Table of Contents

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):	 	August 5, 2004		

SAFEGUARD SCIENTIFICS, INC.

(Exact Name of Registrant as Specified in Charter)
 	 	 	 	 	
PENNSYLVANIA	 	1-5620	 	23-1609753	
	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(I.R.S. Employer
Identification No.)	
 	 	 	
800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA	 	19087-1945	
	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (610) 293-0600
Not applicable

(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS

									
ITEM 12. Results of Operations and Financial Condition	
SIGNATURES	
Exhibit Index	
PRESS RELEASE DATED AUGUST 5, 2004	

Table of Contents
ITEM 12 . Results of Operations and Financial Condition
     On August 5, 2004, Safeguard Scientifics, Inc. (“Safeguard”) issued a press release setting forth Safeguard’s financial information for the second quarter ended June 30, 2004. A copy of Safeguard’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
     This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. 
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 

 	 	 	
 	Safeguard Scientifics, Inc.		
 	 	 	
Dated: August 5, 2004 	By:  	    CHRISTOPHER J. DAVIS  	 	
 	 	    Christopher J. Davis 	 	
 	 	    Executive Vice President and Chief
    Administrative & Financial Officer 	 	
 	
Exhibit Index

		
99.1 	Press release dated August 5, 2004 issued by Safeguard Scientifics, Inc.	

 

EXHIBIT 99.1

CONTACT:
Janine Dusossoit
Vice President, Investor Relations
(610) 293-0600
SAFEGUARD ANNOUNCES SECOND QUARTER 2004 RESULTS
Wayne, PA, August 5, 2004 – Safeguard Scientifics, Inc. (NYSE: SFE), a leader in developing companies primarily in the information technology and healthcare life sciences areas, today announced its operating results for the second quarter ended June 30, 2004.
“Revenues in our Strategic Companies Segment increased 19% from the second quarter last year,” said Anthony L. Craig, President and Chief Executive Officer of Safeguard Scientifics, Inc. “We are seeing real traction in the growth of these companies. Our strong balance sheet positions us well to continue funding their growth as well as to consider acquisitions. We also have enhanced our internal capabilities to source new businesses that meet our focused criteria.”
Financial Highlights
Safeguard’s consolidated revenue for the second quarter of 2004 was $381.8 million, compared with $419.2 million for the second quarter of 2003 primarily a result of lower revenues at CompuCom Systems, continuing a trend from the last several quarters.
For the Strategic Company segment, revenues increased 19% to $31.7 million in the three months ended June 30, 2004, and rose 7% to $62.7 million for the six months ended June 30, 2004.

800 The Safeguard Building • 435 Devon Park Drive • Wayne, PA 19087-1945
Phone (610) 293-0600 • Fax (610) 293-0601 • Toll Free (877) 506-7371
http://www.safeguard.com

 

For the quarter ended June 30, 2004, Safeguard reported a net loss of $12.5 million, or a diluted loss per share of $0.10, compared with a net loss of $3.2 million, or a $0.03 diluted loss per share in the second quarter of 2003. Included in the second quarter 2004 results was a gain of $31.7 million related to the sale of our interest in Sanchez Computer Associates, Inc. Also included in the results for the second quarter is an impairment charge related to the goodwill of CompuCom. As previously announced, in connection with the proposed merger of CompuCom with an affiliate of Platinum Equity LLC, Safeguard anticipated recording an impairment of goodwill in the second quarter. The total impairment charge included in the operating results for the second quarter is $23.3 million after income taxes. This includes $14.0 million related to our share of CompuCom’s goodwill impairment charge, and an additional impairment recorded by Safeguard of $9.3 million.
As of June 30, 2004, Safeguard’s parent company cash balance was $161 million and the market value of its ownership of public company marketable securities was $200 million.
Web Cast
 Safeguard will host a Web cast on August 5, 2004 at 9:00 a.m. (ET) to discuss second quarter 2004 results. The call can be accessed live at the Safeguard Web site at www.safeguard.com and also will be archived and accessible following the live call.
About Safeguard
 Safeguard Scientifics, Inc. (NYSE: SFE) is a company that seeks to create long-term value by taking controlling interests primarily in information technology and healthcare life sciences companies and helping them develop through superior operations and management. Safeguard’s existing strategic companies focus on the following vertical markets: financial services, healthcare and pharmaceutical, manufacturing, retail and distribution, and telecommunications. For more information, visit www.safeguard.com .
Forward-Looking and Cautionary Statements
 Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning

800 The Safeguard Building • 435 Devon Park Drive • Wayne, PA 19087-1945
Phone (610) 293-0600 • Fax (610) 293-0601 • Toll Free (877) 506-7371
http://www.safeguard.com

 

of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are subject to risks and uncertainties. These forward-looking statements that could cause actual results to differ materially, include, among others, managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, the ability to execute our strategy, the uncertainty of the future performance of our companies, acquisitions and dispositions of companies, the inability to manage growth, compliance with government regulations and legal liabilities, additional financing requirements, labor disputes, the effect of economic conditions in the business sectors in which our companies operate, and other uncertainties described in the Company’s filings with the Securities and Exchange Commission. Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. The Company does not assume any obligation to update any forward-looking statements or other information contained in this press release.
# # #
NOTE TO EDITORS: Safeguard is a service mark of Safeguard Scientifics, Inc.

800 The Safeguard Building • 435 Devon Park Drive • Wayne, PA 19087-1945
Phone (610) 293-0600 • Fax (610) 293-0601 • Toll Free (877) 506-7371
http://www.safeguard.com

 

Safeguard Scientifics, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

 	 	    June 30,    	 	December 31,	
 	 	2004
	 	2003
	
 	 	(unaudited)	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	
Current Assets	 	 	 	 	 	 	 	 	
Cash and cash equivalents, restricted cash and short-term investments - Parent	 	$	161,422	 	 	$	131,065	 	
- Subsidiaries	 	 	140,004	 	 	 	94,945	 	
Accounts receivable	 	 	191,286	 	 	 	245,504	 	
Inventories	 	 	20,760	 	 	 	35,849	 	
Prepaid expenses and other current assets	 	 	11,492	 	 	 	11,293	 	

 	 	
Total current assets	 	 	524,964	 	 	 	518,656	 	
 	 	 	 	 	 	 	 	 	
Property and equipment, net	 	 	33,832	 	 	 	34,007	 	
Ownership interests in and advances to companies	 	 	35,763	 	 	 	53,119	 	
Available-for-sale securities	 	 	14,464	 	 	 	—	 	
Intangible assets, net	 	 	11,714	 	 	 	14,689	 	
Goodwill	 	 	153,881	 	 	 	195,652	 	
Other	 	 	27,153	 	 	 	20,208	 	

 	 	
Total Assets	 	$	801,771	 	 	$	836,331	 	

 	 	
 	 	 	 	 	 	 	 	 	
Liabilities and Shareholders’ Equity	 	 	 	 	 	 	 	 	
Total current liabilities	 	$	199,194	 	 	$	240,459	 	
 	 	 	 	 	 	 	 	 	
Long-term debt	 	 	4,812	 	 	 	2,537	 	
Minority interest	 	 	143,720	 	 	 	142,159	 	
Other long-term liabilities	 	 	13,044	 	 	 	15,005	 	
Convertible subordinated notes	 	 	54,763	 	 	 	200,000	 	
Convertible senior debentures	 	 	150,000	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	
Total shareholders’ equity	 	 	236,238	 	 	 	236,171	 	

 	 	
Total Liabilities and Shareholders’ Equity	 	$	801,771	 	 	$	836,331	 	

 	 	

800 The Safeguard Building • 435 Devon Park Drive • Wayne, PA 19087-1945
Phone (610) 293-0600 • Fax (610) 293-0601 • Toll Free (877) 506-7371
http://www.safeguard.com

 

Safeguard Scientifics, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share amounts)

 	 	Three Months Ended June 30,
	 	Six Months Ended June 30,
	
 	 	2004
	 	2003
	 	2004
	 	2003
	
 	 	(unaudited)	 	(unaudited)	
Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product sales	 	$	262,787	 	 	$	309,804	 	 	$	485,815	 	 	$	570,115	 	
Service sales	 	 	118,898	 	 	 	108,519	 	 	 	234,516	 	 	 	218,008	 	
Other	 	 	106	 	 	 	889	 	 	 	124	 	 	 	1,788	 	

 	 	 	 	

Total revenue	 	 	381,791	 	 	 	419,212	 	 	 	720,455	 	 	 	789,911	 	

 	 	 	 	

Operating Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales — product	 	 	244,992	 	 	 	288,246	 	 	 	452,073	 	 	 	524,152	 	
Cost of sales — service	 	 	78,328	 	 	 	70,662	 	 	 	154,433	 	 	 	143,888	 	
Selling and service	 	 	34,051	 	 	 	33,269	 	 	 	68,207	 	 	 	67,565	 	
General and administrative	 	 	29,944	 	 	 	28,694	 	 	 	55,065	 	 	 	59,320	 	
Depreciation and amortization	 	 	6,538	 	 	 	8,255	 	 	 	13,381	 	 	 	16,133	 	
Impairment (a)	 	 	42,719	 	 	 	—	 	 	 	42,719	 	 	 	—	 	

 	 	 	 	

Total operating expenses	 	 	436,572	 	 	 	429,126	 	 	 	785,878	 	 	 	811,058	 	

 	 	 	 	

 	 	 	(54,781	)	 	 	(9,914	)	 	 	(65,423	)	 	 	(21,147	)	
Other income, net	 	 	29,598	 	 	 	12,881	 	 	 	40,077	 	 	 	17,072	 	
Impairment — related party	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(659	)	
Interest Income	 	 	731	 	 	 	853	 	 	 	1,366	 	 	 	1,885	 	
Interest and financing expense	 	 	(2,616	)	 	 	(3,477	)	 	 	(5,914	)	 	 	(6,921	)	

 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before income taxes, minority interest and equity loss	 	 	(27,068	)	 	 	343	 	 	 	(29,894	)	 	 	(9,770	)	
Income tax benefit (expense)	 	 	4,683	 	 	 	(1,465	)	 	 	3,915	 	 	 	(2,857	)	
Minority interest	 	 	13,851	 	 	 	107	 	 	 	15,185	 	 	 	97	 	
Equity loss	 	 	(3,927	)	 	 	(2,135	)	 	 	(6,301	)	 	 	(6,159	)	

 	 	 	 	

Net loss	 	$	(12,461	)	 	$	(3,150	)	 	$	(17,095	)	 	$	(18,689	)	

 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic loss per share	 	$	(0.10	)	 	$	(0.03	)	 	$	(0.14	)	 	$	(0.16	)	
Diluted loss per share	 	$	(0.10	)	 	$	(0.03	)	 	$	(0.14	)	 	$	(0.17	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding - basic and diluted	 	 	119,505	 	 	 	118,348	 	 	 	119,410	 	 	 	118,256	 	
Certain prior year amounts have been reclassified to conform to the current year presentation.
(a) This amount relates to impairment of goodwill related to CompuCom. Safeguard’s net share of the impairment charge included in consolidated net loss is calculated as follows:

Impairment	 	$	(42,719	)	
Share of impairment allocated to minority shareholders of CompuCom (included on the Minority Interest line)	 	 	13,969	 	
Safeguard’s share of CompuCom’s income tax benefit related to the impairment charge	 	 	5,456	 	

Safeguard’s share of the impairment charge included in Consolidated Net Loss	 	$	(23,294	)	

800 The Safeguard Building • 435 Devon Park Drive • Wayne, PA 19087-1945
Phone (610) 293-0600 • Fax (610) 293-0601 • Toll Free (877) 506-7371
http://www.safeguard.com

 

Safeguard Scientifics, Inc.
Results of Segment Operations
(in thousands)

 	 	Three Months Ended June 30,
	 	Six Months Ended June 30,
	
 	 	2004
	 	2003
	 	2004
	 	2003
	
 	 	(unaudited)	 	(unaudited)	
Summary	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Strategic	 	$	(10,586	)	 	$	(10,481	)	 	$	(16,609	)	 	$	(18,182	)	
Non-Strategic	 	 	28,314	 	 	 	12,858	 	 	 	37,486	 	 	 	13,433	 	
CompuCom	 	 	(26,974	)	 	 	3,377	 	 	 	(25,516	)	 	 	6,823	 	

 	 	 	 	

Total segments	 	 	(9,246	)	 	 	5,754	 	 	 	(4,639	)	 	 	2,074	 	
Corporate operations	 	 	(7,898	)	 	 	(7,439	)	 	 	(16,371	)	 	 	(17,906	)	
Income tax benefit (expense)	 	 	4,683	 	 	 	(1,465	)	 	 	3,915	 	 	 	(2,857	)	

 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	(12,461	)	 	$	(3,150	)	 	$	(17,095	)	 	$	(18,689	)	

 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Strategic	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	 	31,665	 	 	 	26,720	 	 	 	62,709	 	 	 	58,415	 	
Net Loss	 	 	(10,586	)	 	 	(10,481	)	 	 	(16,609	)	 	 	(18,182	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-Strategic	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	 	8,186	 	 	 	14,678	 	 	 	16,139	 	 	 	23,297	 	
Net income	 	 	28,314	 	 	 	12,858	 	 	 	37,486	 	 	 	13,433	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CompuCom	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	 	341,913	 	 	 	377,728	 	 	 	641,569	 	 	 	708,025	 	
Net income (loss)	 	 	(26,974	)	 	 	3,377	 	 	 	(25,516	)	 	 	6,823	 	

800 The Safeguard Building • 435 Devon Park Drive • Wayne, PA 19087-1945
Phone (610) 293-0600 • Fax (610) 293-0601 • Toll Free (877) 506-7371
http://www.safeguard.com