GISX Global Imaging Sys (MM)

Revenues up 10.4 Percent and Operating Income up 11.1 Percent from Year-Ago Quarter TAMPA, Fla., Oct. 26 /PRNewswire/ -- Global Imaging Systems, Inc. (NASDAQ:GISX) today announced record revenues, operating income, net income and earnings per share for its fiscal second quarter ended September 30, 2006. Highlights of the quarter include: * Revenues increased 10.4 percent to $285.8 million. * Automated office equipment, primarily copiers, continued to post positive internal revenue growth for the 33rd consecutive quarter. * Operating income grew 11.1 percent to $31.3 million. * Net income was up 17.9 percent to $18.0 million. * Adjusted EBITDA increased 9.7 percent to $36.0 million. * Other income of $1.2 million resulted from the sale of selected training division assets. * Diluted earnings per share were $0.35, up 16.7 percent from the year ago second quarter diluted EPS of $0.30 after adjusting to reflect the 2-for-1 stock split in August 2006. * Repurchased 941,965 shares of common stock for a total price of approximately $20.0 million. * Acquired 20th core company, adding approximately $13.0 million in annualized revenue. The company also reported record results for the first half of fiscal 2007 ended September 30, 2006. Highlights of the first six months include: * Revenues increased 9.0 percent to $550.7 million. * Operating income grew 10.8 percent to $61.1 million. * Net income was up 12.4 percent to $33.6 million. * Adjusted EBITDA increased 9.6 percent to $70.2 million. * Diluted earnings per share were $0.65, up 10.2 percent from the year ago first half diluted EPS of $0.59 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 27.0 percent of total capital. * Repurchased 1,564,365 shares of common stock for a total price of approximately $32.5 million. * Completed three acquisitions, acquiring approximately $29.4 million in annualized revenue. Tom Johnson, chairman and CEO of Global Imaging Systems, said, "Another quarter of record earnings confirms our strategy from day one. Twelve years ago Global was founded with a stated mission to be the most profitable, not necessarily the biggest distributor of office technology. Thanks to our dedicated employees and loyal customers, we have consistently grown operating income faster than revenues and this past quarter was no exception. We've had a great first half of fiscal 2007 and are looking forward to the balance of the year." Michael Shea, president and COO of Global Imaging Systems, said, "We face continued competitive pressure on automated office equipment sales. However, our constant focus on customer retention and aftermarket revenues, including our print management program, resulted in revenue growth from our more profitable service and supplies business that was consistent with our internal revenue targets." Mr. Shea also commented, "Our ongoing, unrelenting attention to management development, sales training, manpower staffing levels and productivity improvement will help ensure our continued revenue and earnings success." Mr. Johnson said, "We ended the quarter with combined internal growth of six percent; which was at the high end of our previous guidance. Our second quarter internal growth for automated office equipment was lower than expected at one percent, due in part to a number of large equipment placements moving from sales to rentals. This was offset by a very strong 24 percent internal growth from our technology business. Our estimate for third quarter growth in total revenue, including acquisitions to date but not potential future acquisitions, is seven to nine percent. In light of the increasing shift to rentals in the automated office equipment business, our estimate for third quarter internal revenue growth is three to five percent. Diluted earnings per share should be in the range of 33 to 35 cents. This would compare with split-adjusted diluted EPS of 32 cents (64 cents as originally reported) for the third 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 second quarter conference call is scheduled for this morning, October 26, at 10:00 a.m. ET, and the third quarter 2007 conference call is scheduled for January 25, 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," variations of such words, "we are optimistic" and similar expressions 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) (Amounts in thousands except per-share amounts) Three Months Ended Six Months Ended September 30, September 30, 2006 2005 2006 2005 Revenues: Equipment and supplies sales $ 216,765 $ 194,993 $ 412,418 $ 377,500 Service and rentals 69,026 63,818 138,302 127,640 Total revenues 285,791 258,811 550,720 505,140 Costs and operating expenses: Cost of equipment and supplies sales 142,525 126,036 266,046 241,761 Service and rental costs 36,182 33,076 72,100 66,425 Selling, general and administrative expenses 75,361 71,099 150,591 140,959 Intangible asset amortization 437 436 906 889 Total costs and operating expenses 254,505 230,647 489,643 450,034 Income from operations 31,286 28,164 61,077 55,106 Other income 1,194 - 1,194 - Loss on early extinguishment of debt - - (1,045) - Interest expense (3,138) (3,445) (6,463) (6,771) Income before income taxes 29,342 24,719 54,763 48,335 Income taxes 11,326 9,443 21,138 18,417 Net income $ 18,016 $ 15,276 $ 33,625 $ 29,918 Net income per common share: Basic $ 0.35 $ 0.33 $ 0.68 $ 0.65 Diluted(a) $ 0.35 $ 0.30 $ 0.65 $ 0.59 Weighted average number of shares outstanding: Basic 51,017 45,810 49,462 46,160 Diluted 52,081 51,574 52,190 51,943 (a) The calculation of diluted earnings per common assumes the conversion of convertible notes issued in May 2003 resulting in 4,814 additional shares for the three months ended September 30, 2005, and 1,719 and 4,814 additional shares for the six months ended September 30, 2006 and 2005, respectively. For purposes of diluted earnings per common share, net income for the three months ended September 30, 2005 includes the addback of $442, representing interest and financing fee expense, net of taxes, associated with the convertible notes. For the six months ended September 30, 2006 and 2005, net income includes the addback of $219 and $885, 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 $ 18,016 $ 15,276 $ 33,625 $ 29,918 Income taxes 11,326 9,443 21,138 18,417 Interest expense 3,138 3,445 6,463 6,771 Amortization 437 436 906 889 Depreciation 4,246 4,180 8,249 8,091 EBITDA 37,163 32,780 70,381 64,086 Other income (1,194) - (1,194) - Loss on early extinguishment of debt - - 1,045 - Adjusted EBITDA $ 35,969 $ 32,780 $ 70,232 $ 64,086 GLOBAL IMAGING SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) September 30, March 31, 2006 2006 ASSETS Current assets: Cash and cash equivalents $ 10,112 $ 51,610 Accounts receivable, net 142,165 131,497 Inventories 109,156 98,073 Other current assets 15,209 14,757 Total current assets 276,642 295,937 Rental equipment, net 17,504 15,687 Property and equipment, net 19,042 17,810 Goodwill and other assets 574,952 555,223 Total assets $ 888,140 $ 884,657 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 99,211 $ 102,500 Current maturities of long-term debt 24 2,133 Deferred revenue 27,799 27,159 Income taxes payable 10,588 7,711 Total current liabilities 137,622 139,503 Deferred income taxes 45,958 42,247 Long-term debt, less current maturities 190,066 260,713 Other long-term liabilities - 976 Total liabilities 373,646 443,439 Total stockholders' equity 514,494 441,218 Total liabilities and stockholders' equity $ 888,140 $ 884,657 GLOBAL IMAGING SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended September 30, 2006 2005 OPERATING ACTIVITIES: Net income $ 33,625 $ 29,918 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,249 8,091 Amortization 906 889 Amortization of financing fees 347 545 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 - 1,159 Deferred income tax expense 4,018 3,671 Stock-based compensation expense 1,582 841 Changes in operating assets and liabilities, net of amounts acquired in purchase business combinations: Accounts receivable (8,752) (4,437) Inventories (8,907) (2,581) Prepaid expenses and other current assets (747) (1,051) Other assets 108 669 Accounts payable and accrued liabilities (8,541) (20,189) Deferred revenue (576) 201 Income taxes payable 2,877 7,083 Other long-term liabilities - 976 Net cash provided by operating activities 24,040 25,785 INVESTING ACTIVITIES: Purchases of property, equipment and rental equipment, net of proceeds from disposals (10,645) (11,118) Proceeds from sale of technology training division assets 1,575 - Purchases of businesses, net of cash acquired (20,208) (8,864) Net cash used in investing activities (29,278) (19,982) FINANCING ACTIVITIES: Payments on long-term debt (241,508) (32,876) Proceeds from issuances of long-term debt 226,251 31,728 Financing fees paid (2,112) - Purchases of treasury stock (32,548) (20,000) Stock options exercised 10,019 2,096 Tax benefit of stock option exercises and vested restricted stock 3,638 - Net cash used in financing activities (36,260) (19,052) Net decrease in cash and cash equivalents (41,498) (13,249) Cash and cash equivalents, beginning of period 51,610 25,365 Cash and cash equivalents, end of period $ 10,112 $ 12,116 Non-cash financing activity: Conversion of convertible notes to common stock, net $ 56,105 $ - 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, Inc. CONTACT: Tom Johnson, Chairman and CEO, or Michael Shea, President and COO, or Ray Schilling, Executive Vice President and CFO, Global Imaging Systems, Inc., +1-813-960-5508 or Investor Relations Consultants, Inc., +1- 727-781-5577 or E-mail, Web site: http://www.gisx.com/

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