SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report - October 14, 1997
ACI TELECENTRICS, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 000-21557 41-1572571
(State or other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
3100 West Lake Street, Suite 300, Minneapolis, Minnesota 55416
(Address of principal executive offices and zip code)
(612) 928-4700
(Registrant's telephone number, including area code)
<PAGE>
The undersigned hereby amends the following items of its Form 8-K Report filed
August 12, 1997 as set forth on the pages attached hereto:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business acquired.
Financial Statements required to be filed pursuant to Item 7
of Form 8-K for Encyclopaedia Britannica Communications
Corporation (an operating subsidiary of Encyclopaedia
Britannica, Inc.) ("EBCC") /1/
(b) Pro forma financial information.
Pro forma financial information required to be filed pursuant
to Item 7 of Form 8-K reflecting the acquisition of EBCC.
/1/ The financial statements for EBCC present the net assets acquired and
revenues and direct operating expenses of EBCC, an operating subsidiary of
Encylopaedia Britannica, Inc. and are not intended to be a complete presentation
of EBCC's financial position and results of operations.
<PAGE>
ENCYCLOPAEDIA BRITANNICA COMMUNICATIONS CORPORATION
(AN OPERATING SUBSIDIARY OF ENCYCLOPAEDIA BRITANNICA, INC.)
FINANCIAL STATEMENTS
Table of Contents
Page
Independent Auditors' Report...................................................4
Statement of Net Assets of Acquired Business as of
September 30, 1996........................................................5
Statement of Revenues and Direct Operating
Expenses for the year ended September 30,1996.............................6
Notes to Financial Statements..................................................7
Statement of Net Assets of Acquired Business as of
June 30, 1997 (Unaudited).................................................9
Statements of Revenues and Direct Operating
Expenses for the Nine month periods ended
June 30, 1997 and 1996 (Unaudited).......................................10
Notes to Unaudited Financial Statements.......................................11
ACI Telecentrics Pro Forma Consolidated
Financial Statements (Unaudited).........................................12
Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1997 (Unaudited)..........................................13
Pro Forma Condensed Consolidated Statement of
Income for the Year Ended
December 31, 1996 (Unaudited)............................................14
Pro Forma Condensed Consolidated Statement of
Income for the Six Months Ended
June 30, 1997 (Unaudited)................................................15
Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited).........................................16
Signature Page................................................................17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Encyclopaedia Britannica, Inc.
We have audited the accompanying statement of net assets of acquired business of
Encyclopaedia Britannica Communications Corporation (EBCC) an operating
subsidiary of Encyclopaedia Britannica, Inc. (the Seller), as of September 30,
1996 and the related statement of revenues and direct operating expenses for the
year then ended. These financial statements are the responsibility of EBCC and
the Seller'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.
The accompanying statements were prepared to present the net assets acquired and
revenues and direct operating expenses of Encyclopaedia Britannica
Communications Corporation, an operating subsidiary of the Seller, pursuant to
the Purchase Agreement described in Note 1, and are not intended to be a
complete presentation of Encyclopaedia Britannica Communications Corporation's
financial position and results of operations.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the net assets of acquired business of Encyclopaedia
Britannica Communications Corporation as of September 30, 1996 and its revenues
and direct operating expenses for the year then ended pursuant to the Stock
Purchase Agreement described in Note 1, in accordance with generally accepted
accounting principles.
Deloitte & Touche LLP
Minneapolis, Minnesota
September 26, 1997
<PAGE>
ENCYCLOPAEDIA BRITANNICA COMMUNICATIONS CORPORATION
(AN OPERATING SUBSIDIARY OF ENCYCLOPAEDIA BRITANNICA, INC.)
STATEMENT OF NET ASSETS OF ACQUIRED BUSINESS
SEPTEMBER 30, 1996
PROPERTY AND EQUIPMENT:
Furniture and Fixtures $ 211,127
Equipment 1,026,378
Leasehold Improvements 165,772
-----------
1,403,277
Less Accumulated Depreciation and Amortization 854,255
-----------
Net Property, Plant, and Equipment 549,022
-----------
TOTAL ASSETS 549,022
CAPITAL LEASE LIABILITIES - CURRENT (231,982)
-----------
NET ASSETS OF ACQUIRED BUSINESS $ 317,040
===========
See notes to financial statements.
<PAGE>
ENCYCLOPAEDIA BRITANNICA COMMUNICATIONS CORPORATION
(AN OPERATING SUBSIDIARY OF ENCYCLOPAEDIA BRITANNICA, INC.)
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
YEAR ENDED SEPTEMBER 30, 1996
REVENUES:
Unaffiliated $5,456,000
Affiliated 1,706,000
----------
Total Revenues 7,162,000
DIRECT OPERATING EXPENSES:
Cost of revenues 3,544,859
Selling, general, and administrative 3,471,857
----------
Total direct operating expenses $7,016,716
----------
EXCESS OF REVENUES OVER DIRECT
OPERATING EXPENSES $ 145,284
==========
See notes to financial statements.
<PAGE>
ENCYCLOPAEDIA BRITANNICA COMMUNICATIONS CORPORATION
(AN OPERATING SUBSIDIARY OF ENCYCLOPAEDIA BRITANNICA, INC.)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
Encyclopaedia Britannica Communications Corporation ("EBCC"), an operating
subsidiary of Encyclopaedia Britannica, Inc. ("the Seller"), provides
telemarketing services at two call centers located in Lombard, IL and
Merrillville, IN. The two call centers each have 96 outbound calling stations
and the Lombard, IL location also includes 27 inbound call stations.
BASIS OF PRESENTATION - The accompanying Statement of Net Assets Acquired and
Statements of Revenues and Direct Operating Expenses have been prepared pursuant
to Article 1 of the the Stock Purchase Agreement between ACI Telecentrics,
Incorporated ("the Buyer") and the Seller dated August 1, 1997.
The statements include all revenues and costs and expenses directly incurred by,
or related to EBCC, including depreciation and rental costs related to
facilities used in the business, payroll, and aggregate employee benefits which
have been applied at 23% of gross pay. The statements do not reflect corporate
income taxes or the cost of certain other corporate services provided by the
Seller, such as legal, treasury, certain information systems, tax planning, and
financing. The various costs and expenses, as described herein, are not
necessarily indicative of the costs and expenses that would have resulted had
EBCC been operated as a separate company, as a result of the aforementioned
corporate expenses.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - Revenues are recognized as services are provided,
generally based on hours incurred. Revenues from two customers represented 62.8%
and 17.9% of total revenues generated from unaffiliated companies.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation
is based on the straight line method over the estimated useful lives of assets
ranging from five to seven years. Leasehold improvements are depreciated on a
straight line basis over the estimated useful life of the property or the life
of the lease, whichever is shorter. Depreciation and amortization totaled
$395,691 for the year ended September 30, 1996.
IMPAIRMENT OF LONG-LIVED ASSETS - In accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," EBCC evaluates the
recoverability of long-lived assets. The statement requires the measurement of
the unamortized balance of the long-lived assets against estimated future cash
flows. At the time such evaluation indicates that undiscounted estimated future
cash flows of certain long-lived assets are not sufficient to recover the
carrying value of such assets, the assets will be adjusted to their fair value.
Based on current evaluations, there were no adjustments to the carrying value of
long-lived assets.
LIABILITIES ASSUMED - Pursuant to Article 1.3 of the Stock Purchase Agreement,
the Buyer has agreed to assume all capital lease liabilities.
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 the financial
statements
<PAGE>
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. LEASE COMMITMENTS
Assets under capital leases had a carrying value of approximately $232,000 at
September 30, 1996. Total future payments under capital lease agreements are
approximately $245,300 including interest of approximately $13,300 as of
September 30, 1996.
Minimum future rental payments under non-cancelable operating leases for
equipment and real estate is as follows:
Year-Ended September 30,
- ------------------------
1997 $172,000
1998 177,000
1999 182,000
2000 187,000
2001 193,000
Thereafter 198,000
Rental expense was approximately $238,700 for 1996.
4. RELATED PARTY TRANSACTIONS
EBCC earned $1,706,000 in revenues from the seller for telemarketing services
provided in 1996. The Seller ceased using EBCC in October 1996 to promote sales
of its products.
<PAGE>
ENCYCLOPAEDIA BRITANNICA COMMUNICATIONS CORPORATION
(AN OPERATING SUBSIDIARY OF ENCYCLOPAEDIA BRITANNICA, INC.)
STATEMENT OF NET ASSETS OF ACQUIRED BUSINESS
JUNE 30, 1997
(Unaudited)
PROPERTY AND EQUIPMENT:
Furniture and Fixtures $ 211,127
Equipment 1,026,378
Leasehold Improvements 165,772
-----------
1,403,277
Less Accumulated Depreciation 1,066,394
-----------
Net Property, Plant and Equipment 336,883
-----------
TOTAL ASSETS 336,883
CAPITAL LEASE LIABILITIES - CURRENT (84,545)
-----------
NET ASSETS OF ACQUIRED BUSINESS $ 252,338
===========
See notes to unaudited financial statements.
<PAGE>
ENCYCLOPAEDIA BRITANNICA COMMUNICATIONS CORPORATION
(AN OPERATING SUBSIDIARY OF ENCYCLOPAEDIA BRITANNICA, INC.)
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(Unaudited)
Nine Months Ended
-----------------------------
June 30, 1997 June 30,1996
------------- ------------
REVENUES
Unaffiliated $ 4,284,123 $ 4,099,594
Affiliated 92,000 1,058,000
----------- -----------
4,376,123 5,157,594
DIRECT OPERATING EXPENSES:
Cost of Revenues 2,640,420 2,717,575
Selling, general, and administrative 2,502,859 2,668,369
----------- -----------
Total direct operating expenses 5,143,279 5,385,944
EXCESS OF DIRECT OPERATING
----------- -----------
EXPENSES OVER REVENUES $ (767,156) $ (228,350)
=========== ===========
See notes to unaudited financial statements.
<PAGE>
ENCYCLOPAEDIA BRITANNICA COMMUNICATIONS CORPORATION
(AN OPERATING SUBSIDIARY OF ENCYCLOPAEDIA BRITANNICA, INC.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
1. In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the Net Assets of Acquired
Business as of June 30, 1997 and the results of Revenues and Direct Operating
Expenses for the nine months ended June 30, 1997 and 1996. Such adjustments are
of a normal recurring nature. The results of revenues and direct operating
expenses for the nine months ended June 30, 1997 and 1996, are not necessarily
indicative of the results to be expected for the full year. These financial
statements should be read in conjunction with the audited financial statements
for the year ended September 30, 1996 included herein.
<PAGE>
ACI TELECENTRICS, INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements
give effect to the acquisition by ACI Telecentrics, Incorporated (the "Company")
of Encyclopaedia Britannica Communications Corporation (an operating subsidiary
of Encyclopaedia Britannica) ("EBCC") using the purchase method of accounting,
and are based on estimates and assumptions set forth below and in the notes to
such statements, which include pro forma adjustments. These pro forma financial
statements are based upon the historical financial statements of ACI
Telecentrics, Incorporated, adjusted to give effect to the acquisition of EBCC
on August 1, 1997.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet reflects the
application of purchase accounting adjustments to the historical balance sheets
of the Company and EBCC. The Unaudited Pro Forma Condensed Consolidated
Statements of Income for the year ended December 31, 1996 and the six months
ended June 30, 1997 are based on historical amounts of the Company and EBCC and
give effect to the acquisition as if it had occurred at the beginning of the
periods presented. Such statements are based on historical statements of
revenues and direct operating expenses of EBCC for the year ended September 30,
1996 and six months ended June 30, 1997.
The purchase price consists of (i) $1,250,000 cash paid at closing; and (ii)
four quarterly payments (each an "Earn-Out Payment," cumulatively the "Total
Earn-Out Payment"). The amount of the Total Earn-Out Payment will depend on the
amount of revenues generated by certain EBCC clients and prospective clients
during the period from January 1, 1998 through December 31, 1998 (the "Earn-Out
Revenues"). For financial statements and presentation the aggregate purchase
price of EBCC is estimated to be approximately $2,750,000. This acquisition has
been accounted for using the purchase method of accounting. The excess of
Purchase Price over Net Assets Acquired is being amortized over 15 years using
the straightline method.
The pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deemed appropriate. Final
purchase accounting adjustments may differ from the pro forma adjustments
presented herein. The unaudited pro forma consolidated financial information
does not profess to represent the Company's results of operations had the above
transaction, in fact, occurred on these dates, or to project the Company's
combined results of operations for any date or period. The pro forma
consolidated financial information should be read in conjunction with the
Company's historical financial statements and notes thereto.
<PAGE>
ACI TELECENTRICS, INCORPORATED, INC
Pro Forma Condensed Consolidated Balance Sheet
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Encyclopaedia
ACI Britannica
Telecentrics Communications Pro Forma Pro Forma
Incorporated Corporation(a) Adjustments Consolidated(a)
------------ -------------- ----------- ---------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $4,923,327 -- $(1,417,780)(d) $ 3,505,547
Trade Receivables less allowance
for doubtful accounts 1,564,492 -- -- 1,564,492
Other Current Assets 72,685 -- -- 72,685
---------- -------- ----------- -----------
Total Current Assets 6,560,504 -- (1,417,780) 5,142,724
PROPERTY AND EQUIPMENT, NET 2,133,673 336,883 45,087 (g) 2,515,643
OTHER ASSETS
Goodwill -- -- 2,620,355 (e) 2,535,810
Other 9,410 -- -- 9,410
---------- -------- ----------- -----------
Total other assets 9,410 -- 2,620,355 2,545,220
TOTAL ASSETS $8,703,587 $336,883 $ 1,247,662 $10,288,132
========== ======== =========== ===========
CURRENT LIABILITIES
Trade accounts payable $ 606,934 $ -- $ -- $ 606,934
Accrued Expenses 223,959 -- -- 223,959
Income taxes payable 12,922 -- -- 12,922
Current Portion of Long Term Debt
and Capital lease obligations 106,525 84,545 750,000 (f) 856,525
---------- -------- ----------- -----------
Total current liabilities 950,340 84,545 750,000 1,700,340
LONG-TERM LIABILITIES
Long-term debt and capital lease
obligations less current portion 102,083 -- 750,000 (f) 852,083
Deferred capital lease liabilities
less current portion 121,407 -- -- 121,407
Deferred income taxes 223,290 -- -- 223,290
---------- -------- ----------- -----------
Total long-term liabilities 446,780 -- 750,000 1,196,780
SHAREHOLDERS' EQUITY
Common stock 6,582,158 252,338 (252,338)(h) 6,582,158
Retained earnings 724,309 -- -- 724,309
---------- -------- ----------- -----------
Total Shareholders equity 7,306,467 252,338 (252,338) 7,306,467
TOTAL LIABILITIES AND
SHAREHOLERS' EQUITY $8,703,587 $336,883 $ 1,247,662 $10,288,132
========== ======== =========== ===========
</TABLE>
See Notes to Pro Forma Condensed Financial Statements.
<PAGE>
ACI TELECENTRICS, INCORPORATED, INC
Pro Forma Condensed Consolidated Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Encyclopaedia
ACI Britannica
Telecentrics Communications Pro Forma Pro Forma
Incorporated Corporation(a) Adjustments(i) Consolidated(a)
------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues $9,991,427 $7,162,000 $ -- $17,153,427
Cost of Revenues 5,309,753 3,544,859 -- 8,854,612
---------- ---------- --------- -----------
Gross Profit 4,681,674 3,617,141 -- 8,298,815
Selling, General and
Administrative Expense 3,848,730 3,471,857 174,690 (b) 7,495,277
---------- ---------- --------- -----------
Operating Income 832,944 145,284 (174,690) 803,538
Other (Expense) Income 21,121 -- -- 21,121
---------- ---------- --------- -----------
Income before Income Taxes 854,065 145,284 (174,690) 824,659
Income Taxes 354,300 -- (11,762)(c) 342,538
---------- ---------- --------- -----------
Net Income $ 499,765 $ 145,284 $(162,928) $ 482,121
========== ========== ========= ===========
Earning Per Common and
Common Equivalent Share $ 0.11 $ 0.11
========== ===========
Weighted Average Common and
Common Equivalent 4,566,000 4,566,000
========== ===========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
ACI TELECENTRICS, INCORPORATED, INC
Pro Forma Condensed Consolidated Statement of Income
For the Six Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Encyclopaedia
ACI Britannica
Telecentrics Communications Pro Forma Pro Forma
Incorporated Corporation(a) Adjustments(i) Consolidated(a)
------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues $7,252,667 $ 2,818,030 $ -- $10,070,697
Cost of Revenues 3,642,914 1,695,383 -- 5,338,297
---------- ----------- --------- -----------
Gross Profit 3,609,753 1,122,647 -- 4,732,400
Selling, General and
Administrative Expense 2,870,009 1,561,859 87,345 (b) 4,519,213
---------- ----------- --------- -----------
Operating Income 739,744 (439,212) (87,345) 213,187
Other (Expense) Income 125,254 -- -- 125,254
---------- ----------- --------- -----------
Income before Income Taxes 864,998 (439,212) (87,345) 338,441
Income Taxes 328,700 -- 200,092 (c) 128,608
---------- ----------- --------- -----------
Net Income $ 536,298 $ (439,212) $ 112,747 $ 209,833
========== =========== ========= ===========
Earning Per Common and
Common Equivalent Share $ 0.09 $ 0.04
========== ===========
Weighted Average Common and
Common Equivalent 5,756,000 5,756,000
========== ===========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
ACI TELECENTRICS, INCORPORATED, INC
Notes to Pro Forma Condensed Consolidated Financial Statements
Pro Forma Adjustments
(a) The financial statements for EBCC present the net assets acquired and
revenues and direct operating expenses of EBCC, an operating subsidiary
of Encyclopaedia Britannica, Inc., and are not intended to be a
complete presentation of EBCC's financial position and results of
operations.
(b) Reflects additional depreciation and amortization expenses related to
the fair value of assets acquired and goodwill. Goodwill is being
amortized on a straight line basis over 15 years.
Cash Paid in Transaction $ 1,250,000
Estimated Additional Cash Payments 1,500,000 (f)
Acquisition Costs 167,780
Net Assets Acquired (297,425)
------------
Goodwill $ 2,620,355
============
(c) Reflects additional income tax (expense) benefit at the statutory rate
based on the excess (deficiency) of revenues over direct expenses of
EBCC and the pro forma adjustments.
(d) Reflects cash paid in purchase transaction.
(e) Reflects total goodwill from the purchase transaction.
(f) Reflects estimated additional purchase price that is estimated to be
payable based on revenues earned by EBCC during calendar year 1998.
(g) Reflects adjustment to record property and equipment at fair value.
(h) Reflects carrying value of net assets acquired.
(i) No pro forma adjustment for overhead allocation for certain corporate
costs including legal, treasury, information, systems, etc., has been
made because management does not believe that additional personnel will
need to be hired to perform these functions.
<PAGE>
SIGNATURES
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.
ACI TELECENTRICS, INCORPORATED, INC
(Registrant)
Dated: October 14,1997 By: /S/ STEVEN A. KAHN
------------------------------------------
Steven A. Kahn
Vice President and Chief Financial Officer
