UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 15, 2005
POMEROY IT SOLUTIONS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-20022 31-1227808
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1020 Petersburg Road, Hebron, KY 41048
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(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code (859) 586-0600
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
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On June 15, 2005, Pomeroy IT Solutions, Inc. (the "Company") announced that the
previously issued interim consolidated financial statements of the Company for
the first quarter ended April 5, 2005 as set forth in its Quarterly Report on
Form 10-Q, and the 2nd Quarter guidance previously provided by the Company
should no longer be relied upon because of accounting errors related to payroll
and subcontractor expenses. A copy of the press release issued by the Company
concerning the accounting errors is furnished herewith as Exhibit 99.1 and is
incorporated herein by reference.
Section 4 - Matters Related to Accountants and Financial Statements
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
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Audit Report or Completed Interim Review.
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The Board of Directors of the Company concluded on June 14, 2005 that the
previously issued interim consolidated financial statements of the Company for
the first quarter ended April 5, 2005 as set forth in its Quarterly Report on
Form 10-Q, should no longer be relied upon because of accounting errors in which
payroll and subcontractor costs were under-accrued as of April 5, 2005. As a
result, cost of sales and service and selling, general and administrative
expenses were understated by $1.421 million and $503 thousand, respectively, for
the three months ended April 5, 2005, resulting in a decrease in service gross
margins from 31.3%, as initially reported, to 28.6% and a decrease in earnings
per share on a fully diluted basis from $.23 to $.14. The Company records
employee and subcontractor expenses related to the provision of services as cost
of sales and service and other employee and subcontractor expenses as selling,
general and administrative expenses.
The errors were identified by management in connection with the review of the
Company's financial accounting systems subsequent to the release of the first
quarter financial results. The under-accrual error relating to payroll expenses
occurred in connection with the final conversion, during the first quarter of
2005, of ARC's payroll practices to the Company's payroll systems as part of
completing the integration of the Company's merger with ARC. The conversion and
integration process involved changing certain employees' payroll payments from a
bi-weekly to a weekly basis and the under-accrual resulted from an error in the
accrual formula. In addition, the processing of certain subcontractor expenses
was not completed on a timely basis as a result of the relocation of that
processing function, during the first quarter of 2005, from the former ARC
headquarters to Pomeroy's headquarters.
The Company advised Crowe Chizek and Company, LLC, the Company's independent
auditor, of the matter promptly after its determination. The Company is taking
steps to enhance its internal control over financial reporting designed to
prevent a recurrence of the
errors discussed above. The Audit Committee and management intend to discuss the
matter in detail with the Company's auditor as part of their efforts to enhance
the Company's internal controls over financial reporting. In addition, the Board
and management are evaluating additional actions to review its accounting and
information systems as well as the recent conversion and integration of the
systems.
The following table sets forth the consolidated statement of income and balance
sheet data previously reported on Form 10-Q for the quarter ended April 5, 2005,
and the restated amounts:
Pomeroy IT Solutions, Inc.
Consolidated Statements of Income
Three months ended April 5, 2005
(in thousands, except earnings per share data)
As reported As restated
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Total net sales and revenues $ 165,590 $ 165,590
Total cost of sales and service 139,733 141,154
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Gross profit 25,857 24,436
Total operating expenses 20,770 21,273
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Income from operations 5,087 3,163
Total other expense 221 221
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Income before income tax 4,866 2,942
Income tax expense 1,971 1,192
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Net income $ 2,895 $ 1,750
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Earnings per share:
Basic $ 0.23 $ 0.14
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Diluted $ 0.23 $ 0.14
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Pomeroy IT Solutions, Inc.
Consolidated Balance Sheet Selected Data
As of April 5, 2005
(in thousands)
As reported As restated
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Total current assets $ 161,714 $ 161,714
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Total assets $ 294,961 $ 294,961
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Total current liabilities $ 76,868 $ 78,013
Total long term liabilities 375 375
Total equity 217,718 216,573
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Total liabilities and equity $ 294,961 $ 294,961
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The Company plans promptly to file an amendment to its Form 10-Q for the quarter
ended April 5, 2005 with the restated consolidated financial statements
correcting the
above errors. The Company's annual reports on Form 10-K and Form 10-K/A for the
year ended January 5, 2005 were not impacted as a result of the errors.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
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(c) Exhibits
99.1 Press release dated June 15, 2005 announcing the Restatement of 1st
Quarter 2005 Results of Operations
SIGNATURES
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 hereunto duly authorized.
POMEROY IT SOLUTIONS, INC.
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Date: June 16, 2005
By: /s/ Michael E. Rohrkemper
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Michael E. Rohrkemper, Chief Financial
Officer and Chief Accounting Officer