FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1997 Commission File Number 1-5620
SAFEGUARD SCIENTIFICS, INC.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1609753
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(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 The Safeguard Building, 435 Devon Park Drive Wayne, PA 19087
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 293-0600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares outstanding as of May 12, 1997
Common Stock 31,268,183
SAFEGUARD SCIENTIFICS, INC.
QUARTERLY REPORT FORM 10-Q
INDEX
PART I-FINANCIAL INFORMATION Page
---------------------------- ----
Item 1-Financial Statements:
Consolidated Balance Sheets-
March 31, 1997 (unaudited) and December 31, 1996.......................... 3
Consolidated Statements of Operations (unaudited)-
Three Months Ended March 31, 1997 and 1996................................ 4
Consolidated Statements of Cash Flows (unaudited)-
Three Months Ended March 31, 1997 and 1996................................ 5
Notes to Consolidated Financial Statements................................ 6
Item 2-Management's Discussion and Analysis of
Financial Condition and Results of Operations........................ 9
PART II-OTHER INFORMATION
-------------------------
Item 4-Submission of Matters to a Vote of Security Holders..................15
Item 5-Other Information....................................................16
Item 6-Exhibits and Reports on Form 8-K.....................................17
Signatures..................................................................18
2
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS March 31 December 31
1997 1996
-------------- ----------------
(UNAUDITED)
Current Assets
Cash and cash equivalents $ 5,399 $ 12,881
Receivables less allowances ($3,105-1997; $3,088-1996) 341,728 399,403
Inventories 193,253 234,543
Other current assets 8,926 7,239
-------- --------
Total current assets 549,306 654,066
Property, Plant and Equipment 122,858 118,394
Less accumulated depreciation and amortization (40,780) (39,525)
-------- --------
82,078 78,869
Other Assets
Investments 148,804 134,844
Notes and other receivables 11,034 9,038
Excess of cost over net assets of business acquired 29,661 30,286
Other 30,263 28,967
-------- --------
219,762 203,135
-------- --------
$851,146 $936,070
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current debt obligations $ 9,207 $ 8,640
Accounts payable 144,878 221,992
Accrued expenses 76,129 77,904
-------- --------
Total current liabilities 230,214 308,536
Long Term Debt 235,492 252,725
Deferred Taxes 19,393 18,311
Minority Interest and Other 87,684 85,356
Convertible Subordinated Notes 90,881 102,131
Shareholders' Equity
Common stock 3,280 3,280
Additional paid-in capital 45,440 35,566
Retained earnings 134,462 129,970
Treasury stock, at cost (5,084) (7,165)
Net unrealized appreciation on investments 9,384 7,360
-------- --------
187,482 169,011
-------- --------
$851,146 $936,070
-------- --------
-------- --------
3
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Three Months Ended
March 31
--------------------------
1997 1996
--------------------------
(UNAUDITED)
Revenues
Net Sales
Product $385,405 $390,087
Services 62,171 40,010
-------- --------
Total net sales 447,576 430,097
Gains on sales of securities, net 7,201 5,680
Other income 2,686 1,888
-------- --------
Total revenues 457,463 437,665
Costs and Expenses
Cost of sales-product 342,068 346,292
Cost of sales-services 40,262 25,477
Selling 33,616 27,954
General and administrative 19,723 17,665
Depreciation and amortization 5,234 4,616
Interest 5,198 5,355
Income from equity investments (104) (887)
-------- --------
Total costs and expenses 445,997 426,472
-------- --------
Earnings Before Minority Interest and Taxes 11,466 11,193
Minority interest (3,979) (4,559)
-------- --------
Earnings Before Taxes On Income 7,487 6,634
Provision for taxes on income 2,995 2,654
-------- --------
Net Earnings $4,492 $3,980
-------- --------
-------- --------
Earnings Per Share
Primary $ .14 $ .12
Fully diluted $ .14 $ .12
Average Common Shares Outstanding
Primary 32,032 31,056
Fully diluted 32,032 31,172
4
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31
--------------------------
1997 1996
--------------------------
(UNAUDITED)
Operating Activities
Net earnings $ 4,492 $ 3,980
Adjustments to reconcile net earnings to cash from operating
activities
Depreciation and amortization 5,234 4,616
Deferred income taxes (179) (71)
Income from equity investments (104) (887)
Gains on sales of securities, net (7,201) (5,680)
Minority interest, net 2,387 2,669
Cash provided (used) by changes in working capital items
Receivables 66,514 1,872
Inventories 41,290 (34,567)
Accounts payable, accrued expenses and other (80,648) 17,305
--------- -------
Cash provided (used) by operating activities 31,785 (10,763)
Proceeds from sales of securities, net 987 6,848
-------- --------
Cash provided (used) by operating activities and sales of
securities, net 32,772 (3,915)
Other Investing Activities
Investments and notes acquired, net (19,247) (6,230)
Capital expenditures (6,395) (2,135)
Business acquisitions, net of cash acquired (5,372)
Other, net (591) (2,492)
-------- --------
Cash (used) by other investing activities (26,233) (16,229)
Financing Activities
Issuance of subordinated notes, net 112,413
Net repayments on revolving credit facilities (15,869) (45,271)
Net repayments on term debt (797) (7,182)
Issuance of Company and subsidiary stock 2,645 1,647
--------- --------
Cash provided (used) by financing activities (14,021) 61,607
--------- --------
Increase (Decrease) in Cash and Cash Equivalents (7,482) 41,463
Cash and Cash Equivalents - beginning of year 12,881 7,267
--------- --------
Cash and Cash Equivalents - End of Period $ 5,399 $ 48,730
--------- --------
--------- --------
5
SAFEGUARD SCIENTIFICS, INC.
Notes to Consolidated Financial Statements
March 31, 1997
1. General
_______
The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The Summary of Accounting
Policies and Notes to Consolidated Financial Statements included in the
1996 Form 10-K should be read in conjunction with the accompanying
statements. These statements include all adjustments (consisting only of
normal recurring adjustments) which the Company believes are necessary for
a fair presentation of the statements. The interim operating results are
not necessarily indicative of the results for a full year.
2. Stock Split
___________
All share and per share data and related data have been retroactively
adjusted to reflect the two-for-one split of the Company's common shares
effective July 17, 1996.
3. Reclassifications
_________________
Certain amounts in the 1996 consolidated financial statements have been
reclassified to conform with the 1997 presentation.
4. Debt
____
The following summarizes (in thousands) long-term debt at March 31,
1997 and December 31, 1996:
March 31, December 31,
1997 1996
------------- ------------------
(UNAUDITED)
Parent Company and Other Recourse Debt
Revolving credit facility $ 14,700
Other 15,930 $ 16,151
------------- --------------------
30,630 16,151
------------- --------------------
Subsidiary Debt (Non-Recourse to Parent)
CompuCom 208,104 239,946
Other 5,965 5,268
------------ --------------------
214,069 245,214
------------- --------------------
244,699 261,365
Current debt obligations (9,207) (8,640)
------------- --------------------
Long-term debt $235,492 $252,725
------------- --------------------
------------- --------------------
6
5. Convertible Subordinated Notes
______________________________
In February 1997, approximately $11.3 million of Notes were converted
into 388,131 shares of the Company's Common Stock.
6. Investments
___________
The following summarizes (in thousands) the Company's investments as of
March 31, 1997 and December 31, 1996. Market value reflects the price of
minority-owned publicly-traded securities at the close of business at the
respective date. Unrealized appreciation reflects the net excess of market
value over carrying value of publicly-traded securities classified as
available-for-sale.
March 31, 1997 December 31, 1996
---------------------- -------------------------
Carrying Market Carrying Market
Value Value Value Value
---------- --------- ------------ ----------
(UNAUDITED)
Equity Investees
Cambridge $17,363 $212,971 $ 15,340 $316,620
Coherent 11,107 83,548 10,206 94,445
Sanchez 4,607 14,109 4,346 22,799
USDATA 6,422 8,571 6,664 14,410
Non-public companies 44,763 40,333
------------ -------------
84,262 76,889
Brandywine Realty Trust 8,519 10,251 8,519 9,695
Diamond 1,549 5,753
Integrated Systems Consulting Group 1,891 6,274 1,891 9,770
National Media 2,035 11,465 2,035 7,790
Sybase 13,733 7,600 13,733 9,059
Other public companies 679 1,500 989 2,005
Unrealized appreciation 14,437 11,152
Non-public companies 21,699 19,636
------------ -------------
$148,804 $134,844
------------ --------------
------------ --------------
The following summarized financial information for investees accounted for
on the equity method of accounting at March 31, 1997 and 1996 has been
compiled from the financial statements of the respective investees and
reflects historical data for the period during which each respective
investee was accounted for on the equity method (in thousands):
Three Months Ended March 31,
1997 1996
------------ -----------
(UNAUDITED)
Net sales:
Public companies $102,302 $69,389
Non-public companies 72,486 28,665
------------ ------------
$174,788 $98,054
------------ ------------
------------ ------------
7
7. Recently Issued Pronouncements
______________________________
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, Earnings Per Share (Statement
128). Statement 128 supersedes APB Opinion No. 15, Earnings Per Share, and
specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential common stock. Statement 128 replaces the presentation of primary
EPS and fully diluted EPS with a presentation of basic EPS and diluted EPS.
Statement 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Adoption of Statement 128
during the first quarter of 1997 would have resulted in basic and diluted
EPS of $.14 and $.14 per share, respectively, compared to $.13 and $.12 per
share, respectively, for the same period in 1996.
8
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
_______
The Company's business strategy is the development of advanced
technology-oriented, entrepreneurially-driven partnership companies to achieve
maximum returns for its shareholders. The Company provides to its partnership
companies and associated venture funds active strategic management, operating
guidance, acquisition and disposition assistance, board and management
recruitment and innovative financing. The Company offers its shareholders,
through the rights offering process, the opportunity to acquire direct ownership
in selected partnership companies which it believes are ready for public
ownership.
If the Company significantly increases or reduces its investment in any of
the partnership companies, the Company's consolidated net sales and earnings may
fluctuate primarily due to the applicable accounting method used for recognizing
its participation in the operating results of that company.
The net sales and related costs and expenses of a partnership company are
included in the Company's consolidated operating results if the Company owns
more than 50% of the outstanding voting securities of the partnership
company. Participation of shareholders other than the Company in the earnings
or losses of a more than 50% owned partnership company is reflected in the
caption "Minority interest" in the Consolidated Statement of Operations which
adjusts consolidated earnings to reflect only the Company's share of the
earnings or losses of the partnership company. The partnership companies
that are consolidated in the first quarter of 1997 are CompuCom Systems,
Inc., Tangram Enterprise Solutions, Inc., Premier Solutions Ltd. and Pioneer
Metal Finishing. Premier was sold in April 1997 and therefore will not be
consolidated beginning in the second quarter.
Investments in companies in which the Company owns 50% or less of the
outstanding voting securities, in which significant influence is exercised,
are accounted for on the equity method of accounting. Significant influence
is presumed at a 20% ownership level; however, the Company applies the equity
method for certain companies in which it owns less than 20% because it exerts
significant influence through representation on those companies' Boards of
Directors and other means. Under the equity method of accounting, a
partnership company's net sales and related costs and expenses are not
included in the Company's consolidated operating results; however, the
Company's share of the earnings or losses of the partnership company is
reflected in the caption "Income from equity investments" in the Consolidated
Statement of Operations. The number of partnership companies accounted for in
the equity method has increased significantly over the last several years. In
addition, the Company's current strategy is to invest in larger more mature
companies. As a result, total revenues from the Company's equity investments,
which are not included in the Consolidated Statements of Operations, have
increased significantly (see Note 6 to the Consolidated Financial Statements).
9
Under either consolidation accounting or the equity method of
accounting, only the Company's share of the earnings or losses of a
partnership company is included in the Consolidated Statement of Operations.
Operations Overview
___________________
Net sales by industry segment were (in thousands):
Three Months Ended
March 31,
1997 1996
----------- -----------
(UNAUDITED)
Information Technology
Microcomputer Systems and Services $431,889 $413,334
Information Solutions 7,970 9,444
-------- --------
439,859 422,778
Metal Finishing 7,717 6,739
Commercial Real Estate 580
-------- --------
$447,576 $430,097
-------- --------
-------- --------
Microcomputer Systems and Services sales increased due to CompuCom's
services sales increasing 63% while its product sales were essentially flat.
The increase in services sales reflects CompuCom's continued focus on
expanding its network and technology services at competitive prices to meet
increased customer demand for its value-added desktop network services. This
increase in services sales was achieved despite the lack of growth in product
sales which CompuCom believes is due to an overall industry-wide demand
softness caused by smaller than anticipated manufacturers' price reductions,
the delay in corporate customers upgrading to Pentium Pro technology, and
increased market share gain by direct marketers. CompuCom anticipates
product demand softness will continue into the second quarter of 1997.
Information Solutions sales decreased due to lower sales at Premier. In
the second quarter of 1997, all of the assets of Premier were sold and the
Company will record a gain from the sale in the second quarter. Tangram's
sales were up modestly over 1996. However, losses increased as a result of
the company's substantial investment in marketing its Asset Insight product
and personnel increases to support the Asset Insight product rollout. Tangram
expects to continue to devote substantial resources to developing sales.
Net earnings were $4.49 million, or $.14 a share in 1997, compared to $3.98
million, or $.12 a share, for the same period in 1996. The Company's increased
net earnings in the first quarter of 1997 resulted primarily from higher
securities gains, improved Metal Finishing results and elimination of losses
from the Company's real estate operations due to the second half 1996 sale of
such operations, partially offset by decreased earnings at CompuCom and lower
income from equity investments. Although CompuCom grew its services sales
significantly, the lack of
10
growth in product sales and CompuCom's continued investment in the service
business and overall infrastructure of the company caused CompuCom's net
earnings to decrease 15%. Future improved profitability at CompuCom will
depend on its ability to retain and hire quality service personnel while
effectively managing the utilization of such personnel, increased focus on
providing technical service and support to customers, product demand,
competition, manufacturer product availability and pricing changes, effective
utilization of vendor programs, and control of operating expenses.
Securities gains in the first quarter of 1997 resulted primarily from the
open market sales of a portion of the Company's interest in Cambridge
Technology Partners and the sale of shares in the Diamond Technology Partners
rights offering to the Company's shareholders. Partially offsetting these
gains were charges incurred in the disposition of investments and provisions
for other investments and notes. The Company continually evaluates
investments for indications of impairment based on the market value of each
investment relative to cost, the financial condition and near-term prospects
of the investment and other relative factors. The market value of the
Company's holdings in Sybase was significantly below carrying value at
December 31, 1996 and March 31, 1997 which is reflected at the end of each
period as a component of Net Unrealized Appreciation on Investments in the
shareholders' equity section of the Consolidated Balance Sheet. The Company
is continuing to evaluate its holdings in Sybase in the second quarter to
determine if the decline in the market value of Sybase is deemed to be other
than temporary. Securities gains of varying magnitude have been realized in
recent years; prior gains are not necessarily indicative of gains which may
be realized in the future.
Income from equity investments fluctuates with the Company's ownership
percentage and the operating results of investees accounted for on the equity
method. Increased equity income from the Company's public equity investments
in 1997 was more than offset by the Company's share of losses at certain
private, early-stage equity investments and increased amortization of the
excess of carrying value over the Company's share of underlying net assets of
equity investments. The Company's public investments accounted for on the
equity method in the first quarter of 1997 include Cambridge, Coherent
Communications, Diamond, Sanchez Computer Associates and USDATA Corporation.
Cambridge's earnings increased 55% on a 50% revenue increase, as it
continues to see increased demand for its services worldwide. Its expanded
service line has been very favorably received and includes developing
Internet-enabled and mission critical client/server applications, deploying
package solutions, particularly enterprise resource solutions, and providing
management consulting services. Safeguard owns approximately 17% of Cambridge's
common stock at March 31, 1997.
Coherent reported increased earnings of 37% on a 44% sales increase as
all of its sales regions reported double digit sales increases in the
quarter. Asian sales were particularly strong with growth in excess of 200%,
as the company opened offices in Singapore, Tokyo, and Beijing, all of which
contributed to the growth. Safeguard owns approximately 32% of Coherent's
common stock at March 31, 1997.
11
Diamond reported increased earnings of 165% on a 49% sales increase.
Diamond has grown revenues sequentially every quarter since its inception eleven
quarters ago, when the company started with the goal of helping clients develop
and deploy digital business strategies. During the first quarter of 1997, the
Company completed the rights offering of Diamond common stock to the Company's
shareholders. As a result of the rights offering, the Company owns less than 9%
of Diamond's common stock at March 31, 1997. Accordingly, the Company
will discontinue accounting for its investment in Diamond on the equity method
of accounting subsequent to the first quarter.
Sanchez's revenues increased 48% with strong earnings, compared to 1996.
The increased revenue was primarily attributable to significant growth in the
number of active implementations of its PROFILE product, in particular the rapid
installation and initial conversion during the quarter of ING Direct in Canada,
its first Direct Bank contract and its first contract performed in partnership
with IBM. Also contributing to the first quarter results was the signing of an
agreement with CitiBank Canada, implementation-related revenues from the
company's first project in the Asia-Pacific Rim, as well as increased activity
relative to client projects in Central Europe. Safeguard owns approximately 24%
of Sanchez's common stock at March 31, 1997.
USDATA reported lower sales and earnings compared to the first quarter of
1996 primarily as a result of weak international software sales. During the
quarter, Bill Newell, a Safeguard Vice President, replaced the former CEO and
President. In addition, a new managing director of European operations was
hired. Safeguard owns approximately 20% of USDATA's common stock at March 31,
1997.
The Company's overall gross margin was 14.6% and 13.6% in the first
quarter of 1997 and 1996, respectively. CompuCom's product gross margin for
the first quarter of 1997 was 10.4% compared to 10.1% for the same period in
1996. The higher margin at CompuCom is principally due to the reduction in
product sales to some of the company's larger customers, which typically have
lower product margins. Future product margins at CompuCom will be influenced
by manufacturers' pricing strategies together with competitive pressures from
other resellers in the industry, as well as the level of sales to some of
CompuCom's larger customers. CompuCom's services gross margin for the first
quarter decreased to 36.0% in 1997 from 37.2% in 1996. The slight decrease
was primarily caused by a change in the mix of services provided during the
periods. CompuCom participates in certain manufacturer-sponsored programs
designed to increase sales of specific products. These programs, excluding
volume incentive programs and specific product rebates, are not material when
compared to CompuCom's overall financial results.
Selling and general and administrative expense as a percentage of net sales
increased to 11.9% in 1997 from 10.6% in 1996 largely as a result of costs
incurred by CompuCom to expand the services business and the growth in service
sales, as services typically carry a higher commission rate than product sales.
CompuCom's general and administrative expenses are reported net of
reimbursements by certain manufacturers for specific training, promotional and
marketing programs. These reimbursements offset the expenses incurred by
CompuCom.
12
Interest expense decreased in the first quarter of l997 compared to the
same period in 1996 primarily as a result of the elimination of interest related
to the Company's real estate operations, partially offset by an increase in
interest at CompuCom due to increased borrowings resulting from their overall
growth.
Liquidity and Capital Resources
_______________________________
The Company maintains a $100 million revolving credit facility which
matures in May 2000. Outstanding borrowings at March 31, 1997 were $14.7
million. The credit facility is secured by the equity securities the Company
holds of its publicly traded partnership companies, including CompuCom. The
value of these securities significantly exceeds the total availability under the
bank credit facility. The Company is presently negotiating with its banks to
increase the availability under the credit facility to $150 million.
Existing cash resources, availability under the Company's revolving credit
facility, proceeds from the sales from time to time of selected minority-owned
publicly traded securities and other internal sources of cash flow should be
sufficient to fund the Company's cash requirements through 1997, including
investments in new or existing partnership companies and general corporate
requirements, as well as the repurchase of up to $20 million of the Company's
Common Stock from time to time in the open market as authorized by the Company's
Board of Directors in March 1997.
CompuCom and Premier maintain separate, independent bank credit
facilities which are nonrecourse to the Company and are secured by
substantially all of the assets of the applicable borrower. During recent
years, CompuCom has utilized operating earnings, bank facilities, equity
financing and long-term subordinated notes to fund its significant sales
growth and related operating asset requirements. CompuCom has $325 million
of financing capacity through bank facilities consisting of a $225 million
credit facility and a $100 million receivables securitization agreement.
CompuCom's credit facility prohibits the payment of common stock dividends by
CompuCom while its credit line remains outstanding. At March 31, 1997,
approximately $202.4 million was outstanding under CompuCom's bank
facilities. Premier had $4.4 million outstanding on its master demand note
at March 31, 1997 which was repaid in the second quarter in connection with
the sale of Premier's assets.
Cash flows related to operating activities increased primarily due to a
decrease in working capital at CompuCom. The Company's operations are not
capital intensive, and capital expenditures in any year normally would not be
significant in relation to the overall financial position of the Company.
Capital asset requirements are generally funded through bank credit
facilities, internally generated funds or other financing sources. CompuCom
has begun to refurbish and update its new headquarters and operations campus
and currently anticipates the consolidation of its existing Dallas
headquarters and operations from two leased facilities to the new site by the
third quarter of 1997. After that consolidation is complete, CompuCom
expects to sell the headquarters facility it currently owns and occupies.
Capital expenditures during the first quarter of 1997 were primarily related
to getting CompuCom's new headquarters and
13
operations campus ready for full occupancy and costs incurred in the
construction of the Monroe, Michagan Metal Finishing Facility. The Company
expects capital expenditures to decline after these construction projects
have been significantly completed. There were no material asset purchase
commitments at March 31, 1997.
14
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
The Company held its Annual Meeting of Shareholders on May 8, 1997. At the
meeting, the shareholders voted in favor of electing as directors the twelve
nominees named in the Proxy Statement dated April 3, 1997 and in favor of
amending the Company's 1990 Stock Option Plan. The number of votes cast were as
follows:
I. ELECTION OF DIRECTORS
FOR WITHHELD
------------ ----------------
Warren V. Musser 28,494,611 172,419
Vincent G. Bell, Jr. 28,494,681 172,349
Donald R. Caldwell 28,467,929 199,101
Robert A. Fox 28,502,716 166,114
Delbert W. Johnson 28,503,741 163,289
Robert E. Keith, Jr. 27,341,641 1,397,389
Peter Likins, Ph.D. 28,495,116 171,914
Jack L. Messman 28,497,916 169,114
Russell E. Palmer 28,502,866 164,164
John W. Poduska, Sr., Ph.D. 28,469,839 197,191
Heinz Schimmelbusch, Ph.D. 28,500,767 166,263
Hubert J.P. Schoemaker, Ph.D. 27,277,298 1,389,732
II. PROPOSAL TO AMEND THE COMPANY'S 1990 STOCK OPTION PLAN
FOR AGAINST ABSTAIN
------------ ---------- -------------
25,388,743 2,095,996 211,368
15
Item 5. Other Information
_________________
In the second quarter of 1997, substantially all of the assets of Premier
Solutions Ltd. were sold for approximately $30 million.
On April 30, 1997, it was announced that one of the Company's partnership
companies, ChromaVision Medical Systems, Inc. (formerly known as MicroVision
Medical Systems, Inc.), had filed a registration statement with the
Securities and Exchange Commission for a rights offering to the Company's
shareholders of approximately 6,400,000 shares of ChromaVision common stock.
ChromaVision has developed an automated intelligent microscope system that
uses proprietary imaging technologies for a wide variety of diagnostic and
research applications. It is anticipated that the rights will have an
exercise price of $5.00 per share and that the rights offering will commence
in mid-1997. The Company's shareholders will receive rights, exercisable for
approximately 35 days after issuance, to purchase one share of ChromaVision
common stock for every five shares of the Company's common stock owned.
Rights holders will be able to exercise rights for as few as 20 shares of
ChromaVision common stock. The offering will be made only by means of a
prospectus, subject to the effectiveness of the registration statement.
16
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
Number Description
10.1 Asset Acquisition Agreement dated April 15, 1997 for the
sale of certain assets of Premier Solutions Ltd. to a
subsidiary of Sungard Data Systems Inc. (exhibits omitted)
10.2 Amendment to Safeguard Scientifics, Inc. 1990 Stock Option
Plan dated October 25, 1996
10.3 Amendment No. 3 to Transfer and Administration Agreement,
dated as of February 1, 1997, among CSI Funding, Inc.,
CompuCom Systems, Inc., Enterprise Funding Corporation and
NationsBank N.A.
11 Computation of Per Share Earnings
27 Financial Data Schedule (electronic filing only)
(b) No reports on Form 8-K have been filed by the Registrant during the
quarter ended March 31, 1997.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAFEGUARD SCIENTIFICS, INC.
(Registrant)
Date: May 15, 1997 /s/ Warren V. Musser
------------------------------------------
Warren V. Musser
Chairman and Chief Executive Officer
Date: May 15, 1997 /s/ Michael W. Miles
------------------------------------------
Michael W. Miles
Vice President and Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
18