SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to Current Report on
Form 8-K/A
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 2, 1998
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-21519 06-1295986
(Commission File Number) (IRS Employer Identification No.)
225 High Ridge Road, Stamford, CT 06905
(Address of Principal Executive Offices) (Zip Code)
(203) 329-3300
Registrant's Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
The undersigned registrant hereby amends Item 7 of its Current Report
on Form 8-K, dated January 2, 1998, which excluded certain financial statements
because they were not available at the time of filing, to read in its entirety
as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
See pages 4 through 14 hereof.
(b) Pro Forma Financial Information.
See pages 15 through 20 hereof.
(c) Exhibits
See Exhibit Index attached hereto at page 21.
2
<PAGE>
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 hereunto duly authorized.
Date: March 16, 1998 INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
(Registrant)
/s/ Peter P. Bassermann
------------------------------------
Peter P. Bassermann, President
3
<PAGE>
Report of Independent Auditors
Board of Directors
ITDS Intelicom Services, Inc.
We have audited the accompanying balance sheets of ITDS Intelicom Services,
Inc., formerly known as CSC Intelicom, Inc. ("Intelicom"), as of March 28, 1997
and January 2, 1998, and the related statements of operations and shareholders'
net investment and cash flows for the years ended March 29, 1996 and March 28,
1997 and for the thirty-nine week period ended January 2, 1998. These financial
statements are the responsibility of Intelicom'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 Intelicom at March 28, 1997 and
January 2, 1998, and the results of its operations and its cash flows for the
years ended March 29, 1996 and March 28, 1997, and for the thirty-nine week
period ended January 2, 1998, in conformity with general accepted accounting
principles.
As discussed in Note 1 to the financial statements, a change in reporting entity
occurred on January 2, 1998. The financial statements for all periods presented
have been restated to reflect this change.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 5, 1998
4
<PAGE>
ITDS Intelicom Services, Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 28, January 2,
1997 1998
-------------------------------
(Dollars in Thousands)
<S> <C> <C>
Assets
Current assets:
Trade accounts receivable, net of allowance for doubtful accounts of $587
and $2,452, respectively $ 12,036 $ 18,310
Prepaid expenses and other current assets 224 203
-------------------------------
Total current assets 12,260 18,513
Property and equipment, at cost 5,243 6,623
Accumulated depreciation (2,654) (3,648)
-------------------------------
Property and equipment, net 2,589 2,975
Other assets:
Goodwill, net of accumulated amortization of $980 and $1,257, respectively 13,020 12,743
Non-compete agreements 5
Purchased software, net of accumulated amortization of $388 and $481,
respectively 385 535
Internally developed software, net of accumulated amortization of $15,690
and $22,767, respectively 15,178 13,530
-------------------------------
Total other assets 28,588 26,808
-------------------------------
Total assets $ 43,437 $ 48,296
===============================
Liabilities and shareholders' net investment
Current liabilities:
Customer advances $ 286 $ 1,096
Accounts payable 837 5,548
-------------------------------
Total current liabilities 1,123 6,644
Deferred income taxes 6,869 7,416
Commitments and contingencies
Shareholders' net investment 35,445 34,236
-------------------------------
Total liabilities and shareholders' net investment $ 43,437 $ 48,296
===============================
</TABLE>
See accompanying notes.
5
<PAGE>
ITDS Intelicom Services, Inc.
Statements of Operations and Shareholders' Net Investment
<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, March 28, January 2,
1996 1997 1998
-------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Revenues $ 31,153 $ 42,189 $ 39,771
Costs of services 5,359 12,584 21,277
Selling, general and administrative 11,784 15,385 12,875
Depreciation and amortization 6,579 8,996 8,444
-------------------------------------------------------
Total costs and expenses 23,722 36,965 42,596
-------------------------------------------------------
Income (loss) before taxes 7,431 5,224 (2,825)
Tax provision (benefit) 2,976 2,182 (972)
-------------------------------------------------------
Net income (loss) 4,455 3,042 (1,853)
Shareholders' net investment, beginning of period 21,965 29,758 35,445
Other borrowings, net 3,338 2,645 644
-------------------------------------------------------
Shareholders' net investment, end of period $ 29,758 $ 35,445 $ 34,236
=======================================================
</TABLE>
See accompanying notes.
6
<PAGE>
ITDS Intelicom Services, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, March 28, January 2,
1996 1997 1998
-------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 4,455 $ 3,042 $ (1,853)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Amortization 5,961 8,079 7,354
Depreciation 618 917 1,090
Deferred income taxes 2,484 1,447 547
Provision for doubtful accounts 31 314 1,865
Trade accounts receivable (2,863) (3,489) (8,139)
Other--net 14 47 26
Accounts payable and customer advances (678) 194 5,521
-------------------------------------------------------
Net cash provided by operating activities 10,022 10,551 6,411
Investing activities
Purchased software (221) (230) (246)
Capitalized software (12,223) (10,749) (5,429)
Purchases of equipment (916) (2,217) (1,380)
-------------------------------------------------------
Net cash used in investing activities (13,360) (13,196) (7,055)
Financing activities
Other borrowings, net 3,338 2,645 644
-------------------------------------------------------
Net cash provided by financing activities 3,338 2,645 644
-------------------------------------------------------
Net change in cash - - -
Cash at beginning of period - - -
-------------------------------------------------------
Cash at end of period $ - $ - $ -
=======================================================
</TABLE>
See accompanying notes.
7
<PAGE>
ITDS Intelicom Services, Inc.
Notes to Financial Statements
March 29, 1996, March 28, 1997 and January 2, 1998
(Dollars in Thousands)
1. Business and Significant Accounting Policies
Change in Reporting Entity
On January 2, 1998, International Telecommunication Data Systems, Inc. ("ITDS")
acquired the stock of ITDS Intelicom Services, Inc., formerly known as CSC
Intelicom, Inc. ("Intelicom"), a company of Computer Sciences Corporation
("CSC"). Concurrent with the acquisition, Intelicom was reorganized and all
divisions other than the TRIS Division ("TRIS") were transferred to CSC in a
spin-off. ITDS acquired only the assets, liabilities and operations of TRIS. As
a result of the spin-off, the accompanying financial statements were restated to
present the financial information for TRIS as a new reporting entity.
Description of Business
TRIS (the "Company") provides comprehensive transactional billing and management
information solutions to providers of wireless, long distance and satellite
telecommunications services in North America. These solutions are built upon a
flexible proprietary software technology to address customer requirements as
they evolve, regardless of market segment, geographic area or mix of network
features or billing options. The Company typically provides its services to
customers under exclusive contracts with terms ranging from three to four years,
and bills customers monthly, typically on a per subscriber basis. As a result,
substantially all of the Company's revenue is recurring in nature, and increases
as a customer's subscriber base grows.
Basis of Presentation
The accompanying financial statements have been prepared from the historical
accounting records of TRIS. As noted above, TRIS was not previously a separate
legal entity and accordingly, the balance sheets and statements of operations
and shareholders' net investment reflects shareholders' net investment which
includes amounts owed to CSC, contributed capital and retained earnings.
Due to allocations associated with certain shared functions more fully described
in Note 4, the accompanying financial statements may not be indicative of costs
that would have been incurred had TRIS been operated as an unaffiliated entity.
8
<PAGE>
ITDS Intelicom Services, Inc.
Notes to Financial Statements (continued)
1. Business and Significant Accounting Policies (continued)
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives of the
assets of three to five years. Leasehold improvements are amortized over the
life of the related lease.
Goodwill
The Company evaluates at least annually the recoverability of its excess cost of
business acquired over related net assets. In assessing recoverability, the
current and future profitability of the related operations are considered, along
with management's plans with respect to the operations and the projected
undiscounted cash flows. Goodwill, which relates to CSC's acquisition of TRIS in
1992, is amortized using the straight-line method over 40 years.
Purchased Software
Purchased software is carried at cost, less accumulated amortization.
Amortization is computed using the straight-line method based on an estimated
life of five years.
Capitalized Software
The Company capitalizes software development costs as incurred for software used
in its product and service line only after establishing technical viability. The
capitalized costs include salaries and related payroll costs incurred in the
development activities. Software development costs are carried at cost less
accumulated amortization computed using the straight-line method over the
remaining estimated useful life of the product; generally, three years. The
establishment of technical viability and the ongoing assessment of
recoverability of capitalized costs require considerable judgment by management
with respect to certain factors including anticipated future gross revenues,
estimated economic life, market potential and changes in technology. Total
amortization expense for capitalized software was $5,592, $7,577 and $7,076 for
the two years and thirty-nine week period ended March 29, 1996, March 28, 1997
and January 2, 1998, respectively.
9
<PAGE>
ITDS Intelicom Services, Inc.
Notes to Financial Statements (continued)
1. Business and Significant Accounting Policies (continued)
Revenue Recognition
Revenues and costs associated with the recurring process of providing billing
and other service/software solutions are recognized at the time services are
performed. License fees and related costs are recognized upon execution of the
licensing agreement and delivery of the software to the customer, provided that
the Company has no significant related obligations or collection uncertainties
remaining. Where there are significant obligations related to the development
and enhancement of the software, license fees are recorded over the expected
installation period or the term of the respective contract.
Accounts receivable at March 28, 1997 and January 2, 1998, include $3,939 and
$8,834, respectively, for services rendered prior to those dates which were
billed in the month subsequent to the respective balance sheet date. The
allowance for doubtful accounts at January 2, 1998 includes $266 attributable to
unbilled accounts receivable.
Major Customers
Certain customers have individually exceeded 10% of total revenue during the
historical period, as follows:
<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended March Year Ended March Period Ended
29, 1996 28, 1997 January 2, 1998
---------------- ----------------- ------------------
<S> <C> <C> <C>
Nextel Communications, Inc. * 16.8% 38.3%
Western Wireless Corp. 19.9% 21.3% 11.2%
CommNet Cellular, Inc. 13.5% 10.5% 10.6%
Bell Atlantic Mobile 16.3% 10.9% 10.5%
Southwestern Bell Telephone Co. 11.9% * *
</TABLE>
*Denotes that sales to this customer did not exceed 10% of total
revenue for the respective period.
10
<PAGE>
ITDS Intelicom Services, Inc.
Notes to Financial Statements (continued)
1. Business and Significant Accounting Policies (continued)
Income Taxes
Income taxes have been provided on a separate return basis for the two years and
39-week period ended March 29, 1996, March 28, 1997 and January 2, 1998,
respectively. Income taxes have not been provided for periods prior to fiscal
1996. 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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts and disclosures reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Property and Equipment
Property and equipment consists of the following:
March 28, January 2,
1997 1998
--------------------------------
Computer equipment $ 2,809 $ 3,879
Furniture, fixtures and other 1,698 2,008
Leasehold improvements 736 736
--------------------------------
5,243 6,623
Less accumulated depreciation (2,654) (3,648)
--------------------------------
$ 2,589 $ 2,975
================================
3. Employee Benefit Plans
Substantially all TRIS employees were eligible for the CSC contributory defined
benefit pension plan. That plan provided pay-related benefits based on years of
participation. Under CSC's funding policy, annual contributions were made to
fund the plan during the participants' time of participation.
11
<PAGE>
ITDS Intelicom Services, Inc.
Notes to Financial Statements (continued)
3. Employee Benefit Plans (continued)
CSC allocated pension plan expense to TRIS on the basis of payroll for
participating employees.
CSC maintained an employee savings plan that qualifies as a cash or deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. Under the
plan, participating employees may defer up to 15% of their pre-tax compensation,
but not more than the applicable statutory limit per calendar year. TRIS through
a benefit allocation from CSC, offered a contribution match to its eligible
employees.
Subsequent to the acquisition of TRIS by ITDS as described in Note 1, all TRIS
employees became eligible to participant in ITDS' employee benefit plans.
4. Related Party Transactions
TRIS is part of the centralized cash management, treasury, disbursements and
collection functions of CSC. Accordingly, TRIS maintains no separate banking,
treasury or accounting functions. Operating expenses reflected in the statement
of operations and shareholders' net investment include both direct costs
pertaining exclusively to and incurred by TRIS, as well as an allocation of
costs associated with certain functions which were performed on a shared basis
for TRIS and other CSC divisions. These functions include insurance, legal,
accounting, human resources, income taxes and technology. Costs are allocated to
TRIS based on allocation methods related to the shared function, principally net
revenues as a percentage of consolidated net revenues. Management believes that
these cost allocation methods are reasonable and reflect TRIS' costs of doing
business.
Allocated costs included in selling, general and administrative expenses were
$3,794, $3,675 and $4,519 for the two years and 39-week period ended March 29,
1996, March 28, 1997 and January 2, 1998, respectively.
Subsequent to the acquisition of TRIS by ITDS as described in Note 1, certain
support functions will be provided by CSC on a transitional basis and other
services will be discontinued.
5. Commitments and Contingencies
In October 1996, TRIS entered into a noncancelable lease expiring in September
2003 for 60,400 square feet of office space in Champaign, Illinois. Minimum
future rental payments due under such lease are $665 per year, which does not
include property tax or utility experiences.
12
<PAGE>
ITDS Intelicom Services, Inc.
Notes to Financial Statements (continued)
5. Commitments and Contingencies (continued)
Rental expense incurred (including related property taxes) was $235, $464 and
$553 for the two years and 39-week period ended March 29, 1996, March 28, 1997
and January 2, 1998, respectively.
In the normal course of business, the Company is party to customer and other
disputes which involve or may involve litigation. It is the opinion of
management that ultimate liability, if any, with respect to these disputes will
not be material to the Company's results of operations or financial position.
6. Income Taxes
Significant components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, March 28, January 2,
1996 1997 1998
------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 411 $ 614 $ (1,268)
State 81 121 (251)
------------------------------------------------------
Total current 492 735 (1,519)
Deferred:
Federal 2,074 1,208 457
State 410 239 90
------------------------------------------------------
Total deferred 2,484 1,447 547
------------------------------------------------------
$ 2,976 $ 2,182 $ (972)
======================================================
</TABLE>
13
<PAGE>
ITDS Intelicom Services, Inc.
Notes to Financial Statements (continued)
6. Income Taxes (continued)
A reconciliation of the applicable federal statutory rate to the Company's
effective tax rate from income (loss) before taxes is as follows:
<TABLE>
<CAPTION>
Thirty-Nine Week
Year Ended Year Ended Period Ended
March 29, March 28, January 2,
1996 1997 1998
------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% (34.0)%
Non-deductible charges 1.7 3.2 3.3
State income taxes, net 4.3 4.6 (3.7)
------------------------------------------------------
40.0% 41.8% (34.4)%
======================================================
</TABLE>
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
March 28, January 2,
1997 1998
--------------------------------
<S> <C> <C>
Deferred tax liabilities:
Capitalized software $ 5,773 $ 5,162
Unbilled revenue 1,503 3,371
--------------------------------
Total deferred tax liabilities 7,276 8,533
Deferred tax assets:
Reserve for doubtful accounts 224 936
Other 183 181
--------------------------------
Total deferred tax assets 407 1,117
--------------------------------
Net deferred tax liability $ 6,869 $ 7,416
================================
</TABLE>
14
<PAGE>
International Telecommunication Data Systems, Inc. ("ITDS")
Unaudited Pro Forma Consolidated Financial Statements
Introductory Note
The following unaudited pro forma consolidated financial statements have been
prepared by ITDS management. These statements reflect ITDS' acquisition of ITDS
Intelicom Services, Inc., formerly known as CSC Intelicom, Inc. ("Intelicom"),
and combine the historical consolidated financial statements of ITDS and
Intelicom for the periods indicated using the purchase method of accounting.
The unaudited pro forma consolidated balance sheet reflects the adjustments as
if the acquisition had occurred on December 31, 1997. The unaudited pro forma
consolidated statement of income has been prepared assuming the acquisition of
TRIS had occurred on January 1, 1997. These pro forma statements should be read
in conjunction with the historical financial statements and related notes of
ITDS and Intelicom. The historical financial statements of Intelicom have been
adjusted to conform with ITDS' December 31 year-end for purposes of the pro
forma financial statements.
The pro forma consolidated financial statements have been prepared using the
following facts and assumptions:
ITDS acquired the outstanding capital stock of Intelicom for $75.8 million in
cash (net of working capital of $14.2 million retained by Computer Sciences
Corporation ("CSC")), subject to adjustment based on the level of receivables,
payables and employment related items at the closing date, and 606,674 shares of
Common Stock of ITDS (valued at $10 million) on January 2, 1998. Additionally,
ITDS would be required to pay CSC $6 million on January 1, 1999 if certain
performance criteria have been met on that date. This amount will be recorded to
goodwill when the final amount is known. ITDS also incurred direct costs of
approximately $2 million. These costs consist primarily of legal, accounting and
financial advisory fees.
ITDS borrowed $70 million, on a long term basis, in order to finance the cash
portion of the acquisition. In addition, ITDS incurred direct financing fees of
approximately $1.5 million.
15
<PAGE>
ITDS estimates that it will incur approximately $5 million in indirect
transaction and combination costs. These costs consist primarily of employment
and personnel related costs and will be expensed in the first quarter of 1998.
The purchase price will be allocated to the assets and liabilities of Intelicom
based on their fair values at the date of acquisition. The purchase price in
excess of the fair value of the net assets acquired of approximately $51.6
million will be amortized over 15 years. In addition, purchased research and
development costs of approximately $20.8 million, before income tax benefit,
will be expensed in the first quarter of 1998. The $5 million and the $20.8
million discussed above have been excluded from the pro forma statement of
income for the year ended December 31, 1997.
Pro forma adjustments to the consolidated statement of income reflecting
anticipated cost savings and other synergies, if any, resulting from the
integration of ITDS and Intelicom are, under most circumstances, not permitted
and, accordingly, have not been reflected in the pro forma financial statements.
However, an adjustment to reverse a credit granted by Intelicom to a major
customer ($4.7 million) for obligations relating to services provided prior to
the acquisition by ITDS was recorded as this item is non recurring.
The pro forma financial results are not intended to be a projection of future
results and are not necessarily indicative of the results which would have
occurred if the business combination had been in effect on the dates presented.
16
<PAGE>
International Telecommunication Data Systems, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro
ITDS Intelicom Adjustments Forma
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $28,967 $ - $ (5,827) (A) $ 23,140
Accounts receivable, net 5,008 18,310 (13,885) (A) 9,433
Prepaid expenses 741 203 944
Deferred income taxes 220 8,320 (B) 8,540
--------------------------------------------------- --------------
Current assets 34,936 18,513 (11,392) 42,057
Computers 4,844 3,879 8,723
Furniture and fixtures 446 2,008 2,454
Equipment 373 373
Leasehold improvements 590 736 1,326
--------------------------------------------------- --------------
6,253 6,623 - 12,876
Accumulated depreciation (2,319) (3,648) (5,967)
--------------------------------------------------- --------------
Property and equipment 3,934 2,975 - 6,909
Product development costs 3,698 13,530 2,270 (A) 19,498
Goodwill, net 12,743 38,818 (A) 51,561
Purchased software, net 535 (535) (A) -
Other 1,884 1,500 (D) 3,384
--------------------------------------------------- --------------
Other assets 5,582 26,808 42,053 74,443
--------------------------------------------------- --------------
Total assets $44,452 $48,296 $ 30,661 $123,409
=================================================== ==============
</TABLE>
17
<PAGE>
International Telecommunication Data Systems, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro
ITDS Intelicom Adjustments Forma
<S> <C> <C> <C> <C>
LIABILITIES AND EQUITY
Accounts payable and accrued expenses $ 2,086 $ 5,548 $ 3,000 (C)
1,500 (E)
3,293 (A) $ 15,427
Customer advances - 1,096 1,096
Current maturities of capital lease obligations 278 278
------------------------------------------------ -------------
Current liabilities 2,364 6,644 7,793 16,801
Capital lease obligations 73 73
Deferred income taxes 1,667 7,416 (7,416) (A) 1,667
Long term debt 70,000 (A) 70,000
Other 30 30
Common stock 128 6 (A) 134
Additional paid-in capital 44,447 9,994 (A) 54,441
Retained deficit (4,026) (20,800) (A)
(3,000) (C)
8,320 (B) (19,506)
Unearned Compensation (231) (231)
Shareholders' net investment 34,236 (34,236) (A) -
------------------------------------------------ -------------
Stockholders' equity 40,318 34,236 (39,716) 34,838
------------------------------------------------ -------------
Total liabilities and stockholders' equity $44,452 $48,296 $ 30,661 $123,409
================================================ =============
</TABLE>
18
<PAGE>
International Telecommunication Data Systems, Inc.
Unaudited Pro Forma Consolidated Statement of Income
Year Ended December 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro
ITDS Intelicom Adjustments forma
<S> <C> <C> <C> <C>
Revenue $ 23,429 $ 52,269 $ 4,706 (1) $80,404
Costs and Expenses:
Operating expenses 8,528 26,797 35,325
General, administrative and selling expenses 6,760 15,415 22,175
Depreciation and amortization 1,596 10,693 6,597 (2)
(9,315) (3) 9,571
------------------------------------------------ ------------
16,884 52,905 (2,718) 67,071
------------------------------------------------ ------------
Operating income 6,545 (636) 7,424 13,333
Other income 1,702 - (320) (4) 1,382
Interest expense (120) - (5,850) (5) (5,970)
------------------------------------------------ ------------
Income before income tax expense 8,127 (636) 1,254 8,745
Income tax expense 3,326 (75) 334 (6) 3,585
------------------------------------------------ ------------
Net Income $ 4,801 $ (561) $ 920 $ 5,160
================================================ ============
Average Shares Outstanding:
Basic 12,728 607 13,335
Diluted 13,193 607 13,800
Earnings per share:
Basic $ 0.38 $ 0.39
Diluted $ 0.36 $ 0.37
</TABLE>
19
<PAGE>
International Telecommunication Data Systems, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
(A) To record assets acquired and liabilities assumed at their estimated fair
values and to reflect CSC's retention of certain accounts receivable and
other working capital components aggregating $14.2 million.
(B) To record deferred tax asset related to the $20.8 million of purchased
research and development costs which will be amortized over a 15 year
period for tax purposes.
(C) To record the indirect costs related to the acquisition, estimated at $5
million, less the applicable income tax benefit.
(D) To capitalize direct financing costs associated with the $70 million loan.
(1) To reverse credits given to a TRIS customer for obligations relating to
services provided prior to the acquisition by ITDS.
(2) To record amortization expense related to the $51.6 million of goodwill
over 15 years and the $15.8 million of software development costs over 5
years.
(3) To reverse amortization expense recorded by TRIS prior to the acquisition.
(4) To reflect reduced earnings on investments related to the cash portion of
the purchase price.
(5) To record interest expense and the amortization of financing costs over the
six year term of the $70 million loan.
(6) To adjust the income tax expense to an effective tax rate of 41%.
20
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
- ----------- -------
2.1+* Stock Purchase Agreement, dated as of December 29, 1997 by and
among International Telecommunication Data Systems, Inc., CSC
Intelicom, Inc. and CSC Domestic Enterprises, Inc.
23.1 Consent of Ernst & Young LLP.
99.1* Press Release, as issued by International Telecommunication Data
Systems, Inc. on December 29, 1997.
- ----------------
+ Confidential treatment obtained as to certain portions which have been
omitted and filed separately with the Securities and Exchange
Commission. For a list of omitted Exhibits and Schedules, see page (vi)
of the Table of Contents to the Stock Purchase Agreement. The
Registrant will furnish a copy of any omitted exhibit or schedule to
the Securities and Exchange Commission upon request.
* Previously filed as an exhibit to the Registrant's Report on Form 8-K
originally filed with the Securities and Exchange Commission on January
13, 1998.
21
Exhibit 23.1
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-21287) pertaining to the 1996 Stock Incentive Plan of International
Telecommunication Data Systems, Inc., in the Registration Statement (Form S-8
No. 333-21283) pertaining to the 1996 Employee Stock Purchase Plan of
International Telecommunication Data Systems, Inc. and in the Registration
Statement (Form S-8 No. 333-47865) pertaining to the 1997 Stock Incentive
Plan of International Telecommunication Data Systems, Inc. of our report dated
March 5, 1998, with respect to the financial statements of ITDS Intelicom
Services, Inc. included in the Current Report on Form 8-K/A dated March 18,
1998.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 18, 1998
