<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- ------ SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1998.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________________
TO ________________.
Commission File Number: 0-23686
PC SERVICE SOURCE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1703687
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2350 VALLEY VIEW LANE, DALLAS, TEXAS 75234
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(972) 481-4000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
As of August 1, 1998, there were 5,760,320 shares of the registrant's common
stock outstanding.
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<PAGE> 2
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 1998 and December 31, 1997 ............................... 1
Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1998
and 1997.......................................................... 2
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1998 and 1997.................... 3
Notes to Condensed Consolidated Financial Statements............... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ...... 10
Item 6. Exhibits and Reports on Form 8-K ......................... 10
SIGNATURES .......................................................................... 12
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
ASSETS ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 1,149 $ 717
Accounts receivable, net ......................................................... 18,474 15,973
Inventories ...................................................................... 21,859 17,511
Other current assets ............................................................. 4,687 2,956
-------- --------
Total current assets ...................................................... 46,169 37,157
Property and equipment, net ........................................................ 14,487 13,526
Other assets, net .................................................................. 4,193 4,475
-------- --------
Total assets ............................................................... $ 64,849 $ 55,158
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................. $ 13,564 $ 8,864
Accrued liabilities .............................................................. 5,954 3,403
Revolving line of credit ......................................................... 10,514
Current installments of obligations under capital leases ......................... 1,198 1,153
-------- --------
Total current liabilities ................................................... 31,230 13,420
Long-term debt-revolving line of credit ............................................ 5,535
Obligations under capital leases ................................................... 2,558 3,160
Deferred income taxes .............................................................. 796 709
Stockholders' equity:
Common Stock ...................................................................... 59 59
Additional paid-in capital ........................................................ 30,982 30,978
Retained Earnings ................................................................. 1,014 3,087
Less treasury stock, at cost ...................................................... (1,790) (1,790)
-------- --------
Total stockholders' equity ................................................... 30,265 32,334
-------- --------
Total liabilities and stockholders' equity ................................ $ 64,849 $ 55,158
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues .................................. $ 38,309 $ 31,711 $ 76,806 $ 64,132
Cost of revenues .............................. 26,981 22,239 54,269 45,674
-------- -------- -------- --------
Gross margin ................................ 11,328 9,472 22,537 18,458
-------- -------- -------- --------
Operating expenses:
Selling, general and administrative ......... 13,431 8,100 23,024 15,504
Depreciation and amortization ............... 1,145 802 2,175 1,544
-------- -------- -------- --------
Total operating expenses .................. 14,576 8,902 25,199 17,048
-------- -------- -------- --------
Earnings (loss) from operations ........... (3,248) 570 (2,662) 1,140
Interest expense, net ......................... 315 141 634 270
-------- -------- -------- --------
Earnings (loss) before income taxes ....... (3,563) 429 (3,296) 1,410
Income tax expense (benefit) .................. (1,322) 158 (1,223) 422
-------- -------- -------- --------
Net earnings (loss) ....................... $ (2,241) $ 271 $ (2,073) $ 718
======== ======== ======== ========
Earnings (loss) per share:
Basic ..................................... $ (.39) $ .05 $ (.36) $ .12
======== ======== ======== ========
Diluted ................................... $ (.39) $ .05 $ (.36) $ .12
======== ======== ======== ========
Weighted average common shares outstanding:
Basic ..................................... 5,758 5,747 5,758 5,747
======== ======== ======== ========
Diluted ................................... 5,758 5,878 5,758 5,882
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) .................................. $(2,073) $ 718
Adjustments to reconcile net earnings (loss) to net
cash used in operating activities:
Depreciation and amortization .................... 2,175 1,544
Deferred income taxes ............................ (845) 151
Other, net ....................................... 108 (108)
Changes in operating assets and liabilities:
Accounts receivable .............................. (2,501) (2,138)
Inventories ...................................... (4,348) 612
Other current assets ............................. (799) (664)
Accounts payable ................................. 4,700 (1,533)
Accrued liabilities .............................. 2,551 215
------- -------
Net cash used in operating activities ................ (1,032) (1,203)
------- -------
Cash flows from investing activities:
Capital expenditures ................................. (2,962) (2,528)
Acquisition of noncash net assets .................... (332)
------- -------
Net cash used in investing activities .................. (2,962) (2,860)
------- -------
Cash flows from financing activities:
Net revolving line of credit borrowings .............. 4,979 887
Payments under capital lease obligations ............. (557) (445)
Proceeds from exercise of common stock options ....... 4
------- -------
Net cash provided by financing activities .............. 4,426 442
------- -------
Net increase (decrease) in cash and cash equivalents ... 432 (3,621)
Cash and cash equivalents at beginning of period ....... 717 3,650
------- -------
Cash and cash equivalents at end of period ............. $ 1,149 $ 29
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE> 6
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(1) BASIS OF PRESENTATION
These unaudited condensed consolidated financial statements of PC
Service Source, Inc. and its majority owned subsidiaries (collectively
the "Company"), for the three and six months ended June 30, 1998 and
1997, have been prepared in accordance with generally accepted
accounting principles for interim financial reporting. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements and should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1997. All
significant intercompany balances and transactions have been eliminated
in consolidation. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary
for a fair presentation of the interim financial information have been
included. The results of operations for any interim period are not
necessarily indicative of the results of operations for a full year.
(2) EARNINGS (LOSS) PER SHARE
The Company adopted Statement of Financial Accounting Standards No.
128 (SFAS 128), Earnings per Share, in the fourth quarter of 1997,
which required companies to present basic earnings per share and
diluted earnings per share. Basic earnings per share is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock. The Company has restated its earnings per
share calculations for the three and six months ended June 30, 1997 to
reflect the adoption of SFAS 128.
The following table sets forth the computation of basic and diluted
earnings per share.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) ................ $(2,241) $ 271 $(2,073) $ 718
======= ======= ======= =======
Weighted average common shares
outstanding - basic ............. 5,758 5,747 5,758 5,747
Employee stock options and other ... 131 135
------- ------- ------- -------
Weighted average common shares
outstanding - diluted ........... 5,758 5,878 5,758 5,882
======= ======= ======= =======
Earnings (loss) per share:
Basic ......................... $ (.39) $ .05 $ (.36) $ .12
Diluted ....................... $ (.39) $ .05 $ (.36) .12
</TABLE>
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<PAGE> 7
The weighted average common shares outstanding-diluted computation for
the three and six months ended June 30, 1998, respectively excluded 107
and 119 employee stock options and other common stock equivalents
because this impact would be anti-dilutive.
(3) COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), Reporting Comprehensive Income, in the first quarter of
1998, which requires companies to disclose comprehensive income
separately from net income from operations. Comprehensive income is
defined as the change in equity during a period from transactions and
other events and circumstances from non-ownership sources. It includes
all changes in equity during a period, except those resulting from
investments by owners and distributions to owners. Comprehensive income
(loss) was ($2,241) and $271 for the three months and ($2,073) and $718
for the six months ended June 30, 1998 and 1997.
(4) SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities reflects cash payments for
interest and income taxes as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1998 1997
---- ----
<S> <C> <C>
Interest paid ................................... $ 524 $ 350
Income taxes paid (refunded), net................ (13) 631
During the six months ended June 30, 1998 and 1997, the Company
acquired $0 and $907 of assets through non-cash capital lease
transactions.
</TABLE>
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<PAGE> 8
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table displays the Company's statements of operations as a
percentage of net revenues:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues ......................................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues ..................................... 70.4 70.1 70.7 71.2
------- ------- ------- -------
Gross margin ................................ 29.6 29.9 29.3 28.8
------- ------- ------- -------
Operating expenses:
Selling, general and administrative ......... 35.1 25.6 30.0 24.2
Depreciation and amortization ............... 3.0 2.5 2.8 2.4
------- ------- ------- -------
Total operating expenses ................. 38.1 28.1 32.8 26.6
------- ------- ------- -------
Earnings (loss) from operations ....... (8.5) 1.8 (3.5) 2.2
Interest expense, net ................................ 0.8 0.4 0.8 0.4
------- ------- ------- -------
Earnings (loss) before income taxes ... (9.3) 1.4 (4.3) 1.8
Income tax expense (benefit) ......................... (3.4) 0.5 (1.6) 0.7
------- ------- ------- -------
Net earnings (loss) ...................... (5.9)% 0.9% (2.7)% 1.1%
======= ======= ======= =======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net revenues were $38.3 million for the second quarter of 1998,
representing an increase of $6.6 million or a 21% increase over the second
quarter of 1997. Revenues are comprised of general parts distribution
operations, service provider alliances, original equipment manufacturers
outsourcing arrangements and remanufacturing. The Company saw a shift in revenue
mix during the second quarter from general parts distribution to service
provider alliances, mainly due to increased service logistics outsourcing
agreements, which contributed primarily to the increase in revenues.
Gross margin as a percentage of net revenues decreased in the second quarter of
1998 to 29.6% from 29.9% in the same period in 1997. The Company's gross margin
on each computer part in inventory varies; therefore, any change in the mix of
parts sold will impact the gross margin from quarter to quarter. During the
second quarter of 1998, gross margin as a percentage of revenue declined due
primarily to a higher mix of lower margin service logistics outsourcing
business. However, a pricing strategy designed to recover more of the costs
incurred in acquiring, stocking, and selling computer parts helped offset this
gross margin decrease.
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<PAGE> 9
Selling, general and administrative expenses ("SG&A") as a percentage of net
revenues increased to 35.1% in the second quarter of 1998 compared to 25.6%
incurred in the second quarter of 1997. The increase in SG&A as a percentage of
revenue was principally due to three unusual factors which contributed equally
to the increase. The first factor was an increase in employee expenses resulting
from new employees hired and trained to handle the Dell Computer laptop repair
contract, overtime and temporary works to assist in the conversion to the
Company's automated warehouse management system, and severance expenses for
former employees. The second factor was a non-recurring charge related to the
termination of an unprofitable warranty processing program with an OEM customer
with whom the Company has other successful programs pending. The third factor
was an increase in freight expense resulting from deficiencies in freight
monitoring, control, and billing processes. These deficiencies were discovered
in connection with the warehouse management system conversion, and management
believes that proper freight billing controls are now in place. While these
three factors principally account for the increase in SG&A expense, that expense
was also adversely impacted, but to a lesser extent by freight concessions
to customers in connection with slow shipping during the warehouse management
system conversion.
Depreciation and amortization increased as a percentage of net revenues to 3.0%
in the second quarter of 1998 compared to 2.5% in the same period of 1997. The
increase is due to a higher asset base in 1998 resulting from the significant
capital expenditures made by the Company during 1997.
Interest expense (net) as a percentage of net revenues increased to .8% during
the second quarter of 1998 from .4% during the same period of 1997 due to a
higher average outstanding balance on the Company's revolving line of credit
during the second quarter of 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net revenues were $76.8 million for the first six months of 1998, representing
an increase of $12.7 million or a 20% increase over the first six months of
1997. The increase was primarily attributed to the increase in service logistics
outsourcing agreements with the Company's service provider alliances.
Gross margin as a percentage of net revenues increased in the first half of 1998
to 29.3% from 28.8% in the same period in 1997. The Company's gross margin on
each computer part in its inventory is different; therefore, any change in the
mix of parts sold will impact the Company's gross margin from period to period.
During the first half of 1998, gross margin percentage improved because of the
adoption of a pricing strategy designed to recover more of the costs incurred in
acquiring, stocking and selling computer parts. During the same period in 1997,
the Company had lowered the average selling price on certain products to
aggressively compete for additional revenue.
SG&A as a percentage of net revenues increased to 30.0% in the first half of
1998 compared to 24.2% incurred in the first half of 1997 primarily for the same
reasons as explained in the three months ended June 30, 1998 compared to the
three months ended for June 30, 1997 analysis discussed above.
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<PAGE> 10
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
Depreciation and amortization increased as a percentage of net revenues to 2.8%
in the first six months of 1998 compared to 2.4% in the same period of 1997. The
increase was due to a higher asset base in 1998 resulting from the significant
capital expenditures made by the Company during 1997.
Interest expense (net) as a percentage of net revenues increased to .8% during
the first half of 1998 from .4% during the same period of 1997 due to a higher
average outstanding balance on the Company's revolving line of credit during the
first half of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently maintains a $20 million revolving bank credit facility
which matures in June 1999. During the second quarter of 1998, the Company
exceeded an agreed upon ratio which triggered a total borrowing base
availability calculation ("asset-based calculation"), which is based upon
defined percentages of eligible accounts receivable and inventory. As a result,
the amount currently available under the Company's credit facility is limited to
the lesser of $20.0 million or calculated availability based on the asset-based
calculation. The Company's available credit facility at June 30, 1998 was $20.0
million.
The Company was not in compliance with certain financial performance covenants
at June 30, 1998. The Company has received a waiver from its lenders with
respect to the covenants and intends to renegotiate the facility to revise
certain covenants. The Company also intends to extend the maturity date of the
facility. The inability of the Company to extend the maturity date of the
facility or to obtain similar alternate financing sources could have a material
adverse impact on the liquidity and capital resources of the Company.
The Company has historically been a net user of cash from operating activities
and has financed its capital expenditure requirements from revolving credit,
lease financing agreements and equity financing. Cash used in operating
activities during the first six months of 1998 was $1.0 million as compared with
cash used in operating activities of $1.2 million for the first six months of
1997.
Capital expenditures, including capital assets acquired through leasing
arrangements, totaled $3.0 million for the first six months of 1998 compared
with $3.4 million in 1997. Expenditures in the 1998 period were primarily
related to the Company's new warehouse management system.
YEAR 2000 COMPLIANCE
In January 1997, the Company developed a plan to deal with the Year 2000 problem
and began converting its computer systems to be Year 2000 compliant. The plan
provides for the conversion efforts to be completed by the end of 1998. The Year
2000 problem is a result of computer programs being written using two digits
rather than four to define the applicable year. The total cost of the project is
estimated to be $200,000 and is being funded through operating cash flows. The
Company is expensing all costs associated with these systems changes as the
costs are incurred. As of June 30, 1998, approximately $60,000 has been
expensed.
To the extent possible, the Company will develop and implement contingency plans
designed to allow continued operations in the event of failure of the Company's
or third parties' systems to be Year 2000 compliant. For example, the Company
plans to have dedicated staff available at crucial dates to remedy unforeseen
problems.
-8-
<PAGE> 11
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
The Company occasionally makes forward-looking statements concerning its plans,
goals, product and service offerings, and anticipated financial performance.
These forward-looking statements may generally be identified by introductions
such as "outlook" for an upcoming period of time, or words and phrases such as
"should", "expect", "hope", "plans", "projected", "believes", "forward-looking"
(or variants of those words and phrases) or similar language indicating the
expression of an opinion or view concerning the future.
These forward-looking statements are subject to risks and uncertainties based on
a number of factors and actual results or events may differ materially from
those anticipated by such forward-looking statements. These factors include, but
are not limited to: the growth rate of the Company's revenue and market share;
the consummation of new and the non-termination of existing OEM outsourcing
arrangements and service provider alliances; the Company's ability to
effectively manage its business functions while growing the Company's business
in a rapidly changing environment; the ability of the Company to adapt and
expand its services in such an environment; the effective and efficient
purchasing of parts and processing of sales orders; and the quality of the
Company's plans and strategies, and the ability of the Company to execute such
plans and strategies.
In addition, forward-looking statements concerning the Company's expected
revenue or earnings levels are subject to many additional uncertainties
applicable to competitors generally and to general economic conditions over
which the Company has no control. The Company generally does not plan to
publicly update prior forward-looking statements for unanticipated events or
otherwise and, accordingly, prior forward-looking statements should not be
considered to be "fresh" simply because the Company has not made additional
comments on those forward-looking statements.
-9-
<PAGE> 12
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
As contemplated in the Company's Proxy Statement which was mailed to
stockholders beginning on April 17, 1998, the Company's stockholders elected
Avery More and Mark Hilz as Class III directors of the Company to serve for a
term of three years each. Each nominee received the number of votes indicated
below.
Number of Votes Cast Number of Votes Cast
Nominee For Election Against or Withheld
- ------- ------------ -------------------
Avery More 5,217,956 35,980
Mark Hilz 5,216,496 37,440
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS
The following exhibits are filed as part of this report:
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.1+ Restated Certificate of
Incorporation of the Company
3.2++ Amended and Restated Bylaws of the Company
10.1+++ Credit Agreement among the Company, certain lenders and NationsBank of
Texas, N.A., as administrative lender
10.2+v Stock Option Plan, including form of Stock Option Agreements, as
amended
10.3+v Director Compensation Plan
10.4v Employee Stock Purchase Plan
27* Financial Data Schedule
- ----------
+ Previously filed as an exhibit to the Company's report on Form S-8,
Registration Number 33-98176, filed with the Securities and Exchange
Commission on October 17, 1995.
++ Previously filed as an exhibit to the Company's report on Form 10-K for
the year ended December 31, 1994, filed with the Securities and
Exchange Commission on March 31, 1995.
+++ Previously filed as an exhibit to the Company's report on Form 10-K for
the year ended December 31, 1997, filed with the Securities and
Exchange Commission on March 31, 1998.
-10-
<PAGE> 13
+v Previously filed as an exhibit to the Company's report on Form 10-K for
the year ended December 31, 1995, filed with the Securities and
Exchange Commission on March 31, 1996.
v Previously filed as an exhibit to the Company's Registration Statement
on Form S-1, Registration Number 333-03977, initially filed with the
Securities and Exchange Commission on May 17, 1996, and declared
effective on May 28, 1996.
* Filed herewith.
B. REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Company on June 15, 1998,
reporting that during May and June 1998, the Company requested several
independent accounting firms, including its existing independent
auditor, to submit a proposal for providing audit and tax services to
the Company. KPMG Peat Marwick LLP, the Company's independent auditor
at that time, advised the Company that it would not be participating in
the request for proposal and resigned as the Company's independent
auditor. At a meeting held on June 17, 1998, the Audit Committee of the
Board of Directors of the Company approved the engagement of Ernst &
Young LLP, as its independent auditor for the fiscal year ending
December 31, 1998, to replace the firm of KPMG Peat Marwick LLP.
-11-
<PAGE> 14
PC SERVICE SOURCE, INC. AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PC SERVICE SOURCE, INC.
------------------------------------
(Registrant)
August 13, 1998 /s/ MARK HILZ
------------------------------------
Mark Hilz
President
/s/ K. S. Frazier
------------------------------------
K. S. Frazier
Controller
(Principal Accounting Officer)
-12-
<PAGE> 15
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.1+ Restated Certificate of Incorporation of the Company
3.2++ Amended and Restated Bylaws of the Company
10.1+++ Credit Agreement among the Company, certain lenders and NationsBank of
Texas, N.A., as administrative lender
10.2+v Stock Option Plan, including form of Stock Option Agreements, as
amended
10.3+v Director Compensation Plan
10.4v Employee Stock Purchase Plan
27* Financial Data Schedule
- -------------
+ Previously filed as an exhibit to the Company's report on Form S-8,
Registration Number 33-98176, filed with the Securities and Exchange
Commission on October 17, 1995.
++ Previously filed as an exhibit to the Company's report on Form 10-K for
the year ended December 31, 1994, filed with the Securities and
Exchange Commission on March 31, 1995.
+++ Previously filed as an exhibit to the Company's report on Form 10-K for
the year ended December 31, 1997, filed with the Securities and
Exchange Commission on March 31, 1998.
+v Previously filed as an exhibit to the Company's report on Form 10-K for
the year ended December 31, 1995, filed with the Securities and
Exchange Commission on March 31, 1996.
v Previously filed as an exhibit to the Company's Registration Statement
on Form S-1, Registration Number 333-03977, initially filed with the
Securities and Exchange Commission on May 17, 1996, and declared
effective on May 28, 1996.
* Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1998 (UNAUDITED) AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AMD
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,149
<SECURITIES> 0
<RECEIVABLES> 19,748
<ALLOWANCES> (1,274)
<INVENTORY> 21,859
<CURRENT-ASSETS> 46,169
<PP&E> 23,518
<DEPRECIATION> (9,031)
<TOTAL-ASSETS> 64,849
<CURRENT-LIABILITIES> 31,230
<BONDS> 10,514
0
0
<COMMON> 59
<OTHER-SE> 30,206
<TOTAL-LIABILITY-AND-EQUITY> 64,849
<SALES> 71,869
<TOTAL-REVENUES> 76,806
<CGS> 50,807
<TOTAL-COSTS> 54,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 634
<INCOME-PRETAX> (3,296)
<INCOME-TAX> (1,223)
<INCOME-CONTINUING> (2,073)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,073)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
<FN>
<F1>PROVISION FOR DOUBTFUL ACCOUNTS AND INVENTORY PROVISION INCLUDED IN TOTAL
COSTS.
</FN>
</TABLE>
