PMRYE Pomeroy IT Solutions (MM)

Pomeroy IT Solutions, Inc. (NASDAQ:PMRYE) today announced that it has filed its quarterly reports on Form 10-Q for the period ended October 5, 2005 and the amended and restated quarterly reports on Form 10-Q for the periods ended April 5, 2005 and July 5, 2005. For the fiscal third quarter ended October 5, 2005, the Company recorded revenues of $185.0 million, a 7.7% decline from revenues of $200.5 million in the third quarter of fiscal 2004. The diluted loss per share in the fiscal third quarter of 2005 was $(0.12), which included an extraordinary provision for doubtful accounts and restructuring and severance charges, and represented a decline from diluted earnings per share of $0.15 in the prior year period. Excluding the provision and charges, the third quarter 2005 diluted earnings per share were $0.06. For the nine months ended October 5, 2005, revenues increased 1.7% to $542.9 million from $533.9 million in the prior year period. For this nine month period of fiscal 2005, diluted earnings per share were $0.11, inclusive of the provision and charges described above, which represented a decline of 81.0% from the diluted earnings per share of $0.58 in the prior year period. Excluding the provision and charges, diluted earnings per share for the fiscal 2005 nine-month period were $0.29. "We are pleased to have now completed the filing of the fiscal 2005 third quarter results along with the restatement process for the first two quarters of fiscal 2005," said Stephen E. Pomeroy, CEO of the Company. "Our main focus in 2006 will be on controlling costs and improving service margins, while maintaining customer satisfaction," said Mr. Pomeroy. The Company amended its financial statements for the first and second quarter of fiscal 2005. The table below highlights selected income statement items ($000's except per share amounts): -0- *T First Quarter First Quarter Second Quarter Second Quarter As Previously As As Previously As Reported Amended Reported Amended Revenue 165,590 165,832 193,671 192,025 Net Income 1,750 565 3,111 2,365 Earnings per Share (diluted) $0.14 $0.04 $0.25 $0.19 *T The Company plans to conduct a conference call to discuss the restated financial statements, the third quarter results and the full fiscal year 2005 results after the Form 10-K for fiscal 2005 is filed. As a national solutions provider, Pomeroy provides services that include: outsourcing, application development, systems integration and other maintenance and support services. The Company maintains a workforce of approximately 3,000 skilled, technical employees with the capabilities to plan, design, implement and support all categories of its consulting, infrastructure and lifecycle solutions offerings. Pomeroy helps clients leverage IT as an enabler to increase productivity, reduce costs and improve profitability. Pomeroy has clientele across a broad spectrum of industries, governments and educational organizations. The Company reported revenues of $742 million for the year ended January 5, 2005. Certain of the statements in the preceding paragraphs regarding reporting financial results constitute "forward-looking statements" for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and as such they involve known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those projected. Factors which could cause actual results to differ materially from current expectations include, but are not limited to, the nature and volume of products and services anticipated to be delivered, the mix of the products and services businesses, the type of services delivered, the Company's need for outside consulting services, new acquisitions by the Company, terms of applicable customer and vendor agreements and certification programs and the assumptions regarding the ability to perform thereunder, the ability to implement the company's best practices strategies, the ability to manage risks associated with customer projects, existing market and competitive conditions including the overall demand for IT products and services, and the ability to attract and retain technical and other highly skilled personnel. -0- *T POMEROY IT SOLUTIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands) October 5, January 5, 2005 2005 ----------- ---------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $129 $13,108 Certificates of deposit 4,638 4,561 Accounts receivable: Trade, less allowance of $4,289 at October 5, 2005 and $1,462 at January 5, 2005 130,007 143,113 Vendor receivables, less allowance of $100 at October 5, 2005 and January 5, 2005 5,769 5,790 Net investment in leases 3,146 3,814 Other 2,590 2,902 ----------- ---------- Total receivables 141,512 155,619 ----------- ---------- Inventories 13,832 17,188 Other 9,375 10,302 ----------- ---------- Total current assets 169,486 200,778 ----------- ---------- Equipment and leasehold improvements: Furniture, fixtures and equipment 30,735 30,113 Leasehold improvements 6,591 6,187 ----------- ---------- Total 37,326 36,300 Less accumulated depreciation 23,915 21,061 ----------- ---------- Net equipment and leasehold improvements 13,411 15,239 ----------- ---------- Net investment in leases, net of current portion 977 1,650 Goodwill 115,626 109,913 Intangible assets, net 3,078 3,702 Other assets 2,373 1,606 ----------- ---------- Total assets $304,951 $332,888 =========== ========== POMEROY IT SOLUTIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands) October 5, January 5, 2005 2005 ----------- ----------- (Unaudited) LIABILITIES AND EQUITY Current Liabilities: Current portion of notes payable $ - $ 912 Short-term borrowings 3,686 20,153 Accounts payable 56,815 72,656 Deferred revenue 3,368 3,490 Employee compensation and benefits 7,760 8,245 Accrued restructuring and severance charges 6,007 7,585 Other current liabilities 8,651 6,778 ----------- ----------- Total current liabilities 86,287 119,819 ----------- ----------- Notes payable, less current portion - 250 Deferred income taxes 2,134 97 Commitments and contingencies Equity: Preferred stock, $.01 par value; authorized 2,000 shares (no shares issued or outstanding) - - Common stock, $.01 par value; authorized 20,000 shares (13,400 and 13,188 shares issued at October 5, 2005 and January 5, 2005, respectively) 134 132 Paid-in capital 87,861 85,231 Accumulated other comprehensive income (loss) 24 (78) Retained earnings 137,633 136,183 ----------- ----------- 225,652 221,468 Less treasury stock, at cost ( 810 and 778 shares at October 5, 2005 and January 5, 2005, respectively) 9,122 8,746 ----------- ----------- Total equity 216,530 212,722 ----------- ----------- Total liabilities and equity $ 304,951 $ 332,888 =========== =========== POMEROY IT SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,except earnings per share data) Three Months Ended ----------------------- October 5, October 5, 2005 2004 ----------- ----------- (Unaudited) (Unaudited) Net sales and service revenues: Sales - equipment, supplies and leasing $129,281 $139,403 Service 55,720 61,101 ----------- ----------- Total net sales and service revenues 185,001 200,504 ----------- ----------- Cost of sales and service: Sales - equipment, supplies and leasing 120,058 129,621 Service 42,427 44,433 ----------- ----------- Total cost of sales and service 162,485 174,054 ----------- ----------- Gross profit 22,516 26,450 ----------- ----------- Operating expenses: Selling, general and administrative 19,005 18,818 Rent expense 830 906 Depreciation 1,187 1,052 Amortization 164 122 Provision for doubtful accounts 2,000 - Restructuring and severance charges 1,662 2,423 ----------- ----------- Total operating expenses 24,848 23,321 ----------- ----------- Income (loss) from operations (2,332) 3,129 ----------- ----------- Other expense: Interest, net 152 32 Other 4 4 ----------- ----------- Total other expense 156 36 ----------- ----------- Income (loss) before income tax (2,488) 3,093 Income tax expense (benefit) (1,008) 1,221 ----------- ----------- Net income (loss) $(1,480) $1,872 =========== =========== Weighted average shares outstanding: Basic 12,583 12,240 =========== =========== Diluted 12,583 12,366 =========== =========== Earnings (loss) per common share: Basic $(0.12) $0.15 =========== =========== Diluted $(0.12) $0.15 =========== =========== (a) Dilutive loss per common share for the three months ended October 5, 2005 would have been anti-dilutive if the number of weighted average shares outstanding were adjusted to reflect the dilutive effect of outstanding stock options. POMEROY IT SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands,except earnings per share data) Nine Months Ended ----------------------- October 5, October 5, 2005 2004 ----------- ----------- (Unaudited) (Unaudited) Net sales and service revenues: Sales - equipment, supplies and leasing $375,617 $407,724 Service 167,241 126,149 ----------- ----------- Total net sales and service revenues 542,858 533,873 ----------- ----------- Cost of sales and service: Sales - equipment, supplies and leasing 347,438 377,638 Service 124,941 91,685 ----------- ----------- Total cost of sales and service 472,379 469,323 ----------- ----------- Gross profit 70,479 64,550 ----------- ----------- Operating expenses: Selling, general and administrative 56,861 44,570 Rent expense 2,556 2,451 Depreciation 3,624 2,968 Amortization 624 201 Provision for doubtful accounts 2,000 - Restructuring and severance charges 1,794 2,423 ----------- ----------- Total operating expenses 67,459 52,613 ----------- ----------- Income from operations 3,020 11,937 ----------- ----------- Other expense: Interest, net 579 1 Other 5 27 ----------- ----------- Total other expense 584 28 ----------- ----------- Income before income tax 2,436 11,909 Income tax expense 986 4,675 ----------- ----------- Net income $1,450 $7,234 =========== =========== Weighted average shares outstanding: Basic 12,542 12,243 =========== =========== Diluted 12,652 12,419 =========== =========== Earnings per common share: Basic $0.12 $0.59 =========== =========== Diluted $0.11 $0.58 =========== =========== POMEROY IT SOLUTIONS, INC. PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,except earnings per share data) Three Months Ended ------------------------- As Reported Proforma(1) October 5, October 5, 2005 2005 ------------ ----------- (Unaudited) (Unaudited) Net sales and service revenues: Sales - equipment, supplies and leasing $129,281 $129,281 Service 55,720 55,720 ------------ ----------- Total net sales and service revenues 185,001 185,001 ------------ ----------- Cost of sales and service: Sales - equipment, supplies and leasing 120,058 120,058 Service 42,427 42,427 ------------ ----------- Total cost of sales and service 162,485 162,485 ------------ ----------- Gross profit 22,516 22,516 ------------ ----------- Operating expenses: Selling, general and administrative 19,005 19,005 Rent expense 830 830 Depreciation 1,187 1,187 Amortization 164 164 Provision for doubtful accounts 2,000 - Restructuring and severance charges 1,662 - ------------ ----------- Total operating expenses 24,848 21,186 ------------ ----------- Income (loss) from operations (2,332) 1,330 ------------ ----------- Other expense: Interest, net 152 152 Other 4 4 ------------ ----------- Total other expense 156 156 ------------ ----------- Income (loss) before income tax (2,488) 1,174 Income tax expense (benefit) (1,008) 475 ------------ ----------- Net income (loss) $(1,480) $699 ============ =========== Weighted average shares outstanding: Basic 12,583 12,583 ============ =========== Diluted 12,583 12,660 ============ =========== Earnings (loss) per common share: Basic $(0.12) $0.06 ============ =========== Diluted $(0.12) $0.06 ============ =========== (1) Excludes provision for doubtful accounts, restructuring and severance charges POMEROY IT SOLUTIONS, INC. PROFORMA CONSOLIDATED STATEMENTS OF INCOME (in thousands,except earnings per share data) Nine Months Ended ------------------------ As Reported Proforma(1) October 5, October 5, 2005 2005 ----------- ----------- (Unaudited) (Unaudited) Net sales and service revenues: Sales - equipment, supplies and leasing $375,617 $375,617 Service 167,241 167,241 ----------- ----------- Total net sales and service revenues 542,858 542,858 ----------- ----------- Cost of sales and service: Sales - equipment, supplies and leasing 347,438 347,438 Service 124,941 124,941 ----------- ----------- Total cost of sales and service 472,379 472,379 ----------- ----------- Gross profit 70,479 70,479 ----------- ----------- Operating expenses: Selling, general and administrative 56,861 56,861 Rent expense 2,556 2,556 Depreciation 3,624 3,624 Amortization 624 624 Provision for doubtful accounts 2,000 - Restructuring and severance charges 1,794 - ----------- ----------- Total operating expenses 67,459 63,665 ----------- ----------- Income from operations 3,020 6,814 ----------- ----------- Other expense: Interest, net 579 579 Other 5 5 ----------- ----------- Total other expense 584 584 ----------- ----------- Income before income tax 2,436 6,230 Income tax expense 986 2,523 ----------- ----------- Net income $1,450 $3,707 =========== =========== Weighted average shares outstanding: Basic 12,542 12,542 =========== =========== Diluted 12,652 12,652 =========== =========== Earnings per common share: Basic $0.12 $0.30 =========== =========== Diluted $0.11 $0.29 =========== =========== (1) Excludes provision for doubtful accounts, restructuring and severance charges. *T