-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VKFYOe28p4BVafI+RZ8advN+YuhBdRqg0h618m3S2zSeJCEdWUe+qkhBRjteGa/T 30aZ0zsRScvn9BAybNdDbQ== 0001015402-00-001427.txt : 20000518 0001015402-00-001427.hdr.sgml : 20000518 ACCESSION NUMBER: 0001015402-00-001427 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000405 FILED AS OF DATE: 20000517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POMEROY COMPUTER RESOURCES INC CENTRAL INDEX KEY: 0000883979 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 311227808 STATE OF INCORPORATION: DE FISCAL YEAR END: 0105 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20022 FILM NUMBER: 638517 BUSINESS ADDRESS: STREET 1: 1020 PETERSBURG ROAD CITY: HEBRON STATE: KY ZIP: 41048 BUSINESS PHONE: 6065860600 MAIL ADDRESS: STREET 1: 1020 PETERSBURG ROAD CITY: HEBRON STATE: KY ZIP: 41048 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 5, 2000 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 0-20022 POMEROY COMPUTER RESOURCES, INC. -------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 31-1227808 - -------- ---------- (State or jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1020 Petersburg Road, Hebron, KY 41048 -------------------------------------- (Address of principal executive offices) (606) 586-0600 -------------- (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 requirements for the past 90 days. YES ___X___NO___ The number of shares of common stock outstanding as of April 30, 2000 was 12,094,226. 1 of 11 POMEROY COMPUTER RESOURCES, INC. TABLE OF CONTENTS
Part I. Financial Information Item 1. Financial Statements: Page ---- Consolidated Balance Sheets as of January 5, 2000 and April 5, 2000 3 Consolidated Statements of Income for the Three Months Ended April 5, 1999 and 2000 5 Consolidated Statements of Cash Flows for the Three Months Ended April 5, 1999 and 2000 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition Item 2. and Results of Operations 9 Part II. Other Information 11 SIGNATURE 11
2 of 11 POMEROY COMPUTER RESOURCES, INC. CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, April 5, 2000 2000 ----------- --------- ASSETS Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,737 $ 64 Accounts receivable: Trade, less allowance of $504 and $371 at January 5, 2000 and April 5, 2000, respectively . . . . . . . . . . . . 129,734 128,418 Vendor receivables, less allowance of $1,902 at January 5, 2000 and April 5, 2000, respectively . . . . 57,309 51,608 Net investment in leases . . . . . . . . . . . . . . . . . 14,937 20,682 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 681 552 ----------- --------- Total receivables. . . . . . . . . . . . . . . . . . 202,661 201,260 ----------- --------- Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 38,858 27,778 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,819 4,914 ----------- --------- Total current assets . . . . . . . . . . . . . . . . 247,075 234,016 ----------- --------- Equipment and leasehold improvements. . . . . . . . . . . . . 25,276 25,742 Less accumulated depreciation . . . . . . . . . . . . . . . . 9,804 10,681 ----------- --------- Net equipment and leasehold improvements . . . . . . 15,472 15,061 ----------- --------- Net investment in leases. . . . . . . . . . . . . . . . . . . 29,183 28,123 Goodwill and other intangible assets. . . . . . . . . . . . . 39,344 38,915 Other assets. . . . . . . . . . . . . . . . . . . . . . . . . 2,067 4,986 ----------- --------- Total assets.. . . . . . . . . . . . . . . . . . . . $ 333,141 $ 321,101 =========== =========
See notes to consolidated financial statements. 3 of 11 POMEROY COMPUTER RESOURCES, INC. CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, April 5, 2000 2000 ----------- --------- LIABILITIES & EQUITY Current liabilities: Current portion of notes payable . . . . . . . . . . . . . . . . $ 11,337 $ 21,278 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 92,454 72,929 Bank notes payable . . . . . . . . . . . . . . . . . . . . . . . 69,027 44,730 Other current liabilities. . . . . . . . . . . . . . . . . . . . 13,131 14,126 ----------- --------- Total current liabilities. . . . . . . . . . . . . . . . . 185,949 153,063 ----------- --------- Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,971 18,470 Equity: Preferred stock (no shares issued or outstanding). . . . . . . . - - Common stock (11,843 and 12,092 shares issued and outstanding at January 5, 2000 and April 5, 2000, respectively) . . . . . 118 121 Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . 66,743 69,801 Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . 73,682 79,968 ----------- --------- 140,543 149,890 Less treasury stock, at cost (31 shares at January 5, 2000 and April 5, 2000). . . . . . . . . . . . . . . . . . . . . . . . 322 322 ----------- --------- Total equity. . . . . . . . . . . . . . . . . . . . . . . . . 140,221 149,568 ----------- --------- Total liabilities and equity. . . . . . . . . . . . . . . . . $ 333,141 $ 321,101 =========== =========
See notes to consolidated financial statements. 4 of 11 POMEROY COMPUTER RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Three Months Ended -------------------------------- April 5, April 5, 1999 2000 -------------------- ---------- Net sales and revenues. . . . . . . . . $ 163,924 $ 211,578 Cost of sales and service . . . . . . . 141,065 184,801 -------------------- ---------- Gross profit . . . . . . . . . 22,859 26,777 -------------------- ---------- Operating expenses: Selling, general and administrative. 11,363 12,806 Rent expense . . . . . . . . . . . . 706 792 Depreciation . . . . . . . . . . . . 1,095 1,025 Amortization . . . . . . . . . . . . 623 912 -------------------- ---------- Total operating expenses . . . 13,787 15,535 -------------------- ---------- Income from operations. . . . . . . . . 9,072 11,242 -------------------- ---------- Other expense (income): Interest expense.. . . . . . . . . . 785 928 Miscellaneous. . . . . . . . . . . . (29) (48) -------------------- ---------- Total other expense. . . . . . 756 880 -------------------- ---------- Income before income tax . . . . . . 8,316 10,362 Income tax expense . . . . . . . . . 3,248 4,076 -------------------- ---------- Net income . . . . . . . . . . . . . $ 5,068 $ 6,286 ==================== ========== Weighted average shares outstanding: Basic. . . . . . . . . . . . . . . . 11,692 11,883 ==================== ========== Diluted. . . . . . . . . . . . . . . 11,858 12,138 ==================== ========== Earnings per common share: Basic. . . . . . . . . . . . . . . . $ 0.43 $ 0.53 ==================== ========== Diluted. . . . . . . . . . . . . . . $ 0.43 $ 0.52 ==================== ==========
See notes to consolidated financial statements. 5 of 11 POMEROY COMPUTER RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Three Months Ended -------------------------------- April 5, April 5, 1999 2000 -------------------- ---------- Cash Flows from Operating Activities: Net cash flows used in operating activities . $ (3,043) $ (501) Cash Flows from Investing Activities: Capital expenditures. . . . . . . . . . . . . (956) (1,008) Acquisition of assets, net of cash acquired . (52) (368) -------------------- ---------- Net investing activities . . . . . . . . . . . . (1,008) (1,376) -------------------- ---------- Cash Flows from Financing Activities: Net borrowings (payments) on bank notes payable. 3,489 (24,298) Net borrowings (payments) on notes payable . . . (1,729) 21,441 Proceeds from exercise of stock options. . . . . 135 3,061 -------------------- ---------- Net financing activities. . . . . . . . . . . 1,895 204 -------------------- ---------- Decrease in cash . . . . . . . . . . . . . . . . (2,156) (1,673) Cash: Beginning of period . . . . . . . . . . . . . 3,962 1,737 -------------------- ---------- End of period . . . . . . . . . . . . . . . . $ 1,806 $ 64 ==================== ==========
See notes to consolidated financial statements. 6 of 11 POMEROY COMPUTER RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Except as disclosed herein, there has been no material change in the information disclosed in the notes to consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended January 5, 2000. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the interim period have been made. The results of operations for the three-month period ended April 5, 2000 are not necessarily indicative of the results that may be expected for future interim periods or for the year ending January 5, 2001. 2. Cash and Bank Notes Payable The Company maintains a sweep account with its bank whereby daily cash receipts are automatically transferred as a payment towards the Company's credit facility. As a result, the Company maintains minimal cash in its bank account. At January 5 and April 5, 2000, bank notes payable include $19.1 million and $22.0 million, respectively, of overdrafts in accounts with a participant bank to the Company's credit facility. These amounts were subsequently funded through the normal course of business. 3. Earnings per Common Share The following is a reconciliation of the number of shares used in the basic EPS and diluted EPS computations: (in thousands, except per share data)
Three Months Ended April 5, --------------------------------------- 1999 2000 ------------------ ------------------- Per Share Per Share Shares Amount Shares Amount ------ ---------- ------ ----------- Basic EPS 11,692 $ 0.43 11,883 $ 0.53 Effect of dilutive Stock options 166 - 255 (0.01) ------ ---------- ------ ----------- Diluted EPS 11,858 $ 0.43 12,138 $ 0.52 ====== ========== ====== ===========
4. Supplemental Cash Flow Disclosures Supplemental disclosures with respect to cash flow information and non-cash investing and financing activities are as follows: (in thousands)
Three Months Ended April 5, ----------------------------- 1999 2000 ------- ------- Interest paid $ 793 $ 927 ======== ====== Income taxes paid $ 589 $1,386 ======== ====== Adjustments to purchase price of acquisition assets $ 1,740 $ - ======== ======
5. Related Parties A director of the Company is president of Information Leasing Corporation ("ILC"). In the first quarter of fiscal 2000, the Company sold certain leases to ILC for $5.0 million. 7 of 11 6. 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 financial position or results of operations. 7. Segment Information Summarized financial information concerning the Company's reportable segments is shown in the following table. (in thousands)
Three Months Ended April 5, 1999 --------------------------------------------- Products Services Leasing Consolidated --------- --------- -------- ------------- Revenues $ 140,799 $ 22,255 $ 870 $ 163,924 Income from operations 3,880 4,847 345 9,072 Total assets 180,404 51,231 25,572 257,207 Capital expenditures 349 222 385 956 Depreciation and amortization 1,179 308 231 1,718 Three Months Ended April 5, 2000 --------------------------------------------- Products Services Leasing Consolidated --------- --------- -------- ------------- Revenues $ 178,036 $ 30,165 $ 3,377 $ 211,578 Income from operations 3,920 6,009 1,313 11,242 Total assets 206,947 54,082 60,072 321,101 Capital expenditures 951 57 - 1,008 Depreciation and amortization 1,513 354 70 1,937
8 of 11 Special Cautionary Notice Regarding Forward-Looking Statements -------------------------------------------------------------- Certain of the matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" contain certain forward looking statements regarding future financial results of the Company. The words "expect," "estimate," "anticipate," "predict," and similar expressions are intended to identify forward-looking statements. Such statements are 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 including, without limitation, those statements made in conjunction with the forward-looking statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations". All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by such factors. POMEROY COMPUTER RESOURCES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TOTAL NET SALES AND REVENUES. Total net sales and revenues increased $47.7 million, or 29.1%, to $211.6 million in the first quarter of fiscal 2000 from $163.9 million in the first quarter of fiscal 1999. This increase was attributable to an increase in sales to existing and new customers. This increase also reflects an increase in sales volume with unit prices relatively stable in the first quarter of fiscal 2000 as compared to the first quarter of fiscal 1999. Products and leasing sales increased $39.7 million, or 28.0%, to $181.4 million in the first quarter of fiscal 2000 from $141.7 million in the first quarter of fiscal 1999. Service revenues increased $7.9 million, or 35.5%, to $30.2 million in the first quarter of fiscal 2000 from $22.3 million in the first quarter of fiscal year 1999. GROSS MARGINS. Gross margin decreased to 12.7% in the first quarter of fiscal 2000 as compared to 13.9% in the first quarter of fiscal 1999. This decrease in gross margin resulted primarily from the Company's decision to obtain new business and increase sales by aggressively pricing certain products and services. Service revenues increased to 14.3% of total net sales and revenues in the first quarter of fiscal 2000 compared to 13.6% of total net sales and revenues in the first quarter of fiscal 1999. Service gross margin increased to 45.2% of total gross margin in the first quarter of fiscal 2000 from 42.7% in the first quarter of fiscal 1999. This increase in the percentage of service gross margin to total gross margin was primarily due to the increase in higher-margin service revenues. Factors that may have an impact on gross margin in the future include the further decline of unit prices, the percentage of equipment or service sales with lower-margin customers, the ratio of service revenues to total net sales and revenues, and personnel utilization rates. OPERATING EXPENSES. Selling, general and administrative expenses (including rent expense) expressed as a percentage of total net sales and revenues decreased to 6.4% in the first quarter of fiscal 2000 from 7.4% in the first quarter of fiscal 1999. 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 decreased to 7.3% in the first quarter of fiscal 2000 from 8.4% in the first quarter of fiscal 1999 for the reason noted above and offset by the increase in amortization expense as a result of acquisitions. INCOME FROM OPERATIONS. Income from operations increased $2.1 million, or 23.9%, to $11.2 million in the first quarter of fiscal 2000 from $9.1 million in the first quarter of fiscal 1999. The Company's operating margin decreased to 5.3% in the first quarter of fiscal 2000 as compared to 5.5% in the first quarter of fiscal 1999. This decrease is primarily due to the decrease in the Company's gross margin. INTEREST EXPENSE. Interest expense increased $0.1 million, or 18.2%, to $0.9 million in the first quarter of fiscal 2000 from $0.8 million in the first quarter of fiscal 1999. This increase is primarily due to the Company's overall increase in debt borrowings in the first quarter of fiscal 2000. 9 of 11 INCOME TAXES. The Company's effective tax rate was 39.3% in the first quarter of fiscal 2000 compared to 39.1% in the first quarter of fiscal 1999. NET INCOME. Net income increased $1.2 million, or 24.0%, to $6.3 million in the first quarter of fiscal 2000 from $5.1 million in the first quarter of fiscal 1999 due to the factors described above. LIQUIDITY AND CAPITAL RESOURCES Cash used in operating activities was $0.5 million in the first three months of fiscal 2000. Cash used in investing activities was $1.4 million which included $1.0 million for capital expenditures and $0.4 million for acquisitions completed in fiscal 1999. Cash provided by financing activities was $0.2 million which included $21.4 million of net borrowings on notes payable, $3.1 million from the exercise of stock options and $24.3 million of net payments on bank notes payable. A significant part of the Company's inventories is financed by floor plan arrangements with third parties. At April 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 April 5, 2000, the amount outstanding was $44.7 million, including $22.0 million of overdrafts on the Company's books in accounts at a participant bank on the credit facility, which was at an interest rate of 7.75%. 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 the first quarter of fiscal 2000, the Company increased the leasing activity through its wholly-owned leasing subsidiary, TIFS. This increased leasing activity during the first quarter of fiscal 2000 resulted in $22.4 million in increased net borrowings under the Company's notes payable. The funding of the Company's net investment in sales-type leases is provided by various financial institutions on a nonrecourse basis. 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 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. 10 of 11 POMEROY COMPUTER RESOURCES, INC. PART II - OTHER INFORMATION Items 1 to 3 None Item 4 None Item 5 None Item 6 Exhibits and Reports on Form 8-K 11 Computation of Earnings per Share 27 Financial Data Schedules (b) Reports on Form 8-K None SIGNATURE 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. POMEROY COMPUTER RESOURCES, INC. ---------------------------------- (Registrant) Date: May 17, 2000 By: /s/ Stephen E. Pomeroy ------------------------------ Stephen E. Pomeroy Chief Financial Officer and Chief Accounting Officer 11 of 11 EX-11 2
Pomeroy Computer Resources, Inc. Exhibit 11 - Computation of Earnings Per Share (in thousands, except per share amounts) Quarter Ended April 5, ------------------ 1999 2000 --------- ------- BASIC Weighted average common shares outstanding 11,692 11,883 ========== ======= Net income $ 5,068 $ 6,286 ========== ======= Net income per common share $ 0.43 $ 0.53 ========== ======= DILUTED Weighted average common shares outstanding 11,692 11,883 Dilutive effect of stock options outstanding during the period 166 255 Total common and common equivalent shares 11,858 12,138 ========== ======= Net income $ 5,068 $ 6,286 ========== ======= Net income per common share $ 0.43 $ 0.52 ========== =======
EX-27 3
5 The followig Financial Data Schedule contains standard data for the three months ended April 5, 2000. 1
3-MOS JAN-05-2001 JAN-06-2000 APR-05-2000 64 0 201260 2273 27778 234016 25742 10681 321101 153063 0 0 0 121 149447 321101 211578 211578 184801 184801 0 0 928 10362 4076 6286 0 0 0 6286 .53 .52
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