EXHIBIT 99.1
CONTACT:
Kevin Gregory, Senior Vice President, CFO
- -----------------------------------------
(859) 586-0600 x1424
- --------------------
kgregory@pomeroy.com
- --------------------
POMEROY IT SOLUTIONS, INC. REPORTS FISCAL 2006 RESULTS
FOURTH QUARTER DILUTED EARNINGS PER SHARE $0.12
HEBRON, KY - MARCH 20, 2007 - Pomeroy IT Solutions, Inc. (NASDAQ:PMRY) a
technology and services solution provider, today reported fiscal 2006 year end
revenue of $631.6 million and earnings per fully diluted share of $0.09. For the
fourth quarter, the Company reported revenue of $161.9 million and earnings per
fully diluted share of $0.12.
"During 2006, we focused on moving forward. We improved gross margins, reduced
costs and increased cash flow," said Stephen E. Pomeroy, Pomeroy IT Solutions,
President and Chief Executive Officer. "During the fourth quarter we had our
third sequential quarterly increase in product revenue. Revenue growth from our
increasing sales momentum needs to be our top priority in 2007," said Pomeroy.
"We expect revenue growth of three to seven percent for 2007 and earnings per
share of $0.60 to $0.70," added Pomeroy.
CONSOLIDATED FINANCIAL RESULTS
FULL YEAR 2006 FINANCIAL RESULTS
- - REVENUE was $631.6 million compared to $714.7 million in fiscal 2005.
o Service revenue was $258.4 million compared to $231.3
million in fiscal 2005, an increase of 11.7 percent or $27.1
million. The increase in service revenues relates primarily to
the growth from new service agreements.
o Product revenue was $373.2 million compared to $483.4
million in fiscal 2005, a decline of $110.2 million. This decline
was due primarily to continuing competitive pressure in the
marketplace, reduction in IT spending by our customers and delays
in IT project deployments by our customers.
- - GROSS PROFIT MARGIN was 14.6 percent compared to 12.8 percent in fiscal
2005.
o Service revenue gross margin was 24.2 percent compared to
24.1 percent in fiscal 2005.
o Product revenue gross margin was 7.9 percent compared to 7.5
percent in fiscal 2005.
- - TOTAL OPERATING EXPENSE was $89.3 million compared to $107.6 million in
fiscal 2005, a decrease of $18.3 million. The decrease is primarily the
result of a decrease in restructuring charge of $2.2 million and a
reduction in the goodwill charge of $12.5 million.
- - NET INCOME (LOSS) was $1.1 million or $0.09 per fully diluted share
compared to $(10.7) million or $(0.85) in fiscal 2005.
- - OTHER FINANCIAL INFORMATION
o Debt - $ 0
o Capital Expenditures - $ 2.3 million
o Cash Flow From Operating Activities - $30.1 million
o Purchases of Company stock $ 2.5 million
o Working Capital - $90.5 million
FOURTH QUARTER 2006 FINANCIAL RESULTS
- - REVENUE was $161.9 million compared to $171.9 million in the fourth quarter
2005.
o Service revenue was $63.3 million compared to $64.1 million
in the fourth quarter 2005, a decrease of $0.8 million.
o Product revenue was $98.6 million compared to $107.8 million
in the fourth quarter 2005, a decline of $9.2 million. This
decline was due primarily to continuing competitive pressure in
the marketplace, reduction in IT spending by our customers and
delays in IT project deployments by our customers.
- - GROSS PROFIT MARGIN was 14.6 percent compared to 12.4 percent in the fourth
quarter 2005.
o Service revenue gross margin was 25.3 percent compared to
20.9 percent in the fourth quarter 2005.
o Product revenue gross margin was 7.6 percent compared to 7.3
percent in the fourth quarter 2005.
- - TOTAL OPERATING EXPENSE was $20.7 million compared to $40.1 million in the
fourth quarter 2005, a decrease of $19.4 million. The decrease is primarily
the result of a decrease in the goodwill charge of $16.0 million, employee
benefit costs, professional fees and other expenses.
- - NET INCOME (LOSS) was $1.5 million or $0.12 per fully diluted share
compared to $(12.1) million or $(0.96) in the fourth quarter 2005.
INTERNAL CONTROL ASSESSMENT
The Company has completed its assessment of its internal controls and believes
that there are no material weaknesses in its internal control over financial
reporting for the year ended January 5, 2007. During the fourth quarter, the
Company has remediated the four material weaknesses that previously existed.
GOODWILL
The Company has completed its annual goodwill impairment test for the year ended
January 5, 2007. The goodwill impairment analysis indicated there was no
goodwill impairment for the year ended January 5, 2007 as the fair value of the
reporting unit slightly exceeded the carrying value of the reporting unit. The
Company considered various factors in determining the fair value of the
reporting unit including discounted cash flows from projected earnings, values
for comparable companies and the market price of the Company's common stock.
CONFERENCE CALL
To participate in a conference call and question and answer session with senior
management regarding the fiscal 2006 results, call 877-842-7108 using passcode
3184711 at 4:30 p.m. (ET) on Tuesday, March 20, 2007. For your convenience, a
replay will be available shortly after the call. This replay will be available
after the call by dialing 1-800-642-1687.
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, existing market
and competitive conditions including the overall demand for IT products and
services, 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
there under, the ability to implement the company's best practices strategies,
the ability to manage risks associated with customer projects, adverse or
uncertain economic conditions, loss of key personnel, litigation 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.
Non-GAAP Financial Measures
The non-GAAP financial measures contained in this earnings press release exclude
the charge for write-down of goodwill and stock based compensation expense. The
Company uses these measures for planning and forecasting its future business, as
well as analyzing such forecasts against past performance. In addition,
excluding these charges enhances the Company's understanding of trends
developing in its operations, as well as its performance in its market and
against its competitors. The Company believes that providing non-GAAP net
income measures that exclude such items, best allows investors to understand the
Company's ongoing business activities during the quarter. The Company believes
that inclusion of certain non-GAAP financial measures provides comparability to
other publicly traded companies. The non-GAAP financial measures should not be
considered as a substitute for, or preferable to, measures of financial
performance prepared in accordance with GAAP and may be different from non-GAAP
financial measures used by others.
The Company believes that these non-GAAP financial measures provide an
additional tool for investors to evaluate its ongoing operating results and
trends. Investors are encouraged to review the reconciliation of these non-GAAP
financial measures to the most directly comparable GAAP financial measures as
detailed below:
Non-GAAP Financial Measures (continued)
Fiscal Year Ended January 5, 2007
----------------------------------------------
Basic Diluted
Net Earnings Earnings
(in thousands, except per share data) Income Per Share Per Share
----------------------------------------------
As reported GAAP financial measures $ 1,143 $ 0.09 $ 0.09
Adjustments
Goodwill writedown 3,472 $ 0.28 0.28
Income tax effect on non-GAAP adjustments (1,351) $ (0.11) (0.11)
----------------------------------------------
Total adustments 2,121 $ 0.17 0.17
----------------------------------------------
Non-GAAP financial measures $ 3,264 $ 0.26 $ 0.26
==============================================
Fiscal Year Ended January 5, 2006
---------------------------------------------
Basic Diluted
Net Earnings Earnings
Loss Per Share Per Share
---------------------------------------------
As reported GAAP financial measures $ (10,662) $ (0.85) $ (0.85)
Adjustments
Goodwill writedown 16,000 1.27 1.27
Income tax effect on non-GAAP adjustments (5,774) (0.45) (0.45)
---------------------------------------------
Total adustments 10,226 0.82 0.82
---------------------------------------------
Non-GAAP financial measures $ (436) $ (0.03) $ (0.03)
=============================================
Three Months Ended January 5, 2006
---------------------------------------------
Basic Diluted
Net Earnings Earnings
Loss Per Share Per Share
---------------------------------------------
As reported GAAP financial measures $ (12,112) $ (0.96) $ (0.96)
Adjustments
Goodwill writedown 16,000 1.27 1.27
Income tax effect on non-GAAP adjustments (5,865) (0.47) (0.47)
---------------------------------------------
Total adustments 10,135 0.80 0.80
---------------------------------------------
Non-GAAP financial measures $ (1,977) $ (0.16) $ (0.16)
=============================================
POMEROY IT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, January 5,
2007 2006
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 13,562 $ 1,486
Certificates of deposit 1,076 3,629
Accounts receivable:
Trade, less allowance of $4,390 and $4,355 at January 5,
2007 and 2006, respectively 136,055 130,814
Vendor receivables, less allowance of $155 and $100
at January 5, 2007 and 2006, respectively 8,095 4,952
Net investment in leases 1,587 1,912
Other 1,016 2,894
----------- -----------
Total receivables 146,753 140,572
----------- -----------
Inventories 16,274 13,665
Other 10,370 11,730
----------- -----------
Total current assets 188,035 171,082
----------- -----------
Equipment and leasehold improvements:
Furniture, fixtures and equipment 22,540 32,770
Leasehold Improvements 8,459 6,796
----------- -----------
Total 30,999 39,566
Less accumulated depreciation 18,406 24,685
----------- -----------
Net equipment and leasehold improvements 12,593 14,881
----------- -----------
Net investment in leases, net of current portion 42 995
Goodwill 98,314 101,048
Intangible assets, net 2,634 3,007
Other assets 3,403 4,132
----------- -----------
Total assets $ 305,021 $ 295,145
=========== ===========
POMEROY IT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data) January 5, January 5,
2007 2006
----------- ------------
LIABILITIES AND EQUITY
Current Liabilities:
Short-term borrowings $ - $ 15,304
Accounts payable:
Floor plan financing 17,226 15,451
Trade 57,149 31,187
----------- ------------
Total accounts payable 74,375 46,638
Deferred revenue 2,604 3,444
Employee compensation and benefits 8,642 8,454
Accrued restructuring and severance charges 1,286 2,192
Other current liabilities 10,590 11,028
----------- ------------
Total current liabilities 97,497 87,060
----------- ------------
Accrued restructuring and severance charges 2,313 3,599
Equity:
Preferred stock, $.01 par value; authorized 2,000 shares,
(no shares issued or outstanding) - -
Common stock, $.01 par value; authorized 20,000 shares,
( 13,476 and 13,400 shares issued at January 5, 2007 and
2006, respectively). 137 135
Paid in capital 89,992 89,126
Unearned compensation - (1,198)
Accumulated other comprehensive income 15 24
Retained earnings 126,664 125,521
----------- ------------
216,808 213,608
Less treasury stock, at cost ( 1,130 and 810 shares
at January 5, 2007 and 2006, respectively) 11,597 9,122
----------- ------------
Total equity 205,211 204,486
----------- ------------
Total liabilities and equity $ 305,021 $ 295,145
=========== ============
POMEROY IT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands,except per share data) Fiscal Years Ended
---------------------------------------------------------------------------
January 5, January 5, January 5,
2007 2006 2005
------------------------ ------------------------ ------------
Net product and service revenues: Non-GAAP Non-GAAP
Product $ 373,232 $ 373,232 $ 483,431 $ 483,431 $ 545,115
Service 258,400 258,400 231,318 231,318 197,175
------------------------ ------------------------ ------------
Total revenues 631,632 631,632 714,749 714,749 742,290
------------------------ ------------------------ ------------
Cost of product and service revenues:
Product 343,689 343,689 447,383 447,383 504,018
Service 195,907 195,907 175,636 175,636 143,136
------------------------ ------------------------ ------------
Total cost of revenues 539,596 539,596 623,019 623,019 647,154
------------------------ ------------------------ ------------
-
Gross profit 92,036 92,036 91,730 91,730 95,136
------------------------ ------------------------ ------------
Operating expenses:
Selling, general and administrative 80,973 80,973 86,010 86,010 72,346
Depreciation and amortization 4,894 4,894 5,568 5,568 4,393
Goodwill charge 3,472 - ** 16,000 - ** -
------------------------ ------------------------ ------------
Total operating expenses 89,339 85,867 107,578 91,578 76,739
------------------------ ------------------------ ------------
Income (loss) from operations 2,697 6,169 (15,848) 152 18,397
------------------------ ------------------------ ------------
Interest income (582) (582) (193) (193) (310)
Interest expense 1,149 1,149 1,028 1,028 561
------------------------ ------------------------ ------------
Interest, net 567 567 835 835 251
------------------------ ------------------------ ------------
Income (loss) before income tax 2,130 5,602 (16,683) (683) 18,146
Income tax expense (benefit) 987 2,338 (6,021) (247) 7,213
------------------------ ------------------------ ------------
Net income (loss) $ 1,143 $ 3,264 $ (10,662) $ (436) $ 10,933
======================== ======================== ============
Weighted average shares outstanding:
Basic 12,650 12,650 12,554 12,554 12,253
======================== ======================== ============
Diluted * 12,659 12,659 12,554 12,554 12,442
======================== ======================== ============
Basic $ 0.09 $ 0.26 $ (0.85) $ (0.03) $ 0.89
======================== ======================== ============
Diluted * $ 0.09 $ 0.26 $ (0.85) $ (0.03) $ 0.88
======================== ======================== ============
* Dilutive loss per common share for the year ended January 5, 2006 would
have been anit-dilutive if the number of weighted average shares
outstanding were adjusted to reflect the dilutive effect of outstanding
stock options.
** See discussion above on non-GAAP Financial Measures.
POMEROY IT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands,except per share data) Three Months Ended
----------------------------------------
January 5, January 5,
2007 2006
------------ --------------------------
Net product and service revenues: Non-GAAP
Product $ 98,596 $107,814 $ 107,814
Service 63,293 64,077 64,077
------------ --------------------------
Total revenues 161,889 171,891 171,891
------------ --------------------------
Cost of product and service revenues:
Product 91,075 99,945 99,945
Service 47,257 50,695 50,695
------------ --------------------------
Total cost of revenues 138,332 150,640 150,640
------------ --------------------------
Gross profit 23,557 21,251 21,251
------------ --------------------------
Operating expenses:
Selling, general and administrative 19,605 22,777 22,777
Depreciation and amortization 1,075 1,337 1,337
Goodwill charge - 16,000 -
------------ --------------------------
Total operating expenses 20,680 40,114 24,114
------------ --------------------------
Income (loss) from operations 2,877 (18,863) (2,863)
------------ --------------------------
Interest income (151) (65) (65)
Interest expense 243 321 321
------------ --------------------------
Interest, net 92 256 256
------------ --------------------------
Income (loss) before income tax 2,785 (19,119) (3,119)
Income tax expense (benefit) 1,242 (7,007) (1,142)
------------ --------------------------
Net income (loss) $ 1,543 $(12,112) $ (1,977)
============ ==========================
Weighted average shares outstanding:
Basic 12,622 12,591 12,591
============ ==========================
Diluted * 12,627 12,591 12,591
============ ==========================
Basic $ 0.12 $ (0.96) $ (0.16)
============ ==========================
Diluted * $ 0.12 $ (0.96) $ (0.16)
============ ==========================
* Dilutive loss per common share for the three months ended January 5, 2006
would have been anit-dilutive if the number of weighted average shares
outstanding were adjusted to reflect the dilutive effect of outstanding
stock options.
POMEROY IT SOLUTIONS, INC.
SELECTED CASH FLOW DATA
(in thousands) Fiscal Years Ended January 5,
----------------------------------------------
Cash Flows from Operating Activities: 2007 2006 2005
-------------- -------------- --------------
Net income (loss) $ 1,143 $ (10,662) $ 10,933
Adjustments to reconcile net income (loss) to
net cash flows from (used in) operating activities:
Depreciation and amortization 4,926 5,597 4,393
Stock option, restricted stock compensation and Employee
Purchase Plan expense 1,571 68 -
Restructuring and severance charges 133 2,305 2,423
Goodwill charge 3,472 16,000 -
Provision for doubtful accounts 1,690 2,000 -
Amortization of earned income (66) (161) (148)
Deferred income taxes 153 (4,038) 2,763
Loss on disposal of fixed assets 287 15 222
Changes in working capital accounts, net of effects of acquisitions:
Accounts receivable (8,215) 9,186 (13,896)
Inventories (2,609) 1,882 (5,697)
Other current assets 1,818 (2,585) (2,216)
Net investment in leases 1,417 2,949 1,657
Floor plan financing 1,775 (3,943) 2,821
Trade payables 25,962 (21,479) 7,533
Deferred revenue (840) (46) (498)
Income tax payable (148) 95 156
Other, net (2,368) (1,611) (4,665)
-------------- -------------- --------------
Net operating activities 30,101 (4,428) 5,781
-------------- -------------- --------------
Investing Activities:
Capital expenditures (2,261) (3,454) (2,350)
Acquisitions of businesses (738) (1,256) (16,441)
Financing Activities:
Net payments of short-term borrowings (15,304) (4,849) 20,153
Purchase of treasury stock (2,475) (376) (467)