<PAGE>   1
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q

(MARK ONE)

  [ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

                                       OR

  [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         FOR THE TRANSITION PERIOD FROM _______________ TO _______________.


                        Commission File Number:  0-23686
                                               -----------

                            PC SERVICE SOURCE, INC.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                  52-1703687
            --------                                  ----------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)                
                                              
  2350 VALLEY VIEW LANE, DALLAS, TEXAS                   75234
  ------------------------------------                   -----
(Address of principal executive offices)               (Zip Code)


                               (214) 406-8583
                               --------------
            (Registrant's telephone number, including area code)


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

As of October 31, 1996, there were 5,746,820 shares of the registrant's common
stock outstanding.
================================================================================

<PAGE>   2
                     PC SERVICE SOURCE, INC. AND SUBSIDIARY

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                         Number
                                                                                         ------
<S>          <C>                                                                         <C>
PART I.      FINANCIAL INFORMATION

             Item 1. Financial Statements   . . . . . . . . . . . . . . . . . . . .           1

             Item 2. Management's Discussion and Analysis of
                     Financial Condition and Results of Operations  . . . . . . . .           6


PART II.     OTHER INFORMATION

             Item 1.   Legal Proceedings  . . . . . . . . . . . . . . . . . . . . .           11

             Item 6.   Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .           11
</TABLE>
<PAGE>   3
                         PART I.  FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS


                     PC SERVICE SOURCE, INC. AND SUBSIDIARY
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                September 30,      December 31,
                                                                    1996               1995        
                                                                -------------      ------------
<S>                                                               <C>              <C>
                           ASSETS

Current assets:
  Cash and cash equivalents . . . . . . . . . . . . . . . .       $   3,339          $      833
  Accounts receivable, net  . . . . . . . . . . . . . . . .          12,801              10,251
  Inventories . . . . . . . . . . . . . . . . . . . . . . .          19,102              13,202
  Deferred income taxes . . . . . . . . . . . . . . . . . .             806               1,322
  Income taxes receivable . . . . . . . . . . . . . . . . .              --                  80
  Other . . . . . . . . . . . . . . . . . . . . . . . . . .             889                 712
                                                                  ---------          ----------
         Total current assets . . . . . . . . . . . . . . .          36,937              26,400

Property and equipment, net . . . . . . . . . . . . . . . .           9,661               6,453
Other noncurrent assets . . . . . . . . . . . . . . . . . .             313                 274
                                                                  ---------          ----------

  Total Assets  . . . . . . . . . . . . . . . . . . . . . .       $  46,911          $   33,127
                                                                  =========          ==========

           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable  . . . . . . . . . . . . . . . . . . . .       $   8,273          $    8,876
  Accrued liabilities . . . . . . . . . . . . . . . . . . .           3,130               1,894
  Current installments of obligations
     under capital leases . . . . . . . . . . . . . . . . .             661                 320
  Income taxes payable  . . . . . . . . . . . . . . . . . .             104               --   
                                                                  ---------          ----------
         Total current liabilities  . . . . . . . . . . . .          12,168              11,090
                                                                  ---------          ----------

Long-term debt  . . . . . . . . . . . . . . . . . . . . . .           2,490              10,165
Deferred income taxes . . . . . . . . . . . . . . . . . . .             336                 269
Stockholders' equity  . . . . . . . . . . . . . . . . . . .          31,917              11,603
                                                                  ---------          ----------

  Total Liabilities and Stockholders' Equity  . . . . . . .       $  46,911          $   33,127
                                                                  =========          ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       1
<PAGE>   4
                     PC SERVICE SOURCE, INC. AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                   Three Months Ended                     Nine Months Ended
                                                       September 30,                        September 30,     
                                               ----------------------------         -----------------------------
                                                  1996              1995              1996                 1995
                                               ---------         ----------         ---------           ---------
<S>                                            <C>               <C>                <C>                 <C>
Net revenues  . . . . . . . . . . . . . .      $  28,478         $   16,301         $  81,545           $  48,357
Cost of revenues  . . . . . . . . . . . .         20,490             11,995            57,668              35,253
                                               ---------         ----------         ---------           ---------
  Gross margin  . . . . . . . . . . . . .          7,988              4,306            23,877              13,104
                                               ---------         ----------         ---------           ---------

Operating expenses:
  Selling, general and administrative . .          7,122              6,436            19,359              14,194
  Depreciation and amortization . . . . .            570                383             1,502               1,116
                                               ---------         ----------         ---------           ---------
    Total operating expenses  . . . . . .          7,692              6,819            20,861              15,310
                                               ---------         ----------         ---------           ---------

    Earnings (loss) from operations . . .            296             (2,513)            3,016              (2,206)

Interest expense, net . . . . . . . . . .             31                166               502                 248
                                               ---------         ----------         ---------           ---------

    Earnings (loss) before income taxes .            265             (2,679)            2,514              (2,454)

Income taxes (benefit)  . . . . . . . . .             86             (1,012)              922                (917)
                                               ---------         ----------         ---------           ---------
Net earnings (loss) . . . . . . . . . . .      $     179         $   (1,667)        $   1,592           $  (1,537)
                                               =========         ==========         =========           ========= 

Earnings (loss) per common share  . . . .      $     .03         $     (.43)        $     .31           $    (.39)
                                               =========         ==========         =========           ========= 

Weighted average common
      shares outstanding  . . . . . . . .          5,991              3,896             5,095               3,894
                                               =========         ==========         =========           ========= 
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       2
<PAGE>   5
                     PC SERVICE SOURCE, INC. AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 Nine Months Ended
                                                                                   September 30,        
                                                                             -------------------------
                                                                               1996            1995
                                                                             ---------       ---------
<S>                                                                          <C>             <C>       
Cash flows from operating activities:
  Net earnings (loss)   . . . . . . . . . . . . . . . . . . . . . . . .      $   1,592       $  (1,537)
  Adjustments to reconcile net earnings to net
      cash used in operating activities:
      Depreciation and amortization . . . . . . . . . . . . . . . . . .          1,502           1,116
      Deferred income taxes . . . . . . . . . . . . . . . . . . . . . .            583             151
      Loss incurred on terminated supply agreement  . . . . . . . . . .             --           1,935
      Other, net  . . . . . . . . . . . . . . . . . . . . . . . . . . .            (75)             --
  Changes in current assets and liabilities:
      Accounts receivable . . . . . . . . . . . . . . . . . . . . . . .         (2,550)         (4,377)
      Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .         (5,900)         (3,661)
      Other current assets  . . . . . . . . . . . . . . . . . . . . . .           (158)           (164)
      Income taxes  . . . . . . . . . . . . . . . . . . . . . . . . . .            184          (1,760)
      Payable to Intelogic Trace  . . . . . . . . . . . . . . . . . . .             --          (1,200)
      Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . .           (603)          2,702
      Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . .          1,236             987
                                                                             ---------       ---------
          Net cash used in operating activities . . . . . . . . . . . .         (4,189)         (5,808)
                                                                             ---------       ---------
Cash flows from investing activities:
  Capital expenditures  . . . . . . . . . . . . . . . . . . . . . . . .         (2,736)         (3,934)
                                                                             ---------       ---------
         Net cash used in investing activities  . . . . . . . . . . . .         (2,736)         (3,934)
                                                                             ---------       ---------

Cash flows from financing activities:
  Proceeds from issuance of common stock  . . . . . . . . . . . . . . .         18,521              --
  Proceeds from exercise of stock options . . . . . . . . . . . . . . .            177              --
  Net long-term debt borrowings (repayments)  . . . . . . . . . . . . .         (8,934)          8,274
  Principal payments under capital lease obligation . . . . . . . . . .           (333)           (141)
                                                                             ---------       ---------
         Net cash provided by financing activities  . . . . . . . . . .          9,431           8,133
                                                                             ---------       ---------
Net increase (decrease) in cash and cash equivalents  . . . . . . . . .          2,506          (1,609)
Cash and cash equivalents at beginning of period  . . . . . . . . . . .            833           2,332
                                                                             ---------       ---------
Cash and cash equivalents at end of period  . . . . . . . . . . . . . .      $   3,339       $     723
                                                                             =========       =========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>   6
                     PC SERVICE SOURCE, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

(1) GENERAL

    These condensed interim consolidated financial statements, which include
    the accounts of PC Service Source, Inc.  ("PCSS") and Cyclix Engineering
    Corporation ("Cyclix"), a majority-owned subsidiary of PCSS (Cyclix and
    PCSS are hereinafter collectively referred to as the "Company"), should be
    read in conjunction with the consolidated financial statements and the
    summary of significant accounting policies and notes thereto included in
    the Company's 1995 Annual Report on Form 10-K.  All significant
    intercompany balances and transactions have been eliminated in
    consolidation.  The information furnished is unaudited but reflects all
    adjustments, consisting only of normal recurring accruals, which are, in
    the opinion of management, necessary to present a fair statement of the
    results for these interim periods.  Interim results are not necessarily
    indicative of results expected for the full year.  Certain prior year
    information has been reclassified to conform to the current year
    presentation.


(2) LONG-TERM DEBT

    Long-term debt (in thousands) consists of the following:

<TABLE>
<CAPTION>
                                                                  September 30,          December 31,
                                                                      1996                   1995       
                                                                 ---------------        --------------
                 <S>                                             <C>                     <C>
                 Revolving bank credit facility . . . . . .      $         --            $       8,934
                 Obligations under capital leases . . . . .                3,151                 1,551
                                                                 ---------------         -------------
                                                                           3,151                10,485

                 Less current installments of obligations
                   under capital leases . . . . . . . . .                    661                   320
                                                                 ---------------         -------------
                 Total long-term debt . . . . . . . . . .        $         2,490         $      10,165
                                                                 ===============         =============
</TABLE>


(3) STOCKHOLDERS' EQUITY

    The Company issued 1,437,500 shares of common stock, par value $.01 per
    share (the "Common Stock") in connection with its June 1996 public stock
    offering.  The transaction resulted in net proceeds to the Company and an
    increase in stockholders' equity of $18.5 million.   Also in connection
    with that offering, CompuCom Systems, Inc. exercised a warrant to purchase
    up to 250,000 shares of Common Stock.  Pursuant to the net exercise
    provision of the warrant, 209,821 shares were issued and are outstanding.
    Also during the first nine months of 1996, a portion of the warrants to
    acquire 100,000 shares of Common Stock that were issued to representatives
    of the underwriters of the Company's 1994 initial public offering were
    exercised.  Pursuant to the net exercise provisions of those warrants,
    22,317 shares were issued and are outstanding and 14,918 shares of Common
    Stock are available to be acquired under the terms of the warrants as of
    September 30, 1996.


                                       4
<PAGE>   7
(4) SUPPLEMENTAL CASH FLOW INFORMATION

    During the first nine months of 1996 and 1995, respectively, the Company
    made interest payments of $553,000 and $177,000, related to borrowings
    under its line of credit and its capital lease obligations, and had cash
    receipts for interest income of $76,000 and $38,000.  The Company had net
    tax payments of $150,000 for the nine months ended September 30, 1996
    compared with tax payments of $688,000 in 1995.  Also, during the first
    nine months of 1996, $1.9 million of assets were acquired through non-cash
    capital lease obligations.





                                       5
<PAGE>   8
                     PC SERVICE SOURCE, INC. AND SUBSIDIARY


ITEM 2:      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table displays the Company's statements of operations as a
percentage of net revenues:

<TABLE>
<CAPTION>
                                                   Three Months Ended                Nine Months Ended
                                                      September 30,                    September 30,     
                                               ---------------------------           ------------------
                                                1996                1995              1996       1995
                                               -------            --------           -------     ------ 
<S>                                            <C>                <C>                 <C>        <C>   
Net revenues . . . . . . . . . . . . . .         100.0%              100.0 %           100.0%     100.0 %
Cost of revenues . . . . . . . . . . . .          72.0                73.6              70.7       72.9
                                               -------            --------           -------     ------ 
    Gross margin . . . . . . . . . . . .          28.0                26.4              29.3       27.1
                                               -------            --------           -------     ------ 

Operating expenses:
    Selling, general and administrative           25.0                39.5              23.8       29.4
    Depreciation and amortization  . . .           2.0                 2.4               1.8        2.3
                                               -------            --------           -------     ------ 
         Total operating expenses  . . .          27.0                41.9              25.6       31.7
                                               -------            --------           -------     ------ 

        Earnings (loss) from operations            1.0               (15.5)              3.7       (4.6)

Interest expense, net  . . . . . . . . .            .1                 1.0                .6         .5
                                               -------            --------           -------     ------ 
        Earnings (loss) before income taxes         .9               (16.5)              3.1       (5.1)

Income taxes (benefit) . . . . . . . . .            .3                (6.2)              1.1       (1.9)
                                               -------            --------           -------     ------ 
        Net earnings (loss)  . . . . . .            .6%              (10.3)%             2.0%       (3.2)%
                                               =======            ========           =======     ======= 
</TABLE>


THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1995

The Company recorded net earnings of $179,000, or $.03 per share, on 5,991,319
shares for the third quarter of 1996 compared with a net loss of $1,667,000, or
$.43 per share, on 3,895,674 shares for the same period in 1995.

Net revenues for the third quarter of 1996 of $28.5 million represent an
increase of $12.2 million, or 75% over the third quarter of 1995.  The
increased revenues occurred in all segments of the Company's business with the
largest gains coming from the general parts distribution operations, which
accounted for $7.2 million of the increase, excluding parts distribution to
service provider alliances and OEM customers.  The increase in general
distribution sales was mainly attributable to increased selling efforts,
including the expansion of the Company's field sales force.  Service provider
alliances also provided a $2.4 million increase over the prior year and OEM
outsourcing revenues grew by $2.0 million in the third quarter of 1996 compared
with the same period in 1995, mainly from new outsourcing arrangements.  The
remaining balance was predominantly due to increased revenues from Cyclix,
remanufacturing operations.


                                       6
<PAGE>   9
Gross margin dollars improved $3.7 million for the third quarter of 1996
compared with the third quarter of 1995.  The gross margin percentage for the
third quarter of 1996 increased to 28.0% compared with 26.4% for the same
period in 1995.  Because the gross margin is different on each computer spare
part which the Company sells, changes in the mix of parts sold by the Company
during a particular period effect the Company's gross margin.  The increase in
gross margin percentage was largely due to favorable variations in the mix of
parts sold during the period, as well as improved margins for parts sold on
exchange and improvements in pricing and purchasing.

Selling, general and administrative expenses ("SG&A") increased 11% to $7.1
million for the quarter ended September 30, 1996, compared with the same period
in 1995.  The increase in SG&A resulted primarily from a $1.2 million increase
in compensation expenses incurred in connection with additions to the Company's
middle and senior management team, which includes all associated placement
costs, higher average employee levels (440 during the third quarter of 1996
compared with 289 for the third quarter of 1995), and higher expenses for
temporary and contract employees.  During the third quarter of 1996, the
Company added two vice presidents to its senior management team; one to manage
the Company's information systems and the other to manage its call center
operations.  Occupancy expenses also increased $233,000, as the Company moved
into its new distribution facility in the first quarter of 1996.  The Company
also incurred higher advertising, telephone and bad debt expenses compared to
the third quarter of 1995.  SG&A as a percentage of net revenues declined to
25.0% compared with 39.5%  for the third quarter of 1995.  The decrease in SG&A
as a percentage of net revenues resulted primarily from the expenditures made
by the Company during 1995 to accommodate the anticipated growth in revenues
during 1996.  In addition, the Company incurred $1,271,000 of  expenses during
the third quarter of 1995 in connection with the termination of its outsourcing
agreement with Intelogic Trace, Inc. ("Intelogic") and the bankruptcy and
liquidation of Intelogic, with no related Intelogic revenues during the third
quarter of 1995.

Depreciation and amortization increased by $187,000 for the quarter ended
September 30, 1996 compared with the same period in 1995 largely due to
depreciation on capital expenditures made over the last year related to the
Company's information systems and new distribution facility.  Depreciation and
amortization as a percentage of net revenues, however, declined to 2.0% for the
third quarter of 1996 compared with 2.4% for the third quarter of 1995 due to
increased revenues in 1996.

Interest expense (net) decreased to $31,000 for the third quarter of 1996
compared with $166,000 for the third quarter of 1995 as a result of the Company
using a portion of the proceeds from its second quarter  1996 public offering
of Common Stock to pay off the entire outstanding indebtedness under its bank
line of credit in June 1996.  Interest (net) incurred by the Company in the
third quarter of 1996 largely represents interest related to its capital lease
obligations.


NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1995

The Company recorded net earnings of $1,592,000, or $.31 per share, on
5,094,688 shares for the nine months ended September 30, 1996 compared with a
net loss of $1,537,000, or $.39 per share, on 3,893,916 shares, for the same
period in 1995.

Net revenues for the first nine months of 1996 of $81.5 million represent an
increase of $33.2 million, or 69%, over the first nine months of 1995.  The
Company's outsourcing agreement with Intelogic contributed $3.1 million in net
revenues during the first nine months of 1995 and that agreement was terminated
in April 1995 in connection with the bankruptcy and liquidation of Intelogic.
Excluding sales to Intelogic during the first nine months of 1995, revenues
increased by $36.3 million, or 80%.  The increased revenues occurred in all
segments of the Company's business with the largest gains coming from the
general parts distribution





                                       7
<PAGE>   10
operations ($19.4 million) and service provider alliances arrangements ($8.8
million, excluding sales to Intelogic in 1995).  In addition, OEM outsourcing
revenues grew by $7.2 million in the first nine months of 1996 compared with
the same period in 1995, mainly from new outsourcing arrangements.

Gross margin dollars improved $10.8 million for the first nine months of 1996
compared with the first nine months of 1995.  The gross margin percentage for
the first nine months 1996 increased to 29.3% compared with 27.1% for the same
period in 1995.  Because the gross margin is different on each computer spare
part which the Company sells, changes in the mix of parts sold by the Company
during a particular period effect the Company's gross margin.  The increase in
gross margin percentage was largely due to favorable variations in the mix of
parts sold during the period, as well as improved margins for parts sold on
exchange, improvements in pricing and purchasing, and the fact that Cyclix had
slightly higher margins than the remainder of the Company's business.

SG&A increased 36.4% to $19.4 million for the nine months ended September 30,
1996, compared with the same period in 1995.  The increase in SG&A resulted
primarily from a $4.4 million increase in compensation expenses incurred in
connection with additions to the Company's middle and senior management team,
which includes all  associated placement costs, higher average employee levels
(397 for the first nine months of 1996 compared with 284 for the first nine
months of 1995), and higher expenses for temporary and contract employees.
During the third quarter of 1996, the Company added two vice presidents to its
senior management team; one to manage the Company's information systems and the
other to manage its call center operations.  Occupancy expenses also increased
$822,000, as the Company experienced higher rent associated with moving into
its new corporate headquarters in June 1995 and its new distribution facility
in the first quarter of 1996. In addition, the Company also incurred higher
telephone, advertising, and bad debt expenses compared to the first nine months
of 1995.  SG&A as a percentage of net revenues declined to 23.8% for the first
nine months of 1996 from 29.4% for 1995.  The decrease in SG&A as a percentage
of net revenues resulted primarily from expenditures made by the Company to
accommodate the anticipated growth in revenues in 1996.  In addition, 1995
included expenses incurred by the Company in connection with the termination of
its outsourcing agreement with Intelogic and the bankruptcy and liquidation of
Intelogic, with no related Intelogic revenues in the second or third quarters
of 1995.

Depreciation and amortization decreased as a percentage of net revenues to 1.8%
for the nine months ended September 30, 1996 compared with 2.3% for the same
period in 1995 despite a $386,000 increase in depreciation and amortization
expense.  The increase in expense was due to depreciation on capital
expenditures made over the last year related to the Company's information
systems, new distribution facility, and new corporate headquarters.

Interest expense (net) increased to $502,000 for the nine months ended
September 30, 1996 compared with $248,000 for the same period in 1995 due to
higher borrowing levels against the Company's revolving line of credit during
the first six months of 1996 and due to increased capital lease obligations.
The higher borrowing levels were dictated by increases in working capital which
were required to support the increase in net revenues.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically been a net user of cash from operations, and has
financed its working capital requirements and its capital expenditures from
revolving credit, equity financing and internally generated funds.

Cash used in operating activities during the first nine months of 1996 was $4.2
million compared with $5.8 million for the first nine months of 1995.  The
decrease in cash used in operating activities resulted largely





                                       8
<PAGE>   11
from a $3.1 million improvement in net earnings ($1.6 million for the nine
months ended September 30, 1996, as compared to a $1.5 million loss in the
first nine months of 1995).  This improvement was somewhat offset by cash used
for working capital activities which was driven by higher inventory levels
required to support the Company's growth.

Cash outflows from investing activities decreased $1.2 million as the Company
acquired $1.9 million of assets through non-cash capital leases and,
accordingly, reduced the level of cash used for capital expenditures.  Cash
flows from financing activities reflects the receipt of net proceeds of $18.5
million from the sale of 1,437,500 shares of Common Stock to the public in June
of 1996.  The Company used approximately $11.4 million of the proceeds from the
stock offering to pay off the balance of the Company's outstanding indebtedness
under its bank line of credit.

The Company currently maintains a revolving bank line of credit which provides
for borrowing up to a maximum of $16 million, based on a borrowing base of
qualified inventory and eligible receivables.  The line is used for working
capital purposes and matures in December 1997.  At September 30, 1996, the
Company had no outstanding borrowings under the line of credit.

On November 1, 1996, the Company acquired the parts distribution division of
ProAmerica, Inc., which included the parts inventory of the division, for
approximately $2,000,000 in cash.

The Company currently has financing agreements in place that allow for the
acquisition of capital assets through leasing arrangements; at September 30,
1996, these arrangements provided approximately $1.1 million to the Company for
the acquisition of capital assets.  During the first nine months of 1996, the
Company acquired $1.9 million of capital assets through capital lease
arrangements and made cash capital expenditures of $2.7 million.  The $4.6
million of capital expenditures were largely for a new enhanced high capacity
computer-telephony integration system for handling order processing,
information systems and warehouse equipment.  The Company anticipates capital
expenditures for the remainder of 1996 of approximately $2.0 million, including
non-cash capital expenditures of approximately $1.1 million for assets acquired
through capital leases.  These capital expenditures will be primarily for
improvements and modifications to the Company's information systems.  The
Company believes these expenditures are required to support and manage future
growth of its business.

The Company believes that its balances of cash and cash equivalents, its
long-term financing capability and its equipment financing agreement will be
sufficient to meet its working capital and capital expenditure requirements for
the foreseeable future.





                                       9
<PAGE>   12
                     PC SERVICE SOURCE, INC. AND SUBSIDIARY
                          PART II.  OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        A.       EXHIBITS

         The following exhibits are filed as part of this report:

         EXHIBIT
           NO.               DESCRIPTION
         -------             -----------

           11               Computation of Earnings Per Common Share

           27               Financial Data Schedule

       B.        REPORTS ON FORM 8-K

         No reports on Form 8-K have been filed by the Registrant during the
         three (3) months ended September 30, 1996.


                                       10
<PAGE>   13
                     PC SERVICE SOURCE, INC. AND SUBSIDIARY


                                   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 thereunto duly authorized.



                                        
                                    PC SERVICE SOURCE, INC.               
                                 -----------------------------------------
                                            (Registrant)
                               
                               
                               
                               
November 14, 1996                By: /s/ Bernard W. Rohde                    
                                     ----------------------------------------
                                         Bernard W. Rohde, Vice President, 
                                       Finance and Chief Accounting Officer





                                       11
<PAGE>   14
                               INDEX TO EXHIBITS



Exhibit
Number                        Description
--------                      -----------

11                   Computation of Earnings Per Common Share

27                   Financial Data Schedule