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GSI Commerce to acquire Innotrac Corporation

06
Oct '08
Leading e-commerce and multichannel solutions provider, GSI Commerce Inc announced it has signed a definitive agreement to acquire Innotrac Corporation. Innotrac is a leading provider of e-commerce fulfillment and customer care services. The company operates eight facilities, including seven primarily used for fulfillment and one primarily used for customer care.

The fulfillment facilities are located in Georgia, Illinois, Kentucky, Nevada and Ohio, and the customer care facility is located in Colorado. As of June 30, 2008 Innotrac had gross property and equipment of $49.9 million and net property and equipment of $17.0 million. The company serves more than 30 clients in the retail, telecommunications and direct marketing industries.

Retail clients accounted for the largest percentage of the company's revenue in 2007 and include leading brands in the apparel, beauty, home, jewelry, entertainment, technology, toys and general merchandise categories. The company's clients include one of the 10 largest retailers in the United States.

For the trailing 12 months ending June 30, 2008 Innotrac recorded net revenues of $128.2 million, income from operations of $4.5 million and non-GAAP income from operations of $9.1 million. Non-GAAP income from operations equals income from operations plus $0.2 million of stock-based compensation expenses and $4.4 million of depreciation and amortization expenses.

As previously announced by Innotrac, these results include contribution from a significant client in the telecommunications category whose fulfillment contract will expire in the middle of 2009 and is not expected to renew.

The addition of Innotrac will increase GSI's client base and expand GSI's North American infrastructure and capacity. Following the close of the acquisition, GSI will operate approximately 4.7 million square feet of fulfillment centers and 2,165 call center seats. GSI intends to utilize the company's Reno, Nev. fulfillment center to begin offering regional fulfillment capabilities to its clients beginning in 2009.

“Innotrac furthers our leadership position in e-commerce and multichannel services by bringing new clients, enhancing our scale for fulfillment and call center services and adding to our available capacity to support growth of new and existing clients. By acquiring Innotrac we believe we will be better positioned to capture a greater share of our growing market opportunity. This acquisition works for us strategically and operationally and we would expect it to have a positive impact on our financial results in 2009,” said Michael G. Rubin, chairman and CEO of GSI.

“We are also excited to begin our regional distribution strategy more than one year earlier than we had planned by utilizing Innotrac's Reno, Nevada fulfillment center. Regional fulfillment will enable our clients to deliver packages to their customers more quickly while saving money on delivery costs. This is a key part of our strategic focus of enhancing the consumer shopping experience.”


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