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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): APRIL 10, 2000
SCB COMPUTER TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 000-27694 62-1201561
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
3800 FOREST HILL-IRENE, SUITE 100, MEMPHIS, TENNESSEE 38125
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 754-6577
N/A
(Former name or former address, if changed since last report)
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Ernst & Young LLP resigned as the independent auditor of SCB Computer
Technology, Inc. (the "Company") effective as of April 10, 2000. The Company has
commenced the selection process for a new independent auditor but has not
engaged a new auditor as of the date hereof.
At a meeting held on March 27, 2000, five Company employees informed the audit
committee of the Company's board of directors of their concerns regarding
potential accounting irregularities affecting the Company's financial
statements. The alleged irregularities principally relate to the appropriateness
and timing of the recognition by the Company of certain items of revenue and
expense during the two fiscal years in the period ended April 30, 1999, and the
subsequent interim periods. The audit committee decided at the meeting that the
interests of the Company and its shareholders would be best served by conducting
an independent, objective investigation into the allegations. The audit
committee, composed of three outside, independent directors, is leading the
investigation. The audit committee has retained the Company's legal counsel,
Baker Donelson Bearman & Caldwell PC, to assist the audit committee in
conducting the investigation. Also assisting in the investigation are Ernst &
Young LLP, which has agreed to continue in this role notwithstanding its
resignation as the Company's independent auditor, and KPMG LLP, another
independent accounting firm. The audit committee's investigation is currently at
an early stage and is expected to be completed within the next 30-60 days.
As a result of the allegations and the investigation proceedings to date, Ernst
& Young LLP advised the audit committee at a meeting held on April 10, 2000,
that information has come to its attention that could materially impact the
fairness and reliability of the Company's financial statements for each of the
two fiscal years in the period ended April 30, 1999, and for the subsequent
interim periods. In addition, pending the completion of the ongoing
investigation, Ernst & Young LLP advised the audit committee that based on such
information Ernst & Young LLP is uncertain as to whether it will be able to
continue to be associated with restated Company financial statements. Based on
these determinations, Ernst & Young LLP advised the audit committee of its
resignation as the Company's independent auditor effective as of April 10, 2000.
The reports of Ernst & Young LLP on the Company's financial statements for the
two fiscal years in the period ended April 30, 1999, did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. In addition, in connection
with the audits of the Company's financial statements for each of the two fiscal
years in the period ended April 30, 1999, and in the subsequent interim periods,
there were no disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of Ernst & Young LLP, would
have caused Ernst & Young LLP to make reference to the matter in connection with
its report.
Based on the information presented to the audit committee to date, the Company
anticipates that it will restate its audited financial statements for each of
the two fiscal years in the period ended April 30, 1999, and its unaudited
financial statements for the subsequent interim periods. The adjustments to the
financial statements could have a material adverse effect on the amount of
revenue and net income recognized by the Company during certain fiscal periods
and the timing of revenue and net income recognition as between various periods.
Because the investigation is at an early stage, the Company cannot currently
estimate the amount of the required adjustments to its financial statements.
Revised financial statements of the Company for the affected periods will be
issued upon the completion of the investigation by the audit committee.
The Company has requested Ernst & Young LLP to furnish it a letter addressed to
the Securities and Exchange Commission stating whether it agrees with the above
statements. A copy of that letter dated April 14, 2000, is filed as Exhibit 16
to this Form 8-K.
On April 14, 2000, SCB issued a press release relating to the matters discussed
above. A copy of that press release is filed as Exhibit 20 hereto.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
16 Letter dated April 14, 2000, from Ernst & Young LLP to the Securities
and Exchange Commission.
20 Press release issued by SCB Computer Technology, Inc., on April 14, 2000.
</TABLE>
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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.
Date: April 14, 2000
SCB COMPUTER TECHNOLOGY, INC.
By: /s/ Michael J. Boling
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Michael J. Boling
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
16 Letter dated April 14, 2000, from Ernst & Young LLP to the Securities
and Exchange Commission.
20 Press release issued by SCB Computer Technology, Inc., on April 14, 2000.
</TABLE>
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EXHIBIT 16
April 14, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read Item 4 of the Form 8-K dated April 10, 2000, of SCB Computer
Technology, Inc., and are in agreement with the statements contained therein.
Very truly yours,
/s/ Ernst & Young LLP
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EXHIBIT 20
SCB COMPUTER TECHNOLOGY, INC.
Contacts: Ben C. Bryant, Jr. Michael J. Boling, CPA
Chairman of the Board, President Executive Vice President and
and Chief Executive Officer Chief Financial Officer
901-754-6577 901-754-6577
SCB COMPUTER TECHNOLOGY, INC. ANNOUNCES
ANTICIPATED RESTATEMENT OF FINANCIAL RESULTS
AND RESIGNATION OF INDEPENDENT AUDITOR
MEMPHIS, TN (April 14, 2000) - SCB Computer Technology, Inc.
(Nasdaq:NM/SCBI) today announced that the audit committee of its board of
directors is conducting an independent investigation into allegations of
potential accounting irregularities affecting SCB's financial statements. As a
result of the allegations and the investigation proceedings to date, Ernst &
Young LLP resigned as SCB's independent auditor effective as of April 10, 2000.
Based on the information presented to the audit committee to date, SCB
anticipates that it will restate its audited financial statements for fiscal
1998 and 1999 and its unaudited financial statements for the first three
quarters of fiscal 2000.
At a meeting held on March 27, 2000, five SCB employees informed the audit
committee of SCB's board of directors of their concerns regarding potential
accounting irregularities affecting SCB's financial statements. The alleged
irregularities principally relate to the appropriateness and timing of the
recognition by SCB of certain items of revenue and expense during the 1998, 1999
and 2000 fiscal years. The audit committee decided at the meeting that the
interests of SCB and its shareholders would be best served by conducting an
independent, objective investigation into the allegations. The audit committee,
composed of three outside, independent directors, is leading the investigation.
The audit committee has retained SCB's legal counsel, Baker Donelson Bearman &
Caldwell PC, to assist the audit committee in conducting the investigation. Also
assisting in the investigation are Ernst & Young LLP, which has agreed to
continue in this role notwithstanding its resignation as SCB's independent
auditor, and KPMG LLP, another independent accounting firm. The audit
committee's investigation is currently at an early stage and is expected to be
completed within the next 30-60 days.
As a result of the allegations and the investigation proceedings to date,
Ernst & Young LLP advised the audit committee at a meeting held on April 10,
2000, that information has come to its attention that could materially impact
the fairness and reliability of SCB's audited financial statements for the
fiscal years ended April 30, 1998 and 1999, and its unaudited financial
statements for the first three quarters of the fiscal year ending April 30,
2000. In addition, pending the completion of the ongoing investigation, Ernst &
Young LLP advised the audit committee that based on such information Ernst &
Young LLP is uncertain as to whether it will be able to be associated with
restated SCB financial statements. Based on these determinations, Ernst & Young
LLP advised the audit committee of its resignation as SCB's independent auditor
effective as of April 10, 2000. The audit committee has commenced the
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selection process for a new independent auditor but has not engaged a new
auditor as of this date.
The reports of Ernst & Young LLP on SCB's financial statements for the
1998 and 1999 fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles. In addition, in connection with the audits of SCB's
financial statements for fiscal 1998 and 1999, and in the subsequent interim
periods, there were no disagreements between SCB and Ernst & Young LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the satisfaction of Ernst
& Young LLP, would have caused Ernst & Young LLP to make reference to the matter
in connection with its report.
Based on the information presented to the audit committee to date, SCB
anticipates that it will restate its audited financial statements for fiscal
1998 and 1999 and its unaudited financial statements for the first three
quarters of fiscal 2000. The adjustments to the financial statements could have
a material adverse effect on the amount of revenue and net income recognized by
SCB during certain fiscal periods and the timing of revenue and net income
recognition as between various periods. Because the investigation is at an early
stage, SCB cannot currently estimate the amount of the required adjustments to
its financial statements. Revised financial statements of SCB for the affected
periods will be issued upon the completion of the investigation by the audit
committee.
Commenting on the announcement, Ben C. Bryant, Jr., the chairman of the
board, president and chief executive officer of SCB, said, "As difficult as this
situation may be, I am pleased that our employees came forward to express their
concerns. We continue to be committed to the welfare of our employees, customers
and shareholders, and we must - and will - promptly address in a straightforward
manner the issues arising from the audit committee's investigation."
In addition, Jack R. Blair, the chairman of SCB's audit committee, stated,
"Speaking on behalf of each member of the audit committee, we are firmly
committed to completing a thorough, expeditious investigation of the allegations
in an independent, objective manner. SCB will take all corrective actions
dictated by the results of our investigation." Mr. Blair added, "We have a great
deal of confidence in Michael Boling, SCB's new chief financial officer who
joined us in December 1999, and in Mark McFall, SCB's new controller who came
onboard in January 2000, both of whom have substantial public accounting
experience. Their presence has undoubtedly strengthened SCB's finance
organization."
Certain statements contained in this press release and related statements
by management of SCB may be deemed to be forward-looking statements. These
forward-looking statements involve a number of risks and uncertainties,
including the ultimate outcome of the audit committee's investigation, the
nature of any adjustments to be made to SCB's financial statements, and the
other risks described in SCB's filings with the Securities and Exchange
Commission. SCB undertakes no obligation to update this forward-looking
information, except as required by law.
SCB Computer Technology, Inc., is a leading provider of information
technology management and technical services to Fortune 1000 companies, state
and local governments, and other large organizations. SCB's services primarily
consist of enterprise solutions strategy consulting and planning, e-business
solutions, enterprise development services, integrated ASP
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services, enterprise resource planning solutions, customer relationship
management solutions, and project management solutions.
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