SAFEGUARD SCIENTIFICS, INC.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
March 30, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Safeguard Scientifics, Inc.
File No. 1-5620
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of
1934, enclosed for electronic filing is the Annual Report on Form 10-K
with exhibits for Safeguard Scientifics, Inc. for the year ended
December 31, 1994. The filing fee of $250.00 has been previously
submitted.
In 1994, the Company changed its method of accounting for
investments to adopt the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
Very truly yours,
Steven Rosard
Senior Corporate Counsel
Enclosures
Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 Commission File Number 1-5620
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SAFEGUARD SCIENTIFICS, INC.
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(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 23-1609753
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE, WAYNE, PA 19087
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 293-0600
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
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COMMON STOCK ($.10 PAR VALUE) NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 report(s)), and (2) has been subject to
such filing 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 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. [ ]
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of March 23, 1995:
COMMON STOCK: 9,582,338 SHARES
Aggregate market value of voting stock held by non-affiliates (based on the
closing price on the New York Stock Exchange) on March 23, 1995 was
approximately $ 200.8 million. For purposes of determining this amount
only, Registrant has defined affiliates as including (a) the executive
officers named in Part III of this 10-K report, (b) all directors of
Registrant, and (c) each shareholder that has informed Registrant by March
23, 1995 that it is the beneficial owner of 10% or more of the outstanding
common stock of Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in this Form 10-K:
PART I
Item 1(b) Page 26 of the Annual Report to Shareholders for year
ended December 31, 1994, which page is filed as part of Exhibit 13 hereto.
PART II
Items 5, 6,
7 and 8 Pages 21 to 39 of the Annual Report to Shareholders for
year ended December 31, 1994, which pages are filed as Exhibit 13 hereto.
PART III
Items 10, 11,
12 and 13 Definitive Proxy Statement relative to the May 11, 1995
annual meeting of shareholders of registrant, to be filed within 120 days
after the end of the year covered by this Form 10-K Report.
PART IV
Item 14(a) Pages 26 to 39 of the Annual Report to Shareholders for
Consolidated year ended December 31, 1994, which pages are filed as
Financial Exhibit 13 hereto.
Statements
PART I
ITEM 1(a). GENERAL DEVELOPMENT OF THE BUSINESS
INTRODUCTION
Safeguard Scientifics, Inc. ("Safeguard") is a strategic information
systems company that has operations in three industry segments: Information
Technology, Metal Finishing, and Commercial Real Estate. Except where the
context otherwise requires, the term "Company" as used herein includes
Safeguard and its majority owned subsidiaries which are consolidated in its
financial statements.
Over 95% of the Company's sales are in the Information Technology
segment, which consists of: the delivery of personal computer services,
including procurement and configuration of personal computers, application
software and related products, network integration, and technical support;
and the design, development and sale of strategic business applications
systems software solutions. The Company operates in this industry segment
primarily through its majority-owned subsidiaries, including CompuCom
Systems, Inc., Premier Solutions Ltd., and Tangram Enterprise Solutions,
Inc. CompuCom and Tangram are both also publicly-held companies, while
Premier is privately held. The Company also actively participates in
numerous additional private and public information technology companies in
which it holds significant minority ownership interests as described under
"OTHER ACTIVITIES."
Safeguard builds value in its entrepreneurially driven "partnership
companies" by providing them with active strategic management, operating
guidance and innovative financing. Safeguard's corporate staff provides
hands-on assistance to the managers of the partnership companies in the
areas of management, financial, marketing, human resources, legal and
technical services. Safeguard's goal is to take its partnership companies
public at the appropriate time through a rights offering. A rights offering
involves the grant to Safeguard's shareholders of rights to buy shares of
the partnership company's stock in the company's initial public offering at
a price established by Safeguard, the company and the underwriter. Through
this process, Safeguard's shareholders are able to participate in IPOs of
high-growth, technology companies which are usually reserved for large
institutional investors. Safeguard's previous rights offerings include
Novell, Inc., Machine Vision International Corporation (now CompuCom
Systems, Inc.), Cambridge Technology Partners(Massachusetts), Inc.,
Coherent Communications Systems Corporation, Rabbit Software Corporation
(now Tangram Enterprise Solutions, Inc.), and CenterCore, Inc. After
taking a partnership company public, Safeguard retains an ownership interest,
and continues to provide strategic, managerial, operational and financial
support. Growth in the value of the public partnership companies benefits
Safeguard and also directly benefits shareholders who continue to hold the
shares purchased in the rights offering. Not all partnership companies are
taken public. Some companies are combined with other operating units, some
are sold, and some are retained as private companies.
The Company's Metal Finishing segment provides specialty metal
finishing services to a variety of industries. The Commercial Real Estate
segment owns and leases income-producing commercial real estate properties.
Safeguard also has an investment in The Nichols Company, a real estate firm
that owns, manages and leases commercial office and industrial properties.
The Company also provides venture capital management services as described
under "OTHER ACTIVITIES." Information about each of the Company's industry
segments appears below under "Item 1(c) - Narrative Description of
Business."
RECENT DEVELOPMENTS
Consolidated net sales for 1994 were $1.41 billion, a 21% increase over
1993, and more than triple net sales for 1990. The increases are primarily
due to the growth of CompuCom Systems, Inc., the Company's largest business
unit, through internal growth and acquisitions. CompuCom's share of the
Company's consolidated net sales has risen steadily from 76% in 1990 to 89%
in 1994. CompuCom is a leading personal computer ("PC") services
integration company. The Company took CompuCom public through a rights
offering in 1985, and currently has majority ownership of CompuCom.
The Company invested an additional $20 million in CompuCom during 1994
through a purchase of convertible preferred stock to support the growth of
CompuCom's core business and an expansion into network services to meet its
customers' needs for network support. In March 1994 CompuCom also
increased its corporate credit facility with its bank group from $125
million to $150 million and extended the maturity to March 1997, while
effectively lowering its interest cost by fixing $60 million of the facility
at a rate of 7.18%.
The Company successfully completed a rights offering in August 1994 for
Coherent Communications Systems Corporation, which develops and markets
voice enhancement products for wireless (including digital cellular),
satellite-based, and wireline telecommunications systems throughout the
world. The Company had previously owned 99% of Coherent prior to the rights
offering. After the rights offering, the Company retained a significant
minority interest in Coherent, and now accounts for Coherent on the equity
method.
In April 1994, Micro Decisionware, Inc., a multi-platform database
access software tool company, merged into Sybase, Inc., a leader in
client/server architecture. The Company received approximately $14 million
of Sybase common stock in exchange for its majority-ownership interest in
Micro Decisionware. In addition, the Company entered into a consulting and
non-competition agreement with Sybase under which the Company may receive up
to $11.9 million based on the performance of Micro Decisionware's business.
The Company increased its bank credit facility from $30 million to $50
million in early 1994 primarily to support its investment in CompuCom, and
increased the facility again in February 1995 to $75 million.
In September 1994, the Company effected a 2-for-1 split of its common
stock. The split was effected in order to increase the market liquidity of
the stock by making the stock available to a broader potential shareholder
base.
Premier Solutions Ltd., a majority-owned subsidiary which develops and
markets sophisticated asset management solutions and professional services
to the financial industry, commenced a project to transform its
GLOBAL(bullet)PLUS product to operate on a UNIX-based client/server
architecture in order to make its products available to a broader segment of
the market. In September 1994, Premier acquired the MAXIMIS product line
from Texas Instruments. This product is used by leading insurance companies
and pension funds for a wide range of asset management and investment
accounting applications on multiple computer platforms.
In 1993, CenterCore, Inc., a majority-owned subsidiary of the Company,
purchased the business and assets of Maris Equipment Company. Maris is a
provider of integrated electronic security systems including detention
hardware primarily to prisons and airports. The Company supported this
acquisition with a loan, an investment in preferred stock of CenterCore, and
the provision of bank debt guarantees. However, many of Maris' major
detention and other contracts in process at the time of acquisition have
incurred unanticipated losses or lower than anticipated gross margins.
These losses, combined with the continuing weakening of CenterCore's
furniture business, resulted in substantial losses for CenterCore in 1994,
including a write-off of $2.1 million of goodwill primarily related to the
Maris acquisition. As a result, CenterCore management is now pursuing a
strategy of significantly downsizing the business, including a sale of its
furniture business and the turnover of certain Maris projects to its bonding
companies. The Company has adopted a plan to reduce its involvement in
CenterCore whereby it will contribute a portion of its stock to CenterCore,
sell a significant portion of its stock to CenterCore management, and
provide certain advances to address current funding requirements of
CenterCore. Consequently, since the Company's ownership in CenterCore will
be reduced to significantly less than 50%, it will not be considered as a
consolidated subsidiary for 1995 or after.
In November 1994, the Company acquired a minority ownership interest in
USDATA Corporation, a leading developer of software tools which customers
use to configure, without programming, a wide range of real-time information
capture and management functions. The Company assisted USDATA in recruiting
and hiring a new CEO, and the Company has announced its intention to take
USDATA public in a rights offering by the summer of 1995. The Company
intends to offer to Safeguard shareholders the right to purchase one share
of USDATA stock for each four shares of Safeguard stock held.
Also in 1994, the Company acquired minority ownership interests in the
following businesses: Diamond Technology Partners, Inc., a company which
provides consulting services to help clients extend their strategic plans
into redesigned business processes, and then translates that strategy into a
working organization with supporting information systems; and National Media
Corporation, a NYSE-listed company which is a worldwide leader in the home
shopping infomercial industry. The investment in National Media included
debt as well as equity. In February 1995, the Company acquired a minority
ownership interest in MultiGen, Inc., a leading developer of real-time 3D
modeling software used to create visual computer simulations. Each of these
investments was made in tandem with Safeguard's associated venture capital
funds.
The Company formed a new subsidiary, Safeguard International Group,
Inc., in 1994 to provide international consulting services and to pursue
international investment opportunities for Safeguard's partnership companies
and others. In 1995, the Company formed Interactive Marketing Group, Inc.,
with a charter to identify and develop direct marketing opportunities for
new and existing products using computer technology and broad customer
databases.
The Company attempted to package its real estate portfolio together
with real estate owned by its affiliate, The Nichols Company, and certain
other developers, into a Real Estate Investment Trust ("REIT") with the
intention of making an underwritten public offering of shares in the REIT.
This offering was targeted to close during 1994, but the market window for
newly-offered REITs closed before the offering could be consummated. The
Company is now pursuing other alternatives for its real estate.
The Company's associated venture capital fund, Technology Leaders L.P.,
which raised $60 million from private investors, has invested in 21
companies, including Cambridge Technology Partners, Diamond Technology
Partners, Inc., XL Vision, Inc., and USDATA, and is now fully invested. In
1994, the Company sponsored the organization of a new venture capital fund,
Technology Leaders II L.P., which has raised over $80 million to date. The
Company manages these venture funds for a fee through a subsidiary, and has
also invested as a limited partner in each of the funds.
ITEM 1 (b). FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information on net sales, operating profit, depreciation and
amortization, capital expenditures and assets employed for each segment of
the Company's business for the three-year period ended December 31, 1994 is
contained under the caption "Financial Information--Industry Segments" on
page 26 of the Company's Annual Report to Shareholders for 1994, which page
is filed as part of Exhibit 13 hereto and is incorporated herein by
reference.
ITEM 1 (c). NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
As noted under Item 1(a) above, the Company has operations in three
industry segments: Information Technology, Metal Finishing and Commercial
Real Estate.
In the Information Technology segment, the Company's business is
conducted primarily through majority-owned subsidiaries: CompuCom Systems,
Inc., Tangram Enterprise Solutions, Inc., and Premier Solutions Ltd. Micro
Decisionware, Inc. was a majority-owned subsidiary of the Company through
April 1994 when it was sold to Sybase, Inc. Coherent Communications Systems
Corporation was a majority-owned subsidiary of the Company through July 1994
when it made a rights offering. CenterCore, Inc. was a majority-owned
subsidiary of the Company through the end of 1994, when the Company wrote
off its investment in CenterCore and determined to dispose of a substantial
portion of its investment in CenterCore. The Information Technology segment
currently consists of the following classes of products and services:
Microcomputer Systems, which involves the delivery of personal computer (PC)
services, including procurement and configuration of PCs, application
software and related products, network integration, and technical support;
and Information Solutions, which involves the design, development and sale
of strategic business applications systems software solutions. The
activities of the Company's Information Technology segment are described
below under "INFORMATION TECHNOLOGY SEGMENT."
Operations under the Metal Finishing segment consist of specialty metal
finishing services which are performed by a division and by a wholly-owned
subsidiary of Safeguard. Operations under the Commercial Real Estate
segment involve the ownership and leasing of income-producing commercial
real estate properties. The activities of the Company under each of these
segments are described below under "METAL FINISHING SEGMENT" and "COMMERCIAL
REAL ESTATE SEGMENT," respectively.
The Company also holds equity positions in a number of other companies,
most of which operate in the Information Technology field, and provides
venture capital fund management services. The Company provides active
strategic management, operating guidance and innovative financing to its
minority-owned partnership companies. These investments and activities are
described under "OTHER ACTIVITIES."
INFORMATION TECHNOLOGY SEGMENT
MICROCOMPUTER SYSTEMS
CompuCom Systems, Inc., together with its subsidiaries ("CompuCom"), is
a leading PC services integration company that provides services primarily
to Fortune 1000 companies throughout the United States, ranging from product
procurement and configuration to network integration and support. CompuCom
is an authorized dealer for major PC lines including Apple Computer
Corporation ("Apple"), Compaq Computer Corporation ("Compaq"), Hewlett-
Packard Company ("HP") and International Business Machines Corporation
("IBM"). CompuCom also sells a broad selection of applications software
products, computer-related peripheral equipment and a range of computer
equipment, principally DOS based, from AST, 3Com, Epson, Lotus, Microsoft,
NEC, Novell, Toshiba and WordPerfect. CompuCom stocks approximately 1,400
products, thereby providing "one-stop-shopping" to its customers. To
further meet customer needs, CompuCom offers its corporate customers a
variety of services, such as custom configuration of PC systems, network
design and integration, installation, and on-site services.
CompuCom focuses its efforts on serving the needs of large businesses
throughout the United States, working with those customers to apply PC
technology to meet their business objectives. CompuCom markets its product
procurement, configuration, network integration and technology support
services through its direct sales force and service employees, operating
through 40 sales and service centers. No one customer accounted for more
than 5% of CompuCom's sales in 1994.
During 1994, CompuCom completed the transition to centralize its
customer service representatives, previously located at various locations,
to its customer center in a newly leased facility in Dallas, Texas. The
primary goal of the customer center is to provide greater support to
CompuCom's customers and to allow its direct sales force to focus on
soliciting new business and to provide the necessary support for the
customer's more complex networking solutions. The reorganization of the
sales process helped enable CompuCom to handle a 24% increase in sales for
1994 while reducing its direct sales force.
CompuCom is actively focusing on increasing sales of services to meet
customer needs and improve profitability. During 1994, CompuCom acquired
three small service companies in order to enhance CompuCom's ability to meet
the service needs of its customers, to expand its service business and build
a nationwide service infrastructure. CompuCom will continue to make
acquisitions which meet its strategic goals.
CompuCom is dependent upon the continued supply of products from its
principal suppliers, Compaq, IBM and HP. Historically, certain suppliers
have occasionally experienced shortages of selected products which render
components unavailable or necessitate product allocations among resellers.
Certain product shortages did exist throughout 1994, which affected the
industry as a whole. There can be no assurance that product allocations or
product unavailability, or both, will not increase in 1995. However, the
impact of such an interruption is not expected to be unduly troublesome
because of the breadth of alternative product lines available to CompuCom
and CompuCom's established programs to accelerate configuration and delivery
times when such events occur.
CompuCom has dealer agreements with Compaq, IBM and HP which are
renewable annually or bi-annually and are subject to termination by the
respective vendors without cause upon prior written notice, which ranges
from 30 to 90 days depending upon the vendor. The termination or non-
renewal of CompuCom's Compaq dealer agreement or IBM dealer agreement, or
both, would materially adversely affect its business. The loss of HP as a
supplier would adversely affect CompuCom's ability to continue its
expansion. However, CompuCom is not aware of any basis for the termination
or non-renewal of any of those dealer agreements and believes that its
relationships with Compaq, HP and IBM are satisfactory. During 1994, sales
of IBM and Compaq products accounted for, in the aggregate, approximately
43% of Information Technology segment sales, with sales of each of those
supplier's products accounting for at least 18% of such sales; and sales of
HP products accounted for approximately 10% of the Information Technology
segment sales. Sales of IBM and Compaq products accounted for, in the
aggregate, approximately 42% of the Information Technology segment sales in
1993 and 39% in 1992, with sales of each of those supplier's products
accounting for at least 21% and 16% of such sales in 1993 and 1992,
respectively. Sales of HP products accounted for approximately 9% of 1993
Information Technology segment sales.
All of CompuCom's principal suppliers require that CompuCom purchase
certain minimum volumes of products in a specified period in order to
maintain favorable pricing levels. CompuCom believes that it purchases
products from Compaq, HP and IBM at pricing levels which are the lowest
prices available to those vendors' respective dealers with the exception of
certain consumer-oriented products from HP. CompuCom also has certain
selling and promotional and related expenses reimbursed by vendors under
dealer programs offered by its vendors. There can be no assurance that
CompuCom will continue to meet the volume requirements to qualify for such
favorable pricing, that any of these programs will continue in 1995, or that
the regular renewals of CompuCom's dealer agreements with its principal
suppliers will continue. Due to rapid delivery requirements of customers and
to assure itself of continuous allotment of products from suppliers,
CompuCom maintains adequate levels of inventory funded through its line of
credit and vendor credit. CompuCom is entitled to credits from certain
vendors on items in inventory when the vendor reduces its product prices,
subject to certain limitations. Purchases may also be returned to vendors
for restocking fees of up to 5%. CompuCom did not incur any material
restocking fees in 1994.
Competition in the PC reseller business is intense, primarily in the
areas of price, product availability, breadth of product line, and customer
technical service and support. CompuCom faces substantial competition from
other large resellers that focus on the corporate market. In addition,
CompuCom will experience additional direct competition if Compaq, HP or IBM
authorize alternative channels of distribution for products on substantially
similar terms to those available to CompuCom, elect to sell direct to
customers, or authorize other distributors to sell direct to corporate
customers.
The industry-wide decline in product margins continued through the
first half of 1994, which resulted in CompuCom seeking alternate ways to
offset lower margin through control of operating expenses and major account
profitability reviews. Product margins increased somewhat in the fourth
quarter, reversing the negative trend, as a result of price reductions by
certain major manufacturers, and competitors' realization of the need to
increase margins. CompuCom believes that gross margins will continue to be
reactive to industry-wide changes in 1995. Future improved profitability
will depend on vendor product pricing, product availability and competition,
as well as CompuCom's operating efficiencies, cost containment measures and
effective utilization of vendor programs.
Customer support, prompt delivery, product availability, product line
choices, price and the knowledge of the sales and service staffs are the
important elements in retaining current customers and obtaining new
customers. During 1995, CompuCom expects to continue its strategy of
expanding sales of technical service and support, improving the efficiency
of its support and sales forces, and increasing overall sales volume.
At March 23, 1995, Safeguard owned approximately 62% of CompuCom's
outstanding common stock.
INFORMATION SOLUTIONS
Safeguard currently has two continuing majority-owned subsidiaries in
the Information Solutions field: Tangram Enterprise Solutions, Inc. and
Premier Solutions Ltd.
TANGRAM ENTERPRISE SOLUTIONS, INC. Tangram Enterprise Solutions, Inc.
("Tangram"), is focused on being a full service provider of enterprise-wide
distributed resource management solutions for large commercial and
governmental organizations, encompassing mainframe, UNIX-based mini, and LAN
server platforms. Tangram services include software, systems integration,
and custom applications development.
Tangram's AM:PM(Registered Trademark) products and companion products,
which address the electronic software distribution market, provide automated
data and software distribution, data collection, and remote data management
with a variety of connectivity options to multiple platforms; automatically
perform software and hardware inventories and provide information on
software usage; and allow end-users to backup workstation data by
distributing it to a remote location for protection in the case of disaster.
In August 1994, Tangram acquired the business of Knozall Systems, Inc.,
an Arizona-based developer of network management tools that allow
organizations to optimize their Novell NetWare(registered trademark)
computing resources. As a result of the acquisition of Knozall's LAN
expertise, Tangram recently completed development of a LAN version of its
AM:PM software, giving Tangram the ability to provide enterprise resource
management solutions in a broad spectrum of computing environments, whether
in local area networks, wide area networks, mainframes, or distributed UNIX-
based client/server computing environments.
The Arbiter(registered trademark) products provide file transfer
capability and PC-to-mainframe connectivity with an IBM mainframe used as a
local area network file server, and allow host data to be automatically
converted to popular workstation application formats. Tangram's Open
Advantage product line provides high-speed connectivity between mainframes
and LANs. Tangram's mainframe connectivity products have experienced
declining markets.
Tangram markets its products to Fortune 1000 companies, government
agencies and other customers worldwide that have a need to move mission-
critical business information across a heterogeneous computing configuration
of workstations, mainframes, servers, local area networks and wide area
networks. Tangram's AM:PM and Arbiter products have been sold in the United
States through a direct sales force operating from its Raleigh, NC office
using a combination of telesales and in-person contacts at the customer
location. The Open Advantage products and the Knozall products are
presently sold through distributors, although an effort is underway to use
more direct sales for the Knozall products. Foreign sales are made through
distributors in Europe, the Pacific Rim and Africa.
Product development resources are allocated between the enhancement of
existing products and the development of new products. Existing products
are enhanced to keep them current with market requirements and to allow them
to support new standards and environments. New products are developed that
are complementary to existing products and exploit new markets for Tangram.
The majority of Tangram's products and associated documentation are
developed internally, although Tangram has in the past and intends to
continue to acquire certain software technology from others and integrate
those technologies into its product lines.
The market for Tangram's products is highly competitive and is
characterized by rapid changes in technology and user needs. Many of
Tangram's actual and potential competitors have substantially greater
financial, marketing and technological resources than Tangram. Tangram
believes that the principal competitive factors in the industry are the
compatibility of products with the customer's computer hardware and
software, ease of use, price, and the substantial base of technology that is
required to join together the various platforms in today's heterogeneous
enterprises.
At March 23, 1995, the Company owned approximately 73% of Tangram's
common stock.
PREMIER SOLUTIONS LTD. Premier Solutions Ltd. ("Premier") markets
sophisticated asset management systems solutions to the financial services
industry worldwide. Premier's GLOBAL(bullet)PLUS(registered trademark)
software provides complete multi-currency accounting and global custody
processing capabilities, two of the demanding functions required by
international asset management organizations. Premier's MAXIMIS(trademark)
software provides a wide range of asset management and investment accounting
solutions on multiple platforms, and is targeted at investment advisors,
insurance companies and pension funds.
Premier markets its products through a direct sales force based at
its headquarters in Pennsylvania and regional offices in Dallas, New York,
Chicago and Toronto. A significant portion of Premier's sales for 1994 were
in Canada. Target industries are major financial institutions, including
traditional trust organizations, investment advisory firms, domestic and
global custodians, international asset management organizations, insurance
companies and large pension funds. In 1994 Premier had two customers which
each accounted for over 10% of sales. An in-house design and development
team is responsible for product development.
Premier is proceeding with its strategic plan to re-engineer its
GLOBAL(bullet)PLUS product line to operate in a client/server environment.
This process will occur in staged deliverables to allow both existing
clients and future clients to take advantage of new technology in an orderly
fashion and without disruption to their existing operations. The MAXIMIS
product line is utilizing state of the art technology through the use of
case tools and data modeling.
In 1994, Premier entered into an agreement with Digital Equipment
Corporation whereby Premier outsourced its data center operations to
Digital, allowing Premier to focus its manpower on product development and
support.
Although certain of Premier's competitors offer multi-currency
capabilities, Premier believes that its GLOBAL(bullet)PLUS product is
currently the only full-featured, installed and proven global asset
management system. Certain of Premier's domestic competitors have a
significantly larger installed domestic customer base; however, these
competitors have only limited multi-currency functionality. In those
markets where global investment management is required, Premier has been
successful. Premier's ability to remain competitive will be partially
dependent on the success of its conversion to a client/server environment.
In the fourth quarter of 1994, the Company converted all of the Premier
debt held by it into Premier common stock. At March 23, 1995, Safeguard
owned approximately 99% of Premier's outstanding common stock and
approximately 96% of Premier's voting stock.
Product Development Expenses
For the Information Solutions continuing product lines in the
aggregate, the Company spent $11.7 million, or 22% of Information
Solutions net sales, for product development in 1994, compared to $6.8
million or 10% of net sales in 1993 and $7.2 million or 12.6% of net sales
in 1992. The increased development expenditures for 1994 reflect significant
development projects commenced by Tangram and Premier. Only an immaterial
amount of product development expenditures were customer-sponsored.
Other Segment Information
Export sales in the Information Technology segment for the three-year
period ended December 31, 1994 were less than 5% of the segment's total
sales in each of these years. However, export and foreign sales made up
approximately one-third of Information Solutions net sales, with Coherent
Communications Systems Corporation accounting for over half of that amount
during the six months it was consolidated in the Company's results. Backlog
for this segment, most of which was accounted for at year-end by CompuCom,
is not considered to be a meaningful indication of future business prospects
due to CompuCom's relatively quick order fulfillment cycle.
METAL FINISHING SEGMENT
This segment is engaged in the finishing of aluminum and other metal
parts. Operations are conducted in Minneapolis, Minnesota; Green Bay,
Wisconsin; and Phoenix, Arizona under the name "Pioneer Metal Finishing."
Major technical processes include sulfuric, hardcoat and R-5 bright dip
anodizing, chromate conversion, electroless nickel and the application of
other specialty coatings. Pioneer Metal Finishing provides insulation, heat
dispersal, decoration and protection to a wide range of metal parts,
including highly sophisticated equipment and small parts with precision
tolerance requirements for the computer, ordnance, automotive, cookware and
recreational industries, electronic components and other applications.
Pioneer refurbished and upgraded its Minneapolis production line during the
first quarter of 1995 at a cost of approximately $1 million.
Safeguard believes that all facilities comply with existing
environmental pollution control regulations, compliance with which in recent
years has been an important competitive factor in the industry.
Metal Finishing services are sold to a wide range of customers and
industries by a direct sales force and independent representatives.
Finishing is usually performed on customer-owned material. Because of
transportation costs, most customers are located within a 200-300 mile
radius of the finishing facilities.
Backlog is not considered material to this business as work is
generally processed in a one-to-two-week period.
Pioneer Metal Finishing competes with many other metal finishers
serving its geographical areas, several of which are similar in size to it,
but Pioneer Metal Finishing has established itself as a reputable industry
leader and quality metal finisher. Prompt service, quality of work
performed and geographic location are the most important competitive
factors.
COMMERCIAL REAL ESTATE SEGMENT
As of March 23, 1995, Safeguard owns and leases approximately 254,000
square feet of commercial office and industrial space in 8 commercial real
estate properties in suburban Philadelphia. The properties are carried at a
book value, after depreciation, in excess of $18 million subject to related
mortgage debt, primarily non-recourse, of approximately $21 million.
Safeguard also holds a 40% interest in The Nichols Company, a real
estate company that owns, manages and leases commercial office and
industrial space.
Competition in the commercial real estate market in the suburban
Philadelphia area is intense, due in part to the level of available
commercial space. Financing is difficult to obtain due to the restrictive
lending environment. Competitors in the suburban Philadelphia area have
been offering reduced rental rates to attract tenants in this difficult
market environment. Safeguard's occupancy rate was 94% at December 31, 1994
after excluding three properties which the Company is in the process of
turning over to its mortgage lenders in satisfaction of the related non-
recourse debt. The Company will not incur any loss on these properties, as
the depreciated book value of the properties is less than the outstanding
mortgage balances. Location, building design and rental rates are the most
important competitive factors for attracting tenants.
Safeguard believes that its real estate holdings are quality commercial
properties in well-positioned suburban locations. The Company sold one of
its properties at a gain in 1994. The Company's real estate operations
typically generate pretax losses because of depreciation, but are
approximately break-even on a cash basis.
OTHER COMPANY INFORMATION
Safeguard and its consolidated subsidiaries have approximately 2,900
employees, of which approximately two-thirds are employed by CompuCom. The
Company believes relations with employees are good.
OTHER ACTIVITIES
Safeguard has equity interests in, and provides management and support
services to, the following businesses.
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. In the second
quarter of 1993, Safeguard participated in a rights offering to its
shareholders of shares of Cambridge Technology Partners, a Massachusetts-
based company which provides information technology consulting and software
design and development services to organizations with large scale
information processing and distribution needs that are utilizing or
migrating to open systems computing environments. In performing these
services, Cambridge Technology Partners employs a rapid development
methodology utilizing client/server architectures. It provides these
services on a fixed-price, fixed-timetable basis with client involvement at
all stages of the process. Software design and development services have
accounted for most of the revenues to date. However, consulting services
are expected to provide important leads to software development projects.
Software applications are designed to enable clients to achieve a
competitive advantage, enhance the efficiency and functionality of specific
business processes, and support their financial goals.
Cambridge Technology Partners markets its services to a wide variety of
industries, and its clients include a diverse group of business and
governmental organizations with large scale information access and
processing needs, both in North America and in Europe. Cambridge Technology
Partners' revenues grew over 80% in 1994 to $59.7 million, with earnings
nearly doubling to $6.6 million.
At March 23, 1995, Safeguard had approximately a 24% equity position in
Cambridge Technology Partners and held warrants which, if exercised, would
increase its ownership to approximately 26%.
COHERENT COMMUNICATIONS SYSTEMS CORPORATION. In the third quarter of
1994, Safeguard participated in a rights offering to its shareholders of
shares of Coherent. Coherent develops, manufactures, and markets voice
enhancement products for wireless (including digital cellular), satellite-
based and wireline telecommunications systems throughout the world.
Coherent's principal products include echo canceller and teleconference
products which utilize a proprietary high speed reduced instruction set
computer (RISC) microchip and Coherent's proprietary echo cancellation
software to enhance the quality of voice communication during a telephone
call. Coherent's echo canceller products enhance voice quality in several
ways, including eliminating voice echoes inherent in modern
telecommunications systems. Coherent's teleconference products include
equipment and related software used in teleconferencing and in
videoconferencing applications.
Coherent sells its echo canceller products to network operators and
other end-users through its direct sales force and third party distributors,
and to telecommunications equipment manufacturers through its direct sales
force. Users of Coherent's echo canceller products include
telecommunications network operators throughout the world, such as British
Telecommunications PLC, Deutsche Bundespost, McCaw Cellular Communications,
Inc., Telefonos de Mexico, SA, and Teleglobe Canada. Coherent has directed
its sales efforts for its echo canceller products primarily in international
markets in which competition is based principally on technological
characteristics, rather than price. Over 70% of Coherent's sales in 1994
were international. Echo canceller products accounted for approximately 78%
of Coherent's revenues in 1994. Coherent's sales for 1994 increased by 33%,
and earnings grew by over 150% excluding the impact of $1.1 million non-
recurring write-off of goodwill in 1993.
Coherent's product development expenditures in 1994 accounted for
approximately 13% of revenues. Coherent's product markets are intensely
competitive and are characterized by short product life cycles. Coherent's
ability to continuously improve its product technology has enabled it to
successfully compete with much larger competitors.
At March 23, 1995, Safeguard owned approximately 40% of Coherent's
outstanding stock.
CENTERCORE, INC. CenterCore designs, manufactures and distributes
space-efficient, modular workstation systems, a line of complementary office
products, including cable and wiring systems and ergonomically designed
seating products, air management systems for temperature blending and
breathing zone filtration, and portable and room-size cleanroom and air
filtration components and systems, and provides integration, installation
and servicing of advanced electronic systems for security access control,
fire alarm, sound, communications and other applications. CenterCore's
management is pursuing a strategy to significantly downsize its business and
the Company is substantially reducing its ownership of CenterCore.
DIAMOND TECHNOLOGY PARTNERS. Diamond Technology Partners is a
consulting company which helps clients redesign their business processes
based on their overall strategic plan, and implements the redesigned
business process through organizational changes, systems integration
services, custom software applications development, and outsourcing of
information systems management.
At March 23, 1995, Safeguard owned approximately 23% of Diamond
Technology Partners outstanding stock.
MICRO DYNAMICS, LTD. Micro Dynamics, Ltd. develops and markets
document imaging systems on a Macintosh platform which combine traditional
database and full-text searching capabilities and streamline the process of
retrieving information. Micro Dynamics' MARSTM (Multi-User Archival and
Retrieval System) can be used for many traditionally paper intensive
applications from signature verification in banking to land title searches
in real estate and can also play a role in mission critical applications
such as litigation support and new drug applications for pharmaceutical
companies. During 1994, Micro Dynamics continued its development of a
cross-platform product that includes both Macintosh and PC workstation
clients.
At March 23, 1995, Safeguard had approximately a 54% equity position in
Micro Dynamics.
MULTIGEN, INC. MultiGen is a leading supplier of interactive,
graphical modeling tools for 3D real-time computer simulations. Its primary
product line, called MultiGen(registered trademark), is used to create
scenes used in real-time applications for visual simulation, location-based
entertainment, virtual reality, game development, CAD visualization and
architectural walk-through. MultiGen markets its products worldwide through
partnerships with leading computer and real-time simulation companies and a
network of distributors. MultiGen's products currently operate primarily on
Silicon Graphics workstations. MultiGen has developed software tools under
an agreement with Nintendo to be used by developers of video games for
Nintendo's next-generation 64-bit operating system.
At March 23, 1995, Safeguard owned approximately 31% of MultiGen's
outstanding stock.
NATIONAL MEDIA CORPORATION. National Media is the leading worldwide
marketer of consumer products through infomercials. National Media's
programming reaches over 80 million households in 40 countries. At March
23, 1995, Safeguard held $4 million of National Media debt, preferred stock
convertible into 3% of National Media's outstanding common stock and
warrants which could increase its position to 14%.
NEW PARADIGM VENTURES, INC. New Paradigm Ventures provides consulting
and project implementation assistance to nationally recognized, branded
product companies. New Paradigm Ventures seeks to develop joint venture
arrangements with its clients, assisting them in accessing new markets for
their products and new methods of delivering their products to target
markets.
At March 23, 1995, Safeguard owned approximately 33% of New Paradigm
Ventures outstanding stock.
SANCHEZ COMPUTER ASSOCIATES, INC. Sanchez Computer Associates
("Sanchez") develops and installs a comprehensive set of integrated banking
and accounting software for the financial services industry worldwide under
the trademark PROFILE(registered trademark). The PROFILE product line runs
on an open platform and includes a multi-currency cost center-based
accounting system with integrated functions that support the front- and
back-office processing requirements of financial institutions, and a full
treasury support system that includes a sophisticated set of asset and
liability tools.
A substantial majority of Sanchez' sales are international,
particularly in Central Europe, Canada, the Carribean and Portugal.
At March 23, 1995, Safeguard owned 41% of the common stock of Sanchez
and held warrants which, if exercised, would increase its ownership
percentage to 44%.
SKY ALLAND MARKETING, INC. Sky Alland Marketing, Inc. ("Sky
Alland") provides research services that assist Fortune 500 companies in
acquiring and retaining customers. Sky Alland performs its customer
monitoring services and customer relationship enhancement services for
automotive, banking and health care industries. Its clients include
Mitsubishi, BMW, Cadillac, Chemical Bank, First Interstate Bank and Columbia
Health Care. At March 23, 1995, Safeguard held approximately 49% of Sky
Alland's voting stock, which would increase to approximately 55% if Safeguard
were to convert the shares of convertible preferred stock it holds.
USDATA CORPORATION. USDATA has been for 20 years a leading provider of
real-time software-enabling tools for manufacturing and process industries.
USDATA also provides integrated automatic data collection systems. USDATA's
FactoryLink(registered trademark) product line enables customers to rapidly
develop real-time applications which provide interactive graphical linkages
between an organization's management information systems and its
manufacturing processes. USDATA's Systems Integration Division delivers to
customers turnkey implementation of integrated data collection systems
featuring bar code labelling and remote, real-time data collection using
automatic identification techniques.
At March 23, 1995, Safeguard owned approximately 30% of USDATA's
outstanding stock.
XL VISION, INC. In 1993, Safeguard acquired a minority voting equity
interest in XL Vision, Inc., a Florida-based company which develops and
manufactures applications-specific electronic imaging products for sale to
original equipment manufacturers and systems integrators. XL Vision is
targeting its products to specific market segments, including orthophoto
scanning, to support geographic information systems; an automated
microscope, to perform cancer screening and other procedures for clinical
labs; photodocumentation scanning, to support national identification and
border control security systems; and a night-vision system for commercial
applications.
At March 23, 1995, Safeguard held voting control over approximately
16% of the common stock of XL Vision and had ownership of non-voting
preferred stock convertible into a majority of the common stock.
RADNOR VENTURE PARTNERS, L.P. Safeguard, through its wholly-owned
subsidiary, SSI Management Company, Inc., serves as the managing general
partner of the general partner of Radnor Venture Partners, L.P. ("RVP"), a
$33 million venture capital fund organized as a limited partnership. RVP
invests in high technology companies with high growth and profit potential
and is fully invested. Safeguard owns 13.7% of the limited partnership
interests in RVP, and has a 6% carried interest in the net gains after the
return of the investors' capital.
TECHNOLOGY LEADERS. Safeguard, through its wholly-owned subsidiary,
Technology Leaders Management, Inc., serves as the manager of Technology
Leaders, a $60 million high technology venture capital fund organized in two
components: a domestic limited partnership and an offshore limited
partnership. Technology Leaders invests in early-stage opportunities in the
areas of biotechnology, information services, health care and certain other
technologies, and is fully invested. Safeguard owns 3.3% of the aggregate
limited partner interests of Technology Leaders and has a 6% carried
interest in the net gains after the return of the investors' capital.
TECHNOLOGY LEADERS II. Safeguard, through Technology Leaders
Management, Inc., serves as the manager of this high technology venture
capital fund, also organized in parallel domestic and offshore limited
partnerships. Technology Leaders II has raised over $80 million of
committed capital, and invests in the areas of information services, health
care, biotechnology and certain other technologies.
ITEM 1(d). FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
The Company does not believe that foreign or geographic area revenues
are material or significant to an understanding of its business and
operations during the three-year period ended December 31, 1994. Where
appropriate, information concerning the Company's export sales is discussed
in Item 1(c) "Narrative Description of Business."
ITEM 1(e). EXECUTIVE OFFICERS
Information about the Company's executive officers can be found in Part
III of this report under "Item 10. Directors and Executive Officers of
Registrant."
ITEM 2. PROPERTIES
The Company owns its corporate headquarters and administrative offices
located in Wayne, Pennsylvania. In addition to sales offices, leased
warehouses, and certain properties not used by the Company in its
operations, the principal properties consisted of the following as of March
23, 1995:
INDUSTRY SEGMENT/LOCATION TYPE OF FACILITY LEASE EXPIRES
------------------------- ---------------- -------------
INFORMATION TECHNOLOGY
----------------------
MICROCOMPUTER SYSTEMS
Dallas, TX Office/Sales Center *
Woolwich, NJ Distribution Center 1998(1)
Stockton, CA Distribution Center 1999(2)
Dallas, TX Customer Center 2000
Fort Worth, TX Distribution Center 2000(3)
INFORMATION SOLUTIONS
Raleigh, NC Office/Data Center 1997
Malvern, PA Office/Distribution 1998(4)
Dallas, TX Office/Distribution 2000
Malvern, PA Office/Distribution 2001
METAL FINISHING
---------------
Minneapolis, MN Manufacturing/Office *
Green Bay, WI Manufacturing/Office *
Phoenix, AZ Manufacturing/Office *
OTHER ACTIVITIES
----------------
Sebastian, Florida Office Space/Assembly
Facility *
COMMERCIAL REAL ESTATE
----------------------
Horsham Business
Center Commercial Office Space *
Horsham, PA
Iron Run Warehouse/Commercial *
Allentown, PA Office Space
Meetinghouse Business
Center Commercial Office Space *
Plymouth Meeting, PA
(5 buildings)
Whiteland Business
Center Warehouse/ *
Commercial Office Space
_________
(*) Owned facility.
(1) The Company has a cancellation option exercisable at any time after
February 1996.
(2) The Company has a cancellation option exercisable beginning May 1995
and each year thereafter.
(3) The Company has a cancellation option exercisable after April 1998.
(4) The Company has a cancellation option exercisable beginning April
1996.
In the opinion of management, the properties and plants are in good
condition and repair and are adequate for the particular operations for
which they are used. The extent of utilization of manufacturing facilities
varies from plant to plant. The existing facilities generally are capable
of supporting increased activity without any significant capital
expenditures.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various claims and
legal actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company incorporates by reference the information contained under
the caption "Common Stock Data" on page 39 of its Annual Report to
Shareholders for 1994 which page is filed as part of Exhibit 13 hereto.
ITEM 6. SELECTED FINANCIAL DATA
The Company incorporates by reference the information contained under
this caption on page 21 of its Annual Report to Shareholders for 1994 which
page is filed as part of Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company incorporates by reference the information contained under
this caption on pages 21 through 25 of its Annual Report to Shareholders for
1994 which pages are filed as part of Exhibit 13 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company incorporates by reference the information on pages 27
through 39 in its Annual Report to Shareholders for 1994 which pages are
filed as part of Exhibit 13 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
EXECUTIVE OFFICERS:
The following persons were executive officers of the Registrant at
March 23, 1995:
HAS BEEN AN
OFFICER
NAME AGE SINCE POSITION
---- --- ----- --------
Warren V. Musser 68 1953 Chairman of the Board, Chief
Executive Officer, and
President
Donald R. Caldwell(1) 48 1993 Executive Vice President
Charles A. Root 62 1984 Executive Vice President
Gerald M. Wilk 58 1973 Vice President - Finance
James W. Dixon(2) 48 1990 Chairman of the Board,
CompuCom Systems, Inc.
Edward R. Anderson(3) 48 1994 President and Chief Executive
Officer, CompuCom Systems,
Inc.
(1) Prior to joining the Company, from 1991 through 1993 Mr. Caldwell
was President of Valley Forge Capital Group, Ltd., a business mergers and
acquisition advisory firm which he founded. From 1990 through 1991, Mr.
Caldwell was Chief Administrative Officer of Cambridge Technology Partners
(Massachusetts), Inc., an information technology consulting and software
development company.
(2) Mr. Dixon has held the position of Chairman of the Board of CompuCom
Systems, Inc. from January 1989 to the present. Mr. Dixon also held the
positions of President from June 1988 to January 1989 and Co-Chief Executive
Officer from January 1989 to March 1991. From 1987 to June 1988, he served
as President of CompuShop Incorporated, a subsidiary of Bell Atlantic
Investment Development Corporation, the assets of which were acquired by
CompuCom Systems, Inc. in June 1988.
(3) Mr. Anderson has served as President and Chief Executive Officer of
CompuCom Systems, Inc. since January 1994 and served as Chief Operating
Officer from August 1993 through December 1993. Prior to joining CompuCom,
Mr. Anderson served from May 1988 to July 1993 as President and Chief
Operating Officer of Computerland Corporation, a computer reseller.
DIRECTORS:
The Company incorporates by reference the information contained under
the caption "ELECTION OF DIRECTORS" in its definitive Proxy Statement
relative to its May 11, 1995 annual meeting of shareholders, to be filed
within 120 days after the end of the year covered by this Form 10-K Report
pursuant to Regulation 14A under the Securities Exchange Act of l934, as
amended.
DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K:
The Company incorporates by reference the information contained under
the caption "COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934" in its definitive Proxy Statement relative to its May 11, 1995 annual
meeting of shareholders, to be filed within 120 days after the end of the
year covered by this Form 10-K Report pursuant to Regulation 14A under the
Securities Exchange Act of l934, as amended.
ITEM 11. EXECUTIVE COMPENSATION
The Company incorporates by reference the information contained under
the captions "Directors' Compensation," "Compensation Committee Interlocks
and Insider Participation" and "EXECUTIVE COMPENSATION" in its definitive
Proxy Statement relative to its May 11, 1995 annual meeting of shareholders,
to be filed within 120 days after the end of the year covered by this Form
10-K Report pursuant to Regulation 14A under the Securities Exchange Act of
l934, as amended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company incorporates by reference the information contained under
the caption "SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" in its definitive Proxy Statement relative to its May 11, 1995
annual meeting of shareholders, to be filed within 120 days after the end of
the year covered by this Form 10-K Report pursuant to Regulation 14A under
the Securities Exchange Act of l934, as amended.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incorporates by reference the information contained under
the captions "Compensation Committee Interlocks and Insider Participation"
and "CERTAIN TRANSACTIONS" in its definitive Proxy Statement relative to its
May 11, 1995 annual meeting of shareholders, to be filed within 120 days
after the end of the year covered by this Form 10-K Report pursuant to
Regulation 14A under the Securities Exchange Act of l934, as amended.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) Financial Statements and Schedules
CONSOLIDATED FINANCIAL STATEMENTS *
INDEPENDENT AUDITORS' REPORT
INDUSTRY SEGMENTS
OPERATIONS - years ended December 31, 1994, 1993, and 1992
BALANCE SHEETS - December 31, 1994 and 1993
CASH FLOWS - years ended December 31, 1994, 1993, and 1992
SHAREHOLDERS' EQUITY - years ended December 31, 1994, 1993,
and 1992
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERLY FINANCIAL DATA
FINANCIAL STATEMENT SCHEDULES**
INDEPENDENT AUDITORS' REPORT
Schedule I - Condensed Financial Information of
Registrant
Schedule II - Valuation and Qualifying Accounts
Schedule III - Real Estate and Accumulated Depreciation
Schedule IV - Mortgage Loans on Real Estate
--------
* Incorporated by reference from pages 26 through 39 of the Company's
Annual Report to Shareholders for 1994, which pages are filed as part of
Exhibit 13 hereto.
** Filed herewith.
(b) Reports on Form 8-K
On October 17, 1994, the Company filed a Form 8-K disclosing under Item
2 the acquisition by its subsidiary, Premier Solutions Ltd., of the MAXIMIS
software business unit from Texas Instruments Incorporated.
On December 16, 1994, the Company filed a Form 8-K/A for such
acquisition, containing the following financial statements under Item 7: (1)
financial statements for the MAXIMIS business unit, and (2) pro forma
consolidated financial statements for Safeguard Scientifics, Inc.
(c) Exhibits
The following is a list of exhibits required by Item 601 of Regulation
S-K filed as part of this Report. Where so indicated by footnote, exhibits
which were previously filed are incorporated by reference. For exhibits
incorporated by reference, the location of the exhibit in the previous
filing is indicated in parentheses.
EXHIBIT NO. EXHIBIT
---------- -------
2.1 Asset Purchase Agreement among MEC Acquisition, Inc.,
CenterCore, Inc. and Maris Equipment Company
dated September 15, 1993 (excluding schedules and
exhibits) (9)(Exhibit 2.1)
2.2 Promissory Note dated September 22, 1993 from MEC
Acquisition, Inc. to Maris Equipment Company
(9)(Exhibit 2.2)
2.3 Asset Purchase Agreement between Texas Instruments
Incorporated and Premier Solutions Ltd. dated as
of September 30, 1994 (excluding schedules and
exhibits) (13) (Exhibit 2.1)
2.4 Services Agreement between Texas Instruments
Incorporated and Premier Solutions Ltd. dated as
of September 30, 1994 (13) (Exhibit 2.2)
3.1 Articles of Incorporation of the Company, as amended
(6)(Exhibit 3.1)
3.2 By-laws of the Company, as amended
(6)(Exhibit 3.2)
4.2 Rights Agreement dated March 31, 1988 between
Safeguard Scientifics, Inc. and Mellon Bank
(East) N.A., as Rights Agent (3)(Exhibit 1)
4.3 Form of letter sent to shareholders regarding
adoption of Shareholder Rights Plan
(3)(Exhibit 2)
4.4 Form of certificate of Safeguard Scientifics, Inc.
Common Stock, par value $.10 per share
(5)(Exhibit 4.3)
4.5** 1979 Stock Option Plan (1)(Exhibit 10)
4.6** 1980 Stock Option Plan (1)(Exhibit 10)(5)(Exhibit 10.5)
4.7** 1990 Stock Option Plan (11) (Exhibit 4.7)
4.8** Stock Option Plan for Non-Employee Directors (11)
(Exhibit 4.8)
4.9** Safeguard Scientifics, Inc. Amended and Restated
Stock Savings Plan*
4.10** Safeguard Scientifics, Inc. Stock Savings Plan
Trust Agreement (5)(Exhibit 4.2)
10.1** Safeguard Scientifics Money Purchase Pension Plan
(6)(Exhibit 10.3)
10.2** First Amendment to Safeguard Scientifics
Money Purchase Pension Plan (11) (Exhibit 10.2)
10.3** Second Amendment to Safeguard Scientifics
Money Purchase Pension Plan*
10.4** Safeguard Scientifics Money Purchase Pension Plan
Trust Agreement (6)(Exhibit 10.4)
10.5** Safeguard Management Incentive Compensation Plan
(7)(Exhibit 10.3)
10.6** Safeguard Scientifics, Inc. Long Term Incentive Plan,
as amended and restated effective June 15, 1994 *
10.7** Form of Promissory Notes dated December 22, 1994
given by certain executives in payment for
restricted stock grants*
10.8** Form of Promissory Notes dated January 3, 1995
given by certain executives in payment for
restricted stock grants*
10.9** Safeguard Scientifics, Inc. Deferred Compensation
Plan (2)(Exhibit 10.12)
10.10** Amended and Restated Credit Agreement dated
June 30, 1994 by and among Safeguard Scientifics,
Inc., Safeguard Scientifics (Delaware), Inc.,
and Midlantic Bank (excluding schedules
and exhibits) (12) (Exhibit 10)
10.11** Amended and Restated Revolving Note dated
June 30, 1994 made by Safeguard Scientifics,
Inc., Safeguard Scientifics (Delaware), Inc.
(12) (Exhibit 10)
10.12 Term Note dated June 30, 1994 from Safeguard
Scientifics, Inc. and Safeguard Scientifics
(Delaware), Inc. (12) (Exhibit 10)
10.13 Second Amended and Restated Credit Agreement
dated February 1, 1995 by and among Safeguard
Scientifics, Inc., Safeguard Scientifics
(Delaware), Inc. and Midlantic Bank
(excluding schedules and exhibits)*
10.14 Second Amended and Restated Revolving Loan Note
dated February 1, 1995 made by Safeguard Scientifics,
Inc., and Safeguard Scientifics (Delaware), Inc.*
10.15 Revolving Credit Financing and Security Agreement dated
as of August 4, 1993 between CompuCom Systems, Inc.
and NationsBank of Texas, N.A.(excluding schedules
and exhibits) (11) (Exhibit 10.12)
10.16 $125,000,000 Master Revolving Promissory Note from
CompuCom Systems, Inc. to NationsBank of Texas, N.A.
dated as of August 4, 1993 (11) (Exhibit 10.13)
10.17 First Amendment to Financing and Security Agreement
dated as of March 31, 1994 between CompuCom Systems, Inc.
and NationsBank of Texas, N.A.*
10.18 Master Revolving Promissory Note dated March 31, 1994 made
by CompuCom Systems, Inc.*
10.19** Letter agreement between Safeguard Scientifics, Inc.
and Jean C. Tempel dated November 5, 1993 (11)
(Exhibit 10.20)
10.20** Letter agreements among Continental Capital Partners,
Charterhouse North America Securities, Inc.,
Valley Forge Capital Group Ltd., MIG Securities, Inc.
and Safeguard Scientifics, Inc. dated September 6,
1991 (11) (Exhibit 10.21)
10.21** Memo of Understanding between Valley Forge Capital
Group, Ltd. and Safeguard Scientifics, Inc. dated
as of October 15, 1992 (11) (Exhibit 10.22)
10.22** Letter agreement dated August 13, 1991 between Valley
Forge Capital Group, Ltd. and CenterCore, Inc. (11)
(Exhibit 10.23)
10.23 Stock Purchase Agreement between CompuCom Systems, Inc.
and Rosetta Stone Corporation dated January 5, 1994,
regarding sale of common stock of PC Parts Express,
Inc. (exhibits omitted) with attached $3,500,000
Promissory Note, Pledge and Security Agreement, and
PC Parts Express, Inc. Common Stock Purchase Warrant
(11) (Exhibit 10.24)
10.24 Asset Purchase Agreement among Rosetta Stone Corporation,
Teknowlogy Corp. and CompuCom Acquisition Corporation,
d/a/a Micro Solutions, dated January 5, 1994, regarding
sale of MicroSolutions' Network Training Group division
(exhibits omitted), with attached $1,000,000
Installment Promissory Note and Pledge and Security
Agreement (11) (Exhibit 10.25)
10.25** Resignation Agreement, effective January 1, 1994,
between Avery More and CompuCom Systems, Inc.
(11) (Exhibit 10.26)
10.26** Promissory Note dated August 31, 1994 from
Edward Anderson to CompuCom Systems, Inc.*
10.27** Pledge Agreement dated August 31, 1994 between
Edward Anderson and CompuCom Systems, Inc.*
10.28** Promissory Note dated January 5, 1995 from
James Dixon to CompuCom Systems, Inc.*
11 Computation of Per Share Earnings*
13 Pages 21 to 39 of Annual Report to Shareholders
for year ended December 31, 1994*
21 List of Subsidiaries*
23 Consent of KPMG Peat Marwick LLP, independent
auditors*
27 Financial Data Schedule*
________________________________
* Filed herewith.
** These exhibits relate to compensatory plans, contracts or
arrangements in which directors and/or executive officers of the registrant
may participate.
(1) Filed on March 30, 1981 as an exhibit to the Annual Report on Form
10-K (No. 1-5620) and incorporated herein by reference.
(2) Filed on March 30, 1987 as an exhibit to Annual Report on Form 10-K
(No. 1-5620) and incorporated herein by reference.
(3) Filed on April 8, 1988 as an exhibit to Form 8-K (No. 1-5620) and
incorporated herein by reference.
(4) Filed on March 29, 1991 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(5) Filed on December 13, 1991 as an exhibit to Form 8-K (No. 1-5620)
and incorporated herein by reference.
(6) Filed on March 30, 1992 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(7) Filed on March 31, 1993 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(8) Filed on April 9, 1993 as an exhibit to Form 8 Amendment to Form 10-
K (No. 1-5620) and incorporated herein by reference.
(9) Filed on October 22, 1993 as an exhibit to Form 8-K (No. 1-5620) and
incorporated herein by reference.
(10) Filed on November 15, 1993 as an exhibit to Form 10-Q (No. 1-5620)
and incorporated herein by reference.
(11) Filed on March 30, 1994 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(12) Filed on August 15, 1994 as an exhibit to Form 10-Q (No. 1-5620)
and incorporated herein by reference.
(13) Filed on October 17, 1994 as an exhibit to Form 8-K (No. 1-5620)
and incorporated herein by reference.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Safeguard Scientifics, Inc.:
Under date of February 16, 1995, we reported on the consolidated balance
sheets of Safeguard Scientifics, Inc. and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of
operations, cash flows and shareholders' equity for each of the years in
the three-year period ended December 31, 1994, as contained in the 1994
annual report to shareholders. These consolidated financial statements
and our report thereon are incorporated by reference in the annual
report on Form 10-K for the year 1994. In connection with our audits of
the aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedules as listed in the
accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on our
audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set
forth therein.
As discussed in note 1 to the consolidated financial statements, the
Company changed its method of accounting for investments by adopting the
provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as of
January 1, 1994.
/s/ KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
February 16, 1995
Safeguard Scientifics, Inc.
Schedule I
Condensed Consolidated Balance Sheets
December 31, 1994 and 1993
(In thousands)
ASSETS
1994 1993
----------- ----------
Current Assets
Cash $ 2,264 $ 3,128
Receivables less allowances
($103 - 1994; $149 - 1993) 3,733 3,753
Notes and other receivables 11,127 1,667
Inventories 1,291 1,188
Other current assets 2,240 1,879
----------- ----------
Total current assets 20,655 11,615
Property, Plant & Equipment, net 20,940 21,296
Commercial Real Estate, net 18,433 36,423
Other Assets
Investments in unconsolidated
subsidiaries and affiliates 147,380 65,899
Notes and other receivables 4,527 18,958
Deferred taxes on income 297
Other 2,587 3,545
----------- ----------
154,494 88,699
----------- ----------
$ 214,522 $ 158,033
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
1994 1993
----------- ----------
Current Liabilities
Current commercial real estate debt $ 3,120 $ 11,038
Current debt obligations 2,154 3,360
Accounts payable 3,040 1,358
Accrued expenses 13,612 6,009
----------- ----------
Total current liabilities 21,926 21,765
----------- ----------
Long-Term Debt 57,882 16,692
Commercial Real Estate Debt 17,594 29,630
Deferred taxes on income 5,404
Other Liabilities 1,169 1,179
Shareholders' Equity
Common stock 1,093 547
Additional paid-in capital 25,669 26,177
Retained earnings 91,780 76,040
Treasury stock (13,228) (13,997)
Net unrealized appreciation on investments 5,233
----------- ----------
110,547 88,767
----------- ----------
$ 214,522 $ 158,033
=========== ==========
Safeguard Scientifics, Inc.
Schedule I
Condensed Consolidated Statements of Operations
December 31, 1994, 1993 and 1992
(In thousands except per share amounts)
1994 1993 1992
------------ ------------ ------------
Revenues
Net sales $ 35,024 $ 32,380 $ 29,411
Gains on sales of securities, net 21,789 9,574 10,214
Other income 7,323 6,088 5,641
------------ ------------ ------------
Total revenues 64,136 48,042 45,266
Costs and Expenses
Cost of sales 22,054 20,289 17,182
Selling 1,307 1,338 1,248
General and administrative 14,334 12,562 10,357
Depreciation and amortization 4,383 4,287 4,074
Interest 5,141 4,404 4,992
Equity in income of unconsolidated
subsidiaries and affiliates,
net of taxes (2,378) (2,060) (4,574)
------------ ------------ ------------
Total costs and expenses 44,841 40,820 33,279
------------ ------------ ------------
Earnings Before Taxes on Income 19,295 7,222 11,987
Provision for Taxes on Income 3,555 3,369 3,123
------------ ------------ ------------
Net Earnings $ 15,740 $ 3,853 $ 8,864
============ ============ ============
Earnings Per Share
Primary $1.54 $.31 $.88
Fully Diluted $1.41 $.21 $.82
Average Common Shares Outstanding
Primary 9,813 10,046 10,100
Fully Diluted 9,893 10,136 10,202
Safeguard Scientifics, Inc.
Schedule I
Condensed Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
------- ------ ------
Operating Activities
Net earnings $15,740 $3,853 $8,864
Adjustments to reconcile net earnings to
cash from operating activities
Depreciation and amortization 4,383 4,287 4,074
Deferred income taxes 3,006 2,690 4,155
Equity in income of unconsolidated
subsidiaries and affiliates, net (2,378) (2,060) (4,574)
Gains on sales of securities, net (21,789) (9,574) (10,214)
------- ------ ------
(1,038) (804) 2,305
Cash provided (used) by changes in working
capital items
Receivables (5,239) 1,741 (3,004)
Inventories (103) (504) (63)
Other current assets (361) (785) (508)
Accounts payable and accrued expenses 1,493 718 1,448
Taxes on income 0 0 (1,134)
------- ------ ------
(4,210) 1,170 (3,261)
------- ------ ------
Cash provided (used) by operating activities (5,248) 366 (956)
Proceeds from sales of securities, net 16,953 20,129 18,689
------- ------ ------
Cash provided by operating activities
and sales of securities, net 11,705 20,495 17,733
Other Investing Activities
Investments and notes acquired (49,343) (7,775) (12,376)
Expenditures for property, plant & equipment (2,375) (5,357) (4,080)
Commercial real estate costs 0 (130) (468)
Other, net (1,302) 80 (971)
------- ------ ------
Cash (used) by other investing activities (53,020) (13,182) (17,895)
Financing Activities
Net borrowings on revolving credit facilities 17,927 6,200
Net borrowings (repayments) on term debt 21,717 (7,735) 1,801
Repurchase of common stock (551) (8,000) (1,506)
Stock options exercised 1,358 1,229
------- ------ ------
Cash provided (used) by financing activities 40,451 (8,306) 295
------- ------ ------
Increase (Decrease) in Cash (864) (993) 133
Cash - beginning of year 3,128 4,121 3,988
------- ------ ------
Cash - End of Year $2,264 $3,128 $4,121
======= ====== ======
Notes to Condensed Consolidated Financial Statements
NOTE 1 - DEBT
1994 1993
------ -----
($000 omitted)
Revolving credit facility and term note payable,
interest at prime and/or LIBOR plus 2.25% $44,100 $10,200
Notes payable, interest ranging from 1% to 2%
below prime 6,975
9.75% mortgage note; payable
monthly through 2002 3,543 3,568
Industrial Development Revenue Bonds,
due in installments through 2002 2,550 2,890
Variable rate Industrial Development
Revenue Bond mortgage due monthly
through 2000 757 1,013
Term loan, interest at 1% above prime
rate; payable monthly through 1998 729 867
Other 1,382 1,514
-------- --------
60,036 20,052
Current debt obligations (2,154) (3,360)
-------- --------
Long-term debt $57,882 $16,692
======== ========
Aggregate maturities of long-term debt during future years are as
follows: $2.2 million-1995; $.8 million--1996; $.8 million--1997;
$51.6 million--1998; $.4 million--1999 and $4.2 million thereafter.
Interest paid in 1994, 1993 and 1992 was $4.9 million, $4.8 million, and
$5.0 million, respectively, of which $2.7 million, $3.5
million and $4.1 million in 1994, 1993 and 1992, respectively, related
to commercial real estate debt.
In connection with investments in certain unconsolidated subsidiaries
and investee companies, the Company is contingently obligated for
approximately $13.8 million in bank loan and other guarantees and $7.5
million for possible future investments.
SAFEGUARD SCIENTIFICS, INC. AND SUBSIDIARIES
--------------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
(In thousands)
Balance Additions
Beginning Charged to Balance
DECSCRIPTION of Year Operations Deductions Other End of Year
------------ ----------- ------------ ------------ -------- ------------
(1)
Allowance for doubtful accounts
Year ended December 31, 1992 $2,243 $2,113 $1,336 $3,020
Year ended December 31, 1993 $3,020 $1,276 $676 $1,860 (2) $5,480
Year ended December 31, 1994 $5,480 $3,378 $1,669 $(723) (3) $6,466
(1) Net write-offs.
(2) Maris Equipment Co. valuation
reserve at acquisition date.
(3) Sale and deconsolidation of Micro
Decisionware and Coherent, respectively.
SAFEGUARD SCIENTIFICS, INC.
SCHEDULE III REAL ESTATE AND
ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(In thousands)
Initial Cost Costs Capitalized Cost
to Company subsequent to at close
(Acquisition) acquisition of period
------------------- --------------------- -------------------
Building & Carrying Building & Accumulated Date of
Description (1) Encumbrances Land Improvements Improvements Costs Land Improvements Depreciation Construction
----------------- ------------ ---- ------------ ------------ ----- ---- ------------ ------------ ---------
(2)
Meeting House All Mortgages $1,527 $10,877 $3,106 $921 $1,527 $14,904 $4,614 1983
Business Center Are Secured
Plymouth Meeting, PA by Related
(5 Properties) Property
Horsham Business All Mortgages 412 2,722 121 412 2,843 928 1984
Center Are Secured
Horsham, PA by Related
(1 Property) Property
Whiteland Business All Mortgages 343 1,928 794 47 343 2,769 807 1985
Center Are Secured
Exton, PA by Related
(1 Property) Property
Iron Run All Mortgages 213 2,148 358 21 213 2,527 756 1984
Allentown, PA Are Secured
(1 Property) by Related
Property
------ ------- ------ ---- ------ ------- ------
$2,495 $17,675 $4,379 $989 $2,495 $23,043 $7,105
====== ======= ====== ==== ====== ======= ======
(1) Acquired June 27, 1986.
(2) All properties and improvements are depreciated over a 10 or 30-year estimated useful life.
Schedule III, cont.
SAFEGUARD SCIENTIFICS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
NOTES TO COLUMNS E AND F
(In thousands)
Note to Column E Year ended December 31
----------------
1994 1993 1992
------------------------------------------------------------
Balance at beginning of period $ 47,460 $ 47,504 $ 47,094
Additions - Tenant required improvements 130 468
Real estate sold (5,015) (12) (58)
Transferred to mortgage holders (16,907)
Other (162)
---------- ---------- ----------
Balance at close of period $ 25,538 $ 47,460 $ 47,504
========== ========== ==========
Aggregate cost for federal income tax $ 22,500 $ 41,042 $ 40,912
========== ========== ==========
Note to Column F
----------------
Balance at beginning of period $ 11,037 $ 9,456 $ 7,898
Additions - Depreciation 1,447 1,581 1,558
Real estate sold (1,111)
Transferred to mortgage holders (4,268)
---------- ---------- ----------
Balance at close of period $ 7,105 $ 11,037 $ 9,456
========== ========== ==========
SAFEGUARD SCIENTIFICS, INC.
SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1994
(In thousands)
Final Periodic
Description Interest rate maturity date payment terms
------------------------------- --------------- --------------- ---------------
Permanent mortgage financing - Ranging from Ranging from Subject to
commercial office buildings and 9% 1995 - 2000 various amortization
land - suburban metropolitan to 10.5% schedules including
Philadelphia area - property balloon payments at
carrying value of $6,609 maturity
(3 mortgages)
1995 - 2,968
1996 - 70
1997 - 1,510
1998 - (19)
1999 - 26
2000 - 2,456
Cash flow permanent mortgage 7.125% 1999 Subject to
financing - commercial office amortization schedules
buildings and land - suburban including balloon
metropolitan Philadelphia area - payments at maturity
property carrying value of $11,824
(1 mortgage) 1995 - 152
1996 - 164
1997 - 176
1998 - 189
1999 - 13,022
Deferred Financing costs
The prime rate at December 31, 1994 was 8.5%.
(Continued)
SAFEGUARD SCIENTIFICS, INC.
SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1994
(In thousands)
Principal amount
of loans subject to
Face amounts Carrying amounts delinquent principal
Prior liens of mortgages of mortgages or interest
------------- -------------- ----------------- ---------------------
Permanent mortgage financing - - $ 7,500 $ 7,184 -
commercial office buildings and
land - suburban metropolitan
Philadelphia area - property
carrying value of $6,609
(3 mortgages)
Cash flow permanent mortgage 15,000 13,703 -
financing - commercial office
buildings and land - suburban
metropolitan Philadelphia area -
property carrying value of $11,824
(1 mortgage)
Deferred Financing costs (173)
------- -------
$22,500 $20,714
======= =======
The prime rate at December 31, 1994 was 8.5%.
Schedule IV, cont.
SAFEGUARD SCIENTIFICS, INC.
MORTGAGE LOANS ON REAL ESTATE, CONTINUED
NOTE TO COLUMN G
(In thousands)
Year ended December 31
1994 1993 1992
--------------------------------------------------
Balance at beginning of period $40,668 $41,159 $41,812
Net decrease (increase) in deferred financing costs 99 178 (183)
---------- ---------- ----------
40,767 41,337 41,629
Dispositions (4,544) 0 0
Transferred to mortgage holders (15,190) 0 0
Payments on permanent financings (319) (669) (470)
---------- ---------- ----------
Balance at close of period $20,714 $40,668 $41,159
========== ========== ==========
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.
Dated: March 27, 1995 SAFEGUARD SCIENTIFICS, INC.
By: Warren V. Musser
---------------------------
Warren V. Musser
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 27, 1995 Warren V. Musser
--------------------------------------
Warren V. Musser
Chairman, President and Chief
Executive Officer (Principal
Executive Officer)
Dated: March 27, 1995 Gerald M. Wilk
--------------------------------------
Gerald M. Wilk, Vice President-Finance
(Principal Financial and Accounting
Officer)
Dated: March 27, 1995 Vincent G. Bell
--------------------------------------
Vincent G. Bell, Jr., Director
Dated: March 27, 1995 Robert A. Fox
--------------------------------------
Robert A. Fox, Director
Dated: March 27, 1995 Delbert W. Johnson
--------------------------------------
Delbert W. Johnson, Director
Dated: March 27, 1995 Peter Likins
--------------------------------------
Peter Likins, Director
Dated: March 27, 1995 Russell E. Palmer
--------------------------------------
Russell E. Palmer, Director
Dated: March 27, 1995 John W. Poduska Sr.
--------------------------------------
John W. Poduska Sr., Director
Dated: March 27, 1995 Hubert J. P. Schoemaker
--------------------------------------
Hubert J. P. Schoemaker, Director
Dated: March 27, 1995 Heinz Schimmelbusch
--------------------------------------
Heinz Schimmelbusch, Director
Dated: March 27, 1995 Jean C. Tempel
--------------------------------------
Jean C. Tempel, Director
EXHIBIT INDEX
The following is a list of exhibits required by Item 601 of Regulation
S-K filed as part of this Report. Where so indicated by footnote, exhibits
which were previously filed are incorporated by reference. For exhibits
incorporated by reference, the location of the exhibit in the previous
filing is indicated in parentheses.
EXHIBIT NO. EXHIBIT
----------- -------
2.1 Asset Purchase Agreement among MEC Acquisition, Inc.,
CenterCore, Inc. and Maris Equipment Company
dated September 15, 1993 (excluding schedules and
exhibits) (9)(Exhibit 2.1)
2.2 Promissory Note dated September 22, 1993 from MEC
Acquisition, Inc. to Maris Equipment Company
(9)(Exhibit 2.2)
2.3 Asset Purchase Agreement between Texas Instruments
Incorporated and Premier Solutions Ltd. dated as
of September 30, 1994 (excluding schedules and
exhibits) (13) (Exhibit 2.1)
2.4 Services Agreement between Texas Instruments
Incorporated and Premier Solutions Ltd. dated as
of September 30, 1994 (13) (Exhibit 2.2)
3.1 Articles of Incorporation of the Company, as amended
(6)(Exhibit 3.1)
3.2 By-laws of the Company, as amended
(6)(Exhibit 3.2)
4.2 Rights Agreement dated March 31, 1988 between
Safeguard Scientifics, Inc. and Mellon Bank
(East) N.A., as Rights Agent (3)(Exhibit 1)
4.3 Form of letter sent to shareholders regarding
adoption of Shareholder Rights Plan
(3)(Exhibit 2)
4.4 Form of certificate of Safeguard Scientifics, Inc.
Common Stock, par value $.10 per share
(5)(Exhibit 4.3)
4.5** 1979 Stock Option Plan (1)(Exhibit 10)
4.6** 1980 Stock Option Plan (1)(Exhibit 10)(5)(Exhibit 10.5)
4.7** 1990 Stock Option Plan (11) (Exhibit 4.7)
4.8** Stock Option Plan for Non-Employee Directors (11)
(Exhibit 4.8)
4.9** Safeguard Scientifics, Inc. Amended and Restated
Stock Savings Plan*
4.10** Safeguard Scientifics, Inc. Stock Savings Plan
Trust Agreement (5)(Exhibit 4.2)
10.1** Safeguard Scientifics Money Purchase Pension Plan
(6)(Exhibit 10.3)
10.2** First Amendment to Safeguard Scientifics
Money Purchase Pension Plan (11) (Exhibit 10.2)
10.3** Second Amendment to Safeguard Scientifics
Money Purchase Pension Plan*
10.4** Safeguard Scientifics Money Purchase Pension Plan
Trust Agreement (6)(Exhibit 10.4)
10.5** Safeguard Management Incentive Compensation Plan
(7)(Exhibit 10.3)
10.6** Safeguard Scientifics, Inc. Long Term Incentive Plan,
as amended and restated effective June 15, 1994 *
10.7** Form of Promissory Notes dated December 22, 1994
given by certain executives in payment for
restricted stock grants*
10.8** Form of Promissory Notes dated January 3, 1995
given by certain executives in payment for
restricted stock grants*
10.9** Safeguard Scientifics, Inc. Deferred Compensation
Plan (2)(Exhibit 10.12)
10.10** Amended and Restated Credit Agreement dated
June 30, 1994 by and among Safeguard Scientifics,
Inc., Safeguard Scientifics (Delaware), Inc.,
and Midlantic Bank (excluding schedules
and exhibits) (12) (Exhibit 10)
10.11** Amended and Restated Revolving Note dated
June 30, 1994 made by Safeguard Scientifics,
Inc., Safeguard Scientifics (Delaware), Inc.
(12) (Exhibit 10)
10.12 Term Note dated June 30, 1994 from Safeguard
Scientifics, Inc. and Safeguard Scientifics
(Delaware), Inc. (12) (Exhibit 10)
10.13 Second Amended and Restated Credit Agreement
dated February 1, 1995 by and among Safeguard
Scientifics, Inc., Safeguard Scientifics
(Delaware), Inc. and Midlantic Bank
(excluding schedules and exhibits)*
10.14 Second Amended and Restated Revolving Loan Note
dated February 1, 1995 made by Safeguard Scientifics,
Inc., and Safeguard Scientifics (Delaware), Inc.*
10.15 Revolving Credit Financing and Security Agreement dated
as of August 4, 1993 between CompuCom Systems, Inc.
and NationsBank of Texas, N.A.(excluding schedules
and exhibits) (11) (Exhibit 10.12)
10.16 $125,000,000 Master Revolving Promissory Note from
CompuCom Systems, Inc. to NationsBank of Texas, N.A.
dated as of August 4, 1993 (11) (Exhibit 10.13)
10.17 First Amendment to Financing and Security Agreement
dated as of March 31, 1994 between CompuCom Systems, Inc.
and NationsBank of Texas, N.A.*
10.18 Master Revolving Promissory Note dated March 31, 1994 made
by CompuCom Systems, Inc.*
10.19** Letter agreement between Safeguard Scientifics, Inc.
and Jean C. Tempel dated November 5, 1993 (11)
(Exhibit 10.20)
10.20** Letter agreements among Continental Capital Partners,
Charterhouse North America Securities, Inc.,
Valley Forge Capital Group Ltd., MIG Securities, Inc.
and Safeguard Scientifics, Inc. dated September 6,
1991 (11) (Exhibit 10.21)
10.21** Memo of Understanding between Valley Forge Capital
Group, Ltd. and Safeguard Scientifics, Inc. dated
as of October 15, 1992 (11) (Exhibit 10.22)
10.22** Letter agreement dated August 13, 1991 between Valley
Forge Capital Group, Ltd. and CenterCore, Inc. (11)
(Exhibit 10.23)
10.23 Stock Purchase Agreement between CompuCom Systems, Inc.
and Rosetta Stone Corporation dated January 5, 1994,
regarding sale of common stock of PC Parts Express,
Inc. (exhibits omitted) with attached $3,500,000
Promissory Note, Pledge and Security Agreement, and
PC Parts Express, Inc. Common Stock Purchase Warrant
(11) (Exhibit 10.24)
10.24 Asset Purchase Agreement among Rosetta Stone Corporation,
Teknowlogy Corp. and CompuCom Acquisition Corporation,
d/a/a Micro Solutions, dated January 5, 1994, regarding
sale of MicroSolutions' Network Training Group division
(exhibits omitted), with attached $1,000,000
Installment Promissory Note and Pledge and Security
Agreement (11) (Exhibit 10.25)
10.25** Resignation Agreement, effective January 1, 1994,
between Avery More and CompuCom Systems, Inc.
(11) (Exhibit 10.26)
10.26** Promissory Note dated August 31, 1994 from
Edward Anderson to CompuCom Systems, Inc.*
10.27** Pledge Agreement dated August 31, 1994 between
Edward Anderson and CompuCom Systems, Inc.*
10.28** Promissory Note dated January 5, 1995 from
James Dixon to CompuCom System, Inc.*
11 Computation of Per Share Earnings*
13 Pages to of Annual Report to Shareholders
for year ended December 31, 1994*
21 List of Subsidiaries*
23 Consent of KPMG Peat Marwick, independent
auditors*
27 Financial Data Schedule*
-------------------------------
* Filed herewith.
** These exhibits relate to compensatory plans, contracts or
arrangements in which directors and/or executive officers of the registrant
may participate.
(1) Filed on March 30, 1981 as an exhibit to the Annual Report on Form
10-K (No. 1-5620) and incorporated herein by reference.
(2) Filed on March 30, 1987 as an exhibit to Annual Report on Form 10-K
(No. 1-5620) and incorporated herein by reference.
(3) Filed on April 8, 1988 as an exhibit to Form 8-K (No. 1-5620) and
incorporated herein by reference.
(4) Filed on March 29, 1991 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(5) Filed on December 13, 1991 as an exhibit to Form 8-K (No. 1-5620)
and incorporated herein by reference.
(6) Filed on March 30, 1992 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(7) Filed on March 31, 1993 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(8) Filed on April 9, 1993 as an exhibit to Form 8 Amendment to Form 10-
K (No. 1-5620) and incorporated herein by reference.
(9) Filed on October 22, 1993 as an exhibit to Form 8-K (No. 1-5620) and
incorporated herein by reference.
(10) Filed on November 15, 1993 as an exhibit to Form 10-Q (No. 1-5620)
and incorporated herein by reference.
(11) Filed on March 30, 1994 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(12) Filed on August 15, 1994 as an exhibit to Form 10-Q (No. 1-5620)
and incorporated herein by reference.
(13) Filed on October 17, 1994 as an exhibit to Form 8-K (No. 1-5620)
and incorporated herein by reference.