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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 10, 1999
LHS GROUP INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 000-22409 58-2224883
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
</TABLE>
SIX CONCOURSE PARKWAY, SUITE 2700
ATLANTA, GEORGIA 30328
(Address of principal executive offices)
770-280-3000
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 10, 1999, pursuant to an Agreement and Plan of Merger dated
April 20, 1999 ("Merger Agreement"), LHS Group Inc. acquired all of the
outstanding capital stock of Priority Call Management, Inc., a Massachusetts
corporation ("PCM"). As provided in the Merger Agreement, holders of PCM capital
stock were entitled to receive 2.3542 shares of LHS common stock for each share
of PCM capital stock. 5% of the shares of LHS common stock have been placed in
an escrow fund to satisfy certain currently unknown claims LHS may have against
PCM.
In addition, all outstanding rights (including options) to purchase
shares of PCM common stock will be converted into rights to purchase shares of
LHS common stock on a 2.3542-to-one ratio.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
A. Financial Statements of Businesses Acquired. Financial
statements of PCM for periods specified in Rule 3-05(b) of Regulation S-X, other
than the period ended March 31, 1999, have been previously filed with the
Securities and Exchange Commission (the "SEC") as part of LHS's Registration
Statement on Form S-4 (File No. 333-77557) and are omitted from this report
pursuant to General Instruction B.3. of Form 8-K. Filed herewith are the
financial statements of PCM for the period ended March 31, 1999.
B. Pro Forma Financial Information (Unaudited). Pro forma
financial information required pursuant to Article 11 of Regulation S-X, other
than the information required for the period ended March 31, 1999, has been
previously filed with the SEC as part of LHS's Registration Statement on Form
S-4 (File No. 333-77557) and is omitted from this Report pursuant to General
Instruction B.3. of Form 8-K. Filed herewith is the pro forma financial
information for the period ended March 31, 1999.
C. Exhibits.
2.1 Agreement and Plan of Merger, dated as of April 20,
1999, by and among LHS Group Inc., Patriot
Acquisition Corp. and Priority Call Management, Inc.
incorporated by reference from LHS's Registration
Statement on Form S-4 (File No. 333-77557).
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PRIORITY CALL MANAGEMENT, INC.
UNAUDITED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
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<S> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 5,224,927
Trade accounts receivable, net ............................. 6,522,452
Inventory .................................................. 5,095,921
Prepaid expenses and other current assets .................. 281,980
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Total current assets .......................................... 17,125,280
Property and equipment, net ................................... 3,515,033
Other ......................................................... 1,827,100
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Total assets .................................................. $ 22,467,413
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LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable ........................................... $ 2,426,209
Accrued expenses and other liabilities ..................... 5,816,593
Deferred revenues .......................................... 1,753,883
Income taxes payable ....................................... --
Deferred income taxes ...................................... --
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Total current liabilities ..................................... 9,996,685
Other long-term obligations ................................... 2,315,215
Stockholders' equity:
Preferred stock ............................................ 5,614
Common stock ............................................... 11,817
Additional paid-in-capital ................................. 15,087,342
Retained earnings .......................................... (4,424,260)
Shareholder loan ........................................... (525,000)
Accumulated other comprehensive income ..................... --
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Total stockholders' equity .................................... 10,155,513
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Total liabilities and stockholders' equity .................... $ 22,467,413
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</TABLE>
See accompanying notes.
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PRIORITY CALL MANAGEMENT, INC.
UNAUDITED CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
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<S> <C> <C>
Revenues:
License and hardware.............................. $ 5,716,805 $ 8,783,192
Service........................................... 399,316 767,437
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Total................................................ 6,116,121 9,550,629
Cost of services..................................... 2,760,818 4,537,196
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Gross margin......................................... 3,355,303 5,013,433
Operating expenses:
Sales and marketing............................... 1,806,739 2,290,075
Research and development.......................... 724,499 1,172,664
General and administrative........................ 814,727 1,127,728
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3,345,965 4,590,467
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Earnings before interest and taxes................... 9,338 422,966
Interest (income) expense, net....................... 52,669 (23,447)
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Earnings before income taxes......................... 62,007 399,519
Income taxes......................................... 24,317 159,760
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Net earnings......................................... $ 37,690 $ 239,759
==============================
Net earnings per share:
Basic............................................. $ .03 $ .20
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Diluted........................................... $ .02 $ .12
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Shares used in per share calculation
Basic............................................. 1,140,000 1,180,000
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Diluted........................................... 1,824,000 2,082,000
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</TABLE>
See accompanying notes.
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PRIORITY CALL MANAGEMENT, INC.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
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<S> <C> <C>
CASH FLOW FROM OPERATIONS
Operating income (loss) $ 37,690 $ 239,759
Add: Depreciation 323,970 581,560
Provision for Bad Debt, net 30,000 30,000
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391,660 851,319
Changes in working capital
Accounts receivable (1,525,693) 776,898
Inventories 196,358 (1,088,599)
Prepaid expenses 4,753 (14,109)
Accounts payable 105,247 (303,319)
Customer deposit (43,676) 753,019
Accrued expenses 144,536 60,067
Deferred revenue 487,646 137,143
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Net working capital changes (630,829) 321,100
Decrease in other assets -- (5,460)
Decrease in technology license liability, net -- (59,115)
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Net cash used in operations (239,169) 1,107,844
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CASH USED FOR CAPITAL EQUIPMENT PURCHASES (614,692) (453,485)
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CASH (USED) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from exercise of common stock options -- 18,906
Repayments of long term installment notes (43,056) (158,722)
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Net cash provided by financing activities (43,056) (43,056)
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NET INCREASE (DECREASE) IN CASH (896,917) 514,543
CASH BALANCE-BEGINNING OF PERIOD 6,293,771 4,710,384
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CASH BALANCE-END OF PERIOD $ 5,396,854 $ 5,224,927
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</TABLE>
See accompanying notes.
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PRIORITY CALL MANAGEMENT, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for fair presentation have been included. For further information,
refer to the consolidated financial statements and footnotes included in the
Proxy Statement and Prospectus on Form S-4 Filed by LHS Group Inc. in
connection with the merger described below.
NOTE 2 - MERGER
On April 20, 1999, the Board of Directors of Priority Call Management, Inc.
approved and the Company signed a definitive agreement to exchange all
outstanding shares of the company's stock for shares of LHS Group Inc. that will
be accounted for as a pooling of interests. The transaction closed on June 10,
1999.
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PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following unaudited pro forma combined condensed financial statements,
including the notes thereto, are qualified in their entirety by reference to,
and should be read in conjunction with the historical consolidated financial
statements of LHS and PCM, including the notes thereto, which are included in
the Proxy Statement/Prospectus filed with the SEC on April 30, 1999, the LHS
March 31, 1999 10-Q and the financial statements included herein..
The unaudited pro forma combined condensed financial statements assume a
business combination between LHS and PCM accounted for as a pooling of interests
and are based on each company's respective historical audited and unaudited
consolidated financial statements and notes thereto. The unaudited pro forma
combined condensed balance sheet combines LHS's consolidated condensed balance
sheet as of March 31, 1999, and PCM's consolidated condensed balance sheet as of
March 31, 1999, giving effect to the Merger as if it had occurred on March 31,
1999.
The unaudited pro forma combined condensed statements of operations combine
LHS's historical results for the three months ended March 31, 1999, with PCM's
historical results for the three months ended March 31, 1999, giving effect to
the Merger as if it had occurred on January 1, 1999.
Certain data and notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The unaudited pro forma combined condensed financial statements provide
information about the impact of the Merger by showing how it might have affected
the financial condition and results of operations of LHS had the Merger actually
been completed as of the dates indicated. The unaudited pro forma combined
condensed financial statements are provided for informational purposes only and
are not necessarily indicative of actual results that would have been achieved
had the Merger been consummated at the beginning of the periods presented or of
future results and should be read in conjunction with the historical financial
statements of LHS and PCM and notes thereto.
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PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
PRO FORMA COMBINED
LHS PCM ADJUSTMENTS PRO FORMA
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(In thousands of U.S. Dollars, except share data)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 41,651 $ 5,225 $ -- $ 46,876
Short-term marketable debt securities ......................... 58,813 -- -- 58,813
Trade accounts receivable, net ................................ 72,687 6,522 -- 79,209
Inventory ..................................................... -- 5,096 -- 5,096
Prepaid expenses and other current assets ..................... 6,586 282 -- 6,868
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Total current assets ............................................. 179,737 17,125 -- 196,862
Property and equipment, net ...................................... 15,660 3,515 -- 19,175
Deferred income taxes ............................................ 914 -- -- 914
Intangible asset, net ............................................ -- -- -- --
Other ............................................................ 6,891 1,827 -- 8,718
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Total assets ..................................................... $ 203,202 $ 22,467 $ -- $ 225,669
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................. $ 4,674 $ 2,426 $ -- $ 7,100
Accrued expenses and other liabilities ........................ 18,648 5,816 4,100 28,564
Deferred revenues ............................................. 11,054 1,754 -- 12,808
Income taxes payable .......................................... 14,155 -- -- 14,155
Deferred income taxes ......................................... 4,127 -- -- 4,127
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Total current liabilities ........................................ 52,658 9,996 4,100 66,754
Other long-term obligations ...................................... 144 2,315 (900) 1,559
Stockholders' equity:
Preferred stock ............................................... -- 6 (6) --
Common stock .................................................. 529 12 29 570
Additional paid-in-capital .................................... 113,768 15,087 (23) 128,832
Retained earnings ............................................. 42,866 (4,424) (3,200) 35,242
Shareholder loan .............................................. -- (525) -- (525)
Accumulated other comprehensive income ........................ (6,763) -- -- (6,763)
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Total stockholders' equity ....................................... 150,400 10,156 (3,200) 157,356
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Total liabilities and stockholders' equity ....................... $ 203,202 $ 22,467 $ -- $ 225,669
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</TABLE>
See accompanying notes.
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PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
LHS PCM COMBINED
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(In thousands of U.S. Dollars, except per share data)
<S> <C> <C> <C>
Revenues:
License and hardware ................ $ 18,763 $ 8,783 $ 27,546
Service ............................. 30,565 767 31,332
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Total .................................. 49,328 9,551 58,878
Cost of services ....................... 16,895 4,537 21,432
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Gross margin ........................... 32,433 5,013 37,446
Operating expenses:
Sales and marketing ................. 5,053 2,290 7,343
Research and development ............ 11,673 1,173 12,846
General and administrative .......... 4,361 1,128 5,489
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21,087 4,590 25,677
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Earnings before interest and taxes ..... 11,346 423 11,769
Interest (income) expense, net ......... (1,136) 23 (1,113)
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Earnings before income taxes ........... 12,482 400 12,882
Income taxes ........................... 4,494 160 4,654
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Net earnings ........................... $ 7,988 $ 240 $ 8,228
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Net earnings per share:
Basic ............................... $ 0.15 $ .20 $ .15
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Diluted ............................. $ 0.15 $ .12 $ .14
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Shares used in per share calculation
Basic ............................... 52,786 1,180 55,564
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Diluted ............................. 54,378 2,082 59,279
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</TABLE>
See accompanying notes.
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NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION. The merger will be accounted for using the
pooling-of-interests method of accounting and, as a result, the unaudited pro
forma combined condensed balance sheet and statements of operations are
presented as if the combining companies had been combined for all periods
presented. The unaudited pro forma combined condensed financial statements for
the years ended December 31, 1998 and 1997 will become the historical financial
statements of LHS upon issuance of financial statements for a period that
includes the date of the merger. No material adjustments were required to
conform the accounting policies of LHS and Priority Call.
STOCKHOLDERS' EQUITY. The common stockholders' equity account of LHS as of March
31, 1999, has been adjusted to reflect the assumed issuance of approximately 4.1
million shares of LHS common stock in exchange for all the issued and
outstanding Priority Call capital stock based upon the exchange ratio of 2.3542
shares of LHS common stock for each share of Priority Call capital stock. The
actual number of shares of LHS common stock to be issued will be determined at
the effective time of the merger based on the exchange ratio and the number of
shares of Priority Call capital stock then outstanding.
MERGER-RELATED EXPENSES. The unaudited pro forma data are presented for
informational purposes only and do not give effect to any synergies that may
occur due to the combining of LHS's and Priority Call's existing operations. LHS
expects to incur charges to operations currently estimated to be approximately
$5.0 million in the quarter ending June 30, 1999, the quarter in which the
merger is expected to be consummated, to reflect costs associated with combining
the operations of the two companies, primarily the transaction fees and costs
incident to the merger. An estimate of merger-related expenses of $3.2 million,
after giving effect to estimated tax benefits, is reflected in the unaudited pro
forma combined condensed balance sheet and is not included in the unaudited pro
forma combined condensed statement of operations. This is a preliminary estimate
only and, therefore, is subject to change.
PRO FORMA ADJUSTMENTS. Adjustments have been included in the pro forma combined
condensed balance sheet to reflect the exchange ratio and the merger related
costs described above. Pro forma adjustments to reflect the effect of the merger
on the pro forma condensed combined balance sheet at December 31, 1998, are as
follows:
- - Common stock is increased by $41,000 to record the LHS common stock
issued in the merger and is decreased by $18,000 to record the
retirement of the Priority Call capital stock.
- - Combined additional paid-in capital is adjusted for the effects of the
pro forma adjustment in a above.
- - Accrued liabilities and retained earnings reflect the estimated direct
costs of the merger of $3.2 million, after giving effect to estimated
tax benefits.
- - Amounts payable in connection with a license agreement of Priority Call
of $900 including a catch-up amount of $500 become due during 1999 in
the event of a change in control and have been reclassified from long
term to current.
NET EARNINGS PER SHARE. Pro forma earnings per basic and diluted share for each
period are based on the combined weighted average number of shares of common
stock outstanding (and dilutive securities for diluted earnings per share),
after adjusting for the conversion of outstanding shares of Priority Call
capital stock into LHS common stock at the exchange ratio.
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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.
LHS GROUP INC.
(Registrant)
Date: June 10, 1999 By /s/ Scott Wharton
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Scott Wharton
Senior Vice President and
General Counsel
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