COMPUCOM SYSTEMS INC - 10-K Annual Report

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UNITED STATES
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, 1997 Commission File Number 0-14371
- ------------------------------------------- ------------------------------

COMPUCOM SYSTEMS, INC.
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(Exact name of Registrant as specified in its charter)

DELAWARE 38-2363156
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

7171 FOREST LANE, DALLAS, TX 75230
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (972) 856-3600
----------------------

Securities registered pursuant to Section 12(b) of the Act: NONE
----------------------

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $.01 PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----

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. [_____]

The aggregate market value of the Common Stock, $.01 par value, held by non-
affiliates (based on the closing price on NASDAQ) on March 16, 1998 was
approximately $192.8 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
stockholder that has informed Registrant by March 16, 1998 that it is the
beneficial owner of 10% or more of the outstanding common stock of Registrant.

The number of shares of the Registrant's Common Stock outstanding as of March
16, 1998 was 46,144,320 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement relative to the May 14, 1998 annual
meeting of stockholders of registrant, to be filed within 120 days after the end
of the year covered by this report on Form 10-K, are incorporated by reference
into Items 10, 11, 12 and 13 (Part III) of this Report. Such Proxy Statement,
except for the parts therein which have been specifically incorporated by
reference, shall not be deemed "filed" for the purposes of this report on Form
10-K.

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PART I
------

ITEM 1 BUSINESS
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INTRODUCTION

Founded in 1987, CompuCom Systems, Inc., together with its subsidiaries
("CompuCom" or "the Company"), is a leading provider of network integration
services to large- and medium-sized businesses throughout the United States.
CompuCom helps Fortune 1000 companies manage information technology to achieve
their business goals by providing a wide range of services in provisioning,
support and technology management. Product and services are sold by a direct
sales force to over 3,500 business customers through 41 sales and service
centers located in and serving large metropolitan areas nationwide. Through its
majority-owned subsidiary, ClientLink, Inc. ("ClientLink"), the Company offers
software application development services. ClientLink designs, develops and
implements customized information technology solutions for organizations with
mission-critical business processing needs.

The Company is an authorized dealer of major distributed desktop computer
products, networking and related products, computer-related peripheral equipment
and software for a number of manufacturers, including Compaq Computer
Corporation ("Compaq"), International Business Machines Corporation ("IBM"),
Hewlett-Packard Company ("HP"), Toshiba America Information Systems ("Toshiba"),
Intel Corporation ("Intel"), and Microsoft Corporation ("Microsoft"). To
further meet the needs of its customers, CompuCom provides a variety of services
including LAN/WAN project services, consulting, asset tracking, network
management, help desk, field engineering, configuration, software management,
distribution, and procurement utilizing network applications such as Novell
Netware, Windows NT, Windows and Windows 95, and IBM OS/2 Warp.

Net revenues for the Company have grown at a compounded rate of 22% over
the past five years, while net earnings have grown by 37% compounded annually
over the same period. Excluding an after-tax nonrecurring gain of $3.4 million
in 1997, net earnings over that period have grown at a compounded rate of 34%.
The Company believes its revenue and net earnings performance is a result of the
Company's continued focus on customer satisfaction, along with the enhancement
and growth of its services capabilities created by a strategy of growth through
existing operations and strategic acquisitions. The Company's target customers
are becoming increasingly dependent on information technology to compete
effectively in today's markets. As a result, the decision-making process that
organizations face when planning, selecting and implementing technology
solutions is becoming more complex and requires many of these organizations to
outsource the management and support of their technology needs.

The Company operates primarily in one industry segment -- sales and
services of distributed desktop computer products, configuration, network
integration and technology support services to businesses nationwide -- and no
separate industry segment information is presented.

RECENT DEVELOPMENTS

Recently, the Company's industry has been undergoing a significant
consolidation and transformation. The Company believes this is due mainly to the
gain in market share of direct marketers and currently anticipates that this
trend will accelerate in 1998.

On March 19, 1998, the Company announced it had signed a nonbinding letter
of intent with Computer Integration Corporation ("CIC") relating to a potential
all-cash acquisition of CIC. Under the proposed terms of the letter of intent,
CompuCom would pay CIC a total of $17.25 million which would be used to pay
certain obligations of CIC and purchase all of CIC's outstanding preferred stock
and common stock.

This document contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 regarding revenues,
margins, operating expenses, earnings, growth rates and certain business trends
that are subject to risks and uncertainties that could cause actual results to
differ materially from the results described herein. Recipients of this
document are cautioned to consider these risks and uncertainties and to not
place undue reliance on these forward-looking statements. See "Operations",
"Products", "Network and Technology Services", "Principal Suppliers",
"Dependence Upon Major Vendors and Other Suppliers" and "Competition" in this
Item and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II, Item 7 of this report for a discussion of
important factors that could affect the validity of any such forward-looking
statement.

2

Sales and Marketing

The Company markets its product procurement, configuration, field
engineering, network management, help desk services and technology management
services primarily through its direct sales force and service personnel,
operating through 41 sales and service centers. The Company focuses on meeting
the business objectives of large corporate businesses, which accounted for the
majority of the Company's net revenue in 1997. However, no one customer
accounted for in excess of 10% of such revenues. Order backlog is not considered
to be a meaningful indicator of the Company's future business prospects due to
the short order fulfillment cycle.

The Company is generally authorized by various vendors to sell desktop
computer products through its sales centers, which are located in major
metropolitan areas in order to provide convenient access for sales and service
personnel to a significant customer base. Each location typically is staffed by
direct sales representatives, support personnel, system engineers and
technicians who are authorized to repair and maintain Compaq, IBM, HP and
certain other manufacturers' products. As of December 31, 1997, the Company
employed approximately 335 full-time direct sales representatives. The sales
force is compensated with a base salary and commissions based on gross margin.

The Company provides support to its customers primarily through the
CompuCom Customer Center ("customer center") located in Dallas, Texas. Customer
center personnel, called inside sales representatives ("ISRs"), may be assigned
to specific customer accounts or to customers in a certain geographical area and
are knowledgeable about computer technology. Each ISR works closely with the
customer and the CompuCom sales representative to keep up-to-date on the
business needs of that customer, and to provide the customer with information
about product availability, services, pricing, shipping and invoicing via a
toll-free telephone number. The primary goal of the customer center is to
provide greater support to the Company's customers while allowing the Company's
direct sales force to focus on soliciting new business and providing the
necessary support for the customer's more complex service needs. At the end of
1997, the Company employed approximately 423 customer center personnel, of whom
approximately 308 worked at the customer center in Dallas, and approximately 115
worked on-site at certain customer locations.

During 1997, net service revenue increased 39% from 1996 levels due to the
Company's continued efforts to increase sales of services to meet customer needs
and to improve profitability. Service revenues for the Company have grown at a
compounded annual rate of 62% over the past three years due to the Company's
strategic efforts. These on-going efforts included: the development of
additional service offerings; additional training was provided for system
engineers; management provided greater support to the services group; additional
corporate resources were allocated to support the services group; and the
compensation plan of sales representatives placed greater emphasis on sales of
services. In addition, the Company emphasized the hiring of quality service
personnel, increasing the number of its service employees from approximately 800
at the beginning of 1995 to over 2,000 by year-end 1997. To further enhance its
service growth, the Company employs an ongoing program in which college
graduates are hired and placed in various engineering training and certification
programs. At the completion of these programs, they are added to the Company's
billable workforce. Through the Company's various efforts, revenues from its
services business have grown to currently represent 12% of its total revenues,
up from 9% in 1996, and 7% in 1995. The Company's services business is an
integral part of the Company's strategy to provide customers with the value-
added service solutions to meet their technology needs.

During 1996, in order to meet customers' global business needs, the Company
helped to create GlobalServe, an alliance of international computer service
suppliers. The objective of the GlobalServe alliance is to provide customers a
single point of contact for accessing the distributed desktop computer products
and services they need worldwide.

3

OPERATIONS

The Company's corporate headquarters and operations campus is located in
Dallas, Texas. As of the fourth quarter of 1997 almost all the Company's
financial and administrative functions, including the customer center,
information services, service support, marketing, human resources, product
services and finance, were located in the two buildings that comprise this
facility.

The Company's integrated information systems ("IS") utilize client/server
distributed relational database technology running on a proactively managed wide
area network based on frame relay technology. The system contains five major
components: the Distribution Information Management System, the Service
Information Management System, the Customer Center System, the Warehouse
Information Management System, and the Financial Information Management System.
Four of these five IS systems operate on mini-computer platforms which afford
the Company maximum system reliability, availability, and growth capacity.

To further enhance the quality and efficiency of its information systems,
the Company has developed a state-of-the-art data warehouse, which increases the
ease with which Company personnel can access historic information and create
customized customer and vendor reports. During 1997, the Company continued to
make significant enhancements to its data warehouse by implementing additional
Internet-based capabilities. Customers are now provided the ability to create
custom-priced quotations for new orders from an Internet-based catalog of
products and place orders over the Internet. Customers may also look up
previously purchased items using either the product serial number or the
customer's "asset tag", which the Company places on products at the customer's
request. Customers may also directly access order status and shipment history
over the Internet. Other improvements include enhanced product sales
information, reporting for principal vendors and real time open call status
reporting for service customers. In 1997, "datamarts", which allow the
definition and creation of download-able data files over the Internet, were made
available to both customers and Company personnel. The Company's comprehensive
Intranet application was significantly enhanced during 1997. Accessible only to
Company personnel, the Intranet provides rapid access to Company organization
charts, policies, procedures and other corporate information and has a user-
friendly query interface to locate answers to frequently asked questions.

During 1997 the Company implemented the first portions of a comprehensive
customer management and event tracking system to be used by Company personnel.
This new system is active in the customer center and is being expanded during
1998 into the product services, credit and collections, remote help desk and
service dispatch areas. This new system also provides the Company with a
unified customer issue and activity tracking capability and improved
interdepartmental communications regarding customer support.

The Company continues to expand its new Sales Force Automation ("SFA")
package, which provides Company sales representatives access to e-mail and key
Company applications from remote locations, allowing them to spend more time
with customers and improve productivity. During 1998, all service engineers
will gain access to the SFA tools which have proven very valuable to the sales
force over the last year. Service engineers will also be able to directly
report time and activities from remote locations using special wireless
communications features expected to be added in 1998. The Company expects these
new capabilities will significantly improve engineer productivity and enhance
customer service levels.

The Company's two distribution centers are highly automated and employ
advanced inventory management and order processing technologies that allow the
Company to configure desktop products and receive, process and ship customer
orders accurately and efficiently. The Company operates a 300,000 square foot
facility in Paulsboro, New Jersey, and a 104,000 square foot facility in
Stockton, California. Each of these facilities contains configuration centers
which the Company expects to be sufficient for the implementation of its
vendors' channel assembly programs. Channel assembly refers to manufacturing
programs that are designed to empower resellers to provide custom-built brand-
name desktop components at competitive prices. The Company has been selected by
Compaq, HP and IBM to be a participant in the development and implementation of
each of their final assembly programs. The distribution centers also utilize
hand-held, radio frequency devices to stock, pick and update the status and
location of inventory. These devices play a key role in enabling the Company to
efficiently handle increasing volume and are used in the daily cycle counting
process, which the Company believes has resulted in improved overall inventory
integrity and bin accuracy.

The Company's distribution, configuration, return merchandise and product
services departments are ISO 9002 certified. ISO 9002 is part of the ISO 9000
set of standards developed by the International Organization of Standardization
("ISO"), which represent common international business quality standards
designed to help demonstrate the capability of a supplier to control the
processes that determine the acceptability of the product being delivered.

4

PRODUCTS

The Company provides procurement services for sophisticated technologies
consisting of distributed desktop computer products, peripherals, software and
services to its customers. It is an authorized dealer of Compaq, HP, IBM,
Intel, Microsoft and Toshiba as well as other major manufacturers and software
suppliers. The Company sources over 5,000 different desktop products,
components and accessories, consisting of leading as well as alternative brands.

CompuCom provides the integration of a variety of manufacturers' products
into various desktop system configurations to meet customers' individual needs.
The Company provides value to its customers by allowing them to choose products
or components from various manufacturers that best suit their desktop and
network needs as opposed to manufacturers' direct sales organizations which
typically configure or market desktop systems that include products only from
that particular manufacturer.

NETWORK AND TECHNOLOGY SERVICES

The Company continues to focus on expanding its presence in the service
market. This commitment is reflected in the increase in its service personnel.
As of December 31, 1997, the Company employed over 2,000 service personnel,
including system engineers, network engineers, and field engineers, compared to
approximately 800 as of the beginning of 1995. These service personnel provide
configuration, field engineering, network management, help desk services and
technology management to the Company's customers.

CompuCom maintains two configuration centers, one in each of the Company's
distribution centers. These centers contain configuration systems that have
the ability to set up and configure product that includes both standard and
nonstandard components or software to enable the Company to meet increasing
customer demand for advanced system and network configuration technologies.
The Company's configuration centers also have the capability to perform its
vendors' channel assembly programs.

Through its field engineering group, the Company provides hardware
maintenance services ranging from simple desktop repairs, installations, moves,
adds, and changes to complex network repairs, application setups and software
upgrades. These services are provided through the Company's sales and service
centers and are performed based upon the specific customer needs, such as on-
site support, warranty support, change and upgrade management, contracted
response or time and material.

CompuCom's Systems Management Group focuses on the development, testing
and implementation of enterprise management systems. The systems management
service offerings include: network audits, which consist of an on-site detailed
analysis of the current configuration and health of the customer's network
environment; network control center design, which includes building a network
control center at the customer's location; and remote network monitoring of the
customer's network performed by CompuCom's network control center located at
the Company's headquarters in Dallas, Texas.

CompuCom offers help desk support through its Remote Help Desk Services
located at the Company's headquarters in Dallas, Texas and at customer
locations. These help desk services offer information systems departments the
skills and resources needed to design, implement and operate a consolidated,
resolution-oriented help desk to support a customer's information technology
investments. CompuCom's help desk services include call management, problem
management and event tracking. The Company's help desk support group consists
of personnel with expertise in software applications, network operating systems
and hardware, who provide technical support to end-users and system
administrators. The help desk support group also has access to a "solutions
database" to help solve common problems.

The Company has reorganized its consulting and system engineering groups
and has formed a National Consulting Group that is intended to create a
nationwide consistency of service offerings. The newly formed group offers
technology management services by providing LAN/WAN project and consulting
services that focus on the integration of new and existing computing
technologies into existing corporate computing environments. These services
include strategic planning, technology briefings, systems analysis, system
design services, technology selection and design of support infrastructures. By
combining the expertise of its consultant personnel with strategic manufacturer
partnerships, the Company will be able to provide solutions for complex network
integration projects. The National Consulting Group also will provide an
improved career path for the Company's service engineers, conduct sales
training to help identify customer opportunities for consulting, and provide a
way for the Company to architect solutions for customers in migration planning,
project management, help desk and overall enterprise systems management.

5

PRINCIPAL SUPPLIERS

A major portion of the Company's revenues are derived from sales of
distributed desktop computer products including Compaq, IBM and HP products.
The Company's agreements with these vendors contain provisions providing for
periodic renewals and permitting termination by the vendor without cause,
generally upon 30 to 90 days written notice, depending upon the vendor. Since
1987, Compaq, IBM and HP have regularly renewed their respective dealer
agreements with the Company, although there can be no assurance that the
regular renewals of the Company's dealer agreements will continue. The
termination, or nonrenewal, of the Company's Compaq, IBM or HP dealer
agreements, could materially adversely affect the Company's business. The
Company, however, is not aware of any reason for the termination, or
nonrenewal, of any of those dealer agreements and believes that its
relationships with Compaq, IBM and HP are satisfactory.

The Company purchases products from Compaq, IBM and HP at pricing levels
that the Company believes are the lowest prices available to those vendors'
respective dealers, with the exception of special bid pricing for specific
large customer accounts. All of the Company's principal suppliers require that
the Company purchase certain minimum volumes of products in a specified period
to maintain favorable pricing levels. The Company also obtains favorable terms
and incentives from Compaq, IBM and HP by participating in certain vendor
programs offered by those suppliers. The Company has certain selling,
promotional and related expenses reimbursed by vendors under dealer programs
offered by those and other suppliers. However, there can be no assurance that
any of these programs will continue in 1998 or that the Company will continue
to participate in any of these programs at the same level as in 1997.

Sales of Compaq, IBM and HP products accounted for approximately 32%, 19%
and 14%, respectively, of the Company's 1997 net revenues compared to 31%, 15%
and 12%, respectively, in 1996 and 28%, 16% and 11%, respectively, in 1995.

The Company has been selected as a participant in the Compaq, IBM, and HP
channel assembly programs. To date, these programs have not been utilized in a
significant portion of the Company's shipments, but the Company expects these
programs to be utilized in a larger proportion of its shipments during 1998.
The objective of channel assembly programs is to achieve cost savings through
lower finished goods inventory, higher inventory turns and lower price
protection requirements and passing such cost savings on to the customer,
minizing the direct marketers' pricing advantage. The Company believes that
being able to effectively utilize its vendors' channel assembly programs will
play an important role in its competitiveness and future financial performance.

Due to the rapid delivery requirements of its customers and to assure
itself of a continuous allotment of products from suppliers, the Company
maintains adequate levels of inventory funded through its credit facilities and
vendor credit. The Company's major suppliers at times provide price protection
programs to the Company that are intended to reduce the risk of inventory
devaluation by absorbing temporary price reductions and long-term price
declines associated with aging product life cycles. The Company also has the
option of returning a certain percentage of its current product inventories
each quarter to these principal suppliers as it assesses each product's current
and forecasted demand schedule. If such returns exceed certain specified
levels, the Company may be charged restocking fees ranging up to 5%. The
Company did not incur any significant restocking fees in 1997 and expects
returns to decrease upon implementation of its vendors' channel assembly
programs.

DEPENDENCE UPON MAJOR VENDORS AND OTHER SUPPLIERS

The Company is dependent upon the continued supply of products and
components from its suppliers, particularly Compaq, IBM and HP. Historically,
certain suppliers occasionally experience shortages of select product that
render components unavailable or necessitate product allocations among
resellers. While certain shortages existed throughout 1997, the Company
believes the product availability issues are a result of the present dynamics
of the desktop computer industry as a whole, which include shortened product
life cycles and increased frequency of new product introductions into the
marketplace. While there can be no assurance that product unavailability or
product allocations, or both, will not increase in 1998, the impact of such an
interruption is not expected to be unduly troublesome due to the breadth of
alternative product lines available to the Company.

6

COMPETITION

The Company's industry is characterized by intense competition, primarily
in the areas of price, product availability and breadth of product line. Many
established desktop computer manufacturers (including some of the Company's own
vendors), direct marketers, systems integrators and other resellers of
distributed desktop or networking products including Entex Information Services,
Inc., InaCom Corp., Microage, Inc., and Vanstar Corporation, compete with the
Company in the configuration and distribution of computer systems and equipment.
In the past, direct marketers have had a distinct pricing advantage over
resellers such as CompuCom. In response to the increased competition,
particularly from direct marketers, a number of the Company's competitors have
sought to increase their market share through acquisitions. The Company expects
that the pace of consolidation in the industry will accelerate in 1998. In order
to keep pace with its primary competitors and to leverage its channel assembly
capabilities, the Company expects to pursue additional acquisitions. In order to
help combat the direct marketers' pricing advantage, the Company and its major
vendors are in the process of developing and implementing channel assembly
programs. The Company believes that being a participant in its vendors' channel
assembly programs will give it both a marketing and pricing advantage over its
reseller competitors who have not been chosen to participate. In the highly
fragmented computer services area, the Company competes with several larger
competitors, other corporate resellers pursuing high-end services opportunities,
as well as smaller computer services companies. Some of these competitors have
financial, technical, manufacturing, sales, marketing and other resources that
are substantially greater than those of the Company. Although the Company
believes it currently competes favorably within the desktop computer industry,
there can be no assurance that the Company will be able to continue to compete
successfully with new or existing competition.

The Company's product margins increased in 1997 as compared to 1996, due in
part to the Company's effort to reduce low-margin product business. The Company
believes that gross margins will continue to be reactive to industry-wide
changes and pricing strategies. Future profitability will depend on the
Company's ability to retain and hire quality service personnel while effectively
managing the utilization of such personnel. It will also depend on increased
focus on providing technical service and support to customers, product demand,
competition, manufacturer product availability and pricing strategies, effective
utilization of vendor programs, the Company's ability to successfully manage the
channel assembly programs of its major vendors, as well as the Company's control
of operating expenses.

THE COMPANY'S EMPLOYEES

The Company employed approximately 4,300 full-time employees as of December
31, 1997. The Company offers its full-time employees health, long-term
disability, dental and life insurance benefits and has a 401(k) plan for
eligible employees. None of the Company's employees are represented by a union,
and the Company considers its employee relations to be good.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
- ----------------------------------------------------------------------------

The Company does not have any foreign operations nor does it engage in any
material export sales.

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 the
Registrant."

7

Item 2 PROPERTIES
- ------ ----------

The Company's principal executive and administrative offices are located on
a 20 acre campus-type setting consisting of two buildings containing
approximately 250,000 square feet of office space in Dallas, Texas. The Company
purchased this facility during 1996, refurbished it, and fully occupied the
facility by the end of 1997. One of the buildings is an eight-story structure
and contains executive offices, marketing, customer center, finance, purchasing,
human resources, and the Company's Dallas sales office. An adjoining three-story
building contains the Company's information systems group and its remote help
desk personnel. The Company completed the sale of its former headquarters
building during the fourth quarter of 1997.

In late 1994, the Company leased approximately 50,000 square feet of
additional office space in Dallas near its headquarters, for a term of 60 months
commencing March 1995. During 1997, the Company relocated the functions that
were in this leased facility to the Company's headquarters and operations
campus. Subsequently, the Company was able to sublet this office space to a
third party for a term coinciding with the Company's lease term, which expires
in February 2000.

The Company distributes products primarily from two leased warehouse
facilities. In August 1996, the Company entered into a lease for approximately
300,000 square feet of warehouse space located in Paulsboro, New Jersey, which
has a five-year term, with a cancellation option exercisable at any time after
August 1999. This new facility doubled warehouse space and contains a state-of-
the-art 90,000 square foot configuration center, which tripled the Company's
configuration capacity, allowing the Company to meet increasing customer demand
for advanced system and network technologies and provides adequate space for
channel assembly. Its western distribution center has approximately 104,000
square feet of leased warehouse space in Stockton, California, under a lease
that expires in May 1999, with a cancellation option exercisable in May of each
year.

The Company also has noncancelable operating leases for its sales and
service centers, expiring at various dates between 1998 and 2004. See Note 12
to the accompanying Notes to Consolidated Financial Statements for additional
information regarding lease costs. The Company believes there will be no
difficulty in negotiating the renewal of its real property leases as they expire
or in finding other satisfactory space. In the opinion of management, the
properties are in good condition and repair and are adequate for the particular
operations for which they are used.

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 and results of
operations, taken as a whole.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------

None have been submitted in the fourth quarter 1997.

8

PART II
-------

Item 5 MARKET FOR REGISTRANT'S COMMON STOCK
- ------ ------------------------------------

The Company's common stock is listed on the NASDAQ National Market (Symbol:
CMPC). As of December 31, 1997, there were approximately 10,000 beneficial
holders of the Company's common stock. The high and low sales prices reported
within each quarter for the years ended December 31, 1997 and 1996 are as
follows:

1997 1996
---------------------- ---------------------
High Low High Low
------- ------- ------- -------

First quarter $11.13 $4.00 $ 9.63 $6.25

Second quarter 7.88 5.75 13.88 8.13

Third quarter 11.00 6.25 12.25 7.13

Fourth quarter 10.88 8.25 12.38 8.00

The last sale price reported for the Company's common stock on March 16,
1998 was $8.81.

The Company has historically reinvested earnings in the growth of its
business and has not paid cash dividends on its common stock. In addition, the
Company's current credit facilities restrict the amount of dividends the Company
may pay on its common stock.

9

Item 6 SELECTED FINANCIAL DATA
- ------ -----------------------

Selected financial data for the Company is presented below:

For the Years Ended December 31,
---------------------------------------------------------------------------
Operating Results 1997 1996 1995 1994 1993
- ----------------- ---------- ---------- ---------- ---------- ----------
(in thousands, except per share amounts)

Net revenues $1,949,802 $1,995,191 $1,441,597 $1,255,813 $1,015,482

Gross margin 267,545 240,963 174,908 141,693 127,875

Earnings before income taxes 58,658 * 50,616 ** 34,335 24,432 18,908

Net earnings 35,194 * 30,471 ** 20,670 14,659 11,439

Earnings per common share:
Basic .75 * .66 ** .54 .43 .37
Diluted .71 * .61 ** .45 .34 .29

Balance Sheet Data
- ------------------

Total assets $ 462,590 $ 692,985 $ 508,704 $ 429,531 $ 365,071

Long-term debt 97,400 236,450 120,364 118,974 107,316

Convertible subordinated notes 3,000 3,000 3,000 18,214 17,880

Stockholders' equity 210,200 171,098 138,341 94,368 55,730

* Includes nonrecurring gains on prepayment of secured note related to sale
of subsidiary in 1994 of $1.0 million and gain on sale of Company's
former headquarters of $2.4 million or $.07 per share (Basic and Diluted)
** Includes nonrecurring gain on sale of securities of $5.2 million (Basic -
$.12 per share, Diluted - $.10 per share)

10

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------ -----------------------------------------------------------------------
OF OPERATIONS
-------------

RESULTS OF OPERATIONS

The following table presents the Company's total revenue, gross margin and
gross margin percentage by revenue source. Operating expenses, financing
expenses, nonrecurring gains, income taxes and net earnings are shown as a
percentage of total net revenue for the three years ended December 31:

1997 1996 1995
-----------------------------------
($ in millions)
Revenue:
Product $1,700 $1,817 $1,334
Service 236 169 101
Other 14 9 6
===================================
Total revenue $1,950 $1,995 $1,441
===================================

Gross margin:
Product $ 176 $ 181 $ 141
Service 84 56 31
Other 7 4 3
===================================
Total gross margin $ 267 $ 241 $ 175
===================================

Gross margin percentage:
Product 10.4% 10.0% 10.6%
Service 35.7% 33.3% 30.5%
Other 48.8% 39.2% 51.2%
-----------------------------------
Total gross margin percentage 13.7% 12.1% 12.1%
-----------------------------------

Operating expenses:
Selling 4.0% 4.0% 4.3%
Service 2.5% 2.0% 1.5%
General and administrative 3.1% 2.8% 2.6%
Depreciation and amortization 0.6% 0.5% 0.4%
-----------------------------------
Total operating expenses 10.2% 9.3% 8.8%
-----------------------------------

Earnings from operations 3.5% 2.8% 3.3%

Financing expenses (0.8%) (0.7%) (0.9%)
Nonrecurring gains 0.3% 0.4%
-----------------------------------

Earnings before income taxes 3.0% 2.5% 2.4%

Income taxes 1.2% 1.0% 1.0%
-----------------------------------

Net earnings 1.8% 1.5% 1.4%
===================================

11

1997 COMPARED TO 1996
---------------------

Product revenue, which is primarily derived from the sale of distributed
desktop computer products to corporate customers, declined 7% to $1.70 billion
in 1997 from $1.82 billion in 1996. Although the Company shipped more desktop,
laptop and server units in 1997 compared to 1996, the units were sold at a lower
average sales price primarily due to manufacturer price reductions, which
contributed to the overall decrease in product revenue. In addition, the Company
believes the product revenue decline is attributable to an increase in direct
marketers' market share and the Company's effort during much of 1997 to improve
product margins by reducing its low-margin product business. The Company
currently plans to grow revenue in 1998 through an acquisition strategy designed
to increase its presence in certain geographical markets and through the hiring
of additional sales representatives.

Product gross margin as a percentage of product net revenue increased to
10.4% in 1997 from 10.0% in 1996. This increase is primarily due to the
Company's effort to reduce its low-margin product business, and an increase in
the amount of manufacturer-sponsored incentives in 1997 compared to 1996. Future
product margins will be influenced by competitive pressures from other resellers
in the industry and direct marketers, manufacturers' pricing strategies, the
Company's ability to successfully manage the channel assembly programs of its
major vendors, and the level of low-margin sales. The Company participates in
certain manufacturer-sponsored programs designed to increase sales of specific
products. These programs, excluding volume incentive programs and specific
product rebates offered by certain manufacturers, are not material when compared
to the Company's overall financial results. Due to the short order fulfillment
cycle, the Company's backlog is not considered to be a meaningful indicator of
future business prospects.

Service revenue increased 39% to $236 million in 1997 from $169 million in
1996. Service revenue is primarily derived from LAN/WAN projects, consulting,
asset tracking, network management, help desk, field engineering, procurement,
configuration, distribution and software management. Service revenue reflects
revenue generated by the actual performance of specific services and does not
include product sales associated with service projects. The increase in service
revenue reflects the Company's continued focus on growing the service business.
Also contributing to the revenue growth in service was the increase in the
number of units sold during 1997 as compared to 1996, which increased demand for
services such as configuration and installation. Service gross margin as a
percentage of service net revenue increased to 35.7% in 1997 from 33.3% in 1996,
primarily due to improved utilization of the Company's service personnel and
growth in the Company's higher-end service offerings, such as systems
engineering and consulting, which typically have higher margins than some of the
Company's other services.

As a percentage of net revenue, operating expenses for 1997 increased to
10.2% compared to 9.3% in 1996. On an absolute dollar basis, operating expenses
for 1997 increased approximately $15 million compared to 1996. These increases
are attributed to increases in service operating expenses, general and
administrative expenses and depreciation expense. Selling expenses decreased
due to the decline in product sales, but remained flat as a percentage of net
revenue when compared to 1996. Service expenses increased both as a percentage
of net revenue and in absolute dollars as a result of the growth in the
Company's service business. Service revenue represented 12% of total revenue in
1997 as compared to 8% in 1996. However, the Company's efforts to control
expenses resulted in a decrease in service expense as a percentage of service
revenue to 21.0% in 1997 as compared to 23.5% in 1996. General and
administrative expenses increased both in dollars and as a percentage of net
revenues. These increases are mainly due to the continued investment in the
Company's information system resources required to broaden the Company's
electronic commerce capabilities and improve efficiency within the Company's
customer center. The Company's operating expenses are reported net of
reimbursements by certain manufacturers for specific training, promotional and
marketing programs. These reimbursements offset the expenses incurred by the
Company.

Depreciation and amortization expense increased in absolute dollars and as
a percentage of net revenue for 1997. These increases primarily reflect
depreciation of enhancements to the Company's information systems, facility
improvements associated with the Company's new headquarters and operations
campus and furniture and fixtures required to support business activity.

Financing expenses remained relatively flat in dollars when 1997 is
compared to 1996, but increased slightly as a percentage of revenue due to the
decrease in revenues. The Company's borrowing levels were slightly higher in
1997 as compared to 1996; however, these higher levels were offset by a lower
effective interest rate for 1997 due to changes the Company made in its
financing arrangements. The Company's effective interest rate for 1997 was 6.7%
as compared to 7.1% for 1996.

(continued)
12

During the third quarter of 1997, the Company recognized a previously
deferred nonrecurring after-tax gain of $1.0 million. Recognition of the gain
was due to the prepayment of a secured note related to the 1994 sale of the
Company's former subsidiary, PC Parts Express, Inc. (now known as PC Service
Source, Inc.).

During the fourth quarter of 1997, the Company recognized a nonrecurring
after-tax gain of $2.4 million on the sale of the Company's former headquarters.

During the second quarter of 1996, the Company participated in the
secondary stock offering of PC Service Source, Inc. resulting in an after-tax,
nonrecurring gain on the sale of securities of $5.2 million.

As a result of the factors discussed above, net earnings, excluding the
nonrecurring gains in 1997 and 1996, increased 26% to $31.8 million in 1997
from $25.2 million in 1996. The earnings per share impact of the 1997
nonrecurring gains was $.07 on a diluted basis, while in 1996, the earnings per
share impact of the nonrecurring gain was $.10 on a diluted basis. Future
profitability will depend on the Company's ability to retain and hire quality
service personnel while effectively managing the utilization of such personnel.
It will also depend on increased focus on providing technical service and
support to customers, demand for product, competition, manufacturer product
availability and pricing changes, effective utilization of vendor programs, the
Company's ability to successfully manage the implementation and operation of the
channel assembly programs of its major vendors, as well as the Company's control
of operating expenses.

1996 COMPARED TO 1995
---------------------

Product revenue increased 36% to $1.82 billion in 1996 compared to $1.33
billion in 1995. The increase in product revenue reflected the Company's
efforts in establishing new relationships with several large customers during
the year, as well as higher demand for distributed computing technologies. The
strong product results also reflect the advancements the Company made in
customer procurement systems, data warehouse queries and Web-based order
statusing, which reduced customers' overall procurement costs.

Product gross margin as a percentage of product net revenue decreased to
10.0% in 1996 from 10.6% in 1995. The Company experienced lower product margins
principally due to pricing to win new business and increased pricing pressures
from competition.

Service revenue increased 68% to $169 million in 1996 from $101 million in
1995. The increase in service revenue reflected the Company's continued focus
on expanding its network and technology services at competitive prices to meet
increased customer demand for the Company's value-added desktop network
services, as well as the full year impact of various small service acquisitions
which occurred during 1995. Service gross margin as a percentage of service net
revenue increased to 33.3% in 1996 from 30.5% in 1995, primarily due to
increased productivity of the Company's service engineers and improved
management of spare parts inventory.

As a percentage of net revenue, operating expenses for 1996 increased to
9.3% compared to 8.8% in 1995, to support the continued revenue growth and
expansion of the service business. On an absolute dollar basis, operating
expenses increased approximately $56 million, primarily due to the continued
investment in the Company's service business and information systems
enhancements. Selling expenses, as a percentage of net revenue, decreased when
compared to 1995 primarily due to the fixed component of expense being spread
over higher volume and increased sales productivity. Service expenses, which
increased both as a percentage of net revenue and in absolute dollars, primarily
reflect costs related to the infrastructure, established starting in 1995,
necessary to manage and expand the service business. General and administrative
expenses increased due to the continued investment in the Company's information
system resources required to enhance customer satisfaction particularly through
data warehousing, improved customer procurement systems, enhanced reporting for
the service business, and expenses related to its campus recruiting program.

Depreciation and amortization expense increased in absolute dollars and as
a percentage of net revenue for 1996 as compared to 1995. The dollar increase
is primarily related to facility improvements and warehouse equipment for the
Company's eastern distribution facility opened during the third quarter of 1996,
enhancements to the Company's information systems, and furniture and fixtures
required to support business activity.

(continued)
13

Financing expenses decreased as a percentage of net revenue for 1996 as
compared to 1995, but increased in absolute dollars by $2.5 million, primarily
due to increased borrowing to support the significant revenue growth, partially
offset by a lower effective interest rate resulting from new financing
arrangements, and redemption in October 1995 of the Company's $18.5 million 9%
Convertible Subordinated Notes ("Notes"). The Notes were converted into 8.4
million shares of the Company's common stock resulting in savings of
approximately $1.7 million annually.

During the second quarter of 1996, the Company participated in the
secondary stock offering of PC Service Source, Inc. resulting in an after-tax,
nonrecurring gain on the sale of securities of $5.2 million.

As a result of the factors discussed above, net earnings increased 47% to
$30.4 million in 1996 from $20.7 million in 1995. Excluding the nonrecurring
gain, net earnings increased 22% to $25.2 million.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1997 was $235 million compared to $342
million at December 31, 1996. The decrease is primarily a result of
modifications to the Company's financing arrangements made during 1997. The
Company was required to account for $175 million of its financing as "off-
balance-sheet" financing in accordance with Statement of Financial Accounting
Standards No. 125; this had the effect of reducing A/R and long-term debt.
Although the Company's working capital decreased in dollar terms from December
31, 1996, the Company's working capital ratio increased to 2.6 in 1997 from 2.2
in 1996. This increase was primarily due to a significant reduction in accounts
payable, as the Company took advantage of early-pay discount programs offered by
certain of its vendors.

The Company's capital asset requirements are generally funded through
financing arrangements and internally generated funds. As of December 31, 1997,
the Company's financing arrangements consist of a $175 million Securitization
Facility, a $125 million working capital facility and a $25 million real estate
loan (collectively, the "Credit Agreements"). The term of the Credit
Agreements is five years. The $25 million real estate loan is payable as
follows: the first quarterly payment of $500,000 is due on April 1, 1999,
quarterly payments increase to $1,000,000 on January 1, 2000, and then increase
to $2,000,000 on January 1, 2001, with a final payment of $3,500,000 due on
November 2, 2002. The Company is currently evaluating other permanent financing
options for the real estate loan.

The Company's business is not capital asset intensive, and capital
expenditures in any year normally would not be significant in relation to the
overall financial position of the Company. Capital expenditures were
approximately $22 million in 1997 as compared to $42 million in 1996. The
majority of the 1997 expenditures were related to facility improvements to
prepare the Company's new headquarters and operations campus for occupancy, as
well as information systems enhancements. The majority of the $42 million in
1996 was for the purchase of the headquarters and operations campus and
improvements to the Company's eastern distribution center. The refurbishment of
the Company's new headquarters and operations campus was substantially completed
by December 31, 1997, and the Company expects capital expenditures to return to
more normal levels in 1998.

On March 19, 1998, the Company announced it had signed a nonbinding letter
of intent with Computer Integration Corporation ("CIC") relating to a potential
all-cash acquisition of CIC. Under the proposed terms of the letter of intent,
CompuCom would pay CIC a total of $17.25 million which would be used to pay
certain obligations of CIC and purchase all of CIC's outstanding preferred stock
and common stock. It is currently anticipated that, if the transaction is
consummated on the proposed terms, approximately $12.95 million would be paid to
common stockholders approximately $10.20 million (or $0.726 per share) in cash
at the closing of the transaction and the remaining $2.75 million (or $0.196 per
share) in an interest-bearing escrow fund. Any amount remaining in the escrow
fund after the payment of certain potential post-closing adjustments would be
paid to common stockholders approximately one year after closing.

(continued)

14

IMPACT OF YEAR 2000 ISSUE

The Year 2000 issue results from the fact that many computer programs were
previously written using two digits rather than four to define the applicable
year. Programs written in this way may recognize a date ending in "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing business delays and disruptions of operations. At this
time, the Company has completed initial assessment of its implemented computer
systems, including its desktop computers, networks and servers, as well as its
core internal information systems. The Company's core information systems
include warehouse management, distribution, service dispatch, service parts,
engineer billing, and financial information systems. This assessment has
included the identification of each hardware, software, tool, and package that
comprise these systems to determine whether or not they support Year 2000 date
codes. The Company plans to complete remediation for those that are not
currently in compliance and to begin testing all of its systems in 1998. The
Company also reviews each of its new potential hardware and software purchases
to ensure they are Year 2000 compliant. The Company has developed a step-by-step
plan which details the tasks, deliverables, resources, and target dates
necessary to monitor the Company's information systems at the turn of the
century and beyond. This validation plan also includes the availability of a
test team that will test the Company's information systems on an on-going basis
to further validate that additions or modifications to any of the Company's
systems do not create Year 2000 compliance issues. As a reseller of computer
products, the Company only passes through to its customers the applicable
vendor's warranties; it makes no warranties regarding Year 2000 compliance on
any of the products it resells. At present, the Company does not anticipate that
its business will be adversely affected by Year 2000 compliance issues. The
total cost and time which will be incurred by the Company associated with the
impact of Year 2000 compliance currently has not been determined with certainty,
but the Company believes that Year 2000 compliance will not result in a material
adverse effect on its financial condition or results of operations.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------

The consolidated financial statements and schedule filed with this report
appear on pages F-2 through F-19, and are listed on page F-1.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

None.

15

PART III
--------

Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------

The executive officers of the Company as of March 16, 1998 are as follows:

Name Age Position
---- --- --------

Edward Anderson /(1)/ 51 President and Chief Executive Officer

Daniel F. Brown /(2)/ 52 Executive Vice President, Sales

William D. Barry /(3)/ 39 Executive Vice President and Chief Operating Officer

M. Lazane Smith /(4)/ 43 Senior Vice President, Finance and Chief Financial Officer

/(1)/ Mr. Anderson has served as President and Chief Executive Officer since
January 1994. Mr. Anderson joined the Company in August 1993 as Chief
Operating Officer and has been a Director of the Company since 1993.
Prior to joining the Company, he held the position of President and Chief
Operating Officer of Computerland Corporation from 1989 until 1993.

/(2)/ Mr. Brown has held the position of Executive Vice President, Sales since
February 1989, when he was promoted from Vice President, Sales, a
position he had held since joining the Company in 1987. Mr. Brown has
been a Director of the Company since 1990.

/(3)/ Mr. Barry has held the position of Executive Vice President and Chief
Operating Officer since February 1998, when he was promoted from Senior
Vice President of Operations. Mr. Barry joined CompuCom in 1987 as a
sales representative, and has held positions as a branch general manager
and then a regional vice president, until being named Senior Vice
President of Operations in August 1997.

/(4)/ Ms. Smith has held the position of Senior Vice President, Finance and
Chief Financial Officer since February 1997. Ms. Smith joined the Company
in 1993 as Corporate Controller and was promoted to Vice President
Finance and Corporate Controller in 1994. Prior to joining the Company,
she held the position of Vice President Finance of Score Group, Inc. from
1992 to 1993.

16

Directors

The Company incorporates by reference the information contained under the
caption "ELECTION OF DIRECTORS" in its definitive Proxy Statement relative to
its May 14, 1998 annual meeting of stockholders, 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 "Section 16(a) Beneficial Ownership Reporting Compliance" in its
definitive Proxy Statement relative to its May 14, 1998 annual meeting of
stockholders, 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 1934, as amended.

ITEM 11 EXECUTIVE COMPENSATION
- ------- ----------------------

The Company incorporates by reference the information contained under the
captions "Directors' Compensation" and "Executive Compensation" in its
definitive Proxy Statement relative to its May 14, 1998 annual meeting of
stockholders, 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 1934, 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 14, 1998 annual meeting of
stockholders, 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 1934, as amended.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------

The Company incorporates by reference the information contained under the
caption "Certain Transactions" in its definitive Proxy Statement relative to its
May 14, 1998 annual meeting of stockholders, 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 1934, as amended.

17

PART IV
-------

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------

(a) Financial Statements and Schedules.

The financial statements and financial statement schedule filed with this
report are listed on page F-1.

(b) Reports on Form 8-K.

Company Press Release filed on December 8, 1997 as Current Report on Form
8-K announcing that ClientLink, Inc., a subsidiary of the Company, has filed a
registration statement with the Securities and Exchange Commission for an
initial public offering of shares of its common stock.

(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.

18

Exhibit
No. Description
- ------- -----------

3(a) Certificate of Incorporation of CompuCom Systems, Inc. (1) (Exhibit B)

3(b) Certificate of Amendment of the Certificate of Incorporation of
CompuCom Systems, Inc. (4) (Exhibit 3(b))

3(c) Certificate of Amendment of the Certificate of Incorporation of
CompuCom Systems, Inc., filed November 30, 1992 (6) (Exhibit 4(c))

3(d) Certificate of Amendment of the Certificate of Incorporation of
CompuCom Systems, Inc., filed July 1, 1993 (6) (Exhibit 4(d))

3(e) Bylaws of CompuCom Systems, Inc., revised April 1, 1991 (4) (Exhibit
3(c))

4(a) Form of Stock Certificate evidencing Common Stock, $.01 par value, of
CompuCom Systems, Inc. (2) (Exhibit 4(b))

4(b)** CompuCom Systems, Inc. 1983 Stock Option Plan, as amended (5) (Exhibit
4(k))

4(c)** CompuCom Systems, Inc. 1993 Stock Option Plan, as amended (15) (Exhibit
A)

4(d)** CompuCom Systems, Inc. 1984 Non-Qualified Stock Option Plan, as amended
(3) (Exhibit 4(g))

4(e)** CompuCom Systems, Inc. Stock Option Plan for Directors (10) (Exhibit
4(g))

4(f)** Stock Option Agreement dated July 21, 1995 between CompuCom Systems,
Inc. and Delbert W. Johnson (10) (Exhibit 4(i))

4(g) Certificate of Designation dated March 31, 1994, establishing Series B
Cumulative Convertible Preferred Stock of CompuCom Systems, Inc. (8)
(Exhibit 4(i))

4(h) Form of Stock Certificate evidencing Series B Cumulative Convertible
Preferred Stock, $.01 par value, of CompuCom Systems, Inc. (9) (Exhibit
4(h))

4(i) $3 Million Subordinated Convertible Note dated October 31, 1995 from
CompuCom Systems, Inc. to Network Compatibility Group, Inc. (11)
(Exhibit 4(k))

10(a)** CompuCom Systems, Inc. 401(k) Matched Savings Plan, as amended and
restated effective January 1, 1989 (7) (Exhibit 10(a))

10(b)** Amendment 1996-1 to CompuCom Systems, Inc. 401(k) Matched Savings Plan,
effective May 1, 1996 (12) (Exhibit 10.9)

10(c) Amended and Restated Agreement for Inventory Financing, dated September
20, 1996, between CompuCom Systems, Inc. and IBM Credit Corporation
(14) (Exhibit 10(d))

10(d) IBM Credit Corporation agreement with CompuCom Systems, Inc. to extend
the terms of the Agreement for Inventory Financing to March 20, 1998. *

10(e) Security Agreement for Wholesale Financing, dated December 27, 1993,
between CompuCom Systems, Inc. and Compaq Computer Corporation (7)
(Exhibit 10(e))

10(f) Intercreditor Agreement, dated December 27, 1993, among NationsBank of
Texas, N.A., CompuCom Systems, Inc., and Compaq Computer Corporation
(7) (Exhibit 10(f))

19

Exhibit
No. Description
- ------- -----------

10(g) Subordination Agreement, dated August 22, 1994, among Hewlett-Packard
Company, NationsBank of Texas, N.A., and IBM Credit Corporation,
pertaining to certain assets of CompuCom Systems, Inc. (9) (Exhibit
10(h))

10(h) Intercreditor Agreement, dated as of April 1, 1996, among NationsBank
of Texas, N.A., CompuCom Systems, Inc. and IBM Credit Corporation (12)
(Exhibit 10.4)

10(i) Credit Agreement, dated as of September 26, 1996, between NationsBank
of Texas, N.A. and CompuCom Systems, Inc. (exhibits and schedules
omitted) (13) (Exhibit 10.1)

10(j) Amended and Restated Master Security Agreement and Administration
Agreement, dated as of September 25, 1996, among CompuCom Systems,
Inc., NationsBank of Texas, N.A., CSI Funding, Inc. and Enterprise
Funding Corporation (exhibits omitted) (13) (Exhibit 10.2)

10(k) Amendment No. 1 to Amended and Restated Master Security Agreement and
Administration Agreement, dated as of December 5, 1996, among CompuCom
Systems, Inc., NationsBank of Texas, N.A.,CSI Funding, Inc. and
Enterprise Funding Corporation (exhibits omitted) (14) (Exhibit 10(k))

10(l) Receivables Purchase Agreement, dated as of April 1, 1996, between
CompuCom Systems, Inc. and CSI Funding, Inc. (exhibits omitted) (12)
(Exhibit 10.6)

10(m) First Amendment to Receivables Purchase Agreement, dated as of
September 25, 1996, between CompuCom Systems, Inc. and CSI Funding,
Inc. (exhibits omitted) (13) (Exhibit 10.3)

10(n) Amendment No. 2 to Receivables Purchase Agreement, dated as of April 1,
1997, between CompuCom Systems, Inc. and CSI Funding, Inc. (exhibits
omitted) (17) (Exhibit 10.2)

10(o) Transfer and Administration Agreement, dated as of April 1, 1996, among
CSI Funding, Inc., CompuCom Systems, Inc., Enterprise Funding
Corporation and NationsBank, N.A. (exhibits omitted) (12) (Exhibit
10.7)

10(p) First Amendment to Transfer and Administration Agreement, dated as of
September 25, 1996, among CSI Funding, Inc., CompuCom Systems, Inc.,
Enterprise Funding Corporation and NationsBank, N.A. (exhibits omitted)
(13) (Exhibit 10.4)

10(q) Amendment No. 2 to Transfer and Administration Agreement, dated as of
December 5, 1996, among CSI Funding, Inc., CompuCom Systems, Inc.,
Enterprise Funding Corporation and NationsBank, N.A. (exhibits omitted)
(14) (Exhibit 10(p))

10(r) Amendment No. 3 to Transfer and Administration Agreement, dated as of
February 1, 1997, among CSI Funding, Inc., CompuCom Systems, Inc.,
Enterprise Funding Corporation and NationsBank, N.A. (exhibits omitted)
(16) (Exhibit 10.1)

10(s) Amendment No. 4 to Transfer and Administration Agreement, dated as of
April 1, 1997, among CSI Funding, Inc., CompuCom Systems, Inc.,
Enterprise Funding Corporation and NationsBank, N.A. (exhibits omitted)
(17) (Exhibit 10.1)

10(t) Amended and Restated Credit Agreement, dated as of November 3, 1997,
among CompuCom Systems, Inc., certain lenders party hereto, and
NationsBank of Texas, N.A., as administrative lender (exhibits and
schedules omitted) *

10(u) Amended and Restated Receivables Purchase Agreement, dated as of
November 3, 1997, between CompuCom Systems, Inc. and CSI Funding, Inc.
(exhibits omitted) *

20

Exhibit
No. Description
- ------- -----------

10(v) Amended and Restated Transfer and Administration Agreement, dated as of
November 3, 1997, among CSI Funding, Inc., CompuCom Systems, Inc.,
Enterprise Funding Corporation and NationsBank, N.A. (exhibits omitted)
*

10(w) Business Partner Agreement, dated September 15, 1994, between IBM
Corporation and CompuCom Systems, Inc., with Dealer Profile, Remarketer
General Terms, and attachments (9) (Exhibit 10(n))

10(x) IBM Corporation Remarketer Announcement, dated March 13, 1996,
modifying its Business Partner Agreement with CompuCom Systems, Inc. to
automatically extend its term for an additional 12 months upon its
expiration (14) (Exhibit 10(r))

10(y) Agreement for participation in the IBM Business Partner - PC,
Authorized Assembler Program, dated January 16, 1997 between IBM
Corporation and CompuCom Systems, Inc. *

10(z) Agreement to extend participation in the IBM Business Partner - PC,
Authorized Assembler Program, dated November 18, 1997 between IBM
Corporation and CompuCom Systems, Inc. to December 31, 1998 *

10(aa) U.S. Reseller Agreement, dated January 23, 1993, between Compaq
Computer Corporation and CompuCom Systems, Inc. (7) (Exhibit 10(l))

10(bb) Software License Agreement, dated January 15, 1998, between Compaq
Computer Corporation and CompuCom Systems, Inc. *

10(cc) Channel Installation Agreement for Microsoft Products, dated January
15, 1998, between Compaq Computer Corporation and CompuCom Systems,
Inc. *

10(dd) U.S. Reseller Agreement, dated March 1, 1996, between Hewlett-Packard
Company and CompuCom Systems, Inc. (12) (Exhibit 10.8)

10(ee) U.S. Agreement for Authorized Reseller Participation in Channel
Assembly Program, dated March 1, 1997, between Hewlett-Packard Company
and CompuCom Systems, Inc. *

10(ff) Administrative Services Agreement, dated January 1, 1988, between
CompuCom Systems, Inc. and Safeguard Scientifics, Inc., with Letter
Amendment dated as of April 1, 1991 (4) (Exhibit 10(z))

10(gg) Lease dated May 16, 1996, between CompuCom Systems, Inc. and The Riggs
National Bank of Washington, D.C. for premises at 1225 Forest Parkway,
Paulsboro, New Jersey (exhibits omitted) (13) (Exhibit 10.8)

10(hh) Ratification Agreement dated January 9, 1992 between CompuCom Systems,
Inc. and The Arch Street Group with respect to assignment of Lease
dated November 1, 1988 between The Arch Road Group and Photo & Sound
Company (attached) for premises at 4686 Frontier, Stockton, California
(4) (Exhibit 10(dd))

10(ii) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Financing Statement, dated as of September 27, 1996, from CompuCom
Systems, Inc. to Nationsbank of Texas, N.A. (exhibits omitted) (13)
(Exhibit 10.7)

10(jj) Contract of Sale between CompuCom Systems, Inc., as seller, and
MacFarlan Realty Partners, L.L.C., as purchaser, for property located
at 10100 North Central Expressway, Dallas, Texas, dated effective
October 23, 1997 *

21

Exhibit
No. Description
- ------- -----------

10(kk) First Amendment to Contract of Sale between CompuCom Systems, Inc., as
seller, and MacFarlan Realty Partners, L.L.C., as purchaser, for
property located at 10100 North Central Expressway, Dallas, Texas,
dated effective December 9, 1997 *

10(ll) $7,840,000 Secured Promissory Note, dated December 30, 1997, from
MacFarlan Realty Partners, L.L.C., to CompuCom Systems, Inc. *

10(mm) Lease dated December 2, 1994 between CompuCom Systems, Inc. and ZML -
Glen Lakes Tower Limited Partnership for premises at 9400 North Central
Expressway, Dallas Texas (9) (Exhibit 10(aa)

10(nn)** $1,181,250 Amended and Restated Secured Term Note, dated February 12,
1997, from Edward R. Anderson to CompuCom Systems, Inc. (14) (Exhibit
10(ff))

10(oo)** Pledge Agreement, dated August 31, 1994, between Edward R. Anderson and
CompuCom Systems, Inc. (9) (Exhibit 10(nn))

10(pp)** $661,251 Secured Term Note, dated June 16, 1997, from Daniel F. Brown
to CompuCom Systems, Inc. *

10(qq)** Pledge Agreement, dated June 16, 1997, from Daniel F. Brown and
CompuCom Systems, Inc. *

10(rr)** Executive Employment Agreement, dated October 24, 1997, between Edward
R. Anderson and CompuCom Systems, Inc. *

10(ss)** Executive Employment Agreement, dated October 24, 1997, between M.
Lazane Smith and CompuCom Systems, Inc. *

21 List of Subsidiaries *

23 Consent of KPMG Peat Marwick LLP *

27.1 Financial Data Schedule *

27.2 Restated Financial Data Schedules for 1995, 1996 *

27.3 Restated Financial Data Schedules for 1997 *
- ---------------

* Filed herewith

** These exhibits relate to management contracts or to compensatory plans,
contracts or arrangements in which directors and/or executive officers
of the registrant may participate, required to be filed as xhibits to
this Form 10-K.

(1) Filed on April 19, 1989 as an exhibit to the 1989 Annual Meeting Proxy
Statement and incorporated herein by reference.

(2) Filed on April 2, 1990 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

(3) Filed on March 29, 1991 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

(4) Filed on March 30, 1992 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

(5) Filed on March 31, 1993 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

(6) Filed on March 14, 1994 as an exhibit to the Registration Statement on
Form S-8 (No. 33-76382) and incorporated herein by reference.

(7) Filed on March 31, 1994 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

(8) Filed on May 15, 1994 as an exhibit to the Quarterly Report on Form
10-Q (No. 0-14371) and incorporated herein by reference.

(9) Filed on March 31, 1995 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

(10) Filed on October 10, 1995 as an exhibit to the Registration Statement
on Form S-8 (No. 33-63309) and incorporated herein by reference.

(11) Filed on March 29, 1996 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

22

(12) Filed on May 13, 1996 as an exhibit to the Quarterly Report on Form
10-Q (No. 0-14371) and incorporated herein by reference.

(13) Filed on November 12, 1996 as an exhibit to the Quarterly Report on
Form 10-Q (No. 0-14371) and incorporated herein by reference.

(14) Filed on March 31, 1997 as an exhibit to the Annual Report on Form 10-K
(No. 0-14371) and incorporated herein by reference.

(15) Filed on April 9, 1997 as an exhibit to the 1997 Annual Meeting Proxy
Statement and incorporated herein by reference.

(16) Filed on May 15, 1997 as an exhibit to the Quarterly Report on Form 10-
Q (No. 0-14371) and incorporated herein by reference.

(17) Filed on August 14, 1997 as an exhibit to the Quarterly Report on Form
10-Q (No. 0-14371) and incorporated herein by reference.

23

Index to Consolidated Financial Statements
------------------------------------------

Independent Auditors' Report F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations F-4

Consolidated Statements of Stockholders' Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

Financial Statement Schedule

Schedule II Valuation and Qualifying Accounts F-19

F-1

Independent Auditors' Report
----------------------------

The Stockholders and Board of Directors
CompuCom Systems, Inc.:

We have audited the accompanying consolidated balance sheets of
CompuCom Systems, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1997. In connection with our audits of the consolidated financial statements, we
also have audited the financial statement schedule as listed in the accompanying
index. The consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements and financial
statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CompuCom
Systems, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

KPMG PEAT MARWICK LLP

Dallas, Texas
January 27, 1998

F-2

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 1997 and 1996
(In thousands, except share amounts)

Assets 1997 1996
------ --------- ---------

Current assets:
Cash $ 4,456 $ 4,320
Receivables, less allowance for doubtful accounts
of $2,672 in 1997 and $2,274 in 1996 177,141 377,598
Inventories 197,958 233,464
Other 2,880 3,508
--------- ---------
Total current assets 382,435 618,890

Property and equipment:
Land, building and improvements 38,441 33,067
Furniture, fixtures and other equipment 41,338 31,556
Leasehold improvements 7,099 6,502
--------- ---------
86,878 71,125
Less accumulated depreciation and amortization (23,519) (16,817)
--------- ---------
Net property and equipment 63,359 54,308

Cost in excess of fair value of tangible net assets
purchased, less accumulated amortization 13,569 16,513
Other 3,227 3,274
--------- ---------

$ 462,590 $ 692,985
========= =========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 72,475 $ 217,424
Accrued liabilities 71,791 59,004
Convertible subordinated notes 3,000
--------- ---------
Total current liabilities 147,266 276,428

Long-term debt 97,400 236,450
Deferred income taxes 7,198 5,671
Other 526 338
Convertible subordinated notes 3,000

Stockholders' equity:
Series B preferred stock, $10 stated value. Authorized 3,000,000
shares; issued and outstanding 1,500,000 shares 15,000 15,000
Common stock, $.01 par value. Authorized 70,000,000 shares;
issued and outstanding 46,111,820 shares in 1997
and 44,927,571 shares in 1996 461 449
Additional paid-in capital 65,762 60,966
Retained earnings 128,977 94,683
--------- ---------
Total stockholders' equity 210,200 171,098
--------- ---------

$ 462,590 $ 692,985
========= =========

See accompanying notes to consolidated financial statements

F-3

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 1997, 1996 and 1995

(In thousands, except per share amounts)

1997 1996 1995
----------- ----------- -----------
Revenue:
Product $ 1,699,268 $ 1,816,504 $ 1,334,442
Service 236,221 169,600 100,868
Other 14,313 9,087 6,287
----------- ----------- -----------
Total revenue 1,949,802 1,995,191 1,441,597
----------- ----------- -----------

Cost of revenue:
Product 1,523,034 1,635,653 1,193,513
Service 151,894 113,046 70,107
Other 7,329 5,529 3,069
----------- ----------- -----------
Total cost of revenue 1,682,257 1,754,228 1,266,689
----------- ----------- -----------

Gross margin 267,545 240,963 174,908

Operating expenses:
Selling 79,188 80,105 62,066
Service 49,563 39,876 22,204
General and administrative 59,539 55,580 37,722
Depreciation and amortization 11,274 8,760 6,291
----------- ----------- -----------
Total operating expenses 199,564 184,321 128,283
----------- ----------- -----------

Earnings from operations 67,981 56,642 46,625

Financing expenses (14,947) (14,764) (12,290)
Nonrecurring gains 5,624 8,738
----------- ----------- -----------
Earnings before income taxes 58,658 50,616 34,335

Income taxes 23,464 20,145 13,665
----------- ----------- -----------

Net earnings $ 35,194 $ 30,471 $ 20,670
=========== =========== ===========

Earnings per common share:
Basic $.75 $.66 $.54

Diluted $.71 $.61 $.45

Average common shares outstanding:
Basic 45,686 44,616 35,857
Diluted 50,034 49,887 48,311

See accompanying notes to consolidated financial statements.

F-4

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995
(In thousands, except share amounts)

Preferred Stock Common Stock Additional Total
----------------------- ----------------------- Paid-in Retained Stockholders'
Shares Amount Shares Amount Capital Earnings Equity
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balances at December 31, 1994 2,000,000 $ 20,000 33,694,764 $ 337 $ 28,164 $ 45,867 $ 94,368

Conversion of preferred stock (500,000) (5,000) 738,552 7 4,993 0

Conversion of convertible debt 8,409,087 84 18,366 18,450

Exercise of common stock warrants 53,331 1 79 80

Exercise of options 1,204,998 12 1,886 1,898

Pre-restructuring tax benefit 4,300 4,300

Preferred stock dividend (1,425) (1,425)

Net earnings 20,670 20,670
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balances at December 31, 1995 1,500,000 15,000 44,100,732 441 57,788 65,112 138,341

Exercise of common stock warrants 71,666 1 107 108

Exercise of options 755,173 7 3,071 3,078

Preferred stock dividend (900) (900)

Net earnings 30,471 30,471
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balances at December 31, 1996 1,500,000 15,000 44,927,571 449 60,966 94,683 171,098

Exercise of options 1,184,249 12 4,796 4,808

Preferred stock dividend (900) (900)

Net earnings 35,194 35,194
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balances at December 31, 1997 1,500,000 $ 15,000 46,111,820 $ 461 $ 65,762 $ 128,977 $ 210,200
========== ========== ========== ========== ========== ========== ==========

See accompanying notes to consolidated financial statements.

F-5

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 1997, 1996 and 1995

(In thousands)

1997 1996 1995
--------- --------- ---------

Cash flows from operating activities:
Net earnings $ 35,194 $ 30,471 $ 20,670
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 11,274 8,760 6,291
Deferred income taxes 1,527 1,719 355
Nonrecurring gains (5,624) (8,738)

Changes in assets and liabilities:
Receivables 207,397 (111,936) (28,450)
Inventories 35,506 (36,933) (41,290)
Other current assets 628 (1,357) 20
Accounts payable (144,949) 28,244 35,111
Accrued liabilities and other 12,970 8,715 13,890
--------- --------- ---------
Net cash provided by (used in) operating activities 153,923 (81,055) 6,597
--------- --------- ---------

Cash flows from investing activities:
Capital expenditures, net (22,418) (42,135) (5,999)
Business acquisitions, net of cash acquired (6,479) (2,310)
Proceeds from sale of building 1,960
Proceeds from sale of securities 2,724 11,368
--------- --------- ---------
Net cash (used in) investing activities (17,734) (37,246) (8,309)
--------- --------- ---------

Cash flows from financing activities:
Net bank credit facility and other borrowings (139,961) 116,086 1,332
Issuance of common stock 4,808 3,186 1,978
Preferred stock dividend (900) (900) (1,425)
--------- --------- ---------
Net cash provided by (used in) financing activities (136,053) 118,372 1,885
--------- --------- ---------

Net increase in cash 136 71 173

Cash at beginning of year 4,320 4,249 4,076

--------- --------- ---------
Cash at end of year $ 4,456 $ 4,320 $ 4,249
========= ========= =========

See accompanying notes to consolidated financial statements.

F-6

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies
------------------------------------------

Description of Business
-----------------------

CompuCom Systems, Inc. and subsidiaries (the "Company") is a
leading provider of network integration services and distributed desktop
products for large corporate customers nationwide. The Company's
services include LAN/WAN projects, consulting and asset tracking,
network management, help desk, field engineering, procurement,
configuration, distribution and software management.

Principles of Consolidation
---------------------------

The consolidated financial statements include the financial
statements of CompuCom Systems, Inc. and its subsidiaries. All
significant intercompany balances and transactions have been eliminated.

Use of Estimates
----------------

The preparation of the consolidated financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.

Inventories
-----------

Inventories are stated at the lower of average cost or market. The
Company continually assesses the appropriateness of the inventory
valuations giving consideration to obsolete, slow-moving and nonsalable
inventory.

Property and Equipment
----------------------

Property and equipment are stated at cost less accumulated
depreciation and amortization. Provision for depreciation and
amortization is based on the estimated useful lives of the assets
(building and leasehold improvements, 3 to 30 years; furniture and
equipment, 5 years) and is computed primarily on the straight-line
method.

Cost in Excess of Fair Value of Tangible Net Assets Purchased
-------------------------------------------------------------

Cost in excess of fair value of tangible net assets purchased
represents goodwill and customer lists and is amortized using the
straight-line method over a 7 to 10 year period. Accumulated
amortization at December 31, 1997 and 1996 was $12,715,000 and
$9,846,000, respectively.

Revenue Recognition
-------------------

Product revenues are recognized upon shipment, with provisions
made for anticipated returns, which historically have been immaterial.
Service revenues are recognized when the service is rendered or ratably
if performed over a service contract period.

(continued)

F-7

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Vendor Programs
---------------

The Company receives volume incentives and rebates from certain
manufacturers related to sales of certain products which are recorded as a
reduction of cost of goods sold when earned. The Company also receives
manufacturer reimbursement for certain training, promotional and marketing
activities that offset the expenses incurred by the Company.

Financing Expenses
------------------

Financing expenses consist of interest incurred on borrowings under
the Company's financing arrangements and discounts on the sale of
receivables.

Income Taxes
------------

The Company uses the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.

Earnings Per Common Share
-------------------------

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share." The Company adopted this
standard, as required, for its December 31, 1997 financial statements.
Basic earnings per common share is based on net earnings after preferred
stock dividend requirements, if any, and the weighted-average number of
common shares outstanding during each year. Diluted earnings per common
share assumes conversion of dilutive convertible securities into common
stock at the later of the beginning of the year or date of issuance and
includes the add-back of related interest expense and/or dividends, as
required.

Financial Instruments
---------------------

The Company's financial instruments, principally cash, accounts
receivable, accounts payable and accrued liabilities, are carried at cost
which approximates fair value due to the short-term maturity of these
instruments. As amounts outstanding under the Company's credit agreements
bear interest approximating current market rates, their carrying amounts
approximate fair value. The fair value of the Company's Convertible
Subordinated Notes approximates cost based upon quoted market prices.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of
-----------------------------------------------------------------------

The Company has adopted the provisions of Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." This Statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

(continued)
F-8

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements
--------------------------------

In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, "Reporting Comprehensive Income." This Statement
establishes standards for reporting and displaying comprehensive
income and its components (revenues, expenses, gains and losses) in
a full set of general-purpose financial statements. Such items may
include foreign currency translation adjustments, unrealized
gains/losses from investing and hedging activities, and other
transactions. This Statement is required to be adopted for fiscal
years beginning after December 15, 1997. The adoption of this
pronouncement will not have an impact on the Company's financial
position and results of operations but may change the presentation
of certain of the Company's financial statements and related notes.

In June 1997, the Financial Accounting Standards Board issued
Statement No. 131 "Disclosures about Segments of an Enterprise and
Related Information." This Statement establishes standards for the
way public business enterprises report information about operating
segments in annual financial statements and requires those
enterprises to report selected information about operating segments
in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. This Statement is
required to be adopted for fiscal years beginning after December 15,
1997. The adoption of this pronouncement will not have an impact on
the Company's financial position and results of operations but may
change the presentation of certain of the Company's financial
statements and related notes.

Stock-Based Compensation
------------------------

The Company accounts for stock options and stock-based awards
using the intrinsic-value method as outlined under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations. In accordance
with Statement No. 123, "Accounting for Stock-Based Compensation,"
the Company has disclosed pro forma net earnings and net earnings
per share as if the fair-value method had been applied.

Reclassifications
-----------------

Certain amounts in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.

(2) Inventories
-----------

Inventory is comprised of product inventory and spare parts. At
December 31, 1997 and 1996, total inventory was $198.0 million and $233.5
million, respectively, net of inventory reserves of $9.9 million and $8.9
million as of the same dates. Gross product inventory was $195.5 million
and $227.6 million at December 31, 1997 and 1996, respectively, and gross
spare parts inventory as of the same dates was $12.4 million and $14.8
million.

(3) Nonrecurring gain on sale of building
-------------------------------------

During the fourth quarter of 1997, the Company sold its former
headquarters building, recognizing a nonrecurring after-tax gain of
approximately $2.4 million. As part of the sale, the Company accepted cash
of $2.0 million and a note receivable in the amount of $7.8 million.
Interest accrues on the note at an annual rate of 6.8%. The note is
secured by the Company's former headquarters building and is due and
payable in full on October 31, 1998, with accrued interest. The note
receivable is included in Receivables on the Consolidated Balance Sheet as
of December 31, 1997.

(continued)
F-9

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(4) Financing Arrangements
----------------------

The Company has financing arrangements which total $325 million,
consisting of a $175 million receivable securitization ("Securitization"),
a $125 million working capital facility ("Revolver"), and a $25 million
real estate loan ("Term Loan").

Under the Securitization, the Company has an agreement with a
financial institution that allows the Company to sell, at a discount, an
interest in a portion of its trade accounts receivable ("receivables") to
a commercial paper conduit sponsored by that financial institution. As
collections reduce receivables balances sold to the conduit, the Company
may sell interests in new receivables to bring the amount available up to
the maximum allowed. In accordance with SFAS No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," the Company has recorded this transaction as a sale of
accounts receivable. This sale is reflected as a reduction of accounts
receivable on the Consolidated Balance Sheet as of December 31, 1997 and
is included in the net cash provided by operating activities in the
Consolidated Statements of Cash Flows. The proceeds from the sale of
receivables were used to pay down long-term debt. The Company is retained
as servicer of the receivables; however, the cost of servicing is not
material. Discounts associated with the sale of receivables are based on a
designated commercial paper rate plus an agreed upon spread and totaled
$4.7 million for 1997. The designated commercial paper rate at December
31, 1997 was 5.5%. The Securitization Facility expires November 2, 2002.

The Revolver bears interest at a rate of LIBOR plus 75 basis points,
subject to adjustment based on certain performance criteria, and is
secured by certain assets of the Company, as defined. The Revolver is
fully available subject to compliance with certain covenants related to,
among others, debt to capital, tangible net worth, asset and fixed charge
coverage ratios. Terms of the Revolver limit the amounts available for
capital expenditures and dividends. The amount outstanding under the
Revolver at December 31, 1997 was $72.4 million. As of December 31, 1997,
the effective interest rate on the Revolver was 6.7%. The Revolver matures
on November 2, 2002.

The Term Loan was used to finance the purchase of the Company's new
headquarters and operations campus. The amount outstanding under the Term
Loan at December 31, 1997 was $25.0 million. The Term Loan bears interest
at a rate of LIBOR plus 75 basis points, subject to adjustment based on
certain performance criteria, and matures on November 2, 2002. Principal
maturities of the Term Loan at December 31, 1997 for the succeeding 5
years are as follows: 1998 - 0; 1999 - $1,500,000; 2000 - $4,000,000; 2001
- $8,000,000; 2002 - $11,500,000.

The Company paid interest and financing costs of $14.9 million,
$15.3 million and $12.1 million, and the Company's weighted-average
interest rate on borrowings was approximately 6.4%, 6.7% and 7.9%, in
1997, 1996 and 1995, respectively.

The Company capitalized interest costs of $1.0 million and $0.5
million in 1997 and 1996, respectively, as part of the refurbishment of
its corporate headquarters and operations campus. Construction was
substantially completed in 1997.

(5) Convertible Subordinated Notes
------------------------------

In conjunction with an acquisition in 1995, the Company issued $3
million of 5% Convertible Subordinated Notes due October 31, 1998 and
convertible at any time into approximately 387,600 shares of the Company's
common stock at $7.74 per share.

(continued)
F-10

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(6) Accrued Liabilities

Accrued liabilities consist of the following as of December 31:

(Amounts in thousands)
1997 1996
------- -------
Accrued sales tax payable $ 8,448 $ 7,049
Accrued payroll and payroll taxes 22,848 18,171
Accrued cost of software and licenses 16,805 13,481
Other 23,690 20,303
------- -------
Total $71,791 $59,004
======= =======

(7) Income Taxes

The provision for income taxes is comprised of the following (in
thousands):

1997 1996 1995
------- ------- -------
Current:
Federal $19,422 $16,826 $11,991
State 2,515 1,600 1,319
Deferred 1,527 1,719 355
------- ------- -------

$23,464 $20,145 $13,665
======= ======= =======

Total income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rate of 35% in 1997, 1996 and 1995 to earnings
before income taxes as a result of the following (in percentages):

1997 1996 1995
------ ------ ------

Computed "expected" tax expense 35.0% 35.0% 35.0%
State taxes, net of U.S. Federal
income tax benefit 2.8% 2.1% 2.5%
Other, net 2.2% 2.7% 2.3%
------ ------ ------

40.0% 39.8% 39.8%
====== ====== ======

(continued)
F-11

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31 are presented below (in thousands).

1997 1996
------- -------

Deferred tax assets:
Inventories, principally due to reserves and additional
costs inventoried for tax purposes $ 746 $ 713
Accounts receivable, principally due to allowance for
doubtful accounts 935 796
Other 2,227 2,069
------- -------
Deferred tax assets 3,908 3,578
------- -------

Deferred tax liabilities:
Accelerated depreciation 3,949 3,104
Other 7,157 6,145
------- -------
Deferred tax liabilities 11,106 9,249
======= =======
Net deferred tax liability $ 7,198 $ 5,671
======= =======

The Company paid $16.1 million, $19.4 million and $9.7 million of
income taxes in 1997, 1996 and 1995, respectively, net of refunds.

(8) Preferred Stock

The Company has authorized three million shares of Series B
Cumulative Convertible Preferred Stock ("Series B Shares"), stated value
$10. In 1994, Safeguard Scientifics, Inc. ("Safeguard"), purchased from
the Company $20 million (2,000,000 shares) of its Series B Shares. The
Series B Shares are convertible into shares of Common Stock based on a
conversion price of $6.77 per share subject to anti-dilutive adjustments.
The Series B Shares are entitled to a 6% per annum cumulative dividend
payable out of legally available funds. The Series B Shares are entitled
to one vote for each share of Common Stock into which such Series B Shares
may be converted, except that in the election of directors (as long as
Safeguard owns at least 40% of the Company's then outstanding voting
securities, excluding the Series B Shares), the Series B Shares will be
entitled to five votes for each share of Common Stock into which the
Series B Shares may be converted. Safeguard has up to a 60% voting
interest as a result of its ownership of the Series B Shares. On December
29, 1995, Safeguard converted 500,000 of its Series B Shares into 738,552
shares of the Company's Common Stock.

(9) Stock-Based Compensation

The Company maintains four stock option plans covering certain key
employees and outside directors. The 1983 Stock Option Plan ("1983 Plan")
and the 1984 Non-Qualified Stock Option Plan ("1984 Plan") expired by
their terms in May 1993 and January 1994, respectively, and therefore no
new grants can be awarded out of those plans. All eligible option grants
have been made from the Stock Option Plan for Directors ("Directors
Plan"), although not all options have been exercised. The Company adopted
a 1993 Stock Option Plan ("1993 Plan") under which the Company may grant
qualified or nonqualified stock options to eligible employees and outside
directors. The 1993 Plan was amended in 1995 and in 1997 to increase the
number of shares available. To the extent allowable, all grants are
incentive stock options. All options granted under the plans to date have
an exercise price equal to the market price of the Company's stock on the
date of grant. Generally, options vest 20% each year and expire after 10
years under the 1983 Plan, the 1984 Plan, and the 1993 Plan. Under the
Directors Plan, nonemployee directors were initially granted 10,000 shares
upon election to the Board, with subsequent service grants awarded in
accordance with formulas based upon years of service. Options under the
Directors Plan vest 25% each year and expire after 10 years. After May
1996, all options granted to nonemployee directors have been issued from
the 1993 Plan. At December 31, 1997, the Company has reserved
approximately 5.2 million shares of its common stock for issuance under
its stock option plans.
(continued)
F-12

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company applies APB 25 and related interpretations in accounting
for its various stock option plans. Had compensation cost been recognized
consistent with SFAS No. 123, the Company's net earnings and earnings per
share would have been reduced to the pro forma amounts indicated below:

(In thousands, except per share amounts) 1997 1996 1995
---- ---- ----

Net earnings As reported $ 35,194 $ 30,471 $ 20,670
Pro forma $ 34,639 $ 29,409 $ 20,228

Basic earnings per share As reported $ .75 $ .66 $ .54
Pro forma $ .74 $ .65 $ .53

Diluted earnings per share As reported $ .71 $ .61 $ .45
Pro forma $ .69 $ .60 $ .44

The per share weighted-average value of stock options issued by the
Company during 1997, 1996 and 1995 was $4.20, $4.91, and $2.43,
respectively, on the dates of grant using the Black Scholes option-pricing
model. The Company used the following weighted-average assumptions to
determine the fair value of stock options granted:

1997 1996 1995
----------------- ----------------- -----------------

Dividend yield 0% 0% 0%
Expected volatility 63% 64% 62%
Average expected option life 5 years 5 years 5 years
Risk-free interest rate 5.9% to 6.8% 5.8% to 6.5% 5.4% to 7.1%

Pro forma net earnings reflects only options granted in 1997, 1996,
and 1995. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net
earnings amounts presented above because compensation cost is reflected
over the options' vesting period and compensation cost for options granted
prior to January 1, 1995 is not considered.

Option activity under the Company's plans is summarized below:

1997 1996 1995
-----------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------------------- -------------------- -------------------
(In thousands) (In thousands) (In thousands)

Outstanding at beginning of year 4,021 $ 3.96 4,278 $ 2.81 4,417 $ 2.07
Granted 1,642 7.07 845 8.28 1,407 4.10
Exercised (1,225) 2.39 (761) 1.90 (1,246) 1.64
Canceled (429) 5.82 (341) 5.82 (300) 2.81
-------- ------- -------

Outstanding at end of year 4,009 $ 5.51 4,021 $ 3.96 4,278 $ 2.81
======== ======= =======

Options exercisable at year-end 1,343 $ 3.40 1,970 $ 2.40 2,048 $ 1.80

Shares available for future grant 1,190 1,483 2,014

(continued)

F-13

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following summarizes information about the Company's stock
options outstanding at December 31, 1997 :

Options Outstanding Options Exercisable
---------------------------------------------------- ------------------------------

Weighted- Weighted- Weighted-
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
-------------------- ---------------- ------------------ -------------- --------------- -------------
(In thousands) (years) (In thousands)

$ 1.00 - $ 3.13 1,209 4.6 $ 2.60 1,027 $ 2.52

3.50 - 5.50 1,022 8.1 4.73 138 4.10

5.63 - 7.25 131 7.8 6.34 35 6.18

7.63 - 7.63 940 9.4 7.63 - -

8.00 - 12.50 707 8.3 8.66 143 8.36
---------------- ---------------
$ 1.00 - $ 12.50 4,009 7.4 $ 5.51 1,343 $ 3.40
================ ===============

(10) Related Party Transactions
--------------------------

The Company founded PC Service Source, Inc. ("PCSS") in 1990, then
known as PC Parts Express, Inc. In January 1994, the Company sold the
majority of its interest in PCSS in exchange for cash, a secured note
receivable ("secured note"), and warrants to purchase additional PCSS
common stock. In April 1994, the Company participated in an initial public
offering of PCSS common stock. During the second quarter of 1996, the
Company participated in a secondary stock offering of PCSS resulting in a
nonrecurring after-tax gain on the sale of securities of $5.2 million.
Concurrent with the secondary offering, the Company exercised warrants for
250,000 shares of PCSS common stock at an exercise price of $2.25, selling
those shares in conjunction with the secondary offering. During the third
quarter of 1997, the Company received early payment of the secured note,
thus recognizing a previously deferred nonrecurring after-tax gain of $1.0
million.

In 1997, the Company loaned an officer and director of the Company
$661,251 evidenced by a term note receivable. Interest on the note accrues
at the rate of 6.25% per annum and is payable annually on June 17. A
portion of the loan proceeds was used to exercise stock options. This
portion of the loan was netted against the options exercised in
Stockholders' equity while the remainder of the loan is included in Other
Assets on the Consolidated Balance Sheets at December 31, 1997. Principal
on the note is due on June 17, 2000.

In 1994, the Company loaned an officer and director of the Company
$1,181,250 evidenced by a term note receivable. Interest on the note
accrues at the rate of 6% per annum and is payable annually on January 1.
Terms of the note were amended in February 1997 such that principal on the
note is due on February 15, 1999. The outstanding balance of the note at
December 31, 1997 was $900,000, which is included in Other Assets on the
Consolidated Balance Sheets.

Safeguard owns approximately 51% of the Company's outstanding common
stock as of December 31, 1997. The Company pays Safeguard a fee for
providing certain administrative, legal and financial services to the
Company. General and administrative expenses include fees paid to
Safeguard of $600,000 in 1997, 1996 and 1995.

(continued)
F-14

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) Earnings Per Share
------------------

In 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."
This statement supersedes APB Opinion No. 15, "Earnings Per Share" and
replaces the presentation of primary earnings per share ("EPS") and fully
diluted EPS with a presentation of basic EPS and diluted EPS. In
accordance with SFAS No. 128, the Company has restated earnings per share
for all prior periods presented. SFAS No. 128 also requires a
reconciliation of the numerators and denominators of the basic and diluted
per share computations as follows (in thousands, except per share
amounts):

Year ended December 31, 1997
------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
-------------- --------------- ----------

Net earnings $ 35,194

Less: Preferred stock dividends (900)

Basic earnings per share
------------------------
Income available to common shareholders 34,294 45,686 $.75

Effect of dilutive securities
-----------------------------
Stock options 1,745
Convertible preferred stock 900 2,216
Convertible debt 92 387
-------- --------

Diluted earnings per share
--------------------------
Income available to common shareholders + assumed conversions 35,286 50,034 $.71
======== ======== ========

Year ended December 31, 1997
------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
-------------- --------------- ----------

Net earnings $ 30,471

Less: Preferred stock dividends (900)

Basic earnings per share
------------------------
Income available to common shareholders 29,571 44,616 $.66

Effect of dilutive securities
-----------------------------
Stock options 2,668
Convertible preferred stock 900 2,216
Convertible debt 92 387
-------- --------

Diluted earnings per share
--------------------------
Income available to common shareholders + assumed conversions 30,563 49,887 $.61
======== ======== ========

(continued)
F-15

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 1995
------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
-------------- --------------- ----------

Net earnings $ 20,670
Less: Preferred stock dividends (1,200)

Basic earnings per share
------------------------
Income available to common shareholders 19,470 35,857 $ .54

Effect of dilutive securities
-----------------------------
Stock options 2,515
Warrants 77
Convertible preferred stock 1,200 2,954
Convertible debt 846 6,908
-------------- ---------------

Diluted earnings per share
--------------------------
Income available to common shareholders + assumed conversions 21,516 48,311 $ .45
============== =============== ==========

The Company has excluded 150,325, 35,281, and 57,701 shares from its
calculations of diluted earnings per share in 1997, 1996, and 1995,
respectively, as they are considered anti-dilutive.

(12) Leases
------

The Company has noncancelable operating leases for facilities and
equipment, which expire at various dates from 1998 to 2004. Total rental
expense for operating leases was $8.9 million, $10.4 million and $6.2
million in 1997, 1996 and 1995, respectively. Future minimum lease
payments under noncancelable operating leases as of December 31, 1997 are:
$7.4 million - 1998; $6.5 million - 1999; $4.6 million - 2000; $2.8
million - 2001; $1.1 million - 2002; and $1.4 million thereafter.

(13) Savings Plan
------------

The Company has a defined contribution plan (401(k) Matched Savings
Plan)("the Plan") covering substantially all employees who have completed
at least six months of qualifying service. Participants may contribute to
the Plan an amount between 1% and 10% of their eligible compensation. The
Company matches 50% of each participant's qualifying contribution up to
4%, and an additional 25% of the next 2% of the participant's qualifying
contributions. Amounts expensed relating to the Plan were $1.6 million,
$1.5 million and $1.0 million in 1997, 1996 and 1995, respectively.

(continued)
F-16

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(14) Quarterly Financial Data (Unaudited)

1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(in thousands, except per share amounts)

1997
----
Revenue:
Product $375,605 $428,353 $437,089 $458,221
Service 53,728 59,715 60,513 62,265
Other 2,556 3,152 3,902 4,703
-------- -------- -------- --------
Net revenue 431,889 491,220 501,504 525,189
Gross margin:
Product $ 38,932 $ 41,099 $ 44,023 $ 52,180
Service 19,362 22,144 21,972 20,849
Other 1,184 1,719 2,129 1,952
-------- -------- -------- --------
Total gross margin 59,478 64,962 68,124 74,981

Net earnings $ 4,872 $ 7,980 $ 9,462 * $ 12,880 **
Earnings per common share:
Basic .10 .17 .20 * .28 **
Diluted .10 .16 .19 * .26 **

* Includes nonrecurring gain on prepayment of secured note related to
1994 sale of subsidiary of $1.0 million or $.02 per share (Basic and
Diluted)
** Includes nonrecurring gain on sale of Company's former headquarters
of $2.4 million (Basic - $.06 per share, Diluted - $.05 per share)

1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(in thousands, except per share amounts)

1996
----
Revenue:
Product $377,983 $467,817 $449,950 $520,754
Service 32,937 38,760 46,570 51,333
Other 2,414 2,178 1,961 2,534
-------- -------- -------- --------
Net revenue 413,334 508,755 498,481 574,621
Gross margin:
Product $ 38,169 $ 47,073 $ 46,088 $ 49,521
Service 12,237 11,630 14,470 18,217
Other 845 588 748 1,377
-------- -------- -------- --------
Total gross margin 51,251 59,291 61,306 69,115

Net earnings $ 5,762 $ 12,334 * $ 4,945 $ 7,430
Earnings per common share:
Basic .13 .27 * .11 .16
Diluted .12 .25 * .10 .15

* Includes nonrecurring gain on sale of securities of $5.2 million
(Basic - $.12 per share, Diluted - $.11 per share) Earnings per
common share calculations are based on the weighted-average number
of shares outstanding in each period. Therefore, the sum of the
quarters may not necessarily equal the year-to-date earnings per
common share.

(continued)
F-17

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(15) Contingencies

The Company is 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 and results of
operations, taken as a whole.

F-18

COMPUCOM SYSTEMS, INC. AND SUBSIDIARIES

Schedule II

Valuation and Qualifying Accounts

Years ended December 31, 1997, 1996 and 1995

(In thousands)

Balance at Charged to Balance at
Beginning of Costs and End of
Description Period Expenses Deductions Period
- --------------------------------------- -------------- -------------- -------------- --------------

Trade receivables-
Allowance for doubtful accounts

1995 $ 1,942 900 608 $ 2,234

1996 $ 2,234 900 860 $ 2,274

1997 $ 2,274 2,114 1,716 $ 2,672

Inventory reserves

1995 $ 9,772 13,333 13,581 $ 9,524

1996 $ 9,524 15,529 16,119 $ 8,934

1997 $ 8,934 14,844 13,854 $ 9,924

F-19

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.

CompuCom Systems, Inc.

By:/s/ M. Lazane Smith
-----------------------
M. Lazane Smith
Senior Vice President, Finance and Chief Financial
Officer (Chief Accounting Officer)

Dated: March 26, 1998
-----------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

Dated: March 26, 1998
-----------------

/s/ Charles A. Root /s/ Delbert W. Johnson
- ----------------------------------- ---------------------------------
Charles A. Root Delbert W. Johnson
Chairman of the Board and Director Director

/s/ Edward R. Anderson /s/ John D. Loewenberg
- ----------------------------------- ---------------------------------
Edward R. Anderson John D. Loewenberg
President and Chief Executive Director
Officer and Director

/s/ Daniel F. Brown /s/ John C. Maxwell III
- ----------------------------------- ---------------------------------
Daniel F. Brown John C. Maxwell, III
Executive Vice President, Director
Sales and Director

/s/ Donald R. Caldwell /s/ Warren V. Musser
- ----------------------------------- ---------------------------------
Donald R. Caldwell Warren V. Musser
Director Director

/s/ Michael J. Emmi /s/ Edward N. Patrone
- ----------------------------------- ---------------------------------
Michael J. Emmi Edward N. Patrone
Director Director

/s/ Richard F. Ford
- ----------------------------------- ---------------------------------
Richard F. Ford
Director