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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 14, 1997 (February 28, 1997)
SCB COMPUTER TECHNOLOGY, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Tennessee 0-27694 62-1201561
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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1365 West Brierbrook Road, Memphis, Tennessee 38138
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 754-6577
Not Applicable
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(Former name or former address, if changed since last report)
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This Current Report on Form 8-K/A amends and supersedes "Item 7.
Financial Statements and Exhibits" of the Registrant's Current Report on Form
8-K, dated March 14, 1997.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
- --------------------------------------------------------------------------------
(a) and (b) Financial Statements of Business Acquired and Pro Forma Financial
Information.
Independent Auditor's Report
Balance Sheet at September 30, 1996
Statement of Income and Retained Earnings for the year ended September
30, 1996
Statement of Cash Flows for the year ended September 30, 1996
Notes to Financial Statements
Unaudited Pro Forma Combined Financial Information as of January 31,
1997 and for the nine months ended January 31, 1997, and for the
fiscal year ended April 30, 1996
Unaudited Pro Forma Combined Balance Sheet for the nine months ended
January 31, 1997
Unaudited Pro Forma Combined Statement of Operations for the nine
months ended January 31, 1997
Unaudited Pro Forma Combined Statement of Operations for the fiscal
year ended April 30, 1996
Notes to Unaudited Pro Forma Combined Financial Information
(c) Exhibits. See Exhibit Index following signature page.
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2
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INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
Technology Management Resources, Inc.
Omaha, Nebraska:
We have audited the accompanying balance sheet of Technology Management
Resources, Inc. as of September 30, 1996, and the related statements of income
and retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Technology Management
Resources, Inc., as of September 30, 1996, and the results of its operations and
its cash flows the year then ended in conformity with generally accepted
accounting principles.
Seim, Johnson, Sestak & Quist, LLP
Omaha, Nebraska,
April 18, 1997.
3
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TECHNOLOGY MANAGEMENT RESOURCES, INC.
BALANCE SHEET
SEPTEMBER 30, 1996
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ASSETS
Current assets:
Cash $ 290,694
Accounts receivable, net of allowance for doubtful
accounts of $59,100 854,856
Prepaid insurance 3,331
----------
Total current assets 1,148,881
Property and equipment, net 36,081
Income tax deposit 40,313
----------
Total assets $1,225,275
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 124,990
Accrued expenses:
Payroll and taxes 163,705
Bonuses 71,000
Vacation 70,519
Worker's compensation insurance 9,592
----------
Total current liabilities 439,806
----------
Stockholders' equity:
Common stock, Class A voting, $1.00 par value, 500 shares
authorized, 34 shares issued and outstanding 34
Common stock, Class B nonvoting, $1.00 par value, 500 shares
authorized, 66 shares issued and outstanding 66
Additional paid-in capital 3,770
Retained earnings 781,599
----------
Total stockholders' equity 785,469
----------
Total liabilities and stockholders' equity $1,225,275
==========
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See notes to financial statements
4
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TECHNOLOGY MANAGEMENT RESOURCES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
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REVENUES $3,931,615
COST OF SERVICES 2,560,507
----------
Gross profit 1,371,108
OPERATING EXPENSES 462,533
NET INCOME 908,575
RETAINED EARNINGS, beginning of period 445,979
CASH DISTRIBUTIONS (572,955)
----------
RETAINED EARNINGS, end of year $ 781,599
==========
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See notes to financial statements
5
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TECHNOLOGY MANAGEMENT RESOURCES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 908,575
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 15,231
(Increase) in trade receivables (484,681)
(Increase) in prepaid insurance (831)
Increase in accounts payable 52,662
Increase in accrued expenses 98,653
---------
Net cash provided by operating activities 589,609
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (23,822)
---------
Net cash used by investing activities (23,822)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid (572,955)
---------
Net cash used by financing activities (572,955)
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NET INCREASE IN CASH (7,168)
CASH - Beginning of year 297,862
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CASH - End of year $ 290,694
=========
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See notes to financial statements
6
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TECHNOLOGY MANAGEMENT RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
The Company, located in Omaha, Nebraska, derives all of its
revenues from providing child support services including
information technology consulting, outsourcing and
professional staffing services under contracts and for others
throughout the United States, and grants credit to clients in
these areas.
B. Concentrations of Credit Risk
For the year ended September 30, 1996, the Company had
contract sales of $2,447,000 to a single client and contract
receivables of $587,800 from this client at September 30,
1996. A material decrease in services provided to this client
could have a materially adverse impact on the Company's
operating results. All major contracts of the Company contain
a cancellation for convenience clause.
Additionally, the Company maintained a deposit in the amount
of $371,350, in a major financial institution which exceeds
Federal Depository Insurance limits. Management believes the
credit risk related to this deposit is minimal.
C. Contract Revenue and Costs
The Company recognizes revenues as professional services are
performed.
D. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
7
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E. Property and Equipment
Property and equipment is stated at cost. Depreciation and
amortization are computed using accelerated methods over the
estimated useful lives of the assets. Property and equipment
as of September 30, 1996 are as follows:
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Office equipment $ 62,580
Vehicles 19,800
---------
82,380
Less accumulated depreciation (46,299)
---------
36,081
=========
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F. Income Taxes
The Company, with the consent of its stockholders, has elected
to be taxed under sections of federal and state income tax
law, which provides that, in lieu of corporation income
taxes, the stockholders separately account for their prorata
share of the Company's items of income, deductions, losses,
and credits. As a result, no provision for income taxes is
provided for in these financial statements.
Also, no provision has been made for any amounts which may be
advanced or paid as distributions to the stockholders in the
future to assist them in paying their personal income taxes on
the income of the Company.
The Company has elected under the Internal Revenue Code to
retain a September 30 fiscal year end. Accordingly, the
Company is required to make deposits to the Internal Revenue
Service. Deposits in the amount of $40,313 have been made as
of September 30, 1996. An additional tax deposit of
approximately $36,800 will be due during the ensuing year.
(2) LEASE
The Company leases office and apartment space under operating leases.
The office lease expires in 1998. Rent paid under operating leases was
$34,100 for the year ended September 30, 1996.
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Minimum annual rentals from noncancelable leases for the years
subsequent to September 30, 1996 are as follows:
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1997 $ 27,600
1998 $ 18,400
--------
$ 46,000
========
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(3) PROFIT-SHARING PLAN
The Company has a qualified profit-sharing plan which covers all
employees who meet eligibility requirements. The Company's contribution
to the plan, as determined by the Board of Directors, is discretionary
but may not exceed 15% of the annual aggregate compensation paid to all
participating employees. The Company did not make a contribution for
1996.
(4) SUBSEQUENT EVENTS
On February 28, 1997, SCB Computer Technology, Inc. (SCB), through a
wholly owned subsidiary, TMR Acquisition, Inc., acquired the assets,
excluding cash and income tax deposit, and assumed certain identified
liabilities of Technology Management Resources, Inc. for $8,500,000 in
cash. As additional purchase price, up to $4,000,000, payable in shares
of common stock of SCB, may be paid to the Company based on the growth
in the business's revenues and earnings for the years ending April 30,
1998, 1999 and 2000.
In connection with and as a condition to the sale, the former owners
entered into employment agreements through April 30, 2000. The
employment agreements contain a covenant not-to-compete with the buyer
for two years following the termination of employment.
Subsequent to September 30, 1996, cash contributions totaling $803,000
were made to the stockholders.
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Unaudited Pro Forma Combined Financial Information
As of January 31, 1997 and for the nine months ended January 31, 1997 and for
the fiscal year ended April 30, 1996
SCB Computer Technology, Inc. (SCB) and
Technology Management Resources, Inc. (TMRI)
The following unaudited pro forma combined financial information presents the
pro forma effect of the acquisition of TMRI by SCB on SCB's historical financial
position and results of operations using the purchase method of accounting.
TMRI's fiscal year ends September 30. In presenting the acquisition on a pro
forma basis, TMRI's financial statements for the twelve months ended April 30,
1996 and for the nine months ended January 31, 1997 were combined with SCB's
financial statements for the same periods and such information is adjusted as if
the acquisition had been consummated on May 1, 1995. The pro forma combined
balance sheet as of January 31, 1997 is presented as if the acquisition had
occurred on January 31, 1997. The pro forma combined financial information has
been prepared and included as required by the rules and regulations of the
Securities and Exchange Commission and does not purport to be indicative of the
results that actually would have been obtained if the acquisition had been
effected on the dates indicated or of the results which may be obtained in the
future.
Results of operations for TMRI will be included in the consolidated results of
operations in future statements only from February 28, 1997, the date of the
purchase acquisition.
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SCB Computer Technology, Inc. and Technology Management Resources, Inc.
Unaudited Pro Forma Combined Balance Sheet
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<CAPTION>
HISTORICAL
--------------------------------
SCB TECHNOLOGY
COMPUTER MANAGEMENT PRO FORMA
TECHNOLOGY, INC. RESOURCES, INC. COMBINED
JANUARY 31, JANUARY 31, PRO FORMA JANUARY 31,
1997 1997 ADJUSTMENTS 1997
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<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents:
Cash $ 458,424 $ 411,394 $ (411,394)(b) $ 458,424
Securities purchased under
agreement to resell 1,600,000 -- -- 1,600,000
Marketable securities 18,580,000 -- (8,500,000)(b) 10,080,000
Accounts receivable:
Trade 8,832,328 808,997 9,641,325
Related parties 19,574 202,620 (202,620)(b) 19,574
Prepaid expenses 182,362 1,520 183,882
Inventory 4,126 -- -- 4,126
Deferred federal and state
income tax 200,160 -- 200,160
----------------------------------------------------------------------
Total current assets 29,876,974 1,424,531 (9,114,014) 22,187,491
Fixed assets:
Buildings 1,357,980 -- -- 1,357,980
Furniture, fixtures, and
equipment 1,481,685 30,897 (11,897)(b) 1,500,685
Accumulated depreciation (744,583) -- -- (744,583)
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2,095,082 30,897 (11,897) 2,114,082
Land 444,670 -- -- 444,670
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2,539,752 30,897 (11,897) 2,558,752
Goodwill -- -- 8,356,760 (b) 8,356,760
Other 297,328 50,907 (50,907)(b) 297,328
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Total assets $ 32,714,054 $ 1,506,335 $ (820,058) $ 33,400,331
======================================================================
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SCB Computer Technology, Inc. and Technology Management Resources, Inc.
Unaudited Pro Forma Combined Balance Sheet
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<CAPTION>
HISTORICAL
--------------------------------
SCB TECHNOLOGY
COMPUTER MANAGEMENT PRO FORMA
TECHNOLOGY, INC. RESOURCES, INC. COMBINED
JANUARY 31, JANUARY 31, PRO FORMA JANUARY 31,
1997 1997 ADJUSTMENTS 1997
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<S> <C> <C> <C> <C>
LABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 565,657 $ 221,013 $ $ 786,670
Accrued and withheld payroll
taxes, insurance, and payroll
deductions 320,802 63,100 383,902
Accrued vacation 465,490 76,014 541,504
Other accrued expenses 798,532 250,150 76,000(b) 1,124,682
Accrued federal and state
income taxes 147,361 -- 147,361
-----------------------------------------------------------------
Total current liabilities 2,297,842 610,277 76,000 2,984,119
Long-term liabilities:
Deferred federal and state income
tax 82,761 -- 82,761
-----------------------------------------------------------------
82,761 -- 82,761
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Total liabilities 2,380,603 610,277 76,000 3,066,880
SHAREHOLDERS' EQUITY:
Preferred stock, no par value-
authorized 1,000,000 shares,
none issued
Common stock-20,000,000 shares
of $.01 par value authorized and
7,015,583 shares issued and out-
standing at January 31, 1997 74,771 100 (100)(b) 74,771
Additional paid-in capital 23,834,147 3,770 (3,770)(b) 23,834,147
Retained earnings 6,424,533 892,188 (892,188)(b) 6,424,533
-----------------------------------------------------------------
Total shareholders' equity 30,333,451 896,058 (896,058) 30,333,451
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Total liabilities and shareholders'
equity $32,714,054 $1,506,335 $ (820,058) $33,400,331
=================================================================
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See accompanying notes.
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SCB Computer Technology, Inc. and Technology Management Resources, Inc.
Unaudited Pro Forma Combined Statement of Operations
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HISTORICAL
---------------------------------
SCB TECHNOLOGY
COMPUTER MANAGEMENT PRO FORMA
TECHNOLOGY, INC. RESOURCES, INC. COMBINED
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
JANUARY 31, JANUARY 31, PRO FORMA JANUARY 31,
1997 1997 ADJUSTMENTS 1997
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<S> <C> <C> <C>
Revenue $46,656,248 $3,630,833 $50,287,081
Cost of services 33,865,981 2,286,105 36,152,086
-----------------------------------------------------------------
Gross profit 12,790,267 1,344,728 14,134,995
Compensation-key executives 550,000 -- 550,000
Selling, general and administrative
expenses 6,933,482 424,639 308,000 (c) 7,666,121
-----------------------------------------------------------------
Total operating expenses 7,483,482 424,639 308,000 8,216,121
-----------------------------------------------------------------
Income from operations 5,306,785 920,089 (308,000) 5,918,874
Other income (expense), net 685,150 -- 685,150
-----------------------------------------------------------------
Income before income taxes 5,991,935 920,089 (308,000) 6,604,024
Income tax expense 2,214,605 -- 340,000(d) 2,554,605
-----------------------------------------------------------------
Net income $ 3,777,330 $ 920,089 $(648,000) $ 4,049,419
=================================================================
Net income per share $ .50 $ 9,200.89 $ .54
=================================================================
Weighted average number of
common and common
equivalent shares outstanding 7,514,870 100 (100)(a) 7,514,870
=================================================================
</TABLE>
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SCB Computer Technology, Inc. and Technology Management Resources, Inc.
Unaudited Pro Forma Combined Statement of Operations
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------
SCB TECHNOLOGY
COMPUTER MANAGEMENT PRO FORMA
TECHNOLOGY, INC. RESOURCES, INC. COMBINED
YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30, PRO FORMA APRIL 30,
1996 1996 ADJUSTMENTS 1996
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<S> <C> <C> <C> <C>
Revenue $ 56,023,871 $ 3,253,320 $ 59,277,191
Cost of services 39,508,422 2,200,070 41,708,492
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Gross profit 16,515,449 1,053,250 17,568,699
Compensation-key executives 3,764,840 -- 3,764,840
Selling, general and administrative
expenses 9,580,223 322,035 411,000 (c) 10,313,258
-------------------------------------------------------------------------
Total operating expenses 13,345,063 322,035 411,000 14,078,098
-------------------------------------------------------------------------
Income from operations 3,170,386 731,215 (411,000) 3,940,601
Other income (expense), net (26,928) -- (26,928)
-------------------------------------------------------------------------
Income before income taxes 3,143,458 731,215 (411,000) 3,463,673
Income tax expense 1,373,139 -- 319,000 (d) 1,692,139
-------------------------------------------------------------------------
Net income $ 1,770,319 $ 731,215 $ (730,000) $ 1,771,534
=========================================================================
Net income per share $ .28 $ 7,312.15 $ .28
=========================================================================
Weighted average number of
common and common
equivalent shares outstanding 6,222,343 100 (100)(a) 6,222,343
=========================================================================
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SCB Computer Technology, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Combined Financial Information
THE FOLLOWING PRO FORMA ITEMS ARE REFLECTED IN THE ACCOMPANYING UNAUDITED PRO
FORMA COMBINED BALANCE SHEET AND STATEMENTS OF OPERATIONS.
(a) Pro forma net income per common and common equivalent share was
computed by dividing pro forma net income by the pro forma combined
weighted average number of common and common equivalent shares
outstanding.
(b) Adjustments to reflect the purchase and purchase price adjustments
associated with SCB's acquisition of TMRI. On February 28, 1997, SCB
acquired certain assets and liabilities of TMRI for $8,500,000 cash.
The allocation of the purchase price will include approximately
$8,210,000 to goodwill, representing the excess of cost over the fair
value of the net assets acquired. The goodwill will be amortized over
a period of 20 years. In addition, up to $4,000,000 payable in shares
of SCB common stock may be paid to TMRI as additional purchase price
based on the growth in the acquired company's revenues and earnings in
fiscal years ending April 30, 1998, 1999 and 2000 which could result
in additional goodwill being recorded in those periods.
(c) Adjustment to reflect the increase in amortization expense relating to
the goodwill recorded in purchase accounting in conjunction with SCB's
acquisition of TMRI. The goodwill will be amortized by the Company
over its estimated life of 20 years.
(d) Adjustment to recognize the effect of the income tax expense for TMRI
as if it had been subject to taxation as a C Corporation versus an S
Corporation. As a result of TMRI being a subchapter S Corporation, any
tax liabilities prior to the acquisition were the responsibility of
the individual TMRI shareholders.
15
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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 hereunto duly authorized.
SCB COMPUTER TECHNOLOGY, INC.
Date: May 14, 1997 By: /s / Gordon L. Bateman
------------------------------
Gordon L. Bateman
Executive Vice President of
Finance and Administration and
Chief Financial Officer
HORN/0523497
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EXHIBIT INDEX
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No. Exhibit
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2 Asset Purchase Agreement by and among SCB Computer Technology, Inc., TMR
Acquisition, Inc., Technology Management Resources, Inc., and the shareholders thereof,
dated as of February 28, 1997 (incorporated by reference to Exhibit 2.2 of the Company's
registration statement on Form S-3, Registration No. 333-22869)
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