.
SAFEGUARD SCIENTIFICS, INC.
By: /s/Michael W. Miles
Vice President, Corporate Controller
Attest:/s/Deirdre Blackburn
Assistant Secretary
SAFEGUARD SCIENTIFICS (DELAWARE) INC.
By: /s/Michael W. Miles
Assistant Treasurer
Attest: /s/Deirdre Blackburn
Assistant Secretary
MIDLANTIC BANK, N.A.
By: /s/Joseph Meterchick
Vice President
<TABLE>
SAFEGUARD SCIENTIFICS, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
(000 omitted except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
Primary earnings per common share
<S> <C> <C> <C> <C>
Net earnings $ 4,705 $ 7,569 $13,007 $14,660
Adjustment (1) (216) (127) (526) (453)
-------- -------- -------- --------
$ 4,489 $ 7,442 $12,481 $14,207
======== ======== ======== ========
Average common shares outstanding 14,626 14,246 14,481 14,154
Average common share equivalents 796 441 817 539
-------- -------- -------- --------
Average number of common shares and
common share equivalents outstanding 15,422 14,687 15,298 14,693
======== ======== ======== ========
Primary earnings per common share $.29 $.51 $.82 $.97
======== ======== ======== ========
Fully diluted earnings per common share
Primary net earnings $ 4,705 $ 7,569 $13,007 $14,660
Adjustment (1) (585) (367) (1,648) (1,114)
-------- -------- -------- --------
$ 4,120 $ 7,202 $11,359 $13,546
======== ======== ======== ========
Average common shares outstanding 14,626 14,246 14,481 14,154
Average common share equivalents 851 477 955 552
-------- -------- -------- --------
Average number of common shares
assuming full dilution 15,477 14,723 15,436 14,706
======== ======== ======== ========
Fully diluted earnings per common share $.27 $.49 $.74 $.92
======== ======== ======== ========
(1) Net earnings are adjusted for the dilutive effect of public subsidiary common stock equivalents
(primary) and convertible securities (fully diluted).
Share and per share data have been retroactively adjusted to reflect the three-for-two split of the
Company's common shares effective August 31, 1995. Earnings per share calculations for each period 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 share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,404
<SECURITIES> 0
<RECEIVABLES> 246,773
<ALLOWANCES> 2,655
<INVENTORY> 173,166
<CURRENT-ASSETS> 429,062
<PP&E> 102,846
<DEPRECIATION> 42,331
<TOTAL-ASSETS> 624,423
<CURRENT-LIABILITIES> 232,395
<BONDS> 204,216
<COMMON> 1,640
0
0
<OTHER-SE> 134,044
<TOTAL-LIABILITY-AND-EQUITY> 624,423
<SALES> 1,080,076
<TOTAL-REVENUES> 1,099,585
<CGS> 883,477
<TOTAL-COSTS> 883,477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,996
<INCOME-PRETAX> 27,869
<INCOME-TAX> 8,670
<INCOME-CONTINUING> 13,007
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,007
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.74
</TABLE>
