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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 5, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ________________
Commission file number 0-20022
POMEROY COMPUTER RESOURCES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1227808
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1020 Petersburg Road, Hebron, Kentucky 41048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (859) 586-0600
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
----------------------------
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 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 the 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 voting stock of the Registrant held by
non-affiliates was $159,846,957 as of February 28, 2001.
The number of shares outstanding of the Registrant's common stock as of February
28, 2001 was 12,610,598.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Into Which Portions of Documents
Document Are Incorporated
- -------- -----------------
Definitive Proxy Statement for the 2001 Part III
Annual Meeting of Stockholders to be
Filed with the Securities and Exchange
Commission prior to May 4, 2001.
2
POMEROY COMPUTER RESOURCES, INC.
FORM 10-K
YEAR ENDED JANUARY 5, 2001
TABLE OF CONTENTS
PART I Page
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Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 13
Item 9. Disagreements on Accounting and Financial
Disclosures 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management 14
Item 13. Certain Relationships and Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 14
SIGNATURES Chief Executive Officer, President, Chief Financial 34
Officer and Chief Accounting Officer
Directors 34
Report of Independent F-1
Certified Public Accountants
Financial Statements F-2 to F-19
Exhibits
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
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Certain of the matters discussed under the captions "Business", "Properties",
"Legal Proceedings", "Market for the Registrant's Common Stock and Related
Stockholder Matters" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" may constitute forward-looking statements
for purposes of the Securities Act of 1933 and the Securities Exchange Act of
1934, as amended, and as such may involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Important factors that could cause the actual results, performance
or achievements of the Company to differ materially from the Company's
expectations are disclosed in this document and in documents incorporated herein
by reference, including, without limitation, those statements made in
conjunction with the forward-looking statements under "Business", "Properties",
"Legal Proceedings", "Market for the Registrant's Common Stock and Related
Stockholder Matters" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the factors discussed under "Business -
Certain Business Factors". All written or oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by such
factors.
PART I
ITEM 1. BUSINESS
Pomeroy Computer Resources, Inc. (the "Company") is a Delaware corporation
organized in February 1992 to consolidate and reorganize predecessor companies.
All of the predecessor companies were controlled by David B. Pomeroy, the
Company's Chairman of the Board and Chief Executive Officer.
The Company's business is comprised of (1) the sale of a broad range of desktop
computer equipment including hardware, software, and related products, and (2)
the provision of information technology (IT) services which support such
computer products, and (3) the provision of in-house leasing solutions for the
Company's products and services customers. Prior to January 6, 1999, the
Company (including its wholly-owned subsidiaries Global Combined Technologies,
Inc., Pomeroy Computer Resources of South Carolina, Inc. ("PCR-SC") and
Technology Integration Financial Services, Inc. ("TIFS")) operated the IT
products and services business as a single integrated business. In December,
1998, the Company formed a new subsidiary, Pomeroy Select Integration Solutions,
Inc. ("Pomeroy Select"), for the purpose of operating independently the IT
services business previously operated by the Company other than procurement and
configuration services which are directly related to the sale of products. On
January 6, 1999, the Company transferred the assets, liabilities, business,
operations and personnel comprising its IT services business (excluding
procurement and configuration services) in exchange for 10 million shares of
Class B common stock of Pomeroy Select. The separation of the IT services
business is a part of the Company's ongoing strategy to expand its services
revenue. In October 1999, the legal structure of the Company was changed for
the purpose of increasing efficiencies. The Company formed the following wholly
owned subsidiaries: Pomeroy Computer Resources Holding Company, Inc. ("PCR
Holding") and Pomeroy Computer Resources Sales Company, Inc. ("PCR Sales"). In
addition, the Company formed Pomeroy Select Advisory Services, Inc. ("PSAS"), a
wholly-owned subsidiary of Pomeroy Select, Acme Data Services, LLC ("Acme
Data"), a wholly-owned subsidiary of PCR Sales, T.I.F.S. Advisory Services, Inc.
("TIFS Advisory"), a wholly-owned subsidiary of TIFS, and Pomeroy Computer
Resources LLP ("PCR Ops"), a partnership between the Company and PCR Holding.
PCR-SC and Global Combined Technologies, Inc. were merged into PCR Sales. In
fiscal 2000, the Company and its wholly owned subsidiary Pomeroy Select acquired
all the outstanding stock of The Linc Corporation ("The Linc"), a network
design, consulting and systems engineering provider located in Birmingham,
Alabama and Val Tech Computer Systems, Inc. ("Val Tech"), a leasing company also
located in Birmingham, Alabama.
The Company operates in three industry segments: products, services and leasing.
The products segment is primarily engaged in the sale and distribution of
computers, hardware, software and related products. The Company offers products
from an array of manufacturers including Cisco, Computer Associates, Sun,
Oracle, EMC, Compaq, Hewlett-Packard, IBM, Microsoft, Nortel Networks, Novell
and Palm Computing. As a service solution provider, the Company offers five
categories of service: internet infrastructure services, network infrastructure
services(LAN/WAN/MAN), network integration services, e-business application
development and desktop management services. Internet infrastructure solutions
include services to assist customers in implementing network and server
infrastructure components, enterprise management services that monitor the
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network buildup and broadband implementation services. Network infrastructure
services include LAN/WAN/MAN implementation services. These services assist the
customer in installing and implementing an internal network infrastructure that
includes cabling, network equipment consulting, implementation and support; IP
telephony services for maximizing voice/data circuits, wireless LAN
implementation and storage services that provide consulting, design,
implementation and support on storage area networks and network attached storage
implementations. Network integration solutions provide services to assist
customers in implementing thin client/server based computing, groupware
implementation and system/application enablement. E-business application
development includes the infrastructure platform consulting, design and
implementation. Desktop management services include assisting customers in
project roll-outs, installation of personal computer systems, peripherals and
accessories; warranty and non-warranty repair and maintenance, redeployment and
end-of-life services. The Company has achieved Gold Authorization from Cisco.
The Company has also been awarded 2 specialization's from Cisco; Voice Access
and IP Telephony, which gives customers access to specialized knowledge and
expertise to consult, design and implement converged voice and data telephony
circuits and wireless LAN implementations. The leasing segment primarily
provides in-house leasing services to the Company's products and services
customers. The Company leases many types of equipment with the predominant focus
on notebook and desktop personal computers, communication products and
high-powered servers. The Company provides products and services primarily to
large and medium sized corporate, health care, governmental, financial and
educational customers. See Note 18 of Notes to Consolidated Financial Statements
for a presentation of segment financial information.
The Company's strategy for building shareholder value is to provide
comprehensive solutions to improve the productivity of its clients' information
technology systems. Key elements of the Company's strategy are: (1) to generate
higher margin revenues by leveraging existing client relationships, (2) to
expand service offerings particularly in the higher end services and networking
areas, (3) to expand offerings and grow the customer base through strategic
acquisitions, and (4) to maintain and enhance technical expertise by hiring and
training highly qualified technicians and systems engineers.
The Company is an authorized dealer or reseller for the products of over 37
major vendors. The Company believes that its access to such vendors enables it
to offer a wide range of products to meet the diverse requirements of its
customers. However, the increasing demand for microcomputers has resulted in
significant product supply shortages from time to time because manufacturers
have been unable to produce sufficient quantities of certain products to meet
demand. As in the past, the Company expects to experience some difficulty in
obtaining an adequate supply of products from its major vendors which has
resulted, and may continue to result, in delays in completing sales. These
delays have not had, and are not anticipated to have, a material adverse effect
on the Company's results of operations. However, the failure to obtain adequate
product supply could have a material adverse effect on the Company's operations
and financial results.
The Company's sales are generated primarily by its 275 person direct sales and
sales support personnel located in 31 regional offices in 16 states throughout
the Southeast and Midwest United States. The Company's business strategy is to
provide its customers with a complete package of personal computers and network
infrastructure products, internet infrastructure services, network
infrastructure services, network integration services, e-business application
development and desktop management services. In addition, the Company attempts
to offer standard leasing services and custom tailored leasing solutions for our
customers. Leases generally range from twelve to thirty-six months. Coupled
with the products and services segments, the Company has the ability to provide
turnkey information technology solutions with all components including equipment
configuration, delivery, installation, maintenance, Internet training, and
de-installation services all included in a periodic payment. The Company
believes that its ability to combine competitive pricing of computer hardware,
software and related products with sophisticated higher margin services allows
it to compete effectively against a variety of alternative microcomputer
distribution channels, including independent dealers, superstores, mail order
and direct sales by manufacturers. With many businesses seeking assistance to
optimize their information technology investments and control ongoing costs
throughout the life cycle of technology systems, the Company is using its
resources to assist customers in their decision-making, project implementation
and equipment and information management.
Most microcomputer products are sold pursuant to purchase orders. For larger
procurements, the Company may enter into written contracts with customers. These
contracts typically establish prices for certain equipment and services and
require short delivery dates for equipment and services ordered by the customer.
These contracts do not require the customer to purchase microcomputer products
or services exclusively from the Company and may be terminated without cause
upon 30 to 90 days notice. Most contracts are for a term of 12 to 24 months and,
in order to be renewed, may require submission of a new bid in response to the
customer's request for proposal. As of January 5, 2001, the Company has been
awarded contracts it estimates will result in an aggregate of approximately
$185.1 million of net sales and revenues after January 5, 2001, $215.7 million
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in net sales and revenues was generated in 2000 from these contracts. Of the
aggregate total, the Company estimates that approximately $121.3 million of net
sales and revenues will be generated in fiscal 2001. By comparison, as of
January 5, 2000, the Company had been awarded contracts that it estimated would
result in an aggregate of approximately $156.3 million of net sales and revenues
after January 5, 2000. Of this amount, the Company estimated that $129.5 million
of net sales and revenues would be generated during fiscal 2000. The estimates
of management could be materially less than stated as a result of factors which
would cause one or more of these customers to order less product or services
than is anticipated. Such factors include that the customer finds another
supplier for the desired products at a lower price or on better terms, the
internal business needs of the customer change causing the customer to require
less or different products and services, or a significant change in technology
or other industry conditions occurs which alters the customer's needs or timing
of purchases.
The Company has also established relationships with industry leaders relating to
its services segment including the authorization to perform warranty and
non-warranty repair work for several vendors. In some cases, the authorization
of Pomeroy Select to continue performing warranty work for a particular
manufacturer's products is dependent upon the performance of the Company under a
dealer agreement with that manufacturer. The Company's technical personnel
currently have an aggregate of more than 180 Microsoft certifications, more than
300 Novell certifications, 31 Bay/Nortel Networks Specialist certifications, 19
IBM Professional Service Expert certifications, 54 Compaq Accredited Systems
Engineer certifications, 20 Hewlett-Packard Network Technical Professional
certifications, 2 Citrix Certified Administrator certifications, 81 Cisco
Certified Network Associates certifications, 31 Cisco Certified Network
Professional certificates, 6 Cisco Certified Internetwork Expert certificates,
12 Cisco Certified Design Associates certifications, 9 Cisco Certified Design
Professionals, 7 Computer Associates Certified Unicenter Engineer
certifications and one of each of the following advanced certifications: Protean
Router, Network General Sniffer, Fore Systems and Oracle Advanced SQL.
The Company provides its services to its customers on a time-and-materials basis
and pursuant to written contracts or purchase orders. Either party with limited
or no advance notice generally can terminate the Company's arrangements with its
customers. The Company also provides some of its services under fixed-price
contracts rather than contracts billed on a time-and-materials basis.
Fixed-price contracts are used when the Company believes it can clearly define
the scope of services to be provided and the cost of providing those services.
The Company has initiated a program known as the Pomeroy Preferred Partner
Program to better serve its customers. Through the program, the Company has the
ability to focus on the group of manufacturers which it has deemed "best in
class" through its research, customer feedback, and its experience in the
industry. By focusing on these "preferred" manufacturers, the company is
building mutual business commitments that will benefit the customers. Such
benefits include access to favorable pricing and key decision-makers, better
terms and conditions and enhanced sales and technical training.
The Company has entered into dealer agreements with substantially all of our
major vendors/manufacturers. These agreements are typically subject to periodic
renewal and to termination on short notice. Substantially all of the Company's
dealer agreements may be terminated by the vendor without cause upon 30 to 90
days advance notice, or immediately upon the occurrence of certain events. A
vendor could also terminate an authorized dealer agreement for reasons unrelated
to the Company's performance. Although the Company has never lost a major
vendor/manufacturer, the loss of such a vendor/product line or the deterioration
of the Company's relationship with such a vendor/manufacturer would have a
material adverse effect on the Company.
For fiscal years 1998, 1999 and 2000, sales of computer hardware, software, and
related products were approximately $554.0 million, $648.9 million, and $775.3
million, respectively, and accounted for approximately 88.3%, 85.8% and 83.8%,
respectively, of the consolidated net sales and revenues of the Company. The
Company's revenues from its service and support activities have grown, as a
percentage of its consolidated net sales and revenues, over the last several
years. For fiscal years 1998, 1999 and 2000, revenues from service and support
activities were approximately $72.5 million, $103.8 million and $139.4 million,
respectively, and accounted for approximately 11.6%, 13.7% and 15.1%,
respectively, of the consolidated net sales and revenues of the Company. The
Company's revenue from its leasing services have grown, as a percentage of its
consolidated net sales and revenues, since its inception in 1997. For fiscal
years 1998, 1999 and 2000, leasing revenues were approximately, $1.4 million,
$4.0 million, and $10.4 million, respectively, and accounted for approximately
0.1%, 0.5%, and 1.1%, respectively, of the consolidated net sales and revenues
of the Company.
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COMPETITION
The microcomputer products, services and leasing market is highly competitive.
Distribution has evolved from manufacturers selling directly to customers, to
manufacturers selling to aggregators (wholesalers), resellers and value-added
resellers. Competition, in particular the pressure on pricing, has resulted in
industry consolidation. In the future, the Company may face fewer but larger
competitors as a consequence of such consolidation. These competitors may have
access to greater financial resources than the Company. In response to
continuing competitive pressures, including specific price pressure from the
direct telemarketing, internet and mail order distribution channels, the
microcomputer distribution channel is currently undergoing segmentation into
value-added resellers who emphasize advanced systems together with service and
support for business networks, as compared to computer "superstores," who offer
retail purchasers a relatively low cost, low service alternative and direct-mail
suppliers which offer low cost and limited service. Certain superstores have
expanded their marketing efforts to target segments of the Company's customer
base, which could have a material adverse impact on the Company's operations and
financial results. While price is an important competitive factor in the
Company's business, the Company believes that its sales are principally
dependent upon its ability to provide comprehensive customer support services.
The Company's principal competitive strengths include: (i) quality assurance;
(ii) service and technical expertise, reputation and experience; (iii)
competitive pricing of products through alternative distribution sources; (iv)
prompt delivery of products to customers; (v) various financing alternatives;
and (vi) its ability to provide prompt responsiveness to customers services
needs and to build performance guarantees into services contracts.
The Company competes for product sales directly with local, national and
international distributors and resellers. In addition, the Company competes with
microcomputer manufacturers that sell product through their own direct sales
forces and to distributors. Although the Company believes its prices and
delivery terms are competitive, certain competitors offer more aggressive
hardware pricing to their customers.
The Company's services solutions segment competes, directly and indirectly, with
a variety of national and regional service providers, including services
organizations of established computer product manufacturers, value-added
resellers, systems integrators, internal corporate management information
systems and, to a lesser extent, consulting firms, aggregators and distributors.
The Company believes that the principal competitive factors for information
technology services include technical expertise, the availability of skilled
technical personnel, breadth of service offerings, reputation, financial
stability and price. To be competitive, the Company must respond promptly and
effectively to the challenges of technological change, evolving standards and
its competitors' innovations by continuing to enhance its service offerings and
expand sales channels. Any pricing pressures, reduced margins or loss of market
share resulting from the Company's failure to compete effectively could have a
material adverse effect on the Company's operations and financial results.
The Company believes its services solutions segment competes successfully by
providing a comprehensive solution portfolio for its customers' information
technology asset management and networking services needs. The Company delivers
cost-effective, flexible, consistent, reliable and comprehensive solutions to
meet customers' information technology infrastructure service requirements. The
Company also believes that it distinguishes itself on the basis of its technical
expertise, competitive pricing and its ability to understand its customers'
needs.
The Company's leasing segment competes directly and indirectly with various
lenders. Manufacturing competitors generally have their own leasing companies,
which include private label services provided by other organizations. In
addition, a number of independent finance companies have sales forces to
originate leases, as well as alignment with manufacturers and resellers to
provide private label leasing solutions. The leasing segment also competes with
bank leasing companies. The Company believes its leasing segment competes
successfully by providing flexible financing alternatives and offering turnkey
solutions.
CERTAIN BUSINESS FACTORS
DEPENDENCE ON MAJOR CUSTOMERS
During fiscal 2000, approximately 29.6% of the Company's total net sales and
revenues were derived from its top 10 customers. No customer accounted for more
than 10% of the Company's total net sales and revenues. During fiscal 2000, MCI
Worldcom accounted for approximately 10.4% of the total net sales and revenues
for the products segment and Columbus Public Schools accounted for approximately
23.4% of the total net sales and revenues for the leasing segment.
RAPID GROWTH
The Company has grown rapidly both internally and through acquisitions, and the
Company intends to continue to pursue both types of growth opportunities as part
of its business strategy. There can be no assurance that the Company will be
successful in maintaining its rapid growth in the future. The Company expects
future growth will result from acquisitions in addition to continued organic
growth. In fiscal 2000, the Company completed four acquisitions and continues to
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evaluate expansion and acquisition opportunities that would complement its
ongoing operations. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional companies or successfully
integrate such additional companies into the Company without substantial costs,
delays or other problems. In addition, there can be no assurance that companies
acquired in the future will be profitable at the time of their acquisition or
will achieve levels of profitability that justify the investment therein.
Acquisitions may involve a number of special risks, including, but not limited
to, adverse short-term effects on the Company's reported operating results,
diversion of management's attention, dependence on retaining, hiring and
training key personnel, risks associated with unanticipated problems or legal
liabilities and amortization of acquired intangible assets, some or all of which
could have a material adverse effect on the Company's operations and financial
results.
VENDOR REBATES AND VOLUME DISCOUNTS
The Company's profitability has been favorably affected by its ability to obtain
rebates and volume discounts from manufacturers and through aggregators and
distributors. Any change in the level of rebates, volume discount schedules or
other marketing programs offered by manufacturers that results in the reduction
or elimination of rebates or discounts currently received by the Company could
have a material adverse effect on the Company's operations and financial
results. In particular, a reduction or elimination of rebates related to
government and educational customers could adversely affect the Company's
ability to serve those customers profitably.
MANUFACTURER MARKET DEVELOPMENT FUNDS
Several manufacturers offer market development funds, cooperative advertising
and other promotional programs to computer resellers such as the Company. The
Company utilizes these programs to fund some of its advertising and promotional
programs. The funds received from manufacturers are offset directly against the
expense, thereby reducing selling, general and administrative expenses and
increasing net income. While such programs have been available to the Company in
the past, there is no assurance that these programs will be continued. Any
discontinuance or material reduction of these programs could have an adverse
effect on the Company's operations and financial results.
MANAGEMENT INFORMATION SYSTEM
The Company relies upon the accuracy and proper utilization of its management
information system to provide timely distribution services, manage its inventory
and track its financial information. To manage its growth, the Company is
continually evaluating the adequacy of its existing systems and procedures.
The Company anticipates that it will regularly need to make capital expenditures
to upgrade and modify its management information system, including software and
hardware, as the Company grows and the needs of its business change. There can
be no assurance that the Company will anticipate all of the demands, which its
expanding operations will place on its management information system. The
occurrence of a significant system failure or the Company's failure to expand or
successfully implement its systems could have a material adverse effect on the
Company's operations and financial results.
DEPENDENCE ON TECHNICAL EMPLOYEES
The success of the Company's services business depends in large part upon the
Company's ability to attract and retain highly skilled technical employees in
competitive labor markets. There can be no assurance that the Company will be
able to attract and retain sufficient numbers of skilled technical employees.
The loss of a significant number of the Company's existing technical personnel
or difficulty in hiring or retaining technical personnel in the future could
have a material adverse effect on the Company's operations and financial
results.
INVENTORY MANAGEMENT
Rapid product improvement and technological change resulting in relatively short
product life cycles and rapid product obsolescence characterize the information
technology industry. While most of the inventory stocked by the Company is for
specific customer orders, inventory devaluation or obsolescence could have a
material adverse effect on the Company's operations and financial results.
Current industry practice among manufacturers is to provide price protection
intended to reduce the risk of inventory devaluation, although such policies are
subject to change at any time and there can be no assurance that such price
protection will be available to the Company in the future. During fiscal 2000,
many manufacturers reduced the number of days for which they provided price
protection. In addition to the price protection mentioned above, the Company
currently has the option of returning inventory to certain manufacturers and
distributors, subject to certain limitations. The amount of inventory that can
be returned to manufacturers without a restocking fee varies under the Company's
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agreements and such return policies may provide only limited protection against
excess inventory. There can be no assurance that new product developments will
not have a material adverse effect on the value of the Company's inventory or
that the Company will successfully manage its existing and future inventory. In
addition, the Company stocks parts inventory for its services business. Parts
inventory is more likely to experience a decrease in valuation as a result of
technological change and obsolescence. Price protection practices are not
ordinarily offered by manufacturers with respect to parts.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent on the services of David B. Pomeroy, II,
the CEO and Chairman of the Board, Stephen E. Pomeroy, President and Chief
Operating Officer of the Company and Chief Executive Officer of Pomeroy Select,
Victor Eilau, President of TIFS and other key personnel. The loss of the
services of David Pomeroy, Stephen Pomeroy, Victor Eilau or other key personnel
could have a material adverse effect on the Company's business. The Company
maintains $1.0 million in key man life insurance insuring the life of David B.
Pomeroy. In addition, the company maintains $700 thousand in key man life
insurance insuring the life of Stephen E. Pomeroy and $500 thousand in key man
life insurance insuring the life of Victor Eilau. The Company has entered into
employment agreements with certain of its key personnel, including David B.
Pomeroy, Stephen E. Pomeroy and Victor Eilau. The Company's success and plans
for future growth will also depend on its ability to attract and retain highly
skilled personnel in all areas of its business.
EMPLOYEES
As of January 5, 2001, the Company had 2,138 full-time employees consisting of
the following: 1,428 technical personnel; 275 direct sales representatives and
sales support personnel; 54 management personnel; and 381 administrative and
distribution personnel. The Company has no collective bargaining agreements and
believes its relations with its employees are good.
BACKLOG
The Company does not have a significant backlog of business since it normally
delivers and installs products purchased by its customers within 10 days from
the date of order. Accordingly, backlog is not material to the Company's
business or indicative of future sales. From time to time, the Company
experiences difficulty in obtaining products from its major vendors as a result
of general industry conditions. These delays have not had, and are not
anticipated to have, a material adverse effect on the Company's results of
operations.
PATENTS AND TRADEMARKS
The Company owns no trademarks or patents. Although the Company's various dealer
agreements do not generally allow the Company to use the trademarks and trade
names of these various manufacturers, the agreements do permit the Company to
refer to itself as an "authorized representative" or an "authorized service
provider" of the products of those manufacturers and to use their trademarks and
trade names for marketing purposes. The Company considers the use of these
trademarks and trade names in its marketing efforts to be important to its
business.
ACQUISITIONS
Acquisitions have contributed significantly to the Company's growth. The Company
believes that acquisitions are one method of increasing its presence in existing
markets, expanding into new geographic markets, adding experienced service
personnel, gaining new product offerings and services, obtaining more
competitive pricing as a result of increased purchasing volumes of particular
products and improving operating efficiencies through economies of scale. In
recent years, there has been consolidation among providers of microcomputer
products and services and the Company believes that this consolidation will
continue, which, in turn, may present additional opportunities for the Company
to grow through acquisitions. The Company continually seeks to identify and
evaluate potential acquisition candidates.
During fiscal 2000, the Company completed four acquisitions. The total
consideration given consisted of $15.2 million in cash and subordinated notes of
$4.8 million. Interest on the subordinated notes is payable quarterly. Principal
in the amount of $.2 million was a 90 day note paid in full in 2000, and the
$4.6 million of principal is payable in equal annual installments commencing on
the first anniversary of closing.
On January 11, 2001, the Company announced it had entered into a letter of
intent to purchase certain operating assets and the systems integration and
consulting business of Osage Systems Group, Inc. ("Osage"). The transaction is
subject to a number of consents. It is contemplated that the transaction will
6
also be effected through the provisions of the U.S. Bankruptcy Code and will,
accordingly, be subject to Court approval. If the sale is completed, the Company
anticipates that the systems integration and consulting business of Osage will
operate as additional branch offices of the Company and the results of
operations from the acquisition will be included in the consolidated statement
of income from the date of acquisition. In addition, the Company is currently
engaged in preliminary discussions with other potential acquisition candidates.
Although it has no binding commitments to acquire such candidates, management
believes that the Company may acquire one or more of these candidates in the
future.
ITEM 2. PROPERTIES
The Company's principal executive offices, distribution facility and national
training center comprised of approximately 36,000, 161,417 and 22,000 square
feet of space, respectively, are located in Hebron, Kentucky. These facilities
are leased from Pomeroy Investments, LLC ("Pomeroy Investments"), a Kentucky
limited liability company controlled by David B. Pomeroy, II, Chief Executive
Officer of the Company, under a ten year triple-net lease agreement which
expires in July 2010. The lease agreement provides for 2 five-year renewal
options.
The Company also has non-cancelable operating leases for its regional offices,
expiring at various dates between 2001 and 2008. 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. The Company does not own any real property.
ITEM 3. LEGAL PROCEEDINGS
Various legal actions arising in the normal course of business have been brought
against the Company. Management believes these matters will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The following table sets forth, for the periods indicated, the high and low
sales price for the Common Stock for the quarters indicated as reported on the
NASDAQ National Market.
1999 2000
-------------------- --------------------
High Low High Low
------ ------ ------ ------
First Quarter $23.13 $11.50 $21.75 $12.50
Second Quarter $15.00 $11.50 $18.25 $13.38
Third Quarter $16.63 $10.75 $30.13 $15.00
Fourth Quarter $13.88 $ 9.56 $19.50 $12.50
As of February 28, 2001, there were approximately 370 holders of record of the
Company's common stock.
Dividends
- ---------
The Company has not paid any cash dividends since its organization and the
completion of its initial public offering. The Company has no plans to pay cash
dividends in the foreseeable future, and the payment of such dividends are
restricted under the Company's current borrowing agreement.
8
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(In thousands, except per share data)
For the Fiscal Years Ended January 5,
-------------------------------------------------------
1997(1) 1998(2) 1999 (4,5) 2000(6) 2001(7)
--------- --------- ----------- --------- ---------
Consolidated Statement of Income Data:
Net sales and revenues. . . . . . . . . . . $336,358 $491,448 $ 627,928 $756,757 $925,138
Cost of sales and service . . . . . . . . . 291,033 426,742 543,764 652,503 801,788
--------- --------- ----------- --------- ---------
Gross profit. . . . . . . . . . . . . . . . 45,325 64,706 84,164 104,254 123,350
Operating expenses:
Selling, general and administrative . . . . 25,895 33,918 43,689 52,216 61,135
Depreciation and amortization . . . . . . . 2,561 3,940 5,377 6,527 9,516
--------- --------- ----------- --------- ---------
Total operating expenses. . . . . . . . . . 28,456 37,858 49,066 58,743 70,651
Income from operations. . . . . . . . . . . 16,869 26,848 35,098 45,511 52,699
Other expense (income):
Interest expense. . . . . . . . . . . . . . 2,170 974 2,670 3,858 4,352
Litigation settlement and related costs (3) 4,392 - - - -
Miscellaneous . . . . . . . . . . . . . . . (221) 54 (140) (93) (547)
--------- --------- ----------- --------- ---------
Total other expense . . . . . . . . . . . . 6,341 1,028 2,530 3,765 3,805
Income before income taxes. . . . . . . . . 10,528 25,820 32,568 41,746 48,894
Income tax expense. . . . . . . . . . . . . 4,296 9,507 12,409 16,864 19,406
--------- --------- ----------- --------- ---------
Net income. . . . . . . . . . . . . . . . . $ 6,232 $ 16,313 $ 20,159 $ 24,882 $ 29,488
========= ========= =========== ========= =========
Earnings per common share (diluted) . . . . $ 0.77 $ 1.44 $ 1.72 $ 2.11 $ 2.38
Consolidated Balance Sheet Data:
Working capital . . . . . . . . . . . . . . $ 27,203 $ 63,028 $ 71,364 $ 61,126 $ 89,849
Long-term debt, net of current maturities.. 2,189 1,434 8,231 6,971 23,303
Equity. . . . . . . . . . . . . . . . . . . 46,593 88,777 112,989 140,221 181,705
Total assets. . . . . . . . . . . . . . . . 121,380 167,264 254,226 333,141 367,833
1) During fiscal 1996, the Company acquired the assets of The Computer Supply
Store and Communication Technology, Inc.
2) During fiscal 1997, the Company acquired the assets of Magic Box, Micro
Care and The Computer Store.
3) Fiscal year 1996 reflects the Vanstar litigation settlement and related
costs of $4,392. Without this charge, net income would have been $8,845 and
diluted earnings per common share would have been $1.09.
4) During fiscal 1998, the Company acquired the assets of Commercial Business
Systems, Inc., Access Technologies, Inc. and all of the outstanding stock
of Global Combined Technologies, Inc. See Note 13 of Notes to Consolidated
Financial Statements.
5) During the fourth quarter of fiscal 1998, the Company's results include an
after tax charge of $681 ($0.06 per diluted share) related to the
uncollectibility of certain vendor warranty claims. Exclusive of this
charge, diluted earnings per share for fiscal 1998 would have been $1.78.
6) During fiscal 1999, the Company acquired certain assets of Systems Atlanta
Commercial Systems, Inc. and all the outstanding stock of Acme Data
Systems, Inc. See Note 13 of Notes to Consolidated Financial Statements.
7) During fiscal 2000, the Company acquired certain assets of Datasource
Hagen, DataNet, Inc. and all the outstanding stock of The Linc Corporation
and Val Tech Computer Systems, Inc. See Note 13 of Notes to Consolidated
Financial Statements.
9
QUARTERLY RESULTS OF OPERATIONS (in thousands, except per share data)
The following table sets forth certain unaudited operating results of each of
the eight prior quarters. This information is unaudited, but in the opinion of
management includes all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the results of operations of such periods.
Fiscal 2000
-----------------------------------------------
First Second Third Fourth
Quarter Quarter(1) Quarter(2) Quarter(3)
-------- ----------- ----------- -----------
Net sales and revenues $211,578 $ 220,910 $ 246,911 $ 245,739
Gross Profit $ 26,777 $ 29,523 $ 34,073 $ 32,977
Net income $ 6,286 $ 7,605 $ 8,187 $ 7,410
Earnings per common share:
Basic $ 0.53 $ 0.63 $ 0.67 $ 0.59
Diluted $ 0.52 $ 0.62 $ 0.65 $ 0.58
Fiscal 1999
--------------------------------------------
First Second Third Fourth
Quarter Quarter(4) Quarter(5) Quarter
-------- ----------- ----------- --------
Net sales and revenues $163,924 $ 186,848 $ 197,090 $208,895
Gross Profit $ 22,859 $ 23,708 $ 27,055 $ 30,632
Net income $ 5,068 $ 5,680 $ 6,532 $ 7,602
Earnings per common share:
Basic $ 0.43 $ 0.49 $ 0.56 $ 0.65
Diluted $ 0.43 $ 0.48 $ 0.55 $ 0.65
1) During the second quarter of fiscal 2000, the Company acquired certain
assets of Datasource Hagen. See Note 13 of Notes to Consolidated Financial
Statements.
2) During the third quarter of fiscal 2000, the Company acquired certain
assets of DataNet, Inc. See Note 13 of Notes to Consolidated Financial
Statements.
3) During the fourth quarter of fiscal 2000, the Company acquired all of the
outstanding stock of The Linc Corporation and Val Tech Computer Systems,
Inc. See Note 13 of Notes to Consolidated Financial Statements.
4) During the second quarter of fiscal 1999, the Company acquired certain
assets of Systems Atlanta Commercial Systems, Inc. See Note 13 of Notes to
Consolidated Financial Statements.
5) During the third quarter of fiscal 1999, the Company acquired all of the
outstanding stock of Acme Data Systems, Inc. See Note 13 of Notes to
Consolidated Financial Statements.
10
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999
Total Net Sales and Revenues. Total net sales and revenues increased $168.3
million, or 22.2%, to $925.1 million in fiscal 2000 from $756.8 million in
fiscal 1999. This increase was attributable to an increase in sales to existing
and new customers and to acquisitions completed in fiscal year 2000. Excluding
acquisitions completed in fiscal year 2000, total net sales and revenues
increased 21.4%.
Products and leasing sales increased $132.7 million, or 20.3%, to $785.7 million
in fiscal 2000 from $653.0 million in fiscal 1999. Excluding acquisitions
completed in fiscal year 2000, products and leasing sales increased 19.6%.
Service revenues increased $35.6 million, or 34.3%, to $139.4 million in fiscal
2000 from $103.8 million in fiscal 1999. Excluding acquisitions completed in
fiscal year 2000, service revenues increased 32.9%.
Gross Profit. Gross profit margin was 13.3% in fiscal 2000 compared to 13.8% in
fiscal 1999. The Company's decrease in its gross margin resulted primarily from
the Company's decision to obtain new business and increase sales by aggressively
pricing certain products and services. Services revenues increased to 15.1% of
total net sales and revenues in fiscal 2000 compared to 13.7% of total net sales
and revenues in fiscal 1999. Factors that may have an impact on gross margin in
the future include the percentage of equipment sales with lower-margin customers
and the ratio of service revenues to total net sales and revenues.
Operating Expenses. Selling, general and administrative expenses (including
rent expense and provision for doubtful accounts) expressed as a percentage of
total net sales and revenues decreased to 6.6% in fiscal 2000 from 6.9% for
fiscal 1999. This decrease is primarily due to the growth in net sales and
revenues exceeding the growth in selling, general and administrative expenses.
Total operating expenses expressed as a percentage of total net sales and
revenues were 7.6% in fiscal 2000 and 7.8% in fiscal 1999.
Income from Operations. Income from operations increased $7.2 million, or
15.8%, to $52.7 million in fiscal 2000 from $45.5 million in fiscal 1999. The
Company's operating margin decreased to 5.7% in fiscal 2000 from 6.0% in fiscal
1999 due to the decrease in gross profit.
Interest Expense. Total interest expense increased $0.5 million, or 12.8%, to
$4.4 million in fiscal 2000 from $3.9 million in fiscal 1999. This increase is
primarily related to higher average borrowings during fiscal 2000 as a result of
higher working capital requirements.
Income Taxes. The Company's effective tax rate was 39.7% in fiscal 2000
compared to 40.4% in fiscal 1999. The decrease in the Company's effective tax
rate results from a lower overall state income tax liability.
Net Income. Net income increased $4.6 million, or 18.5%, to $29.5 million in
fiscal 2000 from $24.9 million in fiscal 1999. The increase was a result of the
factors described above.
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Total Net Sales and Revenues. Total net sales and revenues increased $128.9
million, or 20.5%, to $756.8 million in fiscal 1999 from $627.9 million in
fiscal 1998. This increase was attributable to an increase in sales to existing
and new customers and to acquisitions completed in fiscal years 1999 and late
1998. This increase reflects an increase in sales volume; however,
unit-selling prices have declined in fiscal 1999 as compared to fiscal 1998.
Excluding acquisitions completed in fiscal years 1999 and late 1998, total net
sales and revenues increased 12.8%.
Products and leasing sales increased $97.6 million, or 17.6%, to $653.0 million
in fiscal 1999 from $555.4 million in fiscal 1998. Excluding acquisitions
completed in fiscal years 1999 and late 1998, products and leasing sales
increased 10.9%. Service revenues increased $31.3 million, or 43.2%, to $103.8
million in fiscal 1999 from $72.5 million in fiscal 1998. Excluding
acquisitions completed in fiscal years 1999 and late 1998, service revenues
increased 27.4%.
Gross Profit. Gross profit margin was 13.8% in fiscal 1999 compared to 13.4% in
fiscal 1998. The Company improved its gross margin by increasing the volume of
higher-margin service revenues that offset a decrease in products gross margins
and the growth in product sales. Services revenues increased to 13.7% of total
net sales and revenues in fiscal 1999 compared to 11.6% of total net sales and
revenues in fiscal 1998. Factors that may have an impact on gross margin in the
future include the percentage of equipment sales with lower-margin customers and
the ratio of service revenues to total net sales and revenues.
11
Operating Expenses. Selling, general and administrative expenses (including
rent expense and provision for doubtful accounts) expressed as a percentage of
total net sales and revenues decreased to 6.9% in fiscal 1999 from 7.0% for
fiscal 1998. This decrease is primarily due to the growth in net sales and
revenues exceeding the growth in selling, general and administrative expenses.
Total operating expenses expressed as a percentage of total net sales and
revenues were 7.8% in fiscal 1999 and 1998.
Income from Operations. Income from operations increased $10.4 million, or
29.6%, to $45.5 million in fiscal 1999 from $35.1 million in fiscal 1998. The
Company's operating margin increased to 6.0% in fiscal 1999 from 5.6% in fiscal
1998 due to the increase in gross profit.
Interest Expense. Total interest expense increased $1.2 million, or 44.4%, to
$3.9 million in fiscal 1999 from $2.7 million in fiscal 1998. This increase is
primarily related to higher average borrowings during fiscal 1999 as a result of
higher working capital requirements.
Income Taxes. The Company's effective tax rate was 40.4% in fiscal 1999
compared to 38.1% in fiscal 1998. During fiscal 1998, the Company's effective
tax rate was reduced due to the availability of the Kentucky Jobs Development
Act ("KJDA") credit pertaining to the initial start-up cost component of the
credit. For fiscal 1999, the Company's KJDA benefit was reduced to the annual
eligible lease payments component of the credit plus any carryforward from prior
years. In addition, this increase is the result of an increase in taxable
income in states that have higher tax rates.
Net Income. Net income increased $4.7 million, or 23.3%, to $24.9 million in
fiscal 1999 from $20.2 million in fiscal 1998. The increase was a result of the
factors described above.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash used in operating activities was $1.8 million in fiscal 2000. Cash used in
investing activities was $20.9 million, which included $15.2 million for
acquisitions, and $5.7 million for capital expenditures. Cash provided by
financing activities was $22.1 million which included $23.6 million of net
proceeds under notes payable, $11.6 million from the exercise of stock options
and the related tax benefit, and $0.4 million proceeds from the employee stock
purchase plan, offset by $13.5 million of net payments under bank notes payable.
A significant part of the Company's inventories is financed by floor plan
arrangements with third parties. At January 5, 2001, these lines of credit
totaled $72 million, including $60 million with Deutsche Financial Services
("DFS") and $12 million with IBM Credit Corporation ("ICC"). Borrowings under
the DFS floor plan arrangements are made on thirty-day notes. Borrowings under
the ICC floor plan arrangements are made on either thirty-day or sixty-day
notes. All such borrowings are secured by the related inventory. Financing on
substantially all of the arrangements is interest free due to subsidies by
manufacturers. Overall, the average rate on these arrangements is less than
1.0%. The Company classifies amounts outstanding under the floor plan
arrangements as accounts payable.
The Company's financing of receivables is provided through a portion of its
credit facility with DFS. The credit facility provides a credit line of $80.0
million for accounts receivable financing. The accounts receivable portion of
the credit facility carries a variable interest rate based on the prime rate
less 125 basis points. At January 5, 2001, the amount outstanding was $55.5
million, including $9.2 million of overdrafts on the Company's books in accounts
at a participant bank on the credit facility, which was at an interest rate of
7.75%. The overdrafts were subsequently funded through the normal course of
business. The credit facility is collateralized by substantially all of the
assets of the Company, except those assets that collateralize certain other
financing arrangements. Under the terms of the credit facility, the Company is
subject to various financial covenants.
The Company's credit facility extension agreement with DFS expired on January
12, 2001, and the Company signed an extension agreement with DFS under the same
terms as the original credit facility. This extension will expire May 12, 2001.
DFS approved, subject to execution of documentation, an increase in the total
facility to $175 million during the extension period, which consists of $100
million working capital facility and $75 million inventory facility. The Company
is currently negotiating with various financial institutions a new credit
facility in order to increase its overall financing availability. Although
there can be no assurances that the Company will be able to finalize a new
credit facility, the Company currently anticipates that an agreement will be
reached.
During fiscal 2000, the Company increased the leasing activity through its
wholly owned leasing subsidiary, TIFS. This increased leasing activity for
fiscal 2000 resulted in increased borrowings and resultant interest expense
under the Company's credit facility with DFS. Further increases in leasing
operations could impact one or more of total net sales and revenues, gross
margin, operating income, net income, total debt and liquidity, depending on the
amount of leasing activity and the types of leasing transactions. The funding
of the Company's net investment in sales-type leases is provided by various
financial institutions primarily on a nonrecourse basis.
12
The Company believes that the anticipated cash flow from operations and current
financing arrangements will be sufficient to satisfy the Company's capital
requirements for the next twelve months. Historically, the Company has financed
acquisitions using a combination of cash, earn outs, shares of its Common Stock
and seller financing. The Company anticipates that future acquisitions will be
financed in a similar manner.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates the financial statements required by this item by
reference to Item 14 hereof.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
13
PART III
ITEMS 10-13.
The Registrant hereby incorporates the information required by Form 10-K, Items
10-13 by reference to the Company's definitive proxy statement for its 2001
Annual Meeting of shareholders which will be filed with the Commission prior to
May 4, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
================================================================================
2000 Form
- --------------------------------------------------------------------------------
10-K Page
-----------
1. Financial Statements:
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets,
January 5, 2000 and January 5, 2001 F-2 to F-3
For each of the three fiscal years in
The period ended January 5, 2001:
Consolidated Statements of Income F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Equity F-6
Notes to Consolidated Financial Statements F-7 to F-19
2. Financial Statement Schedules:
None
Filed Herewith
(page #) or
Incorporated
3. Exhibits by Reference to:
--------- ----------------
3(a) Certificate of Incorporation, as amended Exhibit 3(a) of Company's
Form 10-Q filed Aug.11,2000
3(b) Bylaws of the Company Exhibit 3(a) of Company's
Form S-1 filed Feb. 14, 1992
3(i)(a)1 Certificate of Incorporation of Pomeroy Computer Exhibit 3(i)(a)(1) of
Resources, dated February, 1992 Company's Form 10-Q filed
Aug. 11, 2000
3(i)(a)2 Certificate of Amendment to Certificate of Exhibit 3(i)(a)(2) of
Incorporation, dated July 1997 Company's Form 10-Q filed
Aug. 11, 2000
- --------------------------------------------------------------------------------
14
3(i)(a)3 Certificate of Designations of Series A Junior Exhibit 3(i)(a)(3) of
Participating Preferred Stock of Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. February 1998 Aug. 11, 2000
3(i)(a)4 Certificate of Amendment to Certificate of Exhibit 3(i)(a)(4) of
Incorporation, dated August 2000 Company's Form 10-Q filed
Aug. 11, 2000
4 Rights Agreement between the Company and The Exhibit 4 of Company's Form
Fifth Third Bank, as Rights Agent dated as of February 8-K filed February 23, 1998
23,1998
10(i) Material Agreements
(b)(1) Agreement for Wholesale Financing (Security Exhibit 10(i)(b)(1) of
Agreement) between IBM Credit Corporation and Company's Form 10-K filed
the Company dated April 2, 1992 April 7, 1994
(b)(2) Addendum to Agreement for Wholesale Financing Exhibit 10(i)(b)(2) of
between IBM Credit Corporation and the Company Company's Form 10-K filed
dated July 7, 1993 April 7, 1994
(c)(1) Agreement for Wholesale Financing (Security Exhibit 10(i)(c)(1) of
Agreement) between ITT Commercial Finance Company's Form 10-K filed
Corporation and the Company dated March 27, April 7, 1994
1992
(c)(2) Addendum to Agreement for Wholesale Financing Exhibit 10(i)(c)(2) of
between ITT Commercial Finance Corporation and Company's Form 10-K filed
the Company dated July 7, 1993 April 7, 1994
(c)(3) Amendment to Agreement for Wholesale Financing Exhibit 10(i)(c)(3) of
between Deutsche Financial Services f/k/a ITT Company's Form 10-Q filed
Commercial Finance Corporation and the Company May 18, 1995
dated May 5, 1995.
(d)(1) Asset Purchase Agreement among the Company; Exhibit 10(i)(z) of Company's
TCSS; and Richard Feaster, Victoria Feaster, Harry Form 8-K dated March 14,
Feaster, Carolyn Feaster, Victoria Feaster, trustee 1996
of the Emily Patricia Feaster Trust, and Victoria
Feaster, as trustee of the Nicole Ann Feaster Trust
dated March 14, 1996
(d)(4) Registration Rights Agreement between the Exhibit 10.50 of Company's
Company and TCSS dated March 14, 1996 Form S-1 filed June 4, 1996
(e)(1) IBM Agreement for Authorized Dealers Exhibit 10(i)(e)(1) of
and Industry Remarketers with the Company's Form S-1 filed
Company, dated September 3, 1991 Feb. 14, 1992
(e)(2) Schedule of Substantially Exhibit 10(i)(e)(2) of
Identical IBM Agreements for Company's Form S-1 filed
Authorized Dealers and Industry Feb. 14, 1992
Remarketers
(f) Compaq Computer Corporation United Exhibit 10(i)(f) of Company's
States Dealer Agreement with the Form S-1 filed Feb. 14, 1992
Company, dated September 27, 1990
(g) Apple Computer, Inc. and the Exhibit 10(i)(g) of Company's
Company, dated April 1, 1991 Form S-1 filed Feb. 14, 1992
- --------------------------------------------------------------------------------
15
(i) Lease between F.G.&H. Partnership Exhibit 10(i)(i) of Company's
and the Company for 908 DuPont Road, Form S-1 filed Feb. 14, 1992
Louisville, KY, dated May 9, 1990
(j)(1) Purchase Agreement between the Company and Exhibit 10.86 of Company's
First of Michigan Corporation dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(2) Purchase Agreement between the Company and Exhibit 10.87 of Company's
John C. Donnelly dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(3) Purchase Agreement between the Company and Exhibit 10.88 of Company's
Dan B. French dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(4) Purchase Agreement between the Company and Exhibit 10.89 of Company's
James C. Penman dated March 28, 1996 Form S-1 filed June 4, 1996
(m)(1) Asset Purchase Agreement among the Company, Exhibit 10.5 of Company's
AA Microsystems, Inc. and Stuart Raburn dated Form S-3 filed January 3,
August 2, 1996 1997
(m)(2) Promissory Note dated August 2, 1996 of the Exhibit 10.6 of Company's
Company in favor of AA Microsystems, Inc. Form S-3 filed January 3,
1997
(n)(1) Lease between Crown Development Group and the Exhibit 10(i)(n) of Company's
Company for 3740 St. Johns Bluff Road, Suite 19, Form 10-K filed March 31,
Jacksonville, FL dated September 17, 1992 1993
(n)(2) Amendment to Lease between Crown Exhibit 10(i)(n)(2) of
Development Group and the Company for 3740 St. Company's Form 10-K filed
Johns Bluff Road, Suite 19, Jacksonville, FL dated April 4, 1996
December 11, 1995
(p)(1) Remarketing and Agency Agreement (the Exhibit 10(i)(p)(1) of
"Remarketing Agreement") between Information Company's Form S-1 filed
Leasing Corporation and the Company dated Feb. 14, 1992
January 7, 1990
(p)(2) Amendment No. 1 to the Remarketing Agreement Exhibit 10(i)(p)(2) of
dated November 12, 1991 Company's Form S-1 filed
Feb. 14, 1992
(p)(3) Letter, dated February 2, 1994, extending term of Exhibit 10(i)(p)(3) of
Remarketing Agreement to May 1, 1996 Company's Form 10-K filed
April 4, 1996
(p)(4) Amendment No. 2 to the Remarketing Agreement Exhibit 10(i)(p)(4) of
dated October 10, 1995 Company's Form 10-K filed
April 4, 1996
(q) Lease between Athens Properties and the Exhibit 10(i)(q) of Company's
Company for Crosspark Drive, Knoxville, TN dated Form 10-K filed April 4, 1996
October 31, 1995
(r)(1) Asset Purchase Agreement among the Company, Exhibit 10.7 of Company's
Communications Technology, Inc. d/b/a DILAN and Form S-3 filed January 3,
Robert Martin dated October 11, 1996 1997
(r)(2) Subordinated Promissory Note dated October 11, Exhibit 10.8 of Company's
1996 of the Company in favor of Communications Form S-3 filed January 3,
Technology, Inc. 1997
(r)(3) Subordination Agreement among the Company, Exhibit 10.9 of Company's
Communications Technology, Inc. and Star Bank, Form S-3 filed January 3,
N.A. dated October 11, 1996 1997
- --------------------------------------------------------------------------------
16
(s) Services Agreement between the Company and Exhibit 10.13 of Company's
Nationwide Mutual Insurance and the Company Form S-3 filed January 3,
dated December 11, 1996 1997
(t1) Asset Purchase Agreement among the Company Exhibit 10(i)(t)(1) of
and Magic Box, Inc. dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(2) Employment Agreement between the Company Exhibit 10(i)(t)(2) of
and Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(3) Incentive Deferred Compensation Agreement Exhibit 10(i)(t)(3) of
between the Company and Israel Fintz, dated June Company's Form 10-Q filed
26, 1997 August 11, 1997
(t)(4) Employment Agreement between the Company Exhibit 10(i)(t)(4) of
and Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(5) Incentive Deferred Compensation Agreement Exhibit 10(i)(t)(5) of
between the Company and Allison Sokol, dated Company's Form 10-Q filed
June 26, 1997 August 11, 1997
(t)(6) Power of Attorney given to the Company by Magic Exhibit 10(i)(t)(6) of
Box, Inc. for the collection of Accounts Receivable, Company's Form 10-Q filed
dated June 26, 1997 August 11, 1997
(t)(7) Agreement for the Assumption of Liabilities Exhibit 10(i)(t)(7) of
between the Company and Magic Box, Inc. Company's Form 10-Q filed
August 11, 1997
(t)(8) Subordination Agreement by and among the Exhibit 10(i)(t)(8) of
Company, Magic Box, Inc. and Star Bank, N.A., Company's Form 10-Q filed
dated June 26, 1997 August 11, 1997
(t)(9) Subordinated Promissory Note between the Exhibit 10(i)(t)(9) of
Company and Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(10) Subordinated Promissory Note between the Exhibit 10(i)(t)(10) of
Company and Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(11) Subordinated Promissory Note between the Exhibit 10(i)(t)(11) of
Company and Marvin Rosen, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(12) Subordinated Promissory Note between the Exhibit 10(i)(t)(12) of
Company and M. Ronald Krongold, dated June 26, Company's Form 10-Q filed
1997 August 11, 1997
(t)(13) General Bill of Sale between the Company and Exhibit 10(i)(t)(13) of
Magic Box, Inc., dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(14) Non Compete Agreement between the Company Exhibit 10(i)(t)(14) of
and Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(15) Non Compete Agreement between the Company Exhibit 10(i)(t)(15) of
and Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(16) Non Compete Agreement between the Company Exhibit 10(i)(t)(16) of
and Marvin Rosen, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
- --------------------------------------------------------------------------------
17
(t)(17) Non Compete Agreement between the Company Exhibit 10(i)(t)(17) of
and M. Ronald Krongold, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(18) Non Compete Agreement between the Company Exhibit 10(i)(t)(18) of
and Magic Box, Inc., dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(u) Lease between NWI Airpark L.P. and the Company Exhibit 10(i)(u) of Company's
for 717 Airpark Center Drive, Nashville, TN dated Form 10-K filed April 4, 1995
February 24, 1994
(v)(1) Promissory Note dated May 30, 1997 by and Exhibit 10(i)(v)(1) of
among Star Bank, N.A., the Company and Company's Form 10-Q filed
Pomeroy Computer Leasing Company, Inc. August 11, 1997
(v)(2) Loan Agreement dated October 31,1997 between Exhibit 10(i)(v)(2) of
The Fifth Third Bank of Northern Kentucky, Inc. and Company's Form 10-K filed
Technology Integration Financial Services, Inc. April 5, 1998
(v)(3) Guarantor Agreement dated October 31,1997 Exhibit 10(i)(v)(3) of
between Pomeroy Computer Resources, Inc and Company's Form 10-K filed
The Fifth Third Bank of Northern Kentucky, Inc. April 5, 1998
(v)(4) Addendum 1 to Guarantor Agreement dated Exhibit 10(i)(v)(4) of
October 31,1997 between Pomeroy Computer Company's Form 10-K filed
Resources, Inc and The Fifth Third Bank of April 5, 1998
Northern Kentucky, Inc.
(v)(5) Assignment Agreement between dated October Exhibit 10(i)(v)(5) of
31,1997 between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(6) Incumbency and Authorization Agreement dated Exhibit 10(i)(v)(6) of
October 31,1997 between The Fifth Third Bank of Company's Form 10-K filed
Northern Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(7) Draw Facility Note dated October 31,1997 between Exhibit 10(i)(v)(7) of
The Fifth Third Bank of Northern Kentucky, Inc. and Company's Form 10-K filed
Technology Integration Financial Services, Inc. April 5, 1998
(v)(8) Revolving Credit Note dated October 31,1997 Exhibit 10(i)(v)(8) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(9) Security Agreement dated October 31,1997 Exhibit 10(i)(v)(9) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(w)(1) Non Compete Agreement between the Company Exhibit 10(i)(w)(1) of
and Microcare Computer Services, Inc., dated July Company's Form 10-Q filed
24, 1997 November 10, 1997
(w)(2) Non Compete Agreement between the Company Exhibit 10(i)(w)(2) of
and Microcare, Inc., dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(3) Assignment and Assumption Agreement between Exhibit 10(i)(w)(3) of
the Company, and Microcare Computer Services, Company's Form 10-Q filed
Inc., and Microcare Inc., dated July 24, 1997 November 10, 1997
- --------------------------------------------------------------------------------
18
(w)(4) Assumption of Liabilities Agreement between the Exhibit 10(i)(w)(4) of
Company, and Microcare Computer Services, Inc., Company's Form 10-Q filed
and Microcare Inc., dated July 24, 1997 November 10, 1997
(w)(5) Non Compete Agreement between the Company, Exhibit 10(i)(w)(5) of
and Robert L. Versprille, dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(6) Consent for Use of Similar Name between the Exhibit 10(i)(w)(6) of
Company and Microcare, Inc., dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(7) Subordination Agreement between the Company, Exhibit 10(i)(w)(7) of
and Microcare Computer Services, Inc., and Star Company's Form 10-Q filed
Bank, N.A., dated July 24, 1997 November 10, 1997
(w)(8) Subordinated Promissory Note between the Exhibit 10(i)(w)(8) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(9) Registration Rights Agreement between the Exhibit 10(i)(w)(9) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(10) General Bill of Sale and Assignment between the Exhibit 10(i)(w)(10) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(11) General Bill of Sale and Assignment between the Exhibit 10(i)(w)(11) of
Company and Microcare, Inc., dated June 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(12) Asset Purchase Agreement between the Company, Exhibit 10(i)(w)(12) of
and Microcare Computer Services, Inc., Microcare Company's Form 10-Q filed
Inc., and Robert L. Versprille dated July 24, 1997 November 10, 1997
(w)(13) Employment Agreement between the Company Exhibit 10(i)(w)(13) of
and Robert L. Versprille, dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(cc)(1) Plan of Reorganization dated October 17,1997 Exhibit (10)(i)(cc)(1) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina and The Computer Store, Inc. April 5,1998
(cc)(2) Plan of Merger dated October 17,1997 between Exhibit (10)(i)(cc)(2) of
Pomeroy Computer Resources of South Carolina Company's Form 10-K filed
and The Computer Store, Inc. April 5,1998
(cc)(3) Articles of Merger dated October 17,1997 between Exhibit (10)(i)(cc)(3) of
Pomeroy Computer Resources of South Carolina Company's Form 10-K filed
and The Computer Store, Inc. April 5,1998
(cc)(4) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(4) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(5) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(5) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(6) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(6) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
- --------------------------------------------------------------------------------
19
(cc)(7) Guaranty of Employment Agreement dated October Exhibit (10)(i)(cc)(7) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(8) Guaranty of Employment Agreement dated October Exhibit (10)(i)(cc)(8) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(9) Guaranty of Employment Agreement dated October Exhibit (10)(i)(cc)(9) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina, Inc. and Jeffery F. Hipp April 5,1998
(cc)(10) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(10) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(11) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(11) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(12) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(12) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(13) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(13) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(14) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(14) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(15) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(15) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Arthur M. Cox April 5,1998
(cc)(16) Escrow Agreement dated October 17,1997 Exhibit (10)(i)(cc)(16) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc., Arthur M. Cox, Ronald D. Hildreth, April 5,1998
and Jeffrey F. Hipp
(cc)(17) Opinion Letter on Plan of Merger dated October Exhibit (10)(i)(cc)(17) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina and The Computer Store, Inc. April 5,1998
(dd)(1) Asset Purchase Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(1) of
between the Company and Commercial Business Company's Form 10-Q filed
Systems, Inc. May 6,1998
(dd)(2) Employment Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(2) of
between the Company and Thomas Clayton Company's Form 10-Q filed
May 6,1998
(dd)(3) Employment Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(3) of
between the Company and Steven Shapiro Company's Form 10-Q filed
May 6,1998
(dd)(4) Subordinated Promissory Note dated March 6, Exhibit (10)(i)(dd)(4) of
1998 between the Company and Commercial Company's Form 10-Q filed
Business System, Inc. May 6,1998
- --------------------------------------------------------------------------------
20
(dd)(5) Subordination Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(5) of
between the Company and Commercial Business Company's Form 10-Q filed
System, Inc. May 6,1998
(dd)(6) General Bill of Sales and Assignment dated March Exhibit (10)(i)(dd)(6) of
6, 1998 between the Company and Commercial Company's Form 10-Q filed
Business System, Inc. May 6,1998
(dd)(7) Assumption of Liabilities dated March 6, 1998 Exhibit (10)(i)(dd)(7) of
between the Company and Commercial Business Company's Form 10-Q filed
System, Inc. May 6,1998
(dd)(8) Power of Attorney dated March 6, 1998 between Exhibit (10)(i)(dd)(8) of
the Company and Commercial Business System, Company's Form 10-Q filed
Inc. May 6,1998
(dd)(9) Assignment and Assumption Agreement dated Exhibit (10)(i)(dd)(9) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(10) Agreement dated March 6, 1998 between the Exhibit (10)(i)(dd)(10) of
Company and Commercial Business System, Inc. Company's Form 10-Q filed
May 6,1998
(dd)(11) Assignment and Assumption of Lease Agreement Exhibit (10)(i)(dd)(11) of
dated March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(12) Assignment and Assumption of Lease Agreement Exhibit (10)(i)(dd)(12) of
dated March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(13) Covenant Not to Compete Agreement dated March Exhibit (10)(i)(dd)(13) of
6, 1998 between the Company and Steve Shapiro Company's Form 10-Q filed
May 6,1998
(dd)(14) Covenant Not to Compete Agreement dated March Exhibit (10)(i)(dd)(14) of
6, 1998 between the Company and Thomas Company's Form 10-Q filed
Clayton May 6,1998
(dd)(15) Covenant Not to Compete Agreement dated March Exhibit (10)(i)(dd)(15) of
6, 1998 between the Company and Commercial Company's Form 10-Q filed
Business Systems, Inc. May 6,1998
(dd)(16) Consent for use of Similar Name Agreement dated Exhibit (10)(i)(dd)(16) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business Systems, Inc. May 6,1998
(dd)(17) Agreement dated March 6, 1998 between the Exhibit (10)(i)(dd)(17) of
Company and Commercial Business Systems, Inc. Company's Form 10-Q filed
May 6,1998
(ee)(1) Stock Purchase Agreement dated February 26, Exhibit (10)(i)(ee)(1) of
1998 between J. Walter Duncan Jr. , Nicholas Company's Form 10-Q filed
Duncan, James B. Kite, O. Dean Higganbotham, May 6,1998
and Dale Higganbotham and Pomeroy Computer
Resources, Inc.
(ee)(2) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(2) of
between O. Dean Higganbotham and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(3) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(3) of
between Dale Higganbotham and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
- --------------------------------------------------------------------------------
21
(ee)(4) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(4) of
between J. Walter Duncan Jr. and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(5) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(5) of
between Nicholas V. Duncan and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(6) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(6) of
between James B. Kite and Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. May 6,1998
(ee)(7) Employment Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(7) of
between O. Dean Higganbotham, Global Combined Company's Form 10-Q filed
Technologies, Inc. and Pomeroy Computer May 6,1998
Resources, Inc.
(ee)(8) Employment Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(8) of
between Dale Higganbotham, Global Combined Company's Form 10-Q filed
Technologies, Inc. and Pomeroy Computer May 6,1998
Resources, Inc.
(ee)(9) Termination of Employment Agreement dated Exhibit (10)(i)(ee)(9) of
March 17, 1998 between Nicholas V. Duncan and Company's Form 10-Q filed
Global Combined Technologies, Inc. May 6,1998
(ee)(10) Termination of Employment Agreement dated Exhibit (10)(i)(ee)(10) of
March 17, 1998 between O. Dean Higganbotham Company's Form 10-Q filed
and Global Combined Technologies, Inc. May 6,1998
(ee)(11) Termination of Employment Agreement dated Exhibit (10)(i)(ee)(11) of
March 17, 1998 between Dale Higganbotham and Company's Form 10-Q filed
Global Combined Technologies, Inc. May 6,1998
(ee)(12) Purchaser's Certificate Dated March 17, 1998 Exhibit (10)(i)(ee)(12) of
between the Company and Global Combined Technologies, Inc. Company's Form 10-Q filed
May 6,1998
(ee)(13) Incentive Deferred Compensation Agreement dated Exhibit (10)(i)(ee)(13) of
March 17, 1998 between Dale Higganbotham and Company's Form 10-Q filed
Global Combined Technologies, Inc. May 6,1998
(ee)(14) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(14) of
between the Company, Nicholas V. Duncan, and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(15) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(15) of
between the Company, James B, Kite, and Star Company's Form 10-Q filed
Bank, N.A. May 6,1998
(ee)(16) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(16) of
between the Company, O. Dean Higganbotham, Company's Form 10-Q filed
and Star Bank, N.A. May 6,1998
(ee)(17) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(17) of
between the Company, Dale Higganbotham, and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(18) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(18) of
between the Company, J. Walter Duncan Jr., and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
- --------------------------------------------------------------------------------
22
(ee)(19) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(19) of
1998 between the Company and James B, Kite. Company's Form 10-Q filed
May 6,1998
(ee)(20) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(20) of
1998 between the Company and Dean Company's Form 10-Q filed
Higganbotham May 6,1998
(ee)(21) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(21) of
1998 between the Company and Dale Company's Form 10-Q filed
Higganbotham May 6,1998
(ee)(22) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(22) of
1998 between the Company and J. Walter Company's Form 10-Q filed
Duncan Jr. May 6,1998
(ee)(23) Business Credit and Security Agreement among Exhibit (10)(i)(ee)(23) of
Pomeroy Computer Resources, Inc. and Deutsche Company's Form 10-Q filed
Financial Services Corporation, dated July 14, November 12,1998
1998
(ff)(1) The Asset Purchase Agreement dated December Exhibit (10)(i)(ff)(1) of
9, 1998, by, between and among the Company, Company's Form 10-K filed
Access Technologies, Inc., Mark V. Putman, Paul April 5, 1999
Bishop, and Dave Barthel
(ff)(2) Employment Agreement by and between the Exhibit (10)(i)(ff)(2) of
Company and Mark Putman, dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(3) Employment Agreement by and between the Exhibit (10)(i)(ff)(3) of
Company and Paul Bishop, dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(4) Employment Agreement by and between the Exhibit (10)(i)(ff)(4) of
Company and Greg Livingston, dated December Company's Form 10-K filed
9, 1998 April 5, 1999
(ff)(5) Employment Agreement by and between the Exhibit (10)(i)(ff)(5) of
Company and Phillip Qualls, dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(6) Exhibit G Excluded assets of the Asset Purchase Exhibit (10)(i) (ff)(6) of
Agreement Company's Form 10-K filed
April 5, 1999
(ff)(7) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(ff)(7) of
Purchase agreement Company's Form 10-K filed
April 5, 1999
(ff)(8) Assumption of Liabilities of the Asset Purchase Exhibit (10)(i)(ff)(8) of
Agreement Company's Form 10-K filed
April 5, 1999
(ff)(9) Promissory Note between the Company and Exhibit (10)(i)(ff)(9) of
Access Technologies, Inc., dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(10) Consent for Use of Similar Name by Access Exhibit (10)(i)(ff)(10) of
Technologies, Inc., dated December 9, 1998 Company's Form 10-K filed
April 5, 1999
- --------------------------------------------------------------------------------
23
(ff)(11) Power of Attorney issued to the Company by Exhibit (10)(i)(ff)(11) of
Access Technologies, Inc., dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(12) Letter Agreement regarding Contracts by and Exhibit (10)(i)(ff)(12) of
between Access Technologies Inc. and the Company's Form 10-K filed
Company, dated December 9, 1998 April 5, 1999
(ff)(13) Assignment and Assumption Agreement by and Exhibit (10)(i)(ff)(13) of
between Access Technologies, Inc. and the Company's Form 10-K filed
Company, dated December 9, 1998 April 5, 1999
(ff)(14) Subordination Agreement among the Company, Exhibit (10)(i)(ff)(14) of
Access Technologies, Inc. and Deutsche Financial Company's Form 10-K filed
Services Company, dated December 9, 1998 April 5, 1999
(ff)(15) Subordinated Promissory Note issued by the Exhibit (10)(i)(ff)(15) of
Company to Access Technologies, Inc., dated Company's Form 10-K filed
December 9, 1998 April 5, 1999
(ff)(16) Letter of Instructions to Fifth Third Bank issued by Exhibit (10)(i)(ff)(16) of
the Company pursuant to the Asset Purchase Company's Form 10-K filed
Agreement, dated December 9, 1998 April 5, 1999
(ff)(17) Investor's Certificate between Access Exhibit (10)(i)(ff)(17) of
Technologies, Inc. (Investor) and the Company, Company's Form 10-K filed
dated December 9, 1998 April 5, 1999
(ff)(18) Consent of Deutsche Financial Services Company Exhibit (10)(i)(ff)(18) of
to the Company on the purchase of substantially Company's Form 10-K filed
all the operating assets of Access Technologies, April 5, 1999
Inc.
(ff)(19) Sublease Agreement by and between Access Exhibit (10)(i)(ff)(19) of
Technologies, Inc. and the Company, dated Company's Form 10-K filed
December 9, 1998 April 5, 1999
(ff)(20) Noncompetition Agreement by and between David Exhibit (10)(i)(ff)(20) of
Barthel and the Company, dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(21) Noncompetition Agreement by and between Paul Exhibit (10)(i)(ff)(21) of
Bishop and the Company, dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(22) Noncompetition Agreement by and between Mark Exhibit (10)(i)(ff)(22) of
Putman and the Company, dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(23) Noncompetition Agreement by and between Exhibit (10)(i)(ff)(23) of
Access Technologies, Inc. and the Company, Company's Form 10-K filed
dated December 9, 1998 April 5, 1999
(ff)(24) Noncompetition Agreement by and between Greg Exhibit (10)(i)(ff)(24) of
Livingston and the Company, dated December 9, Company's Form 10-K filed
1998 April 5, 1999
(ff)(25) Noncompetition Agreement by and between Exhibit (10)(i)(ff)(25) of
Robert Hendry and the Company, dated Company's Form 10-K filed
December 9, 1998 April 5, 1999
(ff)(26) Assignment and Assumption Lease by and Exhibit (10)(i)(ff)(26) of
between Access Technologies, Inc. and the Company's Form 10-K filed
Company, dated December 9, 1998 April 5, 1999
- --------------------------------------------------------------------------------
24
(gg)(1) Workstation Procurement and Support Service Exhibit (10)(i)(gg)(1) of
Agreement by and between the Procter and Company's Form 10-K filed
Gamble Company and the Company, dated April 5, 1999
January 26, 1999
(gg)(2) Statement of Work to Workstation Procurement Exhibit (10)(i)(gg)(2) of
and Support Services Agreement by and between Company's Form 10-K filed
the Procter and Gamble Company and the April 5, 1999
Company.
(gg)(3) Attachment A - P&G Sites of Statement of Work Exhibit (10)(i)(gg)(3) of
to Workstation Procurement and Support Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(4) Attachment B-1 - Procurement, Workstation Exhibit (10)(i)(gg)(4) of
Distribution and Workstation Disposal Services of Company's Form 10-K filed
Statement of Work to Workstation Procurement April 5, 1999
Services Agreement
(gg)(5) Attachment B-2 - Packaged Software Help Desk Exhibit (10)(i)(gg)(5) of
Services of Statement of Work to Workstation Company's Form 10-K filed
Procurement Services Agreement April 5, 1999
(gg)(6) Attachment B-3 - Deskside and Server Support Exhibit (10)(i)(gg)(6) of
Services of Statement of Work to Workstation Company's Form 10-K filed
Procurement Services Agreement April 5, 1999
(gg)(7) Attachment C - Transition Services of Statement Exhibit (10)(i)(gg)(7) of
of Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(8) Attachment D - Termination and Exhibit (10)(i)(gg)(8) of
Decommissioning of Statement of Work to Company's Form 10-K filed
Workstation Procurement Services Agreement April 5, 1999
(gg)(9) Attachment E - Service Levels of Statement of Exhibit (10)(i)(gg)(9) of
Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(10) Attachment F - Special Projects of Statement of Exhibit (10)(i)(gg)(10) of
Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(11) Attachment G - Resource Charges, Financial Exhibit (10)(i)(gg)(11) of
Responsibility and Pricing of Statement of Work to Company's Form 10-K filed
Workstation Procurement Services Agreement April 5, 1999
(gg)(12) Attachment H - Overall Management of Statement Exhibit (10)(i)(gg)(12) of
of Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(13) Attachment I - Quality Processes of Statement of Exhibit (10)(i)(gg)(13) of
Work to Workstation Procurement Services Company's Form 10-K filed
Agreement April 5, 1999
(gg)(14) Exhibit G-1 of Attachment G of Statement of Work Exhibit (10)(i)(gg)(14) of
to Workstation Procurement Services Agreement Company's Form 10-K filed
April 5, 1999
(gg)(15) Attachment E- Exhibit 1 of Statement of Work to Exhibit (10)(i)(gg)(15) of
Workstation Procurement Services Agreement. Company's Form 10-K filed
April 5, 1999
- --------------------------------------------------------------------------------
25
(hh)(1) The Asset Purchase Agreement dated May 6, Exhibit (10)(i)(hh)(1) of
1999 by, between and among Pomeroy Computer Company's Form 10-Q filed
Resources, Inc., Pomeroy Select Integration May 17,1999
Solutions, Inc., Systems Atlanta Commercial
Systems, Inc. and B. Scott Dobson, Charley G.
Dobson, Betty H. Dobson, and Tyler H. Dobson
(hh)(2) Employment Agreement by and between Pomeroy Exhibit (10)(i)(hh)(2) of
Computer Resources, Inc. and B. Scott Dobson, Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
(hh)(3) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(hh)(3) of
Computer Resources, Inc. to Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(4) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(hh)(4)
Select Integration Solutions, Inc. to Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(5) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(5)
Purchase Agreement with Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. May 17,1999
(hh)(6) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(6)
Purchase Agreement with Pomeroy Select Integration Company's Form 10-Q filed
Solutions, Inc. May 17,1999
(hh)(7) Assignment and Assumption Agreement by and Exhibit (10)(i)(hh)(7)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Computer Resources, Inc., dated May May 17,1999
6, 1999
(hh)(8) Assignment and Assumption Agreement by and Exhibit (10)(i)(hh)(8)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Select Integration Solutions, Inc. May 17,1999
(hh)(9) Assumption of Liabilities of the Asset Purchase Exhibit (10)(i)(hh)(9)
Agreement by and between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy Computer May 17,1999
Resources, Inc., dated May 6, 1999
(hh)(10) Assumption of Liabilities of the Asset Purchase Exhibit (10)(i)(hh)(10)
Agreement by and between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy Select May 17,1999
Integration Solutions, Inc.
(hh)(11) Letter Agreement regarding Contracts by and Exhibit (10)(i)(hh)(11)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Computer Resources, Inc., dated May May 17,1999
6, 1999
(hh)(12) Letter Agreement regarding Contracts by and Exhibit (10)(i)(hh)(12)
between Systems Atlanta Commercial Systems, Inc. Company's Form 10-Q filed
and Pomeroy Select Integration Solutions, Inc. May 17,1999
(hh)(13) Power of Attorney issued to Pomeroy Computer Exhibit (10)(i)(hh)(13)
Resources, Inc. by Systems Atlanta Commercial Company's Form 10-Q filed
Systems, Inc., dated May 6, 1999 May 17,1999
- --------------------------------------------------------------------------------
26
(hh)(14) Power of Attorney issued to Pomeroy Computer Exhibit (10)(i)(hh)(14)
Resources, Inc. by Systems Atlanta Commercial Company's Form 10-Q filed
Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(15) Power of Attorney issued to Pomeroy Select Exhibit (10)(i)(hh)(15)
Integration Solutions, Inc. by Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc., dated May 6, 1999 May 17,1999
(hh)(16) Consent for Use of Similar Name by Systems Atlanta Exhibit (10)(i)(hh)(16)
Commercial Systems, Inc. to Pomeroy Computer Company's Form 10-Q filed
Resources, Inc., dated May 6, 1999 May 17,1999
(hh)(17) Consent for Use of Similar Name by Systems Atlanta Exhibit (10)(i)(hh)(17)
Commercial Systems, Inc. to Pomeroy Select Company's Form 10-Q filed
Integration Solutions, Inc., dated May 6, 1999 May 17,1999
(hh)(18) Noncompetition Agreement by and between Systems Exhibit (10)(i)(hh)(18)
Atlanta Commercial Systems, Inc. and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc., dated May 6, 1999 May 17,1999
(hh)(19) Noncompetition Agreement by and between Systems Exhibit (10)(i)(hh)(19)
Atlanta Commercial Systems, Inc. and Pomeroy Company's Form 10-Q filed
Select Integration Solutions, Inc., dated May 6, 1999 May 17,1999
(hh)(20) Noncompetition Agreement by and between B. Exhibit (10)(i)(hh)(20)
Scott Dobson and Pomeroy Computer Resources, Company's Form 10-Q filed
Inc., dated May 6, 1999 May 17,1999
(hh)(21) Employment Agreement by and between Pomeroy Exhibit (10)(i)(hh)(21)
Computer Resources, Inc. and Tyler H. Dobson Company's Form 10-Q filed
May 17,1999
(hh)(22) Award Agreement between Pomeroy Computer Exhibit (10)(i)(hh)(22)
Resources, Inc. and B. Scott Dobson, dated May 6, Company's Form 10-Q filed
1999 May 17,1999
(hh)(23) Award Agreement between Pomeroy Computer Exhibit (10)(i)(hh)(23)
Resources, Inc. and Tyler H. Dobson, dated May 6, Company's Form 10-Q filed
1999 May 17,1999
(hh)(24) Incentive Deferred Compensation Agreement by and Exhibit (10)(i)(hh)(24)
between Pomeroy Computer Resources, Inc. and B. Company's Form 10-Q filed
Scott Dobson, dated May 6, 1999 May 17,1999
(hh)(25) Incentive Deferred Compensation Agreement by and Exhibit (10)(i)(hh)(25)
between Pomeroy Computer Resources, Inc. and Company's Form 10-Q filed
Tyler H. Dobson, dated May 6, 1999 May 17,1999
(hh)(26) Noncompetition Agreement by and between Tyler H. Exhibit (10)(i)(hh)(26)
Dobson and Pomeroy Select Integration Solutions, Company's Form 10-Q filed
Inc., dated May 6, 1999 May 17,1999
- --------------------------------------------------------------------------------
27
(hh)(27) Noncompetition Agreement by and between Tyler H. Exhibit (10)(i)(hh)(27)
Dobson and Pomeroy Computer Resources, Inc., Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
(hh)(28) Noncompetition Agreement by and between Charley Exhibit (10)(i)(hh)(28)
G. Dobson and Pomeroy Select Integration Solutions, Company's Form 10-Q filed
Inc., dated May 6, 1999 May 17,1999
(hh)(29) Noncompetition Agreement by and between Charley Exhibit (10)(i)(hh)(29)
G. Dobson and Pomeroy Computer Resources, Inc., Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
(hh)(30) Noncompetition Agreement by and between Betty H. Exhibit (10)(i)(hh)(30)
Dobson and Pomeroy Computer Resources, Inc., Company's Form 10-Q filed
dated May 6, 1999 May 17,1999
(hh)(31) Noncompetition Agreement by and between Betty Exhibit (10)(i)(hh)(31)
H. Dobson and Pomeroy Select Integration Company's Form 10-Q filed
Solutions, Inc., dated May 6, 1999 May 17,1999
(hh)(32) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(32)
Purchase Agreement between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy May 17,1999
Computer Resources, Inc.
(hh)(33) General Bill of Sale and Assignment of the Asset Exhibit (10)(i)(hh)(33)
Purchase Agreement between Systems Atlanta Company's Form 10-Q filed
Commercial Systems, Inc. and Pomeroy Select May 17,1999
Integration Solutions, Inc.
(ii)(1) Stock purchase agreement by, between and Exhibit (10)(i)(ii)(1)
among Thomas F. Schneider and Rodney Leas Company's Form 10-Q filed
and Pomeroy Computer Resources, Inc., dated November 12, 1999
August 20, 1999.
(ii)2) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(ii)(2)
Computer Resources, Inc. to Thomas F. Company's Form 10-Q filed
Schneider, dated August 20, 1999. November 12, 1999
(ii)(3) Subordinated Promissory Note issued by Pomeroy Exhibit (10)(i)(ii)(3)
Computer Resources, Inc. to Rodney Leas, dated Company's Form 10-Q filed
August 20, 1999. November 12, 1999
(ii)(4) Agreement by and between Thomas F. Schneider Exhibit (10)(i)(ii)(4)
and Pomeroy Computer Resources, Inc., dated Company's Form 10-Q filed
August 20, 1999. November 12, 1999
(ii)(5) Agreement by and between Rodney Leas and Exhibit (10)(i)(ii)(5)
Pomeroy Computer Resources, Inc., dated August Company's Form 10-Q filed
20, 1999. November 12, 1999
(ii)(6) Incentive Deferred Compensation Agreement by Exhibit (10)(i)(ii)(6)
and between Pomeroy Computer Resources, Inc. Company's Form 10-Q filed
and Thomas F. Schneider, dated August 20, November 12, 1999
1999.
(ii)(7) Employment Agreement by and between Pomeroy Exhibit (10)(i)(ii)(7)
Computer Resources, Inc. and Thomas F. Company's Form 10-Q filed
Schneider, dated August 20, 1999. November 12, 1999
- --------------------------------------------------------------------------------
28
(ii)(8) Amendment to Business Credit and Security Exhibit (10)(i)(ii)(8)
Agreement by and among Deutsche Financial Company's Form 10-Q filed
Services Corporation, Pomeroy Computer November 12, 1999
Resources, Inc. and Global Technologies, Inc.,
dated September 1999.
(ii)(9) Business Credit and Security Agreement between Exhibit (10)(i)(ii)(9)
Pomeroy Select Integration Solutions, Inc. and Company's Form 10-Q filed
Deutsche Financial Services Corporation, dated November 12, 1999
January 6, 1999.
(jj)(1) The Asset purchase agreement dated July 3, Exhibit (10)(i)(jj)(1)
2000 by, between and amount Pomeroy Company's Form 10-Q filed
Computer Resources, Inc., Pomeroy Select August 11, 2000
Integration Solutions, Inc., Datasource Systems
Corporation dba Datasource Hagen and
Datasource Systems Marketing Corporation, and
Roar Lund
(jj)(2) Employment Agreement by and between Pomeroy Exhibit (10)(i)(jj)(2)
Computer Resources, Inc. and Roar Lund, dated Company's Form 10-Q filed
July 3, 2000 August 11, 2000
(jj)(3) Noncompetition Agreement by and between Exhibit (10)(i)(j)j(3)
Datasource Systems Corporation and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. August 11, 2000
(jj)(4) Noncompetition Agreement by and between Exhibit (10)(i)(jj)(4)
Datasource Systems Corporation and Pomeroy Company's Form 10-Q filed
Select Integration Solutions, Inc. August 11, 2000
(jj)(5) Noncompetition Agreement by and between Roar Exhibit (10)(i)(jj)(5)
Lund and Pomeroy Computer Resources, Inc. Company's Form 10-Q filed
August 11, 2000
(jj)(6) Noncompetition Agreement by and between Roar Exhibit (10)(i)(jj)(6)
Lund and Pomeroy Select Integration Solutions, Company's Form 10-Q filed
Inc. August 11, 2000
(kk)(1) The Asset Purchase Agreement dated July 27, 2000 Exhibit 10)(i)(kk)(1)
by, between and among Pomeroy Computer Company's Form 10-Q filed
Resources, Inc., Pomeroy Select Integration November 10, 2000
Solutions, Inc., DataNet, Inc., DataNet Technical
Services, LLC, DataNet Tangible Products, LLC,
DataNet Programming, LLC, Richard Stitt, Gregory
Stitt, Jeffrey Eacho, and Richard Washington.
(kk) (2) Noncompetiton Agreement by and between Jeffrey Exhibit 10)(i)(kk)(2)
Eacho and Pomeroy Computer Resources, Inc. Company's Form 10-Q filed
November 10, 2000
(kk) (3) Noncompetition Agreement by and between Jeffrey Exhibit 10)(i)(kk)(3)
Eacho and Pomeroy Select Integration Solutions, Inc. Company's Form 10-Q filed
November 10, 2000
(kk) (4) Noncompetition Agreement by and between Gregory Exhibit 10)(i)(kk)(4)
Stitt and Pomeroy Computer Resources, Inc. Company's Form 10-Q filed
November 10, 2000
(kk) (5) Noncompetition Agreement by and between Gregory Exhibit 10)(i)(kk)(5)
Stitt and Pomeroy Select Integration Solutions, Inc. Company's Form 10-Q filed
November 10, 2000
- --------------------------------------------------------------------------------
29
(kk) (6) Noncompetition Agreement by and between DataNet Exhibit 10)(i)(kk)(6)
Programming, LLC and Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. November 10, 2000
(kk) (7) Noncompetition Agreement by and between DataNet Exhibit 10)(i)(kk)(7)
Tangible Products, LLC and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. November 10, 2000
(kk) (8) Noncompetition Agreement by and between DataNet Exhibit 10)(i)(kk)(8)
Technical Services, LLC and Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. November 10, 2000
(kk) (9) Noncompetition Agreement by and between DataNet, Exhibit 10)(i)(kk)(9)
Inc. and Pomeroy Computer Resources, Inc. Company's Form 10-Q filed
November 10, 2000
(kk) (10) Noncompetition Agreement by and between DataNet Exhibit 10)(i)(kk)(10)
Programming, LLC and Pomeroy Select Integration Company's Form 10-Q filed
Solutions, Inc. November 10, 2000
(kk) (11) Noncompetition Agreement by and between Exhibit 10)(i)(kk)(11)
DataNet Tangible Products, LLC and Pomeroy Company's Form 10-Q filed
Select Integration Solutions, Inc November 10, 2000
(kk) (12) Noncompetition Agreement by and between Exhibit 10)(i)(kk)(12)
DataNet Technical Services, LLC and Pomeroy Company's Form 10-Q filed
Select Integration Solutions, Inc. November 10, 2000
(kk) (13) Noncompetition Agreement by and between Exhibit 10)(i)(kk)(13)
DataNet, Inc. and Pomeroy Select Integration Company's Form 10-Q filed
Solutions, Inc November 10, 2000
(kk) (14) Noncompetition Agreement by and between Exhibit 10)(i)(kk)(14)
Richard Stitt and Pomeroy Computer Resources, Company's Form 10-Q filed
Inc. November 10, 2000
(kk) (15) Noncompetition Agreement by and between Richard Exhibit 10)(i)(kk)(15)
Stitt and Pomeroy Select Integration Solutions, Inc. Company's Form 10-Q filed
November 10, 2000
(kk) (16) Noncompetition Agreement by and between Richard Exhibit 10)(i)(kk)(16)
Washington and Pomeroy Computer Resources, Company's Form 10-Q filed
Inc. November 10, 2000
(kk) (17) Noncompetition Agreement by and between Exhibit 10)(i)(kk)(17)
Richard Washington and Pomeroy Select Company's Form 10-Q filed
Integration Solutions, Inc. November 10, 2000
(kk) (18) Employment Agreement by and between Pomeroy Exhibit 10)(i)(kk)(18)
Computer Resources, Inc. and Jeffrey Eacho . Company's Form 10-Q filed
November 10, 2000
(kk) (19) Employment Agreement by and between Pomeroy Exhibit 10)(i)(kk)(19)
Computer Resources, Inc. and Gregory Stitt. Company's Form 10-Q filed
November 10, 2000
(kk) (20) Employment Agreement by and between Pomeroy Exhibit 10)(i)(kk)(20) of
Computer Resources, Inc. and Richard Stitt. Company's Form 10-Q filed
November 10, 2000
(kk) (21) Employment Agreement by and between Pomeroy Exhibit 10)(i)(kk)(21) of
Computer Resources, Inc. and Richard Washington. Company's Form 10-Q filed
November 10,2000
(ll)(1) The Stock Purchase Agreement dated November 8, E3- E67
2000 by, between and among Pomeroy
Computer Resources, William Valentz and Barry
Vines.
- --------------------------------------------------------------------------------
30
(ll)(2) Employment Agreement between William Valentz and E68 - E81
Pomeroy Computer Resources, Inc.
(ll)(3) Employment Agreement between Barry Vines and E82 - E97
Pomeroy Computer Resources, Inc.
(ll)(4) Covenant Not to Compete Agreement between William E98 - E102
Valentz and Pomeroy Computer Resources, Inc.
(ll)(5) Covenant Not to Compete Agreement between Barry E103 - E107
Vines and Pomeroy Computer Resources, Inc.
(ll)(6) Incentive Deferred Compensation Agreement between E108 - E110
William Valentz and Pomeroy Computer Resources,
Inc.; and
(ll)(7) Incentive Deferred Compensation Agreement between E111- E113
Barry Vines and Pomeroy Computer Resources, Inc.
10 (iii) Material Employee Benefit and Other Agreements
(a)(1) Employment Agreement between the Company Exhibit 10(iii)(a)of
and David B. Pomeroy, dated March 12, 1992 Company's Form S-1 Filed
Feb. 14, 1992
(a)(2) First Amendment to Employment Agreement between Exhibit 10(iii)(a)(2) of
the Company and David B. Pomeroy effective July 6, Company's Form 10-K filed
1993. April 7, 1994
(a)(3) Second Amendment to Employment Agreement Exhibit 10(iii)(a)(3) of
between the Company and David B. Pomeroy dated Company's Form 10-K filed
October 14, 1993 April 7, 1994
(a)(4) Agreement between the Company and David B. Exhibit 10(iii)(a)(4) of
Pomeroy related to the personal guarantee of the Company's Form 10-K filed
Datago agreement by David B. Pomeroy and his April 7, 1994
spouse effective July 6, 1993
(a)(5) Third Amendment to Employment Agreement Exhibit 10(iii)(a)(5) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1995 November 17, 1995
(a)(6) Supplemental Executive Compensation Agreement Exhibit 10(iii)(a)(6) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1995 November 17, 1995
(a)(7) Collateral Assignment Split Dollar Agreement Exhibit 10(iii)(a)(7) of
between the Company; Edwin S. Weinstein, as Company's Form 10-Q filed
Trustee; and David B. Pomeroy dated June 28, November 17,1995
1995.
(a)(8) Fourth Amendment to Employment Agreement Exhibit 10(iii)(a)(8) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
dated December 20, 1995, effective January 6, May 17, 1996
1995.
(a)(9) Fifth Amendment to Employment Agreement Exhibit 10(iii)(a)(9) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1996 May 17, 1996
(a)(10) Sixth Amendment to Employment Agreement Exhibit 10.10 of Company's
between the Company and David B. Pomeroy Form S-3 filed January 3,
effective January 6, 1997 1997
(a)(11) Award Agreement between the Company and Exhibit 10.11 of Company's
David B. Pomeroy effective January 6, 1997 Form S-3 filed January 3,
1997
- --------------------------------------------------------------------------------
31
(a)(12) Registration Rights Agreement between the Exhibit 10.12 of Company's
Company and David B. Pomeroy effective January Form S-3 filed January 3,
6, 1997 1997
(a)(13) Seventh Amendment to Employment Agreement Exhibit 10)(iii)(a)(13) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1998 May 6, 1998
(a)(14) Collateral Assignment Split Dollar Agreement Exhibit 10)(iii)(a)(14) of
between the Company, James H. Smith as Trustee, Company's Form 10-Q filed
and David B. Pomeroy dated January 6, 1998 May 6, 1998
(a)(15) Eight Amendment to Employment Agreement Exhibit 10(iii)(a)(15) of the
between the Company and David B. Pomeroy Company's Form 10K filed
effective January 6, 1999 March 31, 2000
(a)(16) Ninth Amendment to Employment Agreement Exhibit 10(iii)(a)(16) of the
between the Company and David B. Pomeroy Company's Form 10K filed
effective January 6, 2000 March 31, 2000
(a)(17) Tenth Amendment to Employment Agreement E114 - E117
between the Company and David B. Pomeroy
effective January 6, 2001
(c)(1) Employment Agreement between the Company Exhibit 10(iii)(c)(1) of
and Victor Eilau dated July 6, 1997 Company's Form 10-Q filed
August 11, 1997
(c)(2) Performance Share Right Agreement between the Exhibit 10(iii)(c)(2) of
Company and Victor Eilau dated July 6, 1997 Company's Form 10-Q filed
August 11, 1997
(d) The Company Savings 401(k) Plan, Exhibit 10(iii)(d) of
effective July 1, 1991 Company's Form S-1 filed
Feb. 14, 1992
(f) The Company's 1992 Non-Qualified and Incentive Exhibit 10(iii)(f) of the
Stock Option Plan, dated February 13, 1992 Company's Form S-1
(g) The Company's 1992 Outside Directors Exhibit 10(iii)(g) of
Stock Option Plan, dated February 13, Company's Form S-1 filed
1992 Feb. 14, 1992
(j)(1) Employment Agreement between the Company Exhibit 10.3 of Company's
and Stephen E. Pomeroy dated November 13, Form S-3 filed January 3,
1996 1997
(j)(2) Incentive Deferred Compensation Agreement Exhibit 10.4 of Company's
between the Company and Stephen E. Pomeroy Form S-3 filed January 3,
dated November 13, 1996 1997
(j)(3) Employment Agreement between Pomeroy Select Exhibit (10)(iii) of
Integration Solutions, Inc. and Stephen E. Pomeroy, Company's Form 10-K filed
dated January 6, 1999. April 5, 1999
(j)(4) First Amendment to Employment Agreement between Exhibit (10 (iii) of Company's
Pomeroy Select Integration Solutions, Inc. and form 10-K filed March 31,
Stephen E. Pomeroy, dated September 1, 1999 2000.
(j)(5) Second Amendment to Employment Agreement E118 - E121
between Pomeroy Computer Resources, Pomeroy
Select Integration Solutions, Inc. and Stephen E.
Pomeroy, dated January 6, 2001
- --------------------------------------------------------------------------------
32
(k) The Company's 1998 Employee Stock Purchase Plan, Exhibit 4.3 of Company's
Effective April 1, 1999. Form S-8 filed March 23,
1999
11 Computation of Per Share Earnings E-1
21 Subsidiaries of the Company E-2
- --------------------------------------------------------------------------------
(b) Reports on Form 8-K:
None
33
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.
Pomeroy Computer Resources, Inc.
By: /s/ David B. Pomeroy
----------------------------------
David B. Pomeroy
Chairman of the Board and
Chief Executive Officer
By: /s/ Stephen E. Pomeroy
----------------------------------
Stephen E. Pomeroy
President and Chief Operating
Officer
By: /s/ Dino M. Lucarelli
----------------------------------
Dino M. Lucarelli
Chief Financial Officer and Chief
Accounting Officer
Dated: April 5, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.
Signature and Title Date
- ------------------------------------- --------------
By: /s/ David B. Pomeroy April 5, 2001
- -------------------------------------
David B. Pomeroy, Director
By: /s/ Stephen E. Pomeroy April 5, 2001
- -------------------------------------
Stephen E. Pomeroy, Director
By: /s/ James H. Smith III April 5, 2001
- -------------------------------------
James H. Smith III, Director
By: /s/ Michael E. Rohrkemper April 5, 2001
- -------------------------------------
Michael E. Rohrkemper, Director
By:
- -------------------------------------
William H. Lomicka, Director
By:
- -------------------------------------
Vincent D. Rinaldi, Director
34
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Pomeroy Computer Resources, Inc.
We have audited the accompanying consolidated balance sheets of Pomeroy Computer
Resources, Inc. as of January 5, 2000 and 2001, and the related consolidated
statements of income, equity, and cash flows for each of the three years in the
period ended January 5, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pomeroy Computer
Resources, Inc. at January 5, 2000 and 2001, and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended January 5, 2001 in conformity with accounting principles generally
accepted in the United States.
Grant Thornton LLP
/s/ Grant Thornton LLP
Cincinnati, Ohio
February 9, 2001
F - 1
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, January 5,
2000 2001
----------- -----------
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,737 $ 1,097
Accounts receivable:
Trade, less allowance of $504 and $586 at January 5, 2000 and
2001, respectively . . . . . . . . . . . . . . . . . . . . . 129,882 137,252
Vendor receivables, less allowance of $1,902 and $1,892 at
January 5, 2000 and 2001, respectively . . . . . . . . . . . 53,698 44,622
Net investment in leases. . . . . . . . . . . . . . . . . . . . 14,937 28,950
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,144 5,562
----------- -----------
Total receivables . . . . . . . . . . . . . . . . . . . . 202,661 216,386
----------- -----------
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,858 29,346
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,819 5,845
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . 247,075 252,674
----------- -----------
Equipment and leasehold improvements:
Furniture, fixtures and equipment.. . . . . . . . . . . . . . . 20,773 28,211
Leasehold Improvements. . . . . . . . . . . . . . . . . . . . . 4,503 5,351
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 25,276 33,562
Less accumulated depreciation . . . . . . . . . . . . . . . . . 9,804 14,916
----------- -----------
Net equipment and leasehold improvements. . . . . . . . . 15,472 18,646
----------- -----------
Net investment in leases . . . . . . . . . . . . . . . . . . . . . 29,183 40,110
Goodwill and other intangible assets . . . . . . . . . . . . . . . 39,344 53,458
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,067 2,945
----------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . $ 333,141 $ 367,833
=========== ===========
See notes to consolidated financial statements
F - 2
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of notes payable. . . . . . . . . . . . . . . . $ 11,337 $ 25,617
Accounts payable:
Floor plan financing . . . . . . . . . . . . . . . . . . . . 41,843 49,108
Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,611 18,190
----------- -----------
Total accounts payable. . . . . . . . . . . . . . . . . . 92,454 67,298
Bank notes payable. . . . . . . . . . . . . . . . . . . . . . . 69,027 55,464
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . 5,891 7,124
Accrued liabilities:
Employee compensation and benefits . . . . . . . . . . . . . 4,989 3,841
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . - 418
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 437 449
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 1,814 2,614
----------- -----------
Total current liabilities. . . . . . . . . . . . . . . 185,949 162,825
----------- -----------
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . 6,971 23,303
Equity:
Preferred stock, $.01 par value; authorized 2,000 shares,
(no shares issued or outstanding) . . . . . . . . . . . . - -
Common stock, $.01 par value; authorized 20,000 shares,
(11,843 and 12,585 shares issued at January 5, 2000 and
2001, respectively) . . . . . . . . . . . . . . . . . . . 118 126
Paid in capital. . . . . . . . . . . . . . . . . . . . . . . 66,743 78,731
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 73,682 103,170
----------- -----------
140,543 182,027
Less treasury stock, at cost (31 shares at January 5, 2000
and 2001) . . . . . . . . . . . . . . . . . . . . . . . . 322 322
----------- -----------
Total equity . . . . . . . . . . . . . . . . . . . . . 140,221 181,705
----------- -----------
Total liabilities and equity . . . . . . . . . . . . . $ 333,141 $ 367,833
=========== ===========
See notes to consolidated financial statements
F - 3
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Fiscal Years Ended January 5,
-------------------------------
1999 2000 2001
--------- --------- ---------
Net sales and revenues:
Sales - equipment,supplies and leasing $555,433 $652,936 $785,694
Service. . . . . . . . . . . . . . . . 72,495 103,821 139,444
--------- --------- ---------
Total net sales and revenues . . 627,928 756,757 925,138
--------- --------- ---------
Cost of sales and service:
Equipment, supplies and leasing. . . . 501,162 591,119 718,064
Service. . . . . . . . . . . . . . . . 42,602 61,384 83,724
--------- --------- ---------
Total cost of sales and service. 543,764 652,503 801,788
--------- --------- ---------
Gross profit.. . . . . . . . . . . . . 84,164 104,254 123,350
--------- --------- ---------
Operating expenses:
Selling, general and administrative. . 41,136 48,930 57,476
Rent expense . . . . . . . . . . . . . 2,412 2,940 3,361
Depreciation . . . . . . . . . . . . . 3,748 3,572 5,149
Amortization . . . . . . . . . . . . . 1,629 2,955 4,367
Provision for doubtful accounts. . . . 141 346 298
--------- --------- ---------
Total operating expenses . . . . 49,066 58,743 70,651
--------- --------- ---------
Income from operations. . . . . . . . . . 35,098 45,511 52,699
--------- --------- ---------
Other expense (income):
Interest expense . . . . . . . . . . . 2,670 3,858 4,352
Miscellaneous. . . . . . . . . . . . . (140) (93) (547)
--------- --------- ---------
Total other expense. . . . . . . 2,530 3,765 3,805
--------- --------- ---------
Income before income tax . . . . . . . 32,568 41,746 48,894
Income tax expense . . . . . . . . . . 12,409 16,864 19,406
--------- --------- ---------
Net income.. . . . . . . . . . . . . . $ 20,159 $ 24,882 $ 29,488
========= ========= =========
Weighted average shares outstanding:
Basic. . . . . . . . . . . . . . . . . 11,466 11,728 12,201
========= ========= =========
Diluted. . . . . . . . . . . . . . . . 11,751 11,815 12,411
========= ========= =========
Earnings per common share:
Basic. . . . . . . . . . . . . . . . . $ 1.76 $ 2.12 $ 2.42
========= ========= =========
Diluted. . . . . . . . . . . . . . . . $ 1.72 $ 2.11 $ 2.38
========= ========= =========
See notes to consolidated financial statements
F - 4
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Fiscal Years Ended January 5,
-------------------------------
1999 2000 2001
--------- --------- ---------
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . $ 20,159 $ 24,882 $ 29,488
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . 3,748 4,558 5,977
Amortization . . . . . . . . . . . . . . . . . . 1,629 2,955 4,367
Deferred income taxes. . . . . . . . . . . . . . (331) 715 732
Gain on sale of fixed assets . . . . . . . . . . - - (414)
Changes in working capital accounts, net of
effects of acquisitions:
Accounts receivable . . . . . . . . . . . . . (41,639) (37,828) 7,383
Inventories . . . . . . . . . . . . . . . . . 8,062 (6,472) 7,547
Prepaids. . . . . . . . . . . . . . . . . . . (1,129) (1,721) (2,126)
Net investment in leases. . . . . . . . . . . 261 (26,058) (22,643)
Floor plan financing. . . . . . . . . . . . . 11,949 7,076 7,265
Trade payables. . . . . . . . . . . . . . . . 6,111 4,346 (37,315)
Deferred revenue. . . . . . . . . . . . . . . 366 1,825 982
Income tax payable. . . . . . . . . . . . . . (4,766) (61) (470)
Other, net. . . . . . . . . . . . . . . . . . (912) (882) (2,603)
--------- --------- ---------
Net operating activities . . . . . . . . . . . . 3,508 (26,665) (1,830)
--------- --------- ---------
Cash Flows from Investing Activities:
Capital expenditures . . . . . . . . . . . . . . (3,181) (4,649) (5,649)
Acquisition of subsidiary companies, net of
cash acquired . . . . . . . . . . . . . . . . (10,214) (4,222) (15,226)
Acquisition of reseller assets, net of cash
acquired. . . . . . . . . . . . . . . . . . . (10,999) - -
--------- --------- ---------
Net investing activities . . . . . . . . . . . . (24,394) (8,871) (20,875)
--------- --------- ---------
Cash Flows from Financing Activities:
Payments under notes payable . . . . . . . . . . (2,149) (14,280) (18,195)
Proceeds under notes payable . . . . . . . . . . 6,995 16,549 41,828
Net proceeds (payments) under bank notes payable 16,319 29,248 (13,563)
Proceeds from exercise of stock options and
related tax benefit. . . . . . . . . . . . . . . 3,375 1,495 11,570
Proceeds from employee stock purchase plan . . . - 299 425
Purchase of treasury stock . . . . . . . . . . . (118) - -
Other. . . . . . . . . . . . . . . . . . . . . . 46 - -
--------- --------- ---------
Net financing activities . . . . . . . . . . . . 24,468 33,311 22,065
--------- --------- ---------
Increase (decrease) in cash . . . . . . . . . . . . 3,582 (2,225) (640)
Cash:
Beginning of period. . . . . . . . . . . . . . . 380 3,962 1,737
--------- --------- ---------
End of period. . . . . . . . . . . . . . . . . . $ 3,962 $ 1,737 $ 1,097
========= ========= =========
See notes to consolidated financial statements
F - 5
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except for share Common Paid-in Retained Treasury Total
amounts) stock capital earnings stock equity
------- -------- --------- ---------- ---------
Balances at January 5, 1998 . . . . . . 114 60,226 28,641 (204) 88,777
Net income . . . . . . . . . . . . . 20,159 20,159
38,885 common shares issued
for acquisitions . . . . . . . . . 750 750
Stock options exercised and
related tax benefit. . . . . . . . . 3 3,372 3,375
Repayment of obligations under
Section 16(b) of the Securities
Exchange Act of 1934 . . . . . . . . 46 46
Purchase of treasury stock. . . . . . (118) (118)
------- -------- --------- ---------- ---------
Balances at January 5, 1999 . . . . . . 117 64,394 48,800 (322) 112,989
Net income . . . . . . . . . . . . . 24,882 24,882
38,638 common shares issued
for acquisitions . . . . . . . . . . 556 556
Stock options exercised and
related tax benefit. . . . . . . . . 1 1,494 1,495
26,113 common shares issued for
employee stock purchase plan . . 299 299
------- -------- --------- ---------- ---------
Balances at January 5, 2000 . . . . . . 118 66,743 73,682 (322) 140,221
Net income . . . . . . . . . . . . . 29,488 29,488
Stock options exercised and
related tax benefit. . . . . . . . . 8 11,563 11,571
35,092 common shares issued for
employee stock purchase plan . . 425 425
------- -------- --------- ---------- ---------
Balances at January 5, 2001 . . . . . . $ 126 $ 78,731 $ 103,170 $ (322) $181,705
======= ======== ========= ========== =========
See notes to consolidated financial statements
F - 6
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 5, 1999, JANUARY 5, 2000 AND JANUARY 5, 2001
1. COMPANY DESCRIPTION
Pomeroy Computer Resources, Inc. (the "Company") was organized in February
1992 to consolidate and reorganize predecessor companies. The Company has
20 million shares of $.01 par value common stock authorized, with 12.6
million shares outstanding. The Company is also authorized to issue 2
million shares of $.01 par value preferred stock. In fiscal 1995 the
Company formed a wholly-owned subsidiary, Technology Integration Financial
Services, Inc. ("TIFS") (f/k/a - Pomeroy Computer Leasing Company, Inc.
("PCL")), for the purpose of leasing computer equipment to the Company's
customers. In fiscal 1997, the Company formed a wholly-owned subsidiary,
Pomeroy Computer Resources of South Carolina, Inc. ("PCR-SC") for the
purpose of acquiring The Computer Store ("TCS"), a computer reseller and
service provider located in Columbia, South Carolina. In fiscal 1998, the
Company formed a wholly-owned subsidiary, Pomeroy Select Integration
Solutions, Inc. ("Pomeroy Select"), to which the Company transferred the
assets, liabilities, business, operations and personnel comprising the
Company's information technology ("IT") services business on January 6,
1999. In October 1999, the legal structure of the Company was changed for
the purpose of increasing efficiencies. The Company formed the following
wholly-owned subsidiaries: Pomeroy Computer Resources Holding Company, Inc.
("PCR Holding") and Pomeroy Computer Resources Sales Company, Inc. ("PCR
Sales"). In addition, the Company formed Pomeroy Select Advisory Services,
Inc. ("PSAS"), a wholly-owned subsidiary of Pomeroy Select, Acme Data
Services, LLC ("Acme Data"), a wholly-owned subsidiary of PCR Sales,
T.I.F.S. Advisory Services, Inc. ("TIFS Advisory"), a wholly-owned
subsidiary of TIFS, and Pomeroy Computer Resources LLP ("PCR Ops"), a
partnership between the Company and PCR Holding. PCR-SC and Global Combined
Technologies, Inc. were merged into PCR Sales. In fiscal 2000, The Company
and and its wholly owned subsidiary Pomeroy Select acquired The Linc
Corporation ("The Linc"), a network design, consulting and systems
engineering provider located in Birmingham, Alabama and Val Tech Computer
Systems, Inc. ("Val Tech"), a leasing company also located in Birmingham,
Alabama.
The Company sells, installs, services and leases microcomputers and
microcomputer equipment primarily for commercial, health care,
governmental, financial and educational customers. The Company also derives
revenue as a service solution provider of Internet infrastructure services,
network infrastructure services (LAN/WAN/MAN), and network integration
services, e-business application development and desktop management
services. The Company has thirty-one regional offices located in 16 states
throughout the Southeast and Midwest United States. The Company grants
credit to substantially all customers in these areas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries TIFS, Pomeroy Select, PCR Holding, PCR Sales, PSAS, Acme Data,
TIFS Advisory, PCR Ops, The Linc and Val Tech. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain
reclassifications have been made to the fiscal 1998 and 1999 financial
statements included herein to conform with the presentation used in fiscal
2000.
Fiscal Year - The Company's fiscal year is a 12- month period ending
January 5. References to fiscal 1998, 1999 and 2000 are for the fiscal
years ended January 5, 1999, January 5, 2000 and January 5, 2001,
respectively.
Goodwill and Other Intangible Assets - Goodwill is amortized using the
straight-line method over periods of fifteen to twenty-five years. In
accordance with SFAS No. 121, "Accounting for The Impairment of Long-Lived
Assets", the Company evaluates its goodwill on an ongoing basis to
determine potential impairment by comparing the carrying value to the
undiscounted estimated expected future cash flows of the related assets.
Other intangible assets are amortized using the straight-line method over
periods up to ten years.
Equipment and Leasehold Improvements - Equipment and leasehold improvements
are stated at cost. Depreciation on equipment is computed using the
straight-line method over estimated useful lives. Depreciation on leasehold
improvements is computed using the straight-line method over estimated
useful lives or the term of the lease, whichever is less. During fiscal
2000 and 1999, depreciation expense associated with TIFS's operating leases
is classified under cost of sales. Fiscal 1998 has not been reclassified
due to immateriality. Expenditures for repairs and maintenance are charged
to expense as incurred and additions and improvements that significantly
extend the lives of assets are capitalized. Upon sale or retirement of
depreciable property, the cost and accumulated depreciation are removed
from the related accounts and any gain or loss is reflected in the results
of operations.
F - 7
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Income Taxes - Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Vendor Incentive Rebates - Certain vendors provide incentive rebates to
perform product training, advertising and other sales and market
development activities. The Company recognizes these rebates when it has
completed its obligation to perform under the specific incentive
arrangement. Incentive rebates are recorded as reductions of selling,
general and administrative expense or, if volume based, cost of sales.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined by the average cost method.
Revenue Recognition - The Company recognizes revenue on the sale of
equipment and supplies or sales-type leases when the products are shipped.
Service revenue is recognized when the applicable services are provided or
for service contracts, ratably over the lives of the contracts. Leasing
revenue is recognized on a monthly basis as fees accrue and from financing
at level rates of return over the term of the lease or receivable, which
are primarily sales-type leases ranging from one to three years.
Stock-Based Compensation - The Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation", in the fall of
1995. The statement encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value
beginning in fiscal 1996. The Company elected to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's common
stock at the date of grant over the amount an employee must pay to acquire
the stock. The Company adopted SFAS No. 123 for disclosure purposes and for
non-employee stock options.
Earnings per Common Share - The computation of basic earnings per common
share is based upon the weighted average number of common shares
outstanding during the period. Diluted earnings per common share is based
upon the weighted average number of common shares outstanding during the
period plus, in periods in which they have a dilutive effect, the effect of
common shares contingently issuable, primarily from stock options.
The following is a reconciliation of the number of shares used in the basic
EPS and diluted EPS computations:
Fiscal Years
(in thousands, except per -------------------------------------------------------------
share data) 1998 1999 2000
------------------- ------------------- -------------------
Per Share Per Share Per Share
Shares Amount Shares Amount Shares Amount
------ ----------- ------ ----------- ------ -----------
Basic EPS 11,466 $ 1.76 11,728 $ 2.12 12,201 $ 2.42
Effect of dilutive stock options 285 (0.04) 87 (0.01) 210 (0.04)
------ ----------- ------ ----------- ------ -----------
Diluted EPS 11,751 $ 1.72 11,815 $ 2.11 12,411 $ 2.38
====== =========== ====== =========== ====== ===========
F - 8
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Use of Estimates in Financial Statements - In preparing financial
statements in conformity with generally accepted accounting principles,
management makes estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value Disclosures - The fair value of financial instruments
approximates carrying value.
Comprehensive Income - The Company does not have any comprehensive income
items other than net income.
Derivative Instruments and Hedging Activities - The Company does not
currently have any derivative instruments or hedging activities to report
under this standard.
3. ACCOUNTS RECEIVABLE
The following table summarizes the activity in the allowance for doubtful
accounts for fiscal years 1998, 1999 and 2000:
(in thousands) Trade Other
------- --------
Balance January 5, 1998 $ 355 $ 223
Provision 1998 193 1,100
Accounts written-off (444) (1,171)
Recoveries 175 167
------- --------
Balance January 5,1999 279 319
Provision 1999 346 2,142
Accounts written-off (876) (824)
Recoveries 755 265
------- --------
Balance January 5, 2000 504 1,902
Provision 2000 298 48
Accounts written-off (852) (58)
Recoveries 636 -
------- --------
Balance January 5, 2001 $ 586 $ 1,892
======= ========
4. NET INVESTMENT OF CAPITAL LEASES
The Company's capital lease portfolio includes direct financing and
operating leases. The Company originates financing for customers in a
variety of industries and throughout the United States. The Company has a
diversified portfolio of capital equipment financings for end users.
Direct financing and operating leases consist principally of notebook and
desktop personal computers, communication products and high-powered servers
with terms generally from two to three years. The components of the net
investment in direct financing leases as of end of fiscal years 1999 and
2000:
(in thousands) 1999 2000
-------- --------
Minimum Lease Payments Receivable $23,823 $58,681
Estimated Residual Value 818 4,049
Initial Direct Costs 425 622
Unearned Income (2,430) (5,445)
-------- --------
Total $22,636 $57,907
======== ========
F - 9
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. INVENTORIES
Inventories consist of items held for resale and are comprised of the
following components as of the end of fiscal:
(in thousands) 1999 2000
------- -------
Equipment and supplies $35,077 $25,910
Service parts 3,781 3,436
------- -------
Total $38,858 $29,346
======= =======
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following as of the end
of the fiscal year, net of accumulated amortization of $6,181 thousand
(1999) and $9,818 thousand (2000), respectively:
(in thousands) 1999 2000
------- -------
Goodwill $38,404 $51,862
Covenants not to compete 557 702
Customer lists 383 312
Intangibles - 582
------- -------
$39,344 $53,458
======= =======
In fiscal 1999, the Company acquired certain assets of Systems Atlanta
Commercial Systems, Inc., a privately held systems integrator and provider
of technology staffing in Atlanta, Georgia. In addition, the Company
acquired through a stock purchase Acme Data Systems ("ADS"), a privately
held computer network integrator and services provider in Columbus, Ohio.
The Company recorded $0.8 million and $4.6 million of goodwill in
connection with those acquisitions, respectively.
In fiscal 2000, the Company acquired certain assets of Data Source - Hagen,
a Minneapolis, Minnesota-based network integrator. In addition, the Company
acquired Datanet, Inc., a Raleigh, North Carolina-based Information
Technology Company and The Linc, a Birmingham Alabama-based Cisco Silver
Partner whose primary focus is on network design, consulting, systems
engineering and maintenance in connection with Cisco products and Val Tech,
a Birmingham, Alabama leasing company. The Company recorded $1.2 million,
$8.9 million, and $4.0 million of goodwill in connection with those
acquisitions, respectively.
7. BORROWING ARRANGEMENTS
Bank Notes Payable - The Company has available a $140 million credit
facility with Deutsche Financial Services Corp. ("DFS"). This credit
facility provides a credit line of $60 million for inventory financing and
$80 million for accounts receivable financing. The inventory financing
portion of the credit facility utilizes thirty day notes and provides
interest free financing due to subsidies by manufacturers. The credit
facility can be amended, with proper notification, if the thirty day
interest free subsidies provided by manufacturers are revised. At January
5, 2001, bank notes payable includes $9.2 million of overdrafts in accounts
with a participant bank to this credit facility. These amounts were
subsequently funded through the normal course of business. The accounts
receivable portion of the credit facility carries a variable interest rate
based on the prime rate less 125 basis points. The interest rate charged
was 7.75% at January 5, 2001. The credit facility is collateralized by
substantially all of the assets of the Company, except those assets that
collateralize certain other financing arrangements. Under the terms of the
credit facility, the Company is subject to various financial covenants. The
weighted average interest rate on the bank revolving credit agreements was
7.6%, 7.0%, and 8.0% in fiscal 1998, 1999 and 2000, respectively.
F - 10
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's credit facility extension agreement with DFS expired on
January 12, 2001, and the company signed an extension agreement with DFS
under the same terms as the original credit facility. This extension will
expire May 12, 2001.
Floor plan arrangements - The Company finances inventory through floor plan
arrangements with two finance companies. As of January 5, 2001, the floor
plan lines of credit were $60 million with DFS and $12 million with IBM
Credit Corporation ("ICC"). Borrowings under the ICC floor plan arrangement
are made on either thirty-day or sixty-day notes, with one-half of the note
amount due in thirty days on the sixty-day notes. Borrowings under the DFS
floor plan arrangement are made on thirty-day notes. Financing on many of
the arrangements, which are subsidized by manufacturers, is interest free.
The average rate on the plans overall is less than 1.0%.
Notes payable - Notes payable consist of the following:
(in thousands) Fiscal Years
----------------
1999 2000
------- -------
Non-recourse and recourse notes payable to banks at various
interest rates. The notes mature on various dates through 2003. $12,202 $42,598
Acquisition notes payable at various interest rates and unsecured.
Principal payments are made in equal annual installments ,ranging
from one to four years, through 2002. 4,906 5,599
Capital lease obligation at an imputed interest rate of 8.51%.
Principal and interest are payable in monthly installments of $55
thousand for a two year period through 2002. 1,200 723
------- -------
Total notes payable 18,308 48,920
Less current maturities 11,337 25,617
------- -------
Long-term notes payable $ 6,971 $23,303
======= =======
Payments on long-term debt and capital lease obligations are due as
follows:
(in thousands)
Fiscal Year
-----------------------
2001 $25,617
2002 19,179
2003 4,124
-------
$48,920
=======
F - 11
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
8. INCOME TAXES
The provision for income taxes consists of the following:
(in thousands) Fiscal Years
---------------------------
1998 1999 2000
-------- -------- -------
Current:
Federal $11,430 $14,275 $16,060
State 1,310 3,304 2,614
-------- -------- -------
Total current 12,740 17,579 18,674
-------- -------- -------
Deferred:
Federal (311) (618) 650
State (20) (97) 82
-------- -------- -------
Total deferred (331) (715) 732
-------- -------- -------
Total income tax provision $12,409 $16,864 $19,406
======== ======== =======
The approximate tax effect of the temporary differences giving rise to the
Company's deferred income tax assets (liabilities) are:
(in thousands) Fiscal Years
------------------
1999 2000
-------- --------
Deferred Tax Assets:
Bad debt provision $ 444 $ 246
Depreciation 890 895
Leases 864 1,614
Deferred compensation 627 622
Other 18 72
-------- --------
Total deferred tax assets 2,843 3,449
-------- --------
Deferred Tax Liabilities:
Acquisition of lease residuals (580) (278)
Accounts Receivable (279) (664)
Intangibles (1,161) (1,611)
Other - (805)
-------- --------
Total deferred tax liabilities (2,020) (3,358)
-------- --------
Net deferred tax assets $ 823 $ 91
======== ========
The Company's net long term deferred tax assets are included in long term
other assets. The Company's net short-term deferred liabilities are
included in miscellaneous liabilities.
F - 12
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's effective income tax rate differs from the Federal statutory
rate as follows:
Fiscal Years
-------------------
1998 1999 2000
----- ----- -----
Tax at Federal statutory rate 35.0 35.0 35.0
State taxes 4.4 5.9 3.7
Kentucky Relocation Credits (1.9) (0.9) (0.1)
Other 0.6 0.4 1.1
----- ----- -----
Effective tax rate 38.1 40.4 39.7
===== ===== =====
9. OPERATING LEASES
The Company leases office and warehouse space, vehicles and certain office
equipment from various lessors including a related party. Lease terms vary
in duration and include various option periods. The leases generally
require the Company to pay taxes and insurance. Future minimum lease
payments under noncancelable operating leases with initial or remaining
terms in excess of one year as of January 5, 2001 are as follows:
(in thousands)
Fiscal Year
-----------------------------
2001 $ 5,503
2002 4,013
2003 3,239
2004 1,983
2005 1,885
Thereafter 566
--------
Total minimum lease payments $17,189
========
10. EMPLOYEE BENEFIT PLANS
The Company has a savings plan intended to qualify under sections 401(a)
and 401(k) of the Internal Revenue Code. The plan covers substantially all
employees of the Company. Beginning January 6, 1998, the Company made
contributions to the plan based on a participant's annual pay.
Contributions made by the Company for fiscal 1999 and 2000 were
approximately $263 thousand and $317 thousand, respectively. During fiscal
1998, the distribution of assets from an Employee Stock Ownership Plan was
completed.
The Company has a stock purchase plan (the "1998 plan") under Section 423
of the Internal Revenue Code of 1986, as amended. The 1998 plan provides
substantially all employees of the Company with an opportunity to purchase
through payroll deductions up to 2,000 shares of common stock of the
Company with a maximum market value of $25,000. The purchase price per
share is determined by whichever of two prices is lower: 85% of the closing
market price of the Company's common stock in the first trading date of an
offering period (grant date), or 85% of the closing market price of the
Company's common stock in the last trading date of an offering period
(exercise date). 100,000 shares of common stock of the Company are reserved
for issuance under the 1998 plan. The Board of Directors of the Company may
at any time terminate or amend the 1998 plan. The 1998 plan will terminate
twenty years from the effective date unless sooner terminated.
F - 13
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
11. INVESTMENT IN LEASE RESIDUALS
The Company participates in a Remarketing and Agency Agreement
("Agreement") with Information Leasing Corporation ("ILC") whereby the
Company obtains rights to 50% of lease residual values for services
rendered in connection with locating the lessee, selling the equipment to
ILC and agreeing to assist in remarketing the used equipment.
During fiscal 1998, 1999 and 2000 the Company sold equipment and related
support services to ILC, for lease to ILC's customers, in amounts of $2.8
million, $0.6 million, and $2.8 million, respectively. The Company also
obtained rights to lease residuals from ILC in the amount of $250 thousand
in 1998. Such amounts are recorded as a reduction of the related cost of
sales. Residuals acquired in this manner are recorded at the estimated
present value of the interest retained.
The Company also purchases residuals associated with separate leasing
arrangements entered into by ILC. Such transactions do not involve the sale
of equipment and related support services by the Company to ILC. Residuals
acquired in this manner are accounted for at cost.
The carrying value of investments in lease residuals is $2.6 million and
$2.3 million as of January 5, 2000 and 2001, respectively and is included
in long-term net investment in leases. Investments in lease residuals are
evaluated on a quarterly basis, and are subject only to downward market
adjustments until ultimately realized through a sale or re-lease of the
equipment.
12. MAJOR CUSTOMERS
There were no sales to a major customer for fiscal 1998, 1999 and 2000.
13. ACQUISITIONS
During fiscal 1998, the Company completed several acquisitions. The total
consideration given consisted of $21.2 million in cash, subordinated notes
of $3.3 million and 39 thousand unregistered shares of the Company's stock
with an approximate value of $0.8 million. Interest on the subordinated
notes is payable quarterly. Principal is payable in equal annual
installments. The acquisitions were accounted for as purchases, accordingly
the purchase price was allocated to assets and liabilities based on their
estimated value as of the dates of acquisition. The results of operations
of the acquisitions are included in the consolidated statement of income
from the dates of acquisition. If the 1998 acquisitions had occurred on
January 6, 1998, the pro forma operations of the Company would not have
been materially different than that reported in the accompanying
consolidated statements of income.
During fiscal 1999, the Company completed two acquisitions. The total
consideration given consisted of $4.2 million in cash, subordinated notes
of $2.6 million and 39 thousand unregistered shares of the Company's stock
with an approximate value of $0.6 million. Interest on the subordinated
notes is payable quarterly. Principal in the amount of $0.6 million is
payable in full on the anniversary date of closing and the $2.0 million of
principal is payable in equal annual installments. The acquisitions were
accounted for as purchases, accordingly the purchase price was allocated to
assets and liabilities based on their estimated value as of the dates of
acquisition. The results of operations of the acquisitions are included in
the consolidated statement of income from the dates of acquisition. If the
1999 acquisitions had occurred on January 6, 1999, the pro forma operations
of the Company would not have been materially different than that reported
in the accompanying consolidated statements of income.
During fiscal 2000, the Company completed four acquisitions. The total
consideration given consisted of $15.2 million in cash, subordinated notes
of $4.8 million. Interest on the subordinated notes is payable quarterly.
Principal in the amount of $0.2 million was a 90 day note paid in full in
2000, and the $4.6 million of principal is payable in equal annual
installments commencing on the first anniversary of closing. The
acquisitions were accounted for as purchases, accordingly the purchase
price was allocated to assets and liabilities based on their estimated
value as of the dates of acquisition. The results of operations of the
acquisitions are included in the consolidated statement of income from the
dates of acquisition. If the 2000 acquisitions had occurred on January 6,
2000, the pro forma operations of the Company would not have been
materially different than that reported in the accompanying consolidated
statements of income.
F - 14
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
14. RELATED PARTIES
The Company leases its headquarters, distribution facility and the national
training center from a company that is controlled by the Chief Executive
Officer of the Company. It is a triple net lease agreement, which expires
in the year 2010. Base rental for fiscal 1999 and fiscal 2000 was $863
thousand and $1,068 thousand, respectively. The annual rental for these
properties was determined on the basis of a fair market value rental
opinion provided by an independent real estate company, which was updated
in 2000. In addition, the Company pays for the business use of real estate
that is owned by the Chief Executive Officer of the Company. During fiscal
years 1998, 1999 and 2000, the Company paid $60 thousand, $95 thousand and
$95 thousand, respectively in connection with this real estate.
A director of the Company is President of Information Leasing Corporation
("ILC"). In the first quarter of fiscal 2000, the Company sold certain
leases to ILC for $5.0 million.
15. SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental disclosures with respect to cash flow information and non-cash
investing and financing activities are as follows:
(in thousands) Fiscal Years
-----------------------------
1998 1999 2000
--------- -------- --------
Interest paid $ 2,463 $ 3,704 $ 4,341
========= ======== ========
Income taxes paid $ 17,432 $17,799 $20,206
========= ======== ========
Additions to goodwill for adjustments
to acquisition assets $ - $ 3,147 $ 1,119
========= ======== ========
Business combinations accounted
for as purchases:
Assets acquired $ 50,228 $10,497 $28,602
Liabilities assumed (25,015) (3,166) (8,581)
Notes payable (3,250) (2,553) (4,795)
Stock issued (750) (556) -
--------- -------- --------
Net cash paid $ 21,213 $ 4,222 $15,226
========= ======== ========
16. STOCKHOLDERS' EQUITY AND STOCK OPTION PLANS
The Company's 1992 Non-Qualified and Incentive Stock Option Plan provides
certain employees of the Company with options to purchase common stock of
the Company through options at an exercise price equal to the market value
on the date of grant. 3,500,000 shares of the common stock of the Company
are reserved for issuance under the plan. The plan will terminate ten years
from the date of adoption. Stock options granted under the plan are
exercisable in accordance with various terms as authorized by the
Compensation Committee. To the extent not exercised, options will expire
not more than ten years after the date of grant.
The Company's 1992 Outside Directors' Stock Option Plan provides outside
directors of the Company with options to purchase common stock of the
Company at an exercise price equal to the market value of the shares at the
date of grant. 262,500 shares of common stock of the Company are reserved
for issuance under the plan. The plan will terminate ten years from the
date of adoption. Pursuant to the plan, an option to purchase 10,000 shares
of common stock automatically will be granted on the first day of the
initial term of a director. An additional 2,500 shares of common stock
automatically will be granted to an eligible director upon the first day of
F - 15
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
each consecutive year of service on the board. Options may be exercised
after one year from the date of grant for not more than one-third of the
shares subject to the option and an additional one-third of the shares
subject to the option may be exercised for each of the next two years
thereafter. To the extent not exercised, options will expire five years
after the date of grant.
The following summarizes the stock option transactions under the plans for
the three fiscal years ended January 5, 2001:
Weighted Average
Shares Exercise price
----------- -----------------
Options outstanding January 5, 1998 636,297 $ 12.01
Granted 278,953 17.75
Exercised (264,990) 8.98
Forfeitures (7,175) 10.24
Other (54,826) 6.16
----------
Options outstanding January 5, 1999 588,259 13.97
Granted 811,852 16.02
Exercised (68,961) 7.98
Forfeitures (189,677) 17.74
----------
Options outstanding January 5, 2000 1,141,473 15.14
Granted 1,580,360 15.01
Exercised (726,867) 13.20
Forfeitures (359,572) 18.40
----------
Options outstanding January 5, 2001 1,635,394 $ 15.16
==========
The following summarizes options outstanding and exercisable at January 5,
2001:
Options Outstanding Options Exercisable
---------------------------------------------- ---------------------------
Number Weighted Avg. Number
Range of Outstanding Remaining Weighted Avg. Exercisable Weighted Avg.
Exercise Prices at 1/5/01 Contractual Life Exercise Price at 1/5/01 Exercise Price
- ---------------- ----------- ---------------- --------------- ----------- --------------
2.83 to $5.65 47,500 0.40 $ 5.14 47,500 $ 5.14
5.66 to $8.48 28,125 1.40 $ 5.93 28,125 $ 5.93
8.49 to $11.30 74,750 5.10 $ 10.51 74,750 $ 10.51
11.31 to $14.13 521,085 2.50 $ 12.71 372,277 $ 12.70
14.14 to $16.95 272,849 4.60 $ 15.27 62,899 $ 15.70
16.96 to $19.78 553,285 6.20 $ 17.67 33,812 $ 17.54
19.79 to $22.60 125,300 2.10 $ 21.78 118,634 $ 21.77
22.61 to $25.43 10,000 2.20 $ 23.56 9,167 $ 23.57
25.44 to $28.25 2,500 2.50 $ 26.50 1,667 $ 26.50
---------- ----------
1,635,394 748,831
========== ==========
The weighted average fair value at date of grant for options granted during
fiscal 1998, 1999 and 2000 was $7.00, $5.79 and $7.48, respectively. The
fair value of options at the date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
F - 16
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Fiscal 1998 Fiscal 1999 Fiscal 2000
------------ ------------ ------------
Expected life (years) 2.0 2.0 3.7
Interest rate 5.3% 6.4% 4.7%
Volatility 69% 60% 62%
Dividend yield 0% 0% 0%
Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant date for awards in fiscal 1998, 1999
and 2000 consistent with the provisions of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma
amounts indicated below:
(in thousands, except per
share amounts) Fiscal 1998 Fiscal 1999 Fiscal 2000
------------ ------------ ------------
Net income - as reported $ 20,159 $ 24,882 $ 29,488
Net income - pro forma $ 18,929 $ 20,854 $ 23,342
Net income per common share - as reported
Basic 1.76 2.12 2.42
Diluted 1.72 2.11 2.38
Net income per common share - pro forma
Basic 1.65 1.78 1.91
Diluted 1.61 1.77 1.88
17. LITIGATION
There are various legal actions arising in the normal course of business
that have been brought against the Company. Management believes these
matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
18. SEGMENT INFORMATION AND CONCENTRATIONS
Segment Information - The Company operates in three industry segments:
products, services and leasing. The products segment is primarily engaged
in the sale and distribution of computers, hardware, software and related
products. The Company offers products from an array of manufacturers
including Cisco, Computer Associates, Sun, Oracle, EMC, Compaq,
Hewlett-Packard, IBM, Microsoft, Nortel Networks, Novell and Palm
Computing. As a service solution provider, the Company offers five
categories of service: internet infrastructure services, network
infrastructure services(LAN/WAN/MAN), network integration services,
e-business application development and desktop management services.
Internet infrastructure solutions include services to assist customers in
implementing network and server infrastructure components, enterprise
management services that monitor the network buildup and broadband
implementation services. Network infrastructure services include
LAN/WAN/MAN implementation services. These services assist the customer in
installing and implementing an internal network infrastructure that
includes cabling, network equipment consulting, implementation and support;
IP telephony services for maximizing voice/data circuits, wireless LAN
implementation and storage services that provide consulting, design,
implementation and support on storage area networks and network attached
storage implementations. Network integration solutions provide services to
assist customers in implementing thin client/server based computing,
groupware implementation and System/Application enablement. E-business
application development includes the infrastructure platform consulting,
design and implementation. Desktop management services include assisting
customers in project roll-outs, installation of personal computer systems,
peripherals and accessories; warranty and non-warranty repair and
maintenance, redeployment and end-of-life services. The Company has
achieved Gold Authorization from Cisco. The Company has also been awarded 2
specialization's from Cisco; Voice Access and IP Telephony, which gives
customers access to specialized knowledge and expertise to consult, design
and implement converged voice and data telephony circuits and wireless LAN
implementations. The leasing segment primarily
F - 17
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
provides in-house leasing services to the Company's products and services
customers. The Company leases many types of equipment with the predominant
focus on notebook and desktop personal computers, communication products
and high-powered servers. The Company provides products and services
primarily to large and medium sized corporate, health care, governmental,
financial and educational customers. The Company has no operations outside
the United States.
The accounting policies of the segments are the same as those discussed in
the summary of significant accounting policies. The Company evaluates
performance based on operating earnings of the respective business units.
Intersegment sales and transfers are not significant.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. (in thousands)
Fiscal 1998
--------------------------------------------
Products Services Leasing Consolidated
--------- --------- -------- ------------
Revenue $ 554,012 $ 72,495 $ 1,421 $ 627,928
Income from operations $ 23,101 $ 11,980 $ 17 $ 35,098
Total assets $ 189,438 $ 42,199 $ 22,589 $ 254,226
Capital expenditures $ 766 $ 374 $ 2,041 $ 3,181
Depreciation and amortization $ 4,142 $ 995 $ 240 $ 5,377
Fiscal 1999
--------------------------------------------
Products Services Leasing Consolidated
--------- --------- -------- ------------
Revenue $ 648,924 $ 103,821 $ 4,012 $ 756,757
Income from operations $ 22,954 $ 21,111 $ 1,446 $ 45,511
Total assets $ 229,903 $ 55,043 $ 48,195 $ 333,141
Capital expenditures $ 3,435 $ 492 $ 722 $ 4,649
Depreciation and amortization $ 4,986 $ 1,342 $ 1,185 $ 7,513
Fiscal 2000
--------------------------------------------
Products Services Leasing Consolidated
--------- --------- -------- ------------
Revenue $ 775,299 $ 139,444 $ 10,395 $ 925,138
Income from operations $ 22,742 $ 26,622 $ 3,335 $ 52,699
Total assets $ 222,984 $ 69,652 $ 75,197 $ 367,833
Capital expenditures $ 3,967 $ 729 $ 953 $ 5,649
Depreciation and amortization $ 7,310 $ 1,749 $ 1,285 $ 10,344
Concentrations - During fiscal 1998, 1999 and 2000, approximately 30.2%,
32.2% and 29.6% respectively, of the Company's total net sales and revenues
were derived from its top ten customers.
Due to the demand for the products sold by the Company, significant product
shortages occur from time to time because manufacturers are unable to
produce certain products to meet increased demand. Failure to obtain
adequate product shipments could have a material adverse effect on the
Company's operations and financial results.
The Company is required to have authorizations from manufacturers in order
to sell their products. The loss of a significant vendor's authorization
could have a material adverse effect on the Company's business.
F - 18
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
19. SUBSEQUENT EVENTS
The Company's credit facility extension agreement with DFS expired on
January 12, 2001, and the Company signed an extension agreement with DFS
under the same terms as the original credit facility. This extension will
expire May 12, 2001. DFS approved, subject to execution of documentation,
an increase in the total facility to $175 million during the extension
period, which consists of $100 million working capital facility and $75
million inventory facility. The Company is currently negotiating with
various financial institutions a new credit facility in order to increase
its overall financing availability. Although there can be no assurances
that the Company will be able to finalize a new credit facility, the
Company currently anticipates that an agreement will be reached.
On January 11, 2001, the Company announced it had entered into a letter of
intent to purchase certain operating assets and the systems integration and
consulting business of Osage Systems Group, Inc. ("Osage"). The transaction
is subject to a number of consents. It is contemplated that the transaction
will also be effected through the provisions of the U.S. Bankruptcy Code
and will, accordingly, be subject to court approval. If the sale is
completed, the Company anticipates that the systems integration and
consulting business of Osage will operate as additional branch offices of
the Company and the results of operations from the acquisition will be
included in the consolidated statement of income from the date of
acquisition.
F - 19