CompuCom Reports 3rd Quarter 2002 Results.Business Editors DALLAS--(BUSINESS WIRE)--Oct. 23, 2002 CompuCom Systems, Inc. (Nasdaq:CMPC CMPC Classified Matter Protection and Control CMPC Compañia Manufacturera de Papeles y Cartones S.A. CMPC Cisco Multi-Path Channel CMPC Children's Media Policy Coalition CMPC Central Milk Producers Cooperative CMPC Connecticut Minority Purchasing Council ), a provider of outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. and systems integration services, today announced net earnings grew to $5.46 million, or $.10 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of , an increase from both the same period in 2001 and the second quarter 2002. Third quarter 2001 net earnings were $1.16 million or $.02 diluted earnings per share while second quarter 2002 net earnings were $4.72 million, or $.09 diluted earnings per share. Third quarter 2001 results include goodwill amortization of $.80 million or $.02 per share that is no longer required to be recorded under new SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142 accounting requirements for goodwill and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. adopted this year. Third quarter net revenues were $414.1 million, up 2.3% when compared to third quarter 2001. The growth in revenue was primarily attributable to an increase in service revenue to $81.0 million, 12.7% higher than the same period a year ago. Product revenue was $333.1 million compared to third quarter 2001 product revenue of $332.9 million. For the second quarter 2002, product revenue was $350.3 million and service revenue was $75.9 million. Gross margin as a percentage of revenue was 12.7%, lower than the third quarter 2001 level of 14.7% but even with the second quarter 2002. Product gross margin increased to 7.8% from last quarter's 7.5%, while service gross margin declined sequentially to 32.6% from 36.9%. The service gross margin decline was primarily attributable to an increase in lower margin services provided to the federal government. Service gross margin dollars continued to represent more than half of total gross margin dollars at 50.3%, up from 44.2% a year ago. J. Edward Coleman Edward Coleman may refer to:
"We continued to execute our strategy well, broadening the scope of the IT outsourcing and system integration services that we offer and combining those services with our product fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. capability to bring increased value to our clients. Starting from a strong base of existing solutions, we are expanding our offerings to include additional enterprise solutions based on technologies from BEA BEA - Basic programming Environment for interactive-graphical Applications, from Siemens-Nixdorf. , Hitachi Hitachi (hētä`chē), city (1990 pop. 202,141), Ibaraki prefecture, E central Honshu, Japan, on the Kashima Sea. The city is a leading producer of Japan's electrical equipment. , Network Appliance (1) A specialized device for use on a network. For example, Web servers, cache servers and file servers can be implemented as general-purpose computers with the appropriate software or as network appliances, which are computers dedicated to a single function and cannot do anything , EMC (1) (EMC Corporation, Hopkinton, MA, www.emc.com) The leading supplier of storage products for midrange computers and mainframes. Founded in 1979 by Richard J. Egan and Roger Marino, EMC has developed advanced storage and retrieval technologies for the world's largest companies. , Lexmark (Lexmark International, Inc., Lexington, KY, www.lexmark.com) A manufacturer of desktop and network printers that was spun off from IBM in 1991. For five years, IBM and Lexmark agreed not to compete with each other, and IBM continued to market printers to its own mainframe and and others." "In addition to solid revenue and earnings performance, our balance sheet remains strong," said M. Lazane Smith, CompuCom's senior vice president and chief financial officer. "We ended the quarter with $124 million in cash and continued to achieve strong results in both accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying performance and inventory management. In addition, our ongoing focus on reducing operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. and improving the operational aspects of our business resulted in a decrease in operating expense as a percentage of revenue to 10.5%, down from 14.1% a year ago and 10.8% last quarter." Mr. Coleman Cole·man , Cy Originally Seymour Kauffman. Born 1929. American composer and theatrical producer whose best known Broadway productions include Sweet Charity (1966) and The Will Rogers Follies (1991). concluded, "We are also pleased to have gained additional recognition for the quality of our services. Our Enterprise Help Desk received, for the fourth time, the STAR award in the Outsource Support Provider category from the Service & Support Professionals Association (SSPA SSPA Solid State Power Amplifier SSPA Service and Support Professionals Association SSPA Software Support Professionals Association SSPA Short Statured People of Australia Inc. SSPA Submicron Signal Processor Architecture ). In addition, our product fulfillment processes were re-certified as ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 9001 compliant under the more stringent ISO 9001:2000 standards. We remain focused on service quality as a primary differentiator for CompuCom in the marketplace." Management from CompuCom Systems, Inc. will host a conference call on Thursday Thursday: see week. , October 24, 2002 at 11 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT to discuss the results of the third quarter. To access the conference call, please dial 800/875-6883 and reference conference ID No. 6178358. The conference call will also be broadcast on World Investor Link's Vcall web site at www.vcall.com. A replay will be available by calling 800/642-1687 and referencing Conference ID No. 6178358 through November 1, 2002. CompuCom Systems, Inc., (Nasdaq:CMPC) headquartered in Dallas, is a provider of outsourcing and systems integration services. CompuCom's clients include Fortune 1000 enterprises, federal, state and local government, vertical industry leaders, major technology equipment providers, leading-edge systems integrators An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. and wireless technology providers. CompuCom leverages people, process and technology to offer best in class solutions that enable, optimize optimize - optimisation and operate the digital technology infrastructure. CompuCom is accessible via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.compucom.com. This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding revenues, gross margin, operating and financing expense, earnings, growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. and certain business trends that involve risks and uncertainties that could cause actual results to differ materially from the results discussed herein. Specifically, the following trends may not continue: the ability to grow services revenue and gross margins; declines in product revenue and product gross margin may occur and may be greater than anticipated; the ability to continue to decrease costs including, among others, financing costs; the ability to improve operational efficiency; the ability to improve services gross margin dollars and services gross margin as a percentage of total gross margin; the ability to continue to improve the balance sheet; the ability to win new clients; the expansion of the services the Company provides may not be as broad as the Company currently expects or widely accepted by clients; the manufacturers who use the Company's direct services may elect not to use those services. Other factors that could cause actual results to differ materially are: acquisition integration issues; competitive pricing and supply; the potential impact of the Compaq and Hewlett Packard merger; lower demand than anticipated for the products and services the Company sells; the impact of the manufacturer's shift to direct marketing programs may be more significant than anticipated; changes to manufacturers' and suppliers' pricing, price protection, rebate rebate, partial refund of the total price paid for goods or services. In the United States, rebates were historically given by railroads to favored shippers as a return on transportation charges. and incentive programs; short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. interest rate fluctuations; general economic conditions; employee turnover; potential impact of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; and the ability to collect trade and vendor accounts receivable, as well as the risks and uncertainties set forth from time to time in CompuCom's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and other public filings and disclosures. Readers should refer to those documents and should not place undue reliance on these forward-looking statements.
COMPUCOM SYSTEMS, INC.
CONDENSED COMPARATIVE FINANCIAL DATA
(All amounts in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ----------------------
2002 2001 2002 2001
--------- --------- ---------- -----------
Revenue
Product $333,081 $332,877 $942,640 $1,234,956
Service 81,008 71,883 224,555 212,801
--------- --------- ---------- -----------
Total revenue 414,089 404,760 1,167,195 1,447,757
--------- --------- ---------- -----------
Gross Margin
Product 26,126 33,085 79,136 113,069
Service 26,434 26,245 77,957 75,419
--------- --------- ---------- -----------
Total gross margin 52,560 59,330 157,093 188,488
--------- --------- ---------- -----------
Gross Margin Percentage
Product 7.8% 9.9% 8.4% 9.2%
Service 32.6% 36.5% 34.7% 35.4%
--------- --------- ---------- -----------
Total gross margin
percentage 12.7% 14.7% 13.5% 13.0%
--------- --------- ---------- -----------
Operating expenses
Selling 11,286 14,927 35,105 52,029
Service 10,223 14,359 32,139 41,674
General and
administrative 17,770 22,446 54,265 66,924
Depreciation and
amortization 4,380 5,205 13,854 16,594
--------- --------- ---------- -----------
Total operating expenses 43,659 56,937 135,363 177,221
--------- --------- ---------- -----------
Earnings from operations 8,901 2,393 21,730 11,267
Financing expense (income) (27) 455 523 2,932
--------- --------- ---------- -----------
Earnings before income taxes
and cumulative effect of
a change in accounting
principle for negative
goodwill 8,928 1,938 21,207 8,335
Income taxes 3,471 776 8,381 3,335
--------- --------- ---------- -----------
Earnings before cumulative
effect of a change in
accounting principle for
negative goodwill 5,457 1,162 12,826 5,000
Cumulative effect of a
change in accounting
principle for negative
goodwill, net of
income taxes - - 707 -
--------- --------- ---------- -----------
Net earnings $5,457 $1,162 $13,533 $5,000
========= ========= ========== ===========
Basic and diluted earnings
per common share
Earnings before
cumulative effect
of a change
in accounting principle
for negative goodwill $.10 $.02 $.24 $.09
Cumulative effect of a
change in accounting
principle for negative
goodwill, net of
income taxes - - .01 -
--------- --------- ---------- -----------
Net earnings $.10 $.02 $.25 $.09
========= ========= ========== ===========
Average common shares
outstanding
Basic 48,734 48,146 48,513 47,988
Diluted 51,001 49,355 50,154 48,557
COMPUCOM SYSTEMS, INC.
SUMMARY BALANCE SHEET
(All amounts in thousands)
(unaudited)
September 30, December 31,
2002 2001
------------- ------------
Cash and cash equivalents $124,434 $123,150
Receivables 150,087 134,980
Inventories 36,341 29,608
Other current assets 5,604 8,131
------------- ------------
Total current assets 316,466 295,869
Property and equipment, net 25,750 31,566
Other assets 114,688 116,648
------------- ------------
Total assets $456,904 $444,083
============= ============
Accounts payable $137,312 $120,173
Accrued liabilities 70,075 88,598
------------- ------------
Total current liabilities 207,387 208,771
Stockholders' equity 249,517 235,312
------------- ------------
Total liabilities and stockholders'
equity $456,904 $444,083
============= ============
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