11
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: May 1, 1995
INTERSOLV, Inc.
(Exact name of registrant as specified in charter)
Delaware 0-15188
52-0990382
(State/other jurisdiction of incorporation) (Commission File Number)
(IRS Employer Identification No.)
9420 Key West Avenue, Rockville, Maryland 20850
(Address of principal executive offices)
Registrant's telephone no., including area code 301/838-5000
3200 Tower Oaks Blvd, Rockville, Maryland 20852
(Previous Address)
This Amendment No. 1 to the Current Report is filed on Form 8-K/A by
INTERSOLV, Inc. (the "Company") and amends the Current Report on Form 8-K
filed by the Company on May 11, 1995.
Only those items which are amended are set forth herein.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
A. Statement of Operations for the year ended April 30, 1995
Statement of Cash Flows for the year ended April 30, 1995
Statement of Stockholder's Equity for the year ended April 30,1995
Financial Statements of PC Strategies & Solutions, Inc.
Report of Coopers & Lybrand L.L.P., Independent Accountants
Balance Sheet as of April 30, 1995
Notes to Financial Statements
B. PRO FORMA FINANCIAL STATEMENTS OF INTERSOLV INC.
Unaudited Pro Forma Condensed Combined Balance Sheet as of April
30, 1995
Unaudited Pro Forma Condensed Combined Statements of Operations
for each of the years ended April 30, 1995, 1994 and 1993
C. Exhibits
Exhibit No. Exhibit
23 Consent of Coopers & Lybrand L.L.P., Independent
Accountants
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 thereunto duly authorized.
INTERSOLV, Inc.
Date: July 10, 1995 By /S/ Kenneth A. Sexton
Kenneth A. Sexton
Vice President,
Finance & Administration
(Principal Financial and Accounting
Officer)
ITEM 7.A Financial Statements of PC Strategies & Solutions, Inc.
Attached are the financial statements of PC Strategies &
Solutions, Inc., which includes the Balance Sheet as of April 30, 1995, the
Statement of Operations for the year ended April 30, 1995, the Statement of
Stockholder's Equity for the year ended April 30, 1995, the Statement of
Cash Flows for the year ended April 30, 1995, Notes to Financial Statements
and the Report of Coopers & Lybrand L.L.P., Independent Accountants.
REPORT OF INDEPENDENT ACCOUNTANTS
To Board of Directors and Shareholder
PC STRATEGIES & SOLUTIONS, INC.
We have audited the accompanying balance sheet of PC STRATEGIES &
SOLUTIONS, Inc. as of April 30, 1995, and the related statements of
operations, stockholder's equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of PC STRATEGIES
& SOLUTIONS, Inc. as of April 30, 1995, and the results of its operations
and its cash flows for the year ended April 30, 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
June 9, 1995
PC STRATEGIES & SOLUTIONS INC.
BALANCE SHEET
as of April 30, 1995
(dollar amounts in thousands)
ASSETS
Current assets: $39
Accounts receivable, net of allowance for doubtful
Cash and cash equivalents
Accounts Receivable, net of allowance for doubtful
accounts of $18 900
Prepaid expenses and other current assets 16
Total current assets 955
Furniture and equipment:
Furniture and equipment, at cost 815
Accumulated depreciation and amortization (203)
Total furniture and equipment, net 612
Other assets 47
Total assets $1,614
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $342
Accrued compensation and employee benefits 158
Bank debt 56
Current portion of capital lease obligations 161
Income taxes payable 20
Deferred income taxes 115
Deferred revenue 133
Total current liabilities 985
Long-term portion of capital lease obligations 270
Total liabilities 1,255
Commitments and contingencies
Stockholder's equity:
Common stock, no par value; 100 shares
authorized; issued and outstanding 1
Retained earnings 358
Total stockholder's equity 359
Total liabilities and stockholder's equity $1,614
The accompanying notes are an integral part of the financial statements.
PC STRATEGIES & SOLUTIONS, INC.
STATEMENT OF OPERATIONS
for the Year Ended April 30, 1995
(amounts in thousands)
Service revenues $4,932
Costs and expenses:
Cost of services 3,965
Marketing 341
General and administrative 581
Non-recurring charges 186
Total costs and expenses 5,073
Operating loss (141)
Interest expense ( 34)
Loss before income taxes (175)
Income tax benefit (75)
Net loss ($100)
The accompanying notes are an integral part of the financial statements.
PC STRATEGIES & SOLUTIONS, INC.
STATEMENT OF CASH FLOWS
for the Year Ended April 30, 1995
(amounts in thousands)
Cash inflows (outflows)
Operating activities:
Net loss ($100)
Non-cash items:
Depreciation 131
Deferred income taxes (151)
Changes in assets and liabilities
Accounts receivable (144)
Prepaid expenses and other current assets (15)
Accounts payable and accrued expenses 363
Deferred revenue 133
Taxes payable (68)
Other assets (7)
Net cash provided by operating activities 142
Investing activities:
Additions to property and equipment (108)
Net cash used in investing activities (108)
Financing activities:
Principal payments on capital lease obligations (80)
Principal payments on bank debt (19)
Proceeds from bank debt 75
Principal payments on shareholder loan (40)
Net cash used by financing activities (64)
Net decrease in cash and cash equivalents (30)
Cash and cash equivalents, beginning of year 69
Cash and cash equivalents, end of year $39
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $34
Income taxes $144
Non-cash activity:
Equipment acquired under capital leases $394
The accompanying notes are an integral part of the financial statements.
PC STRATEGIES & SOLUTIONS, INC.
STATEMENT OF CHANGES IN
STOCKHOLDER'S EQUITY
for the Year Ended April 30, 1995
(dollar amounts in thousands)
Shares Common Retained
Amount Stock Earnings Total
Balance, April 30, 1994 100 $1 $458 $ 459
Net Loss ----- ----- (100) (100)
Balance, April 30, 1995 100 $1 $358 $ 359
The accompanying notes are an integral part of the financial statements
PC STRATEGIES & SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
PC STRATEGIES & SOLUTIONS, Inc. (the "Company" or "PCS"), is engaged
in providing consulting and training services to assist companies in the
analysis, design and development of client/server applications.
Revenue Recognition
The Company's service revenues consist primarily of consulting and
training fees. These fees are recognized upon the delivery of the
services.
Cash and Cash Equivalents
Cash and cash equivalents consists of time and demand deposits and
highly liquid investments purchased with a maturity of three months or
less. The Company maintains its time and demand deposits in bank deposit
accounts which, at times, may exceed federally insured limits. The Company
has not experienced any losses in such accounts.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial
Accounting Standards No. 105, consist primarily of trade accounts
receivable. The Company's customer base is primarily Fortune 1000
companies or branches thereof. The Company does not require collateral
upon delivery of its services or products.
Furniture and Equipment
Furniture and equipment are stated at cost and depreciated on a double
declining basis over their estimated useful lives. Furniture and equipment
are generally depreciated over terms of 5 to 7 years.
Income Taxes
The Company's fiscal year for income tax reporting purposes is
September 30. The Company files its income tax return on the cash basis.
On October 1, 1993, the Company, with the consent of its sole shareholder,
revoked its Subchapter S election. The Company has adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109").
(2) BANK DEBT
Line of Credit
The Company has a revolving line of credit with a bank, which
expires January 31, 1996. The line of credit is collateralized by all
assets of the Company and is guaranteed by the sole shareholder.
Interest is due monthly at a variable interest rate equal to 1/2% over
prime. The Company may borrow up to $500,000 under this agreement.
The line of credit contains various restrictive covenants related to
working capital, tangible net worth and liabilities to net worth,
which the Company was in violation of as of April 30, 1995. At April
30, 1995, there were no borrowings outstanding under this line of
credit. Subsequent to April 30, 1995, the line of credit was
terminated by the Company.
Term Loan Payable
The Company has a term loan with a bank which was used to
purchase furniture and equipment. The loan is payable in quarterly
installments of $6,250. The loan bears interest at prime rate plus
3/4%. The loan is collateralized by accounts receivable and equipment
and is subject to the same terms and conditions as the line of credit,
as noted above. At April 30, 1995, the balance on the loan is
$56,250, all which has been classified as a current liability because
of the covenant violation. This loan was paid in full in June 1995.
(3) COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space, office equipment and automobiles
under noncancelable operating leases expiring through 1999. In addition,
the Company leases office equipment on a month-to-month basis, which can be
terminated at any time at the Company's option. None of the agreements
contain unusual renewal or purchase options. Total rent expense in fiscal
1995 was $211,000.
Future minimum lease payments under the noncancelable operating lease
agreements as of April 30, 1995, are as follows ($000's):
Years Ending April 30,
1996 1997 1998 1999 2000 Thereafter Total
$324 $337 $337 $336 $351 $326 $2,011
Letter of Credit
The Company has issued a letter of credit for approximately $46,000 to
the lessor of its office space, which serves as a security deposit under
the office lease.
(4) CAPITAL LEASE OBLIGATIONS
The Company leases various computer equipment under capital leases. This
equipment is classified as part of furniture and equipment with a total
gross cost of $509,000 and accumulated depreciation of $88,000. Future
minimum payments under these leases are as follows (000's):
Year ending
April 30,:
1996 $202
1997 184
1998 113
Total payments 499
Less: amount representing interest (68)
Present value of minimum payments $431
Long-term portion of capital lease obligations $270
(5) EMPLOYEE BENEFIT PLAN
401(k) Plan
The Company has a savings and investment plan (the "Plan") which
covers employees of the Company and that qualifies under section 401(k) of
the Internal Revenue Code. The Company may make discretionary
contributions. The Company contributed $26,390 during the year ended April
30, 1995.
(6) INCOME TAXES
The benefit for income taxes consists of the following (000's):
Current provision:
U.S. federal $60
State 16
Total Current Provision 76
Deferred benefit:
U.S. federal (119)
State (32)
Total Deferred Benefit (151)
Total Tax Benefit $ (75)
The effective tax rate of 43% is the sum of the U.S. Federal
statutory rate of 34% and the state statutory rate of 9%.
The tax effects of the components of the deferred tax assets and
liabilities are as follows:
Deferred tax assets:
Accrued expenses $(215)
Deferred revenue (57)
Deferred tax liability:
Accounts receivable, net 387
Net deferred tax liability $115
(7) Related Party Transaction
During the year ended April 30, 1995, the Company repaid a $40,000 loan to
the sole shareholder.
(8) Subsequent Event
Effective May 1, 1995, the sole stockholder sold 100% of the outstanding
common stock to INTERSOLV, Inc., an unrelated publicly traded software
company. As of April 30, 1995, the Company incurred various non-recurring
charges in connection with the stock sale, consisting primarily of various
legal, accounting and advisory fees, which are reflected in the
accompanying statement of operations.
ITEM 7.B Pro Forma Financial Statements of INTERSOLV Inc.
The following unaudited pro forma combined financial information
sets forth the combined financial position and the combined results of
operations of INTERSOLV Inc. ("INTERSOLV") and PC Strategies and Solutions,
Inc. ("PCS") based upon accounting for the acquisition as a pooling-of-
interests and that the acquisition was consummated (a) on April 30, 1995
for the Balance Sheet and; (b) as of the beginning of each period
presented in the Statements of Operations.
The unaudited pro forma combined financial information combines
the historical Balance Sheets of INTERSOLV and PCS as of April 30, 1995 and
the historical Statements of Operations on INTERSOLV and PCS for each of
the years ended April 30 1995, 1994 and 1993.
For the periods presented in the pro forma condensed combined
Statements of Operations, pro forma shares used in computing earnings per
share give effect to the exchange of 6,750 shares of INTERSOLV common stock
for each share of PCS common stock.
Costs to be incurred by INTERSOLV for non-recurring costs such as
severance, consolidation of facilities, certain transaction costs and other
one-time integration costs have not been reflected in the pro forma
combined financial statements. The following pro forma data is not
necessarily indicative of the financial position or results of operations
which would have actually been reported had the acquisition been in effect
during those periods or which may be reported in the future.
INTERSOLV, INC. AND PC STRATEGIES AND SOLUTIONS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEETS (UNAUDITED)
As of April 30, 1995
(amounts in thousands)
INTERSOLV PCS ADJUSTMENTS COMBINED
ASSETS
Current assets:
Cash and cash equivalents $24,574 $39 $0 $24,613
Accounts receivable, net 37,248 900 0 38,148
Refundable income taxes 389 0 0 389
Prepaid expenses and other
current assets 4,071 16 0 4,087
Total current assets 66,282 955 0 67,237
Software, net 20,187 0 0 20,187
Property and equipment, net 5,744 612 0 6,356
Notes receivable and other assets 1,207 47 0 1,254
Total assets $93,420 $1,614 $0 $95,034
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expense $25,814 $852 $0 $26,666
Deferred revenue 14,365 133 0 14,498
Total current liabilities 40,179 985 0 41,164
Long-term liabilities 0 270 0 270
Total liabilities 40,179 1,255 0 41,434
Stockholders' equity
Common stock 82,052 1 0 82,053
Retained earnings (deficit) (28,028) 358 0 (27,670)
Cumulative translation
adjustment (783) 0 0 (783)
Total stockholders' equity 53,241 359 0 53,600
Total liabilities and stockholders'
equity $93,420 $1,614 $0 $95,034
INTERSOLV, INC. AND PC STRATEGIES AND SOLUTIONS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
Fiscal year ended April 30, 1995
(amounts in thousands, except per share data)
INTERSOLV PCS ADJUSTMENTS COMBINED
Revenues $115,463 $4,932 $120,395
Costs and expenses:
Cost of sales 10,624 0 0 10,624
Cost of services 16,770 3,965 20,735
Sales and marketing 48,356 341 48,697
Research and development 12,109 0 12,109
General and administrative 9,174 767 0 9,941
Total costs and expenses 97,033 5,073 0 102,106
Operating income (loss) 18,430 (141) 0 18,289
Other income, net 789 (34) 755
Income (loss) before income
taxes 19,219 (175) 0 19,044
Provision for income taxes 5,758 (75) 0 5,683
Net income (loss) $13,461 ($100) $0 $13,361
Net income per share $0.83 ($0.15) $0.79
Shares used in computing net income
per share 16,215 675 16,890
INTERSOLV, INC. AND PC STRATEGIES AND SOLUTIONS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
Fiscal year ended April 30, 1994
(amounts in thousands, except per share data)
INTERSOLV PCS ADJUSTMENTS COMBINED
Revenues $85,393 $3,125 $88,518
Costs and expenses:
Cost of sales 7,111 0 0 7,111
Cost of services 11,158 2,063 13,221
Sales and marketing 40,019 134 40,153
Research and development 9,023 0 9,023
General and administrative 6,999 377 7,376
Non-recurring charges 40,660 0 0 40,660
Total costs and expenses 114,970 2 ,574 0 117,544
Operating income (loss) (29,577) 551 0 (29,026)
Other income (expense), net 207 (7) 200
Income (loss) before income taxes(29,370) 544 0 (28,826)
Provision for income taxes 0 261 0 261
Net income (loss) ($29,370) $283 $0 ($29,087)
Net income per share ($2.42) $0.42 ($2.27)
Shares used in computing net income
per share 12,122 675 12,797
INTERSOLV, INC. AND PC STRATEGIES AND SOLUTIONS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
Fiscal year ended April 30, 1993
(amounts in thousands, except per share data)
INTERSOLV PCS ADJUSTMENTS COMBINED
Revenues $80,410 $1,450 $81,860
Costs and expenses:
Cost of sales 5,632 0 5,632
Cost of services 7,357 929 8,286
Sales and marketing 43,401 37 43,438
Research and development 10,752 0 10,752
General and administrative 8,770 197 0 8,967
Non-recurring charges 16,573 16,573
Total costs and expenses 92,485 1,163 0 93,648
Operating income(loss) (12,075) 287 0 (11,788)
Other income, net 52 0 52
Income(loss) before income taxes (12,023) 287 0 (11,736)
Provision(benefit) for income
taxes (128) 98 0 (30)
Net income(loss) ($11,895) $189 $0 ($11,706)
Net income(loss) per share ($1.00) $0.28 $0 ($0.93)
Shares used in computing net income
(loss) per share 11,861 675 12,536
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Intersolv, Inc. on Form S-8, Registration Nos. 33-56220, 33-83794, 33-
56166, and 33-86590, and on Form S-3, Registration No. 33-83796, of our
report dated June 9, 1995,on our audit of the financial statements of PC
Strategies and Solutions, Inc. as of April 30, 1995 and for the year then
ended, which report is included in this Form 8-K/A.
Coopers & Lybrand L.L.P.
Washington, D.C.
July 7, 1995
