<PAGE>
================================================================================
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 EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) - AUGUST 12, 1999
---------------
INFORMATION HOLDINGS INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-14371 06-1518007
- --------------------------- ------- ----------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
2777 SUMMER STREET, SUITE 209, STAMFORD, CONNECTICUT 06905
- ---------------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 961-9106
================================================================================
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
(a) Financial Statements of Business Acquired
The following financial statements are included herein:
I. Financial Statements of Master Data Center, Inc.
Report of Independent Auditors
Balance Sheets as of December 31, 1998 and June 30, 1999 (unaudited)
Statements of Operations for the Periods January 1, 1998 through
November 27, 1998 and November 27, 1998 through December 31,
1998 and for the Six Months Ended June 30, 1999 (unaudited)
Statements of Cash Flows for the Periods January 1, 1998 through
November 27, 1998 and November 27, 1998 through December 31,
1998 and for the Six Months Ended June 30, 1999 (unaudited)
Notes to Financial Statements
(b) Pro Forma Financial Information
The following pro forma financial information is included herein:
I. Pro Forma Condensed Consolidated Financial Statements of Information
Holdings Inc.
Introduction
Pro Forma Condensed Consolidated Statements of Operations for the
year ended December 31, 1998 and for the Six Months Ended June
30, 1999
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1999
Notes to Pro Forma Consolidated Financial Statements
(c) Exhibit
23.1 Consent of Ernst & Young LLP
<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.
INFORMATION HOLDINGS INC.
Dated: October 26, 1999 By: /S/ MASON P. SLAINE
----------------------------------------
Name: Mason P. Slaine
Title: President
<PAGE>
Report of Independent Auditors
Board of Directors
Pearson Plc.
We have audited the accompanying balance sheet of Master Data Center, Inc. (the
Company) an indirectly wholly-owned subsidiary of Pearson, Plc. (the Successor)
as of December 31, 1998 and the related statements of operations and cash flows
for the periods of November 28, 1998 through December 31, 1998, and for the
period in which the Company was a wholly-owned subsidiary of Viacom Inc. (the
Predecessor) of January 1, 1998 through November 27, 1998. 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 audits.
We conducted our audits 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 audits provide 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 Master Data Center, Inc., at
December 31, 1998 and the results of its operations and its cash flows for the
period November 28, 1998 through December 31, 1998 and for the Predecessor for
the period January 1, 1998 through November 27, 1998 in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
August 5, 1999, except for Note 1
which is dated August 12, 1999
F-1
<PAGE>
MASTER DATA CENTER, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ECEMBER 31 JUNE 30
1998 1999
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable $ 5,016 $ 6,182
Prepaid expenses 148 214
---------- -----------
Total current assets 5,164 6,396
Property and equipment, net (NOTE 3) 5 5
Intangible assets, net (NOTE 1) 15,735 15,345
Goodwill, net (NOTE 1) 33,554 32,714
Other assets 94 116
---------- -----------
TOTAL $ 54,552 $ 54,576
---------- -----------
---------- -----------
LIABILITIES AND PEARSON PLC. EQUITY INVESTMENT
CURRENT LIABILITIES:
Annuity tax payment services payable $ 10,777 $ 12,309
Other accounts payable 272 230
Accrued expenses and other liabilities (NOTES 4 AND 7) 3,496 3,767
---------- -----------
Total current liabilities 14,545 16,306
Deferred tax liabilities (NOTE 7) 6,293 6,137
Pearson Plc. equity investment 33,714 32,133
---------- -----------
TOTAL $ 54,552 $ 54,576
---------- -----------
---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-2
<PAGE>
MASTER DATA CENTER, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR SIX MONTHS
COMPANY COMPANY ENDED
JANUARY 1 NOVEMBER 28 JUNE 30
1998 - 1998- 1999
NOVEMBER 27 DECEMBER 31 (UNAUDITED)
1998 1998
<S> <C> <C> <C>
Revenues $ 7,114 $ 725 $ 3,998
Cost of sales 3,105 329 2,151
---------------- ---------------- ---------------
Gross profit 4,009 396 1,847
---------------- ---------------- ---------------
Operating expenses:
Selling, general and administrative 1,265 188 695
Depreciation and amortization 1,021 213 1,230
---------------- ---------------- ---------------
Total operating expenses 2,286 401 1,925
---------------- ---------------- ---------------
Income (loss) from operations 1,723 (5) (78)
Provision for income taxes 949 55 305
---------------- ---------------- ---------------
Net income (loss) $ 774 $ (60) $ (383)
---------------- ---------------- ---------------
---------------- ---------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE>
MASTER DATA CENTER, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR SIX MONTHS
COMPANY COMPANY ENDED
JANUARY 1 NOVEMBER 28 JUNE 30
1998 - 1998- 1999
NOVEMBER 27 DECEMBER 31 (UNAUDITED)
1998 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 774 $ (60) $ (383)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,021 213 1,230
Deferred income taxes 35 (27) (156)
Changes in operating assets and liabilities:
Accounts receivable 887 (2,694) (1,166)
Prepaid expenses (125) 17 (66)
Other assets - (43) (22)
Accounts payable (6,646) 8,206 1,490
Accrued expenses and other liabilities 7,139 (6,386) 271
------------- ---------------- ---------------
Net Cash Provided by (Used in) operating activities 3,085 (774) 1,198
------------- ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net distributions (to) from Viacom Inc./
Pearson Plc. (3,404) 746 (1,198)
Amounts paid by Viacom Inc./Pearson Plc. 319 28 -
------------- ---------------- ---------------
Net Cash (Used in) Provided by financing activities (3,085) 774 (1,198)
------------- ---------------- ---------------
Net change in cash - - -
Cash at beginning of period - - -
------------- ---------------- ---------------
Cash at end of period $ - $ - $ -
------------- ---------------- ---------------
------------- ---------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
Master Data Center, Inc. ("MDC" or the "Company") is a provider of intellectual
property services and software. The Company provides annuity tax payment
services for owners of intellectual property in domestic and foreign markets and
patent and trademark management software for the management of intellectual
property. The Company also provides other related services including training
and product maintenance.
MDC is an indirect wholly owned subsidiary of Pearson Plc. ("Pearson" or the
"Successor") which acquired the Company from Viacom Inc. ("Viacom" or the
"Predecessor") on November 27, 1998. The allocated purchase price of $33 million
in connection with Pearson's acquisition from the Predecessor on November 27,
1998 was preliminarily allocated to acquired net assets based upon the
estimates of their respective fair market value as follows:
Accounts receivable and prepaid expenses
$ 2,487
Property and equipment and capitalized
software 63
Goodwill 33,695
Customer list 15,800
Liabilities assumed (19,045)
-------------------
$ 33,000
-------------------
-------------------
The allocation of the purchase price on November 27, 1998 described above was a
non-cash transaction as the $33 million purchase price resulted in an increase
in the Pearson Plc. Equity investment account.
Goodwill and the customer list are being amortized over 20 years. Goodwill and
other intangible amortization expense was $140 and $65 for the period from
November 28, 1998 through December 31, 1998, respectively.
The financial statements for the period from January 1, 1998 through November
27, 1998 are presented on the Company's previous basis of accounting. Viacom
allocated the excess cost over fair value of the net tangible assets acquired to
goodwill and the customer list, which prior to November 27, 1998 was being
amortized over 20 years. Goodwill and other intangible amortization expense for
the period January 1, 1998 through November 27, 1998 was $601 and $340,
respectively.
F-5
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
On May 14, 1999, Pearson entered into an agreement to sell the stock of the
Company to Information Holdings Inc. ("Information Holdings") for $33 million in
cash. The transaction was completed on August 12, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
INTERIM FINANCIAL STATEMENTS
The balance sheet as of June 30, 1999 and the statements of operations and cash
flows for the six months ended June 30, 1999 are unaudited and have been
prepared on the same basis as the audited financial statements included herein.
In the opinion of management, such unaudited financial statements include all
adjustments necessary to present fairly the information set forth therein, which
consists solely of normal recurring adjustments. The results of operations for
the interim periods are not necessarily indicative of results for the full year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of sales and expenses during the reporting period. Actual
results could subsequently differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the straight-line method
over the estimated useful lives of individual assets.
F-6
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
GOODWILL AND INTANGIBLES
The Company periodically assesses the recoverability of intangibles based on its
expectations of future profitability and the undiscounted cash flow of
operations. These factors, along with management's plans with respect to
operations, are considered in assessing the recoverability of goodwill and other
intangibles. If the Company determines, based on such measures, that the
carrying amount is impaired, the goodwill and intangibles will be written down
to its recoverable value with a corresponding charge to earnings. During the
periods presented no impairment writedowns were incurred.
SOFTWARE DEVELOPMENT COSTS
Capitalized software is stated at the lower of cost or net realizable value.
Principally all software development activities are performed by independent
third parties. The Company capitalizes costs of developing and enhancing its
software products after the determination of technological feasibility, which
includes the completion of a detail program design in accordance with Statement
of Financial Accounting Standards No. 86 ("SFAS 86") "Accounting for the Costs
of Computer Software to be Sold, Leased, or Otherwise Marketed." Development
costs incurred prior to the determination of technological feasibility are
expensed as incurred as research and development costs. Amortization of
capitalized software costs commences once the intended product or release is
available for sale and is amortized ratably over a 3 year period.
REVENUE RECOGNITION
Revenue from annuity tax payment services is recognized in the period when the
related annuity tax payments are made to various regulatory agencies. Amounts
collected from annuity tax customers include a fee for such services which is
recorded as revenue. The amounts passed through to the various regulatory
agencies for annuity tax payment services during the periods of November 28,
1998 through December 31, 1998, January 1 through November 27, 1998 and for the
six months ended June 30, 1999 approximated $2,327, $55,122, and $34,846,
respectively.
Software license revenue is recognized upon shipment, provided no significant
future obligations exist and collection is probable. Software maintenance and
training revenues are recognized ratably over the service period. Deferred
revenue primarily represents the unearned portion of revenue related to software
maintenance.
F-7
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
ADVERTISING EXPENSES
The Company expenses advertising costs as they are incurred. Advertising
expenses for the periods of November 28, 1998 through December 31, 1998 and
January 1, 1998 through Novemer 27, 1998 were $7 and $86, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
133 will be required to be adopted in years beginning after June 15, 2000. SFAS
133 will require the Company to recognize all derivatives on the balance sheet
at fair value. The Company does not anticipate that the adoption of this SFAS
will have a significant effect on its results of operations or financial
position.
3. PROPERTY AND EQUIPMENT
Property and Equipment consists primarily of office furniture. The cost and
accumulated depreciation approximated $5 and $1 at December 31, 1998
Depreciation expense was $3 for the eleven month period ended November 27, 1998
and $1 for the period November 28, 1998 through December 31, 1998.
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are comprised of the following at
December 31, 1998:
Bank overdrafts $2,107
Accrued compensation 479
Deferred revenue 743
Other accrued expenses 167
-------------
$3,496
-------------
-------------
F-8
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
5. VIACOM/PEARSON EQUITY INVESTMENT
An analysis of the Viacom/Pearson equity investment activity is as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
COMPANY COMPANY
JANUARY 1, 1998- NOVEMBER 28, 1998-
NOVEMBER 27, 1998 DECEMBER 31, 1998
----------------------------------------------------
<S> <C> <C>
Balances as of the beginning of the
period $4,585 $ -
Net earnings 774 (60)
Net Capital Contribution - 33,000
Net distributions (to)/from
Viacom/Pearson (3,404) 746
Allocated charges from
Viacom/Pearson 319 28
----------------------------------------------------
Balances as of the end of the period $2,274 $33,714
----------------------------------------------------
----------------------------------------------------
</TABLE>
Viacom/Pearson funds the working capital requirements of the Company based upon
a centralized cash management system. The equity investment account includes
accumulated equity as well as any payables and receivables due to/from
Viacom/Pearson resulting from cash transfers and other intercompany activity. No
interest was charged to the Company on intercompany balances.
6. RELATED PARTY TRANSACTIONS
Viacom/Pearson provided the Company with certain general and administrative
services including insurance, legal, financial and other corporate functions.
Allocated charges for such services were $58 for the eleven month period ending
November 27, 1998 and $7 for the period of November 28, 1998 through December
31, 1998.
Viacom/Pearson sponsor a noncontributory defined benefit pension plan covering
substantially all of its employees, including employees of the Company.
Retirement benefits are based principally on years of service and salary.
Viacom/Pearson charged the Company for pension expense of $44 for the eleven
month period ended November 27, 1998 and $7 for the period November 28, 1998
through December 31, 1998.
F-9
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
Viacom/Pearson also provide other employee benefits to MDC's employees,
including certain post employment benefits, medical and dental insurance costs
and contributions to a 401(k) savings plan. Viacom/Pearson charged the Company
$217 for the eleven month period ended November 27, 1998 and $14 for the period
November 28, 1998 through December 31, 1998 for these benefits.
Management believes that the methodologies used to allocate charges for the
services described above are reasonable.
7. INCOME TAXES
The Company has been included in consolidated federal, state and local income
tax returns filed by Viacom/Pearson. However, the tax expense reflected in the
statement of operations and tax liabilities reflected in the balance sheet have
been prepared on a separate return basis as though the Company had filed
stand-alone income tax returns. The current income tax liabilities of $82 for
the period presented have been reflected in the accrued expenses and other
liabilities in the balance sheet.
Components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
COMPANY COMPANY
JANUARY 1, 1998- NOVEMBER 28, 1998-
NOVEMBER 27, 1998 DECEMBER 31, 1998
---------------------------------------------------
<S> <C> <C>
Current:
Federal $800 $72
State 114 10
---------------------------------------------------
Total current 914 82
Deferred:
Federal 31 (24)
State 4 (3)
---------------------------------------------------
Total deferred 35 (27)
---------------------------------------------------
Provision for income taxes $949 $55
---------------------------------------------------
---------------------------------------------------
</TABLE>
F-10
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
7. INCOME TAXES (CONTINUED)
The Company's provision for income taxes differed from the amount computed by
applying the statutory tax rate to operating income/(loss) as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
COMPANY COMPANY
JANUARY 1, 1998- NOVEMBER 28, 1998-
NOVEMBER 27, 1998 DECEMBER 31, 1998
----------------------------------------------------------
<S> <C> <C>
Federal statutory tax rate $603 $(2)
Amortization of nondeductible goodwill 210 49
State taxes (net of federal benefit) and
other 136 8
----------------------------------------------------------
----------------------------------------------------------
$949 $55
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
Deferred taxes reflect the net effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
income tax purposes. Significant components of the Company's deferred tax assets
and liabilities as of December 31, 1998 are as follows:
Current deferred tax assets:
Allowance for doubtful accounts and other $ 4
Noncurrent deferred liabilities:
Intangible asset bases differences (6,293)
-------------------
Net deferred tax liabilities $(6,289)
-------------------
-------------------
F-11
<PAGE>
MASTER DATA CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED)
(IN THOUSANDS)
8. COMMITMENTS
The Company has long-term noncancelable lease commitments for office space and
equipment which expire at various dates.
At December 31, 1998, minimum rental payments under noncancelable leases are as
follows:
1999 $246
2000 143
2001 and thereafter -
-------------------
$389
-------------------
-------------------
Rent expense was $218 for the eleven month period ended November 27, 1998 and
$20 for the period November 28, 1998 through December 31, 1998.
9. FORWARD CONTRACTS
At December 31, 1998, the Company had entered into forward contracts to acquire
various international currencies aggregating approximately $7.1 million. Such
forward contracts have been designated as hedges for future annual patent
payments to related international regulatory agencies.
F-12
<PAGE>
INFORMATION HOLDINGS INC.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated statements of
operations of Information Holdings Inc. for the year ended December 31, 1998 and
for the six months ended June 30, 1999 and the unaudited pro forma condensed
consolidated balance sheet as of June 30, 1999 give effect to the acquisition of
Master Data Center, Inc. as if it occurred on January 1, 1998. The unaudited
condensed consolidated financial statements give effect to the acquisition under
the purchase method of accounting and the assumptions in the accompanying notes
to the condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial statements
have been prepared by the Company's management. The unaudited pro forma
condensed consolidated financial statements are not designed to represent and do
not represent what the Company's results of operations and financial position
would have been had the aforementioned transaction been completed as of the date
or at the beginning of the period indicated or to project the Company's results
of operations or financial position at any future date or any future period. The
pro forma condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes contained in
the Company's 1998 Annual Report on Form 10-K, Form 10-Q, and the MDC financial
statements included herein.
F-13
<PAGE>
INFORMATION HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
INFORMATION MASTER PRO FORMA PRO FORMA
HOLDINGS DATA CENTER ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C>
Revenues $ 46,651 $ 7,839 $54,490
Cost of sales 11,707 3,434 15,141
----------- ------- -------
Gross profit 34,944 4,405 39,349
----------- ------- -------
Operating expenses:
Selling, general and administrative 24,871 1,453 26,324
Depreciation and amortization 5,313 1,234 $ 1,644(1) 8,191
Severance and special bonuses 1,050 -- -- 1,050
----------- ------- -------- -------
Total operating expenses 31,234 2,687 1,644 35,565
----------- ------- -------- -------
Income (loss) from operations 3,710 1,718 (1,644) 3,784
----------- ------- -------- -------
Other income (expense):
Interest income (expense), net 1,117 -- (570)(2) 547
----------- ------- -------- -------
Income (loss) before income taxes 4,827 1,718 (2,214) 4,331
Provision (benefit) for income taxes 42 1,004 (843)(3) 203
----------- ------- -------- -------
Net income (loss) $ 4,785 $ 714 $ (1,371) $ 4,128
----------- ------- -------- -------
----------- ------- -------- -------
Earnings per share $ 0.28 $ 0.24
(basic and diluted) ----------- -------
----------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
F-14
<PAGE>
INFORMATION HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
JUNE 30, 1999
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
INFORMATION MASTER PRO FORMA PRO FORMA
HOLDINGS DATA CENTER ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C>
Revenues $ 25,032 $ 3,998 $ 29,030
Cost of sales 6,743 2,151 8,894
---------- ---------- ----------
Gross profit 18,289 1,847 20,136
---------- ---------- ----------
Operating expenses:
Selling, general and administrative 13,682 695 14,377
Depreciation and amortization 2,058 1,230 $ 165 (1) 3,453
---------- ---------- -------- ----------
Total operating expenses 15,740 1,925 165 17,830
---------- ---------- -------- ----------
Income (loss) from operations 2,549 (78) (165) 2,306
---------- ---------- -------- ----------
Other income (expense):
Interest income (expense), net 1,107 - (742) (2) 365
Other expense (18) - - (18)
---------- ---------- -------- ----------
Income (loss) before income taxes 3,638 (78) (907) 2,653
Provision (benefit) for income taxes 1,419 305 (527) (3) 1,197
---------- ---------- -------- ----------
Net income (loss) $ 2,219 $ (383) $ (380) $ 1,456
---------- ---------- -------- ----------
---------- ---------- -------- ----------
Earnings per share $ 0.13 $ 0.09
(basic and diluted) ---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
F-15
<PAGE>
INFORMATION HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1999 (IN THOUSANDS)
<TABLE>
<CAPTION>
INFORMATION MASTER PRO FORMA PRO FORMA HOLDINGS
HOLDINGS DATA CENTER ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Cash and equivalents $ 54,730 $(33,000)(4) $ 21,730
Accounts receivable 7,117 $ 6,182 -- 13,299
Other current assets 8,816 214 -- 9,030
-------- ------- -------- --------
Total current assets 70,663 6,396 (33,000) 44,059
Intangible assets, including
goodwill, net 23,565 48,059 12,590 (4) 84,214
Other long-term assets 9,152 121 -- 9,273
-------- ------- -------- --------
Total assets $103,380 $54,576 $(20,410) $137,546
-------- ------- -------- --------
-------- ------- -------- --------
Annuity tax payment services payable $12,309 $ 12,309
Other current liabilities $ 12,991 3,997 $ 2,000 (4) 18,988
Long-term liabilities 3,377 6,137 9,723 (4) 19,237
-------- ------- -------- --------
Total liabilities 16,368 22,443 11,723 50,534
Common stock 169 -- -- 169
Paid in capital 84,750 32,133 (32,133)(4) 84,750
Retained earnings 2,093 -- -- 2,093
-------- ------- -------- --------
Total equity 87,012 32,133 (32,133) 87,012
-------- ------- -------- --------
Total liabilities and equity $103,380 $54,576 $(20,410) $137,546
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
F-16
<PAGE>
INFORMATION HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. PRO FORMA ADJUSTMENTS
For purposes of determining the pro forma effect of the acquisition of Master
Data Center, Inc. on Information Holdings Inc.'s ("IHI") Condensed Consolidated
Statements of Operations for the year ended December 31, 1998 and for the six
months ended June 30, 1999 and the Condensed Consolidated Balance Sheet as of
June 30, 1999, the following adjustments have been made (IN THOUSANDS):
<TABLE>
<CAPTION>
Six Months
Year Ended Ended As of
12/31/98 06/30/99 06/30/99
<S> <C> <C>
(1) - Represents incremental amortization of
acquired intangible assets of MDC, amortized
over 20 years $1,644 $165
(2) - Represents a reduction in the interest income
recorded by Information Holdings Inc. on a cash
balance of $33 million, which reflects the acquisition
cost of MDC, at an average rate of 4.5%.
(Interest for the period ended December 31, 1998 is
calculated from the date subsequent to IHI's Initial
Public Offering on August 12, 1998) 570 742
(3) - Represents the income tax benefit of the tax
deductible components of items (1) and (2) above,
at a tax rate of 39%. A portion of incremental
amortization above is not tax deductible (843) (527)
(4) - Represents adjustment to reflect purchase of
MDC based on a preliminary allocation of the purchase
price as follows - debit (credit):
Cash - acquisition cost (33,000)
Intangible assets - adjustment to reflect excess purchase price 12,590
Current liabilities - costs associated with acquisition (2,000)
Deferred taxes - purchase accounting adjustment (9,723)
Paid in capital - eliminate prior owner's equity 32,133
</TABLE>
F-17
<PAGE>
INFORMATION HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. EARNINGS PER SHARE
Earnings per share is calculated by dividing the net income by the weighted
average outstanding shares during the period. The weighted average outstanding
shares during the period are calculated as follows:
<TABLE>
<CAPTION>
December 31 June 30
1998 1999
<S> <C> <C>
Basic:
Shares outstanding 16,943,189 16,943,189
---------- ----------
---------- ----------
Dilutive:
Shares outstanding 16,943,189 16,943,189
Common stock equivalents - 180,250
---------- ----------
16,943,189 17,123,439
---------- ----------
---------- ----------
</TABLE>
F-18
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-63325) pertaining to the Stock Option Plan of Information Holdings
Inc. of our report dated August 5, 1999 (except for Note 1 which is dated August
12, 1999) on the financial statements of Master Data Center, Inc. included in
Information Holdings Inc.'s Current Report (Form 8-K/A) dated October 26, 1999.
Detroit, Michigan ERNST & YOUNG LLP
October 26, 1999
