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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
JULY 8, 1996 (JUNE 21, 1996)
AFFILIATED COMPUTER SERVICES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 0-24787 51-0310342
(State or other (Commission file number) (IRS employer
jurisdiction of identification no.)
incorporation)
</TABLE>
2828 NORTH HASKELL AVENUE, DALLAS, TEXAS 75204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 841-6111
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 21, 1996, Affiliated Computer Services, Inc. (the "Company")
acquired 100% of the stock of The Genix Group, Inc. ("Genix") from MCN
Investment Corporation ("MCN Investment") for approximately $137.5 million in
cash (the "Acquisition"). The consideration was determined by arms-length
negotiations between representatives of the Company and Genix.
Genix, headquartered in Dearborn, Michigan, provides nationwide data
processing outsourcing services. Genix focuses primarily on providing a diverse
set of data processing outsourcing solutions to companies and delivering data
processing services on a remote basis from host data centers. The mission
critical application systems processed by Genix for its customers include claims
management, manufacturing, retail and wholesale distribution, and financial
systems. In addition to data processing services, Genix provides network
management services, electronic printing, mailing and fulfillment services,
application management services, and business process solutions.
Prior to the Acquisition, Genix owned plant, equipment, and other physical
property devoted principally to its general outsourcing business. The Company
intends that Genix and the Company will continue to devote these assets for the
same purpose.
To finance the Acquisition, the Company incurred approximately $137.5
million in bank debt under its revolving credit agreement, as amended (the
"Amended Credit Agreement"), with Wells Fargo Bank (Texas), N.A. and Bank One,
Texas, N.A. On June 28, 1996, the Company received net proceeds of approximately
$91.9 million (before offering expenses) in connection with an underwritten
public offering of its Class A Common Stock, which were used to repay a portion
of the debt under the Amended Credit Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Genix (incorporated by reference to the
Company's Registration Statement on Form S-3, Registration No. 333-05639).
Independent Auditors' Report
Consolidated Statement of Financial Position as of December 31, 1994 and 1995
Consolidated Statements of Income for the Years Ended December 31, 1993, 1994
and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
1994 and 1995
Notes to Consolidated Financial Statements
Consolidated Interim Financial Position as of March 31, 1996
Condensed Consolidated Interim Statement of Income for the Three Months Ended
March 31, 1995 and 1996
Condensed Consolidated Interim Statement of Cash Flows for the Three Months
Ended March 31, 1995 and 1996
Notes to Condensed Consolidated Interim Financial Statements
(b) Pro Forma Financial Information (Unaudited).
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996 and Related
Notes
Pro Forma Condensed Consolidated Statement of Operations for the Nine Months
Ended March 31, 1996 and Related Notes
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended June
30, 1995 and Related Notes
2
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(c) Exhibits.
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<C> <S>
2 Stock Purchase Agreement, dated May 31, 1996, by and between MCN
Investment Corporation and the Company (incorporated by reference to
Exhibit 2.5 to the Company's Registration Statement on Form S-3,
Registration No. 333-05639)
23 Consent of Deloitte & Touche LLP.
99.1 Financial Statements of Genix (incorporated by reference to the
Company's Registration Statement on Form S-3, Registration No.
333-05639).
99.2 Pro Forma Financial Information.
</TABLE>
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AFFILIATED COMPUTER SERVICES, INC.
Date: July 8, 1996 By: /s/ MARK A. KING
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Mark A. King
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
4
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INDEX TO EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION
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2 Stock Purchase Agreement, dated May 31, 1996, by and between MCN Investment Corporation and the Company
(incorporated by reference to Exhibit 2.5 to the Company's Registration Statement on Form S-3,
Registration No. 333-05639).
*23 Consent of Deloitte & Touche LLP.
99.1 Financial Statements of Genix (incorporated by reference to the Company's Registration Statement on Form
S-3, Registration No. 333-05639).
*99.2 Pro Forma Financial Information.
</TABLE>
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* Filed herewith.
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EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this filing of Affiliated
Computer Services, Inc. ("Company") on Form 8-K of our report on the
consolidated financial statements of The Genix Group, Inc. and subsidiaries
dated March 7, 1996 included in the Prospectus, which is a part of the Company's
Registration Statement on Form S-3 (File Number 333-05639) dated June 24, 1996.
Deloitte & Touche LLP
Detroit, Michigan
July 8, 1996
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EXHIBIT 99.2
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
INDEX TO PRO FORMA FINANCIAL STATEMENTS
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PAGES
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PRO FORMA FINANCIAL STATEMENTS (UNAUDITED):
Pro Forma Condensed Consolidated Financial Information................................................... 2
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996 and Related Notes.................... 3
Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended March 31, 1996 and
Related Notes........................................................................................... 5
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended June 30, 1995 and Related
Notes................................................................................................... 7
</TABLE>
1
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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet as of
March 31, 1996 set forth below presents the financial position of the Company as
if the acquisition of The Genix Group, Inc. ("Genix") had occurred on March 31,
1996. The unaudited pro forma condensed consolidated balance sheet as of March
31, 1996 combines, with appropriate adjustments, the Company's unaudited
condensed consolidated balance sheet as of March 31, 1996 and the unaudited
consolidated statement of financial position of Genix as of March 31, 1996.
The unaudited pro forma condensed consolidated statements of operations for
the nine months ended March 31, 1996 and the year ended June 30, 1995 set forth
below present the results of operations of the Company for such period and such
year as if the acquisition of Genix had occurred at the beginning of each such
period. The unaudited pro forma condensed consolidated statement of operations
for the nine months ended March 31, 1996 combines, with appropriate adjustments,
the Company's and Genix' unaudited condensed consolidated results of operations
for the nine months ended March 31, 1996. The unaudited pro forma condensed
consolidated statement of operations for the year ended June 30, 1995, combines,
with appropriate adjustments, the Company's audited consolidated results of
operations for its fiscal year ended June 30, 1995 and the unaudited
consolidated results of operations for Genix for the twelve months ended June
30, 1995. Certain reclassifications were made to conform the historical
financial statements of Genix with the Company's historical financial
statements.
The unaudited pro forma condensed consolidated financial statements have
been prepared on the basis of preliminary assumptions and estimates. The pro
forma adjustments represent the Company's preliminary determinations of these
adjustments and are based on available information and certain assumptions the
Company considers reasonable under the circumstances. Final amounts could differ
from those set forth herein. The unaudited pro forma consolidated financial
statements may not be indicative of the results of operations that would have
been achieved if the acquisition of Genix had been effected on the dates
indicated or which may be achieved in the future. The unaudited pro forma
consolidated financial statements and notes thereto should be read in
conjunction with the Company's "Selected Consolidated Financial Data",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the annual consolidated financial statements of the Company and
Genix, not included herein.
2
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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
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<CAPTION>
PRO FORMA
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GENIX ACQUISITION
ASSETS ACS GENIX (A) ADJUSTMENTS COMBINED
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<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................................... $ 35,401 $ 1,048 -- $ 36,449
ATM cash.................................................................... 8,950 -- -- 8,950
Accounts receivable, net.................................................... 58,370 26,867 -- 85,237
Inventory................................................................... 10,892 -- -- 10,892
Prepaid expenses and other.................................................. 18,329 5,370 $ (400)(B) 23,299
-------- --------- -------- --------
Total current assets...................................................... 131,942 33,285 (400) 164,827
Property and equipment, net................................................... 57,303 34,787 (10,417)(B) 81,673
Goodwill and other intangible assets, net..................................... 100,961 8,599 130,432(C) 239,992
Other long-term assets........................................................ 15,454 1,987 -- 17,441
-------- --------- -------- --------
Total assets.............................................................. $305,660 $78,658 $ 119,615 $503,933
-------- --------- -------- --------
-------- --------- -------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................................... $ 61,714 $12,332 $ 13,115 (D)(F) $ 87,161
Notes payable, affiliate.................................................... -- 34,071 (34,071)(E) --
Current portion of long-term debt........................................... 14,520 695 -- 15,215
Current portion of unearned revenue......................................... 11,034 -- -- 11,034
-------- --------- -------- --------
Total current liabilities................................................. 87,268 47,098 (20,956) 113,410
Long-term debt................................................................ 7,315 4,355 137,500(E) 149,170
Other long-term liabilities................................................... 15,979 6,594 23,682 (B)(F) 46,255
-------- --------- -------- --------
Total liabilities......................................................... 110,562 58,047 140,226 308,835
-------- --------- -------- --------
Cumulative redeemable preferred stock......................................... 1,100 -- -- 1,100
-------- --------
Stockholders' equity:
Common stock................................................................ 154 -- -- 154
Additional paid-in capital.................................................. 150,199 20,036 (20,036)(G) 150,199
Retained earnings........................................................... 43,645 575 (575)(G) 43,645
-------- --------- -------- --------
Total stockholders' equity................................................ 193,998 20,611 (20,611) 193,998
-------- --------- -------- --------
Total liabilities and stockholders' equity................................ $305,660 $78,658 $ 119,615 $503,933
-------- --------- -------- --------
-------- --------- -------- --------
</TABLE>
See Notes to Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 1996.
3
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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(A) Information obtained from the March 31, 1996 unaudited condensed
consolidated statement of financial position of Genix. Certain amounts
reported in Genix's historical financial statements have been reclassified
to conform with the Company's presentation in the Pro Forma Condensed
Consolidated Balance Sheet.
(B) Adjusts assets and liabilities to their respective fair values.
(C) Reflects goodwill and other intangible assets originating from the Company's
purchase of all of the outstanding stock of Genix. Represents a preliminary
allocation of the excess purchase price using the purchase method of
accounting for the transaction after adjusting the assets acquired and
liabilities assumed to their respective fair values. The purchase price of
Genix could be adjusted downward by up to $41 million based upon the
occurrence of certain contingencies, which include, among other things,
adjustments arising from changes in net assets acquired, retention of
certain large customers for one to two years and tax-related matters.
(D) Reflects transaction costs associated with acquisition of Genix which are
estimated to be $1.3 million and the estimated severance costs and other
benefits of approximately $3.5 million which are to be paid as a result of
an immediate reduction in duplicate workforce.
(E) Adjusts for the Company's financing associated with the transaction and the
extinguishment of intercompany debt owed to the parent of Genix prior to the
acquisition.
(F) Reflects estimate of a liability of up to an additional $32.1 million
resulting from the acquisition of Genix. The liability is associated with a
long-term fixed obligation between Genix and a vendor that was entered into
in March 1995. As the obligation relates to duplicate services for which the
Company has already contracted, the obligation is considered to be an
unfavorable commitment, and the present value of the obligation is reflected
as a liability. Of the total liability of $32.1 million, of which $1.3
million was recorded by Genix as of March 31, 1996, $8.4 million is
reflected as a current liability. Payments related to this obligation are
payable over the remaining nine years of the contract.
(G) Eliminates the equity of Genix.
4
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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
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GENIX
ACQUISITION
ACS GENIX (A) ADJUSTMENTS COMBINED
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<S> <C> <C> <C> <C>
Revenues....................................................... $ 279,708 $ 83,417 $ 363,125
---------- ----------- ----------
Expenses:
Wages and benefits........................................... 110,772 24,046 $ (2,810)(B) 132,008
Services and supplies........................................ 71,313 7,215 (450)(B) 78,078
Rent, lease and maintenance.................................. 55,262 36,188 (780)(C) 90,670
Lease termination charge (G)................................. -- 2,353 -- 2,353
Depreciation and amortization................................ 10,745 5,236 2,337(D) 18,318
Other operating expenses..................................... 3,343 4,324 7,667
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Total operating expenses................................... 251,435 79,362 (1,703) 329,094
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Operating income........................................... 28,273 4,055 1,703 34,031
Interest and other expenses, net............................... 614 1,616 5,377(E) 7,607
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Income before income taxes................................. 27,659 2,439 (3,674) 26,424
Income tax expense (benefit)................................... 11,191 952 (1,580)(F) 10,563
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Net income................................................. $ 16,468 $ 1,487 $ (2,094) $ 15,861
---------- ----------- ------------- ----------
---------- ----------- ------------- ----------
Earnings per common share...................................... $ 1.19 $ 1.15
---------- ----------
---------- ----------
Weighted average shares outstanding............................ 13,849 13,849
---------- ----------
---------- ----------
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statement of Operations
for the Nine Months Ended March 31, 1996.
5
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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1996
(A) Information obtained from the unaudited interim financial statements of
Genix for the nine months ended March 31, 1996. Certain amounts reported in
Genix's historical financial information have been reclassified to conform
with the Company's presentation in the Pro Forma Condensed Consolidated
Statement of Operations.
(B) Reflects the savings expected as a result of employee terminations (i.e.,
salary and related expenses) to be effected immediately after consummation
of the acquisition.
(C) Reflects the reduction in duplicate expenses related to software fees for
which the Company has an existing license.
(D) Reflects the additional amortization of expense of approximately $2.5
million resulting from the allocation of the excess cost of the acquisition
to goodwill after recording the fair value of the assets acquired and the
liabilities assumed and the net reduction in depreciation and amortization
expense of approximately $.2 million as a result of recording Genix's assets
at their respective fair values based on a preliminary purchase price
allocation.
(E) Reflects $6.9 million in interest expense for the financing of the
transaction based upon the terms of the Company's increase in its revolving
line of credit and a $1.5 million reduction in interest expense on
intercompany debt owed to the parent of Genix. The intercompany debt was
extinguished in connection with the consummation of the acquisition.
(F) Reflects the income tax effect for the pro forma adjustments at Genix's
effective tax rate.
(G) In March 1996, Genix entered into a long-term lease agreement to obtain the
latest technology in computer processing equipment. The new equipment is
anticipated to generate substantial savings in annual operating costs and
contribute to overall system efficiency and reliability. In conjunction with
entering into this new agreement, Genix terminated existing leases for
equipment that had been used to provide the same functions as the new
equipment. The lease termination resulted in a $2,353,000 non-recurring
charge to operations in March 1996.
6
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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
----------------------
GENIX
ACQUISITION
ACS GENIX (A) ADJUSTMENTS COMBINED
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<S> <C> <C> <C> <C>
Revenues........................................................................ $313,181 $98,592 -- $411,773
-------- --------- ----------- --------
Expenses:
Wages and benefits............................................................ 106,966 26,845 $(3,746)(B) 130,065
Services and supplies......................................................... 77,613 7,278 (600)(B) 84,291
Rent, lease and maintenance................................................... 80,250 42,502 (1,313)(C) 121,439
Depreciation and amortization................................................. 11,847 6,721 2,710(D) 21,278
Other operating expenses...................................................... 4,963 7,363 12,326
-------- --------- ----------- --------
Total operating expenses.................................................... 281,639 90,709 (2,949) 369,399
-------- --------- ----------- --------
Operating income............................................................ 31,542 7,883 2,949 42,374
Interest and other expenses, net................................................ 1,755 1,495 7,846(E) 11,096
-------- --------- ----------- --------
Income before income taxes.................................................. 29,787 6,388 (4,897) 31,278
Income tax expense (benefit).................................................... 12,183 2,902 (2,106)(F) 12,979
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Net income.................................................................. $ 17,604 $ 3,486 $(2,791) $ 18,299
-------- --------- ----------- --------
-------- --------- ----------- --------
Earnings per common share....................................................... $ 1.37 $ 1.43
-------- --------- ----------- --------
-------- --------- ----------- --------
Weighted average shares outstanding............................................. 12,808 12,808
-------- --------- ----------- --------
-------- --------- ----------- --------
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended June 30, 1995.
7
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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
(A) Information obtained from the unaudited financial statements of Genix for
the twelve months ended June 30, 1995. Certain amounts reported in Genix's
historical financial information have been reclassified to conform with the
Company's presentation in the Pro Forma Condensed Consolidated Statement of
Operations.
(B) Reflects savings expected as a result of employee terminations (i.e., salary
and related expenses) to be effected immediately after consummation of the
acquisition.
(C) Reflects the reduction in duplicate expenses related to software fees for
which the Company has an existing license.
(D) Reflects the additional amortization of expense of approximately $3.4
million resulting from the allocation of the excess cost of the acquisition
to goodwill after recording the fair value of the assets acquired and the
liabilities assumed and the net reduction in depreciation and amortization
expense of approximately $0.7 million as a result of recording the Genix's
assets at their respective fair values based on a preliminary purchase price
allocation.
(E) Reflects $9.5 million in interest expense for the financing of the
transaction based upon the terms of the Company's increase in its revolving
line of credit and a $1.7 million reduction in interest expense on
intercompany debt owed to the parent of Genix. The intercompany debt was
extinguished in connection with the consummation of the acquisition.
(F) Reflects the income tax effect for the pro forma adjustments at Genix's
effective tax rate.
8
