UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
____________________ TO _______________________
Commission File Number: 000-24373
GLOBAL IMAGING SYSTEMS, INC.
-------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 59-3247752
---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3820 Northdale Boulevard, Suite 200A 33624
Tampa, Florida
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(Address of Principal executive offices) (Zip Code)
REGISTRANT'S TELEPONE NUMBER, INCLUDING AREA CODE: 813-960-5508
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The registrant had 18,132,887 Shares of Common Stock, $.01 par value,
outstanding as of August 9, 2000.
<PAGE>
INDEX
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1 - Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2000 (Unaudited)
and March 31, 2000 3
Consolidated Statements of Operations for the three months ended
June 30, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Cash Flows for the three months ended
June 30, 2000 and 1999 (Unaudited) 5
Consolidated Statement of Stockholders' Equity for the three months
ended June 30, 2000 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk 13
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K 14
SIGNATURE 15
EXHIBIT INDEX 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
------------------- -------------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $2,435 $3,629
Accounts receivable, net of allowance for doubtful accounts ($2,060
and $2,064 at June 30, 2000 and March 31, 2000, respectively) 71,955 69,163
Inventories 58,067 57,560
Deferred income taxes 3,650 3,276
Prepaid expenses and other current assets 4,370 2,665
Income taxes receivable - 2,118
------------------- -------------------
Total current assets 140,477 138,411
Rental equipment, net 10,870 9,073
Property and equipment, net 9,129 8,520
Other assets 1,806 1,808
Intangible assets, net:
Goodwill 276,683 268,517
Noncompete agreements 1,838 1,908
Financing fees 5,200 5,328
------------------- -------------------
Total assets $446,003 $433,565
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $27,313 $26,540
Accrued liabilities 6,271 7,614
Accrued compensation and benefits 8,764 9,642
Accrued interest 4,177 1,734
Current maturities of long-term debt 4,587 4,280
Deferred revenue 23,134 21,284
Income taxes payable 724 -
------------------- -------------------
Total current liabilities 74,970 71,094
Deferred income taxes 1,790 1,416
Long-term debt, less current maturities 255,307 243,442
------------------- -------------------
Total liabilities 332,067 315,952
Stockholders' equity:
Preferred stock, $.01 par value:
10,000,000 shares authorized: No shares issued. - -
Common stock, $.01 par value:
50,000,000 shares authorized: 19,225,086 shares issued; 18,428,612
and 19,223,491 shares outstanding at June 30, 2000 and March 31,
2000, respectively 192 192
Common stock held in treasury, at cost (7,269) (35)
Additional paid-in capital 91,475 91,475
Retained earnings 29,538 25,981
------------------- -------------------
Total stockholders' equity 113,936 117,613
------------------- -------------------
Total liabilities and stockholders' equity $446,003 $433,565
=================== ===================
</TABLE>
See accompanying notes.
3
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
2000 1999
------------------- -------------------
<S> <C> <C>
Revenues:
Equipment and supplies sales $102,794 $75,532
Service and rentals 34,123 24,992
------------------- -------------------
Total revenues 136,917 100,524
Costs and operating expenses:
Cost of equipment and supplies sales 69,474 51,572
Service and rental costs 17,072 12,274
Selling, general and administrative expenses 34,715 23,403
Intangible asset amortization 2,439 1,744
------------------- -------------------
Total costs and operating expenses 123,700 88,993
------------------- -------------------
Income from operations 13,217 11,531
Interest expense 6,660 4,243
------------------- -------------------
Income before income taxes 6,557 7,288
Income taxes 3,000 3,200
------------------- -------------------
Income before extraordinary item 3,557 4,088
Extraordinary charge for early retirement of debt, net of tax benefit
of $436 - (654)
------------------- -------------------
Net income $3,557 $3,434
=================== ===================
Basic earnings per share:
Income before extraordinary item $0.19 $0.22
Extraordinary charge for early retirement of debt, net of tax benefit
of $436 - (0.04)
------------------- -------------------
Net income per share $0.19 $0.18
=================== ===================
Diluted earnings per share:
Income before extraordinary item $0.19 $0.22
Extraordinary charge for early retirement of debt, net of tax benefit
of $436 - (0.04)
------------------- -------------------
Net income per share $0.19 $0.18
=================== ===================
Weighted average number of shares outstanding:
Basic 19,001 18,745
Diluted 19,014 18,911
</TABLE>
See accompanying notes.
4
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
2000 1999
------------------- -------------------
<S> <C> <C>
Operating activities:
Net income $3,557 $3,434
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 2,536 1,603
Amortization 2,682 1,917
Extraordinary charge for early retirement of debt - 654
Deferred income taxes 40 234
Changes in operating assets and liabilities, net of amounts
acquired in purchase business combinations:
Accounts receivable (2,059) (4,260)
Inventories 218 2,439
Prepaid expenses and other current assets (1,705) (741)
Other assets 10 326
Accounts payable 498 1,048
Accrued liabilities, compensation and benefits (64) 1,477
Deferred revenue 1,592 300
Income taxes payable 2,802 1,074
------------------- -------------------
Net cash provided by operating activities 10,107 9,505
Investing activities:
Purchase of property, equipment and rental equipment (3,806) (1,493)
Payment for purchase of businesses, net of cash acquired (12,318) (46,024)
------------------- -------------------
Net cash used in investing activities (16,124) (47,517)
Financing activities:
Borrowings under line of credit 13,000 115,000
Payments under line of credit (813) (68,000)
Reduction of other debt (15) (68)
Financing fees (115) (2,585)
Cost of treasury stock (7,234) -
------------------- -------------------
Net cash provided by financing activities 4,823 44,347
------------------- -------------------
Net increase (decrease) in cash and cash equivalents (1,194) 6,335
Cash and cash equivalents, beginning of period 3,629 5,175
------------------- -------------------
Cash and cash equivalents, end of period $2,435 $11,510
=================== ===================
</TABLE>
See accompanying notes.
5
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Additional
Treasury Paid-in Retained
Shares Par Value Stock Capital Earnings Total
-------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balances at March 31, 2000 19,223,491 $192 $(35) $91,475 $25,981 $117,613
Common stock repurchases (794,879) (7,234) (7,234)
Net income 3,557 3,557
-------------- ------------- ------------- ------------- ------------- --------------
Balances at June 30, 2000 18,428,612 $192 $(7,269) $91,475 $29,538 $113,936
============== ============= ============= ============= ============= ==============
</TABLE>
See accompanying notes.
6
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of June 30, 2000,
consolidated statements of operations for the three months ended June 30, 2000
and 1999, the consolidated statements of cash flows for the three months ended
June 30, 2000 and 1999, and the consolidated statement of stockholders' equity
for the three months ended June 30, 2000 are unaudited. In the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
for a fair presentation of the results of operations for the interim periods
presented have been reflected herein. The results of operations for the interim
periods are not necessarily indicative of the results which may be expected for
the entire fiscal year. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in Global Imaging Systems, Inc. (together with its subsidiaries,
"Global" or the "Company") Annual Report for the year ended March 31, 2000.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
NOTE 2. EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income by the
weighted average number of shares outstanding for the period. Diluted EPS
reflects the potential dilution from the exercise of stock options or the
conversion of securities into stock.
The following table reconciles the numerators and denominators of the
basic and diluted EPS computations (shares in thousands):
<TABLE>
<CAPTION>
For Three Months Ended
---------------------------------------
June 30, June 30,
2000 1999
------------------ ------------------
<S> <C> <C>
Numerator:
Income before extraordinary item $3,557 $4,088
Extraordinary charge for early retirement of debt,
net of tax benefit - (654)
Numerator for basic and diluted earnings per share $3,557 $3,434
================== ==================
Denominator:
Denominator for basic earnings per share 19,001 18,745
Effect of dilutive securities:
Employee stock options 13 166
------------------ ------------------
Denominator for diluted earnings per share-adjusted
weighted average shares 19,014 18,911
================== ==================
</TABLE>
NOTE 3. ACQUISITIONS
During the three months ended June 30, 2000 the Company acquired three
businesses that provide office-imaging solutions and network integration
services. Aggregate consideration for these acquisitions was approximately
$11,423 in cash and acquisition related expenses of $71. Liabilities totaling
approximately $727 were assumed by the Company in connection with these
acquisitions. Goodwill of approximately $9,090 was recorded related to these
acquisitions. These acquisitions were accounted for by the purchase method of
accounting and accordingly are included in the results of operations from their
dates of acquisition.
7
<PAGE>
Under the terms of one of its acquisition agreements entered into during
the three months ended June 30, 2000, the Company is committed to make
contingent payments (the Earn-out) of up to $1,800 in cash to the former owners
of the acquired company on or before March 31, 2003. These contingent payments
are based on the future profitability, specifically earnings before interest and
taxes, of the acquired company.
The unaudited pro forma results presented below include the effects of the
Company's acquisitions as if they had been consummated as of April 1, 1999. The
unaudited pro forma financial information below is not necessarily indicative of
either future results of operations or results that might have been achieved had
the acquisitions been consummated at the beginning of the year prior to
acquisition.
<TABLE>
<CAPTION>
Unaudited Pro forma
Three Months ended June 30,
------------------------------------------
2000 1999
------------------- -------------------
<S> <C> <C>
Revenues................................................................... $137,517 $125,107
Income before extraordinary item........................................... 3,533 2,730
Less extraordinary item.................................................... - (654)
------------------- -------------------
Net income................................................................. $3,533 $2,076
=================== ===================
Basic earnings per share:
Income before extraordinary item....................................... $0.19 $0.14
Net income per share................................................... $0.19 $0.11
Diluted earnings per share:
Income before extraordinary item....................................... $0.19 $0.14
Net income per share................................................... $0.19 $0.11
</TABLE>
NOTE 4. STOCK OPTION PLAN
In 1998, the Board of Directors adopted a stock option plan and approved a
number of stock option grants to be effective upon the closing of the initial
public offering. Under the terms of the stock option plan 1,820,000 shares of
the Company's common stock may be sold pursuant to stock options or granted or
sold as restricted stock to directors, officers, employees, and consultants to
the Company. As of June 30, 2000, options to purchase 1,437,425 shares of the
Company's common stock were outstanding under the stock option plan. During the
three months ended June 30, 2000, options to purchase an aggregate of 119,000
shares were granted with exercise prices ranging from $8.00 to $12.00 per share.
In addition to options outstanding under the plan, 10,000 shares of Global's
common stock are issuable upon the exercise of an option granted outside the
plan. This option is exercisable at a price of $12.00 per share.
NOTE 5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The Company has issued $100,000 of 10 3/4% Senior Subordinated Notes, that
are fully and unconditionally guaranteed on a joint and several basis by all the
Company's existing subsidiaries (the Guarantors), each of which is wholly owned,
directly or indirectly, by the Company. The Company is a holding company all of
whose operations are conducted by the Guarantors and the Company has no
operations or assets separate from its investment in its subsidiaries. The
aggregate assets, liabilities, earnings and equity of the Guarantors are
substantially equivalent to the aggregate assets, liabilities, earnings and
equity of the Company, on a consolidated basis. Therefore, separate financial
statements of the Guarantors have not been presented. Separate financial
statements and other disclosures concerning the Guarantors and the Company are
not presented because management believes that such information would not be
material to investors.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The following discussion and analysis should be read in conjunction with
the accompanying financial statements and related notes included elsewhere in
this Report on Form 10-Q and the Company's annual report for the year ended
March 31, 2000. Much of the discussion in this section involves forward-looking
information. Global's actual results may differ significantly from the results
suggested by these forward-looking statements. Some factors that may cause the
Company's results to differ from these statements are described in the "Risk
Factors" section of the Company's Report on Form 10-K for the year ended March
31, 2000.
Overview
Global was founded in June 1994 with the goal of becoming a leading
consolidator in the highly fragmented office imaging solutions industry. Global
is a rapidly growing provider of a number of office imaging solutions. This
includes the sale and service of automated office equipment such as copiers,
facsimile machines, printers and duplicators, network integration services,
electronic presentation equipment and document imaging management ("DIM")
systems. From its founding through June 30, 2000, Global has acquired thirteen
core companies in the United States, two stand-alone companies, and 29
additional satellite companies that have been integrated into the core
companies. The first acquisition was completed in August 1994. Management
believes the acquired businesses and other businesses that Global plans to
acquire will benefit from various Global programs and operating strategies.
These benefits include increased operating efficiencies, the support of
experienced and professional senior management, expansion of the types of office
imaging products and services offered, increased access to capital, and
increased emphasis on financial management.
Global's revenues come from two sources: (1) sales of equipment and
supplies and (2) sales of complementary services and equipment rentals. The
growth of equipment revenues and the complementary supplies, parts and service
revenues depends on several factors, including the demand for equipment,
Global's reputation for providing timely and reliable service, and general
economic conditions. Revenues generated from the sale of equipment and
complementary supplies, parts and services are affected by price, general
economic conditions, service reputation, and competitors' actions in the
marketplace. Revenues from the sale of complementary supplies, parts and
services are also affected by equipment sales and rental volumes.
Gross profit as a percentage of revenues varies from period to period
depending on a number of variables. Those variables include the mix of revenues
from equipment, supplies, service and rentals; the mix of revenues among the
markets served by Global; and the mix of revenues of the businesses acquired. As
Global acquires businesses, the percentage of its revenues from sales of
equipment and supplies, as opposed to service and rentals, fluctuates depending
on whether the businesses acquired are automated office equipment dealers or are
network integrators or electronic presentation systems or DIM systems dealers.
Automated office equipment dealers typically derive a higher percentage of their
revenues from service and rentals, and a lower percentage from sales of
equipment and supplies, than do network integrators, electronic presentation or
DIM systems dealers. Generally, sales of equipment and supplies have lower gross
profit margins than sales of service and rentals. In addition, equipment sales
in the automated office equipment market generally have higher gross profit
margins than equipment sales in the network integration, electronic presentation
systems or DIM systems markets, as these markets are growing faster than the
automated office equipment market. Therefore,
9
<PAGE>
over time a larger percentage of Global's revenues and gross profits may be
derived from sales that have lower gross profit margins than Global's current
gross profit margins.
Cost of goods sold consists primarily of the cost of new equipment, cost
of supplies and parts, labor costs to provide services, rental equipment
depreciation and other direct operating costs. Global depreciates its rental
equipment primarily over a three-year period on a straight-line basis with no
residual value.
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial information
as a percentage of total revenues.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
June 30, June 30,
2000 1999
---------------------- ---------------------
<S> <C> <C>
Revenues:
Equipment and supplies sales......................................... 75.1% 75.1%
Service and rentals.................................................. 24.9 24.9
---------------------- ---------------------
Total revenues......................................................... 100.0 100.0
Cost and operating expenses:
Cost of equipment and supplies sales................................. 50.7 51.3
Service and rental costs............................................. 12.5 12.2
Selling, general, and administrative expenses........................ 25.3 23.3
Intangible asset amortization........................................ 1.8 1.7
---------------------- ---------------------
Total costs and operating expenses..................................... 90.3 88.5
---------------------- ---------------------
Income from operations................................................. 9.7 11.5
Interest expense....................................................... 4.9 4.2
---------------------- ---------------------
Income before income taxes and extraordinary item...................... 4.8 7.3
Income taxes........................................................... 2.2 3.2
---------------------- ---------------------
Income before extraordinary item....................................... 2.6 4.1
Extraordinary charge for early retirement of debt, net of tax
benefit.............................................................. - (.7)
---------------------- ---------------------
Net income............................................................. 2.6% 3.4%
====================== =====================
</TABLE>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Revenues
Total revenues for the three months ended June 30, 2000 increased to
$136,917, 36.2% higher than total revenues of $100,524 for the same period in
1999. The majority of revenue growth was due to the acquisition of businesses
during 1999 and 2000, with the remainder coming from internal growth.
The revenue growth rate for the three months ended June 30, 2000 decreased
from the growth rate for the three months ended June 30, 1999 due to a decrease
in the acquisition rate compared to the revenue base, and increased competition
from direct sources, including internet-based sources for electronic
presentation systems and network integration services.
10
<PAGE>
Sales of equipment and supplies for the three months ended June 30, 2000
increased to $102,794, 36.1% higher than sales of equipment and supplies of
$75,532 for the same period in 1999.
Service and rental revenues for the three months ending June 30, 2000
increased to $34,123, 36.5% higher than service and rental revenues of $24,992
for the same period in 1999.
Gross Profit
Gross profit for the three months ending June 30, 2000 increased to
$50,371, 37.3% higher than gross profit of $36,678 for the same period in 1999.
When viewed as a percent of total revenue, gross profit was 36.8% for the three
months ending June 30, 2000 versus 36.5% for the same period in 1999. Office
equipment dealers typically receive a higher percentage of total revenues from
service and rentals, while network integration, electronic presentation systems
and DIM systems dealers derive a higher percentage of total revenues from sales
of equipment and supplies. The automated office equipment component of sales of
the businesses acquired in 1999 and 2000 had higher equipment and supplies gross
margins than Global's existing businesses. Combined service and rental gross
profit margins were 50.0% for the three months ended June 30, 2000 and 50.9% for
the same period in 1999.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ending
June 30, 2000 increased to $34,715, 48.3% higher than selling, general and
administrative expenses of $23,403 for the same period in 1999, while revenues
increased 36.2% for the three months ending June 30, 2000 compared to 1999. The
increase in expenses was mostly due to the acquisition of businesses in 1999 and
2000. The increase in expenses as a percentage of revenues was the result of the
number of automated office equipment companies acquired during the fiscal year
ended March 31, 2000 and the first three months of the fiscal year ending March
31, 2001. Automated office equipment businesses typically have higher selling,
general and administrative expense to revenue ratios than do network
integration, electronic presentation, or DIM system dealers.
Intangible Asset Amortization
Intangible asset amortization was $2,439 for the three months ended June
30, 2000. During the same period in 1999, asset amortization was $1,744. Asset
amortization includes the amortization of goodwill and non-compete agreements
from acquisitions.
Income From Operations
Income from operations for the three months ended June 30, 2000 was
$13,217, 14.6% higher than $11,531 from the same period in 1999.
Interest Expense
Interest expense for the three months ended June 30, 2000 was $6,660,
57.0% higher than $4,243 from the same period in 1999. The increase was due to
higher borrowing rates and a higher borrowing base.
11
<PAGE>
Income Taxes
The provision for income taxes for the three months ended June 30, 2000
was $3,000, 6.3% less than $3,200 from the same period in 1999. The decrease in
income taxes was primarily due to decreased pre-tax income. The effective income
tax rate increased from 43.9% for the three months ending June 30, 1999 to 45.8%
for the three months ended June 30, 2000. The effective income tax rate for 1999
and 2000 was higher than the federal statutory rate of 35.0% plus state and
local taxes, primarily due to non-deductible goodwill amortization relating to
businesses acquired.
Extraordinary Charges
In June 1999, the Company retired $62,000 of long-term debt payable under
the First Union Credit Agreement due in 2003. The write off of the deferred
financing costs of $1,090 related to the retired debt resulted in an
extraordinary charge of $654 ($.04 per share), net of the related income tax
benefit of $436.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Global has financed its operations primarily through
internal cash flow, sales of stock and bank financing, including the financing
facilities described below. These sources of funds have been used to fund
Global's growth both internally and through acquisitions. Global is pursuing an
acquisition strategy and expects to acquire more businesses. As Global continues
to acquire more businesses it is likely that Global will incur additional debt
and seek additional equity capital.
Under the terms of seven of its acquisition agreements, Global may be
required to make additional payments of up to $25,700 in cash and issue common
stock valued at up to $6,600 over the next five years to certain former owners
of the businesses it has acquired based on the profitability of those businesses
during such time period.
For the three months ended June 30, 2000 the net cash provided by
operations was $10,107 and for the three months ended June 30, 1999 the net cash
provided by operations was $9,505. For the three months ended June 30, 2000 and
for the three months ended June 30, 1999 Global's net cash used in investing
activities was $16,124 and $47,517, respectively, primarily for the purchase of
businesses. For the three months ended June 30, 2000 and the three months ended
June 30, 1999, Global's net cash provided by financing activities was $4,823 and
$44,347, respectively. Net cash provided by financing activities consists of net
borrowings, reduced by $7,234 as part of the stock repurchase program, under
which the Company is authorized to repurchase up to $10,000 of its common stock,
which Global adopted on March 31, 2000 and commenced on May 11, 2000. As of June
30, 2000, Global had repurchased 794,879 shares of its common stock at an
average price of $9.10 per share.
As of June 30, 2000, the Company had $87,000 borrowing availability under
our senior credit facility. Due to increases in interest rates the Company
anticipates reduced borrowings for acquisition activity compared to the levels
of borrowings for acquisitions in the prior fiscal year. The reduced acquisition
rate and the continued internally generated cash flows will extend the time
frame for the Company to seek additional borrowings in either the capital or
equity markets.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended, which is required to be adopted in
12
<PAGE>
years beginning after June 15, 2000. This statement established requirements for
accounting and reporting of derivative instruments and hedging activities.
Management has not completed an analysis to determine the future impact of this
statement on the Company's results of operations.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company is exposed to changes in interest rates, primarily from the
senior credit agreement with First Union. The Company uses interest rate cap and
swap agreements to reduce certain exposures to interest rate fluctuations. The
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.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Exhibit
------ -------
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Amended and Restated Bylaws (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.)
4.4 Credit Agreement, dated as of June 23, 1999, by and among the
Company 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 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Raymond Schilling (4)
10.2 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Michael Mueller (4)
10.3 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Alfred N. Vieira (4)
10.4 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Todd S. Johnson (4)
11.1 Statement of Computation of Per Share Earnings (5)
27.1 Financial Data Schedule
----------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1, No. 333-48103, which was declared effective by the
Securities and Exchange Commission on June 17, 1998.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-4, No. 333-78093, as filed on May 7, 1999.
(3) Incorporated by reference to the Company's Registration Statement on
Form S-4, No. 333-78093, as filed on July 27, 1999.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K
as filed on June 26, 2000.
(5) See Note 2 to the Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the
three months ended June 30, 2000.
14
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Global Imaging Systems, Inc.
--------------------------------------------------------
(Registrant)
August 11, 2000 /s/ Raymond Schilling
---------------------------------------------------------- --------------------------------------------------------
Date Raymond Schilling
Chief Financial Officer, Secretary, and Treasurer,
(Duly Authorized Officer and Principal Financial and
Accounting Officer)
</TABLE>
15
<PAGE>
EXHIBIT INDEX
-------------
(Pursuant to item 601 of Regulation S-K)
Number Exhibit
------ -------
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Amended and Restated Bylaws (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.)
4.4 Credit Agreement, dated as of June 23, 1999, by and among the
Company 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 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Raymond Schilling (4)
10.2 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Michael Mueller (4)
10.3 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Alfred N. Vieira (4)
10.4 Senior Executive Agreement, dated as of April 1, 2000, by and
between Global and Todd S. Johnson (4)
11.1 Statement of Computation of Per Share Earnings (5)
27.1 Financial Data Schedule
----------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1, No. 333-48103, which was declared effective by the
Securities and Exchange Commission on June 17, 1998.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-4, No. 333-78093, as filed on May 7, 1999.
(3) Incorporated by reference to the Company's Registration Statement on
Form S-4, No. 333-78093, as filed on July 27, 1999.
(4) Incorporated by reference to the Company's Annual Report on Form
10-K as filed on June 26, 2000.
(5) See Note 2 to the Notes to Consolidated Financial Statements.
16
