<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended October 31, 1997.
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of Securities
Exchange Act of 1934 For the transition period from _______to ______.
Commission File No.:0-27694
SCB Computer Technology, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-1201561
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1365 W. Brierbrook Road
Memphis, Tennessee 38138
- ----------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
901-754-6577
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of December 10, 1997, 11,235,664 shares of the Registrant's common stock were
outstanding.
<PAGE> 2
Index to Form 10-Q
SCB Computer Technology, Inc.
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - October 31, 1997 and April 30, 1997...............................................3
Consolidated statements of income - Three months ended October 31, 1997 and October 31, 1996;
Six months ended October 31, 1997 and October 31, 1996..........................................................4
Consolidated statements of cash flows - Six months ended October 31, 1997
and October 31, 1996............................................................................................5
Notes to consolidated financial statements......................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........................8
Part II. Other Information
Item 1. Legal Proceedings..............................................................................................11
Item 2. Changes in Securities and Use of Proceeds .....................................................................11
Item 4. Submission of Matters to a Vote of Security Holders............................................................11
Item 6. Exhibits and Reports on Form 8-K...............................................................................12
Signature...............................................................................................................13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCB COMPUTER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1997 April 30, 1997
----------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents
Cash $ 1,463,768 $ 947,083
Securities purchased under agreement to resell -- 787,704
Marketable securities -- 10,080,000
------------ ------------
Total cash and cash equivalents 1,463,768 11,814,787
Accounts receivable:
Trade (net) 18,770,625 11,338,535
Prepaid expenses 977,443 315,689
Inventory 312,893 28,182
Deferred federal & state income taxes 231,663 231,663
------------ ------------
Total current assets 21,756,392 23,728,856
Investment in direct financing leases 21,381,419 --
Equipment under operating leases, net
of accumulated depreciation of $1,733,214 2,954,038 --
Fixed assets:
Buildings 1,348,293 1,348,293
Furniture, fixtures, and equipment 15,609,783 1,813,920
Accumulated depreciation (4,306,305) (838,888)
------------ ------------
12,651,771 2,323,325
Land 209,912 444,670
------------ ------------
12,861,683 2,767,995
Goodwill 24,866,373 8,150,782
Other 1,121,533 446,741
------------ ------------
Total assets $ 84,941,438 $ 35,094,374
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 3,816,261 $ 1,072,451
Accrued & withheld payroll taxes,
insurance, & payroll deductions 147,944 299,859
Accrued vacation 781,902 660,763
Other accrued expenses 2,143,124 1,007,102
Current portion of long term debt 4,970,244 --
Deferred revenue 1,343,552 --
Accrued federal and state income taxes 782,217 149,941
------------ ------------
Total current liabilities 13,985,244 3,190,116
Deferred federal & state income taxes 1,297,300 270,761
Notes payable-revolving term loan 7,741,000 --
Notes payable-non recourse 20,460,469 --
Long term debt 5,854,751 --
------------ ------------
Total long term liabilities 35,353,520 --
Total liabilities 49,338,764 3,460,877
Shareholders' equity:
Preferred stock, no par value-authorized
1,000,000 shares, none issued -- --
Common stock-50,000,000 shares of $.01
par value authorized and 11,235,627
shares issued and outstanding at
October 31, 1997 and 11,217,066 shares
issued and outstanding at April 30, 1997 112,357 112,171
Additional paid-in capital 23,973,477 23,812,192
Retained earnings 11,516,840 7,709,134
------------ ------------
Total shareholders' equity 35,602,674 31,633,497
------------ ------------
Total liabilities & shareholders' equity $ 84,941,438 $ 35,094,374
============ ============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE> 4
SCB COMPUTER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
---------------- ---------------- --------------- ----------------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenue $ 28,054,205 $ 15,583,536 $ 49,387,407 $ 31,164,853
Cost of services 19,356,691 11,242,601 34,210,657 22,305,142
------------ ------------ ------------ ------------
Gross profit 8,697,514 4,340,935 15,176,750 8,859,711
Compensation-key executives 150,000 150,000 300,000 400,000
Other selling, general and
administrative expenses 4,708,558 2,291,789 8,073,835 4,812,968
------------ ------------ ------------ ------------
Total operating expenses 4,858,558 2,441,789 8,373,835 5,212,968
------------ ------------ ------------ ------------
Income from operations 3,838,956 1,899,146 6,802,915 3,646,743
Other income (expenses):
Interest income 50,326 244,250 237,163 494,566
Interest expense (392,403) -- (500,074) --
Other, net (210,580) (4,586) (326,234) (40,016)
------------ ------------ ------------ ------------
Total other income (expenses) (552,657) 239,664 (589,145) 454,550
------------ ------------ ------------ ------------
Income before income taxes 3,286,299 2,138,810 6,213,770 4,101,293
Income tax expense 1,267,664 804,000 2,406,064 1,488,905
------------ ------------ ------------ ------------
Net income $ 2,018,635 $ 1,334,810 $ 3,807,706 $ 2,612,388
============ ============ ============ ============
Net income per share $ 0.18 $ 0.12 $ 0.33 $ 0.23
============ ============ ============ ============
Net Income $ 2,018,635 $ 1,334,810 $ 3,807,706 $ 2,612,388
Pro forma tax expense adjustment -- 64,000 -- 177,000
------------ ------------ ------------ ------------
Pro forma net income $ 2,018,635 $ 1,270,810 $ 3,807,706 $ 2,435,388
------------ ------------ ------------ ------------
Pro forma net income per share $ 0.18 $ 0.11 $ 0.33 $ 0.22
============ ============ ============ ============
Weighted average number of common
and common equivalent shares
outstanding 11,454,938 11,274,212 11,416,932 11,279,339
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 5
SCB COMPUTER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
-----------------------------------
1997 1996
-------------- --------------
(Restated)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,807,706 $ 2,612,388
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation & amortization 2,789,377 99,972
Deferred income taxes (296,461) 1,130
(Increase) decrease in:
Accounts receivable-trade (4,407,242) (996,285)
Prepaid expenses (333,763) (104,292)
Inventory 513,229 (1,244)
Net investment in direct financing activity 5,525,245 --
Deferred revenue (49,939) --
Other assets (686,621) (130,120)
Increase (decrease) in:
Accounts payable-trade (288,793) (140,455)
Accrued federal & state income taxes 671,868 165,941
Accrued vacation 121,139 (28,319)
Other accrued expenses (4,423) 84,590
Accrued & withheld payroll taxes,
insurance, and payroll deductions (151,915) (89,111)
------------ ------------
Total adjustments 3,401,701 (1,138,193)
------------ ------------
Net cash provided by operating
activities 7,209,407 1,474,195
INVESTING ACTIVITIES
Purchases of fixed assets (2,432,331) (295,850)
Purchase of Partners (16,000,000) --
Proceeds from land sale 234,758 --
------------
Net cash used by investing activity (18,197,573) (295,850)
FINANCING ACTIVITIES
Revolving term loan 16,000,000 --
Proceeds from loan 729,103 --
Cash dividends paid to Delta Software Systems, Inc.
shareholders prior to merger -- (240,000)
Other -- (45)
Payments on revolving term loan (8,259,000) --
Options exercised 198,942 --
Repayment of capital lease obligations (118,229) --
Proceeds from non-recourse debt 693,517 --
Payment on non-recourse debt (8,055,884) --
Payments on long-term debt (551,302) --
------------
Net cash provided (used) by financing
activities 637,147 (240,045)
------------ ------------
Net increase (decrease) in cash & cash
equivalents (10,351,019) 938,300
Cash at beginning of period 11,814,787 19,401,015
------------ ------------
Cash at end of period $ 1,463,768 $ 20,339,315
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 500,434 $ --
Income taxes paid $ 2,194,027 $ 1,212,964
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE> 6
SCB COMPUTER TECHNOLOGY, INC.
Notes to Consolidated Financial Statements (Unaudited)
October 31, 1997
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month and six month period ended
October 31, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending April 30, 1998. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Registrant's Annual Report on Form 10-K for the fiscal year ended April 30,
1997 filed with the Securities and Exchange Commission.
On September 26, 1996 the Company issued 461,536 shares of common stock in a
merger of Delta Software Systems, Inc. ("Delta Software") with and into a wholly
owned subsidiary of the Company. The merger was accounted for as a pooling of
interests. Accordingly, these consolidated financial statements have been
restated for all periods to include the results of operations and financial
position of Delta Software. For purposes of earnings per share computations, the
shares issued in the combination with Delta Software have been treated as
outstanding for all periods. In addition, in connection with the combination,
Delta Software's "S" corporation status for income tax purposes was terminated.
Pro forma information presents the combined pro forma tax expense periods of
Delta Software as if it had been a "C" corporation during the three months and
six months ended October 31, 1996.
Note B - Change in Capitalization
In September 1997, the Company effected a three for two stock split, in the form
of a 50% stock dividend to shareholders of record at the close of business on
August 20, 1997. All share and per share amounts have been retroactively
restated to reflect the three for two stock split.
Note C - Recent Acquisitions
Effective June 30, 1997, the Company purchased all of the issued and outstanding
capital stock of Partners Resources, Inc. ("PRI"). The purchase price was
$9,600,000, of which $8,640,000 was paid in cash to the former PRI shareholders
at closing, and $960,000 of which was delivered to an escrow agent, which amount
will be escrowed for one year in connection with potential indemnification
6
<PAGE> 7
claims. As additional purchase price, an amount equal to 14 times PRI's net
income for the year ending December 31, 1997, as determined in accordance with
the terms of the PRI Stock Purchase Agreement, will, subject to certain
conditions, be paid to the PRI shareholders on or before May 1, 1998 in cash or
shares of SCB Common Stock.
Also effective June 30, 1997, the Company purchased all of the issued and
outstanding capital stock of Partners Capital Group ("PCG"). The purchase price
was $6,400,000 of which $5,760,000 was paid in cash to the former PCG
shareholders (who were the same persons as the PRI shareholders) at closing, and
$640,000 of which was delivered to an escrow agent, which amount will also be
escrowed for one year in connection with potential indemnification claims.
PRI and PCG have historically operated as affiliated companies and are sometimes
referred to collectively herein as "The Partners Group." PRI is an information
technology services company specializing in outsourcing projects and PCG is a
computer equipment leasing company.
As a result of the acquisition of PCG, the Company now has leasing operations.
The significant balance sheet captions related to the PCG leasing of data
processing equipment are:
Direct Financing Leases. Leases meeting the criteria for capitalization
in accordance with Statement of Financial Accounting Standards Number
13 are classified as direct financing leases. For direct financing
leases, the sum of the minimum lease payments and the unguaranteed
residual value is recorded as the gross investment in the lease. The
difference between the gross investment and the cost of the leased
property is recorded as unearned income. Income is recognized over the
life of the lease using the interest method.
Operating Leases. Leases not meeting the criteria for capitalization
are classified as operating leases. For operating leases, lease
payments are recognized as rental revenue on a straight-line basis over
the life of the lease. Depreciation expense on equipment under
operating leases is recorded over the lease term. The amount subject to
depreciation is the total cost of the leased asset less the expected
gross residual value at the end of the lease.
Notes Payable Non-Recourse. To purchase assets leased under direct
financing and operating leases, the Company obtains non-recourse
financing, which is secured by the assigned lease payments and the
underlying leased property. The lender receives payments directly from
the lessee.
The significant balance sheet caption related to the acquisition of PRI is:
Deferred Revenue. The Company records deferred revenue for payments
received from certain customers on service contracts prior to the
performance of services required under the service contract.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Revenue increased from $15.6 million for the quarter ended October 31, 1996 to
$28.1 million for the quarter ended October 31, 1997, an increase of
approximately 80.0%. Revenue increased from $31.2 million for the first six
months of fiscal 1997 to $49.4 million for the comparable period for fiscal
1998, an increase of approximately 58.5%. The increases were attributable
primarily to the expansion of the Company's client base, an increase in
consulting and professional staffing services provided to existing clients, an
increase in equipment and software sales and leasing, and growth through
acquisitions.
Gross profit increased from $4.3 million for the second quarter of fiscal 1997
to $8.7 million for the second quarter of fiscal 1998, an increase of
approximately 100.4%. Gross profit increased from $8.9 million for the first six
months of fiscal 1997 to $15.2 million for the comparable period for fiscal
1998, an increase of approximately 71.3%. The increase was primarily
attributable to the increase in revenue over the prior periods. Gross profit
margin for the quarter increased from 27.9% to 31.0%, and gross profit margin
for the comparable six month periods increased from 28.4% to 30.7%, primarily
because of the movement of the revenue mix to higher margin consulting revenue.
Compensation for key executives decreased from $400,000 in the first six months
of fiscal 1997 to $300,000 in the comparable period of fiscal 1998. This
decrease resulted from the decrease in compensation of T. Scott Cobb, Chairman,
and Ben C. Bryant, Jr., President and Chief Executive Officer, pursuant to their
employment contracts.
Other selling, general and administrative expenses increased from $2.3 million
in the second quarter of fiscal 1997 to $4.7 million in second quarter of fiscal
1998, an increase of approximately 105.5%. Other selling, general and
administrative expenses increased from $4.8 million for the first six months of
fiscal 1997 to $8.1 million for the comparable period for fiscal 1998, an
increase of approximately 67.8%. As a percent of revenues other selling, general
and administrative expenses increased from 14.7% in the second quarter of fiscal
1997 to 16.8% for the second quarter of fiscal 1998, and also increased from
15.4% for the first six months of fiscal 1997 to 16.3% for the comparable period
for fiscal 1998. The increase in the dollar amount spent is primarily
attributable to the increase in staffing as a result of SCB's regional business
units becoming fully operational and the increased selling, general and
administrative expenses attributable to acquired companies. The increase, as a
percentage of revenues, is primarily attributable to the acquisition of The
Partners Group, which has higher selling, general and administrative costs as a
percentage of revenues than the rest of the Company's operations. Expenses
related to the government's investigation into the TVA billing matter decreased
from $259,000 for the second quarter of fiscal 1997 to $99,000 for the second
quarter of fiscal 1998, and also decreased from $688,000 for the first six
months of fiscal 1997 to $137,000 for the comparable period for fiscal 1998.
8
<PAGE> 9
Interest income decreased from $244,000 for the second fiscal quarter of 1997 to
$50,000 in the second fiscal quarter of 1998, a decrease of approximately 79.4%.
Interest income decreased from $495,000 for the first six months of fiscal 1997
to $237,000 for the comparable period for fiscal 1998, a decrease of
approximately 52.0%. The decrease was primarily attributable to the reduction in
the Company's cash and cash equivalents as a result of recent acquisitions.
Interest expense increased from none in the second fiscal quarter of 1997 to
$392,000 in the second fiscal quarter of 1998. Interest expense also increased
from none for the first six months of fiscal 1997 to $500,000 for the comparable
period for fiscal 1998. The increase was primarily the result of borrowings to
fund a portion of the acquisition of The Partners Group, debt assumed in the
acquisition of The Partners Group, and the financing of equipment used in the
Company's Arizona data centers. Other expenses, primarily the amortization of
goodwill in connection with the Company's recent acquisitions, increased from
$4,600 for the second quarter of fiscal 1997 to $210,600 in the second quarter
of fiscal 1998, and from $40,000 for the full six months of fiscal 1997 to
$326,000 in the comparable period of fiscal 1998.
Liquidity and Capital Resources
Prior to the acquisition of The Partners Group, cash on hand from the Company's
initial public offering in February 1996 and cash flow from operations had
historically been the Company's primary source of liquidity. Cash flows from
operations were $7,209,000 for the six months ended October 31, 1997, as
compared to $1,474,000 in the comparable period for fiscal 1997. The cash
provided by operations increased during this period primarily because of
increased profits and net investment in direct financing activities.
The Company's working capital decreased from $26,689,000 as of October 31, 1996
to $7,771,000 as of October 31, 1997, primarily due to the use of cash for the
acquisitions of Technology Management Resources, Inc. in February 1997 and The
Partners Group in June 1997. The Company's current ratio at October 31, 1997 was
1.6:1.
The Company made capital expenditures during the first six months of 1998 of
$24 million. Such capital expenditures related primarily to the build-up and
equipment purchases associated with the Company's Emerging Technology Centers in
Memphis and Nashville, equipment purchases and other expenses related to making
the Company's regional business units fully operational, and the purchase of
assets relating to new outsourcing contracts. Furniture, fixtures and equipment
also increased during the quarter as a result of the capitalization of certain
equipment leases acquired in the acquisition of The Partners Group.
On July 10, 1997, the Company entered into a credit facility providing for
borrowing of up to $16.0 million (the "Credit Facility"). The Credit Facility
bears interest at LIBOR plus a spread over LIBOR, which varies based on certain
financial ratios. Certain of the Company's existing subsidiaries are
co-borrowers under the Credit Facility and their stock is pledged to secure the
indebtedness thereunder. In addition, each of PRI and PCG have executed
guarantees in favor of NationsBank. All borrowings under the Credit Facility
mature on August 1, 2000. At October 31,
9
<PAGE> 10
1997, approximately $7.7 million was outstanding under the Credit Facility,
which bore interest at 7.2%.
The Company believes that cash flows from operations and advances under the
Credit Facility will be sufficient to fund the Company's operating needs for at
least the next twelve months. Although the Company is currently in preliminary
discussion with several firms regarding potential acquisitions, presently there
are no definitive agreements with such firms, and no assurance can be made that
any transaction currently being discussed will be consummated. Any such
transactions may be financed through borrowings under the Credit Facility, the
issuance of securities (including Common Stock), or a combination of both.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is effective for both interim and annual
financial statements for periods ending after December 15, 1997. At that time,
the Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new requirements
for calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of Statement 128 on the calculation of primary
earnings per share and fully diluted earnings per share is not expected to be
material.
Forward-Looking Statements
This Quarterly Report on Form 10-Q may be deemed to contain certain
forward-looking statements regarding the anticipated financial and operating
results of the Company. The Company undertakes no obligation to publicly release
any revisions to any forward-looking statements contained herein to reflect
events or circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events.
Information contained in these forward-looking statements is inherently
uncertain and actual performance and results may differ materially due to many
important factors, many of which are beyond the Company's control, including the
Company's dependence on key clients; the Company's dependence on the
availability of qualified IT employees; the Company's dependence on key
management personnel; the Company's ability to sustain and manage growth; the
timing and ultimate outcome of the governmental investigations of the Company
and certain members of its management; competition; general economic conditions;
and the like.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The government's investigation into the TVA billing matter is
continuing. In November 1997, the Company announced that the U.S. Attorney, in
response to a long-standing Company request, has offered the Company an
opportunity to discuss the matters relating to the grand jury's investigation.
The Company also reported that Scott Cobb, its Chairman; Steve White, an
Executive Vice President; and their administrative assistant have received
letters notifying them that they are targets of the investigation. See "Item 3.
Legal Proceedings" in the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1997 for additional information.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Effective September 24, 1997, the Company's Amended and Restated
Charter was amended to increase the authorized shares of common stock from
20,000,000 to 50,000,000. The additional authorized shares of common stock may
be issued by the Board of Directors, at their discretion and without shareholder
approval, except as may be required by law or the rules of The Nasdaq Stock
Market.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 23, 1997, the Company held its 1997 Annual Meeting of
Shareholders. At the Annual Meeting, the shareholders of the Company elected the
following persons to serve as directors for a term of one year and until their
successors are duly elected and qualified with the number of votes cast for or
withheld as set forth opposite their names:
<TABLE>
<CAPTION>
VOTES
---------------------------------------------------
WITHHOLD
FOR AUTHORITY
---------------------------------------------------
<S> <C> <C>
T. Scott Cobb....................... 6,385,174 52,440
Ben C. Bryant, Jr................... 6,385,174 52,440
Steve N. White...................... 6,385,174 52,440
James E. Harwood.................... 6,412,559 25,055
Joseph W. McLeary................... 6,412,559 23,055
</TABLE>
11
<PAGE> 12
The shareholders of the Company also voted to amend the Company's
charter to increase the number of authorized shares of Common Stock of the
Company from 20,000,000 to 50,000,000 with the following number of votes cast
for, against or abstaining:
<TABLE>
<CAPTION>
VOTES
- --------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6,295,845 139,619 2,150
</TABLE>
The shareholders of the Company also voted on the adoption of the
Company's 1997 Stock Incentive Plan with the following votes cast for, against,
abstaining or non-votes:
<TABLE>
<CAPTION>
VOTES
- --------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN NON-VOTE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5,192,619 793,130 4,984 446,881
</TABLE>
The shareholders of the Company also voted on the ratification of Ernst
& Young LLP as the independent public accountants of the Company for fiscal 1998
with the following number of votes cast for, against or abstaining:
<TABLE>
<CAPTION>
VOTES
- --------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6,436,764 100 750
</TABLE>
As of July 16, 1997, the record date for the Annual Meeting, there were
7,481,394 shares of Common Stock outstanding and entitled to vote. The
three-for-two stock split effected in the form of a stock dividend occurred
after the record date.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits following the Signature page.
(b) A Current Report on Form 8-K was filed on July 24, 1997 with
the Securities and Exchange Commission reporting the
acquisition of Partners Resources, Inc. ("PRI") and Partners
Capital Group ("PCG"), which was amended by a Current Report
on Form 8-K/A dated September 12, 1997, which report contained
certain historical financial statements of PRI and PCG and pro
forma combined financial information of the Company, PRI and
PCG.
12
<PAGE> 13
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCB COMPUTER TECHNOLOGY, INC.
By: /s/ Gary E. McCarter
---------------------------------
Title: Chief Financial Officer
------------------------------
Date: December 15, 1997
-------------------------------
13
<PAGE> 14
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------------------------------------------------
<S> <C>
3 Amended and Restated Charter, as amended (restated in electronic format
for SEC filing purposes only)
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule (for the SEC use only)
</TABLE>
14
<PAGE> 1
(Restated in electronic format
for SEC filing purposes only)
AMENDED AND RESTATED CHARTER
OF
SCB COMPUTER TECHNOLOGY, INC.
1. The name of the corporation is SCB Computer Technology, Inc.
2. The corporation is for profit.
3. The duration of the corporation is perpetual.
4. The street address and zip code of the corporation's principal
office in Tennessee shall be:
1365 West Brierbrook Road
Memphis, Tennessee 38138
County of Shelby
5. (a) The name of the corporation's registered agent is Gordon
L. Bateman.
(b) The street address, zip code, and county of the
corporation's registered office and registered agent in Tennessee shall be:
1365 West Brierbrook Road
Memphis, Tennessee 38138
County of Shelby
6. The corporation is organized to do any and all things and to
exercise any and all powers, rights, and privileges that a corporation may now
or hereafter be organized to do, or to exercise, under the Tennessee Business
Corporation Act, as amended.
7. The corporation is authorized to issue two classes of stock
in the following number of shares: (i) 50,000,000 shares of common stock, par
value $.01 per share (the "Common Stock"), and (ii) 1,000,000 shares of
preferred stock, no par value (the "Preferred Stock").
<PAGE> 2
The preferences, limitations, and relative rights of the above classes
of stock shall be as follows:
(a) Preferred Stock. Shares of Preferred Stock may be issued in one or
more classes or series at such time or times for such consideration as the Board
of Directors may determine. Each such class or series shall be given a
distinguishing designation. All shares of any one class or series shall have
preferences, limitations, and relative rights identical with those of other
shares of the same class or series and, except to the extent otherwise provided
in the description of such class or series, with those of other shares of
Preferred Stock. Authority is hereby expressly granted to the Board of Directors
to fix from time to time, by resolution or resolutions providing for the
establishment and issuance of any class or series of Preferred Stock, the
designation of such class or series, and the relative rights, preferences,
qualifications, and limitations of the shares of such class or series. Before
issuing any shares of Preferred Stock, the corporation shall deliver to the
Secretary of State for filing Articles of Amendment, which shall be effective
without shareholder action, that set forth (a) the name of the corporation, (b)
the text of the amendment determining the terms of the class or series, (c) the
date the amendment was adopted, and (d) a statement that the amendment was duly
adopted by the Board of Directors.
(b) Common Stock. Each share shall be entitled to one vote. Upon
dissolution of the corporation, each share of Common Stock shall be entitled to
receive a pro-rata share of the net assets of the corporation.
8. The shareholders of the corporation shall not have preemptive
rights.
9. All corporate powers shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, a Board of Directors consisting of not less than three nor more
than nine directors, the exact number of directors to be determined in the
manner provided in the Bylaws of the corporation. Each director shall be elected
at the annual meeting of shareholders and shall hold office until the next
annual meeting and until his or her successor shall be elected and qualified,
subject, however, to prior death, resignation, retirement, disqualification, or
removal from office. Any vacancy on the Board of Directors, including a vacancy
that results from an increase in the number of directors or a vacancy that
results from the removal of a director with or without cause, shall be filled
either by the Board of Directors or the shareholders.
Any director may be removed from office but only for cause and only by
(a) the affirmative vote of the holders of a majority of the voting power of the
shares entitled to vote for the election of directors, considered for this
purpose as one class, unless a vote of a special voting group is otherwise
required by law, or (b) the affirmative vote of a majority of the entire Board
of Directors then in office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of shareholders, the election,
<PAGE> 3
term of office, filling of vacancies, and other features of such directorships
shall be governed by the terms of this Charter applicable thereto.
10. To the fullest extent permitted by the Tennessee Business
Corporation Act as in effect on the date hereof and as hereafter amended from
time to time, a director of the corporation shall not be liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director. If the Tennessee Business Corporation Act or any successor
statute is amended after adoption of this provision to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Tennessee Business Corporation Act, as so
amended from time to time, or such successor statute. Any repeal or modification
of this Article 10 by the shareholders of the corporation shall not affect
adversely any right or protection of a director of the corporation existing at
the time of such repeal or modification or with respect to events occurring
prior to such time.
11. The corporation shall indemnify every person who is or was a party
or is or was threatened to be made a party to any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the fact
that he or she is or was a director or officer or is or was serving at the
request of the corporation as a director, officer, employee, agent, or trustee
of another corporation or of a partnership, joint venture, trust, employee
benefit plan, or other enterprise, including service on a committee formed for
any purpose (and, in each case, his or her heirs, executors, and
administrators), against all expense, liability, and loss (including counsel
fees, judgments, fines, ERISA excise taxes, penalties, and amounts paid in
settlement) actually and reasonably incurred or suffered in connection with such
action, suit, or proceeding, to the fullest extent permitted by applicable law,
as in effect on the date hereof and as hereafter amended. Such indemnification
may include advancement of expenses in advance of final disposition of such
action, suit, or proceeding, subject to the provision of any applicable statute.
The indemnification and advancement of expenses provisions of this
Article 11 shall not be exclusive of any other right that any person (and his or
her heirs, executors, and administrators) may have or hereafter acquire under
any statute, this Charter, the corporation's Bylaws, resolution adopted by the
shareholders, resolution adopted by the Board of Directors, agreement, or
insurance, purchased by the corporation or otherwise, both as to action in his
or her official capacity and as to action in another capacity. The corporation
is hereby authorized to provide for indemnification and advancement of expenses
through its Bylaws, resolution of shareholders, resolution of the Board of
Directors, or agreement, in addition to that provided by this Charter.
12. The Bylaws of this corporation may be amended, altered, modified,
or repealed by resolution adopted by the Board of Directors, subject to any
provisions of law then applicable.
13. The corporation shall hold a special meeting of shareholders only
in the event (a) of a call of the Board of Directors of the corporation or the
officers authorized to do so by
<PAGE> 4
the Bylaws of the corporation, or (b) the holders of at least twenty-five
percent of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date, and deliver to the
corporation's secretary one or more written demands for the meeting describing
the purpose or purposes for which it is to be held."
<PAGE> 1
EXHIBIT 11-STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
October 31, October 31,
1997 1996 1997 1996
----------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 11,229,838 11,215,679 11,225,086 11,215,679
Net effect of dilutive stock options or
stock grants-based on the treasury
stock method using average market
price 225,100 58,533 191,846 63,660
----------- ----------- ----------- -----------
Totals 11,454,938 11,274,212 11,416,932 11,279,339
=========== =========== =========== ===========
Net income $ 2,018,635 $ 1,334,810 $ 3,807,706 $ 2,612,388
=========== ========== =========== ===========
Net income per share $ 0.18 $ 0.12 $ 0.33 $ 0.23
=========== =========== =========== ===========
Net Income $ 2,018,635 $ 1,334,810 $ 3,807,706 $ 2,612,388
Pro forma tax expense adjustment -- 64,000 -- 177,000
----------- ----------- ----------- -----------
Pro forma net income $ 2,018,635 $ 1,270,810 $ 3,807,706 $ 2,435,388
----------- ----------- ----------- -----------
Pro forma net income per share $ 0.18 $ 0.11 $ 0.33 $ 0.22
=========== =========== =========== ===========
Fully diluted:
Average shares outstanding 11,229,838 11,215,679 11,225,086 11,215,679
Net effect of dilutive stock options or
stock grants-based on the treasury
stock method using the quarter end
market price, if higher than
average market price 225,100 76,610 209,836 76,610
----------- ----------- ----------- -----------
Totals 11,454,938 11,292,289 11,434,922 11,292,289
=========== =========== =========== ===========
Net income $ 2,018,635 $ 1,334,810 $ 3,807,706 $ 2,612,388
=========== =========== =========== ============
Net income per share $ 0.18 $ 0.12 $ 0.33 $ 0.23
=========== =========== =========== ===========
Net Income $ 2,018,635 $ 1,334,810 $ 3,807,706 $ 2,612,388
Pro forma tax expense adjustment -- 64,000 -- 177,000
----------- ----------- ----------- -----------
Pro forma net income $ 2,018,635 $ 1,270,810 $ 3,807,706 $ 2,435,388
----------- ----------- ----------- -----------
Pro forma net income per share $ 0.18 $ 0.11 $ 0.33 $ 0.22
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 1,463,768
<SECURITIES> 0
<RECEIVABLES> 18,795,486
<ALLOWANCES> (24,861)
<INVENTORY> 312,893
<CURRENT-ASSETS> 21,756,392
<PP&E> 17,167,988
<DEPRECIATION> 4,306,305
<TOTAL-ASSETS> 84,941,438
<CURRENT-LIABILITIES> 13,985,244
<BONDS> 0
0
0
<COMMON> 112,357
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 84,941,438
<SALES> 28,054,205
<TOTAL-REVENUES> 28,054,205
<CGS> 19,356,691
<TOTAL-COSTS> 19,356,691
<OTHER-EXPENSES> 552,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 392,403
<INCOME-PRETAX> 3,286,299
<INCOME-TAX> 1,267,664
<INCOME-CONTINUING> 2,018,635
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,018,635
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
