<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 22, 1998
ENGINEERING ANIMATION, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 000-27670 42-1323712
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
</TABLE>
2321 North Loop Drive
Ames, Iowa 50010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 296-9908
None
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Acquisition of DELTA Industrie Informatik GmbH
On December 22, 1998, Engineering Animation, Inc. (the "Company") completed
the acquisition of DELTA Industrie Informatik GmbH ("DELTA"), a privately held
German software company that develops solutions for integrated product and
process engineering. The Company acquired DELTA by purchasing all of the
outstanding shares of DELTA's capital stock from six stockholders. In connection
with the acquisition, the Company issued 556,912 shares of common stock, $0.01
per share par value to DELTA stockholders with a value of approximately
$24,000,000, based on the agreed Company stock price of $42.75 per share, as
provided in the Stock Purchase Agreement (the "Agreement") between the Company,
DELTA and the DELTA Stockholders. The acquisition of DELTA by the Company will
be treated as a pooling of interests for accounting and financial reporting
purposes.
1
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<S> <C> <C>
(a) Financial Statements of DELTA Industrie Informatik GmbH.
Index to DELTA's Financial Statements F - 1
Independent Auditors' Report F - 2
Balance Sheets -- December 31, 1997 and September 30, 1998 (unaudited) F - 3
Statement of Operations -- Year Ended December 31, 1997 and Nine Months Ended September F - 4
30, 1998 (unaudited)
Statement of Shareholders' Equity-- Year Ended December 31, 1997 and Nine Months Ended F - 5
September 30, 1998 (unaudited)
Statements of Cash Flows -- Year Ended December 31, 1997 and Nine Months Ended September F - 6
30, 1998 (unaudited)
Notes to Financial Statements F - 7
(b) Pro Forma Financial Information
Introduction F - 15
Unaudited Pro Forma Combined Balance Sheet at September 30, 1998 F - 16
Unaudited Pro Forma Combined Statement of Operations For the Nine Months Ended September F - 17
30, 1998
Unaudited Pro Forma Combined Statement of Operations For the Year Ended December 31, 1997 F - 18
Unaudited Pro Forma Combined Statement of Operations For the Year Ended December 31, 1996 F - 19
Unaudited Pro Forma Combined Statement of Operations For the Year Ended December 31, 1995 F - 20
Notes to Unaudited Pro Forma Combined Financial Statements F - 21
</TABLE>
2
<PAGE> 4
(c) Exhibits.
Exhibit Description
------- -----------
2.1 Stock Purchase Agreement among the Company, DELTA and the DELTA
Stockholders*
23.1 Consent of Schitag Ernst & Young
- -------------------
* Incorporated herein by reference from the Company's Current
Report on Form 8-K filed January 6, 1999
3
<PAGE> 5
INDEX TO DELTA FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors F - 2
Balance Sheets at December 31, 1997 and September 30, 1998 (unaudited) F - 3
Statements of Operations for the year ended December 31, 1997 and the nine
months ended September 30, 1998 (unaudited) F - 4
Statements of Shareholders' Equity for the year ended December 31, 1997
and the nine months ended September 30, 1998 (unaudited) F - 5
Statements of Cash Flows for the year ended December 31, 1997 and the
Nine months ended September 30, 1998 (unaudited) F - 6
Notes to Financial Statements F - 7
</TABLE>
F-1
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
To the Shareholders,
DELTA Industrie Informatik GmbH
We have audited the accompanying balance sheet of DELTA Industrie Informatik
GmbH as of December 31, 1997 and the related statements of income, shareholders'
equity 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 auditing standards generally accepted
in the United States of America. 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 DELTA Industrie Informatik GmbH
as of December 31, 1997 and the results of its operations and cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
SCHITAG ERNST & YOUNG
Deutsche Allgemeine Treuhand AG
Wirtschaftsprufungsgesellschaft
Wirtschaftsprufer Certified Public Accountant
Stuttgart, Germany
December 23, 1998
F-2
<PAGE> 7
DELTA INDUSTRIE INFORMATIK GmbH
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SEPTEMBER 30, 1998
<S> <C> <C>
ASSETS (UNAUDITED)
Current assets
Cash and cash equivalents $ 412,991 $ 1,300,921
Accounts receivable, net:
Billed, less allowance of
$7,645 and $8,186, respectively 867,293 860,335
Unbilled 146,185
Deferred income taxes 32,085 60,000
Other assets 44,640 49,662
----------- -----------
Total current assets 1,503,194 2,270,918
Property and equipment, net 172,938 237,064
Other long term assets 100,694 97,376
----------- -----------
TOTAL ASSETS $ 1,776,826 $ 2,605,358
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 276,079 $ 128,446
Accrued expenses 611,114 1,298,201
Due to shareholders 93,828 59,899
Other liabilities 295,115 242,947
----------- -----------
Total current liabilities 1,276,136 1,729,493
Deferred taxes 36,828 66,700
Pension accrual 140,541 129,187
----------- -----------
Total liabilities 1,453,505 1,925,380
SHAREHOLDERS' EQUITY
Registered capital 129,000 129,000
Foreign currency translation adjustment (39,694) 9,218
Retained earnings 234,015 541,760
----------- -----------
Total shareholders' equity 323,321 679,978
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,776,826 $ 2,605,358
=========== ===========
</TABLE>
See accompanying notes to the financial statements
F-3
<PAGE> 8
DELTA INDUSTRIE INFORMATIK GmbH
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
(UNAUDITED)
<S> <C> <C>
Revenues $ 5,278,949 $ 4,675,171
Cost of revenues 1,893,263 1,326,279
----------- -----------
Gross profit 3,385,686 3,348,892
Operating expenses
Sales and marketing 726,394 737,254
General and administration 843,836 746,637
Research and development 1,500,445 1,206,375
----------- -----------
Total operating expenses 3,070,675 2,690,266
----------- -----------
OPERATING INCOME 315,011 658,626
Interest income 13,221 17,587
Interest expense (22,015) (2,927)
Other, net 5,599 (9,568)
----------- -----------
OTHER EXPENSE, NET (3,195) 5,092
----------- -----------
Income before income taxes 311,816 663,718
Income taxes 159,475 331,868
----------- -----------
NET INCOME $ 152,341 $ 331,850
=========== ===========
</TABLE>
See accompanying notes to the financial statements
F-4
<PAGE> 9
DELTA INDUSTRIE INFORMATIK GmbH
STATEMENT OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REGISTERED RETAINED
CAPITAL EARNINGS TOTAL
-------------------------------------
<S> <C> <C> <C>
BALANCE JANUARY 1, 1997 $ 129,000 $ 104,914 $ 233,914
Net income 152,341 152,341
Dividend distribution (23,970) (23,970)
Foreign currency translation gain/(loss) (38,964) (38,964)
--------- --------- ---------
BALANCE DECEMBER 31, 1997 129,000 194,321 323,321
========= ========= =========
Net income (unaudited) 331,850 331,850
Dividend distribution (unaudited) (24,105) (24,105)
Foreign currency translation gain/(loss) 48,912 48,912
(unaudited)
--------- --------- ---------
BALANCE SEPTEMBER 30, 1998 $ 129,000 $ 550,978 $ 679,978
========= ========= =========
</TABLE>
See accompanying notes to the financial statements
F-5
<PAGE> 10
DELTA INDUSTRIE INFORMATIK GmbH
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 152,341 $ 331,850
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 123,862 122,470
Deferred taxes 82,356 1,781
Changes in operating assets and liabilities:
Accounts receivable (414,934) 216,634
Other assets (51,031) 7,630
Accounts payable and accrued expenses 549,148 313,142
----------- -----------
Net cash provided by operations 441,742 993,507
INVESTMENT ACTIVITIES
Purchases of fixed assets (157,631) (172,344)
----------- -----------
Net cash used in investing activities (157,631) (172,344)
FINANCING ACTIVITIES
Dividend distribution (23,970) (24,105)
----------- -----------
Net cash used in financing activities (23,970) (24,105)
Net increase in cash and cash equivalents 260,141 797,058
Effect of exchange rate on cash (94,839) 90,872
Cash and cash equivalents at beginning of year 247,689 412,991
=========== ===========
Cash and cash equivalents at end of year $ 412,991 $ 1,300,921
=========== ===========
</TABLE>
See accompanying notes to the financial statements
F-6
<PAGE> 11
DELTA Industrie Informatik GmbH
Notes to Financial Statements
1. DESCRIPTION OF BUSINESS
DELTA Industrie Informatik GmbH ("DELTA" or "the Company") is incorporated in
Fellbach, Germany as a limited liability company. The Company offers
development, customization and support services for customer specific software
applications, SAP applications and various computer systems to companies
principally in Germany and Europe.
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The
Company maintains its financial records in accordance with the German Commercial
Code, which represents generally accepted accounting principles in Germany
("German GAAP"). German GAAP varies in certain significant respects from U.S.
GAAP. Accordingly, the Company has recorded certain adjustments in order that
these financial statements will be in accordance with U.S. GAAP.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered cash equivalents. Cash equivalents are carried at
cost, which approximates market value.
REVENUE RECOGNITION
The Company derives revenue from sales of software products, software
development and system support services. Software development and system support
services are offered for customer specific software applications. Revenue from
sales of products is recognized upon delivery. Revenue from development, service
and customer support is recognized over the period services are provided.
In addition, the Company receives subsidies from the German government for its
research and development. The subsidies are granted on a project by project
basis. The Company records these subsidies as revenue when earned. A total of
approximately $816,000 was received for projects begun in 1997, $167,000 of
which was deferred at December 31, 1997.
SOFTWARE DEVELOPMENT COSTS
The Company capitalizes software development costs in accordance with Statement
of Accounting Standards No. 86 Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed. Capitalization begins when a product's
technological feasibility has been established and ends when the product is
available for general release to customers.
CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments included in current assets and
current liabilities, approximates fair value because of the short maturity of
these items.
F-7
<PAGE> 12
DELTA Industrie Informatik GmbH
Notes to Financial Statements
Financial instruments that potentially subject the Company to concentrated
credit risks consist primarily of cash and cash equivalents and trade accounts
receivable. The Company maintains cash and cash equivalents with various
financial institutions in Germany. Concentrations of credit risk with respect to
accounts receivable are partially limited due to the size and quality of
customers comprising the Company's customer base. The Company does not generally
require collateral or other security to support customer receivable balances.
One major customer accounted for 11% of revenues in 1997. Two major customers
accounted for 30% of accounts receivable at December 31, 1997. No other balances
with individual customers exceeded 10% of the accounts receivable balance at
December 31, 1997.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method. The following summarizes the useful lives of the assets:
<TABLE>
<S> <C>
Computer equipment and software 3 years
Office equipment and other 3 to 8 years
Automobiles 3 to 5 years
</TABLE>
INCOME TAXES
The Company accounts for income taxes using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in the period that
includes the enactment date. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be realized.
ADDITIONAL CASH FLOW INFORMATION
Cash paid for income taxes and interest approximated $78,000 and $16,000,
respectively, for the year ended December 31, 1997.
MANAGEMENT'S ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-8
<PAGE> 13
DELTA Industrie Informatik GmbH
Notes to Financial Statements
3. OTHER ASSETS
The components of other current assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
VAT receivable $17,963
Rent overpayments 14,925
Other 11,752
-------
$44,640
=======
</TABLE>
The components of other long term assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Redemption value of life insurance policies $ 71,297
Intangible pension asset 28,169
Other 1,228
--------
$100,694
========
</TABLE>
The life insurance policies are intended as a funding vehicle for the pension
obligation provided for certain shareholders. The Company is the beneficiary of
the policies, which are redeemable at any time by the Company.
F-9
<PAGE> 14
DELTA Industrie Informatik GmbH
Notes to Financial Statements
4. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
<S> <C>
Computer equipment and software $ 490,801
Office equipment and other 199,527
Automobiles 56,713
--------------------------
747,041
Accumulated depreciation and amortization (574,103)
--------------------------
Property and equipment, net $172,938
==========================
5. OTHER LIABILITIES
The components of other current liabilities are as follows:
DECEMBER 31, 1997
--------------------------
Deferred revenue $167,400
Payroll related liabilities 92,113
VAT and other taxes payable 19,822
Other 15,780
--------------------------
$295,115
==========================
</TABLE>
6. RELATED PARTY TRANSACTIONS
Revenues in 1997 and accounts receivable at December 31, 1997 from a company
controlled by a shareholder amounted to $72,000 and $31,000, respectively.
Furthermore, costs during 1997 and accounts payable at December 31, 1997 of
$77,000 resulted from services rendered during 1997.
F-10
<PAGE> 15
DELTA Industrie Informatik GmbH
Notes to Financial Statements
7. RETIREMENT PLAN
The Company provides retirement benefits to certain employees under defined
benefit plans. Actuarial assumptions used in the determination of the pension
obligation are as follows:
<TABLE>
<S> <C>
Discount rate 6.5%
Future salary increases 0.0%
Future retirement benefit increases 1.0%
</TABLE>
The following table sets forth the plan's funded status and amounts recognized
in the Company's balance sheet at December 31, 1997:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits of $105,355 $140,541
==================
Projected benefit obligation $140,541
Prior service costs (28,169)
Adjustment required to recognize
minimum liability 28,169
------------------
Pension accrual $140,541
==================
Net pension costs for 1997 include the following components:
Service costs $17,634
Interest on projected benefit obligation 7,225
------------------
Net periodic pension cost $24,859
==================
</TABLE>
F-11
<PAGE> 16
DELTA Industrie Informatik GmbH
Notes to Financial Statements
8. COMMITMENTS
The Company leases office space, office equipment and automobiles under
operating leases. Future minimum payments under non-cancelable leases with an
initial term in excess of one year consisted of the following at December 31,
1997:
<TABLE>
<S> <C>
1998 $239,382
1999 220,410
2000 201,996
2001 198,090
2002 64,728
------------------
Total minimum lease payments $924,606
==================
</TABLE>
Rental expense for operating leases approximated $212,196 for the year ended
December 31, 1997.
9. INCOME TAXES
Taxes on income are comprised of corporate taxes and trade taxes. The provision
for income tax expense consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
Current income tax expense $80,530
Deferred income tax expense 78,945
------------------
$159,475
==================
</TABLE>
F-12
<PAGE> 17
DELTA Industrie Informatik GmbH
Notes to Financial Statements
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
<S> <C>
Deferred tax asset:
Accrued expenses $104,625
Deferred tax liability:
Pension accrual (36,828)
Accounts receivable (72,540)
--------------------------
(109,368)
--------------------------
Net deferred tax liability 4,743
==========================
</TABLE>
A reconciliation of income taxes computed using the statutory rate for corporate
income taxes of 45% to actual taxes provided is summarized below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
--------------------------
<S> <C>
Computed income tax expense at corporate statutory rate $140,385
Trade and other income taxes, net of corporate tax benefit 37,313
Other (18,223)
--------------------------
$159,475
==========================
</TABLE>
10. SHAREHOLDERS' EQUITY
DELTA Industrie Informatik GmbH is a limited liability company under German law.
Shareholders are generally not liable for the obligations of a GmbH, except to
the extent of their capital investment. Registered capital of a GmbH is not in
the form of shares and does not represent negotiable securities. The minimum
capital requirement for a GmbH is $27,900.
11. CONTINGENCIES
The Company is the recipient of research subsidies on a project by project
basis. The amount of the subsidy is based on information prepared by the Company
regarding estimates of costs of the projects. This information is subject to
audit by the issuer, whereby subsidies may be required to be repaid based on the
accuracy of the estimates provided by the Company. Based on past experience,
management believes the results of such audits will not have a material effect
on the financial position and results of operations of the Company.
F-13
<PAGE> 18
DELTA Industrie Informatik GmbH
Notes to Financial Statements
12. SUBSEQUENT EVENTS
In October 1998, a shareholder sold a 25% ownership interest in the Company to
the spouses of the remaining shareholders for $900,000. The purchase of this
ownership interest was financed by a loan from the Company which was repaid in
December 1998.
In December 1998 the shareholders of the Company entered into an agreement with
Engineering Animation Inc. (`EAI') to sell their ownership interests in the
Company in exchange for shares of EAI.
13. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The following table sets forth selected unaudited quarterly financial
information for 1997. The Company believes that all necessary adjustments have
been included in the amounts stated below to present fairly the selected
quarterly information.
<TABLE>
<CAPTION>
Three Months ended Year ended
-------------------------------------------------------------------
March 31, June 30, September 30, December 31, December 31,
1997 1997 1997 1997 1997
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands)
Net revenues $1,382 $1,313 $1,152 $1,432 $5,279
Gross profit 920 875 731 860 3,386
Operating expenses 812 749 734 776 3,071
Operating income 108 126 (3) 84 315
Net income 52 64 (4) 40 152
</TABLE>
F-14
<PAGE> 19
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1998, and the related Unaudited Pro Forma Condensed Combined
Statements of Operations for the nine months ended September 30, 1998 and each
of the three years in the period ended December 31, 1997, include the results of
EAI's acquisition of Sense8 Corporation ("Sense8") as if it had occurred as of
the beginning of 1997, the results of the DELTA and Variation Systems Analysis,
Inc. ("VSA") acquisitions as if they had occurred on the first day of the
earliest period presented and the results of the Transom Technologies, Inc.
("Transom") acquisition as if it had occurred on October 7, 1996. The purchase
of Sense8 was effective June 17, 1998. EAI signed a purchase and transfer
agreement to acquire DELTA on December 22, 1998 and the transaction closed
December 22, 1998. EAI signed a definitive agreement to acquire VSA on July 29,
1998, which was amended and restated as of August 19, 1998, and the transaction
closed September 22, 1998. EAI signed a definitive agreement to acquire Transom
on July 29, 1998, which was amended and restated as of August 19, 1998, and the
transaction closed September 22, 1998. The historical EAI results include the
results of Sense8 only from June 17, 1998. This pro forma information has been
prepared utilizing the historical consolidated financial statements of EAI,
DELTA, VSA and Transom and should be read in conjunction with the historical
financial statements and notes thereto, which are incorporated by reference
herein for EAI and which are appearing elsewhere herein for DELTA. The fiscal
year ends on June 30 for VSA and March 31 for Transom; therefore, unaudited
results for the nine months ended September 30, 1998 and the calendar years
ended December 31, 1997, 1996, and 1995 for VSA and the nine months ended
September 30, 1998, the calendar year ended December 31, 1997 and the period
from October 7, 1996 to December 31, 1996 for Transom have been combined with
Sense8's unaudited results for the period January 1, 1998 to June 16, 1998 and
audited results for the year ended December 31, 1997, DELTA's unaudited results
for the nine months ended September 30, 1998, audited results for the year ended
December 31, 1997 and unaudited results for the years ended December 31, 1996
and 1995 and EAI's unaudited results for the nine months ended September 30,
1998 and audited results for the years ended December 31, 1997, 1996 and 1995.
These Unaudited Pro Forma Condensed Combined Financial Statements are presented
for illustrative purposes only and are not necessarily indicative of the
operating results or financial position that would have occurred if the DELTA,
Sense8, VSA and Transom acquisitions had been consummated as of the beginning of
the periods presented or as of the dates presented, nor are they necessarily
indicative of future operating results or financial position.
These Unaudited Pro Forma Condensed Combined Financial Statements are based on
the pooling-of-interests method of accounting for the DELTA, VSA and Transom
acquisitions and the purchase method of accounting for the Sense8 acquisition.
The pro forma adjustments are described in the accompanying notes.
F-15
<PAGE> 20
Unaudited Pro Forma
Combined Balance Sheet
September 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Pro
--------------------- Pro Forma Forma Historical Pro Forma
EAI VSA Adjustments Combined Transom Adjustments
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 15,230 $ 921 $ $16,151 $1,069
Short-term investments 11,889 11,889
Accounts receivable, net:
Billed 22,943 3,322 26,265 803
Unbilled 10,798 1,199 11,997
Deferred income taxes 701 701
Prepaid expenses and other assets 2,046 134 2,180 23
------------------------------------ ---------------------------------
Total current assets 63,607 5,576 69,183 1,895
Property and equipment, net 16,775 645 17,420 674
Other assets:
Note receivable 1,598 1,598
Software development costs, net 1,826 1,826
Deferred income taxes 629 87 716 949(a)
Goodwill, net 1,558 1,558
Other 1,628 32 1,660 60
------------------------------------ ----------------------------------
Total assets $ 87,621 $ 6,340 $ 0 $93,961 $2,629 $ 949
==================================== ==================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,234 $ 269 $ 4,503 $ 2
Accrued compensation and other accrued
expenses 1,665 1,687 3,500 (b) 6,852 170 1,500(b)
Deferred revenue 1,764 301 2,065 202
Current portion long-term debt and lease
obligations 214 3,000 3,214 38
Income taxes payable 2,876 209 3,085
------------------------------------ ----------------------------------
Total current liabilities 10,753 5,466 3,500 19,719 412 1,500
Long-term debt and lease obligations due
after one year 1,426 1,426 166
Other liabilities
Stockholders' equity 75,442 874 (3,500)(b) 72,816 2,051 949 (a)
(2,383)(d) (1,500)(b)
2,383 (d) (4,847)(c)
4,847 (c)
------------------------------------ ----------------------------------
Total liabilities and stockholders' equity $ 87,621 $ 6,340 $ 0 $93,961 $2,629 $ 949
==================================== ==================================
<CAPTION>
Pro Pro
Forma Historical Pro Forma Forma
Combined Delta Adjustments Combined
------------------------------------ --------
Assets
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 17,220 $ 1,301 $ 18,521
Short-term investments 11,889 11,889
Accounts receivable, net:
Billed 27,068 860 27,928
Unbilled 11,997 11,997
Deferred income taxes 701 60 761
Prepaid expenses and other assets 2,203 50 2,253
------------------------------------ ---------
Total current assets 71,078 2,271 73,349
Property and equipment, net 18,094 237 18,331
Other assets:
Note receivable 1,598 1,598
Software development costs, net 1,826 1,826
Deferred income taxes 1,665 1,665
Goodwill, net 1,558 1,558
Other 1,720 97 1,817
------------------------------------ --------
Total assets $ 97,539 $ 2,605 $ 0 $100,144
==================================== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,505 $ 128 $ 4,633
Accrued compensation and other accrued 8,522 1,541 1,000 (h) 11,063
expenses
Deferred revenue 2,267 2,267
Current portion long-term debt and lease
obligations 3,252 60 3,312
Income taxes payable 3,085 3,085
------------------------------------ --------
Total current liabilities 21,631 1,729 1,000 24,360
Long-term debt and lease obligations due
after one year 1,592 1,592
Deferred income taxes 67 67
Other liabilities 129 129
Stockholders' equity 74,316 680 (1,000)(h) 73,996
(129)(j)
129 (j)
---------------------------------- --------
Total liabilities and stockholders' equity $ 97,539 $2,605 $ 0 $100,144
================================== ========
</TABLE>
F-16
<PAGE> 21
Unaudited Pro Forma
Combined Statement of Operations
For the Nine Months Ended September 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Historical
------------------ Pro Forma Pro Forma ---------------- Pro Forma
EAI Sense8 Adjustments Combined VSA Transom Adjustments
------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 54,015 $ 821 $ (210) (e) $ 54,626 $14,819 $ 1,808 (75)(e)
Cost of revenues 13,838 460 (210) (e) 14,088 9,002 162 (75)(e)
------------------------------- ---------------------------- ----------
Gross profit 40,177 361 0 40,538 5,817 1,646 0
Operating expenses:
Sales and marketing 14,794 493 15,287 672 767
General and administrative 6,329 1,308 58 (f) 7,695 1,278 637
Research and development 8,201 398 8,599 2,636 1,197
Acquisition costs 16,360 16,360 1,892 112
------------------------------- ---------------------------- ----------
Total operating expenses 45,684 2,199 58 47,941 6,478 2,713
------------------------------- ---------------------------- ----------
Operating income (loss) (5,507) (1,838) (58) (7,403) (661) (1,067)
Other income (expense) 1,529 (207) 1,322 (131) (3)
------------------------------- ---------------------------- ----------
Income (loss) before
income taxes (3,978) (2,045) (58) (6,081) (792) (1,070)
Income tax expense 2,615 2,615 484 (29) (261)(a)
------------------------------- ---------------------------- ----------
Net Income (Loss) $ (6,593) $(2,045) $ (58) $ (8,696) $(1,276) $(1,041) $ 261
=============================== ============================ ==========
Earnings (loss) per share
Basic ($0.66) $ (0.85)
======== ========
Diluted ($0.66) $ (0.85)
======== ========
Weighted average shares outstanding 10,043 10,188
======== ========
Weighted average shares outstanding
and assumed conversion 10,043 10,188
======== ========
<CAPTION>
Pro Forma Historical Pro Forma Pro Forma
Combined Delta Adjustments Combined
------------------------------------ ---------
<S> <C> <C> <C> <C>
Net revenues $ 71,178 $ 4,675 $ 75,853
Cost of revenues 23,177 1,326 24,503
------------------------------------- --------
Gross profit 48,001 3,349 51,350
Operating expenses:
Sales and marketing 16,726 737 17,463
General and administrative 9,610 746 10,356
Research and development 12,432 1,207 13,639
Acquisition costs 18,364 18,364
------------------------------------- --------
Total operating expenses 57,132 2,690 59,822
------------------------------------- --------
Operating income (loss) (9,131) 659 (8,472)
Other income (expense) 1,188 5 1,193
------------------------------------- --------
Income (loss) before income
taxes (7,943) 664 (7,279)
Income tax expense 2,809 332 3,141
------------------------------------- --------
Net Income (Loss) $ (10,752) $ 332 $(10,420)
===================================== ========
Earnings (loss) per share
Basic $ (0.98) $ (0.91)
========= =======
Diluted $ (0.98) $ (0.91)
========= =======
Weighted average shares outstanding 10,922 11,478
========= =======
Weighted average shares outstanding
and assumed conversion 10,922 11,478
========= =======
</TABLE>
F-17
<PAGE> 22
Unaudited Pro Forma
Combined Statement of Operations
For the Year Ended December 31, 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Historical
---------------- Pro Forma Pro forma ------------------ Pro Forma
EAI Sense8 Adjustments Combined VSA Transom Adjustments
----------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues $49,717 $ 3,988 $ (115) (e) 53,590 17,016 $ 950 (148)(e)
Cost of revenues 12,276 1,095 (3) (e) 13,368 11,797 20 (148)(e)
----------------------------- ------------------------------------------
Gross profit 37,441 2,893 (112) 40,222 5,219 930 0
Operating expenses:
Sales and marketing 15,406 1,911 17,317 877 795
General and administrative 6,534 1,366 115 (f) 8,015 1,522 842
Research and development 7,068 1,118 (65)(e) 8,121 3,108 1,015
Acquisition costs 8,831 - 9,080 (g) 17,911
----------------------------- ------------------------------------------
Total operating expenses 37,839 4,395 9,130 51,364 5,507 2,652
----------------------------- ------------------------------------------
Operating income (loss) (398) (1,502) (9,242) (11,142) (288) (1,722)
Other income (expense) 1,522 (185) 1,337 (99) 46
----------------------------- ------------------------------------------
Income (loss) before income taxes 1,124 (1,687) (9,242) (9,805) (387) (1,676)
Income tax expense 2,772 2,772 (216) (636)(a)
----------------------------- ------------------------------------------
Net income (loss) before minority interest (1,648) (1,687) (9,242) (12,577) (171) (1,676) 636
Minority Interest (49) (49)
----------------------------- ------------------------------------------
Net Income (Loss) (1,697) (1,687) (9,242) (12,626) $ (171) $ (1,676) $636
============================= ==========================================
Earnings (loss) per share
Basic ($0.19) (1.41)
======== =========
Diluted ($0.19) (1.41)
======== =========
Weighted average shares outstanding 8,770 8,928
======== =========
Weighted average shares outstanding and assumed 8,770 8,928
======== =========
<CAPTION>
Pro Forma Historical Pro Forma Pro Forma
Combined Delta Adjustments Combined
-------------------------------- ---------
<S> <C> <C> <C> <C>
Net revenues 71,408 5,279 76,687
Cost of revenues 25,037 1,893 26,930
------------------------------- ---------
Gross profit 46,371 3,386 49,757
Operating expenses:
Sales and marketing 18,989 726 19,715
General and administrative 10,379 844 11,223
Research and development 12,244 1,501 13,745
Acquisition costs 17,911 17,911
------------------------------- ---------
Total operating expenses 59,523 3,071 62,594
------------------------------- ---------
Operating income (loss) (13,152) 315 (12,837)
Other income (expense) 1,284 (3) 1,281
------------------------------- ---------
Income (loss) before income taxes (11,868) 312 (11,556)
Income tax expense 1,920 160 2,080
------------------------------- ---------
Net income (loss) before minority interest (13,788) 152 (13,636)
Minority Interest (49) (49)
------------------------------- ---------
Net Income (Loss) (13,837) 152 (13,685)
=============================== =========
Earnings (loss) per share
Basic (1.43) (1.34)
========== =========
Diluted (1.43) (1.34)
========== =========
Weighted average shares outstanding 9,662 10,219
========== =========
Weighted average shares outstanding and assumed 9,662 10,219
========== =========
</TABLE>
F-18
<PAGE> 23
Unaudited Pro Forma
Combined Statement of Operations
For the Year Ended December 31, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
For the period
Historical October 6, 1996 to
-------------------- December 31, 1996 Pro Forma
EAI VSA Transom Adjustments
------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 27,189 $ 16,887 $ 19
Cost of revenues 6,940 11,417 13
------------------------------------------------------
Gross profit 20,249 5,470 6
Operating expenses:
Sales and marketing 9,799 850 38
General and administrative 3,378 1,537 39
Research and development 3,438 2,400 63
------------------------------------------------------
Total operating expenses 16,615 4,787 140
------------------------------------------------------
Operating income (loss) 3,634 683 (134)
Other income (expense) 987 (102) (1)
------------------------------------------------------
Income (loss) before income taxes 4,621 581 (135)
Income tax expense 1,744 251
------------------------------------------------------
Net income (loss) before minority interest 2,877 330 (135)
Minority Interest (310)
------------------------------------------------------
Net Income (Loss) $ 2,567 $ 330 $ (135)
======================================================
Earnings (loss) per share
Basic $ 0.35
===========
Diluted $ 0.30
===========
Weighted average shares outstanding
7,432
===========
Weighted average shares outstanding and assumed
conversion 8,648
===========
<CAPTION>
Pro Forma Historical Pro Forma Pro Forma
Combined Delta Adjustments Combined
----------------------------------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 44,095 $ 4,484 $ 48,579
Cost of revenues 18,370 1,452 19,822
----------------------------------- ----------
Gross profit 25,725 3,032 28,757
Operating expenses:
Sales and marketing 10,687 859 11,546
General and administrative 4,954 876 5,830
Research and development 5,901 1,212 7,113
----------------------------------- ----------
Total operating expenses 21,542 2,947 24,489
----------------------------------- ----------
Operating income (loss) 4,183 85 4,268
Other income (expense) 884 (37) 847
----------------------------------- ----------
Income (loss) before income taxes 5,067 48 5,115
Income tax expense 1,995 28 2,023
----------------------------------- ----------
Net income (loss) before minority interest 3,072 20 3,092
Minority Interest (310) (310)
----------------------------------- ----------
Net Income (Loss) $ 2,762 $ 20 $ 2,782
=================================== ==========
Earnings (loss) per share
Basic $ 0.34 $ 0.32
========== ==========
Diluted $ 0.30 $ 0.28
========== ==========
Weighted average shares outstanding
8,022 8,579
========== ==========
Weighted average shares outstanding and assumed
conversion 9,245 9,802
========== ==========
</TABLE>
F-19
<PAGE> 24
Unaudited Pro Forma
Combined Statement of Operations
For the Year Ended December 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
------------------------ Pro Forma
EAI VSA Adjustments
----------------------------------------
<S> <C> <C> <C>
Net revenues $ 12,249 $ 12,616
Cost of revenues 3,100 8,513
----------------------------------------
Gross profit 9,149 4,103
Operating expenses:
Sales and marketing 3,573 893
General and administrative 2,276 1,333
Research and development 1,992 1,947
Acquisition costs 2,520 -
----------------------------------------
Total operating expenses 10,361 4,173
----------------------------------------
Operating income (loss) (1,212) (70)
Other income (expense) (158) (40)
----------------------------------------
Income (loss) before income taxes (1,370) (110)
Income tax expense 392 (51)
----------------------------------------
Net income (loss) before minority interest (1,762) (59)
Minority Interest (128)
----------------------------------------
Net Income (Loss) $ (1,890) $ (59)
========================================
Earnings (loss) per share
Basic $ (0.39)
==========
Diluted $ (0.39)
==========
Weighted average shares outstanding 4,805
==========
Weighted average shares outstanding and assumed conversion 4,805
==========
<CAPTION>
Pro Forma Historical Pro Forma Pro Forma
Combined Delta Adjustments Combined
------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 24,865 $ 3,926 $ 28,791
Cost of revenues 11,613 1,227 12,840
------------------------------------------------
Gross profit 13,252 2,699 15,951
Operating expenses:
Sales and marketing 4,466 719 5,185
General and administrative 3,609 816 4,425
Research and development 3,939 1,091 5,030
Acquisition costs 2,520 2,520
------------------------------------------------
Total operating expenses 14,534 2,626 17,160
------------------------------------------------
Operating income (loss) (1,282) 73 (1,209)
Other income (expense) (198) (10) (208)
------------------------------------------------
Income (loss) before income taxes (1,480) 63 (1,417)
Income tax expense 341 34 375
------------------------------------------------
Net income (loss) before minority interest (1,821) 29 (1,792)
Minority Interest (128) (128)
------------------------------------------------
Net Income (Loss) $ (1,949) $ 29 $ (1,920)
================================================
Earnings (loss) per share
Basic $ (0.37) $ (0.33)
========== =============
Diluted $ (0.37) $ (0.33)
========== =============
Weighted average shares outstanding 5,339 5,896
========== =============
Weighted average shares outstanding and assumed conversion 5,339 5,896
========== =============
</TABLE>
F-20
<PAGE> 25
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(a) To reflect the income tax benefit that would be recognized if the Transom
merger had occurred at the beginning of the earliest period presented. The
adjustment is based on the combined tax rate of the companies, and the
elimination of the valuation allowance for deferred tax assets of Transom.
(b) To record estimated one-time merger-related charges for the VSA and Transom
mergers. These expenses include outside accounting and legal fees and
various other costs and filing fees. These charges will be recognized at
the time the VSA and Transom mergers are consummated as required under the
pooling-of-interests accounting method.
(c) To record the exchange of Transom common stock for EAI common stock.
(d) To record the exchange of VSA common stock for EAI common stock.
(e) To eliminate intercompany revenue, expense and cost of sales.
(f) To reflect the amortization of goodwill related to the Sense8 transaction.
(g) To reflect the write-off of in-process technology related to the Sense8
transaction.
(h) To record estimated one-time transaction-related charges for the Delta
transaction. These expenses include outside accounting and legal fees and
various other costs and filing fees. These charges will be recognized at
the time the Delta transaction is completed as required under the
pooling of interests accounting method.
(i) To record the exchange of Delta common stock for EAI common stock.
F-21
<PAGE> 26
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.
ENGINEERING ANIMATION, INC.
Date: February 17, 1999 By: /s/ Jamie A. Wade
------------------------------------
Jamie A. Wade
Vice President of Administration
and General Counsel
S-1
<PAGE> 27
ENGINEERING ANIMATION, INC.
EXHIBIT INDEX TO FORM 8-K/A REPORT
Exhibit Description
- ------- -----------
23.1 Consent of Schitag Ernst & Young
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (Nos. 333-17393, 333-40823, 333-40825, 333-57231, 333-64429 and
333-57231) and the Registration Statement on Form S-3 (No. 333-47809) and to
the use of our report dated December 23, 1998, with respect to the financial
statements of DELTA Industrie Informatik GmbH for the year ended December 31,
1997, included in the Engineering Animation, Inc. Current Report on Form 8-K/A
dated February 17, 1999, filed with the Securities and Exchange Commission.
/s/ SCHITAG ERNST & YOUNG
Deutsche Allgemeine Treuhand AG
Wirtschaftsprufungsgesellschaft
Stuttgart, Germany
February 11, 1999