Pomeroy IT Solutions, Inc. Reports First Quarter 2009 Results

1Q09 Financial Highlights

- Net loss narrows to $(0.6) million in Q1 2009 from $(4.2) million in Q1 2008

- Revenues of $89.5 million in Q1 2009, down 38% year-over-year (YOY)

- Gross profit of $13.0 million, down 17% YOY

- Gross profit margin was 14.5% versus 10.8% in Q1 2008

- Cash flow from operations was $12.9 million in Q1 2009 versus $(4.3) million
in Q1 2008

- Cash and investments of $40.3 million in Q1 2009 versus $31.9 million in Q4
2008

HEBRON, Ky., May 18 /PRNewswire-FirstCall/ -- Pomeroy IT Solutions, Inc.
(Nasdaq: PMRY) an information technology ("IT") solutions provider with a
comprehensive portfolio of hardware, software, technical staffing services, as
well as infrastructure and lifecycle services, today reported revenues of
$89.5 million for the first quarter of fiscal 2009, compared to $145.2 million
for the first quarter of fiscal 2008. The reported first quarter 2009 net loss
of $(0.6) million, or $(0.06) per share compares to a first quarter 2008 net
loss of $(4.2) million, or $(0.35) per share.

(Logo: http://www.newscom.com/cgi-bin/prnh/20090213/POMEROYLOGO )

Chris Froman, President and CEO of Pomeroy IT Solutions, said, "In spite of a
soft demand environment, and a significant reduction in customer's capital
spending, I am proud of our execution and continued improvement in critical
areas of the business. Our gross profit margin of 14.5% represents a year to
year improvement of 370 basis points, service gross profit increased over
first quarter 2008 even though we intentionally reduced our staffing business,
and operating expenses declined 31%. These efforts contributed to our fourth
consecutive quarter of positive EBITDA."

"Our cash flow and cash management was exceptional, and we continue to operate
the Company with no long term debt. In recognition of the ongoing economic
climate and likely softness in product sales, we are continuing to make
necessary adjustments to our operating expenses, and we remain focused on
improving profitability," added Froman.

CONSOLIDATED FINANCIAL RESULTS

First Quarter 2009 versus First Quarter 2008

Total Net Revenues: Total net revenues decreased $55.7 million or 38.4% in
the first quarter of fiscal 2009, compared to the first quarter of fiscal
2008. For the first quarters of fiscal 2009 and fiscal 2008, the net revenues
were $89.5 million and $145.2 million, respectively.

Product revenues were $53.2 million in the first quarter of fiscal 2009, a
decrease of $28.3 million or 34.8% from the first quarter of fiscal 2008. The
decrease in revenue was primarily generated by a reduction in capital
expenditures of large customers within the Financial, Manufacturing and Retail
markets. These expenditures were previously approved in the current year
budgets but were delayed due to ongoing economic uncertainty.

Service revenues were $36.3 million in the first quarter of fiscal 2009, a
decrease of $27.4 million or 43.0% from the first quarter of fiscal 2008. The
Company groups services sales into Technical Staffing and Infrastructure
Services. Technical Staffing Services support clients' project requirements,
ensures regulatory and customer compliance requirements and fulfills interim
and permanent staffing requirements of the staffing projects. Infrastructure
Services help clients optimize the various elements of distributed computing
environments. Encompassing the complete IT lifecycle, these services include
desktop and mobile computing, server and network environments.

(in millions)
Quarter ended April 5,
Service Revenue 2009 2008
Technical Staffing $7.6 $32.5
Infrastructure Services 28.7 31.2
Total Service Revenue $36.3 $63.7

Technical Staffing revenue decreased $24.9 million, or 76.6%, in the first
quarter of fiscal 2009. In June 2008, the Company elected not to renew a
technical services contract with a major customer because the proposed terms
would have been unprofitable for the Company. As a result of the loss of this
business, we expect a decline of approximately $80 million in technical
staffing revenue for the full year in fiscal 2009. Technical Staffing revenue
accounted for approximately 21.0% of total service revenues in the first
quarter of fiscal 2009 compared to 51.0% in the first quarter of fiscal 2008.

Infrastructure Service revenues decreased $2.5 million, or 8.0%, in the first
quarter of fiscal 2009, primarily due to a decline in short-term project
engagements and a loss contract which was exited at the end of the second
quarter of fiscal 2008. Infrastructure Service revenues accounted for
approximately 79.0% of total service revenues in the first quarter of fiscal
2009 compared to 49.0% in the first quarter of fiscal 2008.

Gross Profit: Gross profit was $13.0 million in the first quarter of fiscal
2009, compared to $15.7 million in the first quarter of fiscal 2008. Gross
profit margin, as a percentage of revenue, was 14.5% in the first quarter of
fiscal 2009, compared to 10.8% in the first quarter of fiscal 2008.

Product gross profit was $5.5 million in the first quarter of fiscal 2009,
compared to $8.4 million in the first quarter of fiscal 2008. Product gross
profit margin as a percentage of product revenues increased slightly to 10.4%
in the first quarter of fiscal 2009, compared to 10.3% in the first quarter of
fiscal 2008.

Service gross profit was $7.4 million in the first quarter of fiscal 2009,
compared to $7.3 million in the first quarter of fiscal 2008. Service gross
profit margins were 20.5% in the first quarter of fiscal 2009, compared to
11.4% in the first quarter of fiscal 2008.

(in millions)
Quarter ended April 5,
Service Gross Profit 2009 2008
Technical Staffing $1.2 $2.6
Infrastructure Services 6.2 4.7
Total Service Gross Profit $7.4 $7.3

Gross profit from Technical Staffing Services was $1.2 million for the first
quarter of fiscal 2009, compared to $2.6 million for the first quarter of
fiscal 2008. Gross profit margin increased to 16.1% in the first quarter of
fiscal 2009 from 8.0% in the first quarter of fiscal 2008. The decrease in
gross profit dollars and increase in gross margin is primarily the result of
the non-renewal of the technical services contract with a major customer in
June 2008 which would have been unprofitable for the Company. We expect a
decline in technical staffing gross profit of approximately $6.2 million for
the full year in fiscal 2009.

Gross profit from Infrastructure Services was $6.2 million for the first
quarter of fiscal 2009 compared to $4.7 million for the first quarter of
fiscal 2008. Gross profit margin increased to 21.7% in the first quarter of
fiscal 2009 from 15.0% in the first quarter of fiscal 2008. The increase in
gross profit margin is the result of engagements during the first quarter of
fiscal 2008 that generated revenue of approximately $1.4 million at zero gross
profit and cost reductions in the second and third quarters of fiscal 2008
resulting in improved utilization and productivity of the technical resources.

Operating Expenses: Total operating expenses were $13.5 million in the first
quarter of fiscal 2009, compared to $19.6 million in the first quarter of
fiscal 2008, a decrease of $6.1 million or 31.3%. The decrease is primarily
the result of the following:

-- In the first quarter of fiscal 2008, the Company recorded a $1.0
million
charge to reserve against the collection of Technical Staffing
Services
revenues that were overbilled by subcontractors in 2005 and 2006.
During
the first quarter of fiscal 2009, the Company reversed $0.2 million of
this charge after reevaluating the amounts overbilled.
-- Severance charges for the first quarter of fiscal 2009 totaled $0.1
million compared to severance charges of $0.5 million for the first
quarter of fiscal 2008.
-- The provision for bad debts decreased from $0.3 million in the first
quarter of fiscal 2008 to $0.1 million in the first quarter of fiscal
2009.
-- Selling expenses were reduced by $0.9 million in the first quarter of
fiscal 2009 as a result of decreased revenues.
-- During the first quarter of fiscal 2008, the Company recorded accruals
for loss contracts of $0.3 million, as well as a $0.3 million start-up
penalty for a new contract.

-- Payroll and payroll related expenses decreased approximately $3.2
million in the first quarter of fiscal 2009 as compared to the first
quarter of fiscal 2008 due to reductions in staffing support resources
which were made as a result of the non-renewal of the Technical
Services
contract with a major customer in June 2008. In addition the Company
made changes in order to right-size the business as a result of the
overall decline in revenues.

The decreases in operating expenses described above were partially offset by a
$0.4 million charge in the first quarter of fiscal 2009 associated with the
Company's leased aircraft.

Loss from Operations: Loss from operations decreased $3.4 million, to a loss
of $0.5 million in the first quarter of fiscal 2009 from a loss of $3.9
million in the first quarter of fiscal 2008. The decrease in loss from
operations is the result of the decrease in operating expenses offset by the
decrease in revenues, as described above.

Other income (expense): Net other expense was $0.1 million in the first
quarter of fiscal 2009 compared to $0.3 million during the first quarter of
fiscal 2008. Although the Company has significant cash balances, the Company's
interest expense exceeds its interest income due primarily to outstanding
balances under its floor plan and credit facilities at rates that exceed those
rates earned on the Company's cash and cash equivalents. The decrease in net
other expense is primarily the result of a $0.2 million decrease in interest
expense for outstanding borrowings under the Company's credit facility during
the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008
resulting from the timing of payments of accounts payable and payroll, as well
as a lower outstanding floor plan liability during the first quarter of fiscal
2009 as compared to the first quarter of fiscal 2008.

Income Taxes: For the first quarters of fiscal 2009 and fiscal 2008, the
Company had no income tax expense or benefit. During the first quarters of
fiscal 2009 and 2008, the Company increased its tax valuation allowance by
$200 thousand and $1.6 million, respectively, due to the future uncertainty of
the Company's ability to utilize its deferred tax assets.

Net Loss: Net loss was $0.6 million in the first quarter of fiscal 2009,
compared to $4.2 million in the first quarter of fiscal 2008. The decrease in
net loss is a result of the factors described above.

Other First Quarter Financial Information

-- Working Capital $ 64.5 million
-- Cash Flow Generated by Operating
Activities $ 12.9 million
-- Cash, Cash Equivalents and CD's $ 40.3 million
-- Capital Expenditures $ 0.2 million
-- Outstanding Floor Plan Financing $ 7.4 million
-- Book Value per Share $ 7.67

Non-GAAP Measures
This press release includes a quote that Pomeroy had positive EBITDA in the
first quarter of fiscal 2009. We believe that EBITDA provides a meaningful
measure of our performance to both management and investors. The
reconciliation of the Company's reported net loss to EBITDA for the first
quarter of fiscal 2009 is as follows:

(in millions)
Quarter ended
April 5, 2009
Net loss $(0.6)
Add back: net interest expense 0.1
Add back: income tax expense -
Add back: depreciation and amortization expense 0.7
EBITDA $0.2

CONFERENCE CALL
To participate in a conference call and questions and answer session with
senior management regarding the first quarter 2009 results, call
1-888-260-6133, using conference identification number 99925378 at 4:30 p.m.
(ET) on Monday, May 18, 2009. For your convenience, a replay will be available
shortly after the call by dialing 1-800-642-1687 and referencing the
conference identification number above.

ABOUT POMEROY IT SOLUTIONS, INC.
Pomeroy IT Solutions, Inc. is a leading provider of IT infrastructure
solutions focused on enterprise, network and end-user technologies. Leveraging
its core competencies in IT Outsourcing and Professional Services, Pomeroy
delivers consulting, deployment, operational, staffing and product sourcing
solutions through the disciplines of Six-Sigma, program and project
management, and industry best practices. Pomeroy's consultative approach and
adaptive methodology enables Fortune 2000 corporations, government entities,
and mid-market clients to realize their business goals and objectives by
leveraging information technology to simplify complexities, increase
productivity, reduce costs, and improve profitability. For more information,
go to www.pomeroy.com.

FORWARD-LOOKING STATEMENTS
Certain of the statements in the preceding paragraphs regarding financial
results constitute forward-looking statements. These statements relate to
future events or to 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 Company's ability to accurately project
staffing needs; the ability to fully utilize personnel and increase the use of
higher-margin service employees; the ability to successfully attract and
retain customers, sell additional products and services to existing customers;
the ability to timely bill and collect receivables; the ability to avoid
non-profitable service contracts; 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 costs
and expenses; 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 as "may", "should", "expects", "plans", "anticipates", "believes",
"estimates", "predicts", "potential", "continue", "projects", "intends",
"prospects", "priorities", or negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results
may differ materially.

POMEROY IT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands)
April 5, January 5,
2009 2009
ASSETS

Current Assets:
Cash and cash equivalents $39,161 $30,787
Certificates of deposit 1,152 1,142

Accounts receivable:
Trade, less allowance of $3,335 and $3,233,
respectively 60,767 89,654
Vendor, less allowance of $293 and $293,
respectively 1,432 1,299
Net investment in leases 55 74
Other 531 622
Total receivables 62,785 91,649

Inventories 6,380 7,890
Other 4,134 3,861
Total current assets 113,612 135,329

Equipment and leasehold improvements:
Furniture, fixtures and equipment 13,971 14,040
Leasehold Improvements 5,293 5,055
Total 19,264 19,095

Less accumulated depreciation 13,390 12,748
Net equipment and leasehold improvements 5,874 6,347

Intangible assets, net 680 752
Other assets 462 559
Total assets $120,628 $142,987

POMEROY IT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands)
April 5, January 5,
2009 2009
LIABILITIES AND EQUITY

Current Liabilities:
Floor plan financing $7,412 $11,709
Accounts payable - trade 16,582 30,774
Deferred revenue 1,713 1,557
Employee compensation and benefits 5,054 7,081
Accrued facility closing cost and severance 762 1,149
Other current liabilities 17,550 18,839
Total current liabilities 49,073 71,109

Equity:
Preferred stock, $.01 par value;
authorized 2,000 shares,
(no shares issued or outstanding) - -
Common stock, $.01 par value; authorized
20,000 shares, (13,724 and 13,693 shares
issued, respectively) 144 142
Paid in capital 94,304 93,858
Accumulated other comprehensive income 18 13
Retained earnings 453 1,044
94,919 95,057
Less treasury stock, at cost (4,395 and
4,340 shares, respectively) 23,364 23,179
Total equity 71,555 71,878
Total liabilities and equity $120,628 $142,987

POMEROY IT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(in thousands, except per share data) Three Months Ended
April 5, April 5,
2009 2008

Net revenues:
Product $53,161 $81,477
Service 36,299 63,692
Total net revenues 89,460 145,169

Cost of revenues:
Product 47,644 73,071
Service 28,856 56,422
Total cost of revenues 76,500 129,493

Gross profit 12,960 15,676

Operating expenses:
Selling, general and
administrative 12,771 18,396
Depreciation and amortization 703 1,216
Total operating expenses 13,474 19,612

Loss from operations (514) (3,936)

Other income (expense):
Interest income 86 85
Interest expense (160) (351)
Other (4) -
Other income (expense), net (78) (266)

Loss before income tax (592) (4,202)
Income tax expense (benefit) - -
Net loss $(592) $(4,202)

Weighted average shares outstanding:
Basic 9,354 12,061
Diluted (1) 9,354 12,061

Earnings (loss) per common share:
Basic $(0.06) $(0.35)
Diluted (1) $(0.06) $(0.35)

(1) Dilutive loss per common share for the three months ended April 5,
2009 and 2008 would have been anti-dilutive if the number of weighted
average shares outstanding were adjusted to reflect the dilutive
effect of outstanding stock options and unearned restricted shares.

POMEROY IT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended
Cash Flows from (used in) Operating April 5, April 5,
Activities: 2009 2008
Net loss (592) (4,202)
Adjustments to reconcile net loss to
net cash flows from (used in) operating
activities:
Depreciation and amortization 715 1,250
Stock option, restricted stock compensation
and employee purchase plan expense 364 755
Provision for doubtful accounts 66 300
Amortization of unearned income - (2)
(Gain) loss on disposal of fixed assets - (2)
Changes in working capital accounts:
Accounts receivable 28,778 18,775
Inventories 1,510 259
Other current assets (273) (390)
Net investment in leases 19 336
Accounts payable trade (14,192) (15,163)
Deferred revenue 155 144
Employee compensation and benefits (2,026) (3,811)
Other, net (1,585) (2,539)
Net operating activities 12,939 (4,290)
Cash Flows used in Investing Activities:
Capital expenditures (172) (1,244)
Net investing activities (172) (1,244)
Cash Flows from (used in) Financing
Activities:
Increase in short-term debt, net - 6,919
Net reduction in floor plan financing (4,297) (11,760)
Purchase of treasury stock (185) (1,413)
Proceeds from issuance of common shares for
Employee stock purchase plan 84 172
Net financing activities (4,398) (6,082)
Effect of exchange rate changes on cash and
cash equivalents 5 (8)
Increase (decrease) in cash and cash equivalents 8,374 (11,624)
Cash and cash equivalents:
Beginning of period 30,787 13,282
End of period $39,161 $1,658

SOURCE Pomeroy IT Solutions, Inc.

Craig J. Propst, CFO and Treasurer, +1-859-586-0600 x 1838,
cpropst@pomeroy.com