SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to_________________
Commission File Number 000-24373
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GLOBAL IMAGING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 59-3247752
(State or other jurisdiction of (I.R.S. Employer
incorporate or organization) Identification No.)
3820 Northdale Boulevard, Suite 200A 33624
Tampa, Florida (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (813) 960-5508
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------ ------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such report(s)) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
As of June 16, 2000, the aggregate market value of the 10,205,323 shares of
Common Stock held by non-affiliates of the registrant was $96,338,249 based on
the closing sale price $9.44 of the registrant's Common Stock as reported on the
Nasdaq National Market on such date. (For this computation, the registrant has
excluded the market value of all shares of its Common Stock reported as
beneficially owned by executive officers and directors of the registrant and
certain other stockholders; such exclusion shall not be deemed to constitute an
admission that any such person is an "affiliate" of the registrant.) As of June
16, 2000, there were outstanding 18,554,196 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to stockholders for the year ended March 31, 2000,
are incorporated by reference into Part II of this annual report. Portions of
the proxy statement for the annual stockholders meeting to be held in August
2000 are incorporated by reference into Part III of this annual report.
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
Annual Report on Form 10-K
March 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I...............................................................................................1
Item 1. Business.....................................................................................1
Item 2. Properties...................................................................................8
Item 3. Legal Proceedings............................................................................8
Item 4. Submission of Matters to a Vote of Security Holders..........................................9
Executive Officers of Global..................................................................9
Risk Factors.................................................................................10
PART II.............................................................................................14
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters........................14
Item 6. Selected Financial Data.....................................................................14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................14
Item 8. Financial Statements and Supplementary Data.................................................15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........15
PART III............................................................................................15
Item 10. Directors and Executive Officers of the Registrant.........................................15
Item 11. Executive Compensation.....................................................................15
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................15
Item 13. Certain Relationships and Related Transactions.............................................15
PART IV.............................................................................................15
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........................15
SIGNATURES..........................................................................................20
</TABLE>
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PART I
Item 1. Business
Unless the context otherwise requires, as used in this Form 10-K, the terms
"Global," "Company," "our," or "we" refer to Global Imaging Systems, Inc. and
its subsidiaries.
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-K and the information incorporated into this Form 10-K
contain forward-looking statements, including statements about our acquisition
and business strategy, our expected financial position and operating results,
the projected size of our markets and our financing plans and similar matters.
We have based these forward-looking statements largely on our current
expectations and projections about future events and financial trends affecting
the financial condition of our business. These forward-looking statements are
subject to risks, uncertainties and assumptions about Global, including, among
other things:
o general economic and business conditions, both nationally and in our
markets.
o our acquisition opportunities.
o our expectations and estimates concerning future financial performance,
financing plans and the impact of competition.
o anticipated trends in our business, including those described in the
information incorporated into item 7.
o existing and future regulations affecting our business.
o other risk factors set forth in "risk factors."
In addition, in those and other portions of this annual report, the words
"believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect," "project" and similar expressions, as they relate to Global, its
management, and its industry are intended to identify forward-looking
statements. All forward-looking statements attributable to us, or to persons
acting on our behalf, are expressly qualified in their entirety by this
cautionary statement.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this Form 10-K might not
transpire.
Global Imaging Systems, Inc.
Global Imaging Systems, Inc. is a consolidator in the highly fragmented
office imaging solutions industry. Global provides a broad line of office
imaging solutions, including the sale and service of automated office equipment,
network integration services, electronic presentation systems and document
imaging management systems. Since its founding in June 1994, Global has acquired
41 businesses in the United States. Thirteen of these businesses are "core"
companies, where Global concentrates administrative functions within a region.
Two companies acquired are "stand-alone" companies and the remaining 26 acquired
businesses are "satellite" companies, which means their administrative functions
have been transferred to, and their operations have been integrated into, a core
company. Global's operating philosophy is to "think globally, act locally."
Under its decentralized management system, Global typically continues to operate
its acquired companies under their pre-acquisition names and management in order
to preserve client relationships and motivate management.
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Global believes its emphasis on superior customer service and the
contractual nature of its service business can generate significant recurring
revenue. Senior management largely attributes Global's solid historical
operating performance to: (1) employing a strict performance-based benchmarking
model, (2) pursuing a disciplined acquisition strategy and (3) integrating
acquisitions as they are made. For the year ended March 31, 2000, Global had pro
forma revenues of $512 million.
Global seeks to become the provider of choice for all of its customers'
office imaging needs by offering a full range of products and services and
superior customer service. While Global's clientele includes large, Fortune 500
companies, its growth has been, and is expected to be, largely driven by serving
middle market businesses. Global sells and services a variety of office imaging
solutions, including copiers, facsimile machines, printers, LCD projectors,
video teleconferencing equipment, optical scanning equipment, micrographics
equipment, and the design and installation of equipment related to computer
networks. In addition, Global offers a variety of ongoing services, including
supply and service contracts, network management contracts, technical support
and training.
Global's strategic objective is to continue to grow profitably in existing
markets and new markets through internal growth and by acquiring additional
businesses. Global's strategy for stimulating internal growth is to offer new
products and services, to take advantage of cross-selling opportunities, and to
market aggressively to existing and new customers. Global enters new geographic
markets by acquiring additional core companies and expanding its core markets
through acquisitions of additional satellite companies.
Currently, Global's thirteen core companies operate in 94 locations in 21
states. Global targets for acquisition as core companies, businesses that are
leading competitors in the markets they serve. Global's goal is to acquire core
and satellite companies throughout the United States and Canada.
Certain information regarding Global's core and satellite companies,
including pro forma revenues for the fiscal year ended March 31, 2000, is
summarized in the following table. The pro forma revenues in this table and the
pro forma information presented elsewhere in this annual report give effect to
acquisitions made during the fiscal year ended March 31, 2000 as if such
acquisitions had occurred on April 1, 1999.
<TABLE>
<CAPTION>
----------------------------------------- ------------------------ -------------- ----------- ----------- ------------
Core Company Region Pro Forma No. of Years in Date
Revenues Satellites Business Acquired
----------------------------------------- ------------------------ -------------- ----------- ----------- ------------
(in millions)
<S> <C> <C> <C> <C> <C>
Dahill Industries (Felco) Texas $ 37.6 3 15 Jul 1994
Conway Office Products Northeast 49.1 4 23 Jan 1995
Berney Office Solutions Southeast 18.3 3 35 Feb 1995
Amcom Office Systems Western Pennsylvania 13.6 2 22 Feb 1996
Copy Service & Supply Southeast 8.8 - 16 Jul 1996
Southern Business Communications Southeast 65.6 6 19 Nov 1996
Electronic Systems Mid-Atlantic 93.0 2 19 Jul 1997
Quality Business Systems Pacific Northwest 26.1 3 14 Sep 1997
Connecticut Business Systems Northeast 25.9 1 11 Jan 1998
Carr Business Systems Northeast 30.6 1 53 Sep 1998
Distinctive Business Products Chicago Metro Area 20.5 - 23 Dec 1998
Capitol Office Solutions Mid-Atlantic 36.2 1 18 Dec 1998
Lewan & Associates Colorado 64.0 - 28 June 1999
Stand-alone Company
-------------------
Column Office Equipment Chicago Metro Area 16.7 - 10 Nov 1999
Advanced Business Machines California 6.0 - 9 Dec 1999
----------------------------------------- ------------------------ -------------- ----------- ----------- ------------
</TABLE>
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The Industry
The office imaging solutions industry is highly fragmented. Global
estimates that there are approximately 3,700 dealer and distributor outlets in
the United States primarily engaged in the sale of copiers and other automated
office equipment and related service, parts, and supplies, and that
approximately 3,100 of these dealer outlets are unaffiliated.
Consolidation
Independent distributors and service providers are consolidating
throughout the office imaging solutions industry. A number of factors are
driving this consolidation, including the following:
Technological Change. The technology of office imaging solutions is
changing rapidly. Digital technology, which allows images to be captured,
transmitted, reproduced and stored over wide geographic areas through networks
of personal computers, has in recent years been incorporated into copiers,
electronic presentation equipment and document imaging management ("DIM")
technology. As a result, copiers, facsimile machines and printers are gradually
converging in function, and computers and networks are becoming an increasingly
important component of office imaging systems. This has led businesses to demand
more centralized network integration services over a broader geographic area.
The rapid pace of technological change, including the resulting expansion of
product offerings and increase in product support costs, have outpaced the
technical, managerial and financial resources of many smaller distributors and
service providers, causing them to seek larger partners. Further, the blurring
of the distinction among office imaging technologies and the increased role for
computers has led dealers without network integration expertise to partner with
companies that have such expertise.
Dealer Consolidation by Suppliers. The cost of new product development and
competition among equipment manufacturers have led manufacturers to seek
efficiencies. As a result, manufacturers are consolidating their dealer
networks, concentrating their business with a smaller number of dealers that
possess leading service capabilities, wide geographic coverage and sufficient
financial resources.
Distribution Channel Changes. Changes in distribution channels are also
leading to consolidation in the automated office equipment market. Office
superstores and consumer electronics chains now sell lower-end office products
at prices that are forcing smaller dealers out of the market. Smaller dealers
also face difficulty competing in the market for mid- and high-range office
equipment, because often they are not well equipped to provide the sophisticated
support services required by businesses that purchase these products. Typically,
office superstores and consumer electronics chains also do not offer the support
services required by purchasers of mid- and high-range office equipment.
Office Imaging Products and Services
Automated Office Equipment. Dealers in the automated office equipment
market sell and service some or all of the following: black and white copiers
(digital and analog), color copiers, duplicators, facsimile equipment, printers
and multi-function equipment.
Network Integration Services. With the rise of digital technology,
customers increasingly need network integration services as part of their office
imaging solutions. Network integrators provide outsourced management and support
to organizations' computer network infrastructures. As organizations seek to
take advantage of productivity-enhancing computer network technology, they face
complex and costly issues relating to network design, selection, implementation
and management. Among other challenges, organizations must (1) select from an
expanding number of product options with shortening life cycles, (2) integrate
diverse and often incompatible hardware and software environments and (3) deal
with a shortage of qualified information technology service personnel. As a
result, many smaller businesses seek to outsource installation, upgrade and
support, and many large organizations seek to outsource network improvement
functions and the evaluation of new products.
Electronic Presentation Systems. Dealers in the electronic presentation
systems market, sell and service LCD projectors and panels, smartboards,
overhead projectors and video conferencing equipment. As in the automated office
equipment market, products in this market increasingly use digital technology,
and many customers for these
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products have designated a single buyer to address their needs in both markets.
Competition among manufacturers in this market is strong, leading manufacturers
who introduce new products frequently.
DIM Systems. Like automated office equipment and electronic presentation
systems, DIM systems also involve digital technology and are ultimately used by
the same end-users of other types of office imaging equipment. Dealers in this
market sell and service optical disk storage equipment, write once read many
("WORM") disks and CD-ROM optical storage products, as well as micrographic
equipment (microfilm and microfiche). DIM systems capture and store large
volumes of visual data. Key customers for these products include banks,
educational institutions, government institutions, libraries and insurance
companies.
Growth Strategy
Global believes it is well positioned to benefit from industry trends and
continued consolidation in the office imaging solutions industry. Global's goal
is to become the provider of choice for all of its customers' office imaging
needs by offering a full range of products and services and superior customer
service. The key elements of Global's strategy include:
Serve as a Single Source Provider of Office Imaging Solutions. Global
believes that offering a full spectrum of products and services will give it a
competitive advantage and enable it to capitalize on its customer relationships
by cross-selling products and services. As the technology that drives copiers,
facsimiles, printers, electronic presentation equipment and DIM equipment
converges, customers increasingly need computers and networks to use these
products. Accordingly, customers are demanding more integrated office imaging
solutions. Global plans to expand its product lines so that, within each
geographic region it serves, Global can offer automated office equipment,
network integration services, electronic presentation systems and DIM systems.
As Global's operations in these last three markets expand, Global expects an
increasing percentage of its revenues and gross profits will be generated by
sales of equipment and supplies, which typically have lower gross profit margins
than sales of service and rentals. Global is also considering leveraging its
infrastructure, customer base, and expertise by offering outsourced facilities
management services.
Provide Timely and Reliable Service. Global seeks to achieve the highest
level of service. Effective and responsive service is essential to obtaining
repeat business and developing market recognition. Providing timely and high
quality service also allows Global to maintain its profit margins, engage in
cross-selling, and enjoy a source of recurring revenue.
Make Strategic Acquisitions. Global plans to continue acquiring core
companies in targeted geographic markets and to expand these core acquisitions
through internal growth and satellite acquisitions. Global looks for core
acquisition candidates that are led by an experienced management team that will
continue to manage the company after Global acquires it, that have a strong
regional market share, and that can grow internally and through the acquisition
of satellite companies. Global's senior management team has substantial
experience in making acquisitions. Since its founding in June 1994, Global has
acquired thirteen core companies in the United States, two stand-alone companies
and an additional 26 satellite companies which have been integrated into the
core companies. Global's goal is to acquire core and satellite companies
throughout the United States and Canada.
A key component of Global's growth strategy is to acquire satellite
companies in or near its core companies' markets. Core company management
frequently identifies appropriate satellite acquisition candidates. In
evaluating potential satellite acquisitions, Global considers, among other
factors, the potential satellite's proximity to a core company, the fit between
its product lines and those of the nearby core company, and the potential
satellite's management, employee base and service base under contract.
Stimulate Internal Growth. Global's strategy for stimulating internal
growth in its core companies is to increase sales force productivity through
performance benchmarks; expand product and service offerings; increase sales
force size; and aggressively cross-sell products and services.
Optimize Profitability Using Global's Benchmark Model. Global's senior
management has developed an industry management model composed of a
comprehensive set of performance benchmarks. These benchmarks, which are the
focus of internal reporting from the core companies to headquarters, allow
Global's senior and local
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management to monitor and improve the operations of each core company. Using
these criteria, Global trains its core and satellite company managers to
optimize their business mix and improve performance.
Global strives to reduce costs by consolidating the back-office functions
of its satellite acquisitions into core operations, enabling its core companies
to decrease technician driving time and increase the productivity of sales
personnel and administrators. Global also works to reduce costs by standardizing
financial reporting, cash and inventory management, payroll, billing,
collections, insurance and employee benefit programs, and by negotiating
advantageous relationships with equipment manufacturers and distributors, other
suppliers and lessors.
Operate with a Decentralized Management Structure. Global believes that
its core companies' experienced local management possess valuable understanding
of their markets and customers. Therefore, Global gives its core company
managers responsibility for day-to-day operating decisions. Core companies, and,
in some cases, satellite companies, retain their local name and management after
Global acquires them. This decentralized approach permits local management to
maintain focus and motivation and optimizes customer relationships. Local
management is supported by a senior management team that focuses on Global's
growth strategy, as well as corporate planning and financial reporting and
analysis.
Products and Services
Global currently sells and services the following: (1) automated office
equipment, (2) network integration services, (3) electronic presentation systems
and (4) document imaging management systems ("DIM" systems). In each of these
markets, Global provides a number of office imaging solutions, including the
following:
<TABLE>
<CAPTION>
------------------------------- ---------------------------- ----------------------------- ---------------------------
Automated Network Electronic
Office Equipment Integration Presentation Systems DIM Systems
------------------------------- ---------------------------- ----------------------------- ---------------------------
<S> <C> <C> <C>
o Black and white o Network design and o LCD projectors and o Microfiche and
copiers (digital and installation, and panels, smartboards microfilm equipment
analog) related software and and overhead o CD-ROM optical
o Color copiers (digital) hardware projectors storage products
o Duplicators (digital) o Technical support o Video conferencing o Write once read
o Facsimile machines contracts equipment many ("WORM")
o Printers (including o Network maintenance o Color printers disks and related
color) contracts o Audio visual equipment
o Multi-function o Training and support equipment o Related supplies
equipment o Internet services o Related supplies o Related service
o Related supply and o Related service contracts
service contracts contracts o Training and support
o Training and support
------------------------------- ---------------------------- ----------------------------- ---------------------------
</TABLE>
Set forth below are Global's pro forma revenues from each of these markets
as a percentage of total pro forma revenues for the fiscal year ended March 31,
2000.
Fiscal
Year Ended
March 31, 2000
Markets Served
-------------- ---------------
Automated Office Equipment........................... 67%
Network Integration Services......................... 22%
Electronic Presentation.............................. 10%
DIM Systems.......................................... 1%
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Taking advantage of the "after market" opportunities generated by its
sales of office imaging equipment, Global derives a substantial amount of its
revenues from service activities. Service activities generally provide Global
with a recurring source of revenue. Global's copier service and supply
contracts, for example, provide it with a predictable source of revenue, since
billing is typically based on the number of copies customers make. In the
network integration market, Global focuses on contracts to provide ongoing
maintenance and technical support, since these types of contracts generate a
more steady revenue stream than project-based contracts.
Global believes effective and responsive service is essential for it to
obtain repeat business and to develop the market recognition it needs in order
to grow. Most of Global's copier sales, on a pro forma basis and as measured by
revenue generated, are accompanied by service and supply contracts. These
generally continue for a one year term but, in some cases, continue from month
to month. As part of Global's commitment to quality customer service, Global
works to provide its customers with speedy, reliable service. For example,
Global tries to respond to service calls from its automated office equipment
customers within two to four hours if the call comes in during business hours.
For network integration customers, Global offers a 24 hour technical assistance
"hotline." In addition, Global's service technicians are generally manufacturer-
or vendor-certified to service the equipment Global sells.
Customers, Sales and Marketing
Global believes its customers decide to purchase products and services
from Global based on a variety of factors, the most important of which are the
strength of the relationship with Global, quality of service provided, and
price.
Global's growth has been largely driven by serving middle market
businesses. Global also serves a number of large Fortune 500 companies as well
as educational institutions, government entities and other not-for-profit
groups. Global estimates that over 150,000 customers purchased equipment or
services from Global in the past twelve months, on a pro forma basis. During the
fiscal year ended March 31, 2000, on a pro forma basis, none of Global's
customers accounted for more than 2% of total revenues and its top five
customers collectively accounted for less than 5% of total revenues.
Because the management teams at Global's core companies understand their
markets and customer relationships, Global's core company managers make local
marketing decisions, including decisions regarding product offering mix,
promotional programs, and advertising. Global employs approximately 880 people
in sales and marketing. All of Global's sales personnel are compensated at least
partly on a commission basis, with local management determining the structure of
sales compensation and commissions within the parameters of Global's industry
management model. Global generates sales from within its existing customer base
by tracking lease expirations, cross-selling its products and services, and
giving incentives to service personnel for creating sales leads. Each of
Global's core companies also generates sales leads through telemarketing and
door-to-door marketing.
Training
Global provides its sales and service employees extensive, ongoing
training. Each core company has its own technical trainer, and training is
scheduled on a regular basis. Core company technical trainers are typically
certified by Global's suppliers, which makes Global's service technicians
manufacturer- or vendor-certified technicians. Global also provides formalized
product and general sales training to its sales and marketing personnel.
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Suppliers
The following table lists the products Global sells and their
manufacturers in each of the office imaging markets Global serves:
<TABLE>
<CAPTION>
------------------------------------------- --------------------------------------------------------------------------
Automated Office Equipment
------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Copiers: Canon Inc., Konica, Kyocera/Mita, Ricoh Corporation, Savin
Corporation, Sharp, Toshiba America, Inc., Minolta
Facsimile machines: Muratec America, Inc., Panasonic Communications and Systems
Company, Savin, Toshiba, Sharp
Duplicators: Riso, Inc., Ricoh Corporation
Printers: Hewlett-Packard Company, Tektronix, Inc., TRSystems
------------------------------------------- --------------------------------------------------------------------------
Network Integration Services
------------------------------------------- --------------------------------------------------------------------------
Personal and laptop computers, servers, AST Research, Inc., Axent Technology, Cabletron Systems, Cisco
communication equipment and firewalls: Systems, Compaq Computer Corporation, Dell Computer Corporation,
Gateway, Inc., IBM, Intel Corporation, NEC America, Inc., Network
Associates, Sun Microsystems, Toshiba, 3Com Corp.
Networking software: E Presence, Microsoft Corporation, Novell, Inc.
------------------------------------------- --------------------------------------------------------------------------
Electronic Presentation Systems
------------------------------------------- --------------------------------------------------------------------------
Overhead projectors: DuKane Corporation, 3M
LCD projectors: Epson America, Inc., In Focus Systems, Inc., Plus Corporation, Proxima
Corporation, Sharp, Sony Electronics, Inc.
Video conferencing equipment: Picture Tel, 3M
Smart Boards: Smart Technologies, Inc.
------------------------------------------- --------------------------------------------------------------------------
DIM Systems
------------------------------------------- --------------------------------------------------------------------------
Microfilm and microfiche equipment: Canon, Inc.
Optical data storage equipment: Canon, Inc., Compaq Computer Corporation
Document management software: Westbrook Technologies, Inc.
------------------------------------------- --------------------------------------------------------------------------
</TABLE>
During the fiscal year ended March 31, 2000, on a pro forma basis, Global
purchased 13% of its equipment, parts and supplies from Konica and 11% from
Sharp. No other supplier represented in excess of 7% of such purchases, on a pro
forma basis.
Global's agreements with suppliers generally permit Global to sell
particular products on a nonexclusive basis in particular geographic areas. In
most cases, Global's agreements extend for one-year renewable terms, which the
supplier can choose not to renew with 30 days notice. In addition, Global's
suppliers can terminate Global's agreements upon notice (1) if Global does not
meet minimum purchase quotas or other requirements or (2) under certain other
conditions, including a change in Global's ownership.
Leasing and Rentals
A majority of the copiers Global sells are financed by third party leasing
companies. General Electric Capital Corporation, or GECC, finances most of these
leases under a 5-year private label agreement. The GECC program accounts for at
least 75% of all equipment leasing with Copelco Capital, Inc. financing the
majority of what is not financed through GECC. The advantages to these programs
are (1) better lease rates and terms than are generally available through
individual copier dealers, (2) control over leased equipment at the end of the
lease term, and (3) standardized leasing application and lease document. Under
each of these arrangements Global has an option to purchase the leased
equipment, under already negotiated terms at the end of the lease term. This
gives Global the flexibility to sell the equipment to its customers at the end
of the lease term or to provide for such a sale at the time of original
purchase. Global plans to increase the use of the leasing programs in electronic
presentation and DIM
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systems markets where, Global believes, high equipment costs will make leasing
an attractive financing alternative for many customers.
In some cases, Global's automated office equipment dealers also rent
equipment. Rental arrangements provide Global with a steady monthly revenue
stream and, like its leasing arrangements, give Global control over disposition
of the equipment at the end of the rental term.
Competition
Global operates in highly competitive markets, which forces it to compete
for customers and sometimes for acquisition candidates. Competitors in the
automated office equipment market, the electronic presentation systems market
and the DIM systems market include large dealers, including Danka Business
Systems, IKON Office Solutions, Lanier Worldwide, Inc. and independent dealers,
as well as manufacturers' sales and service divisions, including those of Canon,
Konica, Minolta Co., Ltd., Pitney Bowes, Inc., Wang Laboratories, Inc. and Xerox
Corporation. Global also competes with office superstores and consumer
electronics chains in these markets. Principal areas of competition in these
markets include price and product capabilities; quality and speed of post-sales
service support; availability of equipment, parts and supplies; speed of
delivery; financing terms and availability of financing, leasing, or rental
programs.
Competition from large, nationwide competitors is likely to increase as
Global seeks to attract additional customers, expand its markets geographically
and broaden its product and service offerings. Competition from large,
nationwide competitors will also increase if Global's industry continues to
consolidate. Finally, as digital and other new technologies develop, Global may
face competition from new distribution channels, including computer distributors
and value added resellers, for products containing new technology. Some
competitors have greater financial and personnel resources than Global.
In the network integration services market, Global competes with the large
providers, including GE Capital Information Technology Solutions, Inacom Corp.
and Vanstar Corporation; direct sellers such as Dell Computer Company and
Gateway, Inc. and the sales and service divisions of Hewlett Packard and Compaq
Computer Corporation; smaller competitors with regional or local operations; and
the in-house capabilities of its customers. Principal areas of competition in
this market include reputation, quality and speed of support, and price.
Global also faces competition for core and satellite acquisitions from
manufacturers, consolidators, and a number of other independent dealers.
Employees
Global employs approximately 2,500 people, most of whom work at Global's
core companies. Of these, approximately 880 employees work in sales and
marketing, 1,060 in service, and 560 in operations and administration.
Thirty-two employees work at Global's corporate headquarters in Tampa, Florida.
None of Global's employees is covered by collective bargaining agreements.
Global believes it has good relations with its employees.
Government and Environmental Regulation
Global is subject to regulation under various federal, state and local
laws relating to employee safety and health and environmental protection. Global
is not aware of any material non-compliance with any of these laws.
Item 2. Properties
None of the physical properties Global uses in its business are materially
important to Global.
Item 3. Legal Proceedings
On December 29, 1999, the Company and one of its subsidiaries, Eastern
Copy Products, Inc., entered into arbitration proceedings against De Lage Landen
Financial Services, Inc. The Company and Eastern asserted claims arising from De
Lage Landen's alleged breach of a contractual agreement pursuant to which Global
assigned
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equipment leases to De Lage Landen, and from De Lage Landen's alleged wrongful
interference with Global and Eastern's present and prospective business
relationships. De Lage Landen asserted counterclaims for breach of contract and
interference with business relationships. Prior to the close of the arbitration
proceeding, De Lage Landen waived its claim for damages. The arbitration panel
subsequently denied the Company's claim for damages and the arbitration
proceeding has now concluded.
Currently, Global is not involved in any other material legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of Global's stockholders during the
three months ended March 31, 2000.
Executive Officers of Global
The executive officers of Global and their positions and offices as of
March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Thomas S. Johnson................................. 54 Director, President and Chief Executive Officer
Raymond Schilling................................. 45 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
Michael Mueller................................... 48 Senior Vice President, Chief Operating Officer
Alfred N. Vieira.................................. 52 Vice President-Service
Todd S. Johnson................................... 33 Vice President-Acquisitions
</TABLE>
Thomas S. Johnson has served as a director and as President and Chief
Executive Officer since Global's founding in June 1994. From 1991 to 1994, Mr.
Johnson was an office imaging industry consultant. From 1989 to 1990, Mr.
Johnson served as Chief Operating Officer for Danka. From 1975 to 1989, Mr.
Johnson worked at IKON (formerly known as Alco Standard Corporation) in various
staff and operating roles. When he left there in 1989, he was Vice
President-Operations of the Office Products group and was responsible for
acquisitions and turning around under-performing operations. Mr. Johnson has
been involved in the acquisition of over 70 office equipment dealers since 1985
and has over 24 years of experience in acquiring and integrating businesses. Mr.
Johnson graduated with a B.S. degree from the University of Florida in 1972 and
received his MBA from Harvard Business School in 1976.
Raymond Schilling has served as Senior Vice President of Global since
April 1999 and as Chief Financial Officer, Secretary and Treasurer of Global
since its inception in June 1994. From June 1994 to April 1999, Mr. Schilling
also served as Global's Vice President. From 1988 to 1994, Mr. Schilling was
Vice President-Finance of the California/Nevada region of McCaw Communications
and responsible for all of its finance and administrative functions. From 1980
to 1988, Mr. Schilling worked with Mr. Johnson at IKON in various accounting and
financial reporting functions, including as controller of Alco Office Products,
where his responsibilities included acquisitions and evaluation, integration,
development and installation of financial systems. From 1986 to 1988, Mr.
Schilling also was Vice President of Finance and Administration of San Sierra
Business Systems (an Alco Office Products dealer). From 1976 to 1980, Mr.
Schilling was employed by PriceWaterhouse as a CPA. In total, Mr. Schilling has
been involved in the acquisition of over 45 businesses and has over 17 years of
experience in acquiring and integrating businesses. Mr. Schilling graduated with
a B.A. in Economics and Accounting from Muhlenberg College in 1976.
Michael Mueller has served as Senior Vice President of Global since April
1999 and as Vice President and Chief Operating Officer of Global since January
1, 1995. From 1986 to December 1994, Mr. Mueller was employed as Vice President
by Global Services Inc., a copier and office product sales and service company
in Houston, Texas, and served as its Chief Financial Officer from 1988 to 1994.
Mr. Mueller obtained his B.B.A. from the University of Houston in 1974.
Alfred N. Vieira has served as Vice President-Service of Global since
March 1997. From May 1996 to March 1997, Mr. Vieira served as Vice President and
General Manager of Felco Office Systems, Inc.'s four branch
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locations in South Texas. From 1979 to May 1996, Mr. Vieira was employed by
Global Services, Inc. and served as its Vice President of Operations from May
1988 to May 1996. Mr. Vieira studied electrical engineering at City University
of New York.
Todd S. Johnson has served as Vice President-Acquisitions since April 1999
and has been employed by Global since July 1994 in various roles including
Acquisition Team Manager. From 1993 to 1994, Mr. Johnson was employed as an
office imaging industry consultant. From 1989 to 1993, Mr. Johnson was an
officer in the United States Marine Corps. Mr. Johnson graduated from
Pennsylvania State University with a B.S. in Business Management in 1989.
Risk Factors
Set forth below are the risks that we believe are material to investors
who purchase or own our common stock or our senior subordinated notes.
Our Indebtedness Results in Significant Debt Service Obligations and
Limitations. Because we financed our acquisitions primarily with debt, we
incurred substantial debt and, as a result, we have significant debt service
obligations. As of March 31, 2000, our total indebtedness was $247.7 million,
which represented 67.8% of our total capitalization. We also had $100.0 million
of additional borrowing availability under our senior credit facility. In
addition, our senior credit facilities and the indenture governing our senior
subordinated notes, which we refer to as subordinated debt, allow us to incur
additional indebtedness under certain circumstances. Our indebtedness poses
important consequences to investors, including the risks that:
o we will use a substantial portion of our cash flow from operations
to pay principal and interest on our debt, thereby reducing the
funds available for acquisitions, working capital, capital
expenditures and other general corporate purposes;
o we may be unable to obtain additional financing on satisfactory
terms or to otherwise fund working capital, capital expenditures,
acquisitions, and other general corporate requirements;
o our borrowings under our senior credit facility will bear interest
at variable rates, which would create higher debt service
requirements if market interest rates increase; and
o our degree of leverage may hinder our ability to adjust rapidly to
changing market conditions and could make us more vulnerable to
downturns in the economy generally or in our industry.
If we cannot generate sufficient cash flow from operations to meet our
obligations, we may be forced to reduce or delay acquisitions and other capital
expenditures, sell assets, restructure or refinance our debt, or seek additional
equity capital. We cannot assure that these remedies would be available or
satisfactory. In addition, our ability to pay principal and interest on the
notes, and to satisfy our other debt obligations, will depend on our future
operating performance. Our operating performance will be affected by prevailing
economic conditions and financial, business and other factors which may be
beyond our control.
We May Be Unable to Integrate Our Acquired Businesses into Our Operations
Profitably. Integrating our acquired businesses may involve unanticipated
delays, costs or other operational or financial problems. Successful integration
of the businesses we acquire depends on a number of factors, including our
ability to transition acquired companies to our management information systems
and the ability of our core businesses to integrate acquired satellites into
their operations. In integrating our acquired businesses, we may not achieve
expected economies of scale or profitability or realize sufficient revenues to
justify our investment. For example, if we are unable to increase the sales
force productivity at our acquired businesses as quickly as we expect, our
revenues may not justify our investment. We also face the risk that an
unexpected problem at one of our acquired companies will require substantial
time and attention from senior management, distracting management's attention
away from other aspects of our business. We cannot be certain that our
management and financial reporting systems, procedures and controls will be able
to support us as we grow.
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We Need Substantial Additional Funds to Finance Our Acquisitions. We
intend to finance our future acquisitions primarily by incurring additional
indebtedness, which will be substantial in relation to our equity capital. We
cannot be certain that we will be able to borrow money for future acquisitions
on favorable terms. Also, the restrictions imposed on us under our senior credit
facilities and the indenture governing the notes may limit our ability to borrow
additional funds to purchase acquisitions. We may also pay some of the price of
future acquisitions by issuing common stock or other equity securities to the
sellers of the businesses we acquire or in public or private offerings.
Depending on the market value of our common stock, either we or the sellers of
the businesses we acquire may not be willing to use common stock for part of the
consideration we pay. To the extent we do not have access to additional debt and
do not issue equity to pay for future acquisitions, we would need to use more of
our cash resources to continue our acquisition program. We cannot be certain
that we will be able to obtain debt or equity financing, or that we will have
enough cash resources available to pay for future acquisitions.
Our Combined Operating History is Limited. Although a number of the
companies we have acquired have been in operation for some time, Global itself
has a limited history of operations and profitability. Consequently, the
financial information in this annual report may not be indicative of our
financial condition and future performance. See the information incorporated
into Item 7.
We Have Limited Operating Experience in Some of Our Target Markets. A key
element of our expansion strategy is to acquire businesses in each of our
geographic markets that sell and service electronic presentation systems or
document imaging management systems or that provide network integration or
facilities management services or introduce programs in our markets to sell
these products and services. Our limited experience in offering these products
and services may impair our ability to identify, acquire and integrate
appropriate companies. In addition, we may not be able to cross-sell these
products and services to our different customer bases. These markets also
present us with new challenges. For example, none of our companies currently
operates in the facilities management market. Success in this market would
require that we adapt our operations expertise to running labor-intensive
businesses.
We Depend on Our Chief Executive Officer. Our success substantially
depends on the efforts and ability of Thomas S. Johnson, Global's President and
Chief Executive Officer. Mr. Johnson has developed and implemented Global's
industry management model, and has many years of experience in the office
imaging industry and in the acquisition and integration of office imaging
solutions dealers. Mr. Johnson is currently employed under an executive
agreement that renews automatically each April for a one-year period unless
otherwise terminated by either party upon 60 days notice. The loss or
interruption of his services could have an adverse effect on Global.
We Need to Attract and Retain Skilled Employees. Many of our markets are
experiencing low levels of unemployment. As a result, we must compete to
attract, motivate and retain skilled employees, particularly systems
integrators, service technicians, sales personnel and managers. We need
qualified service technicians to fulfill our service contracts and enter into
new ones. We need talented sales personnel to generate both sales and service
revenues. We need effective managers to integrate and operate our acquired
businesses profitably. As a result, if we cannot hire and keep skilled
employees, our business could be adversely affected.
Technological Developments Will Affect Our Business. The office imaging
solutions industry is moving toward digital technology in a multi-functional
office environment. We must be able to respond to this rapidly changing
environment. Our business will be adversely affected if (1) we or our suppliers
fail to anticipate which products or technologies will gain market acceptance or
(2) we cannot sell these products at competitive prices. We cannot be certain
that manufacturers of popular products will permit us to market their newly
developed equipment. In addition, new products containing new technology may be
sold through other channels of distribution. Technological advancements may
result in lowered per unit costs that may reduce our sales revenues and
reliability improvements that may reduce our service revenues. We will also
incur increased expenses to train our sales and service personnel on any new
technologies.
We Depend on Our Suppliers. A majority of our revenues come from the sale
of equipment and from service and supply contracts for this equipment. As a
result, our success depends on our access to reliable sources of equipment,
parts and supplies at competitive prices. During the fiscal year ended March 31,
2000, on a pro forma basis, Global purchased 13% of its equipment, parts and
supplies from Konica Business Technologies, Inc. and 11% from Sharp Electronics
Corporation. No other supplier represented in excess of 7% of such purchases, on
a pro
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forma basis. There is no guarantee that Konica, Sharp or any of our other
suppliers will continue to sell their products to us, or that they will do so at
competitive prices. Finally, other factors, including reduced access to credit
resulting from economic conditions, may impair our suppliers' ability to provide
products in a timely manner or at competitive prices.
Our Markets are Highly Competitive. We operate in highly competitive
markets, which forces us to compete for customers and sometimes for acquisition
candidates. Competitors in the automated office equipment market, the electronic
presentation systems market and the DIM systems market include Xerox
Corporation, Danka Business Systems PLC, IKON Office Solutions, Inc., Lanier
Worldwide, Inc. and other large, independent dealers, as well as manufacturers'
sales and service divisions, office superstores and consumer electronics chains.
In the network integration services market we compete with large providers,
smaller competitors with regional or local operations, and the in-house
capabilities of our customers.
Some competitors have greater financial and personnel resources than we
do. Competition from large, nationwide competitors is likely to increase as we
seek to attract additional customers, expand our markets geographically and
broaden our product and service offerings. Competition from large, nationwide
competitors will also increase if our industry continues to consolidate.
Finally, as digital and other new technologies develop, we may face competition
from new distribution channels, including computer distributors and value added
resellers, for products containing new technology.
Covenants in Our Debt Instruments Restrict Our Capacity to Borrow and
Invest, Which Could Impair Our Ability to Expand or Finance Our Operations. The
terms of our senior credit agreement and indenture governing the terms of our
subordinated debt imposes operating and financial restrictions that limit our
discretion on some business matters, which could make it more difficult for us
to expand, finance our operations or engage in other business activities that
may be in our interest. These restrictions limit or prohibit our ability to:
o incur additional debt and prepay our subordinated debt
o pay dividends or make other distributions
o make investments or other restricted payments
o undergo a change of control
o pledge or mortgage assets
o enter into transactions with related persons
o sell assets
o consolidate, merge or sell all or substantially all of our assets
If we fail to comply with these restrictions, these debt instruments could
become immediately due and payable.
Fluctuations in the Market Price of Our Common Stock May Make it More
Difficult for Us to Raise Capital. The market price of our common stock is
extremely volatile and has fluctuated over a wide range. These fluctuations may
impair our ability to raise capital by offering equity securities. The market
price may continue to fluctuate significantly in response to various factors,
including:
o general trends in the office imaging solutions industry
o announcements and actions by competitors
o fluctuations in competitor's stock prices
o low trading volume
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o quarterly variations in operating results
o changes in estimates by securities analysts
o our liquidity or ability to raise funds
o general economic conditions
Our Directors, Officers and Significant Stockholders May Control Global.
Our executive officers and directors and their affiliates beneficially own 53.0%
of our common stock, and Golder, Thoma, Cressey, Rauner, Inc., through its
affiliation with Golder, Thoma, Cressey, Rauner Fund IV L.P., owns 39.9% of our
common stock. Accordingly, our executive officers and directors and their
affiliates, particularly Golder, Thoma, Cressey, Rauner, Inc., have significant
influence over the election of directors and corporate actions requiring
stockholder approval. In some cases, Golder, Thoma, Cressey, Rauner, Inc.'s
interests as a stockholder could conflict with the interests of our noteholders
or other stockholders. The concentration of ownership of our common stock could
limit the price that certain investors might be willing to pay in the future for
shares of common stock, and could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of Global.
We Are Prohibited from Paying Dividends. We do not anticipate paying any
dividends for the foreseeable future. The terms of our senior credit agreement
and the indenture governing our subordinated debt prohibits us from paying cash
dividends. Investors should, therefore, not expect to receive dividends on
shares of our common stock.
Our Quarterly Operating Results May Fluctuate Significantly. We may
experience significant quarter to quarter fluctuations in our results of
operations as a result of a variety of factors including the timing of the
acquisition and integration of acquired companies, the demand for our products
and services, the timing and introduction of new products and services by us or
our suppliers or competitors, the market acceptance of new products and
services, competitive conditions in the office imaging solutions industry and
general economic conditions. As a result, we believe that period to period
comparisons of our results of operations are not necessarily meaningful or
indicative of the results that we may achieve in any subsequent quarter or full
year. Such quarterly fluctuations may result in volatility in the market price
of our common stock, and in future quarters our results of operations could be
below the expectations of the public market. Such an event could have a material
adverse effect on the market price of our common stock.
Our Charter and Bylaws May Delay or Prevent a Takeover of Global. Our
certificate of incorporation and bylaws, as well as Delaware corporate law,
contain certain provisions that could delay, defer or prevent a change in
control of Global. These provisions could limit the price that certain investors
might be willing to pay for our common stock. Some of these provisions allow us
to issue, without stockholder approval, preferred stock that has rights senior
to our common stock. Other provisions impose various procedural and other
requirements that could make it difficult for stockholders to effect certain
corporate actions.
Our Subordinated Debt and Guarantees Are Unsecured and Subordinated to Our
Senior Debt. The notes are unsecured, which means that investors in the
subordinated debt have no recourse to specific assets of Global or Global's
subsidiaries if a default occurs under the notes and indenture. In addition,
before we can pay principal and interest on the notes, we must first make
payments on any of our existing and future senior debt that is in default,
including all senior debt of our subsidiaries, if any, and all outstanding
amounts under our senior credit facility.
As of March 31, 2000, we had $147.6 million of senior indebtedness
outstanding. Substantially all of our real and personal property used in our
business operations secures our obligations under our senior credit facilities.
If we default on any payments required under any of our senior debt, or if we
fail to comply with other provisions governing our senior debt, such as meeting
required financial ratios, the senior lenders could declare all amounts
outstanding, together with accrued and unpaid interest, immediately due and
payable. If we are unable to repay amounts due, the lenders could proceed
against the collateral securing the debt. If the lenders proceed against any of
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the collateral, we may not have enough assets left to pay our noteholders.
Moreover, if we become bankrupt or similarly reorganize, we may not be able to
use our assets to pay our noteholders until after we pay all of our senior debt.
In addition, the senior credit facility may prohibit us from paying amounts due
on the subordinated debt, or from purchasing, redeeming or otherwise acquiring
the notes if a default exists under our senior debt.
We May Not Have Sufficient Funds to Repay the Notes Upon a Change of
Control. If we experience certain changes of control, our noteholders will have
the right to require us to purchase the notes at a purchase price equal to 101%
of the principal amount of the notes plus accrued and unpaid interest. In such
circumstances, we may also be required to (1) repay our outstanding senior debt
or (2) obtain our lenders' consent to our purchase of the notes. If we cannot
repay our debt or cannot obtain the needed consents, we may be unable to
purchase the notes.
Upon a change of control, we cannot guarantee that we will have sufficient
funds to make any debt payment, including purchases of the notes. The failure to
purchase the notes would be an event of default under the indenture governing
the subordinated debt. To avoid default, we may try to refinance our debt. We
cannot guarantee, however, that such refinancing would be available or would be
on favorable terms.
The events that qualify as a change of control under the indenture may
also be events of default under the senior credit facility or other
indebtedness. An event of default under the senior credit facility would permit
our lenders to accelerate our indebtedness. If we cannot repay such borrowings
when due, the lenders could proceed against the collateral securing the debt.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Except for the information regarding recent sales of unregistered
securities set forth below, the information required by this item is set forth
in the "quarterly financial data" appearing on page 39 of Global's 2000 Annual
Report to Stockholders and is incorporated herein by reference. Portions of
Global's 2000 Annual Report to Stockholders that are incorporated into this Form
10-K are filed as Exhibit 13.1.
Recent Sales of Unregistered Securities
Between April 1, 1999 and March 31, 2000, Global sold a total of 496,950
shares of common stock to owners of five businesses it acquired in exchange for
ownership interests in those businesses valued at $7.7 million. These sales and
issuances of securities were exempt from registration under the Securities Act
by virtue of Section 4(2) or Regulation D promulgated thereunder. Appropriate
legends are affixed to the stock certificates issued in these transactions. All
recipients received adequate information about Global or had access, through
employment or other relationships, to such information.
Item 6. Selected Financial Data
The presentation of selected financial data as of and for the five years
ended March 31, 2000 is included in the "selected financial data" section
appearing on page 12 of Global's 2000 Annual Report to Stockholders and is
incorporated by reference into this Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is set forth in the "management's
discussion and analysis" appearing on pages 13 through 19 of Global's 2000
Annual Report to Stockholders, and is incorporated by reference into this Form
10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to changes in interest rates, primarily from the
senior credit agreement. The Company uses interest rate cap and swap agreements
to reduce certain exposures to interest rate fluctuations. The
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Company also has long-term debt that bears a fixed rate. There is a risk that
market rates will decline and the required payments will exceed those based on
current market rates on the long-term debt.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial information are set
forth in pages 20 through 38 of Global's 2000 Annual Report to Stockholders and
are incorporated by reference into this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
For information with respect to the executive officers of Global, see
"Executive Officers of Global" at the end of Part I of this Form 10-K. For
information with respect to the directors of Global, see "Election of Directors"
in the proxy statement for the 2000 annual meeting of stockholders to be held in
August 2000, which is incorporated by reference into this Form 10-K. Information
required by Item 405 of Regulation S-K is included under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in Global's proxy statement for
the 2000 annual meeting of stockholders to be held in August 2000 and is
incorporated by reference into this Form 10-K.
Item 11. Executive Compensation
Information with respect to executive compensation is incorporated by
reference into this Form 10-K to the information under the captions
"Compensation of Directors" and "Executive Compensation" in Global's proxy
statement for the 2000 annual meeting of stockholders to be held in August 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to security ownership of certain beneficial
owners and management of Global is incorporated by reference into this Form 10-K
to the information under the caption "Voting Securities and Principal Holders
Thereof" in Global's proxy statement for the 2000 annual meeting of stockholders
to be held in August 2000.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and transactions is
incorporated by reference into this Form 10-K to the information under the
caption "Certain Relationships and Transactions" in Global's proxy statement for
the 2000 annual meeting of stockholders to be held in August 2000.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The consolidated financial statements as of March 31, 2000 and 1999 and
for each of the three years in the period ended March 31, 2000, together with
the report thereon of Ernst & Young LLP dated May 12, 2000, appearing on pages
20 through 38 of Global's 2000 Annual Report to Stockholders are incorporated by
reference into Part II, Item 8 of this Form 10-K. With the exception of the
aforementioned information and the information incorporated by reference in Part
II, Items 5, 6, 7 and 8 of this Form 10-K, Global's 2000 Annual Report to
Stockholders is not to be deemed filed as part of this report.
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Consolidated balance sheets as of March 31, 2000 and 1999
Consolidated statements of operations for the years ended March 31, 2000,
1999 and 1998
Consolidated statements of cash flows for the years ended March 31, 2000,
1999 and 1998
Consolidated statements of stockholders' equity for the years ended March
31, 2000, 1999 and 1998
Notes to consolidated financial statements
Report of Independent Auditors
(a) 2. Financial Statement Schedules Required by Items 8 and 14(d)
Included in this annual report is the following additional financial data
which should be read in conjunction with the consolidated financial statements
in Global's 2000 Annual Report to Stockholders:
Report of Independent Auditors
Schedule II--Valuation and Qualifying Accounts for each of the three years
in the period ended March 31, 2000
Supplemental schedules not included with the additional financial data
have been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
(a) 3. Exhibits
Exhibit Index
-------------
3.1 Amended and Restated Certificate of Incorporation of Global Imaging
Systems, Inc. (1)
3.2 Amended and Restated Bylaws of Global Imaging Systems, Inc. (1)
4.1 Specimen common stock certificate. (1)
4.2 Indenture dated as of March 8, 1999 between Global, the subsidiary
guarantors and United States Trust Company of New York, as Trustee,
relating to the 10 3/4% Senior Subordinated Notes Due 2007. (2)
4.3 Schedule of Supplemental Indentures adding additional subsidiary
guarantors. (Form of Supplemental Indenture is included in Indenture
filed as Exhibit 4.2). (3)
4.4 Form of Exchange Note. (2)
4.5 Credit Agreement, dated as of June 23, 1999, by and among Global and
certain of its subsidiaries, as Borrowers, the Lenders referred to
therein, First Union National Bank, as Administrative Agent, Key
Corporate Capital Inc., as Syndication Agent, and ScotiaBanc, Inc., as
Documentation Agent. (3)
10.1 Registration Agreement, dated as of June 9, 1994, as amended, by and
among Global and the stockholders identified therein. (4)
10.2 Termination Agreement, dated as of May 27, 1998, by and among Global;
Golder, Thoma, Cressey, Rauner Fund IV L.P. ("FUND IV"); Golder, Thoma,
Cressey, Rauner, Inc.; and the stockholders identified therein. (5)
10.3 Senior Executive Agreement, dated as of April 1, 1999, by and between
Global and Thomas S. Johnson (6)*
10.4 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Raymond Schilling*+
10.5 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Michael Mueller*+
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10.6 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Alfred N. Vieira*+
10.7 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Todd S. Johnson*+
10.8 1998 Stock Option and Incentive Plan. (5)*
10.8a Form of Incentive Stock Option Agreement. (5)*
10.8b Form of Non-Qualified Stock Option Agreement. (5)*
10.8c Form of Director's Stock Option Agreement. (5)*
10.8d Director Non-Incentive Stock Option Agreement. (7)*
10.8e Amendments to Global Imaging Systems, Inc. 1998 Stock Option and
Incentive Plan and forms of stock option agreements. (7)
10.9 Form of Supply Agreement between Global and Konica. (8)**
10.10 Non-Exclusive Third Party Lessor Agreement, dated July 16, 1996, as
amended, by and between Global and General Electric Capital
Corporation. (8)**
10.11 License Agreement, dated as of July 31, 1996, as amended, between
Global and Copelco Capital, Inc. (8)**
10.12 Non-Exclusive Third Party Lessor Agreement, dated July 26, 1996, as
amended, by and between Global and Tokai Financial Services, Inc. (8)**
10.13 Stock Purchase Agreement, dated as of June 27, 1996 by and among Global
as Buyer, Copy Service & Supply, Inc., Office Furniture Concepts, Inc.,
CSS Leasing, LLC and Terry K. Smith and Crystal E. Smith as Sellers.
(5)
10.14 Stock Purchase Agreement, dated as of November 13, 1996 by and among
Global as Buyer and Southern Business Communications, Inc. and Mark M.
Lloyd and Arthur E. Kreps as Sellers. (5)**
10.15 Asset Purchase Agreement, dated as of November 13, 1996 by and among
ATS-Atlanta One, LLC as Seller, ATS-Atlanta One, Inc. as Purchaser, and
ATS-Atlanta, Inc., Mark M. Lloyd and Arthur E. Kreps. (5)
10.16 Stock Purchase Agreement, dated as of August 7, 1997 by and among
Global, ESI Acquisition Corporation as Buyer, Electronic Systems, Inc.
("ESI") and the Shareholders of ESI as Sellers. (5)**
10.17 Stock Purchase Agreement, dated as of August 29, 1997 by and among
Global, Conway Office Products as Buyer, Eastern Copy Products, Inc.
and Michael E. Kleinhans as Seller. (5)
10.18 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Duplicating Specialties, Inc. (d/b/a Copytronix) and
Dean Groves as Seller. (5)**
10.19 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Quality Business Systems, Inc. and Gary Stevens as
Seller. (5)**
10.20 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Cascade Office Systems, Inc. and Fred Woodard as
Seller. (5)**
10.21 Stock Purchase Agreement, dated as of December 23, 1997 by and among
Global, ESI as Buyer, Electronic Systems of Richmond, Inc. ("ESRI") and
the Shareholders of ESRI as Seller. (5)**
10.22 Stock Purchase Agreement, dated as of December 31, 1997, as assigned,
by and among Global, Connecticut Business Systems, Inc. as Buyer, and
Global, Michael E. Shea, Jr. and Peter Wenzke as Sellers. (5)**
10.23 Asset Purchase Agreement, dated as of February 26, 1998 by and among
Connecticut Systems, Inc., Bloom's Business Systems, a division of
Bloom's Incorporated, the Assets and Bloom's Incorporated as Seller.
(5)**
10.24 Stock Purchase Agreement, dated as of November 13, 1996, by and among
Global as Buyer, Southern Business Communications of D.C., Inc., and
George Gough, Mark M. Lloyd, and Arthur E. Kreps as Sellers. (5)
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10.25 Equity Subscription Agreement, dated as of March 27, 1998, by and among
Global, FUND IV, JNL and Thomas S. Johnson. (5)
10.26 Form of Indemnification Agreement between Global and its directors and
executive officers. (1)*
10.27 Stock Purchase Agreement, dated as of August 31, 1998, by and among
Global and Southern Business Communications, Inc. ("SBC") as Buyer,
Centre Business Products, Inc., and the shareholders thereof, as
Sellers. (3)
10.28 Stock Purchase Agreement, dated as of September 16, 1998, by and among
Global, Carr Acquisition Corporation, as buyer, Carr Business Machines
of Great Neck Inc. (d/b/a Carr Business Systems) and its Shareholders,
as Sellers. (9)
10.29 Stock Purchase Agreement, dated as of September 28, 1998, by and among
Global and SBC as Buyer, ProView, Inc., and the Shareholders thereof,
as Sellers. (3)
10.30 Stock Purchase Agreement, dated as of November 19, 1998, by and among
Global as Buyer, Capitol Office Solutions, Inc., FUND IV, Armen
Manoogian, and the other persons named therein as Sellers. (10)
10.31 Stock Purchase Agreement, dated as of December 22, 1998, by and among
Global as Buyer, Distinctive Business Products, Inc., and the
shareholders thereof, as Sellers. (11)
10.32 Merger Agreement and Plan of Merger, dated as of February 26, 1999, by
and among Global, Dahill Acquisition, Inc., Dahill Industries, Inc. and
Randall E. Davidson. (2)
10.33 Registration Rights Agreement, dated March 8, 1999, by and among
Global, the subsidiary guarantors, First Union Capital Markets Corp.,
Prudential Securities Incorporated, Raymond James & Associates, Inc.
and Scotia Capital Markets (USA) Inc. (2)
10.34 Merger Agreement, dated June 24, 1999, by and among Global, Lewan
Acquisition, Inc., Lewan & Associates, Inc. and the shareholders of
Lewan & Associates, Inc. (12)
11.1 Statement regarding computation of per share earnings (See Consolidated
Statements of Operations for the years ended March 31, 2000, 1999 and
1998 incorporated herein and Note 7 to the Notes to Consolidated
Financial Statements for the same period).+
13.1 Incorporated portions of Annual Report to Stockholders for the Year
Ended March 31, 2000.+
21.1 Subsidiaries of Global.+
23.1 The consent of Ernst & Young LLP.+
27.1 Financial Data Schedule.+
---------------
(1) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on May 8, 1998.
(2) Incorporated by reference to Global's Registration Statement on Form
S-4, No. 333-78093, as filed with the SEC on May 7, 1999.
(3) Incorporated by reference to Global's Registration Statement on Form
S-4, No. 333-78093, as filed with the SEC on July 27, 1999.
(4) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on March 17, 1998
(5) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on June 11, 1998.
(6) Incorporated by reference to Global's Quarterly Report on Form 10-Q
filed with the SEC on February 14, 2000.
(7) Incorporated by reference to Global's Registration Statement on Form
S-8, No. 333-80801, as filed with the SEC on June 16, 1999.
(8) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on March 27, 1998.
(9) Incorporated by reference to Global's Current Report on Form 8-K, as
filed with the SEC on September 29, 1998.
(10) Incorporated by reference to Global's Current Report on Form 8-K, as
filed with the SEC on January 5, 1999.
18
<PAGE>
(11) Incorporated by reference to Global's Quarterly Report on Form 10-Q
filed with the SEC on February 16, 1999.
(12) Incorporated by reference to Global's Current Report on Form 8-K filed
with the SEC on July 6, 1999.
+ Filed herewith.
* Management contract or compensatory plan, contract or arrangement.
** Confidential treatment has been granted for portions of this exhibit.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the last quarter of the
fiscal year ended March 31, 2000.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Global Imaging Systems, Inc. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Global Imaging Systems, Inc.
By: /s/ Thomas S. Johnson
-------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
Date: June 23, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of June 23, 2000.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ Thomas S. Johnson President, Chief Executive Officer and Director
------------------------------------------------------------ (Principal Executive Officer)
Thomas S. Johnson
Senior Vice President, Chief Financial Officer,
/s/ Raymond Schilling Secretary and Treasurer (Principal Financial
------------------------------------------------------------ and Accounting Officer)
Raymond Schilling
/s/ Carl D. Thoma Chairman of the Board
------------------------------------------------------------
Carl D. Thoma
/s/ Bruce D. Gorchow Director
------------------------------------------------------------
Bruce D. Gorchow
/s/ William C. Kessinger Director
------------------------------------------------------------
William C. Kessinger
/s/ Mark M. Lloyd Director
------------------------------------------------------------
Mark M. Lloyd
/s/ Edward N. Patrone Director
------------------------------------------------------------
Edward N. Patrone
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Global Imaging Systems, Inc.
We have audited the consolidated financial statements of Global Imaging Systems,
Inc. as of March 31, 2000 and 1999, and for each of the three years in the
period ended March 31, 2000, and have issued our report thereon dated May 12,
2000. Our audits also included the financial statement schedule listed in Item
14(a) of this Annual Report (Form 10-K). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Tampa, Florida,
May 12, 2000
21
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Reserve for returns and allowances and bad debts:
Additions
----------------------------
Balance at
the Charged to Charged to Balance at
Beginning of Costs and Other the End of
the period Expenses Accounts (1) Deductions the period
------------ ------------ ------------- ------------ ------------
Year Ended:
<S> <C> <C> <C> <C> <C>
March 31, 1998.................... $ 309,044 $289,879 $532,689 $261,068 $ 870,544
March 31, 1999.................... $ 870,544 $345,993 $472,583 $335,888 $1,353,232
March 31, 2000.................... $1,353,232 $532,677 $585,529 $407,253 $2,064,185
Reserve for excess and slow-moving inventory:
<CAPTION>
Additions
----------------------------
Balance at
the Charged to Charged to Balance at
Beginning of Costs and Other the End of
the period Expenses Accounts (1) Deductions the period
------------ ------------ ------------- ------------ ------------
Year Ended:
<S> <C> <C> <C> <C> <C>
March 31, 1998.................... $ 326,099 $888,802 $ 686,877 $ 606,758 $1,295,020
March 31, 1999.................... $1,295,020 $759,721 $1,160,660 $1,004,646 $2,210,755
March 31, 2000.................... $2,210,755 $531,675 $1,648,151 $1,591,705 $2,798,876
</TABLE>
------------
(1) These amounts primarily represent reserve balances acquired in connection
with business combinations.
22
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
--- -----------
3.1 Amended and Restated Certificate of Incorporation of Global Imaging
Systems, Inc. (1)
3.2 Amended and Restated Bylaws of Global Imaging Systems, Inc. (1)
4.1 Specimen common stock certificate. (1)
4.2 Indenture dated as of March 8, 1999 between Global, the subsidiary
guarantors and United States Trust Company of New York, as Trustee,
relating to the 10 3/4% Senior Subordinated Notes Due 2007. (2)
4.3 Schedule of Supplemental Indentures adding additional subsidiary
guarantors. (Form of Supplemental Indenture is included in Indenture
filed as Exhibit 4.2). (3)
4.4 Form of Exchange Note. (2)
4.5 Credit Agreement, dated as of June 23, 1999, by and among Global and
certain of its subsidiaries, as Borrowers, the Lenders referred to
therein, First Union National Bank, as Administrative Agent, Key
Corporate Capital Inc., as Syndication Agent, and ScotiaBanc, Inc., as
Documentation Agent. (3)
10.1 Registration Agreement, dated as of June 9, 1994, as amended, by and
among Global and the stockholders identified therein. (4)
10.2 Termination Agreement, dated as of May 27, 1998, by and among Global;
Golder, Thoma, Cressey, Rauner Fund IV L.P. ("FUND IV"); Golder, Thoma,
Cressey, Rauner, Inc.; and the stockholders identified therein. (5)
10.3 Senior Executive Agreement, dated as of April 1, 1999, by and between
Global and Thomas S. Johnson (6)*
10.4 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Raymond Schilling*+
10.5 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Michael Mueller*+
10.6 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Alfred N. Vieira*+
10.7 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Todd S. Johnson*+
10.8 1998 Stock Option and Incentive Plan. (5)*
10.8a Form of Incentive Stock Option Agreement. (5)*
10.8b Form of Non-Qualified Stock Option Agreement. (5)*
10.8c Form of Director's Stock Option Agreement. (5)*
10.8d Director Non-Incentive Stock Option Agreement. (7)*
10.8e Amendments to Global Imaging Systems, Inc. 1998 Stock Option and
Incentive Plan and forms of stock option agreements. (7)
10.9 Form of Supply Agreement between Global and Konica. (8)**
10.10 Non-Exclusive Third Party Lessor Agreement, dated July 16, 1996, as
amended, by and between Global and General Electric Capital
Corporation. (8)**
10.11 License Agreement, dated as of July 31, 1996, as amended, between
Global and Copelco Capital, Inc. (8)**
10.12 Non-Exclusive Third Party Lessor Agreement, dated July 26, 1996, as
amended, by and between Global and Tokai Financial Services, Inc. (8)**
10.13 Stock Purchase Agreement, dated as of June 27, 1996 by and among Global
as Buyer, Copy Service & Supply, Inc., Office Furniture Concepts, Inc.,
CSS Leasing, LLC and Terry K. Smith and Crystal E. Smith as Sellers.
(5)
<PAGE>
Exhibit
No. Description
--- -----------
10.14 Stock Purchase Agreement, dated as of November 13, 1996 by and among
Global as Buyer and Southern Business Communications, Inc. and Mark M.
Lloyd and Arthur E. Kreps as Sellers. (5)**
10.15 Asset Purchase Agreement, dated as of November 13, 1996 by and among
ATS-Atlanta One, LLC as Seller, ATS-Atlanta One, Inc. as Purchaser, and
ATS-Atlanta, Inc., Mark M. Lloyd and Arthur E. Kreps. (5)
10.16 Stock Purchase Agreement, dated as of August 7, 1997 by and among
Global, ESI Acquisition Corporation as Buyer, Electronic Systems, Inc.
("ESI") and the Shareholders of ESI as Sellers. (5)**
10.17 Stock Purchase Agreement, dated as of August 29, 1997 by and among
Global, Conway Office Products as Buyer, Eastern Copy Products, Inc.
and Michael E. Kleinhans as Seller. (5)
10.18 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Duplicating Specialties, Inc. (d/b/a Copytronix) and
Dean Groves as Seller. (5)**
10.19 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Quality Business Systems, Inc. and Gary Stevens as
Seller. (5)**
10.20 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Cascade Office Systems, Inc. and Fred Woodard as
Seller. (5)**
10.21 Stock Purchase Agreement, dated as of December 23, 1997 by and among
Global, ESI as Buyer, Electronic Systems of Richmond, Inc. ("ESRI") and
the Shareholders of ESRI as Seller. (5)**
10.22 Stock Purchase Agreement, dated as of December 31, 1997, as assigned,
by and among Global, Connecticut Business Systems, Inc. as Buyer, and
Global, Michael E. Shea, Jr. and Peter Wenzke as Sellers. (5)**
10.23 Asset Purchase Agreement, dated as of February 26, 1998 by and among
Connecticut Systems, Inc., Bloom's Business Systems, a division of
Bloom's Incorporated, the Assets and Bloom's Incorporated as Seller.
(5)**
10.24 Stock Purchase Agreement, dated as of November 13, 1996, by and among
Global as Buyer, Southern Business Communications of D.C., Inc., and
George Gough, Mark M. Lloyd, and Arthur E. Kreps as Sellers. (5)
10.25 Equity Subscription Agreement, dated as of March 27, 1998, by and among
Global, FUND IV, JNL and Thomas S. Johnson. (5)
10.26 Form of Indemnification Agreement between Global and its directors and
executive officers. (1)*
10.27 Stock Purchase Agreement, dated as of August 31, 1998, by and among
Global and Southern Business Communications, Inc. ("SBC") as Buyer,
Centre Business Products, Inc., and the shareholders thereof, as
Sellers. (3)
10.28 Stock Purchase Agreement, dated as of September 16, 1998, by and among
Global, Carr Acquisition Corporation, as buyer, Carr Business Machines
of Great Neck Inc. (d/b/a Carr Business Systems) and its Shareholders,
as Sellers. (9)
10.29 Stock Purchase Agreement, dated as of September 28, 1998, by and among
Global and SBC as Buyer, ProView, Inc., and the Shareholders thereof,
as Sellers. (3)
10.30 Stock Purchase Agreement, dated as of November 19, 1998, by and among
Global as Buyer, Capitol Office Solutions, Inc., FUND IV, Armen
Manoogian, and the other persons named therein as Sellers. (10)
10.31 Stock Purchase Agreement, dated as of December 22, 1998, by and among
Global as Buyer, Distinctive Business Products, Inc., and the
shareholders thereof, as Sellers. (11)
10.32 Merger Agreement and Plan of Merger, dated as of February 26, 1999, by
and among Global, Dahill Acquisition, Inc., Dahill Industries, Inc. and
Randall E. Davidson. (2)
<PAGE>
Exhibit
No. Description
--- -----------
10.33 Registration Rights Agreement, dated March 8, 1999, by and among
Global, the subsidiary guarantors, First Union Capital Markets Corp.,
Prudential Securities Incorporated, Raymond James & Associates, Inc.
and Scotia Capital Markets (USA) Inc. (2)
10.34 Merger Agreement, dated June 24, 1999, by and among Global, Lewan
Acquisition, Inc., Lewan & Associates, Inc. and the shareholders of
Lewan & Associates, Inc. (12)
11.1 Statement regarding computation of per share earnings (See Consolidated
Statements of Operations for the years ended March 31, 2000, 1999 and
1998 incorporated herein and Note 7 to the Notes to Consolidated
Financial Statements for the same period).+
13.1 Incorporated portions of Annual Report to Stockholders for the Year
Ended March 31, 2000.+
21.1 Subsidiaries of Global.+
23.1 The consent of Ernst & Young LLP.+
27.1 Financial Data Schedule.+
-----------
(1) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on May 8, 1998.
(2) Incorporated by reference to Global's Registration Statement on Form
S-4, No. 333-78093, as filed with the SEC on May 7, 1999.
(3) Incorporated by reference to Global's Registration Statement on Form
S-4, No. 333-78093, as filed with the SEC on July 27, 1999.
(4) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on March 17, 1998
(5) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on June 11, 1998.
(6) Incorporated by reference to Global's Quarterly Report on Form 10-Q
filed with the SEC on February 14, 2000.
(7) Incorporated by reference to Global's Registration Statement on Form
S-8, No. 333-80801, as filed with the SEC on June 16, 1999.
(8) Incorporated by reference to Global's Registration Statement on Form
S-1, No. 333-48103, as filed with the SEC on March 27, 1998.
(9) Incorporated by reference to Global's Current Report on Form 8-K, as
filed with the SEC on September 29, 1998.
(10) Incorporated by reference to Global's Current Report on Form 8-K, as
filed with the SEC on January 5, 1999.
(11) Incorporated by reference to Global's Quarterly Report on Form 10-Q
filed with the SEC on February 16, 1999.
(12) Incorporated by reference to Global's Current Report on Form 8-K filed
with the SEC on July 6, 1999.
+ Filed herewith.
* Management contract or compensatory plan, contract or arrangement.
** Confidential treatment has been granted for portions of this exhibit.
