<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO.1
to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 11, 1998
(Date of Report)
June 26, 1998
(Date of earliest event reported)
ANALYTICAL SURVEYS, INC.
(Exact name of registrant as specified in its charter)
COLORADO
(State of incorporation)
0-13111
(Commission File Number)
084-846389
(IRS Employer Identification No.)
941 North Meridian Street
Indianapolis, Indiana 46204
(Address of principal executive offices)
(317)-634-1000
(Registrant's telephone number)
Item 7. Financial Statements and Exhibits
Analytical Surveys, Inc. (the "Company") acquired the outstanding stock of
Cartotech, Inc., San Antonio, Texas, on June 26, 1998. The Company filed a
Current Report on form 8-K dated June 26, 1998 to report the transaction.
This amendment number 1 to Current Report on Form 8-K dated June 26, 1998
presents the audited financial statements of Cartotech, Inc. for the two
years ended December 31, 1997, unaudited interim financial statement for the
five months ended May 31, 1998, and unaudited pro forma financial information.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Cartotech, Inc.:
We have audited the accompanying balance sheets of Cartotech, Inc. (a Texas
corporation), as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Cartotech, Inc., as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
San Antonio, Texas
March 27, 1998
<PAGE>
CARTOTECH, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
May 31, ----------------------------
ASSETS 1998 1997 1996
------ ------------ ----------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 74,608 $ 265,538 $ 537,949
Accounts receivable, net of allowance of $0 for 1997 and
1996 2,864,005 3,233,448 2,811,195
Inventories, net 10,291 65,941 53,199
Prepaid expenses and other 207,676 80,444 43,214
Deferred tax assets 155,300 155,300 150,300
---------- ----------- -----------
Total current assets 3,311,880 3,800,671 3,595,857
---------- ----------- -----------
INVESTMENT IN CONIC SYSTEMS, INC. 863,388 910,997 -
---------- ----------- -----------
PROPERTY AND EQUIPMENT:
Software 1,092,698 1,054,549 639,700
Machinery and equipment 2,498,202 2,345,700 1,715,209
Furniture and fixtures 295,171 287,133 251,919
Leasehold improvements 394,938 389,166 303,045
---------- ----------- -----------
4,281,009 4,076,548 2,909,873
Less- Accumulated depreciation and amortization (2,667,786) (2,355,499) (1,760,571)
---------- ----------- -----------
1,613,223 1,721,049 1,149,302
---------- ----------- -----------
$5,788,491 $6,432,717 $4,745,159
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CARTOTECH, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND May 31, December 31
STOCKHOLDERS' EQUITY 1998 1997 1996
---------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of notes payable due stockholders $ 73,159 $ 89,910 $ 143,159
Current maturities of long-term debt 482,635 208,176 552,778
Accounts payable 300,191 238,460 385,372
Accrued payroll and benefits 717,308 866,072 535,732
Other accrued liabilities - 73,516 105,339
Income taxes payable 66,458 106,445 342,294
Deferred revenue 364,448 1,436,295 361,682
---------- ----------- -----------
Total current liabilities 2,004,199 3,018,874 2,426,356
---------- ----------- -----------
NOTES PAYABLE DUE STOCKHOLDERS, less
current maturities 438,956 475,534 795,791
---------- ----------- -----------
LONG-TERM DEBT, less current maturities 548,570 611,063 449,505
---------- ----------- -----------
DEFERRED TAX LIABILITY, net 51,500 51,500 25,300
---------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par, 1,000,000 shares authorized,
157,100 and 187,900 shares issued as of
December 31,1997 and 1996, respectively 1,571 1,571 1,879
Additional paid-in capital 1,379,976 1,379,976 1,517,739
Retained earnings 2,555,749 2,177,535 867,093
Treasury stock, 281 common shares, at cost - - (178,221)
Unearned ESOP stock (1,192,030) (1,283,336) (1,160,283)
---------- ----------- -----------
Total stockholders' equity 2,745,266 2,275,746 1,048,207
---------- ----------- -----------
$5,788,491 $ 6,432,717 $ 4,745,159
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CARTOTECH, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Five Months For the Year Ended
Ended May 31 December 31
--------------------------- ----------------------------
1998 1997 1997 1996
---------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
SALES $6,269,004 $ 5,463,715 $14,566,904 $11,130,821
COST OF SALES 4,572,476 3,477,065 9,362,187 7,220,100
---------- ----------- ----------- -----------
Gross profit 1,696,528 1,986,650 5,204,717 3,910,721
---------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling 402,623 427,672 1,075,152 835,787
Research and development (Note 2) - 162,863 217,542 267,390
General and administrative 431,311 321,038 1,138,058 687,859
---------- ----------- ----------- -----------
Total operating expenses 833,934 911,573 2,430,752 1,791,036
---------- ----------- ----------- -----------
INCOME FROM OPERATIONS 862,594 1,075,077 2,773,965 2,119,685
---------- ----------- ----------- -----------
OTHER EXPENSES:
Interest, net 53,117 45,141 106,301 207,685
Other, net (3,260) (25,669) (8,701) 32,846
---------- ----------- ----------- -----------
Total other expenses 49,857 19,472 97,600 240,531
---------- ----------- ----------- -----------
EQUITY IN NET LOSS OF CONIC SYSTEMS, INC. 147,609 66,988 301,448 -
---------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 665,128 988,617 2,374,917 1,879,154
INCOME TAX (PROVISION) BENEFIT:
Current-
Federal (211,140) (389,871) (918,300) (672,194)
State (75,774) (33,251) (124,975) (67,519)
Deferred-
Federal - - (19,500) 115,000
State - - (1,700) 10,000
---------- ----------- ----------- -----------
NET INCOME $ 378,214 $ 565,495 $ 1,310,442 $ 1,264,441
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
EARNINGS PER COMMON SHARE -- BASIC $ 2.41 $ 3.58 $ 8.32 $ 7.91
(See Note 3) ------ ------ ------- -------
------ ------ ------- -------
EARNINGS PER COMMON SHARE -- DILUTED $ 2.34 $ 3.58 $ 8.13 $ 7.91
(See Note 3) ------ ------ ------- -------
------ ------ ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CARTOTECH, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Treasury Stock
--------------------------- -------------------------
Shares Amount Shares Amount
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 187,900 $ 1,879 28,100 $(178,221)
Purchase of unearned ESOP stock - - - -
Release of ESOP stock - - - -
Net income - - - -
------- --------- -------- ---------
BALANCE, December 31, 1996 187,900 1,879 28,100 (178,221)
Treasury stock purchase - - 2,700 (160,218)
Retirement of treasury stock (30,800) (308) (30,800) 338,439
Purchase of unearned ESOP stock - - - -
Release of ESOP stock - - - -
Net income - - - -
------- --------- -------- ---------
BALANCE, December 31, 1997 157,100 $ 1,571 - $ -
------- --------- -------- ---------
------- --------- -------- ---------
<CAPTION>
Additional Retained Total
Unearned ESOP Stock Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
---------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 45,300 $(1,161,681) $ 1,517,739 $ (397,348) $ (217,632)
Purchase of unearned ESOP stock 3,400 (125,960) - - (125,960)
Release of ESOP stock (4,913) 127,358 - - 127,358
Net income - - - 1,264,441 1,264,441
------ ----------- ----------- ----------- ----------
BALANCE, December 31, 1996 43,787 (1,160,283) 1,517,739, 867,093 1,048,207
Treasury stock purchase - - - - (160,218)
Retirement of treasury stock - - (338,131) - -
Purchase of unearned ESOP stock 3,300 (280,763) - - (280,763)
Release of ESOP stock (5,590) 157,710 200,368 - 358,078
Net income - - - 1,310,442 1,310,442
------ ----------- ----------- ----------- ----------
BALANCE, December 31, 1997 41,497 $(1,283,336) $ 1,379,976 $ 2,177,535 $2,275,746
------ ----------- ----------- ----------- ----------
------ ----------- ----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CARTOTECH, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Five Months For the Year Ended
Ended May 31 December 31
--------------------------- ----------------------------
1998 1997 1997 1996
---------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 378,214 $ 565,495 $ 1,310,442 $ 1,264,441
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 312,287 199,616 606,407 375,700
Release of ESOP stock 91,306 61,814 358,078 127,358
Deferred income tax benefit - - 21,200 (125,000)
Equity in net loss of Conic Systems, Inc. 147,609 66,988 301,448 -
(Increase) decrease in current assets-
Accounts receivable 369,443 58,662 (422,253) (472,524)
Inventories, net 55,650 (89,090) (12,742) (17,635)
Prepaid expenses and other (127,232) (54,536) (37,230) (6,611)
Federal income tax receivable - - - 31,400
Increase (decrease) in current liabilities-
Accounts payable 61,731 (248,449) (146,912) (33,597)
Accrued payroll and benefits (148,764) 55,458 330,340 210,783
Other accrued liabilities (73,516) 66,827 (31,823) (24,218)
Income taxes payable (39,987) (61,756) (235,849) 342,294
Deferred revenue (1,071,847) 748,856 1,074,613 72,401
---------- ----------- ----------- -----------
Net cash provided by operating activities (45,106) 1,369,885 3,115,719 1,744,792
---------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (204,461) (423,057) (1,251,482) (776,044)
Cash paid for investment in Conic Systems, Inc. (100,000) (500,000) (1,139,117) -
---------- ----------- ----------- -----------
Net cash used in investing activities (304,461) (923,057) (2,390,599) (776,044)
---------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of unearned ESOP stock - - (280,763) (125,960)
Proceeds from issuance of long-term debt 448,000 - 280,763 204,608
Proceeds from issuance of notes payable due
stockholders - 111,510 160,218 25,000
Payments on long-term debt (236,034) (364,252) (463,807) (210,525)
Payments on notes payable due stockholders (53,329) (105,795) (533,724) (369,859)
Purchase of treasury stock - (111,510) (160,218) -
---------- ----------- ----------- -----------
Net cash used in financing activities 158,637 (470,047) (997,531) (476,736)
---------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (190,930) (23,219) (272,411) 492,012
CASH AND CASH EQUIVALENTS, beginning
of period 265,538 537,949 537,949 45,937
---------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
end of period $ 74,608 $ 514,730 $ 265,538 $ 537,949
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
For the Five Months For the Year Ended
Ended May 31 December 31
--------------------------- ----------------------------
1998 1997 1997 1996
---------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 52,533 $ 56,595 $ 155,988 $ 217,636
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Cash paid for income taxes $ 266,000 $ 466,500 $ 1,279,124 $ 397,419
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
On March 24, 1997, the Company contributed
$37,030 in software and $36,298 in property
and equipment as part of its initial capital
contribution to acquire 50 percent of the
outstanding common stock of Conic Systems,
Inc. (Note 4).
The accompanying notes are an integral part of these financial statements.
<PAGE>
CARATOTECH, INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. ORGANIZATION AND OPERATIONS:
Cartotech, Inc. (Cartotech or the Company), is a Texas-based corporation that
provides automated mapping, facilities management and geographic information
services database construction, field inventory, mobile application software
products and information services to a diverse client base with primary focus on
the electric and gas utilities industries. The Company's associates are skilled
in geographic information services, cartography, engineering, computer science
and related disciplines.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following represents a summary of Cartotech's significant accounting
policies:
CASH EQUIVALENTS
Cash equivalents include highly liquid investments with a maturity of three
months or less.
INVENTORIES
Inventories represent work in process which consists of material, labor and
overhead and are stated at the lower of cost or market using the specific
identification method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Equipment held under capital
leases and leasehold improvements are amortized over the lives of the related
leases or the estimated useful lives of the related assets, whichever is
shorter, using the straight-line method. Expenditures for maintenance, repairs,
renewals and improvements which do not significantly extend the useful life of
the asset are charged to operations as incurred.
The estimated useful lives used in computing depreciation and amortization
expense are as follows:
<TABLE>
<CAPTION>
Asset Life
-------------
<S> <C>
Software 3 - 5 years
Machinery and equipment 2 - 5 years
Furniture and fixtures 7 - 10 years
Leasehold improvements 4 - 12 years
</TABLE>
<PAGE>
-2-
SOFTWARE RESEARCH AND DEVELOPMENT
Under the criteria set forth in Statement of Financial Accounting Standards
(SFAS) No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased
or Otherwise Marketed," capitalization of software development costs begins upon
the establishment of technological feasibility. The ongoing assessment of the
recoverability of these costs requires considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic life and changes in software
and hardware technology. After considering the above factors, the Company
capitalized approximately $69,000 in costs related to software during the year
ended December 31, 1996. These capitalized software costs, net of related
amortization of approximately $32,000, were contributed to Conic Systems, Inc.,
on March 24, 1997 (Note 4).
REVENUE RECOGNITION
Cartotech accounts for long-term contracts under the percentage-of-completion
method. The cumulative effects of revisions to estimated total contract costs
and revenues are recorded in the period in which the facts requiring the
revision become known. When a loss is anticipated on a contract, the full
amount of the anticipated loss is accrued for in the period when the amount of
loss can be reasonably estimated.
INCOME TAXES
Deferred tax liabilities and assets are recorded based on the enacted income tax
rates which are expected to be in effect in the periods in which the deferred
tax liability or asset is expected to be settled or realized. A change in the
tax laws or rates results in adjustments to the deferred tax liabilities and
assets. The effect of such adjustments are included in income in the period in
which the tax laws or rates are changed.
SELF-INSURANCE RISK
The Company self insures its medical coverage for employees and dependents up to
$15,000 per person and an annual maximum of $333,000 as of December 31, 1997.
During 1997, the Company recognized approximately $215,000 in self-insurance
expense. The Company's insurer will pay cumulative claims above the attachment
limit of $333,000 up to $1 million. The Company believes they have adequate
reserves for self-insurance as of December 31, 1997.
EARNINGS PER SHARE
The computation of earnings per common share is based on the weighted average
number of common shares outstanding plus the effect of common stock equivalents,
consisting of stock options, determined using the treasury stock method.
FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments at December 31, 1997
and 1996, approximate estimated fair values. The fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying amounts of cash and cash
equivalents, receivables, accounts payable and accrued liabilities approximate
fair value due to the short maturity of these instruments. The carrying amounts
of debt approximate fair value due to the variable nature of the interest rates
of these instruments.
<PAGE>
-3-
ESTIMATES IN THE FINANCIAL STATEMENTS
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
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATION OF PRIOR YEAR
FINANCIAL STATEMENT AMOUNTS
Certain reclassifications have been made to prior year balances to conform to
current year financial statement presentation.
STOCK SPLIT
The board of directors and stockholders of the Company approved a 100-to-1 stock
split of the Company's common stock. All share information in the accompanying
financial statements has been adjusted to give retroactive effect to the stock
split.
3. EARNINGS PER SHARE:
Earnings per share for all periods have been restated to reflect the adoption of
SFAS No. 128, "Earnings Per Share," which established standards for computing
and presenting earnings per share (EPS). SFAS No. 128 requires dual
presentation of basic and diluted EPS on the facte of the income statement for
all entities with complex capital structures. Basic EPS were computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS differs from basic EPS due to the
assumed conversions of potentially dilutive options that were outstanding during
the period. During 1996, the exercise price per share of all outstanding
options exceeded the estimated market value per shares of the Company's common
stock. The following is a reconciliation of the numerators and the denominators
of the basic and diluted per share computations:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
--------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ------------ ---------
<S> <C> <C> <C>
BASIC EPS
Net income available to common stockholders $1,310,442 157,485 $8.32
------
------
EFFECT OF POTENTIALLY DILUTIVE SECURITIES
Stock options 3,752
-------
DILUTED EPS
Net income available to common stockholders
including assumed conversions $1,310,442 160,237 $8.13
---------- ------- -----
---------- ------- -----
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
For the Year Ended December 31, 1996
--------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ------------ ---------
<S> <C> <C> <C>
BASIC EPS
Net income available to common stockholders $1,264,441 159,800 $7.91
-----
-----
DILUTED EPS
Net income available to common stockholders $1,264,441 159,800 $7.91
---------- ------- -----
---------- ------- -----
</TABLE>
4. INVESTMENT IN CONIC SYSTEMS, INC.:
On March 24, 1997, the Company's board of directors approved the contribution of
all of Cartotech's rights, title and interest in the Outfield software and other
related software applications to Conic Systems, Inc. (CSI), a Texas corporation.
The Company also agreed to contribute $1.3 million and certain property and
equipment to CSI. In exchange for their contributions, the Company received a
50 percent interest in the outstanding common stock of CSI and appointed three
board members to the six-member CSI board of directors. The remaining
50 percent common stock interest in CSI is owned by a Gibraltar corporation
which contributed 100 percent of the stock of Conic Systems, Ltd., a UK
corporation. The Company's initial capital contribution consisted of the
following:
<TABLE>
<S> <C>
Cash $1,139,117
Outfield software 37,030
Property and equipment 36,298
----------
$1,212,445
----------
----------
</TABLE>
Additionally, the Company agreed to contribute $160,884 to CSI during 1998.
The investment in CSI is accounted for under the equity method of accounting
(cost, increased or decreased by the Company's share of earnings, losses,
advances or distributions). Accordingly, the Company reduced its investment in
CSI by $301,448, which represents the Company's 50 percent share of CSI's loss
for the year ended December 31, 1997.
5. LONG-TERM DEBT:
Long-term debt at December 31, 1997 and 1996, consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Note payable to a bank, monthly payments of principal of $4,679 plus
accrued interest at prime plus .75 percent (9.25 percent at December 31,
1997) through October 2002 $271,405 $ -
Note payable to a bank, monthly payments of principal of $4,167 plus
accrued interest at prime plus .75 percent (9.25 percent and 9.0 percent
at December 31, 1997 and 1996, respectively) through April 2005 366,667 416,667
<PAGE>
-5-
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Notes payable to a bank, monthly payments of accrued interest at prime
plus .25 percent (8.75 percent and 8.50 percent at December 31, 1997
and 1996, respectively); principal due November 1998 ($19,233),
December 1998 ($35,632), March 1999 ($13,956) and April 1999
($15,777) $ 84,598 $ 163,854
Notes payable to a bank, monthly payments of accrued interest at prime
plus .75 percent (9.0 percent at December 31, 1996); principal due
December 1996 (paid in January 1997) - 300,000
Note payable to a bank, monthly payments of principal of $2,099 plus
accrued interest at prime plus .75 percent (9.25 percent and 9.0 percent
at December 31, 1997 and 1996, respectively) through October 2001 96,569 121,762
-------- ----------
819,239 1,002,283
-------- ----------
Less- Current maturities 208,176 552,778
-------- ----------
-------- ----------
$611,063 $ 449,505
</TABLE>
Notes payable to stockholders at December 31, 1997 and 1996, consisted of
the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Notes payable to two stockholders, each with quarterly payments of
principal of $9,145 plus accrued interest at prime plus .625 percent
(9.125 percent and 8.875 percent at December 31, 1997 and 1996,
respectively) through April 2005 $548,694 $ 621,854
Note payable to a former stockholder, variable monthly payments of
principal and interest at 9.25 percent through February 1998 16,750 -
Notes payable to stockholders, monthly payments of accrued interest at
prime plus 1 percent (9.25 percent at December 31, 1996) - 317,096
-------- ----------
565,444 938,950
Less- Current maturities 89,910 143,159
-------- ----------
$475,534 $ 795,791
-------- ----------
-------- ----------
</TABLE>
At December 31, 1997, maturities of long-term debt and notes payable to
stockholders by year are as follows:
<TABLE>
<CAPTION>
Due Due
Bank Stockholders
-------- ------------
<S> <C> <C>
Year ending December 31-
1998 $208,176 $89,910
1999 139,109 73,159
2000 131,345 73,159
2001 127,146 73,159
2002 96,794 73,159
Thereafter 116,669 182,898
-------- --------
$819,239 $565,444
-------- --------
-------- --------
</TABLE>
<PAGE>
-6-
The long-term debt and notes payable are secured by equipment, accounts
receivable and the outstanding stock of Cartotech and are guaranteed by
Cartotech's stockholders. The carrying value of Cartotech's long-term debt and
notes payable to stockholders approximates fair value. The notes payable to a
bank contain restrictive covenants, which provide that, among other things,
under certain circumstances the bank may accelerate the maturity of the notes.
Furthermore, the covenants contain requirements for the maintenance of certain
minimum working capital and tangible net worth ratios and limitations on
indebtedness to parties other than the bank.
6. INCOME TAXES:
The total income tax provision rate was different than the amount computed by
applying the statutory federal income tax rate to income before taxes as
follows:
<TABLE>
<CAPTION>
December 31
---------------
1997 1996
----- -----
<S> <C> <C>
Statutory federal income tax rate 34.0% 34.0%
Deferred tax assets recognized - (4.8)
State income tax expense, net of
federal income tax benefit 3.4 2.1
Equity in net loss of subsidiary 4.3 -
Appreciation in unearned ESOP stock
allocated 2.9 -
Other .2 1.4
----- -----
Effective provision rate 44.8% 32.7%
----- -----
----- -----
</TABLE>
For the years ended December 31, 1997 and 1996, deferred income taxes arose from
recognizing temporary differences between certain income and expense items for
income tax and financial reporting purposes. The tax effect of significant
temporary differences was as follows:
<TABLE>
<CAPTION>
December 31
---------------
1997 1996
------- -------
<S> <C> <C>
Deferred income tax asset (liability)-
Depreciation and other $(14,500) $ 11,700
Expenses not deducted for tax purposes
until paid 155,300 150,300
ESOP contribution deducted in previous
year (37,000) (37,000)
--------- --------
Net deferred tax assets $103,800 $125,000
--------- --------
--------- --------
</TABLE>
7. COMMITMENTS:
Cartotech leases office space under various operating lease agreements. Total
rental expense for all operating leases was approximately $206,000 and $198,000
for the years ended December 31, 1997 and 1996, respectively. Future minimum
lease payments under noncancelable operating leases are approximately as
follows:
<TABLE>
<CAPTION>
<S> <C>
Years ending December 31-
1998 $ 225,000
1999 218,000
2000 222,000
2001 235,000
2002 188,000
---------
Total future minimum lease payments $1,088,000
----------
----------
</TABLE>
<PAGE>
-7-
8. MAJOR CUSTOMERS:
The Company's customers consist primarily of large utility companies as well as
organizations in the public sector. As such, bad debt expense has historically
been minimal. Approximately 61 percent of Cartotech's total sales in 1997 was
generated from services performed for two major customers (46 percent and
15 percent). In 1996, approximately 55 percent of Cartotech's total sales was
generated from services performed for one major customer.
9. RELATED PARTIES:
In 1995, in connection with the establishment of the ESOP (Note 10), two
stockholders loaned the Company approximately $366,000 each. These notes
payable are classified as notes payable due stockholders in the accompanying
financial statements.
10. EMPLOYEE 401(k) PLAN, EMPLOYEE
STOCK OWNERSHIP PLAN (ESOP)
AND SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN:
During 1994, Cartotech established an Employee Stock Ownership Plan (ESOP) and a
related trust as a long-term benefit for employees who have reached age 21 and
have completed one year of service. Under this plan, the ESOP will authorize
the trust to purchase up to 51 percent of Cartotech's outstanding common stock
over an 11-year period.
In 1995, Cartotech borrowed approximately $1,232,000 to provide loans to the
ESOP to fund the initial purchase of the Company's stock. The borrowing was
comprised of $500,000 payable to a bank and $732,000 payable to two
stockholders. With this borrowing, the ESOP purchased 30 percent of Cartotech's
outstanding stock. Thereafter, the ESOP has the option to purchase 2.1 percent
of the Company's outstanding stock each year over a period of 10 years.
The initial purchase of the shares was recorded by the Company as a charge to
unearned ESOP stock of approximately $1,232,000. The related borrowings are
recorded in the Company's financial statements as notes payable. In 1997 and
1996, respectively, the ESOP purchased a 2.1 percent increment of common stock
for approximately $281,000 and $126,000 with proceeds from a note payable to a
bank.
The Company makes annual contributions to the ESOP equal to the ESOP's debt
service less any dividends received by the ESOP. The ESOP shares initially were
pledged as collateral for its debt. As the debt is repaid, shares are released
from collateral and allocated to active employees, based on the proportion of
debt service paid in the year. The Company accounts for its ESOP in accordance
with Statement of Position 93-6, "Employers' Accounting for Employee Stock
Option Plans." Accordingly, the debt of the ESOP is recorded as debt and the
shares pledged as collateral are reported as unearned ESOP shares in the
accompanying balance sheets. As shares are released from collateral, the
Company reports compensation expense equal to the current market price of the
shares. The Company made principal payments of $157,710 and $127,358 on its
ESOP related borrowings for the years ended December 31, 1997 and 1996,
respectively. As debt payments were made, unearned ESOP shares were released.
The Company recorded compensation expense of $358,078 and $127,358 during 1997
and 1996, respectively, related to the ESOP. Additionally, as a result of
recording the associated compensation expense based upon current market
valuations, additional paid-in capital was increased by $200,368 during 1997.
The Company utilized the services of a third-party appraiser to determine the
market valuations.
<PAGE>
-8-
Individual accounts are maintained for each participant in the plan. These
accounts are separated into three different types of accounts: Company Stock
Account, Other Investments Account and Salary Deferral Account. The Company
Stock Account is a participant account which is credited with the participant's
allocated share of Company stock purchased and paid by the trust or contributed
in-kind by the Company. This account will also receive allocations of
participant's shares, if any, of employer matching contributions made in Company
stock in connection with the Company's 401(k) plan, beginning on or after
January 1, 1995.
The Other Investments Account is a participant account which is credited (or
debited) with the participant's share of net income (loss) of the employer
contributions and forfeitures in other than Company stock, and will be debited
for payments made for purchases of Company stock or for repayment of debt
(including principal and interest) incurred for purchase of Company stock. The
Salary Deferral Account is a 401(k) plan participant account which is credited
with the amount of salary which is deferred by an employee in connection with
the Company's 401(k) plan.
The Company provides a 401(k) profit-sharing plan for all employees who have
reached age 21 and have completed one year of service. Employees may choose to
save up to 15 percent of salary income on a pretax basis, subject to certain IRS
limits. The Company matches a percent of employee contributions, as determined
by the board of directors. Effective January 1, 1995, employer matching
contributions shall be allocated to a participant's Other Investments Account or
Company Stock Account. Employer matching contributions were approximately
$44,300 and $23,300 for the years ended December 31, 1997 and 1996,
respectively.
On December 15, 1997, the board of directors of the Company adopted the
Supplemental Executive Retirement Plan (the SERP) to provide for supplemental
executive retirement benefits to make up for amounts the chairman of the board
would have been entitled to receive had it not been for restrictions under
Section 409(n) of the Internal Revenue Service Code regarding participation in
the Company's 401(k) Plan and ESOP. Accordingly, the Company recorded $76,500
in general and administrative expenses related to the SERP for the year ended
December 31, 1997, in the accompanying financial statements.
11. STOCK OPTIONS:
In 1996, the Company adopted the Cartotech, Inc. 1996 Stock Option Plan (the
Plan), which provides for the granting of incentive stock options at the current
market prices to key employees. The Company has reserved 17,455 shares of
common stock for issuance in accordance with the Plan. Stock options vest
pursuant to the individual stock option agreements with unexercised options
expiring 10 years from the date of grant. The Company has adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," but has elected to continue to account for employee stock-based
compensation under the provisions of APB Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, no compensation expense has been recognized
for options granted to employees as the exercise price is equal to the market
price of the underlying stock at the date of grant.
Under the Plan, in 1996, certain key employees were granted 12,000 stock options
exercisable at $60.36, with 8,050 vesting immediately, 3,500 vesting in 1997 and
450 vesting in 1998. In January and December 1997, certain key employees were
granted 1,000 and 1,500 shares, respectively, exercisable at $60.36 per share
and $85.08 per share, respectively. The January 1997 grants vested at grant
date, while 73 percent of the December 1997 grants vested in 1997 and 27 percent
will vest in 1998.
<PAGE>
-9-
A summary of the status of the Company's stock option plan for the years ended
December 31, 1997 and 1996, and changes during the periods ended on those dates
is presented below:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
-------------------- ------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of period 12,000 $60.36 - $ -
Granted 2,500 75.19 12,000 60.36
Exercised - - - -
Forfeited - - - -
------ ------ ------ ------
Outstanding, end of period 14,500 $62.92 12,000 $60.36
------ ------ ------ ------
------ ------ ------ ------
Options exercisable at end of period 13,650 $62.35 8,050 $60.36
------ ------ ------ ------
------ ------ ------ ------
Weighted average grant date fair value per
option for options granted during the
period $31.65 $25.55
------ ------
------ ------
</TABLE>
The following table summarizes information about the Company's stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ----------------------------
Weighted Weighted Number Weighted
Average Average Exercisable at Average
Number Remaining Exercise December 31, Exercise
Exercise Prices Outstanding Contractual Life Price 1997 Price
--------------- ----------- ---------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$60.36 13,000 9.0 years $60.36 12,550 $60.36
$85.08 1,500 10.0 years $85.08 1,100 $85.08
------ ------
14,500 9.1 years $62.92 13,650 $62.35
------ ------
------ ------
</TABLE>
Had compensation expense for the Company's stock-based compensation plans been
determined based on the fair value at the grant date for awards under this plan
consistent with the method prescribed by FAS 123, the Company's net income would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended
---------------------------------
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Net income, as reported $1,310,442 $1,264,441
---------- ----------
---------- ----------
Net income, pro forma $1,167,274 $1,128,678
---------- ----------
---------- ----------
</TABLE>
<PAGE>
-10-
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants in 1997:
<TABLE>
<S> <C>
Year ended December 31, 1997-
Expected dividend yield 0%
Risk-free interest rate 5.8% - 6.6%
Expected life of options 10 years
</TABLE>
<PAGE>
Analytical Surveys, Inc.
Pro Forma Statement of Operations
Pro Forma Year ended September 30, 1997
<TABLE>
<CAPTION>
Analytical Pro Forma Pro Forma
Surveys Cartotech Adjustments Combined
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Sales 40,799 14,567 55,366
Costs and Expenses
Salaries, wages and related benefits 19,792 9,733 (442)(a) 29,083
Subcontractor costs 5,899 520 6,419
Other general and administrative 7,115 934 8,049
Depreciation and amortization 1,780 606 934(a) 3,320
------ ------ ------- ------
34,586 11,793 492 46,871
------ ------ ------- ------
Earnings from operations 6,213 2,774 (492) 8,495
------ ------ ------- ------
Other (income) expense
Interest expense, net 722 106 615(a) 1,443
Other (2) (9) (11)
------ ------ ------- ------
720 97 615 1,432
------ ------ ------- ------
5,493 2,677 (1,107) 7,063
Equity in net loss of Conic Systems, Inc. 302 (302)(b) 0
------ ------ ------- ------
Earnings before income taxes 5,493 2,375 (805) 7,063
Income tax expense 2,112 1,064 (66)(c) 3,110
------ ------ ------- ------
Net earnings 3,381 1,311 (739) 3,953
------ ------ ------- ------
------ ------ ------- ------
Earnings per common share
Basic 0.69 0.75
Diluted 0.61 0.67
Weighted average common shares outstanding
Basic 4,889 354(d) 5,243
Diluted 5,562 354(d) 5,916
</TABLE>
<PAGE>
Analytical Surveys, Inc.
Pro Forma Statement of Operations
Pro Forma Nine Months ended June 30, 1998
<TABLE>
<CAPTION>
Analytical Pro Forma Pro Forma
Surveys Cartotech Adjustments Combined
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Sales 24,643 11,459 36,102
Costs and Expenses
Salaries, wages and related benefits 11,524 8,040 (435)(a) 19,129
Subcontractor costs 4,419 488 4,907
Other general and administrative 4,029 882 4,911
Depreciation and amortization 973 583 700(a) 2,256
------ ------ ------- ------
20,945 9,993 265 31,203
------ ------ ------- ------
Earnings from operations 3,698 1,466 (265) 4,899
------ ------ ------- ------
Other (income) expense
Interest expense, net 382 71 383(a) 836
Other (8) 110 102
------ ------ ------- ------
374 181 383 938
------ ------ ------- ------
3,324 1,285 (848) 3,961
Merger related costs 490 (490)(b) 0
Equity in net loss of Conic Systems, Inc. 496 (496)(b) 0
------ ------ ------- ------
Earnings before income taxes 3,324 299 338 3,961
Income tax expense 1,267 643 (118)(c) 1,792
------ ------ ------- ------
Net earnings 2,057 (344) 456 2,169
------ ------ ------- ------
------ ------ ------- ------
Earnings per common share
Basic 0.41 0.41
Diluted 0.39 0.39
Weighted average common shares outstanding
Basic 4,978 354(d) 5,332
Diluted 5,260 354(d) 5,614
</TABLE>
<PAGE>
ANALYTICAL SURVEYS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On June 26, 1998, Analytical Surveys, Inc. ("the Company") acquired all of
the outstanding stock of Cartotech, Inc. ("Cartotech"). The transaction was
accounted for as a purchase. The unaudited pro forma statements of operations
do not purport to be indicative of the results of operations had the
acquisition been consummated on October 1, 1996. Purchase and pro forma
adjustments are described below.
The unaudited balance sheet at June 30, 1998 included in the Company's
quarterly report on Form 10-Q dated June 30, 1998 includes the accounts of
Cartotech, therefore no Proforma balance sheet is provided.
The Unaudited Pro Forma Statement of Operations for the year ended September
30, 1997 gives effect to the acquisition as if the transaction occurred on
October 1, 1996. The historical results of operations of Cartotech's fiscal
year ended December 31, 1997 were combined with the historical results of
operations for the year ended September 30, 1997 of Analytical Surveys, Inc.
The Unaudited Pro Forma Statement of Operations for the nine months ended
June 30, 1998 also gives effect to the acquisition as if the transaction
occurred on October 1, 1996. The unaudited results of operations of Cartotech
for its nine months ended June 30, 1998 were combined with the unaudited
results of operations for the nine months ended June 30, 1998 of Analytical
Surveys, Inc.
Pro forma adjustments:
The following pro forma adjustments to the results of operations are
reflected in the pro forma financial statements and are referenced by the
letter indicated
(a) Pro Forma adjustments to Statements of Operations
The combined historical results of operations were adjusted to exclude the
expenses of Cartotech's Employee Stock Ownership Plan (ESOP) and its
Supplemental Executive Retirement Plan (SERP), both of which are discontinued.
The combined historical results of operations also were adjusted to reflect the
amortization of the increased goodwill and the interest expense incurred on
the added term debt.
(b) Non-recurring Items
Non-recurring items include merger related costs and Cartotech's share of
losses incurred by its joint venture, Conic Systems, Inc. which was not
acquired. The pro forma statements of operations were adjusted to exclude
both of these items.
(c) Income taxes
The pro forma statements of operations were adjusted for the tax effects of
the additional interest expense. The additional goodwill related to the
Cartotech acquisition is not deductible for income tax purposes. The merger
related costs and Conic losses also are not deductible for income tax
purposes.
<PAGE>
(d) Average Common Stock Outstanding
The number of shares outstanding were increased to reflect the shares issued
to the seller and earnings per share were calculated using the increased
number of shares outstanding.
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.
Analytical Surveys, Inc.
Date: September 14, 1998 by: /s/ Scott C. Benger
------------------ Secretary/Treasurer
