EXHIBIT 99.1
CONTACT:
KEVIN GREGORY, CFO
(859) 586-0600 X1424
kgregory@pomeroy.com
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POMEROY IT SOLUTIONS, INC. REPORTS FIRST QUARTER 2006 RESULTS
ANNOUNCES GUIDANCE FOR 2006
Hebron, KY - May 15, 2006 - Pomeroy IT Solutions, Inc. (NASDAQ:PMRY) a
technology and services solution provider, today filed its quarterly report on
Form 10-Q for the three month period ended April 5, 2006.
"During the first quarter we saw some encouraging trends," said Stephen E.
Pomeroy, Pomeroy IT Solutions, President and CEO. "Service revenue is up versus
the first quarter of last year and our service margin showed improvement
compared to the fourth quarter of 2005. This drove an increase in our overall
gross profit margin," added Pomeroy.
"The biggest challenge for the first quarter was the continued decline in
product revenue," said Pomeroy. "We are adding sales resources and renewing our
emphasis on product sales without diminishing our focus on our service
offerings," added Pomeroy.
CONSOLIDATED FIRST QUARTER 2006 FINANCIAL RESULTS
- Revenue was $150.7 million compared to $165.8 million in first
quarter of 2005. A decline of $15.1 million. This decline was the
result of declines in product revenue.
o Product revenue was $88.9 million compared to $111.2
million in first quarter 2005. A decline of $22.3 million.
This decline was due primarily to large product deployment
projects that occurred in 2005 that were not repeated in
2006.
o Service revenue was $61.8 million compared to $54.6
million in first quarter 2005. An increase of $7.2 million.
This increase is the result of revenue from new contracts
initiated in late 2005.
- Gross Profit Margin was 14.0 percent compared to 13.8 percent in
the first quarter of 2005. This increase in margin was the result of
product mix as a greater percentage of revenue came from service
revenue with higher margins.
o Product revenue gross margin was 7.8 percent compared
to 7.9 percent in the first quarter of 2005. Sequentially,
product gross margin increased compared to 7.3 percent in
the fourth quarter of 2005.
o Service revenue gross margin was 22.9 percent compared
to 25.6 percent in the first quarter of 2005. Sequentially,
service revenue gross margin was higher compared to 20.9
percent for the fourth quarter of 2005.
- Total Operating Expense was $22.9 million compared to $21.6
million in the first quarter of 2005. An increase of $1.3 million.
This increase was primarily the result of the following:
o Increase in expense of $0.4 million for employee health
benefits.
o Increase in expense of $0.6 million for equity based
compensation expense which was not required to be expensed
in 2005.
o Increase in expense of $0.5 million for outside
consultants fees associated with late filings and the 2005
restatements.
- Net loss was $1.4 million or $(0.11) per fully diluted share
compared to net income of $0.6 million or $0.04 per fully diluted
share in first quarter 2005. A decline of $2.0 million. This decline
was the result of a decline in product revenue and an increase in
operating expense.
GUIDANCE FOR 2006
The Company expects the following for 2006:
- Revenue growth of three to five percent.
- Earnings per share of $0.50 to $0.60. This excludes any goodwill
write-down adjustments that may result from the goodwill valuation
that is currently underway.
CONFERENCE CALL
To participate in a conference call and questions and answer session with senior
management regarding the first quarter 2006 results, call 888-455-9641 using
passcode 1402777 at 4:15 p.m. (ET) on Tuesday May 16, 2006. For your
convenience, a replay will be available shortly after the call. This replay
will be available after the call by dialing 1-866-455-0586.
ABOUT POMEROY IT SOLUTIONS, INC.
As an international technology services and solutions provider, Pomeroy IT
Solutions unites core competencies in IT Outsourcing Services and Professional
Services. Some of the Company's services include consulting, project
management, application development, integration, staffing, and technology
sourcing. Pomeroy's capabilities as an end-to-end services and technology
sourcing provider set the Company apart as a unique, one-stop alternative. This
combination helps its Fortune 1000, government, and mid-market clients realize
their business goals and objectives by leveraging information technology to
simplify complexities, increase productivity, reduce costs, and improve
profitability.
FORWARD-LOOKING STATEMENTS
Certain of the statements in the preceding paragraphs regarding financial
results constitute forward-looking statements. These statements related to
future events or our future financial performance and involve known and unknown
risks, uncertainties and other factors that may cause our markets' actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward looking statements. These
risks and other factors you should specifically consider include but are not
limited to: changes in customer demands or industry standards, adverse or
uncertain economic conditions, loss of key personnel, litigation, 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 ability to
successfully attract and retain customers, sell additional products and service
to existing customers, the ability to timely bill and collect receivables, the
ability to maintain a broad customer base to avoid dependence on any single
customer, the need to successfully attract and retain outside consulting
services, new acquisitions by the Company, terms of 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. In some cases, you can identify forward-looking statements
by such terminology such as "may", "should", "expects", "plans", "anticipates",
"believes", "estimates", "predicts", "potential", "continue", "projects",
"intends", "prospects", "priorities", or negative of such terms or other
comparable terminology. These statements are only predictions. Actual events
or results may differ materially.
POMEROY IT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) April 5, January 5,
2006 2006
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(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ - $ 447
Investments 4,712 4,668
Accounts receivable:
Trade, less allowance of $4,355 at April 5, 2006
and January 5, 2006 125,826 130,814
Vendor receivables, less allowance of $100 at
April 5, 2006 and January 5, 2006 5,504 4,952
Net investment in leases 2,515 1,998
Other 1,442 2,894
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Total receivables 135,287 140,658
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Inventories 9,977 13,665
Other 12,665 11,730
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Total current assets 162,641 171,168
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Equipment and leasehold improvements:
Furniture, fixtures and equipment 33,390 32,655
Leasehold improvements 6,907 6,796
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Total 40,297 39,451
Less accumulated depreciation 25,777 24,656
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Net equipment and leasehold improvements 14,520 14,795
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Net investment in leases, net of current portion 899 995
Goodwill 101,298 101,048
Intangible assets, net 3,136 3,007
Other assets 3,890 4,132
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Total assets $ 286,384 $ 295,145
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POMEROY IT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data) April 5, January 5,
2006 2006
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(Unaudited)
LIABILITIES AND EQUITY
Current Liabilities:
Short-term borrowings $ 8,984 $ 15,304
Accounts payable 46,878 46,638
Deferred revenue 3,160 3,444
Employee compensation and benefits 10,206 8,039
Accrued restructuring and severance charges 5,237 5,791
Other current liabilities 8,031 11,443
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Total current liabilities 82,496 90,659
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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
(13,430 and 13,400 shares issued at April 5, 2006
and January 5, 2006, respectively) 137 135
Paid-in capital 88,747 89,126
Unearned compensation - (1,198)
Accumulated other comprehensive income 24 24
Retained earnings 124,102 125,521
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213,010 213,608
Less treasury stock, at cost ( 810 shares at
April 5, 2006 and January 5, 2006) 9,122 9,122
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Total equity 203,888 204,486
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Total liabilities and equity $ 286,384 $ 295,145
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POMEROY IT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands,except per share data) Three Months Ended
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April 5, April 5,
2006 2005
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(Unaudited) (Unaudited)
Product and service revenues:
Product $ 88,877 $ 111,243
Service 61,815 54,589
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Total revenues 150,692 165,832
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Cost of product and service revenues:
Product 81,985 102,424
Service 47,669 40,592
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Total cost of revenues 129,654 143,016
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Gross profit 21,038 22,816
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Operating expenses:
Selling, general and administrative 20,561 19,108
Rent expense 921 936
Depreciation 1,178 1,201
Amortization 156 268
Restructuring and severance charges 133 132
Other 6 1
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Total operating expenses 22,955 21,646
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Income (loss) from operations (1,917) 1,170
Interest expense, net 309 221
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Income (loss) before income tax (2,226) 949
Income tax expense (benefit) (807) 384
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Net income (loss) $ (1,419) $ 565
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Weighted average shares outstanding:
Basic 12,615 12,469
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Diluted (1) 12,615 12,717
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Earnings (loss) per common share:
Basic $ (0.11) $ 0.05
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Diluted (1) $ (0.11) $ 0.04
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(1) Dilutive loss per common share for the three months ended January 5, 2006
would have been anti-dilutive if the number of weighted average shares
outstanding were adjusted to reflect the dilutive effect of outstanding stock
options and unearned restricted shares.