UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 5, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-20022
POMEROY COMPUTER RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 31-1227808
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1020 Petersburg Road, Hebron, Kentucky 41048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (606) 586-0600
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
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Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock of the Registrant held by non
affiliates was $158,536,975 as of February 29, 2000.
The number of shares outstanding of the Registrant's common stock as of February
29, 2000 was 11,916,164.
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DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Into Which Portions of Documents
Document Are Incorporated
Definitive Proxy Statement for the 2000 Part III
Annual Meeting of Stockholders to be
Filed with the Securities and Exchange
Commission prior to May 4, 2000.
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POMEROY COMPUTER RESOURCES, INC.
FORM 10-K
YEAR ENDED JANUARY 5, 2000
TABLE OF CONTENTS
PART I Page
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Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 13
Item 9. Disagreements on Accounting and Financial
Disclosures 13
PART III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management 13
Item 13. Certain Relationships and Transactions 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 14
SIGNATURES Chief Executive Officer, Chief Financial Officer and
Chief Accounting Officer 33
Directors 33
Report of Independent
Certified Public Accountants F-1
Financial Statements F-2 to F-19
Exhibits
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
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Certain of the matters discussed under the captions "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" may
constitute forward-looking statements for purposes of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended, and as such may involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Important factors that could cause the
actual results, performance or achievements of the Company to differ materially
from the Company's expectations are disclosed in this document and in documents
incorporated herein by reference, including, without limitation, those
statements made in conjunction with the forward-looking statements under
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the factors discussed under "Business - Certain
Business Factors". All written or oral forward-looking statements attributable
to the Company are expressly qualified in their entirety by such factors.
PART I
ITEM 1. BUSINESS
Pomeroy Computer Resources, Inc. (the "Company") is a Delaware Corporation
organized in February 1992 to consolidate and reorganize predecessor companies.
All of the predecessor companies were controlled by David B. Pomeroy, the
Company's Chairman of the Board, President and Chief Executive Officer.
The Company's business is comprised of (1) the sale of a broad range of desktop
computer equipment including hardware, software, and related products, and (2)
the provision of information technology (IT) services which support such
computer products, and (3) the provision of in-house leasing solutions for the
Company's products and services customers. Prior to January 6, 1999, the Company
(including its wholly-owned subsidiaries Global Combined Technologies, Inc.,
Pomeroy Computer Resources of South Carolina, Inc. ("PCR-SC") and Technology
Integration Financial Services, Inc. ("TIFS")) operated the IT products and
services business as a single integrated business. In December, 1998, the
Company formed a new subsidiary, Pomeroy Select Integration Solutions, Inc.
("Pomeroy Select"), for the purpose of operating independently the IT services
business previously operated by the Company other than procurement and
configuration services which are directly related to the sale of products. On
January 6, 1999, the Company transferred the assets, liabilities, business,
operations and personnel comprising its IT services business (excluding
procurement and configuration services) in exchange for 10 million shares of
Class B common stock of Pomeroy Select. The separation of the IT services
business is a part of the Company's ongoing strategy to expand its services
revenue. In January 1999, Pomeroy Select filed an initial S-1 registration
statement with the Securities and Exchange Commission (the "SEC") with respect
to an initial public offering of its Class A Common Stock. Currently, this S-1
registration is on hold due to market conditions and there can be no assurance
that Pomeroy Select will be able to consummate this public offering. In October
1999, the legal structure of the Company was changed for the purpose of
increasing efficiencies. The Company formed the following wholly-owned
subsidiaries: Pomeroy Computer Resources Holding Company, Inc. ("PCR Holding")
and Pomeroy Computer Resources Sales Company, Inc. ("PCR Sales"). In addition,
the Company formed Pomeroy Select Advisory Services, Inc. ("PSAS"), a
wholly-owned subsidiary of Pomeroy Select, Acme Data Services, LLC ("Acme
Data"), a wholly-owned subsidiary of PCR Sales, T.I.F.S. Advisory Services, Inc.
("TIFS Advisory"), a wholly-owned subsidiary of TIFS, and Pomeroy Computer
Resources LLP ("PCR Ops"), a partnership between the Company and PCR Holding.
PCR-SC and Global Combined Technologies, Inc. were merged into PCR Sales.
The Company now operates in three industry segments: products, services and
leasing. The products segment is primarily engaged in the sale, and distribution
of computers, hardware, software and related products. The Company offers
products from an array of manufacturers including Cisco, Computer Associates,
Compaq, Hewlett-Packard, IBM, Microsoft, Nortel Networks, Novell and 3Com Palm
Computing. The services segment offers three categories of services:
internetworking services, user support services and desktop management services.
Internetworking services include project management; network design,
integration, management, migration and support; and network infrastructure
services. User support services include customized help desk services,
internet-based training on many popular software packages, managed internet
access, internet search engine deployment and video/teleconferencing services.
Desktop management services include warranty and non-warranty repair and
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maintenance; a full range of install, move, add or change services; redeployment
and mobile systems management; evaluation and tracking of information technology
assets; and end-of-life services. The leasing segment primarily provides in
house leasing services to the Company's products and services customers. The
Company leases many types of equipment with the predominant focus on notebook
and desktop personal computers, communication products and high powered servers.
The Company provides products and services primarily to large and medium sized
corporate, health care, governmental, financial and educational customers. See
Note 17 of Notes to Consolidated Financial Statements for a presentation of
segment information.
The Company's strategy for building shareholder value is to provide
comprehensive solutions to improve the productivity of its clients' information
technology systems. Key elements of the Company's strategy are: (1) to generate
higher margin revenues by leveraging existing client relationships, (2) to
expand service offerings particularly in the higher end services and networking
areas, (3) to expand offerings and grow the customer base through strategic
acquisitions, and (4) to maintain and enhance technical expertise by hiring and
training highly qualified technicians and systems engineers.
The Company is an authorized dealer or reseller for the products of over 35
major vendors. The Company believes that its access to major vendors enables it
to offer a wide range of products to meet the diverse requirements of its
customers. However, the increasing demand for microcomputers has resulted in
significant product supply shortages from time to time because manufacturers
have been unable to produce sufficient quantities of certain products to meet
demand. As in the past, the Company expects to experience some difficulty in
obtaining an adequate supply of products from its major vendors which has
resulted, and may continue to result, in delays in completing sales. These
delays have not had, and are not anticipated to have, a material adverse effect
on the Company's results of operations. However, the failure to obtain adequate
product supply could have a material adverse effect on the Company's results of
operations.
The Company's sales are generated primarily by its 275 person direct sales and
sales support personnel located in 31 regional offices in 14 states throughout
the Southeast and Midwest United States. The Company's business strategy is to
provide its customers with a complete package of personal computers and network
infrastructure products, internetworking services and desktop management
services. Internetworking services and support includes: including network
architecture, consulting and design, network integration, network performance
and capacity tuning, E-business architecture and implementation, designing and
installing systems, training, maintaining and repairing hardware and software
and brokering used equipment. In addition, the Company is in a position to offer
standard leasing services and custom tailored leasing solutions for our
customers. Leases generally range from twelve to thirty-six months. Coupled with
the products and services segments, the Company has the ability to provide
turnkey financial services with all components including equipment
configuration, delivery, installation, maintenance, internet training, and
de-installation services all included in a periodic payment. The Company
believes that its ability to combine competitive pricing of computer hardware,
software and related products with sophisticated higher margin services allows
it to compete effectively against a variety of alternative microcomputer
distribution channels, including independent dealers, superstores, mail order
and direct sales by manufacturers. With many businesses seeking assistance to
optimize their information technology investments and control ongoing costs
throughout the life cycle of technology systems, the Company is using its
resources to assist customers in their decision-making, project implementation
and equipment and information management.
Most microcomputer products are sold pursuant to purchase orders. For larger
procurements, the Company may enter into written contracts with customers. These
contracts typically establish prices for certain equipment and services and
require short delivery dates for equipment and services ordered by the customer.
These contracts do not require the customer to purchase microcomputer products
or services exclusively from the Company and may be terminated without cause
upon 30 to 90 days notice. Most contracts are for a term of 12 to 24 months and,
in order to be renewed, may require submission of a new bid in response to the
customer's request for proposal. As of January 5, 2000, the Company has been
awarded contracts which it estimates will result in an aggregate of
approximately $156.3 million of net sales and revenues after January 5, 2000. Of
this amount, the Company estimates that approximately $129.5 million of net
sales and revenues will be generated in fiscal 2000. By comparison, as of
January 5, 1999, the Company had been awarded contracts which it estimated would
result in an aggregate of approximately $77.2 million of net sales and revenues
after January 5, 1999. Of this amount, the Company estimated that $51.2 million
of net sales and revenues would be generated during fiscal 1999 and the
remainder would be generated after the end of fiscal 1999. The estimates of
management could be materially less than stated as a result of factors which
would cause one or more of these customers to order less product or services
than is anticipated. Such factors include that the customer finds another
supplier for the desired products at a lower price or on better terms, the
internal business needs of the customer change causing the customer to require
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less or different products and services, or a significant change in technology
or other industry conditions occurs which alters the customer's needs or timing
of purchases.
The Company has also established relationships with industry leaders relating to
its services segment including the authorization to perform warranty and
non-warranty repair work for several vendors. In some cases, the authorization
of Pomeroy Select to continue performing warranty work for a particular
manufacturer's products is dependent upon the performance of the Company under a
dealer agreement with that manufacturer. The Company's technical personnel
currently have an aggregate of more than 200 Microsoft certifications, more than
300 Novell certifications, 34 Nortel Networks Specialist certifications, 16
Nortel Networks Expert certifications, 17 IBM Professional Service Expert
certifications, 45 Compaq Accredited Systems Engineer certifications, 24 Hewlett
- -Packard Network Technical Professional certifications, 10 Citrix Certified
Administrator certifications, 31 Cisco Certified Network Associates
certifications, 1 Cisco Certified Network Professional certificate, 1 Cisco
Certified Internetwork Expert certificate, 3 Cisco Certified Design Associates
certifications, 4 Computer Associates Certified Unicenter Engineer
certifications and one of each of the following advanced certifications: Protean
Router, Network General Sniffer, Fore Systems and Oracle Advanced SQL.
The Company generally provides its services to its customers on a
time-and-materials basis and pursuant to written contracts or purchase orders.
The Company's arrangements with its customers generally can be terminated by
either party with limited or no advance notice. The Company also provides some
of its services under fixed-price contracts rather than contracts billed on a
time-and-materials basis. Fixed-price contracts are used when the Company
believes it can clearly define the scope of services to be provided and the cost
of providing those services.
The Company has initiated a program known as the Pomeroy Preferred Partner
Program to better serve its customers. Through the program, the Company has the
ability to focus on the group of manufacturers which it has deemed "best in
class" through its research, customer feedback, and its experience in the
industry. By focusing on these "preferred" manufacturers, the company is
building mutual business commitments that will benefit the customers. Such
benefits include access to favorable pricing, key decision-makers, better terms
and conditions and enhanced sales and technical training.
In July 1999, the Company began participating in the newly established channel
assembly program from IBM called Build from Parts Program ("BFP"). The
objective of the BFP program is to achieve cost savings through lower finished
goods inventory, higher inventory turns and lower price protection requirements,
while passing cost savings on to customers and minimizing the direct marketers'
pricing advantage. Since that date, the Company has assembled, tested, and
performed various levels of custom configuration on over 30,000 units. The BFP
Program is an evolutionary change to the successful IBM Authorized Assembler
Program ("AAP"). The Company has been participating in the IBM channel assembly
programs since September of 1997.
The Company has entered into dealer agreements with its major
vendors/manufacturers. These agreements are typically subject to periodic
renewal and to termination on short notice. Substantially all of the Company's
dealer agreements may be terminated by the vendor without cause upon 30 to 90
days advance notice, or immediately upon the occurrence of certain events. A
vendor could also terminate an authorized dealer agreement for reasons unrelated
to the Company's performance. Although the Company has never lost a major
vendor/manufacturer, the loss of such a vendor/product line or the deterioration
of the Company's relationship with such a vendor/manufacturer would have a
material adverse effect on the Company.
For fiscal years 1997, 1998 and 1999, sales of computer hardware, software, and
related products were approximately $445.8 million, $554.0 million, $648.9
million respectively, and accounted for approximately 90.7%, 88.3% and 85.8%
respectively, of the consolidated net sales and revenues of the Company. The
Company's revenues from its service and support activities have grown over the
last several years. For fiscal years 1997, 1998 and 1999, revenues from service
and support activities were approximately $45.2 million, $72.5 million and
$103.8 million respectively, and accounted for approximately 9.2%, 11.6% and
13.7% respectively, of the consolidated net sales and revenues of the Company.
The Company's revenue from its leasing services has grown since its inception in
1997. For fiscal years 1997, 1998 and 1999, leasing revenues were approximately
$0.5 million, $1.4 million and $4.0 million respectively, and accounted for
approximately 0.1% for fiscal 1997 and 1998 and 0.5% for fiscal 1999 of the
consolidated net sales and revenues of the Company.
COMPETITION
The microcomputer products, services and leasing market is highly competitive.
Distribution has evolved from manufacturers selling directly to customers, to
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manufacturers selling to aggregators (wholesalers), resellers and value-added
resellers. Competition, in particular the pressure on pricing, has resulted in
industry consolidation. In the future, the Company may face fewer but larger
competitors as a consequence of such consolidation. These competitors may have
access to greater financial resources than the Company. In response to
continuing competitive pressures, including specific price pressure from the
direct telemarketing, internet and mail order distribution channels, the
microcomputer distribution channel is currently undergoing segmentation into
value-added resellers who emphasize advanced systems together with service and
support for business networks, as compared to computer "superstores," who offer
retail purchasers a relatively low cost, low service alternative and direct-mail
suppliers which offer low cost and limited service. Certain superstores have
expanded their marketing efforts to target segments of the Company's customer
base, which could have a material adverse impact on the Company's operations and
financial results. While price is an important competitive factor in the
Company's business, the Company believes that its sales are principally
dependent upon its ability to provide comprehensive customer support services.
The Company's principal competitive strengths include: (i) quality assurance;
(ii) service and technical expertise, reputation and experience; (iii)
competitive pricing of products through alternative distribution sources; (iv)
prompt delivery of products to customers; (v) various financing alternatives;
(vi) ability to provide prompt responsiveness to customers services needs and to
build performance guarantees into services contracts.
The Company competes for product sales directly with local, national and
international distributors and resellers. In addition, the Company competes with
microcomputer manufacturers that sell product through their own direct sales
forces and to distributors. Although the Company believes its prices and
delivery terms are competitive, certain competitors offer more aggressive
hardware pricing to their customers.
The Company's services segment competes, directly and indirectly, with a variety
of national and regional service providers, including services organizations of
established computer product manufacturers, value-added resellers, systems
integrators, internal corporate management information systems and, to a lesser
extent, consulting firms, aggregators and distributors. The Company believes
that the principal competitive factors for information technology services
include technical expertise, the availability of skilled technical personnel,
breadth of service offerings, reputation, financial stability and price. To be
competitive, the Company must respond promptly and effectively to the challenges
of technological change, evolving standards and its competitors' innovations by
continuing to enhance its service offerings and expand sales channels. Any
pricing pressures, reduced margins or loss of market share resulting from the
Company's failure to compete effectively could materially adversely affect its
business.
The Company believes its services segment competes successfully by providing a
comprehensive solution for its customers' information technology asset
management and networking services needs. The Company delivers cost-effective,
flexible, consistent, reliable and comprehensive solutions to meet customers'
information technology infrastructure service requirements. The Company also
believes that it distinguishes itself on the basis of its technical expertise,
competitive pricing and its ability to understand its customers' needs.
The Company's leasing segment competes directly and indirectly with various
lenders. Manufacturing competitors generally have their own leasing companies,
which include private label services provided by other organizations. In
addition, a number of independent finance companies have sales forces to
originate leases, as well as alignment with manufacturers and resellers to
provide private label leasing solutions. TIFS also competes with bank leasing
companies. The Company believes its leasing segment competes successfully by
providing flexible financing alternatives and offering turnkey solutions.
CERTAIN BUSINESS FACTORS
DEPENDENCE ON MAJOR CUSTOMERS
During fiscal 1999, approximately 32.2% of the Company's total net sales and
revenues were derived from its top 10 customers. No customer accounted for more
than 10.0% of the Company's total net sales and revenues in fiscal 1999. In
addition, no customer accounted for more than 10% of the Company's net sales and
revenues for either the products or services segments in fiscal 1999.
RAPID GROWTH
The Company has grown rapidly both internally and through acquisitions, and the
Company intends to continue to pursue both types of growth opportunities as part
of its business strategy. There can be no assurance that the Company will be
successful in maintaining its rapid growth in the future. The Company expects
that future growth will result from acquisitions in addition to continued
organic growth. In fiscal 1999, the Company completed two acquisitions and
continues to evaluate expansion and acquisition opportunities that would
complement its ongoing operations. There can be no assurance that the Company
will be able to identify, acquire or profitably manage additional companies or
successfully integrate such additional companies into the Company without
substantial costs, delays or other problems. In addition, there can be no
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assurance that companies acquired in the future will be profitable at the time
of their acquisition or will achieve levels of profitability that justify the
investment therein. Acquisitions may involve a number of special risks,
including, but not limited to, adverse short-term effects on the Company's
reported operating results, diversion of management's attention, dependence on
retaining, hiring and training key personnel, risks associated with
unanticipated problems or legal liabilities and amortization of acquired
intangible assets, some or all of which could have a material adverse effect on
the Company's operations and financial results.
VENDOR REBATES AND VOLUME DISCOUNTS
The Company's profitability has been favorably affected by its ability to obtain
rebates and volume discounts from manufacturers and through aggregators and
distributors. Any change in the level of rebates, volume discount schedules or
other marketing programs offered by manufacturers that results in the reduction
or elimination of rebates or discounts currently received by the Company could
have a material adverse effect on the Company's operations and financial
results. In particular, a reduction or elimination of rebates related to
government and educational customers could adversely affect the Company's
ability to serve those customers profitably.
MANUFACTURER MARKET DEVELOPMENT FUNDS
Several manufacturers offer market development funds, cooperative advertising
and other promotional programs to computer resellers such as the Company. The
Company utilizes these programs to fund some of its advertising and promotional
programs. The funds received from manufacturers are offset directly against the
expense, thereby reducing selling, general and administrative expenses and
increasing net income. While such programs have been available to the Company in
the past, there is no assurance that these programs will be continued. Any
discontinuance or material reduction of these programs could have an adverse
effect on the Company's operations and financial results.
MANAGEMENT INFORMATION SYSTEM
The Company relies upon the accuracy and proper utilization of its management
information system to provide timely distribution services, manage its inventory
and track its financial information. To manage its growth, the Company is
continually evaluating the adequacy of its existing systems and procedures. The
Company completed its upgrade of its management information system to a year
2000 compliant version and no significant issues were encountered.
The Company anticipates that it will regularly need to make capital expenditures
to upgrade and modify its management information system, including software and
hardware, as the Company grows and the needs of its business change. There can
be no assurance that the Company will anticipate all of the demands, which its
expanding operations will place on its management information system. The
occurrence of a significant system failure or the Company's failure to expand or
successfully implement its systems could have a material adverse effect on the
Company's operations and financial results.
DEPENDENCE ON TECHNICAL EMPLOYEES
The success of the Company's services business, in particular its network and
integration services, depends in large part upon the Company's ability to
attract and retain highly skilled technical employees in competitive labor
markets. There can be no assurance that the Company will be able to attract and
retain sufficient numbers of skilled technical employees. The loss of a
significant number of the Company's existing technical personnel or difficulty
in hiring or retaining technical personnel in the future could have a material
adverse effect on the Company's operations and financial results.
INVENTORY MANAGEMENT
The information technology industry is characterized by rapid product
improvement and technological change resulting in relatively short product life
cycles and rapid product obsolescence. While most of the inventory stocked by
the Company is for specific customer orders, inventory devaluation or
obsolescence could have a material adverse effect on the Company's operations
and financial results. Current industry practice among manufacturers is to
provide price protection intended to reduce the risk of inventory devaluation,
although such policies are subject to change at any time and there can be no
assurance that such price protection will be available to the Company in the
future. During fiscal 1999, many manufacturers reduced the number of days for
which they provided price protection. Also, the Company currently has the option
of returning inventory to certain manufacturers and distributors, subject to
certain limitations. The amount of inventory that can be returned to
manufacturers without a restocking fee varies under the Company's agreements and
such return policies may provide only limited protection against excess
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inventory. There can be no assurance that new product developments will not have
a material adverse effect on the value of the Company's inventory or that the
Company will successfully manage its existing and future inventory. In addition,
the Company stocks parts inventory for its services business. Parts inventory is
more likely to experience a decrease in valuation as a result of technological
change and obsolescence and price protection practices are not offered by
manufacturers with respect to parts.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent on the services of David B. Pomeroy, II,
its Chairman of the Board, President and Chief Executive Officer, Stephen E.
Pomeroy, Chief Financial Officer of the Company and Chief Executive Officer of
Pomeroy Select, Victor Eilau, President of TIFS and other key personnel. The
loss of the services of David Pomeroy, Stephen Pomeroy, Victor Eilau or other
key personnel could have a material adverse effect on the Company's business.
The Company maintains $1.0 million in key man life insurance insuring the life
of David B. Pomeroy. In addition, the company maintains $700 thousand in key man
life insurance insuring the life of Stephen E. Pomeroy and $500 thousand in key
man life insurance insuring the life of Victor Eilau. The Company has entered
into employment agreements with certain of its key personnel, including David B.
Pomeroy, Stephen E. Pomeroy and Victor Eilau. The Company's success and plans
for future growth will also depend on its ability to attract and retain highly
skilled personnel in all areas of its business.
EMPLOYEES
As of January 5, 2000, the Company had 1,843 full-time employees consisting of
the following: 1,041 technical personnel; 275 direct sales representatives and
sales support personnel; 100 management personnel; and 427 administrative and
distribution personnel. The Company has no collective bargaining agreements and
believes its relations with its employees are good.
BACKLOG
The Company does not have a significant backlog of business since it normally
delivers and installs products purchased by its customers within 10 days from
the date of order. Accordingly, backlog is not material to the Company's
business or indicative of future sales. From time to time, the Company
experiences difficulty in obtaining products from its major vendors as a result
of general industry conditions. These delays have not had, and are not
anticipated to have, a material adverse effect on the Company's results of
operations.
PATENTS AND TRADEMARKS
The Company owns no trademarks or patents. Although the Company's various dealer
agreements do not generally allow the Company to use the trademarks and trade
names of these various manufacturers, the agreements do permit the Company to
refer to itself as an "authorized representative" or an "authorized service
provider" of the products of those manufacturers and to use their trademarks and
trade names for marketing purposes. The Company considers the use of these
trademarks and trade names in its marketing efforts to be important to its
business.
ACQUISITIONS
Acquisitions have contributed significantly to the Company's growth. The Company
believes that acquisitions are one method of increasing its presence in existing
markets, expanding into new geographic markets, adding experienced service
personnel, gaining new product offerings and services, obtaining more
competitive pricing as a result of increased purchasing volumes of particular
products and improving operating efficiencies through economies of scale. In
recent years, there has been consolidation among providers of microcomputer
products and services and the Company believes that this consolidation will
continue, which, in turn, may present additional opportunities for the Company
to grow through acquisitions. The Company continually seeks to identify and
evaluate potential acquisition candidates.
During fiscal 1999, the Company completed two acquisitions. The total
consideration given consisted of $4.2 million in cash, subordinated notes of
$2.6 million and 39 thousand unregistered shares of the Company's common stock
with an approximate value of $0.6 million. Interest on the subordinated notes is
payable quarterly. Principal in the amount of $0.6 million is payable in full on
the anniversary date of closing and the $2.0 million of principal is payable in
equal annual installments over a period of two years.
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The Company is currently engaged in preliminary discussions with potential
acquisition candidates. Although it has no binding commitments to acquire such
candidates, management believes that the Company may acquire one or more of
these candidates in the future.
ITEM 2. PROPERTIES
The Company's principal executive offices and distribution facility comprised of
approximately 36,000 and 161,417 square feet of space, respectively are located
in Hebron, Kentucky. These facilities are leased from Pomeroy Investments, LLC
("Pomeroy Investments"), a Kentucky limited liability company controlled by
David B. Pomeroy, II, Chief Executive Officer of the Company, under a ten year
triple-net lease agreement which expires in May 2006. The lease agreement
provides for 2 five year renewal options. During fiscal 1999, Pomeroy
Investments entered into a contract to begin construction of an additional
22,000 square feet of executive office space. Although the Company has not
formally entered into an amended lease agreement with Pomeroy Investments, the
Company's Board of Directors has approved the transaction and the Company is
expected to sign an amended lease agreement which shall provide for a new ten
year, triple-net lease upon the completion of the construction. It is
anticipated that the construction will be complete and the amended lease will be
effective in the summer of 2000 .
The Company also has noncancelable operating leases for its regional offices,
expiring at various dates between 2000 and 2008. The Company believes there will
be no difficulty in negotiating the renewal of its real property leases as they
expire or in finding other satisfactory space. In the opinion of management, the
properties are in good condition and repair and are adequate for the particular
operations for which they are used. The Company does not own any real property.
ITEM 3. LEGAL PROCEEDINGS
Various legal actions arising in the normal course of business have been brought
against the Company. Management believes these matters will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Page 7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The following table sets forth, for the periods indicated, the high and low
sales price for the Common Stock for the quarters indicated as reported on the
NASDAQ National Market.
<TABLE>
<CAPTION>
1998 1999
------------------- --------------------
High Low High Low
----- ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter $25.25 $15.25 $23.13 $11.50
Second Quarter $27.75 $20.38 $15.00 $11.50
Third Quarter $28.31 $11.00 $16.63 $10.75
Fourth Quarter $22.63 $10.88 $13.88 $ 9.56
</TABLE>
As of February 29, 2000, there were approximately 450 holders of record of the
Company's common stock.
Dividends
- ---------
The Company has not paid any cash dividends since its organization and the
completion of its initial public offering. The Company has no plans to pay cash
dividends in the foreseeable future, and the payment of such dividends are
restricted under the Company's current borrowing agreement.
Page 8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(In thousands, except per share data)
For the Fiscal Years Ended January 5,
-------------------------------------------------------
1996 1997(1) 1998(2) 1999 (4,5) 2000(7)
--------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Income Data:
Net sales and revenues. . . . . . . . . . . $230,710 $336,358 $491,448 $ 627,928 $756,757
Cost of sales and service (6). . . . . . . 203,025 291,033 426,742 543,764 652,503
--------- --------- --------- ----------- ---------
Gross profit. . . . . . . . . . . . . . . . 27,685 45,325 64,706 84,164 104,254
Operating expenses:
Selling, general and administrative . . . . 17,396 25,895 33,918 43,689 52,216
Depreciation and amortization . . . . . . . 1,004 2,561 3,940 5,377 6,527
--------- --------- --------- ----------- ---------
Total operating expenses. . . . . . . . . . 18,400 28,456 37,858 49,066 58,743
Income from operations. . . . . . . . . . . 9,285 16,869 26,848 35,098 45,511
Other expense (income):
Interest expense. . . . . . . . . . . . . . 1,999 2,170 974 2,670 3,858
Litigation settlement and related costs (3) - 4,392 - - -
Miscellaneous . . . . . . . . . . . . . . . (64) (221) 54 (140) (93)
--------- --------- --------- ----------- ---------
Total other expense.. . . . . . . . . . . . 1,935 6,341 1,028 2,530 3,765
Income before income taxes. . . . . . . . . 7,350 10,528 25,820 32,568 41,746
Income tax expense. . . . . . . . . . . . . 2,983 4,296 9,507 12,409 16,864
--------- --------- --------- ----------- ---------
Net income. . . . . . . . . . . . . . . . . $ 4,367 $ 6,232 $ 16,313 $ 20,159 $ 24,882
========= ========= ========= =========== =========
Earnings per common share (diluted) . . . . $ 0.73 $ 0.77 $ 1.44 $ 1.72 $ 2.11
Consolidated Balance Sheet Data:
Working capital . . . . . . . . . . . . . . $ 10,340 $ 27,203 $ 63,028 $ 71,364 $ 61,126
Long-term debt, net of current maturities . 100 2,189 1,434 8,231 6,971
Equity. . . . . . . . . . . . . . . . . . . 19,200 46,593 88,777 112,989 140,221
Total assets. . . . . . . . . . . . . . . . 63,985 121,380 167,264 254,226 333,141
</TABLE>
1) During fiscal 1996, the Company acquired the assets of The Computer Supply
Store and Communication Technology, Inc. See Note 12 of Notes to
Consolidated Financial Statements.
2) During fiscal 1997, the Company acquired the assets of Magic Box, Micro
Care and The Computer Store. See Note 12 of Notes to Consolidated Financial
Statements.
3) Fiscal year 1996 reflects the Vanstar litigation settlement and related
costs of $4,392. Without this charge, net income would have been $8,845 and
diluted earnings per common share would have been $1.09.
4) During Fiscal 1998, the Company acquired the assets of Commercial Business
Systems, Inc., Access Technologies, Inc. and all of the outstanding stock
of Global Combined Technologies, Inc. See Note 12 of Notes to Consolidated
Financial Statements.
5) During the fourth quarter of fiscal 1998, the Company's results include an
after tax charge of $681 ($0.06 per diluted share) related to the
uncollectibility of certain vendor warranty claims. Exclusive of this
charge, diluted earnings per share for fiscal 1998 would have been $1.78.
6) During the first quarter of fiscal 1999, the Company changed the
classification of services' labor costs. The Company now classifies direct
costs of service personnel in cost of sales and service; previously, such
costs were included in selling, general and administrative expenses. Prior
periods have been reclassified to conform with the current year's
presentation.
Page 9
<PAGE>
7) During fiscal 1999, the Company acquired certain assets of Systems Atlanta
Commercial Systems, Inc. and all the outstanding stock of Acme Data
Systems, Inc. See Note 12 of Notes to Consolidated Financial Statements.
QUARTERLY RESULTS OF OPERATIONS (in thousands, except per share data)
The following table sets forth certain unaudited operating results of each of
the eight prior quarters. This information is unaudited, but in the opinion of
management includes all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the results of operations of such periods.
<TABLE>
<CAPTION>
Fiscal 1999
--------------------------------------------
First Second Third Fourth
Quarter Quarter(1) Quarter(2) Quarter
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Net sales and revenues $163,924 $186,848 $197,090 $208,895
Gross Profit (6) $ 22,859 $ 23,708 $ 27,055 $ 30,632
Net income $ 5,068 $ 5,680 $ 6,532 $ 7,602
Earnings per common share:
Basic $ 0.43 $ 0.49 $ 0.56 $ 0.65
Diluted $ 0.43 $ 0.48 $ 0.55 $ 0.65
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998
----------------------------------------------
First Second Third Fourth
Quarter(3) Quarter Quarter Quarter(4,5)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Net sales and revenues $135,198 $158,843 $163,790 $170,097
Gross Profit (6) $ 17,763 $ 20,778 $ 22,297 $ 23,326
Net income $ 4,277 $ 5,008 $ 5,393 $ 5,481
Earnings per common share:
Basic $ 0.38 $ 0.44 $ 0.47 $ 0.48
Diluted $ 0.37 $ 0.42 $ 0.46 $ 0.47
</TABLE>
1) During the second quarter of fiscal 1999, the Company acquired certain
assets of Systems Atlanta Commercial Systems, Inc. See Note 12 of Notes to
Consolidated Financial Statements.
2) During the third quarter of fiscal 1999, the Company acquired all the
outstanding stock of Acme Data Systems, Inc. See Note 12 of Notes to
Consolidated Financial Statements.
3) During the first quarter of fiscal 1998, the Company acquired certain
assets of Commercial Business Systems, Inc. and all of the outstanding
stock of Global Combined Technologies, Inc. See Note 12 of Notes to
Consolidated Financial Statements.
4) During the fourth quarter of fiscal 1998, the Company acquired certain
assets of Access Technologies, Inc. See Note 12 of Notes to Consolidated
Financial Statements.
5) During the fourth quarter of fiscal 1998, the Company's results include an
after tax charge of $681 ($0.06 per diluted share) related to the
uncollectibility of certain vendor warranty claims. Exclusive of this
charge, basic earnings per share and diluted earnings per share in the
fourth quarter would have been $0.54 and $0.53, respectively.
6) During the first quarter of fiscal 1999, the Company changed the
classification of services' labor costs. The Company now classifies direct
costs of service personnel in cost of sales and service; previously, such
costs were included in selling, general and administrative expenses. Prior
periods have been reclassified to conform with the current year's
presentation.
Page 10
<PAGE>
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Total Net Sales and Revenues. Total net sales and revenues increased $128.9
million, or 20.5%, to $756.8 million in fiscal 1999 from $627.9 million in
fiscal 1998. This increase was attributable to an increase in sales to existing
and new customers and to acquisitions completed in fiscal years 1999 and late
1998. This increase reflects an increase in sales volume; however, unit selling
prices have declined in fiscal 1999 as compared to fiscal 1998. Excluding
acquisitions completed in fiscal years 1999 and late 1998, total net sales and
revenues increased 12.8%.
Products and leasing sales increased $97.6 million, or 17.6%, to $653.0 million
in fiscal 1999 from $555.4 million in fiscal 1998. Excluding acquisitions
completed in fiscal years 1999 and late 1998, products and leasing sales
increased 10.9%. Services revenues increased $31.3 million, or 43.2%, to $103.8
million in fiscal 1999 from $72.5 million in fiscal 1998. Excluding acquisitions
completed in fiscal years 1999 and late 1998, service revenues increased 27.4%.
Gross Profit. Gross profit margin was 13.8% in fiscal 1999 compared to 13.4% in
fiscal 1998. The Company improved its gross margin by increasing the volume of
higher-margin services revenues which offset a decrease in products gross
margins and the growth in products sales. Services revenues increased to 13.7%
of total net sales and revenues in fiscal 1999 compared to 11.6% of total net
sales and revenues in fiscal 1998. Factors that may have an impact on gross
margin in the future include the percentage of equipment sales with lower-margin
customers and the ratio of service revenues to total net sales and revenues.
Operating Expenses. Selling, general and administrative expenses (including
rent expense and provision for doubtful accounts) expressed as a percentage of
total net sales and revenues decreased to 6.9% in fiscal 1999 from 7.0% for
fiscal 1998. This decrease is primarily due to the growth in net sales and
revenues exceeding the growth in selling, general and administrative expenses.
Total operating expenses expressed as a percentage of total net sales and
revenues was 7.8% in fiscal 1999 and 1998.
Income from Operations. Income from operations increased $10.4 million, or
29.6%, to $45.5 million in fiscal 1999 from $35.1 million in fiscal 1998. The
Company's operating margin increased to 6.0% in fiscal 1999 from 5.6% in fiscal
1998 due to the increase in gross profit.
Interest Expense. Total interest expense increased $1.2 million, or 44.4%, to
$3.9 million in fiscal 1999 from $2.7 million in fiscal 1998. This increase is
primarily related to higher average borrowings during fiscal 1999 as a result of
higher working capital requirements.
Income Taxes. The Company's effective tax rate was 40.4% in fiscal 1999
compared to 38.1% in fiscal 1998. During fiscal 1998, the Company's effective
tax rate was reduced due to the availability of the Kentucky Jobs Development
Act ("KJDA") credit pertaining to the initial start-up costs component of the
credit. For fiscal 1999, the Company's KJDA benefit was reduced to the annual
eligible lease payments component of the credit plus any carryforward from prior
years. In addition, this increase is the result of an increase in taxable
income in states which have higher tax rates.
Net Income. Net income increased $4.7 million, or 23.3%, to $24.9 million in
fiscal 1999 from $20.2 million in fiscal 1998. The increase was a result of the
factors described above.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Total Net Sales and Revenues. Total net sales and revenues increased $136.5
million, or 27.8%, to $627.9 million in fiscal 1998 from $491.4 million in
fiscal 1997. This increase was attributable to an increase in sales to existing
and new customers and to acquisitions completed in fiscal years 1998 and 1997.
Excluding acquisitions completed in fiscal years 1998 and 1997, total net sales
and revenues increased 9.7%.
Products and leasing sales increased $109.2 million, or 24.5%, to $555.4 million
in fiscal 1998 from $446.2 million in fiscal 1997. Excluding acquisitions
completed in fiscal years 1998 and 1997, products and leasing sales increased
5.9%. Services revenues increased $27.3 million, or 60.4%, to $72.5 million in
fiscal 1998 from $45.2 million in fiscal 1997. Excluding acquisitions completed
in fiscal years 1998 and 1997, service revenues increased 47.4%. Services
Page 11
<PAGE>
revenues include all of the IT services transferred to Pomeroy Select on January
6, 1999 plus the configuration services retained by the Company.
Gross Profit. Gross profit margin was 13.4% in fiscal 1998 compared to 13.2% in
fiscal 1997. The Company improved its gross margin by increasing the volume of
higher-margin services revenues which offset a decrease in products gross
margins, the growth in products sales and the write-off of $1.1 million of
vendor receivables related to parts returned and warranty work performed prior
to fiscal 1998. Services revenues increased to 11.6% of total net sales and
revenues in fiscal 1998 compared to 9.2% of total net sales and revenues in
fiscal 1997. The write-offs were primarily due to internal reporting and
tracking problems. Prior to fiscal 1998, the Company's tracking and control of
reimbursements due from vendors was performed manually. The Company's ability to
organize and retain the support documentation for warranty claims, as well as
its collection efforts, was hindered due to the manual nature of the reporting
and tracking processes. Beginning in January 1998, the Company automated its
processes for recording and tracking warranty claims, substantially reducing the
tracking and follow up issues which existed under the manual system. As a result
of the changes to these processes, the Company anticipates that the write-offs
pertaining to vendor receivables as a percentage of total vendor receivables
will decrease in the future. Factors that may have an impact on gross margin in
the future include the percentage of equipment sales with lower-margin customers
and the ratio of service revenues to total net sales and revenues.
Operating Expenses. Selling, general and administrative expenses (including
rent expense and provision for doubtful accounts) expressed as a percentage of
total net sales and revenues increased to 7.0% in fiscal 1998 from 6.9% for
fiscal 1997. This increase is primarily attributable to the investment made in
technical personnel during the first nine months of fiscal 1998 to generate the
increase in service revenues. This trend declined during the fourth quarter of
fiscal 1998 as the Company achieved greater billable personnel utilization.
Total operating expenses expressed as a percentage of total net sales and
revenues increased to 7.8% in fiscal 1998 from 7.7% in fiscal 1997 due to the
factor described above.
Income from Operations. Income from operations increased $8.3 million, or
31.0%, to $35.1 million in fiscal 1998 from $26.8 million in fiscal 1997. The
Company's operating margin increased to 5.6% in fiscal 1998 from 5.5% in fiscal
1997 as the increase in gross profit margin offset the increase in operating
expenses as a percentage of total net sales and revenues.
Interest Expense. Total interest expense increased $1.7 million, or 170.0%, to
$2.7 million in fiscal 1998 from $1.0 million in fiscal 1997. This increase is
primarily related to higher average borrowings during fiscal 1998 as a result of
higher working capital requirements.
Income Taxes. The Company's effective tax rate was 38.1% in fiscal 1998
compared to 36.8% in fiscal 1997. This increase is the result of an increase in
taxable income in states which have higher tax rates.
Net Income. Net income increased $3.9 million, or 23.9%, to $20.2 million in
fiscal 1998 from $16.3 million in fiscal 1997. The increase was a result of the
factors described above.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash used in operating activities was $26.7 million in fiscal 1999. Cash used in
investing activities was $8.9 million which included $4.2 million for
acquisitions and $4.7 million for capital expenditures. Cash provided by
financing activities was $33.3 million which included $29.2 million of net
proceeds from bank notes payable, $2.3 million of net proceeds under notes
payable, $1.5 million from the exercise of stock options and the related tax
benefit, and $0.3 million proceeds from the employee stock purchase plan.
A significant part of the Company's inventories is financed by floor plan
arrangements with third parties. At January 5, 2000, these lines of credit
totaled $72.0 million, including $60.0 million with Deutsche Financial Services
("DFS") and $12.0 million with IBM Credit Corporation ("ICC"). Borrowings under
the DFS floor plan arrangements are made on thirty-day notes. Borrowings under
the ICC floor plan arrangements are made on either thiry-day or sixty-day notes.
All such borrowings are secured by the related inventory. Financing on
substantially all of the arrangements is interest free due to subsidies by
manufacturers. Overall, the average rate on these arrangements is less than
1.0%. The Company classifies amounts outstanding under the floor plan
arrangements as accounts payable.
The Company's financing of receivables is provided through a portion of its
credit facility with DFS. The credit facility provides a credit line of $80.0
million for accounts receivable financing. The accounts receivable portion of
the credit facility carries a variable interest rate based on the prime rate
less 125 basis points. At January 5, 2000, the amount outstanding was $49.9
million, including $19.1 million of overdrafts on the Company's books in
Page 12
<PAGE>
accounts at a participant bank on the credit facility, which was at an interest
rate of 7.25%. The overdrafts were subsequently funded through the normal course
of business. The credit facility is collateralized by substantially all of the
assets of the Company, except those assets that collateralize certain other
financing arrangements. Under the terms of the credit facility, the Company is
subject to various financial covenants.
During fiscal 1999, the Company increased the leasing activity through its
wholly-owned leasing subsidiary, TIFS. This increased leasing activity for
fiscal 1999 resulted in increased borrowings and resultant interest expense
under the Company's credit facility with DFS. Further increases in leasing
operations could impact one or more of total net sales and revenues, gross
margin, operating income, net income, total debt and liquidity, depending on the
amount of leasing activity and the types of leasing transactions. The funding
of the Company's net investment in sales-type leases is provided by various
financial institutions primarily on a nonrecourse basis.
The Company believes that the anticipated cash flow from operations and current
financing arrangements will be sufficient to satisfy the Company's capital
requirements for the next twelve months. Historically, the Company has financed
acquisitions using a combination of cash, earn outs, shares of its Common Stock
and seller financing. The Company anticipates that future acquisitions will be
financed in a similar manner.
OTHER
Year 2000 Issues
The Company experienced no technology-related problems upon the arrival of
January 1, 2000, nor was there any disruption to the business. During the year
leading up to January 1, 2000, the Company implemented a Year 2000 compliance
program designed to ensure that the Company's computer systems and applications
would function properly beyond 1999. The program was successfully completed
during 1999. The cost of the program was not significant other than the time
spent by the Company's own personnel. The Company will continue to monitor all
critical systems for the appearance of delayed complications or disruptions and
problems encountered through suppliers, customers and other third parties with
whom the Company deals. Although these and other unanticipated Year 2000 issues
could have an adverse effect on the results of operations or financial condition
of the Company, it is not possible to anticipate the extent of impact at this
time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates the financial statements required by this item by
reference to Item 14 hereof.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEMS 10-13.
The Registrant hereby incorporates the information required by Form 10-K, Items
10-13 by reference to the Company's definitive proxy statement for its 2000
Annual Meeting of shareholders which will be filed with the Commission prior to
May 4, 2000.
Page 13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
1999 Form
10-K Page
-----------
<S> <C> <C>
1. Financial Statements:
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets,
January 5, 1999 and January 5, 2000 F-2 to F-3
For each of the three fiscal years in
The period ended January 5, 2000:
Consolidated Statements of Income F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Equity F-6
Notes to Consolidated Financial Statements F-7 to F-19
2. Financial Statement Schedules:
None
</TABLE>
<TABLE>
<CAPTION>
FILED HEREWITH
(PAGE #) OR
INCORPORATED
3. EXHIBITS BY REFERENCE TO:
- ----------- ----------------------------------
<S> <C> <C> <C>
3(a) Certificate of Incorporation of the Company Exhibit 3(a) of Company's
Form S-1 filed Feb. 14, 1992
3(b) Bylaws of the Company Exhibit 3(a) of Company's
Form S-1 filed Feb. 14, 1992
4 Rights Agreement between the Company and The Exhibit 4 of Company's Form
Fifth Third Bank, as Rights Agent dated as of 8-K filed February 23, 1998
February 23,1998
Page 14
<PAGE>
10(i) Material Agreements
(b)(1) Agreement for Wholesale Financing (Security Exhibit 10(i)(b)(1) of
Agreement) between IBM Credit Corporation and Company's Form 10-K filed
the Company dated April 2, 1992 April 7, 1994
(b)(2) Addendum to Agreement for Wholesale Financing Exhibit 10(i)(b)(2) of
between IBM Credit Corporation and the Company's Form 10-K filed
Company dated July 7, 1993 April 7, 1994
(c)(1) Agreement for Wholesale Financing (Security Exhibit 10(i)(c)(1) of
Agreement) between ITT Commercial Finance Company's Form 10-K filed
Corporation and the Company dated March 27, 1992 April 7, 1994
(c)(2) Addendum to Agreement for Wholesale Financing Exhibit 10(i)(c)(2) of
between ITT Commercial Finance Corporation Company's Form 10-K filed
and the Company dated July 7, 1993 April 7, 1994
(c)(3) Amendment to Agreement for Wholesale Exhibit 10(i)(c)(3) of
Financing between Deutsche Financial Services Company's Form 10-Q filed
f/k/a ITT Commercial Finance Corporation and the May 18, 1995
Company dated May 5, 1995.
(d)(1) Asset Purchase Agreement among the Company; Exhibit 10(i)(z) of Company's
TCSS; and Richard Feaster, Victoria Feaster, Form 8-K dated March 14, 1996
Harry Feaster, Carolyn Feaster, Victoria Feaster,
trustee of the Emily Patricia Feaster Trust, and
Victoria Feaster, as trustee of the Nicole Ann
Feaster Trust dated March 14, 1996
(d)(2) Lease between the Company and TCSS dated Exhibit 10.48 of Company's
March 15, 1996 Form S-1 filed June 4, 1996
(d)(3) Lease between Arthur K. Jones Trust, Firststar Exhibit 10.49 of Company's
Bank Des Moines, N.A., and William A. Jones, Form S-1 filed June 4, 1996
Trustees, and The Computer Supply Store, Inc.
dated July 1, 1994 (assigned to the Company
effective as of March 14, 1996)
(d)(4) Registration Rights Agreement between the Exhibit 10.50 of Company's
Company and TCSS dated March 14, 1996 Form S-1 filed June 4, 1996
(d)(5) Employment Agreement between the Company Exhibit 10.51 of Company's
and Richard Feaster dated March 14, 1996 Form S-1 filed June 4, 1996
(d)(6) Employment Agreement between the Company Exhibit 10.52 of Company's
and Victoria Feaster dated March 14, 1996 Form S-1 filed June 4, 1996
(e)(1) IBM Agreement for Authorized Dealers Exhibit 10(i)(e)(1) of
and Industry Remarketers with the Company's Form S-1 filed
Company, dated September 3, 1991 Feb. 14, 1992
(e)(2) Schedule of Substantially Exhibit 10(i)(e)(2) of
Identical IBM Agreements for Company's Form S-1 filed
Authorized Dealers and Industry Feb. 14, 1992
Remarketers
(f) Compaq Computer Corporation United Exhibit 10(i)(f) of Company's
States Dealer Agreement with the Form S-1 filed Feb. 14, 1992
Company, dated September 27, 1990
Page 15
<PAGE>
(g) Dealer Sales Agreement between Exhibit 10(i)(g) of Company's
Apple Computer, Inc. and the Form S-1 filed Feb. 14, 1992
Company, dated April 1, 1991
(i) Lease between F.G.&H. Partnership Exhibit 10(i)(i) of Company's
and the Company for 908 DuPont Road, Form S-1 filed Feb. 14, 1992
Louisville, KY, dated May 9, 1990
(j)(1) Purchase Agreement between the Company and Exhibit 10.86 of Company's
First of Michigan Corporation dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(2) Purchase Agreement between the Company and Exhibit 10.87 of Company's
John C. Donnelly dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(3) Purchase Agreement between the Company and Exhibit 10.88 of Company's
Dan B. French dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(4) Purchase Agreement between the Company and Exhibit 10.89 of Company's
James C. Penman dated March 28, 1996 Form S-1 filed June 4, 1996
(l) Covenant not to Compete between the Company Exhibit 10(i)(l)(2) of
and Richard C. Mills dated July 7, 1993 Company's Form 10-K filed
April 7, 1994
(m)(1) Asset Purchase Agreement among the Company, Exhibit 10.5 of Company's
AA Microsystems, Inc. and Stuart Raburn dated Form S-3 filed January 3, 1997
August 2, 1996
(m)(2) Promissory Note dated August 2, 1996 of the Exhibit 10.6 of Company's
Company in favor of AA Microsystems, Inc. Form S-3 filed January 3, 1997
(n)(1) Lease between Crown Development Group and Exhibit 10(i)(n) of Company's
the Company for 3740 St. Johns Bluff Road, Suite Form 10-K filed March 31, 1993
19, Jacksonville, FL dated September 17, 1992
(n)(2) Amendment to Lease between Crown Exhibit 10(i)(n)(2) of
Development Group and the Company for 3740 Company's Form 10-K filed
St. Johns Bluff Road, Suite 19, Jacksonville, FL April 4, 1996
dated December 11, 1995
(p)(1) Remarketing and Agency Agreement (the Exhibit 10(i)(p)(1) of
"Remarketing Agreement") between Information Company's Form S-1 filed
Leasing Corporation and the Company dated January 7, 1990 Feb. 14, 1992
(p)(2) Amendment No. 1 to the Remarketing Agreement Exhibit 10(i)(p)(2) of
dated November 12, 1991 Company's Form S-1 filed
Feb. 14, 1992
(p)(3) Letter, dated February 2, 1994, extending term of Exhibit 10(i)(p)(3) of
Remarketing Agreement to May 1, 1996 Company's Form 10-K filed
April 4, 1996
(p)(4) Amendment No. 2 to the Remarketing Agreement Exhibit 10(i)(p)(4) of
dated October 10, 1995 Company's Form 10-K filed
April 4, 1996
(q) Lease between Athens Properties and the Exhibit 10(i)(q) of Company's
Company for Crosspark Drive, Knoxville, TN dated Form 10-K filed April 4, 1996
October 31, 1995
Page 16
<PAGE>
(r)(1) Asset Purchase Agreement among the Company, Exhibit 10.7 of Company's
Communications Technology, Inc. d/b/a DILAN Form S-3 filed January 3, 1997
and Robert Martin dated October 11, 1996
(r)(2) Subordinated Promissory Note dated October 11, Exhibit 10.8 of Company's
1996 of the Company in favor of Communications Form S-3 filed January 3, 1997
Technology, Inc.
(r)(3) Subordination Agreement among the Company, Exhibit 10.9 of Company's
Communications Technology, Inc. and Star Bank, Form S-3 filed January 3, 1997
N.A. dated October 11, 1996
(s) Services Agreement between the Company and Exhibit 10.13 of Company's
Nationwide Mutual Insurance and the Company Form S-3 filed January 3, 1997
dated December 11, 1996
(t1) Asset Purchase Agreement among the Company Exhibit 10(i)(t)(1) of
and Magic Box, Inc. dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(2) Employment Agreement between the Company Exhibit 10(i)(t)(2) of
and Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(3) Incentive Deferred Compensation Agreement Exhibit 10(i)(t)(3) of
between the Company and Israel Fintz, dated Company's Form 10-Q filed
June 26, 1997 August 11, 1997
(t)(4) Employment Agreement between the Company Exhibit 10(i)(t)(4) of
and Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(5) Incentive Deferred Compensation Agreement Exhibit 10(i)(t)(5) of
between the Company and Allison Sokol, dated Company's Form 10-Q filed
June 26, 1997 August 11, 1997
(t)(6) Power of Attorney given to the Company by Magic Exhibit 10(i)(t)(6) of
Box, Inc. for the collection of Accounts Company's Form 10-Q filed
Receivable, dated June 26, 1997 August 11, 1997
(t)(7) Agreement for the Assumption of Liabilities Exhibit 10(i)(t)(7) of
between the Company and Magic Box, Inc. Company's Form 10-Q filed
August 11, 1997
(t)(8) Subordination Agreement by and among the Exhibit 10(i)(t)(8) of
Company, Magic Box, Inc. and Star Bank, N.A., Company's Form 10-Q filed
dated June 26, 1997 August 11, 1997
(t)(9) Subordinated Promissory Note between the Exhibit 10(i)(t)(9) of
Company and Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(10) Subordinated Promissory Note between the Exhibit 10(i)(t)(10) of
Company and Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(11) Subordinated Promissory Note between the Exhibit 10(i)(t)(11) of
Company and Marvin Rosen, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
Page 17
<PAGE>
(t)(12) Subordinated Promissory Note between the Exhibit 10(i)(t)(12) of
Company and M. Ronald Krongold, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(13) General Bill of Sale between the Company and Exhibit 10(i)(t)(13) of
Magic Box, Inc., dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(14) Non Compete Agreement between the Company Exhibit 10(i)(t)(14) of
and Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(15) Non Compete Agreement between the Company Exhibit 10(i)(t)(15) of
and Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(16) Non Compete Agreement between the Company Exhibit 10(i)(t)(16) of
and Marvin Rosen, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(17) Non Compete Agreement between the Company Exhibit 10(i)(t)(17) of
and M. Ronald Krongold, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(18) Non Compete Agreement between the Company Exhibit 10(i)(t)(18) of
and Magic Box, Inc., dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(u) Lease between NWI Airpark L.P. and the Exhibit 10(i)(u) of Company's
Company for 717 Airpark Center Drive, Nashville, Form 10-K filed April 4, 1995
TN dated February 24, 1994
(v)(1) Promissory Note dated May 30, 1997 by and Exhibit 10(i)(v)(1) of
among Star Bank, N.A., the Company and Company's Form 10-Q filed
Pomeroy Computer Leasing Company, Inc. August 11, 1997
(v)(2) Loan Agreement dated October 31,1997 between Exhibit 10(i)(v)(2) of
The Fifth Third Bank of Northern Kentucky, Inc. Company's Form 10-K filed
and Technology Integration Financial Services, April 5, 1998
Inc.
(v)(3) Guarantor Agreement dated October 31,1997 Exhibit 10(i)(v)(3) of
between Pomeroy Computer Resources, Inc and Company's Form 10-K filed
The Fifth Third Bank of Northern Kentucky, Inc. April 5, 1998
(v)(4) Addendum 1 to Guarantor Agreement dated Exhibit 10(i)(v)(4) of
October 31,1997 between Pomeroy Computer Company's Form 10-K filed
Resources, Inc and The Fifth Third Bank of April 5, 1998
Northern Kentucky, Inc.
(v)(5) Assignment Agreement between dated October Exhibit 10(i)(v)(5) of
31,1997 between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(6) Incumbency and Authorization Agreement dated Exhibit 10(i)(v)(6) of
October 31,1997 between The Fifth Third Bank of Company's Form 10-K filed
Northern Kentucky, Inc. and Technology April 5, 1998
Integration Financial Services, Inc.
Page 18
<PAGE>
(v)(7) Draw Facility Note dated October 31,1997 Exhibit 10(i)(v)(7) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(8) Revolving Credit Note dated October 31,1997 Exhibit 10(i)(v)(8) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(9) Security Agreement dated October 31,1997 Exhibit 10(i)(v)(9) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(w)(1) Non Compete Agreement between the Company Exhibit 10(i)(w)(1) of
and Microcare Computer Services, Inc., dated Company's Form 10-Q filed
July 24, 1997 November 10, 1997
(w)(2) Non Compete Agreement between the Company Exhibit 10(i)(w)(2) of
and Microcare, Inc., dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(3) Assignment and Assumption Agreement between Exhibit 10(i)(w)(3) of
the Company, and Microcare Computer Services, Company's Form 10-Q filed
Inc., and Microcare Inc., dated July 24, 1997 November 10, 1997
(w)(4) Assumption of Liabilities Agreement between the Exhibit 10(i)(w)(4) of
Company, and Microcare Computer Services, Inc., Company's Form 10-Q filed
and Microcare Inc., dated July 24, 1997 November 10, 1997
(w)(5) Non Compete Agreement between the Company, Exhibit 10(i)(w)(5) of
and Robert L. Versprille, dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(6) Consent for Use of Similar Name between the Exhibit 10(i)(w)(6) of
Company and Microcare, Inc., dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(7) Subordination Agreement between the Company, Exhibit 10(i)(w)(7) of
and Microcare Computer Services, Inc., and Star Company's Form 10-Q filed
Bank, N.A., dated July 24, 1997 November 10, 1997
(w)(8) Subordinated Promissory Note between the Exhibit 10(i)(w)(8) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(9) Registration Rights Agreement between the Exhibit 10(i)(w)(9) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(10) General Bill of Sale and Assignment between the Exhibit 10(i)(w)(10) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(11) General Bill of Sale and Assignment between the Exhibit 10(i)(w)(11) of
Company and Microcare, Inc., dated June 24, 1997 Company's Form 10-Q filed
November 10, 1997
Page 19
<PAGE>
(w)(12) Asset Purchase Agreement between the Exhibit 10(i)(w)(12) of
Company, and Microcare Computer Services, Company's Form 10-Q filed
Inc., Microcare Inc., and Robert L. Versprille November 10, 1997
dated July 24, 1997
(w)(13) Employment Agreement between the Company Exhibit 10(i)(w)(13) of
and Robert L. Versprille, dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(x) Lease between the Company and Pomeroy Exhibit 10(i)(x) of Company's
Investments, LLC for buildings at Airpark Form 10-Q filed November 17, 1995
International dated September 5, 1995
(y) Lease between the Company and New England Exhibit 10(i)(y) of Company's
Mutual Life Insurance Company for building at Form 10-Q filed November 17, 1995
Lexington Business Center dated October 4, 1995
(z)(1) Asset Purchase Agreement between the Exhibit 10(i)(z)(1) of
Company and Cabling Unlimited, Inc. dated Company's Form 10-K filed
October 13, 1995 April 4, 1996
(z)(2) Agreement between Cabling Unlimited, Inc. and Exhibit 10(i)(z)(2) of
the Company dated October 13, 1995 Company's Form 10-K filed
April 4, 1996
(z)(3) Agreement between Karen Epperson and the Exhibit 10(i)(z)(3) of
Company dated October 13, 1995 Company's Form 10-K filed
April 4, 1996
(z)(4) Employment Agreement between Karen Epperson Exhibit 10(i)(z)(4) of
and the Company dated October 13, 1995 Company's Form 10-K filed
April 4, 1996
(z)(5) Assumption of Liabilities between Cabling Exhibit 10(i)(z)(5) of
Unlimited, Inc. and the Company dated Company's Form 10-K filed
October 13, 1995 April 4, 1996
(cc)(1) Plan of Reorganization dated October 17,1997 Exhibit (10)(i)(cc)(1) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina and The Computer Store, Inc. April 5,1998
(cc)(2) Plan of Merger dated October 17,1997 between Exhibit (10)(i)(cc)(2) of
Pomeroy Computer Resources of South Carolina Company's Form 10-K filed
and The Computer Store, Inc. April 5,1998
(cc)(3) Articles of Merger dated October 17,1997 Exhibit (10)(i)(cc)(3) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina and The Computer Store, Inc. April 5,1998
(cc)(4) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(4) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(5) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(5) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(6) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(6) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
Page 20
<PAGE>
(cc)(7) Guaranty of Employment Agreement dated Exhibit (10)(i)(cc)(7) of
October 17,1997 between Pomeroy Computer Company's Form 10-K filed
Resources of South Carolina, Inc. and Authur M. April 5,1998
Cox
(cc)(8) Guaranty of Employment Agreement dated Exhibit (10)(i)(cc)(8) of
October 17,1997 between Pomeroy Computer Company's Form 10-K filed
Resources of South Carolina, Inc. and Ronald D. April 5,1998
Hildreth
(cc)(9) Guaranty of Employment Agreement dated Exhibit (10)(i)(cc)(9) of
October 17,1997 between Pomeroy Computer Company's Form 10-K filed
Resources of South Carolina, Inc. and Jeffery F. April 5,1998
Hipp
(cc)(10) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(10) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(11) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(11) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(12) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(12) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(13) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(13) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(14) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(14) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(15) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(15) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(16) Escrow Agreement dated October 17,1997 Exhibit (10)(i)(cc)(16) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc., Authur M. Cox, Ronald D. Hildreth, April 5,1998
and Jeffrey F. Hipp
(cc)(17) Opinion Letter on Plan of Merger dated October Exhibit (10)(i)(cc)(17) of
17,1997 between Pomeroy Computer Resources Company's Form 10-K filed
of South Carolina and The Computer Store, Inc. April 5,1998
(dd)(1) Asset Purchase Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(1) of
between the Company and Commercial Business Company's Form 10-Q filed
Systems, Inc. May 6,1998
(dd)(2) Employment Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(2) of
between the Company and Thomas Clayton Company's Form 10-Q filed
May 6,1998
(dd)(3) Employment Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(3) of
between the Company and Steven Shapiro Company's Form 10-Q filed
May 6,1998
Page 21
<PAGE>
(dd)(4) Subordinated Promissory Note dated March 6, Exhibit (10)(i)(dd)(4) of
1998 between the Company and Commercial Company's Form 10-Q filed
Business System, Inc. May 6,1998
(dd)(5) Subordination Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(5) of
between the Company and Commercial Business Company's Form 10-Q filed
System, Inc. May 6,1998
(dd)(6) General Bill of Sales and Assignment dated March Exhibit (10)(i)(dd)(6) of
6, 1998 between the Company and Commercial Company's Form 10-Q filed
Business System, Inc. May 6,1998
(dd)(7) Assumption of Liabilities dated March 6, 1998 Exhibit (10)(i)(dd)(7) of
between the Company and Commercial Business Company's Form 10-Q filed
System, Inc. May 6,1998
(dd)(8) Power of Attorney dated March 6, 1998 between Exhibit (10)(i)(dd)(8) of
the Company and Commercial Business System, Company's Form 10-Q filed
Inc. May 6,1998
(dd)(9) Assignment and Assumption Agreement dated Exhibit (10)(i)(dd)(9) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(10) Agreement dated March 6, 1998 between the Exhibit (10)(i)(dd)(10) of
Company and Commercial Business System, Inc. Company's Form 10-Q filed
May 6,1998
(dd)(11) Assignment and Assumption of Lease Agreement Exhibit (10)(i)(dd)(11) of
dated March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(12) Assignment and Assumption of Lease Agreement Exhibit (10)(i)(dd)(12) of
dated March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(13) Covenant Not to Compete Agreement dated Exhibit (10)(i)(dd)(13) of
March 6, 1998 between the Company and Steve Company's Form 10-Q filed
Shapiro May 6,1998
(dd)(14) Covenant Not to Compete Agreement dated Exhibit (10)(i)(dd)(14) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Thomas Clayton May 6,1998
(dd)(15) Covenant Not to Compete Agreement dated Exhibit (10)(i)(dd)(15) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business Systems, Inc. May 6,1998
(dd)(16) Consent for use of Similar Name Agreement dated Exhibit (10)(i)(dd)(16) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business Systems, Inc. May 6,1998
(dd)(17) Agreement dated March 6, 1998 between the Exhibit (10)(i)(dd)(17) of
Company and Commercial Business Systems, Company's Form 10-Q filed
Inc. May 6,1998
(ee)(1) Stock Purchase Agreement dated February 26, Exhibit (10)(i)(ee)(1) of
1998 between J. Walter Duncan Jr. , Nicholas Company's Form 10-Q filed
Duncan, James B. Kite, O. Dean Higganbotham, May 6,1998
and Dale Higganbotham and Pomeroy Computer
Resources, Inc.
Page 22
<PAGE>
(ee)(2) Non-Compete Agreement dated February 26, Exhibit (10)(i)(ee)(2) of
1998 between O. Dean Higganbotham and Company's Form 10-Q filed
Pomeroy Computer Resources, Inc. May 6,1998
(ee)(3) Non-Compete Agreement dated February 26, Exhibit (10)(i)(ee)(3) of
1998 between Dale Higganbotham and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(4) Non-Compete Agreement dated February 26, Exhibit (10)(i)(ee)(4) of
1998 between J. Walter Duncan Jr. and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(5) Non-Compete Agreement dated February 26, Exhibit (10)(i)(ee)(5) of
1998 between Nicholas V. Duncan and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(6) Non-Compete Agreement dated February 26, Exhibit (10)(i)(ee)(6) of
1998 between James B. Kite and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(7) Employment Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(7) of
between O. Dean Higganbotham, Global Company's Form 10-Q filed
Combined Technologies, Inc. and Pomeroy May 6,1998
Computer Resources, Inc.
(ee)(8) Employment Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(8) of
between Dale Higganbotham, Global Combined Company's Form 10-Q filed
Technologies, Inc. and Pomeroy Computer May 6,1998
Resources, Inc.
(ee)(9) Termination of Employment Agreement dated Exhibit (10)(i)(ee)(9) of
March 17, 1998 between Nicholas V. Duncan and Company's Form 10-Q filed
Global Combined Technologies, Inc. May 6,1998
(ee)(10) Termination of Employment Agreement dated Exhibit (10)(i)(ee)(10) of
March 17, 1998 between O. Dean Higganbotham Company's Form 10-Q filed
and Global Combined Technologies, Inc. May 6,1998
(ee)(11) Termination of Employment Agreement dated Exhibit (10)(i)(ee)(11) of
March 17, 1998 between Dale Higganbotham and Company's Form 10-Q filed
Global Combined Technologies, Inc. May 6,1998
(ee)(12) Purchaser's Certificate Dated March 17, 1998 Exhibit (10)(i)(ee)(12) of
between the Company and Global Combined Company's Form 10-Q filed
Technologies, Inc. May 6,1998
(ee)(13) Incentive Deferred Compensation Agreement Exhibit (10)(i)(ee)(13) of
dated March 17, 1998 between Dale Company's Form 10-Q filed
Higganbotham and Global Combined May 6,1998
Technologies, Inc.
(ee)(14) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(14) of
between the Company, Nicholas V. Duncan, and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(15) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(15) of
between the Company, James B, Kite, and Star Company's Form 10-Q filed
Bank, N.A. May 6,1998
Page 23
<PAGE>
(ee)(16) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(16) of
between the Company, O. Dean Higganbotham, Company's Form 10-Q filed
and Star Bank, N.A. May 6,1998
(ee)(17) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(17) of
between the Company, Dale Higganbotham, and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(18) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(18) of
between the Company, J. Walter Duncan Jr., and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(19) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(19) of
1998 between the Company and James B, Kite. Company's Form 10-Q filed
May 6,1998
(ee)(20) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(20) of
1998 between the Company and Dean Company's Form 10-Q filed
Higganbotham May 6,1998
(ee)(21) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(21) of
1998 between the Company and Dale Company's Form 10-Q filed
Higganbotham May 6,1998
(ee)(22) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(22) of
1998 between the Company and J. Walter Company's Form 10-Q filed
Duncan Jr. May 6,1998
(ee)(23) Business Credit and Security Agreement among Exhibit (10)(i)(ee)(23) of
Pomeroy Computer Resources, Inc. and Deutsche Company's Form 10-Q filed
Financial Services Corporation, dated July 14, 1998 November 12,1998
(ff)(1) The Asset Purchase Agreement dated December Exhibit (10)(i)(ff)(1) of
9, 1998, by, between and among the Company, Company's Form 10-K filed
Access Technologies, Inc., Mark V. Putman, Paul April 5, 1999
Bishop, and Dave Barthel
(ff)(2) Employment Agreement by and between the Exhibit (10)(i)(ff)(2) of
Company and Mark Putman, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(3) Employment Agreement by and between the Exhibit (10)(i)(ff)(3) of
Company and Paul Bishop, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(4) Employment Agreement by and between the Exhibit (10)(i)(ff)(4) of
Company and Greg Livingston, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(5) Employment Agreement by and between the Exhibit (10)(i)(ff)(5) of
Company and Phillip Qualls, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
Page 24
<PAGE>
(ff)(6) Exhibit G Excluded assets of the Asset Purchase Exhibit (10)(i) (ff)(6) of
Agreement Company's Form 10-K filed
April 5, 1999
(ff)(7) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(ff)(7) of
Purchase agreement Company's Form 10-K filed
April 5, 1999
(ff)(8) Assumption of Liabilities of the Asset Purchase Exhibit (10)(i)(ff)(8) of
Agreement Company's Form 10-K filed
April 5, 1999
(ff)(9) Promissory Note between the Company and Exhibit (10)(i)(ff)(9) of
Access Technologies, Inc., dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(10) Consent for Use of Similar Name by Access Exhibit (10)(i)(ff)(10) of
Technologies, Inc., dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(11) Power of Attorney issued to the Company by Exhibit (10)(i)(ff)(11) of
Access Technologies, Inc., dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(12) Letter Agreement regarding Contracts by and Exhibit (10)(i)(ff)(12) of
between Access Technologies Inc. and the Company's Form 10-K filed
Company, dated December 9, 1998 April 5, 1999
(ff)(13) Assignment and Assumption Agreement by and Exhibit (10)(i)(ff)(13) of
between Access Technologies, Inc. and the Company's Form 10-K filed
Company, dated December 9, 1998 April 5, 1999
(ff)(14) Subordination Agreement among the Company, Exhibit (10)(i)(ff)(14) of
Access Technologies, Inc. and Deutsche Financial Company's Form 10-K filed
Services Company, dated December 9, 1998 April 5, 1999
(ff)(15) Subordinated Promissory Note issued by the Exhibit (10)(i)(ff)(15) of
Company to Access Technologies, Inc., dated Company's Form 10-K filed
December 9, 1998 April 5, 1999
(ff)(16) Letter of Instructions to Fifth Third Bank issued by Exhibit (10)(i)(ff)(16) of
the Company pursuant to the Asset Purchase Company's Form 10-K filed
Agreement, dated December 9, 1998 April 5, 1999
(ff)(17) Investor's Certificate between Access Exhibit (10)(i)(ff)(17) of
Technologies, Inc. (Investor) and the Company, Company's Form 10-K filed
dated December 9, 1998 April 5, 1999
(ff)(18) Consent of Deutsche Financial Services Company Exhibit (10)(i)(ff)(18) of
to the Company on the purchase of substantially Company's Form 10-K filed
all the operating assets of Access Technologies, April 5, 1999
Inc.
(ff)(19) Sublease Agreement by and between Access Exhibit (10)(i)(ff)(19) of
Technologies, Inc. and the Company, dated Company's Form 10-K filed
December 9, 1998 April 5, 1999
(ff)(20) Noncompetition Agreement by and between David Exhibit (10)(i)(ff)(20) of
Barthel and the Company, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
Page 25
<PAGE>
(ff)(21) Noncompetition Agreement by and between Paul Exhibit (10)(i)(ff)(21) of
Bishop and the Company, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(22) Noncompetition Agreement by and between Mark Exhibit (10)(i)(ff)(22) of
Putman and the Company, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(23) Noncompetition Agreement by and between Exhibit (10)(i)(ff)(23) of
Access Technologies, Inc. and the Company, Company's Form 10-K filed
dated December 9, 1998 April 5, 1999
(ff)(24) Noncompetition Agreement by and between Greg Exhibit (10)(i)(ff)(24) of
Livingston and the Company, dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
(ff)(25) Noncompetition Agreement by and between Exhibit (10)(i)(ff)(25) of
Robert Hendry and the Company, dated Company's Form 10-K filed
December 9, 1998 April 5, 1999
(ff)(26) Assignment and Assumption Lease by and Exhibit (10)(i)(ff)(26) of
between Access Technologies, Inc. and the Company's Form 10-K filed
Company, dated December 9, 1998 April 5, 1999
(gg)(1) Workstation Procurement and Support Service Exhibit (10)(i)(gg)(1) of
Agreement by and between the Procter and Company's Form 10-K filed
Gamble Company and the Company, dated April 5, 1999
January 26, 1999
(gg)(2) Statement of Work to Workstation Procurement Exhibit (10)(i)(gg)(2) of
and Support Services Agreement by and between Company's Form 10-K filed
the Procter and Gamble Company and the April 5, 1999
Company.
(gg)(3) Attachment A - P&G Sites of Statement of Work Exhibit (10)(i)(gg)(3) of
to Workstation Procurement and Support Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(4) Attachment B-1 - Procurement, Workstation Exhibit (10)(i)(gg)(4) of
Distribution and Workstation Disposal Services of Company's Form 10-K filed
Statement of Work to Workstation Procurement April 5, 1999
Services Agreement
(gg)(5) Attachment B-2 - Packaged Software Help Desk Exhibit (10)(i)(gg)(5) of
Services of Statement of Work to Workstation Company's Form 10-K filed
Procurement Services Agreement April 5, 1999
(gg)(6) Attachment B-3 - Deskside and Server Support Exhibit (10)(i)(gg)(6) of
Services of Statement of Work to Workstation Company's Form 10-K filed
Procurement Services Agreement April 5, 1999
(gg)(7) Attachment C - Transition Services of Statement Exhibit (10)(i)(gg)(7) of
of Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(8) Attachment D - Termination and Exhibit (10)(i)(gg)(8) of
Decommissioning of Statement of Work to Company's Form 10-K filed
Workstation Procurement Services Agreement April 5, 1999
Page 26
<PAGE>
(gg)(9) Attachment E - Service Levels of Statement of Exhibit (10)(i)(gg)(9) of
Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(10) Attachment F - Special Projects of Statement of Exhibit (10)(i)(gg)(10) of
Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(11) Attachment G - Resource Charges, Financial Exhibit (10)(i)(gg)(11) of
Responsibility and Pricing of Statement of Work to Company's Form 10-K filed
Workstation Procurement Services Agreement April 5, 1999
(gg)(12) Attachment H - Overall Management of Statement Exhibit (10)(i)(gg)(12) of
of Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(13) Attachment I - Quality Processes of Statement of Exhibit (10)(i)(gg)(13) of
Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(14) Exhibit G-1 of Attachment G of Statement of Work Exhibit (10)(i)(gg)(14) of
to Workstation Procurement Services Agreement. Company's Form 10-K filed
April 5, 1999
(gg)(15) Attachment E- Exhibit 1 of Statement of Work to Exhibit (10)(i)(gg)(15) of
Workstation Procurement Services Agreement. Company's Form 10-K filed
April 5, 1999
(hh)(1) The Asset Purchase Agreement dated May 6, Exhibit (10)(i)(hh)(1) of
1999 by, between and among Pomeroy Computer Company's Form 10-Q filed
Resources, Inc., Pomeroy Select Integration May 17,1999
Solutions, Inc., Systems Atlanta Commercial
Systems, Inc. and B. Scott Dobson, Charley G.
Dobson, Betty H. Dobson, and Tyler H. Dobson
(hh)(2) Employment Agreement by and between Pomeroy Exhibit (10)(i)(hh)(2) of
Computer Resources, Inc. and B. Scott Dobson, Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
(hh)(3) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(hh)(3) of
Computer Resources, Inc. to Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(4) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(hh)(4)
Select Integration Solutions, Inc. to Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(5) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(5)
Purchase Agreement with Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. May 17,1999
(hh)(6) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(6)
Purchase Agreement with Pomeroy Select Integration Company's Form 10-Q filed
Solutions, Inc. May 17,1999
Page 27
<PAGE>
(hh)(7) Assignment and Assumption Agreement by and Exhibit (10)(i)(hh)(7)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Computer Resources, Inc., dated May 6, 1999 May 17,1999
(hh)(8) Assignment and Assumption Agreement by and Exhibit (10)(i)(hh)(8)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Select Integration Solutions, Inc. May 17,1999
(hh)(9) Assumption of Liabilities of the Asset Purchase Exhibit (10)(i)(hh)(9)
Agreement by and between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy Computer May 17,1999
Resources, Inc., dated May 6, 1999
(hh)(10) Assumption of Liabilities of the Asset Purchase Exhibit (10)(i)(hh)(10)
Agreement by and between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy Select May 17,1999
Integration Solutions, Inc.
(hh)(11) Letter Agreement regarding Contracts by and Exhibit (10)(i)(hh)(11)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Computer Resources, Inc., dated May 6, 1999 May 17,1999
(hh)(12) Letter Agreement regarding Contracts by and Exhibit (10)(i)(hh)(12)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Select Integration Solutions, Inc. May 17,1999
(hh)(13) Power of Attorney issued to Pomeroy Computer Exhibit (10)(i)(hh)(13)
Resources, Inc. by Systems Atlanta Commercial Company's Form 10-Q filed
Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(14) Power of Attorney issued to Pomeroy Computer Exhibit (10)(i)(hh)(14)
Resources, Inc. by Systems Atlanta Commercial Company's Form 10-Q filed
Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(15) Power of Attorney issued to Pomeroy Select Exhibit (10)(i)(hh)(15)
Integration Solutions, Inc. by Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(16) Consent for Use of Similar Name by Systems Atlanta Exhibit (10)(i)(hh)(16)
Commercial Systems, Inc. to Pomeroy Computer Company's Form 10-Q filed
Resources, Inc., dated May 6, 1999 May 17,1999
(hh)(17) Consent for Use of Similar Name by Systems Atlanta Exhibit (10)(i)(hh)(17)
Commercial Systems, Inc. to Pomeroy Select Company's Form 10-Q filed
Integration Solutions, Inc., dated May 6, 1999 May 17,1999
(hh)(18) Noncompetition Agreement by and between Systems Exhibit (10)(i)(hh)(18)
Atlanta Commercial Systems, Inc. and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc., dated May 6, 1999 May 17,1999
Page 28
<PAGE>
(hh)(19) Noncompetition Agreement by and between Systems Exhibit (10)(i)(hh)(19)
Atlanta Commercial Systems, Inc. and Pomeroy Company's Form 10-Q filed
Select Integration Solutions, Inc., dated May 6, 1999 May 17,1999
(hh)(20) Noncompetition Agreement by and between B. Exhibit (10)(i)(hh)(20)
Scott Dobson and Pomeroy Computer Resources, Company's Form 10-Q filed
Inc., dated May 6, 1999 May 17,1999
(hh)(21) Employment Agreement by and between Pomeroy Exhibit (10)(i)(hh)(21)
Computer Resources, Inc. and Tyler H. Dobson Company's Form 10-Q filed
May 17,1999
(hh)(22) Award Agreement between Pomeroy Computer Exhibit (10)(i)(hh)(22)
Resources, Inc. and B. Scott Dobson, dated May 6, 1999 Company's Form 10-Q filed
May 17,1999
(hh)(23) Award Agreement between Pomeroy Computer Exhibit (10)(i)(hh)(23)
Resources, Inc. and Tyler H. Dobson, dated May 6, 1999 Company's Form 10-Q filed
May 17,1999
(hh)(24) Incentive Deferred Compensation Agreement by and Exhibit (10)(i)(hh)(24)
between Pomeroy Computer Resources, Inc. and B. Company's Form 10-Q filed
Scott Dobson, dated May 6, 1999 May 17,1999
(hh)(25) Incentive Deferred Compensation Agreement by and Exhibit (10)(i)(hh)(25)
between Pomeroy Computer Resources, Inc. and Company's Form 10-Q filed
Tyler H. Dobson, dated May 6, 1999 May 17,1999
(hh)(26) Noncompetition Agreement by and between Tyler H. Exhibit (10)(i)(hh)(26)
Dobson and Pomeroy Select Integration Solutions, Company's Form 10-Q filed
Inc., dated May 6, 1999 May 17,1999
(hh)(27) Noncompetition Agreement by and between Tyler H. Exhibit (10)(i)(hh)(27)
Dobson and Pomeroy Computer Resources, Inc., Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
(hh)(28) Noncompetition Agreement by and between Charley Exhibit (10)(i)(hh)(28)
G. Dobson and Pomeroy Select Integration Solutions, Company's Form 10-Q filed
Inc., dated May 6, 1999 May 17,1999
(hh)(29) Noncompetition Agreement by and between Charley Exhibit (10)(i)(hh)(29)
G. Dobson and Pomeroy Computer Resources, Inc., Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
(hh)(30) Noncompetition Agreement by and between Betty H. Exhibit (10)(i)(hh)(30)
Dobson and Pomeroy Computer Resources, Inc., Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
Page 29
<PAGE>
(hh)(31) Noncompetition Agreement by and between Betty Exhibit (10)(i)(hh)(31)
H. Dobson and Pomeroy Select Integration Company's Form 10-Q filed
Solutions, Inc., dated May 6, 1999 May 17,1999
(hh)(32) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(32)
Purchase Agreement between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy May 17,1999
Computer Resources, Inc.
(hh)(33) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(33)
Purchase Agreement between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy May 17,1999
Select Integration Solutions, Inc.
(ii)(1) Stock purchase agreement by, between and Exhibit (10)(i)(ii)(1)
among Thomas F. Schneider and Rodney Leas Company's Form 10-Q filed
and Pomeroy Computer Resources, Inc., dated November 12, 1999
August 20, 1999.
(ii)2) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(ii)(2)
Computer Resources, Inc. to Thomas F. Company's Form 10-Q filed
Schneider, dated August 20, 1999. November 12, 1999
(ii)(3) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(ii)(3)
Computer Resources, Inc. to Rodney Leas, dated Company's Form 10-Q filed
August 20, 1999. November 12, 1999
(ii)(4) Agreement by and between Thomas F. Schneider Exhibit (10)(i)(ii)(4)
and Pomeroy Computer Resources, Inc., dated Company's Form 10-Q filed
August 20, 1999. November 12, 1999
(ii)(5) Agreement by and between Rodney Leas and Exhibit (10)(i)(ii)(5)
Pomeroy Computer Resources, Inc., dated August 20, 1999. Company's Form 10-Q filed
November 12, 1999
(ii)(6) Incentive Deferred Compensation Agreement by Exhibit (10)(i)(ii)(6)
and between Pomeroy Computer Resources, Inc. Company's Form 10-Q filed
and Thomas F. Schneider, dated August 20, 1999. November 12, 1999
(ii)(7) Employment Agreement by and between Pomeroy Exhibit (10)(i)(ii)(7)
Computer Resources, Inc. and Thomas F. Company's Form 10-Q filed
Schneider, dated August 20, 1999. November 12, 1999
(ii)(8) Amendment to Business Credit and Security Exhibit (10)(i)(ii)(8)
Agreement by and among Deutsche Financial Company's Form 10-Q filed
Services Corporation, Pomeroy Computer November 12, 1999
Resources, Inc. and Global Technologies, Inc.,
dated September 1999.
(ii)(9) Business Credit and Security Agreement between Exhibit (10)(i)(ii)(9)
Pomeroy Select Integration Solutions, Inc. and Company's Form 10-Q filed
Deutsche Financial Services Corporation, dated November 12, 1999
January 6, 1999.
Page 30
<PAGE>
10(iii) Material Employee Benefit and Other Agreements
(a)(1) Employment Agreement between the Company Exhibit 10(iii)(a) of
And David B. Pomeroy, dated March 12, 1992 Company's Form S-1 Filed
Feb. 14,1992
(a)(2) First Amendment to Employment Agreement Exhibit 10(iii)(a)(2) of
between the Company and David B. Pomeroy Company's Form 10-K filed
effective July 6, 1993 April 7, 1994
(a)(3) Second Amendment to Employment Agreement Exhibit 10(iii)(a)(3) of
between the Company and David B. Pomeroy Company's Form 10-K filed
dated October 14, 1993 April 7, 1994
(a)(4) Agreement between the Company and David B. Exhibit 10(iii)(a)(4) of
Pomeroy related to the personal guarantee of the Company's Form 10-K filed
Datago agreement by David B. Pomeroy and his April 7, 1994
spouse effective July 6, 1993
(a)(5) Third Amendment to Employment Agreement Exhibit 10(iii)(a)(5) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1995 November 17, 1995
(a)(6) Supplemental Executive Compensation Exhibit 10(iii)(a)(6) of
Agreement between the Company and David B. Company's Form 10-Q filed
Pomeroy effective January 6, 1995 November 17, 1995
(a)(7) Collateral Assignment Split Dollar Agreement Exhibit 10(iii)(a)(7) of
between the Company; Edwin S. Weinstein, as Company's Form 10-Q filed
Trustee; and David B. Pomeroy dated June 28, 1995 November 17,1995
(a)(8) Fourth Amendment to Employment Agreement Exhibit 10(iii)(a)(8) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
dated December 20, 1995, effective January 6, 1995 May 17, 1996
(a)(9) Fifth Amendment to Employment Agreement Exhibit 10(iii)(a)(9) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1996 May 17, 1996
(a)(10) Sixth Amendment to Employment Agreement Exhibit 10.10 of Company's
between the Company and David B. Pomeroy Form S-3 filed January 3, 1997
effective January 6, 1997
(a)(11) Award Agreement between the Company and Exhibit 10.11 of Company's
David B. Pomeroy effective January 6, 1997 Form S-3 filed January 3, 1997
(a)(12) Registration Rights Agreement between the Exhibit 10.12 of Company's
Company and David B. Pomeroy effective January 6, 1997 Form S-3 filed January 3, 1997
(a)(13) Seventh Amendment to Employment Agreement Exhibit 10)(iii)(a)(13) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1998 May 6, 1998
(a)(14) Collateral Assignment Split Dollar Agreement Exhibit 10)(iii)(a)(14) of
between the Company, James H. Smith as Company's Form 10-Q filed
Trustee, and David B. Pomeroy dated January 6, 1998 May 6, 1998
Page 31
<PAGE>
(a)(15) Eight Amendment to Employment Agreement E-1 to E-3
between the Company and David B. Pomeroy
effective January 6, 1999
(a)(16) Ninth Amendment to Employment Agreement E-4 to E-8
between the Company and David B. Pomeroy
effective January 6, 2000
(c)(1) Employment Agreement between the Company Exhibit 10(iii)(c)(1) of
and Victor Eilau dated July 6, 1997 Company's Form 10-Q filed
August 11, 1997
(c)(2) Performance Share Right Agreement between the Exhibit 10(iii)(c)(2) of
Company and Victor Eilau dated July 6, 1997 Company's Form 10-Q filed
August 11, 1997
(d) The Company Savings 401(k) Plan, Exhibit 10(iii)(d) of
effective July 1, 1991 Company's Form S-1 filed
Feb. 14, 1992
(f) The Company's 1992 Non-Qualified Exhibit 10(iii)(f) of Company's
and Incentive Stock Option Plan, Form S-1 filed Feb. 14, 1992
dated February 13, 1992
(g) The Company's 1992 Outside Directors Exhibit 10(iii)(g) of
Stock Option Plan, dated February 13,1992 Company's Form S-1 filed
Feb. 14, 1992
(h) Employment Agreement between the Company Exhibit 10(iii)(h) of
and Richard C. Mills dated July 7, 1993 Company's Form 10-K filed
April 7, 1994
(I) Employment Agreement between the Company Exhibit 10.64 of Company's
and James Eck dated February 6, 1996, and Form S-1 filed June 4, 1996
effective as of September 18, 1995
(j)(1) Employment Agreement between the Company Exhibit 10.3 of Company's
and Stephen E. Pomeroy dated November 13,1996 Form S-3 filed January 3, 1997
(j)(2) Incentive Deferred Compensation Agreement Exhibit 10.4 of Company's
between the Company and Stephen E. Pomeroy Form S-3 filed January 3, 1997
dated November 13, 1996
(j)(3) Employment Agreement between Pomeroy Select Exhibit (10)(iii) of Company's
Integration Solutions, Inc. and Stephen E. Pomeroy, Form 10-K filed April 5, 1999
dated January 6, 1999.
(j)(4) First Amendment to Employment Agreement between E-8 to E-9
Pomeroy Select Integration Solutions, Inc. and
Stephen E. Pomeroy, dated September 1, 1999
(k)(1) The Company's 1998 Employee Stock Purchase Exhibit 4.3 of Company's
Plan, effective April 1, 1999. Form S-8 filed March 23, 1999
11 Computation of Per Share Earnings E-1
21 Subsidiaries of the Company E-2
27 Financial Data Schedule E-3
</TABLE>
(b) Reports on Form 8-K:
None.
Page 32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pomeroy Computer Resources, Inc.
By: /s/ David B. Pomeroy
-----------------------------------------
David B. Pomeroy
Chairman of the Board, President and
Chief Executive Officer
By: /s/ Stephen E. Pomeroy
-----------------------------------------
Chief Financial Officer and Chief
Accounting Officer
Dated: March 31, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.
Signature and Title Date
------------------- ----
By: /s/ David B. Pomeroy March 31 ,2000
- -----------------------------------
David B. Pomeroy, Director
By: /s/ Stephen E. Pomeroy March 31, 2000
- -----------------------------------
Stephen E. Pomeroy, Director
By: /s/ James H. Smith III March 31, 2000
- -----------------------------------
James H. Smith III, Director
By:
- -----------------------------------
Dr. David W. Rosenthal, Director
By: /s/ Michael E. Rohrkemper March 31, 2000
- -----------------------------------
Michael E. Rohrkemper, Director
By:
- -----------------------------------
William H. Lomicka, Director
By:
- -----------------------------------
Vincent D. Rinaldi, Director
Page 33
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Pomeroy Computer Resources, Inc.
We have audited the accompanying consolidated balance sheets of Pomeroy Computer
Resources, Inc. as of January 5, 1999 and 2000, and the related consolidated
statements of income, equity, and cash flows for each of the three years in the
period ended January 5, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pomeroy
Computer Resources, Inc. at January 5, 1999 and 2000, and the consolidated
results of its operations and its consolidated cash flows for each of the three
years in the period ended January 5, 2000 in conformity with accounting
principles generally accepted in the United States.
Grant Thornton LLP
/s/ Grant Thornton LLP
Cincinnati, Ohio
February 11, 2000
F1
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, January 5,
1999 2000
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,962 $ 1,737
Accounts receivable:
Trade, less allowance of $279 and $504 at January 5, 1999 and
2000, respectively. . . . . . . . . . . . . . . . . . . . . . . . 114,801 129,734
Vendor receivables, less allowance of $319 and $1,902 at January 5,
1999 and 2000, respectively . . . . . . . . . . . . . . . . . . . 38,201 57,309
Net investment in leases . . . . . . . . . . . . . . . . . . . . . . 10,996 14,937
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993 681
----------- -----------
Total receivables. . . . . . . . . . . . . . . . . . . . . . . 164,991 202,661
----------- -----------
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,333 38,858
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,084 3,819
----------- -----------
Total current assets.. . . . . . . . . . . . . . . . . . . . . 204,370 247,075
----------- -----------
Equipment and leasehold improvements:
Furniture, fixtures and equipment. . . . . . . . . . . . . . . . . . 17,593 20,773
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . 6,203 4,503
----------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,796 25,276
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . 10,323 9,804
----------- -----------
Net equipment and leasehold improvements . . . . . . . . . . . 13,473 15,472
----------- -----------
Net investment in leases. . . . . . . . . . . . . . . . . . . . . . . . 3,219 29,183
Goodwill and other intangible assets. . . . . . . . . . . . . . . . . . 32,249 39,344
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 915 2,067
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 254,226 $ 333,141
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F2
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, January 5,
1999 2000
----------- -----------
<S> <C> <C>
LIABILITIES & EQUITY
Current liabilities:
Current portion of notes payable . . . . . . . . . . . . . . . . $ 5,028 $ 11,337
Accounts payable:
Floor plan financing. . . . . . . . . . . . . . . . . . . . . 34,767 41,843
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,050 50,611
------------ -----------
Total accounts payable . . . . . . . . . . . . . . . . . . 78,817 92,454
Bank notes payable . . . . . . . . . . . . . . . . . . . . . . . 39,629 69,027
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . 4,065 5,891
Accrued liabilities:
Employee compensation and benefits. . . . . . . . . . . . . . 3,707 4,989
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 61 -
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 283 437
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 1,416 1,814
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . 133,006 185,949
------------ -----------
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,231 6,971
Equity:
Preferred stock (no shares issued or outstanding). . . . . . . . - -
Common stock (11,707 and 11,843 shares issued and outstanding
at January 5, 1999 and 2000, respectively). . . . . . . . . . 117 118
Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . 64,394 66,743
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . 48,800 73,682
------------ -----------
113,311 140,543
Less treasury stock, at cost (31 shares at January 5, 1999 and
2000) 322 322
------------ -----------
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . 112,989 140,221
------------ -----------
Total liabilities and equity. . . . . . . . . . . . . . . . . $ 254,226 $ 333,141
============ ===========
</TABLE>
See notes to consolidated financial statements.
F3
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Fiscal Years Ended January 5,
-----------------------------
1998 1999 2000
-------- --------- ---------
<S> <C> <C> <C>
Net sales and revenues:
Sales - equipment,supplies and leasing $446,239 $555,433 $652,936
Service. . . . . . . . . . . . . . . . 45,209 72,495 103,821
-------- --------- ---------
Total net sales and revenues.. . 491,448 627,928 756,757
-------- --------- ---------
Cost of sales and service:
Equipment, supplies and leasing. . . . 399,605 501,162 591,119
Service. . . . . . . . . . . . . . . . 27,137 42,602 61,384
-------- --------- ---------
Total cost of sales and service. 426,742 543,764 652,503
-------- --------- ---------
Gross profit . . . . . . . . . . . . . 64,706 84,164 104,254
-------- --------- ---------
Operating expenses:
Selling, general and administrative. . 31,637 41,136 48,930
Rent expense . . . . . . . . . . . . . 1,956 2,412 2,940
Depreciation . . . . . . . . . . . . . 2,958 3,748 3,572
Amortization . . . . . . . . . . . . . 982 1,629 2,955
Provision for doubtful accounts. . . . 325 141 346
-------- --------- ---------
Total operating expenses . . . . 37,858 49,066 58,743
-------- --------- ---------
Income from operations. . . . . . . . . . 26,848 35,098 45,511
-------- --------- ---------
Other expense (income):
Interest expense . . . . . . . . . . . 974 2,670 3,858
Miscellaneous. . . . . . . . . . . . . 54 (140) (93)
-------- --------- ---------
Total other expense. . . . . . . 1,028 2,530 3,765
-------- --------- ---------
Income before income tax . . . . . . . 25,820 32,568 41,746
Income tax expense . . . . . . . . . . 9,507 12,409 16,864
-------- --------- ---------
Net income . . . . . . . . . . . . . . $ 16,313 $ 20,159 $ 24,882
======== ========= =========
Weighted average shares outstanding:
Basic. . . . . . . . . . . . . . . . . 11,052 11,466 11,728
======== ========= =========
Diluted. . . . . . . . . . . . . . . . 11,367 11,751 11,815
======== ========= =========
Earnings per common share:
Basic. . . . . . . . . . . . . . . . . $ 1.48 $ 1.76 $ 2.12
======== ========= =========
Diluted. . . . . . . . . . . . . . . . $ 1.44 $ 1.72 $ 2.11
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F4
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Fiscal Years Ended January 5,
--------------------------------
1998 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income. . . . . . . . . . . . . . . . . . . $ 16,313 $ 20,159 $ 24,882
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . 2,958 3,748 4,558
Amortization . . . . . . . . . . . . . . . . . . 982 1,629 2,955
Deferred income taxes. . . . . . . . . . . . . . (638) (331) -
Issuance of common shares for stock awards . . . 65 - -
Changes in working capital accounts, net of
effects of acquisitions:
Accounts receivable. . . . . . . . . . . . . . (29,618) (41,639) (37,828)
Inventories. . . . . . . . . . . . . . . . . . (16,369) 8,062 (6,472)
Prepaids . . . . . . . . . . . . . . . . . . . (71) (1,129) (1,721)
Net investment in leases. . . . . . . . . . . . (437) 261 (26,058)
Floor plan financing . . . . . . . . . . . . . (11,791) 11,949 7,076
Trade payables . . . . . . . . . . . . . . . . 10,321 6,111 4,346
Deferred revenue . . . . . . . . . . . . . . . 1,031 366 1,825
Income tax payable . . . . . . . . . . . . . . 3,270 (4,766) (61)
Other, net . . . . . . . . . . . . . . . . . . 1,044 (912) (167)
--------- --------- ---------
Net operating activities . . . . . . . . . . . . (22,940) 3,508 (26,665)
--------- --------- ---------
Cash Flows from Investing Activities:
Capital expenditures. . . . . . . . . . . . . . (2,399) (3,181) (4,649)
Acquisition of subsidiary companies, net of
cash acquired. . . . . . . . . . . . . . . . . (509) (10,214) (4,222)
Acquisition of reseller assets, net of cash
acquired . . . . . . . . . . . . . . . . . . . (2,990) (10,999) -
--------- --------- ---------
Net investing activities . . . . . . . . . . . . (5,898) (24,394) (8,871)
--------- --------- ---------
Cash Flows from Financing Activities:
Payments under notes payable . . . . . . . . . . (843) (2,149) (14,280)
Proceeds under notes payable . . . . . . . . . . - 6,995 16,549
Net proceeds of stock offering . . . . . . . . . 23,256 - -
Net proceeds (payments) under bank notes payable (1,535) 16,319 29,248
Proceeds from exercise of stock options and
related tax benefit . . . . . . . . . . . . . . 1,531 3,375 1,495
Proceeds from employee stock purchase plan.. . . - - 299
Purchase of treasury stock . . . . . . . . . . . - (118) -
Other. . . . . . . . . . . . . . . . . . . . . . - 46 -
--------- --------- ---------
Net financing activities. . . . . . . . . . . . 22,409 24,468 33,311
-------- --------- ---------
Increase (decrease) in cash. . . . . . . . . . . . (6,429) 3,582 (2,225)
Cash:
Beginning of period . . . . . . . . . . . . . . 6,809 380 3,962
--------- --------- ---------
End of period . . . . . . . . . . . . . . . . . $ 380 $ 3,962 $ 1,737
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F5
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except for share Common Paid-in Retained Treasury Total
amounts) stock capital earnings stock equity
-------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 5, 1997 . . . . 65 34,402 12,330 (204) 46,593
Net income . . . . . . . . . . . 16,313 16,313
5,188 common shares issued
for stock awards . . . . . . . 65 65
36,953 common shares issued
for acquisitions . . . . . . . 1,021 1,021
Stock options exercised and
related tax benefit. . . . . . 1 1,530 1,531
Effect of 3 for 2 stock split. . 38 (38) (2) (2)
1,020,000 common shares
issued by public offering. . . 10 23,246 23,256
-------- --------- ---------- ---------- --------
Balances at January 5, 1998 . . . . 114 60,226 28,641 (204) 88,777
Net income . . . . . . . . . . . 20,159 20,159
38,885 common shares issued
for acquisitions . . . . . . . 750 750
Stock options exercised and
related tax benefit. . . . . . 3 3,372 3,375
Repayment of obligations under
Section 16(b) of the Securities
Exchange Act of 1934 . . . . . 46 46
Purchase of treasury stock . . . (118) (118)
-------- --------- ---------- ---------- --------
Balances at January 5, 1999 . . . . 117 64,394 48,800 (322) 112,989
Net income . . . . . . . . . . . 24,882 24,882
38,638 common shares issued
for acquisitions . . . . . . . 556 556
Stock options exercised and
related tax benefit. . . . . . 1 1,494 1,495
26,113 common shares issued for
employee stock purchase plan . 299 299
-------- --------- ---------- ---------- --------
Balances at January 5, 2000 . . . . $ 118 $ 66,743 $ 73,682 $ (322) $140,221
======== ========= ========== ========== ========
</TABLE>
See notes to consolidated financial statements.
F6
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 5, 1998, JANUARY 5, 1999 AND JANUARY 5, 2000
1. COMPANY DESCRIPTION
Pomeroy Computer Resources, Inc. (the "Company") was organized in February
1992 to consolidate and reorganize predecessor companies. The Company has
15 million shares of $.01 par value common stock authorized, with 11.8
million shares outstanding. The Company is also authorized to issue 2
million shares of $.01 par value preferred stock. In fiscal 1995 the
Company formed a wholly-owned subsidiary, Technology Integration Financial
Services, Inc. ("TIFS") (f/k/a - Pomeroy Computer Leasing Company, Inc.
("PCL")), for the purpose of leasing computer equipment to the Company's
customers. In fiscal 1997, the Company formed a wholly-owned subsidiary,
Pomeroy Computer Resources of South Carolina, Inc. ("PCR-SC") for the
purpose of acquiring The Computer Store ("TCS"), a computer reseller and
service provider located in Columbia, South Carolina. In fiscal 1998, the
Company formed a wholly-owned subsidiary, Pomeroy Select Integration
Solutions, Inc. ("Pomeroy Select"), to which the Company transferred the
assets, liabilities, business, operations and personnel comprising the
Company's information technology ("IT") services business on January 6,
1999. In January 1999, Pomeroy Select filed an initial S-1 registration
statement with the Securities and Exchange Commission (the "SEC") with
respect to an initial public offering of its Class A Common Stock.
Currently, this S-1 registration is on hold due to market conditions and
there can be no assurance that Pomeroy Select will be able to consummate
this public offering. In October 1999, the legal structure of the Company
was changed for the purpose of increasing efficiencies. The Company formed
the following wholly-owned subsidiaries: Pomeroy Computer Resources Holding
Company, Inc. ("PCR Holding") and Pomeroy Computer Resources Sales Company,
Inc. ("PCR Sales"). In addition, the Company formed Pomeroy Select Advisory
Services, Inc. ("PSAS"), a wholly-owned subsidiary of Pomeroy Select, Acme
Data Services, LLC ("Acme Data"), a wholly-owned subsidiary of PCR Sales,
T.I.F.S. Advisory Services, Inc. ("TIFS Advisory"), a wholly-owned
subsidiary of TIFS, and Pomeroy Computer Resources LLP ("PCR Ops"), a
partnership between the Company and PCR Holding. PCR-SC and Global Combined
Technologies, Inc. were merged into PCR Sales.
The Company sells, installs, services and leases microcomputers and
microcomputer equipment primarily for commercial, health care,
governmental, financial and educational customers. The Company also derives
revenue from customer support services, including network analysis, design
and integration, systems configuration, cabling, custom installation,
training, maintenance and repair. The Company has thirty-one regional
offices located in 14 states throughout the Southeast and Midwest United
States. The Company grants credit to substantially all customers in these
areas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries TIFS, Pomeroy Select, PCR Holding, PCR Sales, PSAS, Acme Data,
TIFS Advisory and PCR Ops. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain
reclassifications have been made to the fiscal 1997 and 1998 financial
statements included herein to conform with the presentation used in fiscal
1999.
Fiscal Year - The Company's fiscal year is a 12- month period ending
January 5. References to fiscal 1997, 1998 and 1999 are for the fiscal
years ended January 5, 1998, January 5, 1999 and January 5, 2000,
respectively.
Goodwill and Other Intangible Assets - Goodwill is amortized using the
straight-line method over periods of fifteen to twenty-five years. In
accordance with SFAS No. 121, "Accounting for The Impairment of Long-Lived
Assets", the Company evaluates its goodwill on an ongoing basis to
determine potential impairment by comparing the carrying value to the
undiscounted estimated expected future cash flows of the related assets.
Other intangible assets are amortized using the straight-line method over
periods up to ten years.
Equipment and Leasehold Improvements - Equipment and leasehold improvements
are stated at cost. Depreciation on equipment is computed using the
straight-line method over estimated useful lives. Depreciation on leasehold
improvements is computed using the straight-line method over estimated
useful lives or the term of the lease, whichever is less. During fiscal
1999, depreciation expense associated with TIFS's operating leases is
classified under cost of sales. Prior periods presented have not been
reclassified due to immateriality. Expenditures for repairs and maintenance
are charged to expense as incurred and additions and improvements that
significantly extend the lives of assets are capitalized. Upon sale or
retirement of depreciable property, the cost and accumulated depreciation
are removed from the related accounts and any gain or loss is reflected in
the results of operations.
F-7
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Income Taxes - Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Vendor Incentive Rebates - Certain vendors provide incentive rebates to
perform product training, advertising and other sales and market
development activities. The Company recognizes these rebates when it has
completed its obligation to perform under the specific incentive
arrangement. Incentive rebates are recorded as reductions of selling,
general and administrative expense or, if volume based, cost of sales.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined by the average cost method.
Revenue Recognition - The Company recognizes revenue on the sale of
equipment and supplies or sales-type leases when the products are shipped.
Service revenue is recognized when the applicable services are provided.
Leasing revenue is recognized on a monthly basis as fees accrue and from
financing at level rates of return over the term of the lease or
receivable, which are primarily sales-type leases ranging from one to three
years.
Deferred Revenue - Revenues received on maintenance contracts are
recognized ratably over the lives of the contracts. Costs related to
maintenance contracts are recognized when incurred.
Net sales and revenues - In the first quarter of fiscal 1999, the Company
changed its classification of configuration/warehouse fees, freight and
miscellaneous revenues. The Company now classifies these revenues as
equipment, supplies and leasing; previously, such revenues were included in
service. Prior periods have been reclassified to conform with the current
year's presentation.
Cost of sales and services - In the first quarter of fiscal 1999, the
Company changed its classification of services' labor costs. The Company
now classifies direct costs of service personnel in cost of sales and
service; previously, such costs were included in selling, general and
administrative expenses. Prior periods have been reclassified to conform
with the current year's presentation.
Stock-Based Compensation - The Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation", in the fall of
1995. The statement encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value
beginning in fiscal 1996. The Company elected to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's common
stock at the date of grant over the amount an employee must pay to acquire
the stock. The Company adopted SFAS No. 123 for disclosure purposes and for
non-employee stock options.
Earnings per Common Share - The computation of basic earnings per common
share is based upon the weighted average number of common shares
outstanding during the period. Diluted earnings per common share is based
upon the weighted average number of common shares outstanding during the
period plus, in periods in which they have a dilutive effect, the effect of
common shares contingently issuable, primarily from stock options.
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS 128
changed the computation, presentation and disclosure requirements for
earnings per share ("EPS"). Under SFAS 128, EPS is presented as basic
earnings per share ("basic EPS") and diluted earnings per share ("diluted
EPS") and replaced the presentation of primary EPS and fully diluted EPS.
The adoption of SFAS 128 resulted in the restatement of earnings per share
for fiscal 1997 presented in the Company's consolidated financial
statements.
The following is a reconciliation of the number of shares used in the basic
EPS and diluted EPS computations:
F-8
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
(in thousands, except per Fiscal Years
-------------
share data) 1997 1998 1999
---------------------- ------------------ ------------------
Per Share Per Share Per Share
Shares Amount Shares Amount Shares Amount
- --------------------------------- --------- ----------- ------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS 11,052 $ 1.48 11,466 $ 1.76 11,728 $ 2.12
Effect of dilutive stock options 315 (0.04) 285 (0.04) 87 (0.01)
--------- ----------- ------ ---------- ------- ---------
Diluted EPS 11,367 $ 1.44 11,751 $ 1.72 11,815 $ 2.11
========= =========== ====== ========== ======= =========
</TABLE>
Use of Estimates in Financial Statements - In preparing financial
statements in conformity with generally accepted accounting principles,
management makes estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value Disclosures - The fair value of financial instruments
approximates carrying value.
Comprehensive Income - The Company does not have any comprehensive income
items other than net income.
New Pronouncements - In June 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard No. 133 ("SFAS
No. 133"), Accounting for Derivative Instruments and Hedging Activities,
which requires entities to report all derivatives at fair value as assets
or liabilities in their statements of financial position. In June 1999, the
FASB issued Statement of Financial Accounting No. 137 which deferred the
effective date of SFAS No. 133 for financial statements issued for fiscal
periods beginning after June 15, 2000. The Company does not currently have
any derivative instruments or hedging activities to report under this
standard.
3. ACCOUNTS RECEIVABLE
The following table summarizes the activity in the allowance for doubtful
accounts for fiscal years 1997, 1998 and 1999:
<TABLE>
<CAPTION>
(in thousands) Trade Other
------- --------
<S> <C> <C>
Balance January 5, 1997 $ 372 $ 137
Provision 1997 125 200
Accounts written-off (601) (415)
Recoveries 459 301
------- --------
Balance January 5, 1998 355 223
Provision 1998 193 1,100
Accounts written-off (444) (1,171)
Recoveries 175 167
------- --------
Balance January 5, 1999 279 319
Provision 1999 346 2,142
Accounts written-off (876) (824)
Recoveries 755 265
------- --------
Balance January 5, 2000 $ 504 $ 1,902
======= ========
</TABLE>
F-9
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4. INVENTORIES
Inventories consist of items held for resale and are comprised of the
following components as of the end of fiscal:
<TABLE>
<CAPTION>
(in thousands) 1998 1999
------- -------
<S> <C> <C>
Equipment and supplies $28,081 $35,077
Service parts 5,252 3,781
------- -------
Total $33,333 $38,858
======= =======
</TABLE>
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following as of the end
of the fiscal year, net of accumulated amortization of $3,419 thousand
(1998) and $6,181 thousand (1999), respectively:
<TABLE>
<CAPTION>
(in thousands) 1998 1999
------- -------
<S> <C> <C>
Goodwill $31,531 $38,404
Covenants not to compete 292 557
Customer lists 426 383
------- -------
$32,249 $39,344
======= =======
</TABLE>
In fiscal 1997, the Company acquired certain assets of Magic Box, Inc.
("Magic Box") , a privately held network integrator located in Miami,
Florida, and Micro Care, Inc. ("Micro Care"), a privately held systems
integrator located in Indianapolis, Indiana. A wholly-owned subsidiary of
the Company, Pomeroy Computer Resources of South Carolina, Inc., acquired
all the assets and liabilities of The Computer Store Inc., a network
integrator located in Columbia, South Carolina. The Company recorded $1.7
million, $1.9 million and $0.4 million of goodwill in connection with those
acquisitions, respectively.
In fiscal 1998, the Company acquired certain assets of Commercial Business
Systems, a privately held systems integrator in Richmond, Virginia, and
Access Technologies, Inc. ("Access"), a privately held telecommunications
and computer networking provider in Memphis, Tennessee. The Company
recorded $1.9 million and $8.9 million of goodwill in connection with those
acquisitions, respectively. In addition, the Company acquired through a
stock purchase Global Combined Technologies, Inc. a privately held systems
integrator in Oklahoma City, Oklahoma. The Company recorded $9.7 million of
goodwill in connection with this acquisition.
In fiscal 1999, the Company acquired certain assets of Systems Atlanta
Commercial Systems, Inc., a privately held systems integrator and provider
of technology staffing in Atlanta, Georgia. In addition, the Company
acquired through a stock purchase Acme Data Systems ("ADS"), a privately
held computer network integrator and services provider in Columbus, Ohio.
The Company recorded $0.8 million and $4.6 million of goodwill in
connection with those acquisitions, respectively.
6. BORROWING ARRANGEMENTS
Bank Notes Payable - The Company has available a $140 million credit
facility with Deutsche Financial Services Corp. ("DFS"). This credit
facility provides a credit line of $60.0 million for inventory financing
and $80.0 million for accounts receivable financing. The inventory
financing portion of the credit facility utilizes thirty day notes and
provides interest free financing due to subsidies by manufacturers. The
credit facility can be amended, with proper notification, if the thirty day
interest free subsidies provided by manufacturers are revised. At January
5, 2000, bank notes payable include $19.1 million of overdrafts in accounts
with a participant bank to this credit facility. These amounts were
subsequently funded through the normal course of business. The accounts
receivable portion of the credit facility carries a variable interest rate
based on the prime rate less 125 basis points. The interest rate charged
was 7.25% at January 5, 2000. The credit facility is collateralized by
substantially all of the assets of the Company, except those assets that
collateralize certain other financing arrangements. Under the terms
F-10
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
of the credit facility, the Company is subject to various financial
covenants. The weighted average interest rate on the bank revolving credit
agreements was 7.3%, 7.6% and 7.0% in fiscal 1997, 1998 and 1999,
respectively.
Floor plan arrangements - The Company finances inventory through floor plan
arrangements with two finance companies. As of January 5, 2000, the floor
plan lines of credit were $60 million with DFS and $12 million with IBM
Credit Corporation ("ICC"). Borrowings under the ICC floor plan arrangement
are made on either thirty-day or sixty-day notes, with one-half of the note
amount due in thirty days on the sixty-day notes. Borrowings under the DFS
floor plan arrangement are made on thirty-day notes. Financing on many of
the arrangements, which are subsidized by manufacturers, is interest free.
The average rate on the plans overall is less than 1.0%.
Notes payable - Notes payable consist of the following:
<TABLE>
<CAPTION>
(in thousands) Fiscal Years
----------------
1998 1999
------- -------
<S> <C> <C>
Non-recourse notes payable to banks at various interest rates. The notes
mature on various dates through 2002. $ 6,061 $12,202
Acquisition notes payable at various interest rates and unsecured. Principal
payments are made in equal annual installments ,ranging from one to four
years, through 2002. 5,725 4,906
Bank notes payable at various interest rates. Principal payments were made
in either monthly or quarterly installments through 2003. 1,473 -
Capital lease obligation at an imputed interest rate of 8.51%. Principal and
interest are payable in monthly installments of $55 thousand for a two year
period through 2002. - 1,200
------- -------
Total notes payable 13,259 18,308
Less current maturities 5,028 11,337
------- -------
Long-term notes payable $ 8,231 $ 6,971
======= =======
</TABLE>
Payments on long-term debt and capital lease obligations are due as
follows:
<TABLE>
<CAPTION>
(in thousands)
Fiscal Year
- ------------
<S> <C>
2000 $ 11,337
2001 6,059
2002 912
--------
18,308
========
</TABLE>
F-11
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(in thousands) Fiscal Years
---------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Current:
Federal $8,742 $11,430 $14,275
State 1,036 1,310 3,304
------- -------- --------
Total current 9,778 12,740 17,579
------- -------- --------
Deferred:
Federal (217) (311) (618)
State (54) (20) (97)
------- -------- --------
Total deferred (271) (331) (715)
------- -------- --------
Total income tax provision $9,507 $12,409 $16,864
======= ======== ========
</TABLE>
The approximate tax effect of the temporary differences giving rise to the
Company's deferred income tax assets (liabilities) are:
<TABLE>
<CAPTION>
(in thousands) Fiscal Years
------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Bad debt provision $ 353 $ 444
Depreciation 293 890
Leases - 864
Deferred compensation 584 627
Other - 18
-------- --------
Total deferred tax assets 1,230 2,843
-------- --------
Deferred Tax Liabilities:
Acquisition of lease residuals (615) (580)
Accounts Receivable (388) (279)
Intangibles - (1,161)
Other (119) -
-------- --------
Total deferred tax liabilities (1,122) (2,020)
-------- --------
Net deferred tax assets $ 108 $ 823
======== ========
</TABLE>
The Company's net deferred tax assets are included in other current and
long-term assets.
F-12
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's effective income tax rate differs from the Federal statutory
rate as follows:
<TABLE>
<CAPTION>
Fiscal Years
-------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Tax at Federal statutory rate 35.0 35.0 35.0
State taxes 4.7 4.4 5.9
Kentucky Relocation Credits (2.2) (1.9) (0.9)
Other (0.7) 0.6 0.4
----- ----- -----
Effective tax rate 36.8 38.1 40.4
===== ===== =====
</TABLE>
8. OPERATING LEASES
The Company leases office and warehouse space, vehicles and certain office
equipment from various lessors including a related party. Lease terms vary
in duration and include various option periods. The leases generally
require the Company to pay taxes and insurance. Future minimum lease
payments under noncancelable operating leases with initial or remaining
terms in excess of one year as of January 5, 2000 are as follows:
<TABLE>
<CAPTION>
(in thousands)
Fiscal Year
- ----------------------------
<S> <C>
2000 $ 3,717
2001 3,147
2002 1,893
2003 1,347
2004 967
Thereafter 1,599
-------
Total minimum lease payments $12,670
=======
</TABLE>
9. EMPLOYEE BENEFIT PLANS
The Company has a savings plan intended to qualify under sections 401(a)
and 401(k) of the Internal Revenue Code. The plan covers substantially all
employees of the Company. The Company did not contribute to the plan in
fiscal 1997. Beginning January 6, 1998, the Company made contributions to
the plan based on a participant's annual pay. Contributions made by the
Company for fiscal 1998 and 1999 were approximately $169 thousand and $263
thousand, respectively. During fiscal 1998, the distribution of assets from
an Employee Stock Ownership Plan was completed.
In June 1999, the Board of Directors of the Company approved the 1998 stock
purchase plan (the "1998 plan") under Section 423 of the Internal Revenue
Code of 1986, as amended. The 1998 plan provides substantially all
employees of the Company with an opportunity to purchase through payroll
deductions up to 2,000 shares of common stock of the Company with a maximum
market value of $25,000. The purchase price per share is determined by
whichever of two prices is lower: 85% of the closing market price of the
Company's common stock in the first trading date of an offering period
(grant date), or 85% of the closing market price of the Company's common
stock in the last trading date of an offering period (exercise date).
100,000 shares of common stock of the Company are reserved for issuance
under the 1998 plan. The Board of Directors of the Company may at any time
terminate or amend the 1998 plan. The 1998 plan will terminate twenty years
from the effective date unless sooner terminated. In fiscal 1999, 26,113
shares of common stock were purchased under the 1998 plan.
F-13
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
10. INVESTMENT IN LEASE RESIDUALS
The Company participates in a Remarketing and Agency Agreement
("Agreement") with Information Leasing Corporation ("ILC") whereby the
Company obtains rights to 50% of lease residual values for services
rendered in connection with locating the lessee, selling the equipment to
ILC and agreeing to assist in remarketing the used equipment.
During fiscal 1997, 1998 and 1999 the Company sold equipment and related
support services to ILC, for lease to ILC's customers, in amounts of $7.7
million, $2.8 million, and $0.6 million, respectively. The Company also
obtained rights to lease residuals from ILC in the amount of $562 thousand
and $250 thousand in 1997 and 1998, respectively. Such amounts are recorded
as a reduction of the related cost of sales. Residuals acquired in this
manner are recorded at the estimated present value of the interest
retained.
The Company also purchases residuals associated with separate leasing
arrangements entered into by ILC. Such transactions do not involve the sale
of equipment and related support services by the Company to ILC. Residuals
acquired in this manner are accounted for at cost.
The carrying value of investments in lease residuals is $3.2 million and
$2.6 million as of January 5, 1999 and 2000, respectively and is included
in long-term net investment in leases. Investments in lease residuals are
evaluated on a quarterly basis, and are subject only to downward market
adjustments until ultimately realized through a sale or re-lease of the
equipment.
11. MAJOR CUSTOMERS
Sales to a major customer were approximately $60.4 million for fiscal 1997.
There were no sales to a major customer for fiscal 1998 and 1999.
12. ACQUISITIONS
During fiscal 1997, the Company completed several acquisitions. The total
consideration given consisted of $3.7 million in cash, subordinated notes
of $1.3 million and 37 thousand unregistered shares of the Company's common
stock with an approximate value of $1.0 million. Interest on the
subordinated notes is payable quarterly. Principal is payable in equal
annual installments. The acquisitions were accounted for as purchases,
accordingly the purchase price was allocated to assets and liabilities
based on their estimated value as of the dates of acquisition. The results
of operations of the acquisitions are included in the consolidated
statement of income from the dates of acquisition. If the 1997 acquisitions
had occurred on January 6, 1996, the pro forma operations of the Company
would not have been materially different than that reported in the
accompanying consolidated statements of income.
During fiscal 1998, the Company completed several acquisitions. The total
consideration given consisted of $21.2 million in cash, subordinated notes
of $3.3 million and 39 thousand unregistered shares of the Company's stock
with an approximate value of $0.8 million. Interest on the subordinated
notes is payable quarterly. Principal is payable in equal annual
installments. The acquisitions were accounted for as purchases, accordingly
the purchase price was allocated to assets and liabilities based on their
estimated value as of the dates of acquisition. The results of operations
of the acquisitions are included in the consolidated statement of income
from the dates of acquisition. If the 1998 acquisitions had occurred on
January 6, 1997, the pro forma operations of the Company would not have
been materially different than that reported in the accompanying
consolidated statements of income.
During fiscal 1999, the Company completed two acquisitions. The total
consideration given consisted of $4.2 million in cash, subordinated notes
of $2.6 million and 39 thousand unregistered shares of the Company's stock
with an approximate value of $0.6 million. Interest on the subordinated
notes is payable quarterly. Principal in the amount of $0.6 million is
payable in full on the anniversary date of closing and the $2.0 million of
principal is payable in equal annual installments. The acquisitions were
accounted for as purchases, accordingly the purchase price was allocated to
assets and liabilities based on their estimated value as of the dates of
acquisition. The results of operations of the acquisitions are included in
the consolidated statement of income from the dates of acquisition. If the
1999 acquisitions had occurred on January 6, 1998, the pro forma operations
of the Company would not have been materially different than that reported
in the accompanying consolidated statements of income.
F-14
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
13. RELATED PARTIES
The Company leases its headquarters and distribution facility from a
company that is controlled by the Chief Executive Officer of the Company.
It is a triple net lease agreement which expires in the year 2006. The base
rental for fiscal 1997 on an annualized basis was $858 thousand and base
rental for fiscal 1998 and fiscal 1999 was $828 thousand and $863 thousand,
respectively. The annual rental for these properties was determined on the
basis of a fair market value rental opinion provided by an independent real
estate company conducted in 1995. In addition, the Company pays for the
business use of real estate that is owned by the Chief Executive Officer of
the Company. During fiscal years 1997, 1998 and 1999, the Company paid $60
thousand, $60 thousand and $95 thousand, respectively in connection with
this real estate.
As of January 5, 2000, amounts due from a company that is controlled by the
Chief Executive Officer of the Company was $209 thousand.
14. SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental disclosures with respect to cash flow information and non-cash
investing and financing activities are as follows:
<TABLE>
<CAPTION>
(in thousands) Fiscal Years
-----------------------------
1997 1998 1999
-------- --------- --------
<S> <C> <C> <C>
Interest paid $ 1,045 $ 2,463 $ 3,704
======== ========= ========
Income taxes paid $ 4,920 $ 17,432 $17,799
======== ========= ========
Additions to goodwill for adjustments
to acquisition assets $ - $ - $ 3,147
======== ========= ========
Business combinations accounted
for as purchases:
Assets acquired $ 7,358 $ 50,228 $10,497
Liabilities assumed (1,495) (25,015) (3,166)
Note payable (1,343) (3,250) (2,553)
Stock issued (1,021) (750) (556)
-------- --------- --------
Net cash paid $ 3,499 $ 21,213 $ 4,222
======== ========= ========
</TABLE>
15. STOCKHOLDERS' EQUITY AND STOCK OPTION PLANS
In February 1997, the Company completed a secondary public offering of 1.02
million shares of its common stock. The net proceeds of $23.3 million were
used to reduce amounts outstanding under the Company's line of credit. If
this secondary offering had been completed as of January 6, 1997, pro forma
basic and diluted earnings per share would have been $1.38 and $1.34 ,
respectively, for fiscal 1997. This computation assumes no interest expense
related to the credit line and the issuance of only a sufficient number of
shares to eliminate the credit line at the beginning of fiscal 1997.
On September 8, 1997, the Company's Board of Directors authorized a
three-for-two stock split in the form of a stock dividend payable October
6, 1997, to shareholders of record September 22, 1997. The split resulted
in the issuance of 3.8 million new shares of common stock. The stated par
value of each share was not changed from $0.01. A total of $38 thousand was
reclassified from the Company's additional paid in capital account to the
Company's common stock account. Accordingly, net income per common share,
weighted average shares outstanding and stock option plan information were
restated to reflect the stock split.
In January 1998, the Board of Directors of the Company approved the
repricing of certain unexercised options granted under the 1992
Non-Qualified and Incentive Stock Option Plan. As a result, 109,649 options
granted during fiscal 1997 were repriced to $16.63 per share from $34.19
per share. These amounts approved by the Board of Directors do not give
effect to the stock split approved after the date of the original grant of
the options.
F-15
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's 1992 Non-Qualified and Incentive Stock Option Plan provides
certain employees of the Company with options to purchase common stock of
the Company through options at an exercise price equal to the market value
on the date of grant. 2,350,000 shares of the common stock of the Company
are reserved for issuance under the plan. The plan will terminate ten years
from the date of adoption. Stock options granted under the plan are
exercisable in accordance with various terms as authorized by the
Compensation Committee. To the extent not exercised, options will expire
not more than ten years after the date of grant.
The Company's 1992 Outside Directors' Stock Option Plan provides outside
directors of the Company with options to purchase common stock of the
Company at an exercise price equal to the market value of the shares at the
date of grant. 262,500 shares of common stock of the Company are reserved
for issuance under the plan. The plan will terminate ten years from the
date of adoption. Pursuant to the plan, an option to purchase 10,000 shares
of common stock automatically will be granted on the first day of the
initial term of a director. An additional 2,500 shares of common stock
automatically will be granted to an eligible director upon the first day of
each consecutive year of service on the board. Options may be exercised
after one year from the date of grant for not more than one-third of the
shares subject to the option and an additional one-third of the shares
subject to the option may be exercised for each of the next two years
thereafter. To the extent not exercised, options will expire five years
after the date of grant.
The following summarizes the stock option transactions under the plans for
the three fiscal years ended January 5, 2000:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise price
---------- ---------------
<S> <C> <C>
Options outstanding January 5, 1997 292,175 $ 7.27
Granted 216,328 30.10
Exercised (95,260) 8.70
Forfeitures (4,700) 34.19
Stock split effect 227,754 5.61
----------
Options outstanding January 5, 1998 636,297 12.01
Granted 278,953 17.75
Exercised (264,990) 8.98
Forfeitures (7,175) 10.24
Repricing effect (54,826) 6.16
----------
Options outstanding January 5, 1999 588,259 13.97
Granted 811,852 16.02
Exercised (68,961) 7.98
Forfeitures (189,677) 17.74
----------
Options outstanding January 5, 2000 1,141,473 $ 15.16
===========
</TABLE>
F-16
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following summarizes options outstanding and exercisable at January 5,
2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Number Weighted Avg. Number
Range of Outstanding Remaining Weighted Avg. Exercisable Weighted Avg.
Exercise Prices at 1/5/00 Contractual Life Exercise Price at 1/5/00 Exercise Price
- ---------------- ----------- ---------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
2.83 to $5.65 78,687 1.10 $ 5.20 78,687 $ 5.20
5.66 to $8.48 39,475 0.80 $ 6.33 39,475 $ 6.33
8.49 to $11.30 155,750 2.80 $ 10.71 155,750 $ 10.71
11.31 to $14.13 292,200 1.70 $ 12.93 269,700 $ 12.88
14.14 to $16.95 118,599 0.80 $ 15.38 118,599 $ 15.38
16.96 to $19.78 162,062 0.60 $ 17.56 160,812 $ 17.56
19.79 to $22.60 197,600 2.30 $ 21.75 187,600 $ 21.75
22.61 to $25.43 94,600 1.20 $ 22.89 89,602 $ 22.86
25.44 to $28.25 2,500 3.50 $ 26.50 834 $ 26.50
----------- -----------
1,141,473 1.60 $ 15.16 1,101,059 $ 15.08
=========== ===========
</TABLE>
The weighted average fair value at date of grant for options granted during
fiscal 1997, 1998 and 1999 was $6.77, $7.00 and $5.79, respectively. The
fair value of options at the date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1998 Fiscal 1999
------------ ------------ ------------
<S> <C> <C> <C>
Expected life (years) 1.8 2.0 2.0
Interest rate 6.1% 5.3% 6.4%
Volatility 56% 69% 60%
Dividend yield 0% 0% 0%
</TABLE>
Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant date for awards in fiscal 1997, 1998
and 1999 consistent with the provisions of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
(in thousands, except per
share amounts) Fiscal 1997 Fiscal 1998 Fiscal 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net income - as reported $ 16,313 $ 20,159 $ 24,882
Net income - pro forma $ 14,455 $ 18,929 $ 20,854
Net income per common share - as reported
Basic 1.48 1.76 2.12
Diluted 1.44 1.72 2.11
Net income per common share - pro forma
Basic 1.31 1.65 1.78
Diluted 1.27 1.61 1.77
</TABLE>
In fiscal 1997, 5,188 shares of common stock were awarded to officers of the
Company. Compensation expense resulting from the awards was $20 thousand in
fiscal 1997.
F-17
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
16. LITIGATION
There are various legal actions arising in the normal course of business
that have been brought against the Company. Management believes these
matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
17. SEGMENT INFORMATION AND CONCENTRATIONS
Segment Information - The Company operates in three industry segments:
products, services and leasing. The products segment is primarily engaged
in the sale and distribution of microcomputers and related products. The
services segment offers three categories of services: life cycle services,
internetworking services and customer support services. Life cycle services
include warranty and non warranty repair and maintenance; a full range of
install, move, add or change services; redeployment and mobile systems
management; evaluation and tracking of information technology assets; and
end-of-life services. Internetworking services include project management;
network design, integration, management, migration and support; and cabling
services. Customer support services include customized help desk services,
Internet-based training on many popular software packages and
video/teleconferencing services. The leasing segment provides leasing
services primarily to the customers of the products and services segments.
The Company provides products, services and leasing primarily to large and
medium sized corporate, health care, governmental, financial and
educational customers located in the United States. The Company has no
operations outside the United States.
The accounting policies of the segments are the same as those discussed in
the summary of significant accounting policies. The Company evaluates
performance based on operating earnings of the respective business units.
Intersegment sales and transfers are not significant.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. (in thousands)
<TABLE>
<CAPTION>
Fiscal 1997
-------- ------------------------------------
Products Services Leasing Consolidated
--------- --------- -------- -------------
<S> <C> <C> <C> <C>
Revenue $ 445,783 $ 45,209 $ 456 $ 491,448
Income from operations $ 20,651 $ 6,033 $ 164 $ 26,848
Total assets $ 136,356 $ 24,702 $ 6,206 $ 167,264
Capital expenditures $ 1,418 $ 955 $ 26 $ 2,399
Depreciation and amortization $ 3,357 $ 582 $ 1 $ 3,940
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998
---------------------------------------------
Products Services Leasing Consolidated
--------- --------- -------- -------------
<S> <C> <C> <C> <C>
Revenue $ 554,012 $ 72,495 $ 1,421 $ 627,928
Income from operations $ 23,101 $ 11,980 $ 17 $ 35,098
Total assets $ 189,438 $ 42,199 $ 22,589 $ 254,226
Capital expenditures $ 766 $ 374 $ 2,041 $ 3,181
Depreciation and amortization $ 4,142 $ 995 $ 240 $ 5,377
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1999
---------------------------------------------
Products Services Leasing Consolidated
--------- --------- -------- -------------
<S> <C> <C> <C> <C>
Revenue $ 648,924 $ 103,821 $ 4,012 $ 756,757
Income from operations $ 22,954 $ 21,111 $ 1,446 $ 45,511
Total assets $ 229,903 $ 55,043 $ 48,195 $ 333,141
Capital expenditures $ 3,435 $ 492 $ 722 $ 4,649
Depreciation and amortization $ 4,986 $ 1,342 $ 1,185 $ 7,513
</TABLE>
Concentrations - During fiscal 1999, approximately 32.2% of the Company's
total net sales and revenues were derived from its top ten customers.
F-18
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Due to the demand for the products sold by the Company, significant product
shortages occur from time to time because manufacturers are unable to
produce certain products to meet increased demand. Failure to obtain
adequate product shipments could have a material adverse effect on the
Company's operations and financial results.
The Company is required to have authorizations from manufacturers in order
to sell their products. The loss of a significant vendor's authorization
could have a material adverse effect on the Company's business.
F-19
<PAGE>
EIGHTH AMENDMENT TO EMPLOYMENT AGREEMENT
THIS EIGHTH AMENDMENT TO EMPLOYMENT AGREEMENT is made effective the 6th day of
January, 1999, by and between POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation ("Company") and DAVID B. POMEROY, II (the "Executive").
WHEREAS, on the 12th day of March, 1992, Company and Executive executed an
Employment Agreement ("Agreement") that became effective on the date of the
closing of the initial public offering of the Company (April 10, 1992); and
WHEREAS, Company and Executive entered into an Amendment to Employment Agreement
effective July 6, 1993; and
WHEREAS, Company and Executive entered into a Second Amendment to Employment
Agreement effective October 14, 1993;
WHEREAS, Company and Executive entered into a Third Amendment to Employment
Agreement effective January 6, 1995;
WHEREAS, Company and Executive entered into a Fourth Amendment to Employment
Agreement effective for the fiscal year ending January 5, 1996;
WHEREAS, Company and Executive entered into a Fifth Amendment to Employment
Agreement effective January 6, 1996;
WHEREAS, Company and Executive entered into a Sixth Amendment to Employment
Agreement effective January 6, 1997;
WHEREAS, Company and Executive entered into a Seventh Amendment to Employment
Agreement effective January 6, 1998; and
WHEREAS, Company and Executive desire to amend the Agreement, as amended, to
reflect certain changes agreed upon by Company and Executive regarding
compensation payable to Executive for the 1999 fiscal year and thereafter.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties hereto covenant and agree as
follows:
1. Section 5(b)(i) is amended commencing with the 1999 fiscal year as follows:
(i) Executive shall be entitled to a bonus and non-qualified stock option
award for the 1999 fiscal year in the event Employee satisfies the
applicable criteria set forth below of the income from operations (as
defined) of the Company for 1999, as follows:
1
<PAGE>
(i) Income from operations greater than $35,000,000.00 but less than
or equal to $38,000,000.00 = $300,000.00 cash bonus and 25,000
non-qualified stock options;
(ii) Income from operations greater than $38,000,000.00 but less than
or equal to $41,000,000.00 = $400,000.00 cash bonus and 50,000
non-qualified stock options; or
(iii)Income from operations greater than $41,000,000.00 = $500,000.00
cash bonus and 75,000 non-qualified stock options.
Within thirty (30) days of the conclusion of the 1999 fiscal year of the
Corporation and each fiscal year thereafter, Executive and Company shall
agree upon the threshold of operating income to be utilized for determining
any bonus and non-qualified stock options to be awarded to Executive for
such year. Such bonus and non-qualified stock option awards for each
subsequent year of this Agreement shall be consistent with Executive's
prior plan.
Any award of stock options to acquire the common stock of the Company shall
be at the fair market value of such common stock as of the applicable date.
For purposes of this Agreement, the fair market value as of the applicable
date shall mean with respect to the common shares, the average between the
high and low bid and asked prices for such shares on the over the counter
market on the last business day prior to the date on which the value is to
be determined (or the next preceding date on which sales occurred if there
were no sales on such date).
For purposes of this Agreement, the term "income from operations" shall be
computed without respect to the bonus payable to the Executive pursuant to
this Section 5(b)(i) and shall exclude any gains or losses realized by the
Company on the sale or other disposition of its assets (other than in the
ordinary course of business). Such income from operations of the Company
shall be determined on a consolidated basis by the independent accountant
regularly retained by the Company, subject to the foregoing provisions of
this subparagraph (i) in accordance with generally accepted accounting
principles. Said determination and payment of such bonus shall be made
within ninety (90) days following the end of the fiscal year of the Company
and the determination by the accountant shall be final, binding and
conclusive upon all parties hereto. In the event the audited financial
statements are not issued within such ninety-day period, the Company shall
make the payment due hereunder (if any) based on its best reasonable
estimate of any liability hereunder, which amount shall be reconciled by
both parties once the audited financial statements are issued. Company
shall have the ability to advance amounts to Executive based on the
projected amount of the bonus compensation to be paid hereunder. In the
event that such advance payments are in excess of the amount due hereunder,
any such excess shall be reimbursed to Company by Executive within ninety
(90) days following the end of the fiscal year. In the event such advance
payments are less than the amount of said bonus as determined hereunder,
any additional amount due Executive shall be
2
<PAGE>
paid within ninety (90) days following the end of the fiscal year of the
Company.
2. Section 19 shall be amended by adding at the end of such Section, the
following language:
Executive shall be awarded, effective January 6, 1999, an option to acquire
25,000 shares of the common stock of Company at the fair market value of
such shares on January 5, 1999. Such option shall be awarded to Executive
by Company pursuant to the terms of an Award Agreement which is attached
hereto and incorporated herein by reference as Exhibit C.
Except as modified above, the terms of the Employment Agreement, as amended, are
hereby affirmed and ratified by the parties.
IN WITNESS WHEREOF, this Eighth Amendment to Employment Agreement has been
executed as of the day and year first above written.
WITNESSES: POMEROY COMPUTER RESOURCES, INC.
- -----------------------
- ----------------------- By: ------------------------------
- -----------------------
- ----------------------- --------------------------------------
DAVID B. POMEROY, II, Executive
3
<PAGE>
NINTH AMENDMENT TO EMPLOYMENT AGREEMENT
THIS NINTH AMENDMENT TO EMPLOYMENT AGREEMENT is made effective the 6th day of
January, 2000, by and between POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation ("Company") and DAVID B. POMEROY, II (the "Executive").
WHEREAS, on the 12th day of March, 1992, Company and Executive executed an
Employment Agreement ("Agreement") that became effective on the date of the
closing of the initial public offering of the Company (April 10, 1992); and
WHEREAS, Company and Executive entered into an Amendment to Employment Agreement
effective July 6, 1993; and
WHEREAS, Company and Executive entered into a Second Amendment to Employment
Agreement effective October 14, 1993;
WHEREAS, Company and Executive entered into a Third Amendment to Employment
Agreement effective January 6, 1995;
WHEREAS, Company and Executive entered into a Fourth Amendment to Employment
Agreement effective for the fiscal year ending January 5, 1996;
WHEREAS, Company and Executive entered into a Fifth Amendment to Employment
Agreement effective January 6, 1996;
WHEREAS, Company and Executive entered into a Sixth Amendment to Employment
Agreement effective January 6, 1997;
WHEREAS, Company and Executive entered into a Seventh Amendment to Employment
Agreement effective January 6, 1998; and
WHEREAS, Company and Executive entered into an Eighth Amendment to Employment
Agreement effective January 6, 1999; and
WHEREAS, Company and Executive desire to amend the Agreement, as amended, to
reflect certain changes agreed upon by Company and Executive regarding
compensation payable to Executive for the 2000 fiscal year and thereafter.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties hereto covenant and agree as
follows:
1
<PAGE>
1. Section 5(a)(iii) shall be amended as follows:
(iii)During the Company's 2000 fiscal year, Executive shall be paid at
the annual rate of Four Hundred Ninety-Five Thousand Dollars
($495,000.00). This rate shall continue for each subsequent year
of the Agreement unless modified by the compensation committee as
provided in Section 5(a)(iv).
2. Section 5(b)(i) is amended commencing with the 2000 fiscal year as follows:
(i) Executive shall be entitled to a bonus and non-qualified stock option
award for the 2000 fiscal year in the event Employee satisfies the
applicable criteria set forth below of the income from operations (as
defined) of the Company for 2000, as follows:
(i) Income from operations greater than $40,000,000.00 but less than
or equal to $45,000,000.00 = $200,000.00 cash bonus and 25,000
non-qualified stock options;
(ii) Income from operations greater than $45,000,000.00 but less than
or equal to $50,000,000.00 = $400,000.00 cash bonus and 50,000
non-qualified stock options; or
(iii)Income from operations greater than $50,000,000.00 = $600,000.00
cash bonus and 75,000 non - qualified stock options.
Within thirty (30) days of the conclusion of the 2000 fiscal year of the
Corporation and each fiscal year thereafter, Executive and Company shall
agree upon the threshold of operating income to be utilized for determining
any bonus and non-qualified stock options to be awarded to Executive for
such year. Such bonus and non-qualified stock option awards for each
subsequent year of this Agreement shall be consistent with Executive's
prior plan.
Any award of stock options to acquire the common stock of the Company shall
be at the fair market value of such common stock as of the applicable date.
For purposes of this Agreement, the fair market value as of the applicable
date shall mean with respect to the common shares, the average between the
high and low bid and asked prices for such shares on the over the counter
market on the last business day prior to the date on which the value is to
be determined (or the next preceding date on which sales occurred if there
were no sales on such date).
For purposes of this Agreement, the term "income from operations" shall be
computed without respect to the bonus payable to the Executive pursuant to
this Section 5(b)(i) and shall exclude any gains or losses realized by the
Company on the sale or other disposition of its assets (other than in the
ordinary course of business). Such income from operations of the Company
shall be determined on a consolidated basis by the independent accountant
regularly retained by the
2
<PAGE>
Company, subject to the foregoing provisions of this subparagraph (i) in
accordance with generally accepted accounting principles. Said
determination and payment of such bonus shall be made within ninety (90)
days following the end of the fiscal year of the Company and the
determination by the accountant shall be final, binding and conclusive upon
all parties hereto. In the event the audited financial statements are not
issued within such ninety-day period, the Company shall make the payment
due hereunder (if any) based on its best reasonable estimate of any
liability hereunder, which amount shall be reconciled by both parties once
the audited financial statements are issued. Company shall have the ability
to advance amounts to Executive based on the projected amount of the bonus
compensation to be paid hereunder. In the event that such advance payments
are in excess of the amount due hereunder, any such excess shall be
reimbursed to Company by Executive within ninety (90) days following the
end of the fiscal year. In the event such advance payments are less than
the amount of said bonus as determined hereunder, any additional amount due
Executive shall be paid within ninety (90) days following the end of the
fiscal year of the Company.
3. Section 5(g) of the Agreement is amended by inserting the words"Fifteen
Hundred Dollars ($1,500.00) per month" in lieu of "One Thousand Three
Hundred and Fifty Dollars ($1,350.00)".
4. Section 5(j) shall be amended by the following new Section 5(j):
During the term of this Agreement, Company shall pay Executive (or to a
legal entity controlled by him) the sum of Seven Thousand Nine Hundred
Sixteen Dollars and Sixty-Seven Cents ($7,916.67) per month to enable
Company to utilize real estate owned by Executive (or such legal entity
controlled by Executive that owns such real estate) in Desert Mountain,
Arizona, for the purpose of conducting business related to Company's
operation in the midwest and southwest portions of the United States, and
for periodic Board of Directors meetings. Company and Executive shall agree
upon designated times for use of such property for the purposes set forth
above.
5. Section 19 shall be amended by adding at the end of such Section, the
following language:
Executive shall be awarded, effective December 15, 1999, an option to
acquire 50,000 shares of the common stock of Pomeroy at the fair market
value of such shares on December 15, 1999. Such option shall be awarded to
Executive by Company pursuant to the terms of an Award Agreement which is
attached hereto and incorporated herein by reference as Exhibit C.
Except as modified above, the terms of the Employment Agreement, as amended, are
hereby affirmed and ratified by the parties.
IN WITNESS WHEREOF, this Ninth Amendment to Employment Agreement has been
executed as of the day and year first above written.
3
<PAGE>
WITNESSES: POMEROY COMPUTER RESOURCES, INC.
- ------------------------
- ------------------------- By: ----------------------------------
- ------------------------
- ----------------------- -------------------------------------
DAVID B. POMEROY, II, Executive
4
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment of Employment Agreement is made effective September 1,
1999, by and between Pomeroy Select Integration Solutions, Inc., a Delaware
corporation, ("Company"), and Stephen E. Pomeroy ("Employee").
WHEREAS, on the 6th day of January, 1999, Company and Employee executed an
Employment Agreement ("Agreement");
WHEREAS, pursuant to Section 16 of the Agreement, the parties have the
right to amend such Agreement;
WHEREAS, Company and Employee desire to amend the Agreement to reflect
certain changes agreed upon by Company and Employee regarding compensation.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties hereto covenant and agree as
follows:
1. Line 2 of Section 2 of the Agreement is amended by inserting the year
"1999" in lieu of the year "1996";
1. Effective September 1, 1999, Section 5(a) of the Agreement is
amended by inserting the sum of Two Hundred Seventy-Five Thousand Dollars
($275,000.00) in lieu of One Hundred Seventy-Five Thousand Dollars ($175,000.00)
as the base annual salary of Employee.
2.
3. Pursuant to the provisions of Section 5(e) of the Agreement, in
consideration of Employee's performance in identifying various acquisition
candidates and implementing the acquisition of various entities or their assets
by Company and its parent company, Pomeroy Computer Resources, Inc. during this
current fiscal year of Company, Company shall pay Employee a cash bonus of Two
Hundred Thousand Dollars ($200,000.00) on or before October 15, 1999.
4.
5. Except as modified above, the terms of the Employment Agreement, as
amended, are hereby affirmed and ratified by the parties.
6.
7. IN WITNESS WHEREOF, this First Amendment to Employment Agreement has
been executed as of the day and year first above written.
8.
9.
----------------------------------------
10. POMEROY SELECT INTEGRATION
SOLUTIONS, INC.
11.
12.
13.
----------------------------------------
14. By:
<PAGE>
15.
16.
17.
18.
19.
20.
21.
22. Stephen E. Pomeroy
----------------------------------------
23.
24.
<PAGE>
<TABLE>
<CAPTION>
Pomeroy Computer Resources, Inc.
Exhibit 11 - Computation of Earnings Per Share
(in thousands, except per share amounts)
Fiscal Years
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
BASIC
Weighted average common shares
outstanding 11,052 11,466 11,728
======= ======= =======
Net income $16,313 $20,159 $24,882
======= ======= =======
Net income per common share $ 1.48 $ 1.76 $ 2.12
======= ======= =======
DILUTED
Weighted average common shares
outstanding 11,052 11,466 11,728
Dilutive effect of stock options outstanding
during the period 315 285 87
Total common and common equivalent
------- ------- -------
shares 11,367 11,751 11,815
======= ======= =======
Net income $16,313 $20,159 $24,882
======= ======= =======
Net income per common share $ 1.44 $ 1.72 $ 2.11
======= ======= =======
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 21
Subsidiaries of Pomeroy Computer Resources, Inc.
Subsidiary State of Incorporation
- ----------- ----------------------
<S> <C>
Technology Integration Financial Services, Inc.
f/k/a Pomeroy Computer Leasing Company, Inc. Kentucky
The subsidiary does business under the name Technology Integration Financial Services, Inc.
Pomeroy Select Integration Solutions, Inc. Delaware
Pomeroy Computer Resources Holding Company, Inc. Delaware
Pomeroy Computer Resources Sales Company, Inc. Delaware
Pomeroy Select Advisory Services, Inc. Delaware
T.I.F.S. Advisory Services, Inc. Delaware
Acme Data Services, LLC Delaware
Pomeroy Computer Resources Operations, LLP Kentucky
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule contains standard data for the year ended
January 5, 2000.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-05-2000
<PERIOD-START> JAN-06-1999
<PERIOD-END> JAN-05-2000
<CASH> 1737
<SECURITIES> 0
<RECEIVABLES> 202661
<ALLOWANCES> 2406
<INVENTORY> 38858
<CURRENT-ASSETS> 247075
<PP&E> 25276
<DEPRECIATION> 9804
<TOTAL-ASSETS> 333141
<CURRENT-LIABILITIES> 185949
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 140103
<TOTAL-LIABILITY-AND-EQUITY> 333141
<SALES> 756757
<TOTAL-REVENUES> 756757
<CGS> 652503
<TOTAL-COSTS> 652503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 346
<INTEREST-EXPENSE> 3858
<INCOME-PRETAX> 41746
<INCOME-TAX> 16864
<INCOME-CONTINUING> 24882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24882
<EPS-BASIC> 2.12
<EPS-DILUTED> 2.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule contains restated standard reports for the
year ended January 5, 1999.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-05-1999
<PERIOD-START> JAN-06-1998
<PERIOD-END> JAN-05-1999
<CASH> 3962
<SECURITIES> 0
<RECEIVABLES> 164991
<ALLOWANCES> 598
<INVENTORY> 33333
<CURRENT-ASSETS> 204370
<PP&E> 23796
<DEPRECIATION> 10323
<TOTAL-ASSETS> 254226
<CURRENT-LIABILITIES> 133006
<BONDS> 0
0
0
<COMMON> 117
<OTHER-SE> 112872
<TOTAL-LIABILITY-AND-EQUITY> 254226
<SALES> 627928
<TOTAL-REVENUES> 627928
<CGS> 543764
<TOTAL-COSTS> 543764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 141
<INTEREST-EXPENSE> 2670
<INCOME-PRETAX> 32568
<INCOME-TAX> 12409
<INCOME-CONTINUING> 20159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20159
<EPS-BASIC> 1.76
<EPS-DILUTED> 1.72
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule contains restated standard reports for the
year ended January 5, 1998.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-05-1998
<PERIOD-START> JAN-06-1997
<PERIOD-END> JAN-05-1998
<CASH> 380
<SECURITIES> 0
<RECEIVABLES> 99707
<ALLOWANCES> 578
<INVENTORY> 39160
<CURRENT-ASSETS> 140063
<PP&E> 17316
<DEPRECIATION> 6770
<TOTAL-ASSETS> 167264
<CURRENT-LIABILITIES> 77035
<BONDS> 0
0
0
<COMMON> 114
<OTHER-SE> 88663
<TOTAL-LIABILITY-AND-EQUITY> 167264
<SALES> 491448
<TOTAL-REVENUES> 491448
<CGS> 426742
<TOTAL-COSTS> 426742
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 325
<INTEREST-EXPENSE> 974
<INCOME-PRETAX> 25820
<INCOME-TAX> 9507
<INCOME-CONTINUING> 16313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16313
<EPS-BASIC> 1.48
<EPS-DILUTED> 1.44
</TABLE>
