<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MARCH 30, 2000
PEROT SYSTEMS CORPORATION
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-22495 75-2230700
--------------- --------- --------------
(STATE OR OTHER (COMMISSION FILE (IRS EMPLOYER
JURISDICTION OF INCORPORATION) NUMBER) IDENTIFICATION NO.)
12404 PARK CENTRAL DRIVE
DALLAS, TEXAS 75251
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(972) 340-5000
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Solutions Consulting, Inc.
Report of Independent Auditors ............................................................................4
Balance Sheet as of December 31, 1999......................................................................5
Statement of Operations for the year ended December 31, 1999...............................................6
Statement of Stockholders' Equity for the year ended December 31, 1999.....................................7
Statement of Cash Flows for the year ended December 31, 1999...............................................8
Notes to Financial Statements .............................................................................9
</TABLE>
(b) Pro Forma Financial Information.
The pro forma condensed consolidated data of Perot Systems Corporation ("PSC" or
the "Company") presents the purchase by the Company of substantially all of the
assets of Solutions Consulting, Inc. ("SCI") (the "Transaction"). The unaudited
pro forma condensed consolidated statement of operations for the year ended
December 31, 1999 has been presented as if the Transaction had occurred at the
beginning of the period, and the unaudited pro forma condensed consolidated
balance sheet as of December 31, 1999 has been presented as if the Transaction
had occurred on December 31, 1999.
<TABLE>
<S> <C>
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended
December 31, 1999...............................................................................17
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1999..........................18
Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet.....................................19
</TABLE>
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
*2.1 Asset Purchase Agreement, dated as of March 1, 2000, by and
among Perot Systems Corporation, a Delaware corporation, PSSC
Acquisition Corporation, a Delaware corporation, Solutions
Consulting, Inc., a Pennsylvania corporation, Mark G. Miller, a
Pennsylvania resident, and Sanford B. Ferguson, a Pennsylvania
resident.
**2.2 Amendment No. 1 to Asset Purchase Agreement, dated as of March
30, 2000, by and among Perot Systems Corporation, a Delaware
corporation, PSSC Acquisition LLC (formerly PSSC Acquisition
Corporation), a Delaware limited liability company and wholly
owned subsidiary of Perot Systems Corporation, Solutions
Consulting Inc., a Pennsylvania corporation, Mark G. Miller, and
Sanford B. Ferguson.
***2.3 Consent of Ernst & Young LLP dated May 11, 2000.
</TABLE>
* Incorporated by reference to Exhibit 10.42 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999.
** Incorporated by reference to Exhibit 2.2 to the Registrant's filing on Form
8-K filed April 14, 2000.
*** Filed herewith.
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 11, 2000 PEROT SYSTEMS CORPORATION
By: /s/ Terry Ashwill
----------------------------------------
Terry Ashwill
Vice President and Chief Financial
Officer
-3-
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Solutions Consulting, Inc.
We have audited the accompanying balance sheet of Solutions Consulting, Inc.
(the Company) as of December 31, 1999, and the related statements of operations,
stockholders' 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 Solutions Consulting, Inc. at
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
February 10, 2000
Pittsburgh, Pennsylvania
-4-
<PAGE> 5
Solutions Consulting, Inc.
Balance Sheet
December 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,066,415
Accounts receivable 10,265,563
Prepaid expenses and other 321,619
------------
Total current assets 18,653,597
Investments 4,739,427
Property and equipment, net 7,475,697
------------
Total assets $ 30,868,721
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 371,648
Accrued payroll and benefits 2,653,868
Accrued pension contribution 2,684,973
Deferred revenue 641,888
Other accrued liabilities 1,852,099
------------
Total current liabilities 8,204,476
Stockholders' equity:
Common stock, $.01 par value, 23,500,000 shares
authorized and 17,650,000 shares issued and outstanding 176,500
Paid-in capital 13,965,157
Retained earnings 8,883,901
Accumulated other comprehensive loss:
Unrealized loss on available-for-sale securities (361,313)
------------
Total stockholders' equity 22,664,245
------------
Total liabilities and stockholders' equity $ 30,868,721
============
</TABLE>
See accompanying notes.
-5-
<PAGE> 6
Solutions Consulting, Inc.
Statement of Operations
Year ended December 31, 1999
<TABLE>
<S> <C>
Revenues $59,778,119
Project personnel and related expenses 33,181,116
Subcontractor expenses 2,224,767
-----------
Gross profit 24,372,236
Expenses:
Marketing and sales 327,634
Recruiting 137,816
Management and administrative support 6,973,150
Executive recruiting charge 10,000,000
Pension contribution 2,684,973
-----------
Total costs and expenses 20,123,573
-----------
Operating profit 4,248,663
Other income:
Gain on sale of investments 1,671,437
Interest income 752,569
-----------
2,424,006
-----------
Net income $ 6,672,669
===========
</TABLE>
See accompanying notes.
-6-
<PAGE> 7
Solutions Consulting, Inc.
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMMON PAID-IN COMPREHENSIVE RETAINED STOCKHOLDERS'
SHARES STOCK CAPITAL (LOSS) INCOME EARNINGS EQUITY
---------- -------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 17,650,000 $176,500 $ 539,800 $ 693,257 $ 15,664,307 $ 17,073,864
Net income - - - - 6,672,669 6,672,669
Distributions to stockholders - - - - (13,453,075) (13,453,075)
Contribution to ESOP - - 3,425,357 - - 3,425,357
Executive stock option grant - - 10,000,000 - - 10,000,000
Other comprehensive loss:
Unrealized loss on
available-for-sale
securities, net of
reclassification
adjustment for gains
included in net income
of $1,671,437 - - - (1,054,570) - (1,054,570)
---------- -------- ----------- ----------- ------------ ------------
Balance at December 31, 1999 17,650,000 $176,500 $13,965,157 $ (361,313) $ 8,883,901 $ 22,664,245
========== ======== =========== =========== ============ ============
</TABLE>
See accompanying notes.
-7-
<PAGE> 8
Solutions Consulting, Inc.
Statement of Cash Flows
Year ended December 31, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 6,672,669
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 807,951
Gain on sale of investments (1,671,437)
Executive recruiting charge 10,000,000
Pension contribution 2,684,973
Changes in other assets and liabilities:
Accounts receivable (3,220,748)
Prepaid expenses and other 285,787
Accounts payable (454,310)
Accrued payroll and benefits 706,506
Deferred revenue 591,748
Other accrued liabilities 953,222
------------
Net cash provided by operating activities 17,356,361
INVESTING ACTIVITIES
Proceeds on sale of investment 3,843,647
Purchase of investments (1,384,787)
Purchases of property and equipment (5,783,201)
------------
Net cash used by investing activities (3,324,341)
FINANCING ACTIVITIES
Distributions to stockholders (13,453,075)
------------
Net cash used by financing activities (13,453,075)
------------
Net increase in cash and cash equivalents 578,945
Cash and cash equivalents at beginning of year 7,487,470
------------
Cash and cash equivalents at end of year $ 8,066,415
============
</TABLE>
See accompanying notes.
-8-
<PAGE> 9
Solutions Consulting, Inc.
Notes to Financial Statements
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Solutions Consulting, Inc. was founded in 1992. The Company specializes in
systems and business integration consulting services including selection,
design, implementation and support of Electronic Commerce, Customer Relationship
Management (CRM), Enterprise Resource Planning (ERP) and Supply Chain Management
(SCM) systems for manufacturing and distribution companies. These services are
provided in a variety of computing environments and use leading technologies,
including client/server architectures, object-oriented programming, distributed
databases and the latest networking and communication technologies.
REVENUE RECOGNITION
The Company recognizes revenues and cost of revenues on time-and-materials
contracts as the services are performed for clients. Amounts billed in advance
of services being performed are recorded as deferred revenue and recognized in
revenue as services are performed.
MAJOR CUSTOMERS
During 1999, five customers accounted for approximately 38% of total revenues.
CASH AND CASH EQUIVALENTS
The Company considers all unrestricted, highly liquid investments with original
terms of less than 90 days to be cash equivalents.
INVESTMENTS
The Company's equity securities are classified as available-for-sale.
Available-for-sale securities are stated at fair value, with unrealized gains
and losses reported in the statement of stockholders' equity. Realized gains and
losses, and declines in value judged to be other than temporary on
available-for-sale securities are included in results of operations.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided on the
straight-line basis over estimated useful lives ranging from one to five years.
Costs of repairs and maintenance are charged to expense as incurred.
-9-
<PAGE> 10
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
For federal and state income tax purposes, the Company has elected to be taxed
under Subchapter S of the Internal Revenue Code and the respective state codes.
As an S corporation, the Company's stockholders are responsible for any federal
and state income taxes resulting from the Company's taxable income.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements and accompanying notes. Actual results could differ from those
estimates.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
was issued in June 1998. The Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
imbedded in other contracts, and for hedging activities. It requires an entity
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The accounting
for changes in the fair value of a derivative (i.e., gains and losses) depends
on the intended use of the derivative and the resulting designation. Statement
No. 133, originally effective for fiscal years beginning after June 15, 1999,
has been deferred and will be effective for fiscal years beginning after June
15, 2000. The Company does not expect the effect of the adoption of this
Statement to be material.
IMPACT OF YEAR 2000 (UNAUDITED)
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and noninformation technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
-10-
<PAGE> 11
2. INVESTMENTS
The following is a summary of securities available-for-sale at December 31,
1999:
<TABLE>
<CAPTION>
GROSS UNREALIZED GAIN ESTIMATED FAIR
COST (LOSS) VALUE
----------- --------------------- --------------
<S> <C> <C> <C>
U.S. Treasury bonds $ 765,070 $ (27,770) $ 737,300
Corporate bonds 2,547,760 (178,379) 2,369,381
Municipal bonds 937,285 (91,419) 845,866
Corporate preferred stock 756,250 (131,870) 624,380
Corporate common stock 94,375 68,125 162,500
----------- ----------- -----------
$ 5,100,740 $ (361,313) $ 4,739,427
=========== =========== ===========
</TABLE>
At December 31, 1999, unrealized losses totaled $(361,313) and are reflected in
stockholders' equity.
The amortized cost and estimated fair value of debt securities at December 31,
1999, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
---------- ----------
<S> <C> <C>
Within one year $ 882,323 $ 820,548
One to five years 2,043,242 1,900,186
Five to ten years 1,324,550 1,231,813
Over ten years -- --
---------- ----------
$4,250,115 $3,952,547
========== ==========
</TABLE>
-11-
<PAGE> 12
3. PROPERTY AND EQUIPMENT
The following are the components of property and equipment at December 31, 1999:
<TABLE>
<S> <C>
Furniture and fixtures $ 1,646,853
Equipment 1,254,803
Computer software 68,387
Leasehold improvements 102,605
Construction in progress 5,879,022
-----------
8,951,670
Accumulated depreciation (1,475,973)
-----------
$ 7,475,697
===========
</TABLE>
Depreciation expense for the year ended December 31, 1999 totaled $807,951.
In November 1998, the Company began construction of a new corporate
headquarters. Total estimated cost of the new headquarters is approximately
$9,200,000, of which $5,284,840 was incurred in 1999. Upon completion, the
building will be depreciated over its estimated useful life of 40 years.
4. OPERATING LEASES
The Company leases certain office facilities from third parties under
noncancelable lease arrangements. These operating leases expire in various years
through March 2004 and may be renewed for periods ranging from one to five
years.
Future minimum payments under noncancelable operating leases with initial terms
of one year or more consisted of the following at December 31, 1999:
<TABLE>
<S> <C>
2000 $ 775,705
2001 720,211
2002 598,505
2003 499,281
2004 178,876
Thereafter --
----------
Total minimum lease payments $2,772,578
==========
</TABLE>
Rental expense on leased office space was $651,919 for the year ended December
31, 1999.
-12-
<PAGE> 13
4. OPERATING LEASES (CONTINUED)
The Company intends to move into a new corporate headquarters in March 2000. The
Company's current corporate office lease is noncancelable through 2003, and
represents approximately $177,000 per year of future minimum lease payments
through 2003. The Company intends to use its best efforts to sublease this
location to offset these future payments.
5. LINE OF CREDIT
The Company maintains a $10,000,000 line-of-credit agreement with PNC Bank (see
Note 3) to support working capital and other general business purposes. The
interest rate is the bank's prime rate less one percent. Amounts borrowed under
the line of credit may be secured by pledging investments or accounts receivable
to the bank. There were no borrowings outstanding as of December 31, 1999 under
the line of credit.
6. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan which covers all employees who have attained the
age of 21. Eligible employees make voluntary contributions to the plan up to 15%
of their annual compensation, not to exceed a dollar limit which is set by law.
The limit for 1999 was $10,000. The 15% limitation is offset by any employer
contributions. The Company made no contributions for 1999.
7. STOCK PLANS
OPTION PLAN
On September 14, 1992, the Company adopted the Solutions Consulting, Inc. Stock
Option Plan which provides the option for eligible employees to purchase shares
of common stock at the current book value. The Company has amended this plan to
provide that future options granted under it will be governed by the same terms
as the Solutions Consulting, Inc. Stock Incentive Plan, which is described in
the following paragraph.
INCENTIVE PLAN
Effective January 1, 1998, the Company adopted the Solutions Consulting, Inc.
1998 Stock Incentive Plan which provides for the grant of 5,800,000 incentive
stock options to purchase common stock. Plan participants included all eligible
employees and selected consultants to the Company who are approved by the Board
of Directors. The options granted under this plan will have a ten-year term and
will become vested and exercisable only under one of the following three
circumstances: 1) the options will vest in full on the occurrence of a "change
of control"
-13-
<PAGE> 14
7. STOCK PLANS (CONTINUED)
INCENTIVE PLAN (CONTINUED)
of the Company, as defined in the plan; 2) if there is a public offering of the
securities of the Company, the options will vest under a multiyear vesting
schedule; or 3) notwithstanding any other provision of the agreement to the
contrary, options shall vest in their entirety, on the ninth anniversary of the
date of grant provided that the optionee remains in the employment of the
Company.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123). SFAS No. 123 establishes financial accounting and reporting
standards for stock-based compensation plans and for transactions in which an
entity issues its equity instruments to acquire goods and services from
nonemployees. The new accounting standards prescribed by SFAS No. 123 are
optional, and the Company has continued to account for its stock purchase plans
under previously issued accounting standards (APB Opinion No. 25, Accounting for
Stock Issued to Employees).
The Company has complied with the pro forma requirements of SFAS No. 123 for
those companies which choose not to account for the effects of stock-based
compensation in the financial statements under SFAS No. 123. The fair value of
these options was estimated at the grant date using the minimum value method
option pricing model with the following assumptions for 1999: risk-free interest
rate of 6.46%, dividend yield of 0%, and an expected life of the options of 5
years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting periods. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
1999
----------
<S> <C>
Net income--as reported $6,672,669
==========
Pro forma net income $4,200,915
==========
</TABLE>
Because the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimates, the pro forma
disclosures are not likely to be representative of the effects on reported net
income for future years.
-14-
<PAGE> 15
7. STOCK PLANS (CONTINUED)
INCENTIVE PLAN (CONTINUED)
A summary of the Company's stock option activity and related information under
the Stock Incentive Plan for the year ended December 31, 1999 follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
---------- --------------
<S> <C> <C>
Outstanding--December 31, 1998 4,124,000 $ 8.18
Granted 1,890,500 10.09
Forfeited (404,454) 8.18
---------- ---------
Outstanding--December 31, 1999 5,610,046 $ 8.70
========== =========
Exercisable--end of year --
==========
Common stock reserved for future options 189,954
==========
</TABLE>
The fair value of options granted during 1999 ranged from $10.00 to $10.25.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company established the Solutions Consulting, Inc. Employee Stock Ownership
Plan (ESOP) on January 1, 1998 and appointed the President to act as trustee of
the plan. All employees who have attained the age of twenty-one are eligible to
participate, except for employees who are nonresident aliens. The ESOP is a
combination "stock bonus" and "money purchase pension" plan. Under the stock
bonus portion of the plan, the Company has discretion to contribute any amount
it determines appropriate for any plan year. Under the money purchase pension
portion of the plan, the Company is obligated to contribute to the plan, for
each plan year, an amount equal to 10% of each participant's compensation for
that plan year. Participants vest 100% after five years or immediately upon
retirement, death or disability. During 1999, the Company incurred expense of
$2,684,973 in connection with the plan.
EXECUTIVE RECRUITING CHARGE
On May 28, 1999, the majority shareholder of the Company entered into a stock
option agreement with the President of the Company as an incentive to accept
employment. This agreement entitles the President to an option to purchase from
the majority shareholder 2,000,000 shares of the Company's common stock at an
exercise price of $5.00 per share. These
-15-
<PAGE> 16
7. STOCK PLANS (CONTINUED)
EXECUTIVE RECRUITING CHARGE (CONTINUED)
options vest in full upon commencement of employment of the President. In
accordance with AICPA interpretation of APB Opinion No. 25, Stock Plans
Established by a Principal Stockholder, the Company must account for stock
option plans entered into by the majority shareholder. As such, the Company
recognized a $10,000,000 executive recruiting charge, which represented the
difference between the fair market value of the underlying shares and the option
price at date of grant.
8. STOCKHOLDERS' EQUITY
On April 15, 1999, June 14, 1999, and September 13, 1999, the Board of Directors
declared distributions of $2,209,082, $2,205,000, and $2,215,500, respectively.
The distributions were to cover 1999 taxes.
On December 31, 1999, the Board of Directors voted in favor of a distribution
equal to approximately $.16 per share, to be paid to stockholders of record
subsequent to fiscal year-end 1999.
On December 30, 1998, the Board of Directors voted in favor of a distribution
equal to $.20 per share, to be paid to stockholders of record subsequent to
fiscal year-end 1998.
-16-
<PAGE> 17
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(SHARES AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1999
Historical Pro Forma
PSC SCI Adjustment Pro Forma
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue .......................................... $ 1,151,553 $ 59,778 $ -- $ 1,211,331
Costs and expenses:
Direct cost of services ..................... 875,779 35,406 -- 911,185
Selling, general and administrative
expenses ............................... 169,176 20,123 4,766(a) 194,065
----------- ----------- ----------- -----------
Operating income ................................. 106,598 4,249 (4,766) 106,081
Interest income .................................. 11,328 753 -- 12,081
Interest expense ................................. (423) -- -- (423)
Equity in earnings of unconsolidated affiliates .. 8,976 -- -- 8,976
Other income (expense) ........................... (650) 1,671 -- 1,021
----------- ----------- ----------- -----------
Income before taxes .............................. 125,829 6,673 (4,766) 127,736
Provision for income taxes ....................... 50,332 -- 762(b) 51,094
----------- ----------- ----------- -----------
Net income .................................. $ 75,497 $ 6,673 $ (5,528) $ 76,642
=========== =========== =========== ===========
Basic and diluted earnings per common share:
Basic earnings per common share ............. $ 0.85 $ 0.85
Weighted average common shares
outstanding ............................ 88,350 1,966(c) 90,316
Diluted earnings per common share ........... $ 0.67 $ 0.67
Weighted average diluted common shares
outstanding ............................ 113,229 1,966(c) 115,195
</TABLE>
(a) Represents the increase in amortization expense for the excess of the
purchase price over estimated fair value of the net assets purchased under
the terms of the asset purchase agreement. In connection with the asset
purchase of SCI, PSC recorded approximately $84.3 million of intangibles,
including goodwill which is expected to be amortized over 20 years. The pro
forma adjustment reflects additional amortization expense assuming the
asset purchase occurred as of the beginning of 1999.
(b) Represents the tax liability applicable to SCI earnings, as SCI would no
longer qualify for S Corporation status, net of the tax effect of pro forma
adjustments.
(c) Represents the common stock issued to seller pursuant to the asset purchase
agreement.
Note: There was a nonrecurring compensation charge of $22.1 million which was a
direct result of the acquisition that has not been reflected in the foregoing
pro forma presentations.
-17-
<PAGE> 18
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
December 31, 1999 Historical Pro Forma
PSC SCI Adjustments Pro Forma
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ............... $294,645 $ 8,066 $(72,100)(a) $230,461
(150)(b)
Accounts receivable, net ................ 156,754 10,266 -- 167,020
Prepaid expenses and other .............. 91,098 322 -- 91,420
-------- -------- -------- --------
Total current assets ................ 542,497 18,654 (72,250) 488,901
Investments ................................ -- 4,739 -- 4,739
Property, equipment and purchased
software, net ........................... 38,965 7,476 (5,454)(c) 40,987
Investments in and advances to
unconsolidated affiliates ............... 24,884 -- -- 24,884
Goodwill and other intangible assets, net... 659 -- 82,519(a) 83,178
Other non-current assets ................... 6,960 -- -- 6,960
-------- -------- -------- --------
Total assets ........................ $613,965 $ 30,869 $ 4,815 $649,649
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable ......................... $ 38,069 $ 372 $ (346)(d) $ 38,095
Accrued liabilities ..................... 94,203 1,852 (75)(d) 95,980
Accrued compensation .................... 53,057 2,654 -- 55,711
Other current liabilities ............... 30,900 3,327 -- 34,227
-------- -------- -------- --------
Total current liabilities ........... 216,229 8,205 (421) 224,013
Other long-term liabilities ................ 7,014 -- -- 7,014
-------- -------- -------- --------
Total liabilities ................... 223,243 8,205 (421) 231,027
-------- -------- -------- --------
Stockholders' equity:
Total stockholders' equity .......... 390,722 22,664 (22,664)(a) 418,622
-------- --------
50,000 (a)
(22,100)(a)
--------
Total liabilities and stockholders'
equity .......................... $613,965 $ 30,869 $ 4,815 $649,649
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this pro forma condensed
consolidated balance sheet.
-18-
<PAGE> 19
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
(a) Represents the excess of purchase price over estimated fair value of the
net assets acquired under the terms of the asset purchase agreement as
follows: (in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Cash $ 72,100
Common Stock 50,000
--------
Total Purchase Price 122,100
Net Assets Acquired:
Cash 7,916
Accounts receivable, net 10,266
Prepaid expenses and other 322
Investments 4,739
Property, equipment and purchased software, net 2,022
Less: Liabilities Assumed 7,784
--------
Net Assets Acquired 17,481
--------
Compensation paid to SCI employees 22,100
--------
Intangible assets including goodwill $ 82,519
========
</TABLE>
(b) Represents the cash that will be retained by the sellers pursuant to the
asset purchase agreement.
(c) Represents the net book value of the building beneficially owned by the
sellers at December 31, 1999. The building is not an asset being purchased
pursuant to the asset purchase agreement.
(d) Represents excluded liabilities pursuant to the asset purchase agreement.
-19-
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
*2.1 Asset Purchase Agreement, dated as of March 1, 2000, by and
among Perot Systems Corporation, a Delaware corporation, PSSC
Acquisition Corporation, a Delaware corporation, Solutions
Consulting, Inc., a Pennsylvania corporation, Mark G. Miller, a
Pennsylvania resident, and Sanford B. Ferguson, a Pennsylvania
resident.
**2.2 Amendment No. 1 to Asset Purchase Agreement, dated as of March
30, 2000, by and among Perot Systems Corporation, a Delaware
corporation, PSSC Acquisition LLC (formerly PSSC Acquisition
Corporation), a Delaware limited liability company and wholly
owned subsidiary of Perot Systems Corporation, Solutions
Consulting Inc., a Pennsylvania corporation, Mark G. Miller, and
Sanford B. Ferguson.
***2.3 Consent of Ernst & Young LLP dated May 11, 2000.
</TABLE>
* Incorporated by reference to Exhibit 10.42 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
** Incorporated by reference to Exhibit 2.2 to the Company's filing on Form
8-K filed April 14, 2000.
*** Filed herewith.
<PAGE> 1
EXHIBIT 2.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-82869; Form S-4 No. 333-30068; Form S-8 No. 333-30401; Form
S-8 No. 333-70267; Form S-8 No. 333-31278) of Perot Systems Corporation of our
report dated February 10, 2000, with respect to the financial statements of
Solutions Consulting, Inc. for the year ended December 31, 1999, included in
this Current Report on Form 8-K/A dated May 11, 2000 filed with the Securities
and Exchange Commission.
/s/ ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
May 11, 2000
