<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT 1
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 21, 1998
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
13902 North Dale Mabry Hwy., Suite 300, Tampa, FL 33618
- --------------------------------------------------------------------------------
(Former name or address, if changed since last report)
Exhibit Index is on Page 31
<PAGE>
On January 5, 1999, Global Imaging Systems, Inc., ("Global") filed a report on
Form 8-K with respect to its acquisition of the stock of Capitol Office
Solutions, Inc. ("Capitol"). 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 the Company stated in such Form
8-K that 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. By this amendment to such Form 8-K,
Global is amending and restating Item 7 thereof to include the required
financial statement and pro forma financial information.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 21, 1998 Global purchased all of the issued and outstanding stock of
Capitol pursuant to a Stock Purchase Agreement, dated as of November 19, 1998,
by and among Global, as Buyer; Capitol; Armen Manoogian; L. Neal Berney; John
Boyett; Edward Cobb; Bruce D. Cook; Raymond Echols; Gary M. Fuller; Golder,
Thoma, Cressey, Rauner Fund IV,L.P. (the "Fund"); Kevin Godwin; Green, Manning &
Bunch Holdings, Inc.; Christopher Groff; Jackson National Life Insurance Company
("JNL"); Todd S. Johnson; Thomas S. Johnson; Mark M. Lloyd; Scott Lloyd; Alexis
McGhee; Michael Mueller; Raymond Schilling; Allan Small; Terry K. Smith and
Crystal E. Smith; Dewey Suddeth; Tidewater Partners, LLC; and Alfred Vieira, as
Sellers. Messrs. Thomas Johnson, Mueller, Schilling and Vieira are executives
officers of Global. Mr. Todd Johnson is Mr. Thomas Johnson's son. Messrs. Thomas
Johnson and Berney are directors of Global. Two other directors of Global, Carl
Thoma and William Kessinger, are Principals of the general partner of the Fund's
general partner and a third director, Bruce Gorchow, is Executive Vice President
of PPM America, Inc., the exclusive investment advisor to JNL.
Global paid the Sellers a total purchase price of approximately $46,400,000 in
cash, plus 612,455 shares of Global's Common Stock, par value $.01 per share.
Approximately $16,132,000 of indebtedness of Capitol was repaid upon the closing
of the acquisition by the sellers. Global borrowed funds under its $175 million
line of credit from First Union National Bank to pay the cash portion of the
purchase price. The purchase price for the acquisition was the subject of a
fairness opinion by an independent advisor to Global's Board of Directors.
Capitol is engaged in the office imaging solutions industry in the Washington
D.C., Southern Maryland, and Northern Virginia area.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Capitol Office Solutions.
Report of Independent Auditors.
Consolidated Balance Sheets as of June 30, 1998 and 1997.
Consolidated Statements of Earnings for the Years Ended June 30, 1998,
1997, and 1996.
Consolidated Statements of Stockholders Equity (Deficit) for the Years
Ended June 30, 1998, 1997, and 1996.
Consolidated Statements of Cash Flows for the Years Ended June 30, 1998,
1997, and 1996.
Notes to Consolidated Financial Statements.
Consolidated Unaudited Balance Sheet as of September 30, 1998.
Consolidated Unaudited Statements of Earnings for the Three Months Ended
September 30, 1998 and 1997.
Consolidated Unaudited Statements of Cash Flows for the Three Months Ended
September 30, 1998 and 1997.
2
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Report of Independent Auditors
To the Board of Directors and Stockholders
of Capitol Office Solutions, Inc.
Beltsville, Maryland
We have audited the accompanying consolidated balance sheets of Capitol Office
Solutions, Inc., formerly Capitol Copy Products, Inc., and subsidiary as of June
30, 1998 and 1997, and the related consolidated statements of earnings,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended June 30, 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 Capitol Office Solutions, Inc., and
subsidiary as of June 30, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1998,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Washington, D.C.
August 28, 1998
3
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
ASSETS 1998 1997
------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,671,371 $ 1,790,230
Accounts receivable 2,825,868 2,024,542
Inventories 1,946,903 1,853,098
Refundable income taxes 159,509 153,709
Deferred income taxes 105,000 57,000
Prepaid expenses and other 82,991 69,454
----------- -----------
Total current assets 8,791,642 5,948,033
----------- -----------
PROPERTY AND EQUIPMENT:
Office furniture and equipment 412,818 430,124
Property under capital leases 130,662 112,155
Leasehold improvements 177,015 232,135
Rental equipment 120,340 109,231
----------- -----------
840,835 883,645
Less accumulated depreciation and amortization (609,928) (654,541)
----------- -----------
Total property and equipment 230,907 229,104
----------- -----------
OTHER ASSETS:
Excess of acquisition cost over value of
net assets acquired - net 2,089,409 2,160,847
Deferred financing and other deferred
costs - net 710,000 895,000
Deferred income taxes 119,000 41,000
Deposits and other 75,488 72,988
----------- -----------
Total other assets 2,993,897 3,169,835
----------- -----------
TOTAL ASSETS $12,016,446 9,346,972
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1998 1997
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Loan payable $ - $ 1,450,000
Accounts payable and accrued liabilities 1,527,084 1,141,885
Deferred revenue 582,836 504,845
Current portion of long-term debt 3,904,000 -
Current portion of capital lease obligations 12,228 14,538
------------ ------------
Total current liabilities 6,026,148 3,111,268
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt (less current portion shown above) 14,961,000 18,865,000
Capital lease obligations (less current portion shown above) 68,867 31,881
------------ ------------
Total long-term liabilities 15,029,867 18,896,881
------------ ------------
Total liabilities 21,056,015 22,008,149
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIT):
Class A common stock, $.01 par value -
authorized, 200,000 shares;
issued and outstanding, 59,400 shares 594 594
Class B common stock, $.01 par value -
authorized, 100,000 shares;
issued and outstanding, 29,700 shares 297 297
Class C common stock, $.01 par value -
authorized; 40,000, shares;
issued and outstanding, 9,000 shares 90 90
Additional paid-in capital 999,891 999,891
Retained earnings (deficit) (10,040,441) (13,662,049)
------------ ------------
Total stockholders' equity (deficit) (9,039,569) (12,661,177)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 12,016,446 $ 9,346,972
============ ============
</TABLE>
5
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
------------ ------------ -------------
<S> <C> <C> <C>
SALES:
Sales of equipment $ 14,459,555 $ 11,192,343 $ 9,267,028
Sales of services and supplies 13,709,553 12,360,411 10,942,168
------------ ------------ -------------
Total sales 28,169,108 23,552,754 20,209,196
------------ ------------ -------------
COST OF SALES:
Cost of equipment sold 9,575,547 8,278,146 6,433,208
Cost of services and supplies sold 6,041,436 5,906,491 5,603,351
------------ ------------ -------------
Total cost of sales 15,616,983 14,184,637 12,036,559
------------ ------------ -------------
GROSS PROFIT 12,552,125 9,368,117 8,172,637
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,103,664 4,497,166 3,781,559
------------ ------------ -------------
OPERATING INCOME 7,448,461 4,870,951 4,391,078
INTEREST EXPENSE (1,735,245) (8,201) (11,330)
OTHER INCOME 81,392 257,591 112,360
------------ ------------ -------------
EARNINGS BEFORE INCOME TAXES 5,794,608 5,120,341 4,492,108
PROVISION FOR INCOME TAXES 2,173,000 1,870,000 1,780,000
------------ ------------ -------------
NET EARNINGS $ 3,621,608 $ 3,250,341 $ 2,712,108
=========== ============ ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL
CLASS A CLASS B CLASS C ADDITIONAL RETAINED STOCKHOLDERS'
COMMON COMMON COMMON CLASS B PAID-IN EARNINGS EQUITY
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) (DEFICIT)
----------- ---------- ----------- ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1995 $ - $ - $ - $ 120 $ 749,880 $ 5,503,737 $ 6,253,737
Dividends declared - - - - - (240,000) (240,000)
Net earnings - - - - - 2,712,108 2,712,108
----------- ---------- ----------- ----------- ------------- ------------- ---------------
BALANCE, JUNE 30, 1996 - - - 120 749,880 7,975,845 8,725,845
Dividends declared - - - - - (5,834,390) (5,834,390)
Recapitalization 7 4 1 (120) 108 - -
Net earnings - - - - - 3,250,341 3,250,341
Purchase and retirement of
common stock, including
transaction costs (5) (3) - - (749,988) (19,052,977) (19,802,973)
Stock split 493 296 79 - - (868) -
Sale of common stock 99 - 10 - 999,891 - 1,000,000
----------- ---------- ----------- ----------- ------------- ------------- ---------------
BALANCE, JUNE 30, 1997 594 297 90 - 999,891 (13,662,049) (12,661,177)
Net earnings - - - - - 3,621,608 3,621,608
----------- ---------- ----------- ----------- ------------- ---------- ---------
BALANCE, JUNE 30, 1998 $ 594 $ 297 $ 90 $ - $ 999,891 $ (10,040,441) $ (9,039,569)
=========== ========== =========== =========== ============= ============= ===============
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,621,608 $ 3,250,341 $ 2,712,108
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation and amortization 379,387 194,960 221,476
Deferred income taxes (126,000) 76,000 (65,000)
Loss on disposal of equipment 6,871 13,179 -
Changes in operating assets and liabilities:
Accounts receivable (801,326) 26,700 (319,496)
Inventories (93,805) 323,422 (425,730)
Refundable income taxes (5,800) (153,709) -
Prepaid expenses and other assets (16,037) (14,953) 21,359
Accounts payable and accrued liabilities 385,199 277,972 179,027
Deferred revenue 77,991 4,202 20,785
------------ ------------ ------------
Net cash provided by operating
activities 3,428,088 3,998,114 2,344,529
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - net (78,633) (141,361) (55,189)
Increase in other assets - (300,000) -
------------ ------------ ------------
Net cash used in investing
activities (78,633) (441,361) (55,189)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term notes - 18,865,000 -
Proceeds from bank line of credit - 1,450,000 -
Proceeds from sale of common stock - 1,000,000 -
Acquisition and retirement of common stock - (19,802,973) -
Debt issuance costs - (595,000) -
Principal payments on long-term notes - (5,104) (19,015)
Principal payments on bank line of credit (1,450,000) - -
Principal payments on capital lease obligations (18,314) (27,750) (34,156)
Dividends paid - (5,834,390) (240,000)
------------ ------------ ------------
Net cash used in financing activities (1,468,314) (4,950,217) (293,171)
------------ ------------ ------------
(Continued)
</TABLE>
8
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH 1,881,141 (1,393,464) 1,996,169
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,790,230 3,183,694 1,187,525
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 3,671,371 $ 1,790,230 $ 3,183,694
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid $ 1,754,125 $ 8,135 $ 10,730
=========== =========== ===========
Income taxes paid $ 2,122,500 $ 2,157,100 $ 1,633,107
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Capital leases $ 52,900 $ 37,040 $ -
=========== =========== ===========
(Concluded)
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Operations - Capitol Office Solutions, Inc., formerly Capitol Copy
Products, Inc. ("COS" or "the Company"), a majority-owned subsidiary of Golder,
Thoma, Cressey, Rauner Fund IV, L.P., is in the business of selling, leasing,
and servicing copier and facsimile equipment, and selling related supply
products. The Company's principal business territory comprises the greater
Metropolitan Washington, D.C., and Baltimore areas. The Company operates
pursuant to certain dealer agreements, primarily with Canon, USA, Inc.
Principles of Consolidation - The consolidated financial statements include the
accounts of COS and its wholly owned subsidiary, General Service Leasing, Inc.
All significant intercompany balances and transactions have been eliminated in
consolidation.
Revenue Recognition - The Company recognizes revenue from the sale of equipment,
maintenance contracts, and month-to-month equipment rental agreements. Sales of
equipment are recorded as revenue on the date the equipment is shipped. Revenue
from maintenance contracts and month-to-month equipment rental agreements is
recognized ratably over the terms of the agreements.
Cash and Cash Equivalents - Cash and cash equivalents consist of checking
accounts and temporary investments in repurchase agreements. For purposes of the
consolidated statements of cash flows, the Company considers only highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
Inventories - Inventories are stated at the lower of average cost or market.
Property and Equipment - Property and equipment are stated at cost. Depreciation
is computed using straight-line methods based on the estimated useful lives of
the related equipment. Leasehold improvements are amortized over the lives of
the respective leases or service lives of the improvements, whichever is
shorter.
Repairs and maintenance are charged directly to expense as incurred. Betterments
or improvements that increase the estimated useful life of an asset are
capitalized.
Goodwill - The excess of cost over fair values of the net tangible assets
acquired (goodwill) is amortized using the straight-line method over forty
years. The Company annually reviews its goodwill recoverability by assessing
historical profitability and expectations as to future nondiscounted cash flows
and net income as well as the Company's success in meeting its commitments under
its dealer agreements. Based upon its most recent analysis, the Company believes
that no material impairment of goodwill exists at June 30, 1998.
Deferred Financing and Other Deferred Costs - Deferred financing costs consist
of financing fees paid by the Company to obtain its line of credit and loan
payable (see Notes 5 and 7). The fees are amortized using the straight-line
method over the life of the loan payable. Other deferred costs relate to costs
associated with an agreement entered into upon the Company's recapitalization,
10
<PAGE>
stock redemption, and stock purchase (see Note 2). These costs are amortized
using the straight-line method over three years, the term of the agreement.
Income Taxes - The Company records its provision for income taxes in accordance
with Statement of Financial Accounting Standards No. 109 (SFAS 109). SFAS 109
requires the Company to record a provision for deferred income taxes for
differences between the basis of certain assets and liabilities for income tax
and financial statement reporting purposes, and between reporting methods for
income tax return and financial statement reporting purposes, which will create
taxable income or deductions in future periods.
Deferred income taxes result primarily from temporary differences in the
recognition of revenue from maintenance contracts, certain inventory costs, bad
debt expense, and depreciation for tax and financial reporting purposes.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Reclassifications - Certain 1997 amounts have been
reclassified for comparative purposes. Actual results could differ from those
estimates.
2. RECAPITALIZATION, STOCK REDEMPTION, AND STOCK PURCHASE
Prior to June 30, 1997, the Company was a majority owned subsidiary (66-2/3%) of
CERBCO, Inc., with the remaining 33-1/3% owned by the President of the Company.
Effective June 30, 1997, the following transactions took place:
. A $5,684,390 dividend was paid to the existing shareholders
representing cash held by the Company in excess of $800,000.
. The Company recapitalized itself by amending its Certificate of
Incorporation to authorize three classes of common stock. Class A
Common Stock, $.01 par value (the "Class A Common"); Class B Common
Stock, $.01 par value (the "Class B Common"); and Class C Common
Stock, $.01 par value (the "Class C Common"). Each share of the
Company's then currently issued and outstanding Class B stock was
exchanged for .61875 shares of Class A Common, .37125 shares of Class
B Common, and .01 shares of Class C Common.
. The Company entered into credit agreements with a financial
institution that provided for loans to the Company in the principal
amount of up to approximately $30,000,000.
. Following the above transactions, all of the shares of Class A Common,
Class B Common, and Class C Common of the Company held by CERBCO,
Inc., were redeemed by the Company for an aggregate purchase price of
$19,000,000, subject to adjustment and escrow holdbacks.
. Immediately after the redemption, the Company effected a 200-to-1
stock split of the Class A Common, which resulted in 200,000 shares of
Class A Common being authorized and 49,500 shares being issued and
outstanding; a 200-to-1 stock split of the Class B Common, which
resulted in 100,000 shares of Class B Common being authorized and
29,700 shares being issued and outstanding; and a 2,000-to-1 stock
split of the Class C Common, which resulted in 40,000 shares of Class
11
<PAGE>
C Common being authorized and 8,000 shares being issued and outstanding.
. Immediately after the stock split, new investors purchased from the Company
9,900 shares of Class A common and 1,000 shares of Class C Common for a
purchase price of $100 per share of Class A Common and $10 per share of Class
C Common, an aggregate purchase price of $1,000,000.
. Contemporaneously with the above investment, the new investors purchased all
49,500 shares of Class A Common and 62.5% of Class C Common (5,000 shares)
held by the President of the Company.
. In connection with the transactions, the President, the new investors, and
the Company entered into various stockholder agreements, registration rights
agreements, and employment agreements.
3. ACCOUNTS RECEIVABLE
The allowance for doubtful accounts was $35,000 and $30,000 at June 30, 1998 and
1997, respectively. The provisions for doubtful accounts included in selling,
general, and administrative expense for the years ended June 30, 1998, 1997, and
1996, were $51,345, $35,585 and $26,226 respectively.
4. INVENTORIES
Inventories at June 30, 1998 and 1997, consist of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Equipment $ 1,452,109 $ 1,288,937
Supplies 197,181 192,578
Parts 297,613 371,583
----------- -----------
$ 1,946,903 $ 1,853,098
=========== ===========
</TABLE>
5. LOAN PAYABLE
The Company has available a line of credit as part of a credit agreement with a
life insurance company (see Note 7) that enables the Company to borrow up to
$2,500,000, subject to a borrowing base, at an interest rate equal to the LIBOR
rate plus 3.0% (8.6445% and 8.6875% at June 30, 1998 and 1997, respectively).
The agreement expires in June 2004 and is collateralized by all personal and
real property. The agreement requires the Company to meet certain financial
covenants quarterly. As of June 30, 1998, the Company is in compliance with the
required financial covenants.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at June 30, 1998 and 1997, consist of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Accounts payable $ 328,450 $ 177,537
Accrued expenses and other 929,856 873,759
Income taxes payable 268,778 77,945
Other - 12,644
---------- -----------
$1,527,084 $ 1,141,885
========== ===========
</TABLE>
12
<PAGE>
7. LONG-TERM DEBT
Long-term debt at June 30, 1998 and 1997, consists of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Term loan payable that matures in June 2004,
with a percentage of principal payable every
six months beginning in January 2000 and interest
due monthly at LIBOR plus 3.25% $18,865,000 $18,865,000
Less: Current portion 3,904,000 -
------------ ------------
$ 14,961,000 $ 18,865,000
============ ============
</TABLE>
The total term loan commitment is $27,500,000. In addition to the percentage of
principal payments required, the Company is required to prepay the term loan and
related revolving loan (Note 5) in an amount equal to 70% of excess cash flow as
defined in the credit agreement for each fiscal year beginning with year fiscal
1998. This prepayment of excess cash flows is classified as current portion of
long-term debt at June 30, 1998. The Company is required to meet certain
financial covenants quarterly. As of June 30, 1998, the Company is in
compliance with the required financial covenants.
8. COMMITMENTS
The Company leases warehouse, store, and office facilities under operating
leases that expire on various dates through 2008. Some of the facility leases
provide for renewal options. Rental expense was approximately $165,000,
$148,000 and $139,000 for the years ended June 30, 1998, 1997 and 1996,
respectively. In addition, the Company leases equipment under capital leases
that expire on various dates through 1999. Accumulated amortization for
property under capital leases was $52,947 and $70,557 as of June 30, 1998 and
1997, respectively. Minimum future rental commitments under long-term capital
and operating leases in effect at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
<S> <C> <C>
1999 $24,000 $ 335,000
2000 24,000 308,000
2001 24,000 289,000
2002 17,000 260,000
2003 12,000 237,000
Thereafter 16,000 1,080,000
--------- -----------
Total minimum payments 117,000 $ 2,509,000
Less: Interest 36,000 ===========
Present value of minimum payments $ 81,000
=========
</TABLE>
13
<PAGE>
9. INCOME TAXES
The provision for taxes for the years ended June 30, 1998, 1997, and 1996, is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal $ 1,849 $ 1,534 $ 1,580
State 450 260 265
------- ------- -------
Total current 2,299 1,794 1,845
------- ------- -------
Deferred:
Federal (102) 66 (55)
State (24) 10 (10)
------- ------- -------
Total deferred (126) 76 (65)
------- ------- -------
Total provision for taxes $ 2,173 $ 1,870 $ 1,780
======= ======= =======
</TABLE>
The provision for income taxes is different from that computed using the
statutory federal income tax rate of 34% for the years ended June 30, 1998,
1997, and 1996, for the following reasons (in thousands except percentages):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------- -------------------------
Amounts % Amounts % Amounts %
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at
statutory rate $ 1,970 34.0 % $ 1,741 34.0 % $ 1,527 34.0 %
Increase in taxes resulting
from:
State income taxes,
net of federal income
tax benefit 281 4.8 179 3.5 176 3.9
Nondeductible items 27 0.5 29 0.6 29 0.6
Other (105) (1.8) (79) (1.6) 48 1.1
------- ---- ------- ---- ------- ----
Total provision for taxes $ 2,173 37.5 % $ 1,870 36.5 % $ 1,780 39.6 %
======= ==== ======= ==== ======= ====
</TABLE>
The approximate tax effect of each type of temporary difference that gave rise
to the Company's deferred tax asset amount (in thousands) at June 30, 1998 and
1997, is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Bad debt reserves $ 14 $ 12
Vacation expenses 23 19
Depreciation 49 41
Inventory costs 67 35
Deferred revenue 21 -
Deferred rent allowance 37 -
Section 197 intangible 33 -
Other (20) (9)
---- ----
$224 $ 98
==== ====
</TABLE>
14
<PAGE>
10. PROFIT SHARING AND 401(K) PLAN
The Company has a profit sharing and 401(k) retirement plan for all of its
employees meeting certain minimum eligibility requirements. Contributions are
determined annually by the Company's Board of Directors. The Company contributed
$151,552, $147,438, and $120,713 to the plan through the 401(k) matching
provision in fiscal years 1998, 1997 and 1996, respectively.
11. STOCKHOLDER'S EQUITY
The Company has three classes of Common Stock, which are designated as Class A,
B, and C Common Stock. Shares of Class C Common Stock have one vote per share on
all matters to be voted on by the Company's stockholders. Shares of Classes A
and B Common Stock are not entitled to vote on any matter submitted to a vote of
the Company's stockholders.
12. RELATED PARTY TRANSACTIONS
On June 30, 1997, the Company entered into a consulting agreement with Global
whereby the Company will pay Global an annual management fee of $150,000. Global
will provide human resources, administration, financial, accounting, and
consulting services.
* * * * * *
15
<PAGE>
CAPITOL OFFICE SOLUTIONS
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements of Capitol Office Solutions
("Capitol") as of September 30, 1998 and for the three month periods ended
September 30, 1998 and 1997 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 June 30, 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 Capitol.
16
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED UNAUDITED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,925,958
Accounts receivable, net 2,593,163
Inventories 2,097,238
Prepaid expenses and other 134,441
-------------
Total current assets 7,750,800
PROPERTY AND EQUIPMENT:
Office furniture and equipment 545,712
Leasehold improvements 232,720
Rental equipment 120,340
-------------
898,772
Less accumulated depreciation and amortization (684,893)
-------------
Total property and equipment 213,879
OTHER ASSETS:
Excess of acquisition cost over value of
net assets acquired - net 2,071,549
Deposits and other 1,406,297
-------------
Total other assets 3,477,846
-------------
TOTAL ASSETS $ 11,442,525
=============
</TABLE>
17
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED UNAUDITED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
LIABILIITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,209,175
Income taxes payable 590,866
Deferred service revenue 536,233
Current maturities of long-term debt 78,000
--------------------
Total current liabilities 2,414,274
LONG-TERM LIABILITIES:
Long-term debt (less current portion shown above) 16,842,225
--------------------
Total liabilities 19,256,499
COMMITMENTS
STOCKHOLDERS' DEFICIT:
Class A common stock, $.01 par value -
authorized, 200,000 shares;
issued and outstanding, 59,400 shares 594
Class B common stock, $.01 par value -
authorized, 100,000 shares;
issued and outstanding, 29,700 shares 297
Class C common stock, $.01 par value -
authorized; 40,000, shares;
issued and outstanding, 9,000 shares 90
Additional paid-in capital 999,891
Retained deficit (8,814,846)
--------------------
Total stockholders' deficit (7,813,974)
--------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 11,442,525
====================
</TABLE>
18
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED UNAUDITED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998, AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
<S> <C> <C>
SALES:
Sales of equipment $3,896,521 $3,099,616
Sales of services and supplies 3,641,953 3,349,651
--------------- ---------------
Total sales 7,538,474 6,449,267
--------------- ---------------
COST OF SALES:
Cost of equipment sold 2,358,475 2,054,815
Cost of services and supplies sold 1,314,938 1,316,940
--------------- ---------------
Total cost of sales 3,673,413 3,371,755
--------------- ---------------
GROSS PROFIT 3,865,061 3,077,512
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,458,589 1,186,818
--------------- ---------------
OPERATING INCOME 2,406,472 1,890,694
INTEREST EXPENSE 366,877 443,224
--------------- ---------------
EARNINGS BEFORE INCOME TAXES 2,039,595 1,447,470
PROVISION FOR INCOME TAXES 814,000 575,000
--------------- ---------------
NET EARNINGS $ 1,225,595 $ 872,470
=============== ===============
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
CAPITOL OFFICE SOLUTIONS, INC
CONSOLIDATED UNAUDITED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,225,595 $ 872,470
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation and amortization 107,045 76,601
Change in operating assets and liabilities:
Accounts receivable 232,705 (1,044,150)
Inventories (150,335) 126,387
Prepaid expenses and other assets 421,250 (590,168)
Accounts payable (317,909) 86,938
Accrued expenses 590,866 401,236
Deferred revenues (46,603) 24,392
--------------- --------------
Net cash provided by operating activities 2,062,614 (46,294)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment - net (72,157) (61,716)
--------------- --------------
Net cash provided (used) by investing activities (72,157) (61,716)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash used to pay long-term debt (2,654,775) 895,000
Cash used to pay capital leases (81,095) (3,420)
Cash used to pay revolver loan borrowings - (1,450,000)
--------------- --------------
Net cash used in financing activities (2,735,870) (558,420)
NET DECREASE IN CASH (745,413) (666,430)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,671,371 1,790,230
--------------- --------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,925,958 $ 1,123,800
=============== ==============
</TABLE>
20
<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 January
5, 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, 1998.
Notes to Unaudited Pro Forma Consolidated Statement of Operations for the
fiscal year ended March 31, 1998.
Unaudited Pro Forma Consolidated Statement of Operations for the six months
ended September 30,1998.
Notes to Pro Forma Consolidated Statement of Operations for the six months
ended September 30, 1998.
Unaudited Pro forma Consolidated Balance Sheet as of September 30, 1998.
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1998.
21
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(in thousands except number of shares data)
On December 21, 1998 Global purchased all of the issued and outstanding stock of
Capitol pursuant to a Stock Purchase Agreement, dated as of November 19, 1998,
by and among Global, as Buyer; Capitol; Armen Manoogian; L. Neal Berney; John
Boyett; Edward Cobb; Bruce D. Cook; Raymond Echols; Gary M. Fuller; GTCR; Kevin
Godwin; Green, Manning & Bunch Holdings, Inc.; Christopher Groff; Jackson
National Life Insurance; Todd S. Johnson; Thomas S. Johnson; Mark M. Lloyd;
Scott Lloyd; Alexis McGhee; Michael Mueller; Raymond Schilling; Allan Small;
Terry K. Smith and Crystal E. Smith; Dewey Suddeth; Tidewater Partners, LLC; and
Alfred Vieira, as Sellers. Global paid $46,400 in cash and 612,455 in shares of
Global's Common Stock for the Capitol stock. Global also assumed approximately
$15,132 of indebtedness of Capitol, all of which it repaid upon the closing of
the acquisition.
The accompanying unaudited pro forma consolidated statement of operations for
the fiscal year ended March 31, 1998 gives effect to the acquisition by the
Company of Capitol ("the acquisition") as if it had occurred on April 1, 1997.
The unaudited pro forma consolidated statement of operations for the six months
ended September 30, 1998 gives effect to the acquisition as if it had occurred
on April 1, 1998. The unaudited pro forma consolidated balance sheet at
September 30, 1998 gives effect to the acquisition as if it had occurred on
September 30, 1998.
The pro forma effects are based on the historical financial statements of the
acquired entity, giving effect to the transaction under the purchase method of
accounting. 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 intended to be
indicative of the actual results of operations or financial position that would
have been achieved, had the acquisition in fact been consummated at the
beginning of the periods 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 Capitol, and related
notes set forth herein.
22
<PAGE>
<TABLE>
<CAPTION>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1998
(IN THOUSANDS EXEPT PER SHARE DATA)
Historical Historical Historical
Global Carr Capitol
Imaging Business Carr Office Capitol
Systems, Systems, Pro Forma Solutions, Pro Forma Pro Forma
Inc.(a) Inc.(b) Adjustments Inc.(f) Adjustments Consolidated
------------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equipment and supplies
sales $ 121,316 $ 13,630 $ 19,177 $ 154,123
Service and rentals 43,059 $ 3,671 8,992 55,722
------------- ----------- ----------- ------------ ----------- ------------
Total Revenues 164,375 17,301 - 28,169 - 209,845
Costs and operating
expenses:
Cost of equipment
and supplies sales 85,972 7,459 11,386 104,817
Service and rental costs 21,594 2,933 4,231 28,758
Selling, general and
administrative expenses 38,619 5,047 4,766 48,432
Intangible asset amortization 3,076 - 424 (c) 256 1,105 (g) 4,861
------------- ----------- ----------- ------------ ----------- ------------
Total costs and operating
expenses 149,261 15,439 424 20,639 1,105 186,868
------------- ----------- ----------- ------------ ----------- ------------
Income from operations 15,114 1,862 (424) 7,530 (1,105) 22,977
Interest expense (6,713) (37) (1,149)(d) (1,735) (2,394)(h) (12,028)
------------- ----------- ----------- ------------ ----------- ------------
Income before income taxes 8,401 1,825 (1,573) 5,795 (3,499) 10,949
Income taxes 3,949 62 76 (e) 2,173 (756)(i) 5,504
------------- ----------- ----------- ------------ ----------- ------------
Net income 4,452 1,763 (1,649) 3,622 (2,743) 5,445
Yield adjustment on Class
A common stock (2,442) - - - - (2,442)
------------- ----------- ----------- ------------ ----------- ------------
Net income available to
common stockholders $ 2,010 $ 1,763 $ (1,649) $ 3,622 $ (2,743) 3,003
============= =========== =========== ============ =========== ============
Earnings per share, basic
and diluted $ 0.21 $ 0.28
============= ============
Weighted average number of
shares used in the
calculation, basic
and diluted 9,804 332 612 10,748
============= =========== =========== ============
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1998
(in thousands)
(a) This column represents the historical consolidated results of operations of
Global for the fiscal year ended March 31, 1998.
(b) This column represents the historical operating results of Carr for the
fiscal year ended December 31, 1997. This information was used in lieu of
the twelve months ended March 31, 1998 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. This information is included in
this schedule in order to present a more accurate pro forma presentation.
Carr was deemed a significant acquisition, and an 8-K was filed for this
acquisition during the fiscal year.
(c) Reflects additional goodwill amortization expense of $374 and non-compete
covenant amortization expense of $50. 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, including the repayment
of existing Carr debt, had the acquisition been consummated at April 1,
1997. An average interest rate of 8.9% 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 ($592) based on an effective rate of
approximately 37.6%, and the income tax expense of $668 on historical S-
Corporation earnings based on an effective rate of approximately 40%.
(f) This column represents the historical operating results of Capitol for the
fiscal year ended June 30, 1998. This information was used in lieu of the
twelve months ended March 31, 1998 because it was within 93 days of the
Company's fiscal year end. Certain reclassifications have been made to be
consistent with the Company's presentation.
(g) Reflects additional goodwill amortization expense of $1,336 and non-compete
covenant amortization expense of $25 offset by a reduction of ($256) for
goodwill amortization already on Capitol's books. The goodwill
amortization period is 40 years and goodwill is amortized using the
straight-line method. The non-compete covenant amortization period is 2
years; the non-compete covenant is amortized using the straight-line
method.
(h) Reflects additional interest expense related to borrowings that would have
been incurred by the Company to finance the acquisition, including the
repayment of existing Capitol debt, had the acquisition been consummated at
April 1, 1997. An average interest rate of 8.9% was used for this
calculation, which approximates the Company's average borrowing rate during
such period.
24
<PAGE>
(i) Represents the income tax benefit on purchase accounting adjustments and
other pro forma adjustments of ($756) based on an effective rate of
approximately 37.6%.
25
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical
-------------------------------------
Global Imaging Capital Office Pro Forma Pro Forma
Systems, Inc.(a) Solutions, Inc.(b) Adjustments Consolidated
---------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Equipment and supplies sales $ 95,292 $ 9,907 $ 105,199
Service and rentals 29,916 4,817 34,733
---------------- ------------------ ----------- ---------
Total Revenues 125,208 14,724 - 139,932
Costs and operating expenses:
Cost of equipment and supplies sales 68,809 5,159 73,968
Service and rental costs 14,555 1,770 16,325
Selling, general and administrative expenses 27,293 3,020 30,313
Intangible asset amortization 1,844 182 499 (c) 2,525
---------------- ------------------ ----------- ---------
Total costs and operating expenses 112,501 10,131 499 123,131
---------------- ------------------ ----------- ---------
Income from operations 12,707 4,593 (499) 16,801
Interest expense (3,686) (752) (1,313) (d) (5,751)
---------------- ------------------ ----------- ---------
Income before income taxes 9,021 3,841 (1,812) 11,050
Income taxes 4,096 1,466 (424) (e) 5,138
---------------- ------------------ ----------- ---------
Net income before extraordinary item 4,925 2,375 (1,388) 5,912
Yield adjustment on Class A common stock (901) - (901)
---------------- ------------------ ----------- ---------
Net income available to common stockholders $ 4,024 $ 2,375 $ (1,388) $ 5,011
================ ================== =========== =========
Basic earnings per share: $ 0.28 $ 0.33
================ =========
Diluted earnings per share: $ 0.27 $ 0.32
================ =========
Weighted average number of shares outstanding:
Basic 14,601 612 15,213
================ =========== =========
Diluted 15,122 612 15,734
================ =========== =========
</TABLE>
See accompanying notes.
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1998
(in thousands)
(a) This column represents the historical consolidated results of operations,
before extraordinary item, of Global for the six months ended September 30,
1998.
(b) This column represents the historical operating results of Capitol for the
six months ended September 30, 1998.
(c) Reflects additional goodwill amortization expense of $668 and non-compete
covenant amortization expense of $13 offset by a reduction of ($182) for
goodwill amortization already on Capitol's books. The goodwill
amortization period is 40 years and is amortized using the straight-line
method. The non-compete covenant amortization period is 2 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 the Company to finance the acquisition, including the
repayment of existing Capitol debt, had the acquisition been consummated at
April 1, 1998. An average interest rate of 8.9% was used for this
calculation which approximates Global's average borrowing rate during such
period.
(e) Represents the income tax benefit on purchase accounting adjustments and
other pro forma adjustments of ($424) based on an effective rate of
approximately 37.6%
27
<PAGE>
<TABLE>
<CAPTION>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(in thousands)
Historical Acquired Pro Forma Pro Forma
Company (a) Business (b) Adjustments Consolidated
------------------- -------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 4,835 $ 2,926 $ (2,100) (c) $ 5,661
Accounts receivable, net of
allowance for doubtful accounts 38,541 2,593 (560) (d) 40,574
Inventories 24,357 2,097 (60) (e) 26,394
Deferred income taxes 1,629 - - 1,629
Prepaid expenses and other
current assets 1,067 134 1,201
------------------- -------------------- ----------------- ------------------
Total current assets 70,429 7,750 (2,720) 75,459
Rental equipment, net 4,651 8 - 4,659
Property and equipment, net 4,766 206 (20) (f) 4,952
Other assets 761 - - 761
Deferred income taxes 265 - - 265
Related party notes receivable 547 - - 547
Intangible assets, net:
Goodwill 113,817 2,072 53,088 (g) 168,977
Noncompete agreements 1,255 175 (125) (h) 1,305
Financing fees 1,270 521 (521) (i) 1,270
------------------- -------------------- ----------------- ------------------
Total assets $ 197,761 $ 10,732 $ 49,702 $ 258,195
=================== ==================== ================= ==================
Current liabilities:
Accounts payable $ 15,589 $ 339 $ - $ 15,928
Accrued liabilities 4,960 1,461 20 (j) 6,441
Accrued compensation and benefits 3,970 - - 3,970
Current maturities of long-term debt 118 78 - 196
Deferred revenue 11,732 536 - 12,268
------------------- -------------------- ----------------- ------------------
Total current liabilities 36,369 2,414 20 38,803
Long-term debt, less current maturities 87,600 16,132 30,268 (k) 134,000
------------------- -------------------- ----------------- ------------------
Total liabilities 123,969 18,546 30,288 172,803
Stockholders' equity:
Common stock 180 1 5 (l) 186
Additional paid-in capital 70,858 1,000 10,594 (m) 82,452
Retained earnings (deficit) 2,754 (8,815) 8,815 (n) 2,754
------------------- -------------------- ----------------- ------------------
Total stockholders' equity 73,792 (7,814) 19,414 85,392
------------------- -------------------- ----------------- ------------------
Total liabilities and
stockholders' equity $ 197,761 $ 10,732 $ 49,702 $ 258,195
=================== ==================== ================= ==================
</TABLE>
See accompanying notes.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(in thousands)
(a) This column represents the historical consolidated balance sheet of the
Company as of September 30, 1998.
(b) This column represents the historical balance sheet of Capitol as of
September 30, 1998.
(c) This represents cash on Capitol's books that was distributed pro-rata to
shareholders at closing.
(d) This represents an adjustment of $55 to record accounts receivable at fair
value, and reduction of shareholder notes receivable paid out of the
proceeds from the transaction of $505.
(e) This represents an adjustment to record inventory at fair value.
(f) This represents an adjustment to record property and equipment at fair
value.
(g) This represents the portion of the purchase price allocated to goodwill as a
result of the acquisition of Capitol.
(h) This represents the portion of the purchase price allocated to the non-
compete covenant as a result of the acquisition of Capitol in the amount of
$50, and the elimination of a non-compete covenant on Capitol's Balance
Sheet in the amount of $175.
(i) This represents the write off of financing fees (related to institutional
borrowings) that had been capitalized on Capitol's books.
(j) This represents an adjustment to record accrued liabilities at fair value.
(k) This represents the pay-off of Capitol's existing debt of $16,132, and
borrowings of $46,400 by Global to fund the acquisition of Capitol.
(l) Represents the par value of 612 shares of Global common stock issued to the
sellers of Capitol in the amount of $6 in connection with the acquisition,
offset by the elimination of Capitol common stock of $1.
(m) Represents additional paid-in capital on Global's common stock issued to the
sellers of Capitol in connection with the acquisition, of $11,594, by the
elimination of additional paid-in capital on Capitol common stock of
$1,000.
(n) This represents the elimination of Capitol's retained earnings.
29
<PAGE>
(c) Exhibits.
Exhibit Number Description
- -------------- -----------
10.1 Stock Purchase Agreement, dated as of
November 19, 1998, by and among Global, as
Buyer, Capitol, Armen Manoogian, and the
other persons named therein as Sellers.
23.1 Consent of Deloitte & Touche LLP
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: February 9, 1999
GLOBAL IMAGING SYSTEMS, INC.
/s/ Raymond Schilling
----------------------------------------
Raymond Schilling
Vice President, Chief Financial Officer,
Secretary and Treasurer
30
<PAGE>
Exhibit Number Description Page
- -------------- ----------- ----
10.1 Stock Purchase Agreement, dated as of *
December 21, 1998, by and among Global,
as Buyer, Capitol, Armen Manoogian, and
other persons named therein as Sellers.
23.1 Consent of Deloitte & Touche LLP 32
* Previously filed.
31
<PAGE>
Exhibit 23.1
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (No. 333-62765) of Global Imaging Systems, Inc. of our report dated
August 28, 1998 (relating to the Financial Statements of Capitol Office
Solutions, Inc.) included in this Current Report on Form 8-K/A.
/s/ Deloitte & Touche LLP
February 8, 1998
32
