<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT 3
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 24, 1999
GLOBAL IMAGING SYSTEMS, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-24373 59-3247752
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
3820 Northdale Blvd., Suite 200A, Tampa, FL 33624
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 960-5508
- --------------------------------------------------------------------------------
(Former name or address, if changed since last report)
Exhibit Index is on Page 25
<PAGE>
On July 6, 1999, Global Imaging Systems, Inc. ("Global") filed a report on Form
8-K with respect to its acquisition of the stock of Lewan & Associates, Inc.
("Lewan"). At that time, it was impracticable to provide the financial
statements and pro forma financial information required to be filed therewith
relative to the acquired stock, and Global stated in such Form 8-K that it
intended to file the required company financial statements and pro forma
financial information as soon as practicable, but no later than 60 days from the
due date of that filing. On July 27, 1999 and August 4, 1999, Global filed
amended and restated reports on Form 8-K/A, amending and restating Item 7 to
include the required financial statement and pro forma information. By this
amendment, Global is filing an amended consent of Deloitte & Touche LLP.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 24, 1999 Global acquired all of the issued and outstanding stock of
Lewan pursuant to a Merger Agreement, dated as of June 24, 1999, by and among
Global, Lewan Acquisition, Inc., Lewan and the shareholders of Lewan.
As consideration of the merger, Global paid Lewan's shareholders approximately
$50,000,000 in cash, plus 288,704 shares of Global's common stock, par value
$.01 per share. An additional amount of up to $15,000,000 in cash and
approximately $5,000,000 in shares of Global's common stock may be paid based
upon Lewan's future earnings. Global borrowed funds under its $250 million line
of credit from First Union National Bank to pay the cash portion of the purchase
price.
Lewan is engaged in the office automation industry, including the sales of
copiers and computers, in the Colorado and southern Wyoming area.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Lewan & Associates, Inc.
Report of Independent Auditors.
Consolidated Balance Sheets as of December 31, 1998 and 1997.
Consolidated Statements of Income for the Years Ended December 31, 1998, 1997,
and 1996.
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1998, 1997, and 1996.
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998,
1997, and 1996.
Notes to Consolidated Financial Statements.
Unaudited Balance Sheet as of March 31, 1999.
Unaudited Statements of Income for the Three Months Ended March 31, 1999 and
1998.
Unaudited Statements of Cash Flows for the Three Months Ended March 31, 1999 and
1998.
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Lewan & Associates, Inc.:
We have audited the accompanying consolidated balance sheets of Lewan &
Associates, Inc. (the Company) and subsidiary as of December 31, 1998 and 1997,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and subsidiary as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
March 5, 1999, except for Note 8, as to which the
date is June 24, 1999
3
<PAGE>
LEWAN & ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,288,137 $ 2,788,038
Trade accounts receivable, net of allowance:
1998 - $138,000; 1997 - $125,000 9,451,065 8,882,515
Other receivables 207,568 289,245
Inventories 4,826,233 4,953,319
Prepaid expenses 4,177 354
Deferred income taxes 369,143 476,616
----------- -----------
Total current assets 18,146,323 17,390,087
----------- -----------
RENTAL EQUIPMENT, net of accumulated depreciation: 1998 -
$6,050,422; 1997 - $5,293,384 5,356,894 5,403,819
PROPERTY AND EQUIPMENT, net 2,071,986 1,840,867
OTHER ASSETS 88,661 93,099
----------- -----------
$25,663,864 $24,727,872
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 4,966,608 $ 5,554,352
Accrued salaries, wages and benefits 3,226,221 4,185,669
Other accrued expenses 637,386 1,002,717
Deferred revenue 2,884,349 3,420,958
Current portion of long term debt 430,492 492,216
----------- -----------
Total current liabilities 12,145,056 14,655,912
----------- -----------
LONG-TERM DEBT 237,071 291,722
----------- -----------
DEFERRED INCOME TAXES 371,559 392,069
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value: 399,200,000 shares
authorized; 1,010,000 issued and outstanding 613,570 613,570
Retained earnings 12,296,608 8,774,599
----------- -----------
Total stockholders' equity 12,910,178 9,388,169
----------- -----------
$25,663,864 $24,727,872
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
LEWAN & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Equipment and supplies sales $46,266,314 $43,331,634 $43,489,491
Service and rentals 24,650,925 23,994,826 19,493,965
----------- ----------- -----------
Total revenues 70,917,239 67,326,460 62,983,456
----------- ----------- -----------
COSTS AND OPERATING EXPENSES:
Cost of equipment and supplies sales 34,643,962 30,923,791 32,912,008
Service and rentals cost 12,334,546 12,268,035 8,687,108
Selling, general and administrative expense 18,413,989 19,119,519 17,926,423
----------- ----------- -----------
Total costs and operating expenses 65,392,497 62,311,345 59,525,539
----------- ----------- -----------
INCOME FROM OPERATIONS 5,524,742 5,015,115 3,457,917
OTHER INCOME (EXPENSE):
Interest income 181,283 90,376 81,022
Interest expense (46,180) (223,755) (375,191)
----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 5,659,845 4,881,736 3,163,748
PROVISION FOR INCOME TAXES 2,137,836 1,813,758 1,165,101
----------- ----------- -----------
NET INCOME $ 3,522,009 $ 3,067,978 $ 1,998,647
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
LEWAN & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Stock Retained Stockholder's
-------------------------
Shares Amount Earnings Equity
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 966,000 $ 378,830 $ 3,707,974 $ 4,086,804
Stock issued for compensation 22,000 97,020 97,020
Net income 1,998,647 1,998,647
--------- --------- ------------ -------------
BALANCE, DECEMBER 31, 1996 988,000 475,850 5,706,621 6,182,471
Stock issued for compensation 22,000 137,720 137,720
Net income 3,067,978 3,067,978
--------- --------- ------------ -------------
BALANCE, DECEMBER 31, 1997 1,010,000 613,570 8,774,599 9,388,169
Net income 3,522,009 3,522,009
--------- --------- ------------ -------------
BALANCE, DECEMBER 31, 1998 1,010,000 $ 613,570 $ 12,296,608 $ 12,910,178
========= ========= ============ =============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
LEWAN & ASSOCIATES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,522,009 $ 3,067,978 $ 1,998,647
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,480,932 2,548,949 2,397,081
Allowance for doubtful accounts receivable (39,955) (21,522) 61,418
(Gain) loss on sale of property and equipment 23,111 (25,362) 33,136
Stock issued for compensation 137,720 97,020
Deferred tax provision (benefit) 86,963 (61,862) (12,995)
Other 25,596 45,068 30,515
Changes in operating assets and liabilities:
Trade accounts receivable (528,595) (1,376,218) 19,811
Other receivables 81,677 (113,231) (517,578)
Inventories (3,917,115) (4,334,092) (3,913,475)
Prepaid expenses (3,823) 45,504 (33,587)
Rental equipment 1,224,413 687,058 1,056,693
Other assets 4,438 (60,251) 5,541
Trade accounts payable (587,744) 825,695 (524,609)
Other accrued expenses (1,380,625) 919,137 680,105
Deferred revenue (536,609) 124,181 308,351
---------- ----------- -----------
Net cash provided by operating activities 1,454,673 2,408,752 1,686,074
---------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (871,499) (683,433) (927,552)
Proceeds from sale of property and equipment 3,050 91,882 152,443
Distributions from joint venture 30,250 23,375 13,750
---------- ----------- ------------
Net cash used in investing activities (838,199) (568,176) (761,359)
---------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from long-term debt 725,041 1,816,353 1,953,410
Principal payments on long-term debt (841,416) (2,687,364) (1,570,232)
---------- ----------- -----------
Net cash used in financing activities (116,375) (871,011) 383,178
---------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 500,099 969,565 1,307,893
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,788,038 1,818,473 510,580
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,288,137 $ 2,788,038 $ 1,818,473
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 49,556 $ 231,742 $ 391,344
=========== =========== ===========
Taxes $ 2,070,614 $ 1,935,131 $ 1,278,727
=========== =========== ===========
</TABLE>
During the years ended December 31, 1998, 1997 and 1996 the Company transferred
inventory totalling $4,044,201, $3,700,327 and $4,078,886, respectively, to
rental equipment.
See notes to consolidated financial statements.
7
<PAGE>
LEWAN & ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - Lewan & Associates, Inc. sells, leases, services and
provides training and support of office technology equipment to businesses,
schools and municipalities from several locations throughout Colorado and
Wyoming.
Consolidation - The consolidated financial statements include the accounts of
Lewan & Associates, Inc. and its 55% owned subsidiary, Colorado Boulevard
Partners (collectively, the "Company"). Colorado Boulevard Partner's only
significant assets are a 50% interest in a corporate joint venture (the
"Joint Venture") and a leasehold interest. The Joint Venture's only
significant asset is a 100% interest in a partnership that owns an office
building which the Company leases for its corporate headquarters. Colorado
Boulevard Partners accounts for its investment in the Joint Venture utilizing
the equity method and accordingly recognizes 50% of the net income (loss) of
the Joint Venture as equity in earnings (loss) of Joint Venture. All
intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents - The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
Inventories - Inventories consist of finished goods available for sale and
are stated at the lower of cost or market value using the average cost
method. Inventories supplied by certain vendors are subject to priority claim
rights on specific product lines.
Rental Equipment - The Company rents equipment to its customers under
cancelable operating leases requiring certain minimum rentals, ranging in
length from month-to-month to 60 months. Rental equipment is recorded at cost
and depreciated to its estimated residual value using accelerated methods
based upon the estimated useful life of the respective assets, which is five
years. In accordance with industry practice, depreciation expense associated
with rental equipment is included in cost of sales in the accompanying
consolidated statements of income.
Property and Equipment - Depreciation and amortization on property and
equipment is computed using accelerated and straight-line methods over the
shorter of the estimated useful lives or the terms of the underlying leases
of the related assets.
The Company evaluates the potential impairment of long-lived assets and long-
lived assets to be disposed of in accordance with Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. There were no impairments
of the Company's long-lived assets in 1998, 1997 or 1996.
Income Taxes - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. Deferred
income tax assets and liabilities are determined based upon differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws. In the event this difference
results in a deferred tax asset, the Company evaluates the probability of
being able to realize the future benefits indicated by such asset. A
valuation allowance related to a deferred tax asset is recorded when it is
more likely than not that some portion or all of the deferred tax asset will
not be realized.
8
<PAGE>
Revenue Recognition - Equipment sales are recognized at the time of customer
acceptance. Supply sales to customers are recognized at the time of shipment.
Customer service and support contract revenues are recognized ratably over
the term of the underlying customer service or support contract. Other
service revenues are recognized as earned. Deferred revenue consists of
unearned customer service and support contract revenue, and payments
collected in advance under cancelable operating leases and for supplies.
Rental equipment revenues are recognized ratably over the lives of the
underlying cancelable operating leases.
The Company has arrangements with several non-affiliated entities under which
the Company receives commissions on certain sales of products by the entities
to the Company's customers. Commission revenues are recognized upon shipment
of the product to the customer.
Concentrations - Financial instruments which may subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents and trade receivables. Credit risks relating to concentrations
from accounts receivable are mitigated due to the large number of customers.
In 1998, 1997 and 1996, the Company purchased 26%, 26% and 27, respectively,
of its equipment inventory for resale and resale supplies and parts from one
vendor. Purchases from this vendor are based upon inventory requirements and
no purchase commitments or blanket purchase orders exist at December 31,
1998.
Stock Issued for Services - Common stock was issued to certain officers of
the Company in 1997 and 1996 for services and was valued at fair value as of
the award date as determined by the Company's Board of Directors. No common
stock was issued for services during 1998.
Use of Estimates - The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows at December 31:
<TABLE>
<CAPTION>
Estimated Lives 1998 1997
<S> <C> <C> <C>
Leasehold improvements shorter of lease term or life $ 959,286 $ 933,392
Furniture, fixtures and equipment 3 to 7 years 2,308,601 2,138,002
Vehicles 5 years 134,950 57,916
Computer equipment 3 to 5 years 485,034 517,304
Leasehold interest 600,089 600,089
----------- -----------
4,487,960 4,246,703
Accumulated depreciation
and amortization (2,415,974) (2,405,836)
----------- -----------
$ 2,071,986 $ 1,840,867
=========== ===========
</TABLE>
9
<PAGE>
3. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Notes payable to bank, bearing interest at 7.75%,
payable in monthly principal and interest installments of
$26,031 through April 2000 $392,571
Notes payable to bank, bearing interest at 7.75%,
payable in monthly principal and interest installments of
$12,898 through November 2000 274,992
Notes payable to bank, bearing interest at 8.75% to 10.25%,
payable in monthly principal and interest installments
of $39,375; repaid in February 1998 $303,348
Notes payable to bank, bearing interest at 8.48% to 8.85%,
payable in monthly principal and interest installments of
$32,995 through July 1999; repaid in February 1998 430,590
Other - repaid in February 1998 50,000
-------- --------
Total long-term debt 667,563 783,938
Less current portion 430,492 492,216
-------- --------
Long-term debt, net of current maturities $237,071 $291,722
======== ========
</TABLE>
The notes payable to bank are collateralized by accounts receivable,
equipment and inventories, to the extent not subject to priority claims. In
March 1999, all outstanding debt was repaid.
4. INCOME TAXES
The components of the income tax provision are as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal $1,786,940 $1,634,445 $1,028,557
State 263,933 241,175 149,539
---------- ---------- ----------
2,050,873 1,875,620 1,178,096
---------- ---------- ----------
Deferred:
Federal 79,269 (53,570) (11,253)
State 7,694 (8,292) (1,742)
---------- ---------- ----------
86,963 (61,862) (12,995)
---------- ---------- ----------
$2,137,836 $1,813,758 $1,165,101
========== ========== ==========
</TABLE>
10
<PAGE>
The effective tax rate differs from the statutory federal tax rate primarily
due to state income taxes.
The Company's current deferred tax assets relate primarily to temporary
differences associated with accrued liabilities and inventories. The
noncurrent deferred tax liabilities primarily relate to temporary differences
associated with property and equipment and its investment in the Joint
Venture.
5. COMMITMENTS AND CONTINGENCIES
The Company leases office, retail and warehouse space under long-term lease
agreements which are classified as operating leases. The Company subleases a
portion of the office space under noncancelable operating leases. Future
minimum lease commitments under all operating leases as of December 31, 1998
are as follows:
<TABLE>
<CAPTION>
Lease
Commitment
<S> <C>
1999 $1,113,208
2000 1,122,235
2001 1,052,573
2002 1,013,472
2003 858,586
----------
Total minimum lease payments $5,160,074
==========
</TABLE>
Minimum rental expense and sublease rental income related to land and
building leases are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Minimum rental expense $1,127,533 $1,045,091 $997,279
Sublease rental income (137,435) (78,095) (58,843)
---------- ---------- --------
Net rent expense $ 990,098 $ 966,996 $938,436
========== ========== ========
</TABLE>
In connection with the Company's investment in the Joint Venture (Note 1),
the Company has guaranteed debt of the Joint Venture aggregating $1,246,088
as of December 31, 1998.
11
<PAGE>
6. RELATED PARTIES
Lewan & Associates, Inc. leases office machines and furniture from a
partnership whose general partner is a significant shareholder of the
Company. The leases have various expiration dates ranging from twenty four
months to sixty months. These machines are used by the Company as rental
machines for its customers. During 1998, 1997 and 1996, the Company paid
rental fees to the partnership of $456,031, $363,481 and $363,905
respectively. In addition, the Company received $12,000, $12,000 and $11,000
in 1998, 1997 and 1996, respectively, from the partnership in payment for
administrative services under the rental program.
Four of the properties leased by the Company for office, retail and warehouse
space are owned partially or totally by shareholders of the Company. Lease
payments for these properties amounted to approximately $783,096, $741,680
and $646,998, in 1998, 1997 and 1996, respectively.
Future minimum lease payments to related parties totaling $3,851,502 are
included in Note 5.
7. EMPLOYEE BENEFITS
The Company has established a profit sharing plan (Plan) for qualified
employees as well as an employees' thrift savings plan established under the
provisions of Internal Revenue Code Section 401(k). Contributions to the
profit sharing plan are made annually at the discretion of the Company's
Board of Directors. In 1998, 1997 and 1996, contributions totaling $700,000,
$1,000,000 and $850,000, respectively, were made to the Plan.
Additionally, the Company made a matching contribution of one dollar in 1998,
1997 and 1996, for every dollar the employees contributed to the 401(k) plan
with a limit of $600 per employee in 1998, and $500 per employee in 1997 and
1996. Matching contributions to the 401(k) totaled $189,500, $153,000, and
$144,740 in 1998, 1997 and 1996, respectively.
While the Company expects to continue the Plan indefinitely, it has reserved
the right to modify, amend, or terminate the Plan. In the event of
termination, the entire amount contributed under the Plan must be applied to
the payment of benefits to the participants or their beneficiaries.
8. SUBSEQUENT EVENTS
In March 1999, the Company issued 40,000 shares of its common stock to an
employee/officer/ shareholder as stock based compensation and recognized
related expense of $590,400.
In March 1999, the Company sold its interest in its subsidiary Colorado
Boulevard Partners to certain of the other partners in the partnership for a
total of $200,000. The sale resulted in a loss of approximately $241,000.
The Company terminated its profit sharing plan effective May 31, 1999 and, in
connection therewith, all participant accounts became 100% vested. The
Company contributed $503,813 to the Plan during the period ended May 31,
1999.
On June 24, 1999, all outstanding common stock of the Company was acquired by
Global Imaging Systems, Inc.
******
12
<PAGE>
LEWAN & ASSOCIATES, INC.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements of Lewan & Associates ("Lewan") as of
March 31, 1999 and for the three month periods ended March 31, 1999 and 1998 do
not provide all disclosures included in the annual financial statements. These
interim financial statements should be read in conjunction with the annual
audited financial statements and the footnotes thereto. Results for the interim
periods are not necessarily indicative of the results for the fiscal year ending
December 31, 1999. In the opinion of management, the accompanying interim
financial statements reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial position
and results of operations of Lewan.
13
<PAGE>
Lewan & Associates, Inc.
Unaudited Balance Sheet
As of March 31, 1999
- ---------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,871,380
Trade accounts receivable 8,353,347
Other receivables 832,519
Inventories 4,892,856
Prepaid expenses 31,648
Deferred income taxes 369,143
-----------
Total current assets 18,350,893
RENTAL AND LEASED EQUIPMENT, net 5,552,270
PROPERTY AND EQUIPMENT, net 1,512,794
OTHER NON-CURRENT ASSETS 118,134
-----------
TOTAL ASSETS $25,534,091
===========
</TABLE>
14
<PAGE>
Lewan & Associates, Inc.
Unaudited Balance Sheet
As of March 31, 1999
- ------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Trade accounts payable $ 5,849,251
Accrued salaries, wages and benefits 2,695,451
Accrued expenses 731,085
Deferred revenue 2,950,040
-----------
Total current liabilities 12,225,827
STOCKHOLDERS' EQUITY:
Common Stock 1,203,970
Retained earnings 12,104,294
-----------
Total stockholders' equity 13,308,264
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,534,091
===========
</TABLE>
15
<PAGE>
Lewan & Associates, Inc.
Unaudited Statements of Income
For the Three Months Ended March 31, 1999 and 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------- -----------
REVENUES
<S> <C> <C>
Equipment and supplies sales $13,127,928 $ 9,533,498
Service and rentals 6,270,762 5,963,924
----------- -----------
Total Revenues 19,398,690 15,497,422
----------- -----------
COST AND OPERATING EXPENSES:
Cost of equipment and supplies sales 10,234,230 6,360,076
Service and rentals cost 2,917,721 3,016,620
Selling, general and administrative expense 6,318,582 4,460,921
----------- -----------
Total costs and operating expenses 19,470,533 13,837,617
----------- -----------
INCOME (LOSS) FROM OPERATIONS (71,843) 1,659,805
OTHER INCOME (EXPENSE):
Interest income 23,726 21,454
Interest expense (23,197) (15,895)
Loss on sale of partnership (241,000) 0
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (312,314) 1,665,364
PROVISION FOR INCOME TAXES (120,000) 619,515
----------- -----------
NET INCOME (LOSS) $ (192,314) $ 1,045,849
=========== ===========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Lewan & Associates, Inc.
Unaudited Statements of Cash Flows
For the Three Months Ended March 31, 1999 and 1998
- ------------------------------------------------------------------------------------------------------
1999 1998
---------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (192,314) $ 1,045,849
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 738,984 820,859
Allowance for doubtful accounts receivable 71,747 1,850
(Gain) loss on sale of property and equipment 561,205 (204,153)
Stock issued for compensation 590,400 0
Deferred tax (benefit) (371,559) 0
Changes in operating assets and liabilities:
Trade accounts receivable 1,025,971 2,353,376
Other receivables (624,951) 4,603
Inventories (66,623) (848,832)
Prepaid expenses (27,471) (24,516)
Rental equipment (810,780) (636,193)
Other assets (29,473) (2,822)
Trade accounts payable 882,643 (1,158,233)
Accrued salaries, wages and benefits (530,770) (233,938)
Other accrued expenses 93,699 (6,092)
Deferred revenue 65,691 (304,934)
---------------- -----------------
Net cash provided by operating activities 1,376,399 806,824
INVESTING ACTIVITIES:
Purchase of property and equipment (812,916) (383,229)
Proceeds from sale of property and equipment 687,323 444,886
---------------- -----------------
Net cash provided by (used in) investing activities (125,593) 61,657
FINANCING ACTIVITIES:
Principal payments on long term debt (667,563) (783,938)
---------------- -----------------
Net cash used in financing activities (667,563) (783,938)
INCREASE IN CASH AND CASH EQUIVALENTS 583,243 84,543
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,288,137 2,788,038
---------------- -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,871,380 $ 2,872,581
================ =================
</TABLE>
17
<PAGE>
(b) Pro Forma Financial Information.
The following pro forma financial information required pursuant to Article 11
of Regulation S-X previously omitted from the Company's 8-K filed on June 24,
1999 is filed with this amendment:
Introduction to Unaudited Pro Forma Consolidated Financial Data.
Unaudited Pro Forma Consolidated Statement of Operations for the fiscal year
ended March 31, 1999.
Notes to Unaudited Pro Forma Consolidated Statement of Operations for the
fiscal year ended March 31, 1999.
Unaudited Pro forma Consolidated Balance Sheet as of March 31, 1999.
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1999.
18
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
On June 24, 1999 Global acquired all of the issued and outstanding stock of
Lewan & Associates, Inc. ("Lewan") pursuant to a Merger Agreement, dated as of
June 24, 1999, by and among Global, Lewan Acquisition, Inc., Lewan and the
shareholders of Lewan.
The accompanying unaudited pro forma consolidated statement of operations for
the fiscal year ended March 31, 1999 gives effect to the acquisition by the
Company of Lewan ("the acquisition") as if it had occurred on April 1, 1998. The
unaudited pro forma consolidated balance sheet at March 31, 1999 gives effect to
the acquisition as if it had occurred on March 31, 1999.
The pro forma adjustments, based on the historical financial statements of the
acquired entity, giving effect to the transaction under the purchase method of
accounting, are based on currently available information, as well as upon
certain assumptions that management believes are reasonable. As such, the total
cost of the acquisition has been allocated to the net tangible and intangible
assets acquired, and liabilities assumed, based upon their respective fair
values at the effective date of the acquisition.
The unaudited pro forma consolidated financial statements are not necessarily
indicative of either future results of operations, or results of operations or
financial position that might have been achieved, had the acquisition in fact
been consummated at the beginning of the period, or at the balance sheet date,
referenced above. The unaudited pro forma financial data should be read in
conjunction with the consolidated financial statements of the Company and the
historical financial statements of Lewan, and related notes set forth herein.
19
<PAGE>
<TABLE>
<CAPTION>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1999
(in thousands except per share data)
Historical
--------------------------------------
Global Imaging Lewan & Associates, Pro Forma
Systems, Inc.(a) Inc. (b) Adjustments Pro Forma
------------- ------------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Equipment and supplies sales $ 218,653 $ 46,266 $ - $ 264,919
Service and rentals 69,542 24,651 94,193
------------- ------------------- -------------- -----------
Total Revenues 288,195 70,917 - 359,112
Costs and operating expenses:
Cost of equipment and supplies sales 154,083 34,644 - 188,727
Service and rental costs 34,434 12,334 - 46,768
Selling, general and
administrative expenses 63,133 18,414 - 81,547
Intangible asset amortization 4,627 - 1,388 (c) 6,015
------------- ------------------- -------------- -----------
Total costs and operating expenses 256,277 65,392 1,388 323,057
------------- ------------------- -------------- -----------
Income from operations 31,918 5,525 (1,388) 36,055
Interest expense (8,427) 135 (3,760)(d) (12,052)
------------- ------------------- -------------- -----------
Income before income taxes 23,491 5,660 (5,148) 24,003
Income taxes 10,390 2,138 (1,378)(e) 11,150
------------- ------------------- -------------- -----------
Net income $ 13,101 $ 3,522 $ (3,770) $ 12,853
============= =================== ============== ===========
Earnings per share, basic $ 0.80 $ 0.77
============= ===========
Earnings per share, diluted $ 0.78 $ 0.75
============= ===========
Weighted average number of shares
used in the calculation, basic 16,478 16,767
============= ===========
Weighted average number of shares
used in the calculation, diluted 16,811 17,100
============= ===========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated
financial statements.
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1999
(in thousands)
(a) This column represents the historical consolidated results of operations of
Global for the fiscal year ended March 31, 1999 excluding the effects of an
extraordinary item of $1,817, net of taxes of $1,241.
(b) This column represents the historical operating results of Lewan for the
fiscal year ended December 31, 1998. This information was used in lieu of
the twelve months ended March 31, 1999 because it was within 93 days of the
Global's fiscal year end. Certain reclassifications have been made to be
consistent with Global's presentation.
(c) Reflects additional goodwill amortization expense of $1,055 and non-compete
covenant amortization expense of $333. The goodwill amortization period is
40 years; goodwill is amortized using the straight-line method. The non-
compete covenant amortization period is 3 years; the non-compete covenant
is amortized using the straight-line method.
(d) Reflects additional interest expense related to borrowings that would have
been incurred by Global to finance the acquisition had the acquisition been
consummated at April 1, 1998. An average interest rate of 7.25% was used
for this calculation which approximates the Company's average borrowing
rate during such period.
(e) Represents the income tax benefit on purchase accounting adjustments and
other pro forma adjustments of ($1,504) and additional income tax expense
of $126 on historical earnings of Lewan based on an effective rate of
approximately 40%.
21
<PAGE>
<TABLE>
<CAPTION>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1999
(in thousands)
Historical
----------------------------------------
Global Imaging Lewan & Pro Forma
Systems, Inc. (a) Associates, Inc. (b) Adjustments Pro Forma
-------------- ----------------- --------------- --------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 5,176 $ 3,872 $ - $ 9,048
Accounts receivable, net of
allowance for doubtful
accounts 45,700 8,353 (115)(c) 53,938
Inventories 36,793 4,893 (410)(d) 41,276
Deferred income taxes 2,591 369 390 (e) 3,350
Prepaid expenses and other
current assets 1,940 864 - 2,804
-------------- ----------------- --------------- --------------
Total current assets 92,200 18,351 (135) 110,416
Rental equipment, net 4,377 5,552 (100)(f) 9,829
Property and equipment, net 6,409 1,513 - 7,922
Other assets 781 118 - 899
Related party notes receivable 47 - - 47
Intangible assets, net:
Goodwill 201,307 - 40,877 (g) 242,184
Noncompete agreements 1,207 - 1,000 (h) 2,207
Financing fees 4,091 - - 4,091
-------------- ----------------- --------------- --------------
Total assets $ 310,419 $ 25,534 $ 41,642 $ 377,595
============== ================= =============== ==============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 16,718 $ 5,849 $ - $ 22,567
Accrued liabilities 7,584 731 250 (i) 8,565
Accrued compensation and
benefits 5,221 2,696 - 7,917
Current maturities of
long-term debt 176 - - 176
Deferred revenue 16,195 2,950 100 (j) 19,245
Income taxes payable 1,383 - - 1,383
-------------- ----------------- --------------- --------------
Total current liabilities 47,277 12,226 350 59,853
Long-term debt, less current
maturities 168,101 - 50,000 (k) 218,101
Deferred income taxes 142 - - 142
-------------- ----------------- --------------- --------------
Total liabilities 215,520 12,226 50,350 278,096
Stockholders' equity:
Common stock 187 - 3 (l) 190
Common stock held in treasury,
at cost (35) - - (35)
Additional paid-in capital 83,817 1,204 3,393 (m) 88,414
Retained earnings 10,930 12,104 (12,104)(n) 10,930
-------------- ----------------- --------------- --------------
Total stockholders' equity 94,899 13,308 (8,708) 99,499
-------------- ----------------- --------------- --------------
Total liabilities and
stockholders' equity $ 310,419 $ 25,534 $ 41,642 $ 377,595
============== ================= =============== ==============
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(in thousands)
(a) This column represents the historical consolidated balance sheet of the
Company as of March 31, 1999.
(b) This column represents the historical balance sheet of Lewan as of March
31, 1999.
(c) This represents an adjustment to record accounts receivable at estimated
fair value.
(d) This represents an adjustment to record inventory at estimated fair value.
(e) This represents the tax impact of recording purchase accounting
adjustments.
(f) This represents an adjustment to record rental equipment at estimated fair
value.
(g) This represents the portion of the purchase price allocated to goodwill as
a result of the acquisition of Lewan.
(h) This represents the portion of the purchase price allocated to the non-
compete covenant as a result of the acquisition of Lewan.
(i) This represents an adjustment to record accrued liabilities at estimated
fair value.
(j) This represents an adjustment to record deferred revenues at estimated fair
value.
(k) This represents cash borrowed to fund the acquisition.
(l) Represents the par value of 289 shares of Global common stock issued to the
sellers of Lewan in the amount of $3 in connection with the acquisition.
(m) Represents additional paid-in capital on Global's common stock issued to
the sellers of Lewan in connection with the acquisition, of $4,597 and
offset by the elimination of additional paid-in capital on Lewan common
stock of $1,204.
(n) This represents the elimination of Lewan's retained earnings.
23
<PAGE>
(c) Exhibits.
Exhibit Number Description
- -------------- -----------
10.1* Stock Purchase Agreement, dated as of June 24, 1999, by
and among Global, Lewan Acquisition, Inc., Lewan and
the shareholders of Lewan.
23.1 Consent of Deloitte & Touche LLP
- ----------------------
*Previously filed
SIGNATURE
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.
Date: August 18, 1999
GLOBAL IMAGING SYSTEMS, INC.
/s/ Raymond Schilling
-------------------------------
Raymond Schilling
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
24
<PAGE>
Exhibit Number Description
- -------------- -----------
10.1* Stock Purchase Agreement, dated as of June 24, 1999, by and
among Global, Lewan Acquisition, Inc., Lewan and the
shareholders of Lewan.
23.1 Consent of Deloitte & Touche LLP
* Previously filed.
25
<PAGE>
Exhibit 23.1
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (Nos. 333-62765 and 333-80801) of Global Imaging Systems, Inc. of our
report dated March 5,1999, except for Note 8, as to which the date is June 24,
1999 (relating to the Financial Statements of Lewan & Associates, Inc. as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998) included in this Current Report on Form 8-K/A Amendment No.
3.
/s/ Deloitte & Touche LLP
Denver, Colorado
August 16, 1999
26
