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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 2001
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 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
incorporate or organization) Identification No.)
3820 Northdale Boulevard, Suite 200A 33624
Tampa, Florida (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (813) 960-5508
____________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
____________ ____________
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
____________
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 periods that the
registrant was required to file such report(s)) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
As of June 18, 2001, the aggregate market value of the 8,489,988 shares of
Common Stock held by non-affiliates of the registrant was $83,201,882 based on
the closing sale price $9.80 of the registrant's Common Stock as reported on the
Nasdaq National Market on such date. (For this computation, the registrant has
excluded the market value of all shares of its Common Stock reported as
beneficially owned by executive officers and directors of the registrant and
certain other stockholders; such exclusion shall not be deemed to constitute an
admission that any such person is an "affiliate" of the registrant.) As of
June 18, 2001, there were outstanding 18,049,447 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to stockholders for the year ended March 31, 2001,
are incorporated by reference into Part II of this annual report. Portions of
the proxy statement for the annual stockholders meeting to be held in August
2001 are incorporated by reference into Part III of this annual report.
GLOBAL IMAGING SYSTEMS, INC.
Annual Report on Form 10-K
March 31, 2001
TABLE OF CONTENTS
Page
----
PART I.......................................................................................... 1
Item 1. Business................................................................................ 1
Item 2. Properties.............................................................................. 8
Item 3. Legal Proceedings....................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders..................................... 8
Executive Officers of Global............................................................. 8
Risk Factors............................................................................. 9
PART II......................................................................................... 13
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.................... 13
Item 6. Selected Financial Data................................................................. 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations... 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................. 13
Item 8. Financial Statements and Supplementary Data............................................. 14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 14
PART III........................................................................................ 14
Item 10. Directors and Executive Officers of the Registrant..................................... 14
Item 11. Executive Compensation................................................................. 14
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 14
Item 13. Certain Relationships and Related Transactions......................................... 14
PART IV......................................................................................... 14
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................... 14
SIGNATURES...................................................................................... 16
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, as used in this Form 10-K, the terms
"Global," "Company," "our," or "we" refer to Global Imaging Systems, Inc. and
its subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K and the information incorporated into this Form 10-K contain
forward-looking statements, including statements about our acquisition and
business strategy, our expected financial position and operating results, the
projected size of our markets and our financing plans and similar matters. In
addition, in those and other portions of this annual report, the words
"believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect," "project" and similar expressions, as they relate to Global, its
management, and its industry are intended to identify forward-looking
statements. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
affecting the financial condition of our business. Actual results may differ
materially. Some of the risks, uncertainties and assumptions about Global that
may cause actual results to differ from the results in these forward-looking
statements include the following:
. general economic and business conditions, both nationally and in our
markets.
. our acquisition opportunities.
. our expectations and estimates concerning future financial performance,
financing plans and the impact of competition.
. anticipated trends in our business, including those described in the
information incorporated into item 7.
. existing and future regulations affecting our business.
. other risk factors set forth in "risk factors."
All forward-looking statements attributable to us, or to persons acting on
our behalf, are expressly qualified in their entirety by this cautionary
statement.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this Form 10-K might not transpire.
GLOBAL IMAGING SYSTEMS, INC.
Global Imaging Systems, Inc. provides a broad line of office imaging
solutions, including the sale and service of automated office equipment, network
integration services and electronic presentation systems. While Global's
clientele includes large, Fortune 500 companies, its growth has been, and is
expected to be, largely driven by serving middle-market businesses.
Global seeks to become the provider of choice for all of its customers'
office imaging needs by offering a full range of products and services and
superior customer service. Global sells and services a variety of office imaging
solutions, including copiers, facsimile machines, printers, data and video
projectors, video teleconferencing equipment, optical scanning equipment,
micrographics equipment, and the design and installation of equipment related to
computer networks. In addition, Global offers a variety of ongoing services,
including supply and service contracts, network management contracts, technical
support and training.
Global believes its emphasis on superior customer service and the contractual
nature of its service business can generate significant recurring revenue.
Senior management largely attributes Global's solid historical operating
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performance to: (1) focusing on middle-market customers, (2) employing a strict
performance-based benchmarking model, and (3) pursuing a disciplined acquisition
strategy including the integration of acquisitions as they are made.
Global's strategic objective is to continue to grow profitably in existing
markets and new markets through internal growth and by acquiring additional
businesses. Global's strategy for stimulating internal growth is to offer new
products and services, to take advantage of cross-selling opportunities, and to
market aggressively to existing and new customers. Global enters new geographic
markets by acquiring additional core companies and expanding its core markets
through acquisitions of additional satellite companies.
To that end, Global is a consolidator in the highly fragmented office imaging
solutions industry. Global targets for acquisition as core companies, businesses
that are leading competitors in the markets they serve. Global's ultimate goal
is to acquire core and satellite companies throughout the United States and
Canada. Since its founding in June 1994, Global has acquired 50 businesses in
the United States. Fourteen of these businesses are "core" companies, where
Global concentrates administrative functions within a region. The remaining 36
acquired businesses are "satellite" companies, which means their administrative
functions have been transferred to, and their operations have been integrated
into, a core company. Global's operating philosophy is to "think globally, act
locally." Under its decentralized management system, Global typically continues
to operate its acquired companies under their pre-acquisition names and
management in order to preserve client relationships and motivate management.
Currently, Global's fourteen core companies operate in 99 locations in 24
states. For the year ended March 31, 2001, Global had pro forma revenues of $611
million.
Certain information regarding Global's core and satellite companies,
including pro forma revenues for the fiscal year ended March 31, 2001, is
summarized in the following table. The pro forma revenues in this table give
effect to acquisitions made during the fiscal year ended March 31, 2001 as if
such acquisitions had occurred on April 1, 2000.
- -----------------------------------------------------------------------------------------------------------------------------
CORE COMPANY REGION PRO FORMA NO. OF YEARS IN DATE
REVENUES SATELLITES BUSINESS ACQUIRED
- -----------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)
Dahill Group Texas $40.9 3 16 Jul 1994
Conway Group Northeast 55.8 6 24 Jan 1995
Berney Group Southeast 28.3 4 36 Feb 1995
Amcom Group Western Pennsylvania 13.1 2 23 Feb 1996
CSS Group Southeast 15.3 2 17 Jul 1996
SBC Group Southeast 81.9 6 20 Nov 1996
ESI Group Mid-Atlantic 94.5 2 20 Jul 1997
NW Group Pacific Northwest 29.8 3 15 Sep 1997
CBS Group Northeast 28.9 2 12 Jan 1998
Carr Group Northeast 38.1 2 54 Sep 1998
Chicago Group Chicago Metro Area 41.9 1 24 Dec 1998
Capitol Group Mid-Atlantic 43.0 1 19 Dec 1998
Lewan Group Colorado 85.7 1 29 June 1999
Southwest Group Southwest 13.4 1 15 Dec 1999
- -----------------------------------------------------------------------------------------------------------------------------
2
THE INDUSTRY
The office imaging solutions industry is highly fragmented. Global estimates
that there are approximately 3,700 dealer and distributor outlets in the United
States primarily engaged in the sale of copiers and other automated office
equipment and related service, parts, and supplies, and that approximately 3,100
of these dealer outlets are unaffiliated.
CONSOLIDATION
Independent distributors and service providers are consolidating throughout
the office imaging solutions industry. A number of factors are driving this
consolidation, including the following:
Technological Change. The technology of office imaging solutions is changing
rapidly. Digital technology, which allows images to be captured, transmitted,
reproduced and stored over wide geographic areas through networks of personal
computers, has in recent years been incorporated into copiers and electronic
presentation equipment. As a result, copiers, facsimile machines and printers
are gradually converging in function, and computers and networks are becoming an
increasingly important component of office imaging systems. This has led
businesses to demand more centralized network integration services over a
broader geographic area. The rapid pace of technological change, including the
resulting expansion of product offerings and increase in product support costs,
have outpaced the technical, managerial and financial resources of many smaller
distributors and service providers, causing them to seek larger partners.
Further, the blurring of the distinction among office imaging technologies and
the increased role for computers has led dealers without network integration
expertise to partner with companies that have such expertise.
Dealer Consolidation by Suppliers. The costs of new product development and
competition among equipment manufacturers have led manufacturers to seek
efficiencies. As a result, manufacturers are consolidating their dealer
networks, concentrating their business with a smaller number of dealers that
possess leading service capabilities, wide geographic coverage and sufficient
financial resources.
Distribution Channel Changes. Changes in distribution channels are also
leading to consolidation in the automated office equipment market. Office
superstores and consumer electronics chains now sell lower-end office products
at prices that are forcing smaller dealers out of the market. Smaller dealers
also face difficulty competing in the market for mid- and high-range office
equipment, because often they are not well equipped to provide the sophisticated
support services required by businesses that purchase these products.
Typically, office superstores and consumer electronics chains also do not offer
the support services required by purchasers of mid- and high-range office
equipment. Computer equipment manufacturers are increasingly utilizing direct
distribution to sell their products.
OFFICE IMAGING PRODUCTS AND SERVICES
Automated Office Equipment. Dealers in the automated office equipment market
sell and service some or all of the following: black and white copiers (digital
and analog), color copiers, duplicators, facsimile equipment, printers and
multi-function equipment, and support to organizations computer network
infrastructures.
Network Integration Services. With the rise of digital technology, customers
increasingly need network integration services as part of their office imaging
solutions. Network integrators provide outsourced management and support to
organizations' computer network infrastructures. As organizations seek to take
advantage of productivity-enhancing computer network technology, they face
complex and costly issues relating to network design, selection, implementation
and management. Among other challenges, organizations must (1) select from an
expanding number of product options with shortening life cycles, (2) integrate
diverse and often incompatible hardware and software environments and (3) deal
with a shortage of qualified information technology service personnel. As a
result, many smaller businesses seek to outsource installation, upgrade and
support, and many large organizations seek to outsource network improvement
functions and the evaluation of new products.
Electronic Presentation Systems. Dealers in the electronic presentation
systems market sell and service data and video projectors, smartboards, distance
learning systems and video conferencing equipment. As in the
3
automated office equipment market, products in this market increasingly use
digital technology, and many customers for these products have designated a
single buyer to address their needs in both markets. Competition among
manufacturers in this market is strong, leading manufacturers who introduce new
products frequently.
GROWTH STRATEGY
Global believes it is well positioned to benefit from industry trends and
continued consolidation in the office imaging solutions industry. Global's goal
is to become the provider of choice for all of its customers' office imaging
needs by offering a full range of products and services and superior customer
service. The key elements of Global's strategy include:
Serve as a Single Source Provider of Office Imaging Solutions. Global
believes that offering a full spectrum of products and services will give it a
competitive advantage and enable it to capitalize on its customer relationships
by cross-selling products and services. As the technology that drives copiers,
facsimiles, printers and electronic presentation equipment converges, customers
increasingly need computers and networks to use these products. Accordingly,
customers are demanding more integrated office imaging solutions. Global plans
to expand its product lines so that, within each geographic region it serves,
Global can offer automated office equipment, network integration services and
electronic presentation systems. As Global's operations in these last three
markets expand, Global expects an increasing percentage of its revenues and
gross profits will be generated by sales of equipment and supplies, which
typically have lower gross profit margins than sales of service and rentals.
Global is also considering leveraging its infrastructure, customer base, and
expertise by offering outsourced facilities management services.
Provide Timely and Reliable Service. Global seeks to achieve the highest
level of service. Effective and responsive service is essential to obtaining
repeat business and developing market recognition. Providing timely and high
quality service also allows Global to maintain its profit margins, engage in
cross-selling, and enjoy a source of recurring revenue.
Stimulate Internal Growth. Global's strategy for stimulating internal growth
in its core companies is to increase sales force productivity through
performance benchmarks; expand product and service offerings; increase sales
force size; and aggressively cross-sell products and services.
Optimize Profitability Using Global's Benchmark Model. Global's senior
management has developed an industry management model composed of a
comprehensive set of performance benchmarks. These benchmarks, which are the
focus of internal reporting from the core companies to headquarters, allow
Global's senior and local management to monitor and improve the operations of
each core company. Using these criteria, Global trains its core and satellite
company managers to optimize their business mix and improve performance.
Global strives to reduce costs by consolidating the back-office functions of
its satellite acquisitions into core operations, enabling its core companies to
decrease technician driving time and increase the productivity of sales
personnel and administrators. Global also works to reduce costs by
standardizing financial reporting, cash and inventory management, payroll,
billing, collections, insurance and employee benefit programs, and by
negotiating advantageous relationships with equipment manufacturers and
distributors, other suppliers and lessors.
Operate with a Decentralized Management Structure. Global believes that its
core companies' experienced local management teams possess valuable
understanding of their markets and customers. Therefore, Global gives its core
company managers responsibility for day-to-day operating decisions. Core
companies, and, in some cases, satellite companies, retain their local name and
management after Global acquires them. This decentralized approach permits
local management to maintain focus and motivation and optimizes customer
relationships. Local management is supported by a senior management team that
focuses on Global's growth strategy, as well as corporate planning and financial
reporting and analysis.
Make Strategic Acquisitions. Global plans to continue acquiring core
companies in targeted geographic markets and to expand these core acquisitions
through internal growth and satellite acquisitions. Global looks for core
acquisition candidates that are led by an experienced management team that will
continue to manage the company after Global acquires it, that have a strong
regional market share, and that can grow internally and through
4
the acquisition of satellite companies. Global's senior management team has
substantial experience in making acquisitions. Since its founding in June 1994,
Global has acquired fourteen core companies in the United States, and 36
satellite companies which have been integrated into the core companies. Global's
goal is to acquire core and satellite companies throughout the United States and
Canada.
A key component of Global's growth strategy is to acquire satellite companies in
or near its core companies' markets. Core company management frequently
identifies appropriate satellite acquisition candidates. In evaluating potential
satellite acquisitions, Global considers, among other factors, the potential
satellite's proximity to a core company, the fit between its product lines and
those of the nearby core company, and the potential satellite's management,
employee base and service base under contract.
PRODUCTS AND SERVICES
Global currently sells and services automated office equipment, network
integration services and electronic presentation systems. Global provides a
number of office imaging solutions, including the following:
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMATED NETWORK ELECTRONIC
OFFICE EQUIPMENT INTEGRATION PRESENTATION SYSTEMS
- ------------------------------------------------------------------------------------------------------------------------------------
. Black and white copiers (digital and analog) . Network design and installation, and . Data and video projectors and
. Color copiers (digital) related software and hardware smartboards
. Duplicators (digital) . Technical support contracts . Video conferencing and distance
. Facsimile machines . Network maintenance contracts learning systems
. Printers (including color) . Training and support . Color printers
. Multi-function equipment . Internet services . Audio visual equipment
. Related supply and service contracts . Wireless network systems . Related supplies
. Related service contracts
. Training and support
- ------------------------------------------------------------------------------------------------------------------------------------
Taking advantage of the "after market" opportunities generated by its sales
of office imaging equipment, Global derives a substantial amount of its revenues
from service activities. Service activities generally provide Global with a
recurring source of revenue. Global's copier service and supply contracts, for
example, provide it with a predictable source of revenue, since billing is
typically based on the number of copies customers make. In the network
integration market, Global focuses on contracts to provide ongoing maintenance
and technical support, since these types of contracts generate a more steady
revenue stream than project-based contracts.
Global believes effective and responsive service is essential for it to
obtain repeat business and to develop the market recognition it needs in order
to grow. Most of Global's copier sales are accompanied by service and supply
contracts. These generally continue for a one year term but, in some cases,
continue from month to month. As part of Global's commitment to quality customer
service, Global works to provide its customers with speedy, reliable service.
For example, Global tries to respond to service calls from its automated office
equipment customers within two to four hours if the call comes in during
business hours. For network integration customers, Global offers a 24 hour
technical assistance "hotline." In addition, Global's service technicians are
generally manufacturer-or vendor-certified to service the equipment Global
sells.
CUSTOMERS, SALES AND MARKETING
Global believes its customers decide to purchase products and services from
Global based on a variety of factors, the most important of which are the
strength of the relationship with Global, quality of service provided, and
price.
Global's growth has been largely driven by serving middle market businesses.
Global also serves a number of large Fortune 500 companies as well as
educational institutions, government entities and other not-for-profit groups.
Global estimates that over 150,000 customers purchased equipment or services
from Global in the past twelve months. During the fiscal year ended March 31,
2001, none of Global's customers accounted for more than 2% of total revenues
and its top five customers collectively accounted for less than 6% of total
revenues.
5
Because the management teams at Global's core companies understand their
markets and customer relationships, Global's core company managers make local
marketing decisions, including decisions regarding product offering mix,
promotional programs, and advertising. Global employs approximately 1,100 people
in sales and marketing. All of Global's sales personnel are compensated at least
partly on a commission basis, with local management determining the structure of
sales compensation and commissions within the parameters of Global's industry
management model. Global generates sales from within its existing customer base
by tracking lease expirations, cross-selling its products and services, and
giving incentives to service personnel for creating sales leads. Each of
Global's core companies also generates sales leads through telemarketing and
door-to-door marketing.
TRAINING
Global provides its sales and service employees extensive, ongoing training.
Each core company has its own technical trainer, and training is scheduled on a
regular basis. Core company technical trainers are typically certified by
Global's suppliers, which makes Global's service technicians manufacturer- or
vendor-certified technicians. Global also provides formalized product and
general sales training to its sales and marketing personnel.
SUPPLIERS
The following table lists the products Global sells and their manufacturers
in each of the office imaging markets Global serves:
- ------------------------------------------------------------------------------------------------------------------
AUTOMATED OFFICE EQUIPMENT
- ------------------------------------------------------------------------------------------------------------------
Copiers: Canon Inc., Gestetner, Konica, Kyocera/Mita, Ricoh Corporation,
Savin Corporation, Sharp, Toshiba America, Inc., Minolta
Facsimile machines: Canon, Inc., Muratec America, Inc., Panasonic Communications and
Systems Company, Savin, Toshiba, Sharp
Duplicators: Gestetner, Riso, Inc., Ricoh Corporation
Printers: Hewlett-Packard Company, Tektronix, Inc., TRSystems
- ------------------------------------------------------------------------------------------------------------------
NETWORK INTEGRATION SERVICES
- ------------------------------------------------------------------------------------------------------------------
Personal and laptop computers, servers, Adobe Systems, Inc., Aprisma, AST Research, Inc., Axent Technology,
communication equipment and firewalls and Cisco Systems, Compaq Computer Corporation, Dell Computer
wireless networks for universities and Corporation, Enterasys Networks, Gateway, Inc., IBM, Intel
municipalities: Corporation, NEC America, Inc., Network Associates, Sun
Microsystems, Toshiba, 3Com Corp., ViewSonic Corp., Xircom, Inc.
Networking software: Citrix, E Presence, Microsoft Corporation, Novell, Inc., Veritas
Software Corp
- ------------------------------------------------------------------------------------------------------------------
ELECTRONIC PRESENTATION SYSTEMS
- ------------------------------------------------------------------------------------------------------------------
Large screen display devices: Epson America, Inc., InFocus Corporation, NEC Technologies,
Phillips, Plus Corporation, Sharp Electronics, Sony Electronics,
Inc.
Video conferencing hardware and software: CuSeeMe Networks, Picture Tel, VCON
Electronic white boards: Electronics for Imaging, Inc., SMART Technologies, Inc.
- ------------------------------------------------------------------------------------------------------------------
During the fiscal year ended March 31, 2001, Global purchased 12% of its
equipment, parts and supplies from Konica. No other supplier represented in
excess of 7% of such purchases.
Global's agreements with suppliers generally permit Global to sell particular
products on a nonexclusive basis in particular geographic areas. In most cases,
Global's agreements extend for one-year renewable terms, which the supplier can
choose not to renew with 30 days notice. In addition, Global's suppliers can
terminate Global's agreements upon notice (1) if Global does not meet minimum
purchase quotas or other requirements or (2) under certain other conditions,
including a change in Global's ownership.
6
LEASING AND RENTALS
A majority of the copiers Global sells are financed by third party leasing
companies. Global has a five-year strategic alliance with General Electric
Capital Corporation and a three-year program agreement with CitiCapital. The
GECC program accounts for at least 85% of all equipment leasing with
CitiCapital, Inc. financing the majority of what is not financed through GECC.
The advantages to these programs are (1) better lease rates and terms than are
generally available to individual copier dealers and (2) control over leased
equipment at the end of the lease term. Under each of these arrangements Global
has an option to purchase the leased equipment, under already negotiated terms
at the end of the lease term. This gives Global the flexibility to sell the
equipment to its customers at the end of the lease term or to provide for such a
sale at the time of original purchase. Global plans to increase the use of the
leasing programs in electronic presentation markets where, Global believes, high
equipment costs will make leasing an attractive financing alternative for many
customers.
In some cases, Global's automated office equipment dealers also rent
equipment. Rental arrangements provide Global with a steady monthly revenue
stream and, like its leasing arrangements, give Global control over disposition
of the equipment at the end of the rental term.
COMPETITION
Global operates in highly competitive markets, which forces it to compete for
customers and sometimes for acquisition candidates. Competitors in the
automated office equipment market and the electronic presentation systems market
include large dealers, including Danka Business Systems and IKON Office
Solutions and independent dealers, as well as manufacturers' sales and service
divisions, including those of Canon, Konica, Minolta Co., Ltd., Pitney Bowes,
Inc. and Xerox Corporation. Global also competes with office superstores and
consumer electronics chains in these markets. Principal areas of competition in
these markets include price and product capabilities; quality and speed of post-
sales service support; availability of equipment, parts and supplies; speed of
delivery; financing terms and availability of financing, leasing, or rental
programs.
Competition from large, nationwide competitors is likely to increase as
Global seeks to attract additional customers, expand its markets geographically
and broaden its product and service offerings. Competition from large,
nationwide competitors will also increase if Global's industry continues to
consolidate. Finally, as digital and other new technologies develop, Global may
face competition from new distribution channels, including computer distributors
and value added resellers, for products containing new technology. Some
competitors have greater financial and personnel resources than Global.
In the network integration services market, Global competes with the
e-commerce providers, including CDW Computer Centers, Inc., Insight Enterprises,
Inc. and PC Connection; direct sellers such as Dell Computer Company and
Gateway, Inc. and the sales and service divisions of Hewlett Packard and Compaq
Computer Corporation; smaller competitors with regional or local operations; and
the in-house capabilities of its customers. Principal areas of competition in
this market include reputation, quality and speed of support, and price.
Global also faces competition for core and satellite acquisitions from
manufacturers, consolidators, and a number of other independent dealers.
EMPLOYEES
Global employs approximately 2,900 people, most of whom work at Global's core
companies. Of these, approximately 1,100 employees work in sales and marketing,
1,200 in service, and 600 in operations and administration. Twenty-seven
employees work at Global's corporate headquarters in Tampa, Florida. None of
Global's employees is covered by collective bargaining agreements. Global
believes it has good relations with its employees.
7
GOVERNMENT AND ENVIRONMENTAL REGULATION
Global is subject to regulation under various federal, state and local laws
relating to employee safety and health and environmental protection. Global is
not aware of any material non-compliance with any of these laws.
ITEM 2. PROPERTIES
None of the physical properties Global uses in its business are materially
important to Global.
ITEM 3. LEGAL PROCEEDINGS
Currently, Global is not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Global's stockholders during the three
months ended March 31, 2001.
EXECUTIVE OFFICERS OF GLOBAL
The executive officers of Global and their positions and offices as of
March 31, 2001 are as follows:
NAME AGE POSITION
- ---- --- --------
Thomas S. Johnson......................... 55 Director, President and Chief Executive Officer
Raymond Schilling......................... 46 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
Alfred N. Vieira.......................... 53 Vice President-Operations/Service
Todd S. Johnson........................... 34 Vice President-Acquisitions
THOMAS S. JOHNSON has served as a director and as President and Chief
Executive Officer since Global's founding in June 1994. From 1991 to 1994,
Mr. Johnson was an office imaging industry consultant. From 1989 to 1990,
Mr. Johnson served as Chief Operating Officer for Danka. From 1975 to 1989,
Mr. Johnson worked at IKON (formerly known as Alco Standard Corporation) in
various staff and operating roles. When he left there in 1989, he was Vice
President-Operations of the Office Products group and was responsible for
acquisitions and turning around under-performing operations. Mr. Johnson has
been involved in the acquisition of over 79 office equipment dealers since 1985
and has over 25 years of experience in acquiring and integrating businesses.
Mr. Johnson graduated with a B.S. degree from the University of Florida in 1972
and received his MBA from Harvard Business School in 1976.
RAYMOND SCHILLING has served as Senior Vice President of Global since April
1999 and as Chief Financial Officer, Secretary and Treasurer of Global since its
inception in June 1994. From June 1994 to April 1999, Mr. Schilling also served
as Global's Vice President. From 1988 to 1994, Mr. Schilling was Vice
President-Finance of the California/Nevada region of McCaw Communications and
responsible for all of its finance and administrative functions. From 1980 to
1988, Mr. Schilling worked with Mr. Johnson at IKON in various accounting and
financial reporting functions, including as controller of Alco Office Products,
where his responsibilities included acquisitions and evaluation, integration,
development and installation of financial systems. From 1986 to 1988,
Mr. Schilling also was Vice President of Finance and Administration of San
Sierra Business Systems (an Alco Office Products dealer). From 1976 to 1980,
Mr. Schilling was employed by PriceWaterhouse as a CPA. In total, Mr. Schilling
has been involved in the acquisition of over 54 businesses and has over 18 years
of experience in acquiring and integrating businesses. Mr. Schilling graduated
with a B.A. in Economics and Accounting from Muhlenberg College in 1976.
ALFRED N. VIEIRA has served as Vice President-Operations/Service of Global
since October 2000. From March 1997 to October 2000, Mr. Vieira served as Vice
President-Service of Global. From May 1996 to March 1997, Mr. Vieira served as
Vice President and General Manager of Felco Office Systems, Inc.'s four branch
locations in
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South Texas. From 1979 to May 1996, Mr. Vieira was employed by Global Services,
Inc., and served as its Vice President of Operations from May 1988 to May 1996.
Mr. Vieira studied electrical engineering at City University of New York.
TODD S. JOHNSON has served as Vice President-Acquisitions since April 1999
and has been employed by Global since July 1994 in various roles, including as
Acquisition Team Manager. From 1993 to 1994, Mr. Johnson was employed as an
office imaging industry consultant. From 1989 to 1993, Mr. Johnson was an
officer in the United States Marine Corps. Mr. Johnson graduated from
Pennsylvania State University with a B.S. in Business Management in 1989.
RISK FACTORS
Set forth below are the risks that we believe are material to investors who
purchase or own our common stock or our senior subordinated notes.
OUR INDEBTEDNESS RESULTS IN SIGNIFICANT DEBT SERVICE OBLIGATIONS AND
LIMITATIONS. Because we financed our acquisitions primarily with debt, we
incurred substantial debt and, as a result, we have significant debt service
obligations. As of March 31, 2001, our total indebtedness was $276.7 million,
which represented 69.1% of our total capitalization. We also had $66.9 million
of additional borrowing availability under our senior credit facility. In
addition, our senior credit facilities and the indenture governing our senior
subordinated notes, which we refer to as subordinated debt, allow us to incur
additional indebtedness under certain circumstances. Our indebtedness poses
important consequences to investors, including the risks that:
. we will use a substantial portion of our cash flow from operations to pay
principal and interest on our debt, thereby reducing the funds available
for acquisitions, working capital, capital expenditures and other general
corporate purposes;
. we may be unable to obtain additional financing on satisfactory terms or
to otherwise fund working capital, capital expenditures, acquisitions,
and other general corporate requirements;
. our borrowings under our senior credit facility will bear interest at
variable rates, which would create higher debt service requirements if
market interest rates increase; and
. our degree of leverage may hinder our ability to adjust rapidly to
changing market conditions and could make us more vulnerable to downturns
in the economy generally or in our industry.
If we cannot generate sufficient cash flow from operations to meet our
obligations, we may be forced to reduce or delay acquisitions and other capital
expenditures, sell assets, restructure or refinance our debt, or seek additional
equity capital. We cannot assure that these remedies would be available or
satisfactory. In addition, our ability to pay principal and interest on the
notes, and to satisfy our other debt obligations, will depend on our future
operating performance. Our operating performance will be affected by prevailing
economic conditions and financial, business and other factors which may be
beyond our control.
WE MAY BE UNABLE TO INTEGRATE OUR ACQUIRED BUSINESSES INTO OUR OPERATIONS
PROFITABLY. Integrating our acquired businesses may involve unanticipated
delays, costs or other operational or financial problems. Successful
integration of the businesses we acquire depends on a number of factors,
including our ability to transition acquired companies to our management
information systems and the ability of our core businesses to integrate acquired
satellites into their operations. In integrating our acquired businesses, we
may not achieve expected economies of scale or profitability or realize
sufficient revenues to justify our investment. For example, if we are unable to
increase the sales force productivity at our acquired businesses as quickly as
we expect, our revenues may not justify our investment. We also face the risk
that an unexpected problem at one of our acquired companies will require
substantial time and attention from senior management, distracting management's
attention away from other aspects of our business. We cannot be certain that
our management and financial reporting systems, procedures and controls will be
able to support us as we grow.
9
WE NEED SUBSTANTIAL ADDITIONAL FUNDS TO FINANCE OUR ACQUISITIONS. We intend
to finance our future acquisitions primarily through cash flow from operations
and by incurring additional indebtedness, which will be substantial in relation
to our equity capital. We cannot be certain that we will be able to borrow
money for future acquisitions on favorable terms. Also, the restrictions
imposed on us under our senior credit facilities and the indenture governing the
notes may limit our ability to borrow additional funds to purchase acquisitions.
We may also pay some of the price of future acquisitions by issuing common stock
or other equity securities to the sellers of the businesses we acquire or in
public or private offerings. Depending on the market value of our common stock,
either we or the sellers of the businesses we acquire may not be willing to use
common stock for part of the consideration we pay. To the extent we do not have
access to additional debt and do not issue equity to pay for future
acquisitions, we would need to use more of our cash resources to continue our
acquisition program. We cannot be certain that we will be able to obtain debt
or equity financing, or that we will have enough cash resources available to pay
for future acquisitions.
OUR COMBINED OPERATING HISTORY IS LIMITED. Although a number of the
companies we have acquired have been in operation for some time, Global itself
has a limited history of operations and profitability. Consequently, the
financial information in this annual report may not be indicative of our
financial condition and future performance. See the information incorporated
into Item 7.
WE HAVE LIMITED OPERATING EXPERIENCE IN SOME OF OUR TARGET MARKETS. A key
element of our expansion strategy is to acquire businesses in each of our
geographic markets that sell and service electronic presentation systems or
document imaging management systems or that provide network integration or
facilities management services or introduce programs in our markets to sell
these products and services. Our limited experience in offering these products
and services may impair our ability to identify, acquire and integrate
appropriate companies. In addition, we may not be able to cross-sell these
products and services to our different customer bases. These markets also
present us with new challenges. For example, none of our companies currently
operates in the facilities management market. Success in this market would
require that we adapt our operations expertise to running labor-intensive
businesses.
WE DEPEND ON OUR CHIEF EXECUTIVE OFFICER. Our success substantially depends
on the efforts and ability of Thomas S. Johnson, Global's President and Chief
Executive Officer. Mr. Johnson has developed and implemented Global's industry
management model, and has many years of experience in the office imaging
industry and in the acquisition and integration of office imaging solutions
dealers. Mr. Johnson is currently employed under an executive agreement
terminating on April 1, 2002, but renews automatically for successive three-year
periods unless otherwise terminated by either party upon 60 days notice. The
loss or interruption of his services could have an adverse effect on Global.
WE NEED TO ATTRACT AND RETAIN SKILLED EMPLOYEES. Many of our markets are
experiencing low levels of unemployment. As a result, we must compete to
attract, motivate and retain skilled employees, particularly systems
integrators, service technicians, sales personnel and managers. We need
qualified service technicians to fulfill our service contracts and enter into
new ones. We need talented sales personnel to generate both sales and service
revenues. We need effective managers to integrate and operate our acquired
businesses profitably. As a result, if we cannot hire and keep skilled
employees, our business could be adversely affected.
TECHNOLOGICAL DEVELOPMENTS WILL AFFECT OUR BUSINESS. The office imaging
solutions industry is moving toward digital technology in a multi-functional
office environment. We must be able to respond to this rapidly changing
environment. Our business will be adversely affected if (1) we or our suppliers
fail to anticipate which products or technologies will gain market acceptance or
(2) we cannot sell these products at competitive prices. We cannot be certain
that manufacturers of popular products will permit us to market their newly
developed equipment. In addition, new products containing new technology may be
sold through other channels of distribution. Technological advancements may
result in lowered per unit costs that may reduce our sales revenues and
reliability improvements that may reduce our service revenues. We will also
incur increased expenses to train our sales and service personnel on any new
technologies.
WE DEPEND ON OUR SUPPLIERS. A majority of our revenues come from the sale of
equipment and from service and supply contracts for this equipment. As a
result, our success depends on our access to reliable sources of equipment,
parts and supplies at competitive prices. During the fiscal year ended March 31,
2001, Global purchased
10
12% of its equipment, parts and supplies from Konica Business Technologies, Inc.
No other supplier represented in excess of 7% of such purchases. There is no
guarantee that Konica or any of our other suppliers will continue to sell their
products to us, or that they will do so at competitive prices. Finally, other
factors, including reduced access to credit resulting from economic conditions,
may impair our suppliers' ability to provide products in a timely manner or at
competitive prices.
OUR MARKETS ARE HIGHLY COMPETITIVE. We operate in highly competitive
markets, which forces us to compete for customers and sometimes for acquisition
candidates. Competitors in the automated office equipment market and the
electronic presentation systems market include Xerox Corporation, Danka Business
Systems PLC, IKON Office Solutions, Inc. and other large, independent dealers,
as well as manufacturers' sales and service divisions, office superstores and
consumer electronics chains. In the network integration services market we
compete with large providers, smaller competitors with regional or local
operations, and the in-house capabilities of our customers.
Some competitors have greater financial and personnel resources than we do.
Competition from large, nationwide competitors is likely to increase as we seek
to attract additional customers, expand our markets geographically and broaden
our product and service offerings. Competition from large, nationwide
competitors will also increase if our industry continues to consolidate.
Finally, as digital and other new technologies develop, we may face competition
from new distribution channels, including computer distributors and value added
resellers, for products containing new technology.
COVENANTS IN OUR DEBT INSTRUMENTS RESTRICT OUR CAPACITY TO BORROW AND INVEST,
WHICH COULD IMPAIR OUR ABILITY TO EXPAND OR FINANCE OUR OPERATIONS. The terms
of our senior credit agreement and indenture governing the terms of our
subordinated debt imposes operating and financial restrictions that limit our
discretion on some business matters, which could make it more difficult for us
to expand, finance our operations or engage in other business activities that
may be in our interest. These restrictions limit or prohibit our ability to:
. incur additional debt and prepay our subordinated debt
. pay dividends or make other distributions
. make investments or other restricted payments
. undergo a change of control
. pledge or mortgage assets
. enter into transactions with related persons
. sell assets
. consolidate, merge or sell all or substantially all of our assets
If we fail to comply with these restrictions, these debt instruments could
become immediately due and payable.
FLUCTUATIONS IN THE MARKET PRICE OF OUR COMMON STOCK MAY MAKE IT MORE
DIFFICULT FOR US TO RAISE CAPITAL. The market price of our common stock is
extremely volatile and has fluctuated over a wide range. These fluctuations may
impair our ability to raise capital by offering equity securities. The market
price may continue to fluctuate significantly in response to various factors,
including:
. general trends in the office imaging solutions industry
. announcements and actions by competitors
. fluctuations in competitor's stock prices
11
. low trading volume
. quarterly variations in operating results
. changes in estimates by securities analysts
. our liquidity or ability to raise funds
. general economic conditions
OUR DIRECTORS, OFFICERS AND SIGNIFICANT STOCKHOLDERS MAY CONTROL GLOBAL. Our
executive officers and directors and their affiliates beneficially own 54.3% of
our common stock, and Golder, Thoma, Cressey, Rauner, Inc., through its
affiliation with Golder, Thoma, Cressey, Rauner Fund IV L.P., owns 41.0% of our
common stock. Accordingly, our executive officers and directors and their
affiliates, particularly Golder, Thoma, Cressey, Rauner, Inc., have significant
influence over the election of directors and corporate actions requiring
stockholder approval. In some cases, Golder, Thoma, Cressey, Rauner, Inc.'s
interests as a stockholder could conflict with the interests of our noteholders
or other stockholders. The concentration of ownership of our common stock could
limit the price that certain investors might be willing to pay in the future for
shares of common stock, and could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of Global.
WE ARE PROHIBITED FROM PAYING DIVIDENDS. We do not anticipate paying any
dividends for the foreseeable future. The terms of our senior credit agreement
and the indenture governing our subordinated debt prohibits us from paying cash
dividends. Investors should, therefore, not expect to receive dividends on
shares of our common stock.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. We may
experience significant quarter to quarter fluctuations in our results of
operations as a result of a variety of factors including the timing of the
acquisition and integration of acquired companies, the demand for our products
and services, the timing and introduction of new products and services by us or
our suppliers or competitors, the market acceptance of new products and
services, competitive conditions in the office imaging solutions industry and
general economic conditions. As a result, we believe that period to period
comparisons of our results of operations are not necessarily meaningful or
indicative of the results that we may achieve in any subsequent quarter or full
year. Such quarterly fluctuations may result in volatility in the market price
of our common stock, and in future quarters our results of operations could be
below the expectations of the public market. Such an event could have a material
adverse effect on the market price of our common stock.
OUR CHARTER AND BYLAWS MAY DELAY OR PREVENT A TAKEOVER OF GLOBAL. Our
certificate of incorporation and bylaws, as well as Delaware corporate law,
contain certain provisions that could delay, defer or prevent a change in
control of Global. These provisions could limit the price that certain
investors might be willing to pay for our common stock. Some of these provisions
allow us to issue, without stockholder approval, preferred stock that has rights
senior to our common stock. Other provisions impose various procedural and
other requirements that could make it difficult for stockholders to effect
certain corporate actions.
OUR SUBORDINATED DEBT AND GUARANTEES ARE UNSECURED AND SUBORDINATED TO OUR
SENIOR DEBT. The notes are unsecured, which means that investors in the
subordinated debt have no recourse to specific assets of Global or Global's
subsidiaries if a default occurs under the notes and indenture. In addition,
before we can pay principal and interest on the notes, we must first make
payments on any of our existing and future senior debt that is in default,
including all senior debt of our subsidiaries, if any, and all outstanding
amounts under our senior credit facility.
As of March 31, 2001, we had $176.5 million of senior indebtedness
outstanding. Substantially all of our real and personal property used in our
business operations secures our obligations under our senior credit facilities.
If we default on any payments required under any of our senior debt, or if we
fail to comply with other provisions governing our senior debt, such as meeting
required financial ratios, the senior lenders could declare all amounts
outstanding, together with accrued and unpaid interest, immediately due and
payable. If we are unable to repay
12
amounts due, the lenders could proceed against the collateral securing the debt.
If the lenders proceed against any of the collateral, we may not have enough
assets left to pay our noteholders. Moreover, if we become bankrupt or similarly
reorganize, we may not be able to use our assets to pay our noteholders until
after we pay all of our senior debt. In addition, the senior credit facility may
prohibit us from paying amounts due on the subordinated debt, or from
purchasing, redeeming or otherwise acquiring the notes if a default exists under
our senior debt.
WE MAY NOT HAVE SUFFICIENT FUNDS TO REPAY THE NOTES UPON A CHANGE OF CONTROL.
If we experience certain changes of control, our noteholders will have the right
to require us to purchase the notes at a purchase price equal to 101% of the
principal amount of the notes plus accrued and unpaid interest. In such
circumstances, we may also be required to (1) repay our outstanding senior debt
or (2) obtain our lenders' consent to our purchase of the notes. If we cannot
repay our debt or cannot obtain the needed consents, we may be unable to
purchase the notes.
Upon a change of control, we cannot guarantee that we will have sufficient
funds to make any debt payment, including purchases of the notes. The failure
to purchase the notes would be an event of default under the indenture governing
the subordinated debt. To avoid default, we may try to refinance our debt. We
cannot guarantee, however, that such refinancing would be available or would be
on favorable terms.
The events that qualify as a change of control under the indenture may also
be events of default under the senior credit facility or other indebtedness. An
event of default under the senior credit facility would permit our lenders to
accelerate our indebtedness. If we cannot repay such borrowings when due, the
lenders could proceed against the collateral securing the debt.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required by this item is set forth in the "quarterly
financial data" appearing on page 43 of Global's 2001 Annual Report to
Stockholders and is incorporated herein by reference. Portions of Global's 2001
Annual Report to Stockholders that are incorporated into this Form 10-K are
filed as Exhibit 13.1 to this form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The presentation of selected financial data as of and for the five years
ended March 31, 2001 is included in the "selected financial data" section
appearing on page 17 of Global's 2001 Annual Report to Stockholders and is
incorporated by reference into this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is set forth in the "management's
discussion and analysis" appearing on pages 18 through 24 of Global's 2001
Annual Report to Stockholders, and is incorporated by reference into this
Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates, primarily from its
senior credit agreement and uses interest rate cap and swap agreements to fix
interest rates on variable debt and 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. The Company's risk
management objective in entering into such contracts and agreements is only to
reduce its exposure to the effects of interest rate fluctuations and not for
speculative investment. Of the Company's total long-term debt of $277 million,
approximately $177 million is variable rate debt. The Company's interest rate
swaps have effectively converted $52 million of the variable rate debt to fixed
rate debt, leaving $125 million of the long-term debt exposed to interest rate
risk. Assuming the $125 million of variable rate debt was outstanding for a full
fiscal period, a hypothetical 100 basis point increase (decrease) in the
variable interest rate would have resulted in approximately $1.2 million of
additional (reduced) interest expense. Additional information regarding
financial instruments including in the notes to the company's financial
statements on pages 31 and 36 of this report is an integral part of this
disclosure about market risk.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information required by
this item are set forth in pages 25 through 43 of Global's 2001 Annual Report to
Stockholders and are incorporated by reference into this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the executive officers of Global, see
"Executive Officers of Global" at the end of Part I of this Form 10-K. For
information with respect to the directors of Global, see "Election of Directors"
in the proxy statement for the 2001 annual meeting of stockholders to be held in
August 2001, which is incorporated by reference into this Form 10-K.
Information required by Item 405 of Regulation S-K is included under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in Global's proxy
statement for the 2001 annual meeting of stockholders to be held in August 2001
and is incorporated by reference into this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is incorporated by
reference into this Form 10-K to the information under the captions
"Compensation of Directors" and "Executive Compensation" in Global's proxy
statement for the 2001 annual meeting of stockholders to be held in August 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management of Global is incorporated by reference into this Form 10-K to the
information under the caption "Voting Securities and Principal Holders Thereof"
in Global's proxy statement for the 2001 annual meeting of stockholders to be
held in August 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and transactions is
incorporated by reference into this Form 10-K to the information under the
caption "Certain Relationships and Transactions" in Global's proxy statement for
the 2001 annual meeting of stockholders to be held in August 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The consolidated financial statements as of March 31, 2001 and 2000 and for
each of the three years in the period ended March 31, 2001, together with the
report thereon of Ernst & Young LLP dated May 11, 2001, appearing on pages 25
through 44 of Global's 2001 Annual Report to Stockholders are incorporated by
reference into Part II, Item 8 of this Form 10-K. With the exception of the
aforementioned information and the information incorporated by reference in
Part II, Items 5, 6, 7 and 8 of this Form 10-K, Global's 2001 Annual Report to
Stockholders is not to be deemed filed as part of this report.
Consolidated balance sheets as of March 31, 2001 and 2000
Consolidated statements of operations for the years ended March 31, 2001,
2000 and 1999
14
Consolidated statements of cash flows for the years ended March 31, 2001,
2000 and 1999
Consolidated statements of stockholders' equity for the years ended March 31,
2001, 2000 and 1999
Notes to consolidated financial statements
Report of Independent Auditors
(a) 2. Financial Statement Schedules Required by Items 8 and 14(d)
Included in this annual report is the following additional financial data,
which should be read in conjunction with the consolidated financial statements
in Global's 2001 Annual Report to Stockholders:
Report of Independent Auditors
Schedule II--Valuation and Qualifying Accounts for each of the three years in
the period ended March 31, 2001
Supplemental schedules not included with the additional financial data have
been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
(a) 3. Exhibits
The Exhibit Index filed herewith is incorporated herein by reference.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the last quarter of the
fiscal year ended March 31, 2001.
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Global Imaging Systems, Inc. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Global Imaging Systems, Inc.
By: /s/ Thomas S. Johnson
---------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
Date: June 29, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of June 29, 2001.
NAME TITLE
---- -----
/s/ Thomas S. Johnson President, Chief Executive Officer and Director
- ---------------------------------------------- (Principal Executive Officer)
THOMAS S. JOHNSON
/s/ Raymond Schilling Senior Vice President, Chief Financial Officer,
- ---------------------------------------------- Secretary and Treasurer (Principal Financial
RAYMOND SCHILLING and Accounting Officer)
/s/ Carl D. Thoma Chairman of the Board
- ----------------------------------------------
CARL D. THOMA
/s/ Bruce D. Gorchow Director
- ----------------------------------------------
BRUCE D. GORCHOW
/s/ William C. Kessinger Director
- ----------------------------------------------
WILLIAM C. KESSINGER
/s/ Mark M. Lloyd Director
- ----------------------------------------------
MARK M. LLOYD
/s/ R. Eric McCarthey Director
- ----------------------------------------------
R. ERIC MCCARTHEY
/s/ Edward N. Patrone Director
- ----------------------------------------------
EDWARD N. PATRONE
16
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Global Imaging Systems, Inc.
We have audited the consolidated financial statements of Global Imaging Systems,
Inc. as of March 31, 2001 and 2000, and for each of the three years in the
period ended March 31, 2001, and have issued our report thereon dated May 11,
2001. Our audits also included the financial statement schedule listed in
Item 14(a) of this Annual Report (Form 10-K). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Tampa, Florida
May 11, 2001
17
GLOBAL IMAGING SYSTEMS, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Reserve for returns and allowances and bad debts:
ADDITIONS
BALANCE AT -------------------------------
THE CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER THE END OF
THE PERIOD EXPENSES ACCOUNTS (1) DEDUCTIONS THE PERIOD
-------------- ------------- ------------- ------------- ---------------
Year Ended:
March 31, 1999...................... $ 870,544 $345,993 $472,583 $ 335,888 $1,353,232
March 31, 2000...................... 1,353,232 532,677 585,529 407,253 2,064,185
March 31, 2001...................... 2,064,185 972,752 216,968 1,104,271 2,149,634
Reserve for excess and slow-moving inventory:
ADDITIONS
BALANCE AT -------------------------------
THE CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER THE END OF
THE PERIOD EXPENSES ACCOUNTS (1) DEDUCTIONS THE PERIOD
-------------- ------------- ------------- ------------- -------------
Year Ended:
March 31, 1999...................... $1,295,020 $ 759,721 $1,160,660 $1,004,646 $2,210,755
March 31, 2000...................... 2,210,755 531,675 1,648,151 1,591,705 2,798,876
March 31, 2001...................... 2,798,876 1,209,059 493,683 1,089,736 3,411,882
(1) These amounts primarily represent reserve balances acquired in connection
with business combinations.
18
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ---- -----------
3.1 Amended and Restated Certificate of Incorporation of Global Imaging
Systems, Inc. (1)
3.2 Amended and Restated Bylaws of Global Imaging Systems, Inc. (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). (3)
4.4 Form of Exchange Note. (2)
4.5 Credit Agreement, dated as of June 23, 1999, by and among Global 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)
4.5a First Amendment and Waiver to Credit Agreement, dated as of
February 14, 2000.+
4.5b Second Amendment and Waiver to Credit Agreement, dated as of March 30,
2000.+
10.1 Registration Agreement, dated as of June 9, 1994, as amended, by and
among Global and the stockholders identified therein. (4)
10.2 Termination Agreement, dated as of May 27, 1998, by and among Global;
Golder, Thoma, Cressey, Rauner Fund IV L.P. ("FUND IV"); Golder,
Thoma, Cressey, Rauner, Inc.; and the stockholders identified therein.
(5)
10.3 Senior Executive Agreement, dated as of April 1, 1999, by and between
Global and Thomas S. Johnson. (6)*
10.4 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Raymond Schilling. (10)*
10.5 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Michael Mueller. (10)*
10.6 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Alfred N. Vieira. (10)*
10.7 Senior Executive Agreement, dated as of April 1, 2000, by and between
Global and Todd S. Johnson. (10)*
10.8 Amended and Restated 1998 Stock Option and Incentive Plan. *+
10.8a Form of Incentive Stock Option Agreement. (5)*
10.8b Form of Non-Qualified Stock Option Agreement. (5)*
10.8c Form of Director's Stock Option Agreement. (5)*
10.8d Director Non-Incentive Stock Option Agreement. (7)*
10.8e Amendments to Global Imaging Systems, Inc. 1998 Stock Option and
Incentive Plan and forms of stock option agreements. (7)
10.9 Form of Supply Agreement between Global and Konica. (8)**
10.10 Equity Subscription Agreement, dated as of March 27, 1998, by and
among Global, FUND IV, JNL and Thomas S. Johnson. (5)
10.11 Form of Indemnification Agreement between Global and its directors and
executive officers. (1)*
19
EXHIBIT
NO. DESCRIPTION
- ---- -----------
10.12 Registration Rights Agreement, dated March 8, 1999, by and among
Global, the subsidiary guarantors, First Union Capital Markets Corp.,
Prudential Securities Incorporated, Raymond James & Associates, Inc.
and Scotia Capital Markets (USA) Inc. (2)
10.13 Merger Agreement, dated June 24, 1999, by and among Global, Lewan
Acquisition, Inc., Lewan & Associates, Inc. and the shareholders of
Lewan & Associates, Inc. (9)
13.1 Incorporated portions of Annual Report to Stockholders for the Year
Ended March 31, 2001.+
21.1 Subsidiaries of Global.+
23.1 The consent of Ernst & Young LLP.+
- -----------------------
(1) In corporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on May 8, 1998.
(2) In corporated by reference to Global's Registration Statement on Form S-4,
No. 333-78093, as filed with the SEC on May 7, 1999.
(3) Incorporated by reference to Global's Registration Statement on Form S-4,
No. 333-78093, as filed with the SEC on July 27, 1999.
(4) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on March 17, 1998
(5) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on June 11, 1998.
(6) Incorporated by reference to Global's Quarterly Report on Form 10-Q filed
with the SEC on February 14, 2000.
(7) Incorporated by reference to Global's Registration Statement on Form S-8,
No. 333-80801, as filed with the SEC on June 16, 1999.
(8) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on March 27, 1998.
(9) Incorporated by reference to Global's Current Report on Form 8-K filed with
the SEC on July 6, 1999.
(10) Incorporated by reference to Global's Annual Report on Form 10-K filed with
the SEC on June 26, 2000.
+ Filed herewith.
* Management contract or compensatory plan, contract or arrangement.
** Confidential treatment has been granted for portions of this exhibit.
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