GISX Global Imaging Sys (MM)

Revenues up 8.0 Percent and Net Income up 8.5 Percent from Year-Ago Quarter TAMPA, Fla., Jan. 25/PRNewswire/ -- Global Imaging Systems, Inc. (NASDAQ:GISX) today announced third quarter record revenues, operating income, net income and earnings per share for the three months ended December 31, 2006. Highlights of the quarter include: * Revenues increased 8.0 percent to $277.5 million. * Automated office equipment, primarily copiers and multi function products (MFPs), continued to post positive internal revenue growth for the 34th consecutive quarter. * Operating income grew 6.1 percent to $31.5 million. * Net income was up 8.5 percent to $17.5 million. * Adjusted EBITDA increased 5.5 percent to $36.2 million. * Diluted earnings per share were $0.34, up from the year ago third quarter diluted EPS of $0.32 after adjusting to reflect the 2-for-1 stock split in August 2006. * Repurchased 589,750 shares of common stock for a total price of approximately $12.6 million. * Acquired Copy Dynamics, Inc., a New Jersey office technology dealer, adding approximately $13.0 million in annualized revenue. The company also reported record results for the first nine months of fiscal 2007 ended December 31, 2006. Highlights of the nine months include: * Revenues increased 8.7 percent to $828.2 million. * Operating income grew 9.2 percent to $92.5 million. * Net income was up 11.0 percent to $51.1 million. * Adjusted EBITDA increased 8.2 percent to $106.4 million. * Diluted earnings per share were $0.99 versus the year ago comparable period diluted EPS of $0.91, after adjusting to reflect the 2-for-1 stock split in August 2006. * Completed the recasting of the company's capital structure, which includes a more flexible senior credit facility with lower interest rates. * Paid down debt to 28.2 percent of total capital. * Repurchased 2,154,115 shares of common stock for a total price of approximately $45.1 million. * Completed four acquisitions, acquiring approximately $42.4 million in annualized revenue. Tom Johnson, chairman and CEO of Global Imaging Systems, said, "Another quarter of record net income speaks for itself. We thank our loyal customers and especially our dedicated management team and employees for maintaining their focus on and commitment to outstanding customer service which translates into our consistent bottom-line results." Michael Shea, president and COO of Global Imaging Systems, said, "A year ago at this time one of our biggest challenges was healthcare costs, which we have effectively addressed. Our biggest challenge, and opportunity, for the balance of this fiscal year and next year is staffing for continuing growth in a low unemployment environment. We are already addressing this challenge by accelerating our investment in recruiting and training sales professionals. Keeping in mind our historical efforts to balance profitability and growth, we believe these strategic investments will provide the catalyst to increase our internal revenue growth while maintaining our mission of being the most profitable distributor of office technology." Mr. Shea added, "At the same time, our constant focus on customer retention, aftermarket revenues and our print management initiative continue to have a positive impact on our growth in service and supplies, the most profitable part of our business. We intend to sustain our focus on print management while expanding our sales force and more importantly our customer base." Mr. Johnson said, "We ended the quarter with total internal revenue growth of three percent. Our third quarter internal growth for automated office equipment was one percent, and for our technology business 12 percent. Our estimate for fourth quarter growth in total revenue, including acquisitions to date but not potential future acquisitions, is six to nine percent. Our estimate for fourth quarter internal revenue growth is two to four percent, as we continue to compare with strong results in prior year periods. Diluted earnings per share should be in the range of 32 to 34 cents. This would compare with split-adjusted diluted EPS of 31 cents (63 cents as originally reported) for the fourth quarter last year. Our acquisition program's external growth goal for fiscal year 2007 remains to acquire $60 to $100 million in annualized revenue." The company's third quarter conference call is scheduled for this morning, January 25, at 10:00 a.m. ET, and the fiscal year 2007 conference call is scheduled for May 9, 2007 at 10:00 a.m. ET. You may access the calls through live webcasts by using the link provided on the company's Internet home page at http://www.gisx.com/. The webcasts will also be archived and available on the company's website. About Global Imaging Systems Global Imaging Systems offers thousands of middle-market customers a one- stop solution for office technology needs in 32 states and the District of Columbia. The company provides a broad line of office technology solutions including the sale and service of copiers and other automated office equipment, network integration services, and electronic presentation systems. The company is also a disciplined, profitable consolidator in the highly fragmented office technology solutions industry. This press release includes presentations of earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA. Adjusted EBITDA represents EBITDA adjusted for the loss on early extinguishment of debt and other income. EBITDA is a measure commonly used by the capital markets to value enterprises. Interest, taxes, depreciation and amortization can vary significantly between companies due in part to differences in accounting policies, tax strategies, levels of indebtedness and interest rates. Excluding these items provides insight into the underlying results of operations and facilitates comparisons between Global and other companies. EBITDA is also a useful measure of the company's ability to service debt and is one of the measures used for determining debt covenant compliance. Management believes EBITDA and adjusted EBITDA information is useful to investors for these reasons. Both EBITDA and adjusted EBITDA are non-GAAP financial measures and should not be viewed as an alternative to GAAP measures of performance. Management believes the most directly comparable GAAP financial measure is net income and has provided a reconciliation of EBITDA and adjusted EBITDA to net income in this press release. This news release contains forward-looking statements and statements based on forward-looking information, including statements relating to Global's expected future acquisitions, future revenue growth and future diluted earnings per share. These statements include the words "expect," "believe," "should," and variations of such words, which are intended to identify such forward-looking statements. These statements are based on numerous assumptions and are subject to uncertainties and risks. Actual results could differ materially. Factors that might cause Global's results to differ materially include risks relating to changes in the overall economy; rising interest rates; Global's debt and debt service obligations; the challenge of integrating acquired businesses; the need for funding acquisitions; Global's ability to close acquisitions in a timely and cost-effective manner; the need for skilled employees; rapid technological change in Global's industry; dependence on suppliers; and high levels of competition. Most of these risks are discussed in more detail under the caption "Risk Factors" in Global's annual report on Form 10-K for the year ended March 31, 2006. GLOBAL IMAGING SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (IN THOUSANDS EXCEPT PER-SHARE AMOUNTS) Three Months Ended Nine Months Ended December 31, December 31, 2006 2005 2006 2005 Revenues: Equipment and supplies sales $205,853 $190,325 $618,271 $567,825 Service and rentals 71,625 66,519 209,927 194,159 Total revenues 277,478 256,844 828,198 761,984 Costs and operating expenses: Cost of equipment and supplies sales 130,848 119,889 396,894 361,650 Service and rental costs 38,127 34,909 110,227 101,334 Selling, general and administrative expenses 76,547 71,917 227,138 212,876 Intangible asset amortization 485 458 1,391 1,347 Total costs and operating expenses 246,007 227,173 735,650 677,207 Income from operations 31,471 29,671 92,548 84,777 Other income - - 1,194 - Loss on early extinguishment of debt - - (1,045) - Interest expense (3,046) (3,631) (9,509) (10,402) Income before income taxes 28,425 26,040 83,188 74,375 Income taxes 10,972 9,947 32,110 28,364 Net income $17,453 $16,093 $51,078 $46,011 Net income per common share: Basic $ 0.35 $0.35 $1.02 $1.00 Diluted (a) $ 0.34 $0.32 $0.99 $0.91 Weighted average number of shares outstanding: Basic 50,551 46,141 49,842 46,154 Diluted 51,599 51,935 51,981 51,943 (a) The calculation of diluted earnings per common share assumes the conversion of convertible notes issued in May 2003 resulting in 4,814 additional shares for the three months ended December 31, 2005, and 1,144 and 4,814 additional shares for the nine months ended December 31, 2006 and 2005, respectively. For purposes of diluted earnings per common share, net income for the three months ended December 31, 2005 includes the addback of $442, representing interest and financing fee expense, net of taxes, associated with the convertible notes. For the nine months ended December 31, 2006 and 2005, net income includes the addback of $219 and $1,326, respectively. All previously outstanding convertible notes were converted to common stock as of June 9, 2006. Reconciliation of Net Income to EBITDA and Adjusted EBITDA: Net income $17,453 $16,093 $51,078 $46,011 Income taxes 10,972 9,947 32,110 28,364 Interest expense 3,046 3,631 9,509 10,402 Amortization 485 458 1,391 1,347 Depreciation 4,226 4,163 12,475 12,254 EBITDA 36,182 34,292 106,563 98,378 Other income - - (1,194) - Loss on early extinguishment of debt - - 1,045 - Adjusted EBITDA $36,182 $34,292 $106,414 $98,378 GLOBAL IMAGING SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) December 31, March 31, 2006 2006 ASSETS Current assets: Cash and cash equivalents $9,386 $51,610 Accounts receivable, net 141,859 131,497 Inventories 109,381 98,073 Other current assets 15,855 14,757 Total current assets 276,481 295,937 Rental equipment, net 17,401 15,687 Property and equipment, net 19,053 17,810 Goodwill and other assets 585,115 555,223 Total assets $898,050 $884,657 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $90,576 $102,500 Current maturities of long-term debt 22 2,133 Deferred revenue 28,172 27,159 Income taxes payable 5,887 7,711 Total current liabilities 124,657 139,503 Deferred income taxes 47,113 42,247 Long-term debt, less current maturities 205,060 260,713 Other long-term liabilities - 976 Total liabilities 376,830 443,439 Total stockholders' equity 521,220 441,218 Total liabilities and stockholders' equity $898,050 $884,657 GLOBAL IMAGING SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended December 31, 2006 2005 OPERATING ACTIVITIES: Net income $51,078 $46,011 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,475 12,254 Amortization 1,391 1,347 Amortization of financing fees 490 823 Other income (1,194) - Non-cash portion of loss on early extinguishment of debt 1,045 - Tax benefit of stock option exercises and vested restricted stock (3,866) 1,978 Deferred income tax expense 5,170 5,631 Stock-based compensation expense 2,494 1,261 Changes in operating assets and liabilities, net of amounts acquired in purchase business combinations: Accounts receivable (7,451) (9,822) Inventories (8,809) (6,289) Prepaid expenses and other current assets (1,387) (1,888) Other assets 220 807 Accounts payable (15,196) (10,556) Accrued liabilities, compensation and benefits and interest (3,160) (5,519) Deferred revenue (1,990) (371) Income taxes payable 2,042 5,320 Other long-term liabilities - 976 Net cash provided by operating activities 33,352 41,963 INVESTING ACTIVITIES: Purchases of property, equipment and rental equipment (14,537) (14,761) Proceeds from sale of technology training division assets 1,575 - Purchases of businesses, net of cash acquired (29,697) (13,879) Net cash used in investing activities (42,659) (28,640) FINANCING ACTIVITIES: Payments on long-term debt (285,389) (33,419) Proceeds from issuances of long-term debt 285,125 31,728 Financing fees paid (2,143) (19) Purchases of treasury stock (45,129) (20,000) Stock options exercised 10,753 4,294 Tax benefit of stock option exercises and vested restricted stock 3,866 - Net cash used in financing activities (32,917) (17,416) Net decrease in cash and cash equivalents (42,224) (4,093) Cash and cash equivalents, beginning of period 51,610 25,365 Cash and cash equivalents, end of period $9,386 $21,272 Non-cash financing activity: Conversion of convertible notes to common stock, net $56,081 $- Treasury stock issued for business purchases $1,100 $920 Note: Certain prior year amounts have been reclassified to conform to the current year presentation. DATASOURCE: Global Imaging Systems CONTACT: Tom Johnson, Chairman and CEO, or Michael Shea, President and COO, or Ray Schilling, Executive Vice President and CFO, all of Global Imaging Systems, Inc., +1-813-960-5508; or Investor Relations Consultants, Inc., +1-727-781-5577 or Web site: http://www.gisx.com/

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