UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 5, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-20022
POMEROY COMPUTER RESOURCES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1227808
- -------- ----------
(State or jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
1020 Petersburg Road, Hebron, KY 41048
--------------------------------------
(Address of principal executive offices)
(606) 586-0600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days.
YES X NO
--- ---
The number of shares of common stock outstanding as of August 06, 2000 was
12,190,301.
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POMEROY COMPUTER RESOURCES, INC.
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements: Page
----
Consolidated Balance Sheets as of 3
January 5, 2000 and July 5, 2000
Consolidated Statements of Income for 5
the Three Months Ended July 5, 1999 and
2000
Consolidated Statements of Income for 6
the Six Months Ended July 5, 1999 and
2000
Consolidated Statements of Cash Flows 7
for the Six Months Ended July 5, 1999
and 2000
Notes to Consolidated Financial 8
Statements
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of
Operations
Part II. Other Information 14
SIGNATURE 16
2 of 16
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, July 5,
2000 2000
----------- --------
ASSETS
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,737 $ 78
Accounts receivable:
Trade, less allowance of $504 and $428 at January 5, 2000
and July 5, 2000, respectively . . . . . . . . . . . . . 129,882 147,208
Vendor receivables, less allowance of $1,902 and $1,952 at
January 5, 2000 and July 5, 2000, respectively . . . . . 55,347 42,373
Net investment in leases. . . . . . . . . . . . . . . . . . 14,937 23,073
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,495 2,667
----------- --------
Total receivables . . . . . . . . . . . . . . . . . . 202,661 215,321
----------- --------
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . 38,858 36,615
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,819 4,952
----------- --------
Total current assets. . . . . . . . . . . . . . . . . 247,075 256,966
----------- --------
Equipment and leasehold improvements . . . . . . . . . . . . . 25,276 27,568
Less accumulated depreciation. . . . . . . . . . . . . . . . . 9,804 11,890
----------- --------
Net equipment and leasehold improvements. . . . . . . 15,472 15,678
----------- --------
Net investment in leases . . . . . . . . . . . . . . . . . . . 29,183 31,344
Goodwill and other intangible assets . . . . . . . . . . . . . 39,344 39,983
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 2,067 2,122
----------- --------
Total assets. . . . . . . . . . . . . . . . . . . . . $ 333,141 $346,093
=========== ========
See notes to consolidated financial statements.
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POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, July 5,
2000 2000
----------- --------
LIABILITIES & EQUITY
Current liabilities:
Current portion of notes payable . . . . . . . . . . . . . . . . $ 11,337 $ 18,440
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 92,454 81,910
Bank notes payable . . . . . . . . . . . . . . . . . . . . . . . 69,027 58,779
Other current liabilities. . . . . . . . . . . . . . . . . . . . 13,131 13,426
----------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . 185,949 172,555
----------- --------
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,971 15,890
Equity:
Preferred stock (no shares issued or outstanding). . . . . . . . - -
Common stock (11,843 and 12,123 shares issued and outstanding
at January 5, 2000 and July 5, 2000, respectively). . . . . . 118 121
Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . 66,743 70,276
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . 73,682 87,573
----------- --------
140,543 157,970
Less treasury stock, at cost (31 shares at January 5, 2000 and
July 5, 2000) . . . . . . . . . . . . . . . . . . . . . . . . 322 322
----------- --------
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . 140,221 157,648
----------- --------
Total liabilities and equity. . . . . . . . . . . . . . . . . $ 333,141 $346,093
=========== ========
See notes to consolidated financial statements.
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POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Three Months Ended
--------------------
July 5, July 5,
1999 2000
--------- ---------
Net sales and revenues . . . . . . . . $186,848 $220,910
Cost of sales and service. . . . . . . 163,140 191,387
--------- ---------
Gross profit. . . . . . . . . 23,708 29,523
--------- ---------
Operating expenses:
Selling, general and administrative 11,258 13,017
Rent expense. . . . . . . . . . . . 696 764
Depreciation. . . . . . . . . . . . 702 1,159
Amortization. . . . . . . . . . . . 692 1,017
Provision for doubtful accounts . . 46 100
--------- ---------
Total operating expenses. . . 13,394 16,057
--------- ---------
Income from operations . . . . . . . . 10,314 13,466
--------- ---------
Other expense (income):
Interest expense. . . . . . . . . . 865 903
Miscellaneous . . . . . . . . . . . (16) (60)
--------- ---------
Total other expense . . . . . 849 843
--------- ---------
Income before income tax. . . . . . 9,465 12,623
Income tax expense. . . . . . . . . 3,785 5,018
--------- ---------
Net income. . . . . . . . . . . . . $ 5,680 $ 7,605
========= =========
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . 11,697 12,077
========= =========
Diluted . . . . . . . . . . . . . . 11,791 12,240
========= =========
Earnings per common share:
Basic . . . . . . . . . . . . . . . $ 0.49 $ 0.63
========= =========
Diluted . . . . . . . . . . . . . . $ 0.48 $ 0.62
========= =========
See notes to consolidated financial statements.
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POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Six Months Ended
-------------------
July 5, July 5,
1999 2000
--------- ---------
Net sales and revenues . . . . . . . . $350,772 $432,488
Cost of sales and service. . . . . . . 304,205 376,188
--------- ---------
Gross profit. . . . . . . . . 46,567 56,300
--------- ---------
Operating expenses:
Selling, general and administrative 22,621 25,824
Rent expense. . . . . . . . . . . . 1,402 1,557
Depreciation. . . . . . . . . . . . 1,797 2,183
Amortization. . . . . . . . . . . . 1,315 1,929
Provision for doubtful accounts . . 46 100
--------- ---------
Total operating expenses. . . 27,181 31,593
--------- ---------
Income from operations . . . . . . . . 19,386 24,707
--------- ---------
Other expense (income):
Interest expense. . . . . . . . . . 1,650 1,831
Miscellaneous . . . . . . . . . . . (45) (109)
--------- ---------
Total other expense . . . . . 1,605 1,722
--------- ---------
Income before income tax. . . . . . 17,781 22,985
Income tax expense. . . . . . . . . 7,033 9,094
--------- ---------
Net income. . . . . . . . . . . . . $ 10,748 $ 13,891
========= =========
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . 11,691 11,980
========= =========
Diluted . . . . . . . . . . . . . . 11,820 12,188
========= =========
Earnings per common share:
Basic . . . . . . . . . . . . . . . $ 0.92 $ 1.16
========= =========
Diluted . . . . . . . . . . . . . . $ 0.91 $ 1.14
========= =========
See notes to consolidated financial statements.
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POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Six Months Ended
--------------------
July 5, July 5,
1999 2000
--------- ---------
Cash Flows from Operating Activities:
Net cash flows used in operating activities. $ (8,685) $ (5,114)
Cash Flows from Investing Activities:
Capital expenditures . . . . . . . . . . . . (1,489) (1,815)
Acquisition of assets, net of cash acquired. (1,082) (2,430)
--------- ---------
Net investing activities. . . . . . . . . . . . (2,571) (4,245)
--------- ---------
Cash Flows from Financing Activities:
Net borrowings (payments) on bank notes payable 17,308 (10,248)
Net borrowings (payments) on notes payable. . . (5,164) 14,413
Proceeds from exercise of stock options . . . . 296 3,535
--------- ---------
Net financing activities . . . . . . . . . . 12,440 7,700
--------- ---------
Increase (decrease) in cash . . . . . . . . . . 1,184 (1,659)
Cash:
Beginning of period. . . . . . . . . . . . . 3,962 1,737
--------- ---------
End of period. . . . . . . . . . . . . . . . $ 5,146 $ 78
========= =========
See notes to consolidated financial statements.
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POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Except as disclosed herein, there has been no material change in the
information disclosed in the notes to consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended
January 5, 2000. In the opinion of management, all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of the
interim period have been made. The results of operations for the six-month
period ended July 5, 2000 are not necessarily indicative of the results
that may be expected for future interim periods or for the year ending
January 5, 2001.
2. Cash and Bank Notes Payable
The Company maintains a sweep account with its bank whereby daily cash
receipts are automatically transferred as a payment towards the Company's
credit facility. As a result, the Company maintains minimal cash in its
bank account. At January 5 and July 5, 2000, bank notes payable include
$19.1 million and $15.6 million, respectively, of overdrafts in accounts
with a participant bank to the Company's credit facility. These amounts
were subsequently funded through the normal course of business.
3. Accounts Receivable
Reclassification have been made to the January 5,2000 consolidated balance
sheets included herein to conform with the presentation used as of July 5,
2000.
4. Earnings per Common Share
The following is a reconciliation of the number of shares used in the basic
EPS and diluted EPS computations: (in thousands, except per share data)
Three Months Ended July 5,
----------------------------------
1999 2000
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ -------- ------ --------
Basic EPS 11,697 $ 0.49 12,077 $ 0.63
Effect of dilutive
Stock options 94 (0.01) 163 (0.01)
------ -------- ------ --------
Diluted EPS 11,791 $ 0.48 12,240 $ 0.62
====== ======== ====== ========
Six Months Ended July 5,
----------------------------------
1999 2000
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ -------- ------ --------
Basic EPS 11,691 $ 0.92 11,980 $ 1.16
Effect of dilutive
Stock options 129 (0.01) 208 (0.02)
------ -------- ------ --------
Diluted EPS 11,820 $ 0.91 12,188 $ 1.14
====== ======== ====== ========
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5. Supplemental Cash Flow Disclosures
Supplemental disclosures with respect to cash flow information and non-cash
investing and financing activities are as follows: (in thousands)
Six Months Ended July 5,
----------- -----------
1999 2000
----------- -----------
Interest paid $ 1,668 $ 1,885
=========== ===========
Income taxes paid $ 555 $ 9,755
=========== ===========
Adjustments to purchase price
of acquisition assets $ 1,740 $ -
=========== ===========
Business combinations accounted for
as purchases:
Assets acquired $ 2,601 $ 5,643
Liabilities assumed 973 3,063
Notes payable 546 150
----------- -----------
Net cash paid $ 1,082 $ 2,430
=========== ===========
6. Related Parties
A director of the Company is president of Information Leasing Corporation
("ILC"). In the first quarter of fiscal 2000, the Company sold certain
leases to ILC for $5.0 million.
7. Litigation
There are various legal actions arising in the normal course of business
that have been brought against the Company. Management believes these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
8. Segment Information
Summarized financial information concerning the Company's reportable
segments is shown in the following table. During the second quarter of
fiscal 1999, depreciation expense associated with TIFS's operating leases
was reclassified under cost of sales.
(in thousands)
Three Months Ended July 5, 1999
----------------------------------------------
Products Services Leasing Consolidated
--------- --------- --------- -------------
Revenues $ 160,787 $ 25,145 $ 916 $ 186,848
Income from operations 5,391 4,610 313 10,314
Total assets 201,101 48,720 27,302 277,123
Capital expenditures 240 240 53 533
Depreciation and amortization 1,246 329 (181) 1,394
Three Months Ended July 5, 2000
----------------------------------------------
Products Services Leasing Consolidated
--------- --------- --------- -------------
Revenues $ 185,708 $ 33,328 $ 1,874 $ 220,910
Income from operations 4,559 8,524 383 13,466
Total assets 222,322 63,349 60,422 346,093
Capital expenditures 665 142 - 807
Depreciation and amortization 1,684 397 95 2,176
9 of 16
Six Months Ended July 5, 1999
----------------------------------------------
Products Services Leasing Consolidated
--------- --------- --------- -------------
Revenues $ 301,586 $ 47,400 $ 1,786 $ 350,772
Income from operations 9,271 9,457 658 19,386
Total assets 201,101 48,720 27,302 277,123
Capital expenditures 782 462 245 1,489
Depreciation and amortization 2,425 637 50 3,112
Six Months Ended July 5, 2000
----------------------------------------------
Products Services Leasing Consolidated
--------- --------- --------- -------------
Revenues $ 363,744 $ 63,493 $ 5,251 $ 432,488
Income from operations 8,478 14,533 1,696 24,707
Total assets 222,322 63,349 60,422 346,093
Capital expenditures 1,616 199 - 1,815
Depreciation and amortization 3,196 751 165 4,112
9. Subsequent Events
The Company's credit facility with DFS expired on July 14, 2000 and the
Company signed a ninety-day extension agreement with DFS under the same
terms as the original credit facility. This extension will expire October
14, 2000. Additionally on July 14, 2000, the Company signed an engagement
letter and fee letter with a managing agent for a $300 million credit
facility. The proposed facility will be syndicated to multiple banks and
financial institutions. The proposed facility consists of a $60
million distribution finance facility, a $50 million term loan, a $50
million acquisition facility and a $140 million revolving credit facility.
Although there are can be no assurances that the Company will be able to
finalize this new credit facility, the Company currently anticipates that
an agreement will be reached.
On July 28, 2000, the Company acquired Datanet, Inc., a Raleigh, North
Carolina-based Information Technology Company. The acquisition will be
accounted for as a purchase and was not significant with respect to the
Company's consolidated financial statements. The purchase price will be
allocated to the assets and liabilities based upon their estimated value as
of the date of acquisition. The results of operations from this acquisition
will be included in the consolidated statement of income from the date of
acquisition.
10 of 16
Special Cautionary Notice Regarding Forward-Looking Statements
--------------------------------------------------------------
Certain of the matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contain certain
forward looking statements regarding future financial results of the Company.
The words "expect," "estimate," "anticipate," "predict," and similar expressions
are intended to identify forward-looking statements. Such statements are
forward-looking statements for purposes of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
the Company's expectations are disclosed in this document including, without
limitation, those statements made in conjunction with the forward-looking
statements under "Management's Discussion and Analysis of Financial Condition
and Results of Operations". All written or oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by such
factors.
POMEROY COMPUTER RESOURCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TOTAL NET SALES AND REVENUES. Total net sales and revenues increased $34.1
million, or 18.2%, to $220.9 million in the second quarter of fiscal 2000 from
$186.8 million in the second quarter of fiscal 1999. This increase was
attributable to an increase in sales to existing and new customers. In
particular, the increase in network integration services revenue. Products and
leasing sales increased $25.9 million, or 16.0%, to $187.6 million in the second
quarter of fiscal 2000 from $161.7 million in the second quarter of fiscal 1999.
Service revenues increased $8.2 million, or 32.7%, to $33.3 million in the
second quarter of fiscal 2000 from $25.1 million in the second quarter of fiscal
year 1999.
Total net sales and revenues increased $81.7 million, or 23.3%, to $432.5
million in the first half of fiscal 2000 from $350.8 million in the first half
of fiscal 1999. This increase was attributable to an increase in sales to
existing and new customers. Products and leasing sales increased $65.6 million,
or 21.6%, to $369.0 million in the first half of fiscal 2000 from $303.4 million
in the first half of fiscal 1999. Service revenues increased $16.1 million, or
34.0%, to $63.5 million in the first half of fiscal 2000 from $47.4 million in
the first half of fiscal year 1999.
GROSS MARGINS. Gross margin increased to 13.4% in the second quarter of fiscal
2000 as compared to 12.7% in the second quarter of fiscal 1999. This increase
in gross margin resulted primarily from the increase in higher-margin service
revenues. In particular, the increase in network integration services revenue.
Service revenues increased to 15.1% of total net sales and revenues in the
second quarter of fiscal 2000 compared to 13.4% of total net sales and revenues
in the second quarter of fiscal 1999. Service gross margin increased to 50.7% of
total gross margin in the second quarter of fiscal 2000 from 42.6% in the second
quarter of fiscal 1999. This increase in the percentage of service gross margin
to total gross margin was primarily due to the increase in higher-margin service
revenues. Factors that may have an impact on gross margin in the future include
the further decline of unit prices, the percentage of equipment or service sales
with lower-margin customers, the ratio of service revenues to total net sales
and revenues, and personnel utilization rates.
Gross margin decreased to 13.0% in the first half of fiscal 2000 as compared to
13.3% in the first half of fiscal 1999. This decrease in gross margin resulted
primarily from the Company's decision to obtain new business and increase sales
by aggressively pricing certain products and services in the first quarter of
fiscal 2000. Service revenues increased to 14.7% of total net sales and
revenues in the first half of fiscal 2000 compared to 13.5% of total net sales
and revenues in the first half of fiscal 1999. Service gross margin increased to
48.1% of total gross margin in the first half of fiscal 2000 from 42.7% in the
first half of fiscal 1999. This increase in the percentage of service gross
margin to total gross margin was primarily due to the increase in higher-margin
service revenues. Factors that may have an impact on gross margin in the future
include the further decline of unit prices, the percentage of equipment or
service sales with lower-margin customers, the ratio of service revenues to
total net sales and revenues, and personnel utilization rates.
11 of 16
OPERATING EXPENSES. Selling, general and administrative expenses (including
rent expense) expressed as a percentage of total net sales and revenues
decreased to 6.3% in the second quarter of fiscal 2000 from 6.4% in the second
quarter of fiscal 1999. This decrease is primarily due to the growth in net
sales and revenues exceeding the growth in selling, general and administrative
expenses. Total operating expenses expressed as a percentage of total net sales
and revenues increased to 7.3% in the second quarter of fiscal 2000 from 7.2% in
the second quarter of fiscal 1999 due to the increase in depreciation expense
and amortization expense as a result of acquisitions.
Selling, general and administrative expenses (including rent expense) expressed
as a percentage of total net sales and revenues decreased to 6.4% in the first
half of fiscal 2000 from 6.8% in the first half of fiscal 1999. This decrease is
primarily due to the growth in net sales and revenues exceeding the growth in
selling, general and administrative expenses. Total operating expenses expressed
as a percentage of total net sales and revenues decreased to 7.3% in the first
half of fiscal 2000 from 7.7% in the first half of fiscal 1999 due to the reason
noted above and offset by the increases in depreciation and amortization
expenses.
INCOME FROM OPERATIONS. Income from operations increased $3.2 million, or
31.1%, to $13.5 million in the second quarter of fiscal 2000 from $10.3 million
in the second quarter of fiscal 1999. The Company's operating margin increased
to 6.1% in the second quarter of fiscal 2000 as compared to 5.5% in the second
quarter of fiscal 1999. This increase is primarily due to the increase in the
Company's gross margin.
Income from operations increased $5.3 million, or 27.3%, to 24.7 million in the
first half of fiscal 2000 from $19.4 million in the first half of fiscal 1999.
The Company's operating margin increased to 5.7% in the first half of fiscal
2000 as compared to 5.5% in the first half of fiscal 1999. This increase is
primarily due to the increase in net sales and revenues.
INTEREST EXPENSE. Interest expense remained constant at $0.9 million in the
second quarter of fiscal 2000 and fiscal 1999.
Interest expense increased $0.1 million, or 5.9%, to $1.8 million in the first
half of fiscal 2000 from $1.7 million in the first half of fiscal 1999. This
increase is primarily due to the Company's overall increase in debt borrowings
in the first quarter of fiscal 2000.
INCOME TAXES. The Company's effective tax rate was 39.8% in the second quarter
of fiscal 2000 compared to 40.0% in the second quarter of fiscal 1999.
The Company's effective tax rate was 39.6% in the first half of fiscal 2000 and
fiscal 1999.
NET INCOME. Net income increased $1.9 million, or 33.3%, to $7.6 million in the
second quarter of fiscal 2000 from $5.7 million in the second quarter of fiscal
1999 due to the factors described above.
Net income increased $3.1 million, or 28.7%, to $13.9 million in the first half
of fiscal 2000 from $10.8 million in the first half of fiscal 1999 due to the
factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities was $5.1 million in the first half of fiscal
2000. Cash used in investing activities was $4.2 million which included $1.8
million for capital expenditures and $2.4 million for acquisitions completed in
fiscal 1999. Cash provided by financing activities was $7.7 million which
included $14.4 million of net borrowings on notes payable, $3.5 million from the
exercise of stock options and $10.2 million of net payments on bank notes
payable.
A significant part of the Company's inventories is financed by floor plan
arrangements with third parties. At July 5, 2000, these lines of credit totaled
$72.0 million, including $60.0 million with Deutsche Financial Services ("DFS")
and $12.0 million with IBM Credit Corporation ("ICC"). Borrowings under the DFS
floor plan arrangements are made on thirty-day notes. Borrowings under the ICC
floor plan arrangements are made on either thirty-day or sixty-day notes. All
such borrowings are secured by the related inventory.
12 of 16
Financing on substantially all of the arrangements is interest free due to
subsidies by manufacturers. Overall, the average rate on these arrangements is
less than 1.0%. The Company classifies amounts outstanding under the floor
plan arrangements as accounts payable.
The Company's financing of receivables is provided through a portion of its
credit facility with DFS. The credit facility provides a credit line of $80.0
million for accounts receivable financing. The accounts receivable portion of
the credit facility carries a variable interest rate based on the prime rate
less 125 basis points. At July 5, 2000, the amount outstanding was $58.8
million, including $15.6 million of overdrafts on the Company's books in
accounts at a participant bank on the credit facility, which was at an interest
rate of 8.25%. The overdrafts were subsequently funded through the normal course
of business. The credit facility is collateralized by substantially all of the
assets of the Company, except those assets that collateralize certain other
financing arrangements. Under the terms of the credit facility, the Company is
subject to various financial covenants.
During the first half of fiscal 2000, the Company increased the leasing activity
through its wholly-owned leasing subsidiary, TIFS. This increased leasing
activity during the first half of fiscal 2000 resulted in $18.3 million in
increased net borrowings under the Company's notes payable. The funding of the
Company's net investment in sales-type leases is provided by various financial
institutions on a nonrecourse basis. Further increases in leasing operations
could impact one or more of total net sales and revenues, gross margin,
operating income, net income, total debt and liquidity, depending on the amount
of leasing activity and the types of leasing transactions.
The Company's credit facility with DFS expired on July 14, 2000 and the Company
signed a ninety-day extension agreement with DFS under the same terms as the
original credit facility. This extension will expire October 14, 2000.
Additionally on July 14, 2000, the Company signed an engagement letter and fee
letter with a managing agent for a $300 million credit facility. The proposed
facility will be syndicated to multiple banks and financial institutions.
The proposed facility consists of a $60 million distribution finance
facility, a $50 million term loan, a $50 million acquisition facility and a $140
million revolving credit facility. Although there are can be no assurances
that the Company will be able to finalize this new credit facility, the Company
currently anticipates that an agreement will be reached.
The Company believes that the anticipated cash flow from operations and current
financing arrangements will be sufficient to satisfy the Company's capital
requirements for the next twelve months. Historically, the Company has financed
acquisitions using a combination of cash, earn outs, shares of its Common Stock
and seller financing. The Company anticipates that future acquisitions will be
financed in a similar manner.
13 of 16
POMEROY COMPUTER RESOURCES, INC.
PART II - OTHER INFORMATION
Items 1 to 3 None
Item 4 Submission of Matters to a Vote of Security Holders
On June 8, 2000, the Company held its annual meeting of stockholders
for the following purposes:
1. To elect six directors, and;
2. To approve an increase in the number of authorized shares of
Common Stock, $0.01 par value, from 15,000,000 to 20,000,000,
and;
3. To approve an increase in the number of shares of common stock
reserved for issuance under the Company's 1992 Non-Qualified
and Incentive Stock Option Plan from 2,350,000 shares to
3,500,000.
The voting on the above matters by the stockholders was as follows:
Matter For Withheld
------ --- --------
Election of Directors:
----------------------
David B. Pomeroy, II 9,599,282 1,818,172
Stephen E. Pomeroy 10,879,989 537,465
Michael E. Rohrkemper 10,891,372 526,082
James H. Smith, III 10,887,492 529,962
William H. Lomicka 10,885,372 532,082
Vincent D. Rinaldi 10,885,472 531,982
Approve an increase in the number of
Authorized shares of Common Stock, 11,052,336 352,651
0.01 par value, from 15,000,000 to
20,000,000 shares
Holders of 12,467 shares abstained from voting on the forgoeing proposal. The
number of shares voted in favor of the proposal was sufficient for its passage.
Approve an increase in the number of
Shares of common stock reserved for
issuance under the Company's 1992
Non-Qualified and Incentive Stock Option
Plan from 2,350,000 to 3,500,000 shares 6,145,824 2,387,429
Holders of 61,469 shares abstained from voting and there were 2,822,732 shares
of Broker Non-Votes on the forgoeing proposal. The number of shares voted in
favor of the proposal was sufficient for its passage.
Item 5 None
Item 6 Exhibits and Reports on Form 8-K
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(a) Exhibits
- --------------
3(i) Articles of Incorporation
Certificate of Incorporation of Pomeroy
(a)(1) Certificate of Incorporation of Pomeroy
Computer Resources, Inc., dated
February 1992.
(a)(2) Certificate of Amendment to Certificate
of Incorporation, dated July 1997.
(a)(3) Certificate of Designations of Series A
Junior Participating Preferred Stock of
Pomeroy Computer Resources, Inc.,
February 1998.
(a)(4) Certificate of Amendment to Certificate
of Incorporation, dated August 2000.
10(i) Material Agreements
(jj)(1) The Asset purchase agreement dated
July 3, 2000 by, between and among
Pomeroy Computer Resources, Inc.,
Pomeroy Select Integration Solutions,
Inc., Datasource Systems Corporation
dba Datasource Hagen and
Datasource Systems Marketing
Corporation, and Roar Lund.
(jj) (2) Employment Agreement by and
between Pomeroy Computer
Resources, Inc. and Roar Lund, dated
July 3, 2000.
(jj) (3) Noncompetition Agreement by and
between Datasource Systems
Corporation and Pomeroy Computer
Resources, Inc.
(jj) (4) Noncompetition Agreement by and
between Datasource Systems
Corporation and Pomeroy Select
Integration Solutions, Inc.
(jj) (5) Noncompetition Agreement by and
between Roar Lund and Pomeroy
Computer Resources, Inc.
(jj) (6) Noncompetition Agreement by and
between Roar Lund and Pomeroy Select
Integration Solutions, Inc.
11 Computation of Earnings per Share
27 Financial Data Schedules
(b) Reports on Form 8-K None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POMEROY COMPUTER RESOURCES, INC.
--------------------------------
(Registrant)
Date: August 11, 2000 By: /s/ Stephen E. Pomeroy
--------------------------------
Stephen E. Pomeroy
Chief Financial Officer and
Chief Accounting Officer
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