SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13 or 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
SAFEGUARD SCIENTIFICS, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NO. 1-5620
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its current report on Form 8-K
dated October 17, 1994 as set forth on the pages attached hereto:
(a) Item 7 - Financial Statements, Pro Forma Financial Information
and Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
SAFEGUARD SCIENTIFICS, INC.
By: /s/Gerald M. Wilk
-------------------
Gerald M. Wilk
Vice President - Finance
Dated: December 16, 1994
SAFEGUARD SCIENTIFICS, INC.
COMMISSION FILE NO. 1-5620
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Maximis
1. Report of Ernst & Young LLP, Independent Auditors.
2. Balance Sheet as of September 30, 1994 and December 31, 1993 and 1992.
3. Statements of Operations for the years ended December 31, 1993,
1992 and 1991, and for the nine months ended September 30, 1994 and
1993 (unaudited).
4. Statements of Cash Flows for the years ended December 31, 1993,
1992 and 1991, and for the nine months ended September 30, 1994 and
1993 (unaudited).
5. Notes to Financial Statements.
(b) Safeguard Scientifics, Inc. Pro Forma Financial Information (Unaudited)
1. Description of Pro Forma Financial Information.
2. Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1993.
3. Pro Forma Consolidated Statement of Operations for the nine months
ended September 30, 1994.
4. Notes to Pro Forma Consolidated Statements of Operations.
5. Pro Forma Consolidated Balance Sheet as of September 30, 1994.
(c) Exhibits
23.1 Consent of Independent Auditors.
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors
Texas Instruments Incorporated
We have audited the accompanying balance sheet of MAXIMIS
(formerly a business unit of Texas Instruments Incorporated) at
December 31, 1993 and 1992 and September 30, 1994, and the
related statements of operations and cash flows for each of the
three years in the period ended December 31, 1993 and the nine
months ended September 30, 1994. These financial statements are
the responsibility of the management of Texas Instruments
Incorporated. 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.
As discussed in Note 1, Premier Solutions Ltd. acquired certain
assets and assumed certain liabilities of MAXIMIS as of
September 30, 1994. Prior to September 30, 1994, MAXIMIS was a
part of Texas Instruments Incorporated and, as such, had no
separate legal status or existence. Transactions with Texas
Instruments Incorporated are described in Note 2.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of MAXIMIS at December 31, 1993, 1992 and September
30, 1994, and the results of its operations and cash flows for
each of the three years in the period ended December 31, 1993
and the nine months ended September 30, 1994, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
December 2, 1994
Dallas, Texas
MAXIMIS
Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
------------ -------------
1994 1993 1992
----- ----- -----
(In Thousands)
<S> <C> <C> <C>
Assets
Current assets:
Receivables $6 $599 $3
Prepaid commissions 29 120 112
----- ------- ------
Total current assets 35 719 115
Equipment 505 485 384
Less accumulated depreciation (320) (258) (169)
----- ------- ------
Equipment, net 185 227 215
Capitalized software -- 11,377 8,329
Goodwill less accumulated amortization
of $629,000, $518,000 and $366,000 as
of September 30, 1994 and December 31,
1993 and 1992, respectively 111 222 374
----- ------- ------
Total assets $331 $12,545 $9,033
===== ======= ======
Liabilities and Divisional Account
Current liabilities:
Accounts payable $142 $126 $215
Accrued employee benefits 488 387 305
Deferred maintenance revenue 59 129 28
Other accrued expenses -- -- 67
----- ------- ------
Total current liabilities 689 642 615
Accrued retirement costs 487 522 300
Divisional account (845) 11,381 8,118
----- ------- ------
Total liabilities and divisional deficit $331 $12,545 $9,033
===== ======= ======
</TABLE>
See accompanying notes.
Maximis
Statements of Operations
<TABLE>
<CAPTION>
For the nine months
ended September 30 For the year ended
1994 1993 December 31
------------------------
(unaudited) 1993 1992 1991
----- ------- ------ ------ ------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Revenue:
Sales $6 $753 $1,568 $530 $2,059
Service 247 209 313 228 267
------- -------- -------- -------- --------
Total revenue 253 962 1,881 758 2,326
Operating costs and
expenses:
Cost of revenue 5,891 4,948 6,696 7,095 4,575
Write-off of
capitalized software
(Note 3) 12,149 -- -- -- --
Selling, general, and
administrative 1,287 1,183 1,503 1,607 736
------- -------- -------- -------- --------
Total operating costs
and expenses 19,327 6,131 8,199 8,702 5,311
------- -------- -------- -------- --------
Net loss $(19,074) $(5,169) $(6,318) $(7,944) $(2,985)
========== ======== ======== ======== ========
</TABLE>
See accompanying notes.
Maximis
Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months
ended September 30
----------------------------
1994 1993 For the year ended December 31
--------------------------------
(unaudited) 1993 1992 1991
------------- ------------ --------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Operating Activities
Net loss $(19,074) $(5,169) $(6,318) $(7,944) $(2,985)
Depreciation 73 66 89 78 76
Amortization 885 2,438 3,249 1,842 148
Write-off of capitalized software 12,149 -- -- -- --
(Increase) decrease in working capital:
Accounts receivable 593 (596) (596) 1,427 (1,312)
Prepaid commissions 91 (8) (8) (112) -
Accounts payable and accrued expenses 47 31 27 65 358
Accrued retirement costs (35) 222 222 300 --
--------- -------- -------- ------- --------
Net cash used in operating activities (5,271) (3,016) (3,335) (4,344) (3,715)
Investing Activities
Capitalization of software development costs (1,546) (4,578) (6,145) (6,436) (3,165)
Additions to equipment (31) (72) (101) (71) (147)
--------- -------- -------- ------- --------
Net cash used in investing activities (1,577) (4,650) (6,246) (6,507) (3,312)
Financing Activity
Net transfers from parent 6,848 7,666 9,581 10,851 7,027
Net change in cash and cash equivalents -- -- -- -- --
Cash and cash equivalents at beginning of year -- -- -- -- --
--------- -------- -------- ------- --------
Cash and cash equivalents at end of year $-- $-- $-- $-- $--
========= ======== ======== ======= ========
</TABLE>
See accompanying notes.
Maximis
Notes to Financial Statements
September 30, 1994
1. Description of Business and Subsequent Event
MAXIMIS (the Business) was formerly a business unit of Texas
Instruments Incorporated (the Parent) which marketed an
investment management information system to leading insurance
companies and state pension funds for a wide range of asset
management and investment accounting applications. The Business
is economically dependent on four primary customers which
account for substantially all revenues earned. As of September
30, 1994, Premier Solutions Ltd. acquired certain assets and
assumed certain liabilities of the Business as defined in the
purchase agreement.
2. Significant Accounting Policies
Allocation of Expenses
The Parent provides various administrative services to the
Business including marketing, data processing and personnel
services. The Parent charged these expenses and all other
central operating costs, first on the basis of direct usage
when identifiable, with the remainder allocated among the
Parent's division entities on the basis of their respective
revenues, headcount, or level of effort. Rent expense was
allocated to the Business based on square footage used. In the
opinion of management, these methods of allocation are
reasonable.
Capitalized Software
The Business capitalizes certain software development costs.
Amounts capitalized are amortized by the straight-line method
over three years.
Equipment
Equipment is stated at cost and primarily consists of personal
computers. Depreciation is computed over the estimated useful
life of five years using the 150 percent declining-balance
method.
Goodwill
Goodwill consists of the excess of the purchase price over the
fair value of the net assets of the business acquired and is
amortized by the straight-line method over five years.
2. Significant Accounting Policies (continued)
Revenue Recognition
The Business recognizes revenue from sales of software licenses
upon delivery of the software product unless the Business has
significant related obligations remaining. Revenue is not
recognized until such obligations have been completed or are no
longer significant. Service revenue is recognized upon
performance. Revenue from maintenance contracts is deferred and
recognized over the terms of the related contracts.
Cash
The Business's cash and short-term borrowing activities have
been included in the Parent's cash management system, and the
Business's cash receipts and disbursements were combined with
other Parent cash transactions and balances. Accordingly, no
cash balances or short-term borrowings are presented in the
accompanying balance sheet. The net cash transfers between the
Business and the Parent appear in the accompanying statement of
cash flows as "Net transfers from parent" and are included in
the "Divisional account" in the accompanying balance sheet.
Pension and Other Postretirement Benefits
The Business received an allocation from the Parent for the
pension and postretirement benefits of Business employees. The
Parent's actuarial valuation does not provide an allocation of
the information relevant to the Business; thus, the related
expense and liabilities have been determined for the Business
based on headcount.
3. Amortization of Capitalized Software Costs
<TABLE>
<CAPTION>
Nine months ended
September 30
-----------------
1994 1993 Year ended December 31
-----------------------
(unaudited) 1993 1992 1991
------------------ ----- ------ -----
(In Thousands)
<S> <C> <C> <c <C> <C>
Amortization of capitalized software costs $774 $2,323 $3,097 $1,698 $--
</TABLE>
In connection with the Parent's decision in 1994 to divest the Business,
capitalized software of $12,149 was written off
in 1994. The write-off is reflected on the face of the Statement of Operations.
4. Research and Development Expense
<TABLE>
<CAPTION>
Nine months ended
September 30
-----------------
1994 1993 Year ended December 31
-----------------------
(unaudited) 1993 1992 1991
------------------ ----- ------ -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Research and development expense $742 $140 $186 $393 $--
</TABLE>
5. Income Taxes
The Business accounts for income taxes under Statement of
Financial Accounting Standards No. 109. Although the Business
was included in the Parent's consolidated tax return, the
income taxes for the purposes of these financial statements
have been prepared on a separate return basis. Accordingly, the
net operating loss carryforwards and tax deductible items
included below have already been utilized by the Parent. Under
a separate return computation, there is no current provision
for income taxes. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The deferred income
tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
Nine months ended Year ended
September 30 December 31
----------------- -------------------------
1994 1993 1992
----------------- ------ ------
(In Thousands)
<S> <C> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards $11,981 $6,911 $5,950
Accrued vacation 131 108 107
Accrued retirement costs (pension and retiree
health care) 210 210 105
Other 21 45 33
-------- ------- -------
Subtotal deferred income tax assets 12,343 7,274 6,195
Less valuation allowance (12,324) (5,681) (3,516)
-------- ------- -------
Total deferred income
tax assets 19 1,593 2,679
======== ======= =======
Deferred income tax liabilities:
Capitalized software -- (1,538) (2,622)
Other (19) (55) (57)
-------- ------- -------
Total deferred income tax liabilities (19) (1,593) (2,679)
======== ======= =======
Net deferred income tax assets $-- $-- $--
======== ======= =======
</TABLE>
SAFEGUARD SCIENTIFICS, INC.
COMMISSION FILE NO. 1-5620
SAFEGUARD SCIENTIFICS, INC.
PRO FORMA FINANCIAL INFORMATION
The pro forma consolidated financial statements should be read in
conjunction with the related description of the acquisition of the Maximis
Software Business Unit (Maximis) of Texas Instruments Incorporated by
Premier Solutions, Ltd. (Premier) , a 94% owned subsidiary of the
Registrant included in the Registrant's Form 8-K dated October 17, 1994.
The Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1993 reflects the results of operations for the Registrant as
if the acquisition of Maximis was consummated January 1, 1993. The Pro Forma
Consolidated Statement of Operations for the nine months ended September
30, 1994 reflects the results of operations for the Registrant as if the
acquisition of Maximis was consummated January 1, 1994. The Pro Forma
Consolidated Balance Sheet as of September 30, 1994 assumes the acquisition
was consummated on September 30, 1994. Pro forma adjustments reflect the
elimination of certain assets not purchased and the elimination of
depreciation and amortization on certain of those assets, the elimination
of certain liabilities not assumed, the elimination of Maximis' equity
and the tax effect of pro forma adjustments.
These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
acquisition been made at January 1, 1993 or January 1, 1994, nor are they
indicative of results which may occur in the future.
<TABLE>
<CAPTION>
SAFEGUARD SCIENTIFICS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(000 omitted) except per share data
Safeguard
Scientifics, Pro Forma Consolidated
Inc. Maximis Adjustments Pro Forma
----------------------------------------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Net sales $1,168,349 $1,881 $1,170,230
Gains on sales of securities, net 9,574 9,574
Other income 2,698 2,698
----------------------------------------------- ---------------
Total revenues 1,180,621 1,881 1,182,502
Costs and Expenses
Cost of revenues 940,900 6,696 (2,482)(a) 945,114
Selling, general and administrative 180,500 1,262 (1,000)(b) 180,762
Depreciation and amortization 18,422 241 ($241)(c) 18,422
Interest 13,701 13,701
Loss from equity investments 818 818
Goodwill write-off 6,419 6,419
----------------------------------------------- ---------------
Total costs and expenses 1,160,760 8,199 (3,723) 1,165,236
----------------------------------------------- ---------------
Earnings Before Minority Interest and Taxes 19,861 (6,318) 3,723 17,266
Minority interest (6,523) (6,523)
----------------------------------------------- ---------------
Earnings (Loss) Before Taxes on Income 13,338 (6,318) 3,723 10,743
Provision for (benefit of) taxes on income 9,485 (882)(d) 8,603
----------------------------------------------- ---------------
Net Earnings (Loss) $3,853 ($6,318) $4,605 $2,140
=============================================== ===============
Earnings Per Share
Primary $0.31 $0.14
Fully Diluted $0.21 $0.04
Average Common Shares Outstanding
Primary 10,046 10,046
Fully Diluted 10,136 10,136
</TABLE>
<TABLE>
<CAPTION>
SAFEGUARD SCIENTIFICS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994
(000 omitted) except per share data
Safeguard
Scientifics, Pro Forma Consolidated
Inc. Maximis Adjustments Pro Forma
----------------- ------- ----------- ---------------
<S> <C> <C> <C> <c.
REVENUES
Net sales $1,014,210 $253 $1,014,463
Gains on sales of securities, net 15,337 15,337
Other income 2,898 2,898
----------------------------------------------- ---------------
Total revenues 1,032,445 253 1,032,698
Costs and Expenses
Cost of revenues 840,061 5,891 (803)(a) 845,149
Selling general and administrative 142,475 1,103 (1,000)(b) 142,578
Depreciation and amortization 12,584 184 ($184)(c) 12,584
Interest 12,434 12,434
(Income) Loss from equity investments (952) (952)
Write-off of Capitalized Software 12,149 (12,149)(e) 0
----------------------------------------------- ---------------
Total costs and expenses 1,006,602 19,327 (14,136) 1,011,793
----------------------------------------------- ---------------
Earnings Before Minority Interest and Taxes 25,843 (19,074) 14,136 20,905
Minority interest (4,092) (4,092)
----------------------------------------------- ---------------
Earnings (Loss) Before Taxes on Income 21,751 (19,074) 14,136 16,813
Provision for (benefit of) taxes on income 7,091 (1,679)(d) 5,412
----------------------------------------------- ---------------
Net Earnings (Loss) $14,660 ($19,074) $15,815 $11,401
=============================================== ===============
Earnings Per Share
Primary $1.45 $1.12
Fully Diluted $1.38 $1.05
Average Common Shares Outstanding
Primary 9,795 9,795
Fully Diluted 9,804 9,804
</TABLE>
SAFEGUARD SCIENTIFICS, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(a) Eliminate amortization on capitalized software for which no value
was assigned in applying purchase accounting, net of amortization of
software costs capitalized during the period presented.
(b) Utilization of non-recurring operating subsidy received in
connection with the acquisition.
(c) Eliminate depreciation on property, plant and equipment and
amortization of goodwill for which no value was assigned in applying
purchase accounting.
(d) Federal tax benefit of the pro forma loss at the statutory 34% rate.
(e) Eliminate capitalized software write-off as there was no value
assigned to capitalized software in applying purchase accounting. This
charge was made in connection with the former parent's decision to divest
itself of the MAXIMIS business.
<TABLE>
<CAPTION>
SAFEGUARD SCIENTIFICS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994
(000 omitted)
Safeguard
Scientifics, Pro Forma Consolidated
Inc. Maximis Adjustments (a) Pro Forma
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets $416,933 $35 $2,770 419,738
Property, plant & equipment 42,019 185 (185) 42,019
Commercial real estate 31,404 31,404
Other assets, principally investments and 0
excess of cost over net assets of 0
businesses acquired 77,410 111 (111) 77,410
-----------------------------------------------------------------
Total assets 567,766 331 2,474 570,571
=================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities 227,669 689 2,116 230,474
Long-term and commercial real estate debt 197,074 197,074
Minority interest, deferred taxes and other liabil 35,340 487 (487) 35,340
Shareholders' equity 107,683 (845) 845 107,683
-----------------------------------------------------------------
$567,766 $331 $2,474 $570,571
=================================================================
</TABLE>
(a)Pro forma adjustments reflect the application
of purchase accounting. The adjustment to
current assets is principally for cash
received in connection with
the acquisition.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(No. 33-41853, No. 33-31840, No. 2-79617, No. 2-63245, No. 33-48579, No. 33-
48462, No. 2-72362, No. 33-72559 and No. 33-72560) on Form S-8 and (No. 2-
93525) on Form S-3 of Safeguard Scientifics, Inc. of our report dated
December 2, 1994, with respect to the balance sheet of MAXIMIS (formerly a
business unit of Texas Instruments, Inc.) at December 31, 1993 and 1992 and
September 30, 1994, and the related statements of operations and cash flows
for each of the three years in the period ended December 31, 1993 and the
nine months ended September 30, 1994, included in this Form 8-K/A.
Ernst & Young LLP
Dallas, Texas
December 13, 1994
