<PAGE>
As filed with the Securities and Exchange Commission on August 7, 1996
Registration No. 33-96838
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
________________________
Cambridge Technology Partners (Massachusetts), Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1320610
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
304 Vassar Street, Cambridge, MA 02139, (617) 374-9800
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
________________________
Arthur M. Toscanini
Chief Financial Officer
304 Vassar Street
Cambridge, MA 02139
(617) 374-9800
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
________________________
Copy to:
James P. O'Hare, Esq.
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
(617) 248-7000
________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
________________________
If the only securities being registered on this form are being offered
pursuant to dividend or interest re-investment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
================================================================================
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
EXPLANATORY NOTE
The Company previously registered 575,089 shares of its Common Stock on a
Registration Statement on Form S-3 (Registration Statement No. 33-96838) to
which this Post-Effective Amendment No. 1 relates. The Company has effected a
three-for-one stock split in the form of a 100% stock dividend which was paid
on June 19, 1996 to the stockholders of record on May 29, 1996 (the "Share
Dividend"). Unless otherwise indicated, the information set forth herein
reflects the Share Dividend.
<PAGE>
SUBJECT TO COMPLETION: DATED AUGUST 7, 1996
Cambridge Technology Partners (Massachusetts), Inc.
________________________
1,725,267 Shares
Common Stock
$.01 par value per share
________________________
This Prospectus relates to the sale of up to 1,725,267 shares (the "Shares") of
the common stock, par value $.01 per share (the "Common Stock"), of Cambridge
Technology Partners (Massachusetts), Inc. ("Cambridge Technology Partners" or
the "Company") by certain stockholders of the Company (collectively, the
"Selling Stockholders"). The Selling Stockholders may sell the Shares from time
to time at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling Stockholders
may effect these transactions by selling the Shares to or through broker-
dealers, who may receive compensation in the form of discounts or commissions
from the Selling Stockholders or from the purchasers of the Shares for whom the
broker-dealers may act as an agent or to whom they may sell as principal, or
both. See "Selling Stockholders" and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the Shares.
The Company has agreed to bear all of the expenses in connection with the
registration and sale of the Shares (other than selling commissions).
The Common Stock of the Company is quoted on the Nasdaq National Market under
the symbol "CATP." On August 5, 1996, the last reported sale price for the
Common Stock on the Nasdaq National Market was $25.50 per share.
________________________
See "Risk Factors" on page 4 for information that should be considered by
prospective investors.
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO OR SOLICITATION OF ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT BE LAWFULLY MADE.
The date of this Prospectus is August 7, 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at 450 Fifth Street,
Room 1024, N.W., Washington, D.C. 20549, and at the following regional offices
of the Commission: Seven World Trade Center, 13th Floor, New York, New York
10048 and North-West Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, Room 1024, N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock of the Company is
quoted on the Nasdaq National Market, and such material may also be inspected at
the offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including all amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Common Stock offered hereby. This Prospectus does not contain all
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information regarding the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding
the contents of any agreement or other document filed as an exhibit to the
Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such agreement filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and
schedules thereto, may be inspected at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and copies of all or any part thereof may be obtained from such office upon
payment of the prescribed fees.
The Company will provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Written requests for such copies should be
directed to Arthur M. Toscanini, Chief Financial Officer, Cambridge Technology
Partners, 304 Vassar Street, Cambridge, Massachusetts 02139.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated in this Prospectus by reference
(File No. 0-21040):
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
5. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
6. The Company's Current Report on Form 8-K dated August 21, 1995,
reporting the acquisition by the Company of The Systems Consulting
Group, Inc., a Florida corporation.
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<PAGE>
7. The Company's Current Report on Form 8-K dated October 16, 1995
reporting the acquisition by the Company of Axiom Management
Consulting, Inc., a California corporation.
8. The description of the Company's Common Stock, $.01 par value per
share, contained in the Registration Statement on Form 8-A filed under
the Exchange Act on December 24, 1992, including any amendment or
report filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Shares, shall be deemed to be incorporated by reference in this
Prospectus and made a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein or in any Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY
Cambridge Technology Partners provides information technology and
management consulting and software development and evaluation services to
organizations with large scale information processing and distribution needs
that are utilizing or migrating to open systems computing environments. In
performing these services, the Company employs a rapid development methodology
utilizing client/server architectures. The Company provides its services on a
fixed-price, fixed-timetable basis with client involvement at all stages of the
process. Open systems computing environments offer end-users a more flexible
and more easily accessible computing environment than centralized, mainframe-
based computer systems. The Company believes that businesses will continue to
migrate to open systems computing environments.
The Company's information technology consulting services are offered
at the enterprise-wide, specific business process and application software
levels of an organization. Upon the completion of consulting services, the
Company designs and develops one or more strategic software applications and
then rolls-out such applications to the organization's end-users. These
software applications are designed to achieve a competitive advantage, enhance
the efficiency and functionality of specific business processes, and support
financial goals. The Company may also assist its clients in providing end-user
training for managing the organizational changes that accompany the roll-out of
new applications and the assimilation of such applications into production
environments. In addition, the Company offers a variety of optional services to
support the developed software application, including application enhancements,
application maintenance, project management support, developer support, software
tools support and systems management support. Cambridge Technology Partners
also provides network analysis, design and deployment services to assist its
clients in successfully implementing the applications in an open systems
environment. To date, revenues have been generated principally from the
Company's software design and development activities.
The Company's principal offices are located at 304 Vassar Street,
Cambridge, Massachusetts and the Company's telephone number is (617) 374-9800.
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<PAGE>
RECENT DEVELOPMENTS
On August 14, 1995, the Company acquired all of the outstanding shares
of capital stock of The Systems Consulting Group, Inc. ("SCG"), a Florida
corporation (the "SCG Acquisition"), pursuant to an Agreement and Plan of
Reorganization dated as of August 11, 1995 (the "SCG Acquisition Agreement"),
among the Company, the stockholders of SCG and the other parties named therein.
The SCG Acquisition was accomplished through an exchange of up to 2,274,000
shares of the Company's common stock for all outstanding shares of capital stock
of SCG and the assumption of all outstanding options to acquire shares of
capital stock of SCG. The SCG Acquisition has been accounted for under the
pooling-of-interests method. The purchase price and terms for the transaction
were determined in arms-length negotiations.
SCG was founded in 1988, has offices in Miami and Chicago and
approximately 200 employees. Revenues for 1994 were $12.2 million. SCG focuses
on evaluation and implementation of packages for financial reporting and
consolidation, human resources/payroll, remote workforce automation,
manufacturing, and retail distribution. SCG also specializes in emerging
technologies and techniques, such as imaging, cooperative processing and
wireless communications. SCG will be operated as a wholly-owned subsidiary of
the Company.
On October 17, 1995, Cambridge Technology Partners (Massachusetts),
Inc. (the "Company") acquired all of the outstanding shares of capital stock of
Axiom Management Consulting, Inc. ("Axiom"), a California corporation (the
"Axiom Acquisition"), pursuant to an Agreement and Plan of Reorganization (the
"Axiom Acquisition Agreement") dated as of October 16, 1995, among the Company,
the stockholders of Axiom and the other parties named therein. The Axiom
Acquisition was accomplished through an exchange of up to 1,026,591 shares of
the Company's common stock for all outstanding shares of capital stock of Axiom
and the assumption of all outstanding options to acquire shares of capital stock
of Axiom. The Axiom Acquisition has been accounted for under the pooling-of-
interests method. The purchase price and terms for the transaction were
determined in arms-length negotiations.
Formed in 1988, Axiom had 1994 revenues of $13.5 million and has 100
employees. Axiom has offices in San Francisco, Atlanta, Chicago, Dallas, Los
Angeles, New York and Seattle. Axiom provides "business process re-engineering"
consulting services to Fortune 1,000 companies. Axiom will be operated as a
wholly-owned subsidiary of the Company.
RISK FACTORS
In addition to the other information in this Prospectus, and the information
incorporated in this Prospectus by reference, the following investment
considerations should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby.
Difficulty of Integrating The Companies. The SCG Acquisition was completed on
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August 14, 1995 and the Axiom Acquisition was completed on October 17, 1995.
The successful integration of the Company, SCG and Axiom is important to the
future financial performance of the combined enterprise. The anticipated
benefits of the SCG Acquisition and Axiom Acquisition may not be achieved
unless, among other things, the operations of SCG and Axiom are successfully
combined with those of the Company in a timely manner. The diversion of the
attention of management, and any difficulties encountered in the transition
process, could have an adverse impact on the revenues and operating results of
the combined enterprise. There can be no assurance that the Company will be
able to successfully integrate SCG and Axiom into the Company's operations.
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<PAGE>
Management of Growth. The Company is currently experiencing a period of growth
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which has placed, and could continue to place, a strain on the Company's
financial and other resources. The Company's ability to manage its staff and
facilities growth effectively will require it to continue to improve its
operational, financial, and other internal systems, and to train, motivate and
manage its employees. If the Company's management is unable to manage growth
effectively and new employees are unable to achieve anticipated performance
levels, the Company's results of operations could be adversely affected.
Potential investors should consider the risks, expenses and difficulties
frequently encountered in connection with the operation and development of a new
and expanding business.
Attraction and Retention of Employees. The Company's business involves the
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delivery of professional services and is labor-intensive. The Company's success
will depend in large part upon its ability to attract, retain and motivate
highly skilled employees, particularly project managers and client managers and
other senior personnel. Qualified project managers are in particularly great
demand and are likely to remain a limited resource for the foreseeable future.
Although the Company expects to continue to attract sufficient numbers of highly
skilled employees and to retain existing project managers, client managers and
other senior personnel for the foreseeable future, there can be no assurance
that the Company will be able to do so. The loss of some or all of the
Company's project managers, client managers and other senior personnel could
have a material adverse impact on the Company, including its ability to secure
and complete engagements.
Variability of Quarterly Operating Results. Variations in the Company's
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revenues and operating results occur from time to time as a result of a number
of factors, such as the significance of client engagements commenced and
completed during a quarter, the number of working days in a quarter and employee
hiring and utilization rates. The timing of revenues is difficult to forecast
because the Company's sales cycle is relatively long in the case of new clients
and may depend on factors such as the size and scope of assignments and general
economic conditions. Because a high percentage of the Company's expenses are
relatively fixed, a variation in the timing of the initiation or the completion
of client assignments, particularly at or near the end of any quarter, can cause
significant variations in operating results from quarter to quarter and could
result in losses. The Company's engagements generally are terminable without
client penalty. An unanticipated termination of a major project could require
the Company to maintain or terminate under-utilized employees, resulting in a
higher than expected number of unassigned persons or higher severance expenses.
While professional staff must be adjusted to reflect active projects, the
Company must maintain a sufficient number of senior professionals to oversee
existing client projects and participate with the Company's sales force in
securing new client assignments. Because substantially all of the Company's
engagements are performanced on a fixed-price basis, the Company also bears the
risk of cost overruns and inflation. In addition, in order to meet client
demand, the Company expects to continue to increase its professional staff and
to open additional sales and operations offices in 1995 in both North America
and Europe. Although the Company's plans to open offices and hire personnel are
driven in response to increased demand for the Company's information technology
consulting and software development services, a portion of these expenses will
be incurred in anticipation of increased demand. Operating results and
liquidity may be adversely affected if market demand and revenues do not
increase as anticipated.
Competition. The information technology consulting and software development
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market comprises a large number of participants, is subject to rapid changes,
and is highly competitive. The market includes participants from a variety of
market segments, including systems consulting and integration firms, contract
programming companies, application software firms, the professional service
groups of computer equipment companies such as Hewlett-Packard Company, Unisys
Corporation and Digital Equipment Corporation, facilities management and MIS
outsourcing companies, "Big Six" accounting firms, and general management
consulting firms. The Company's competitors also include companies such as
Andersen Consulting, Technology Solutions Corporation, SHL Systemhouse, Inc.,
Innovative Information Systems Inc., Cap Gemini America, Business System Group,
the consulting division of Computer Sciences Corporation, Electronic Data
Systems Corporation and Keane, Inc. Many participants in the information
technology consulting and software development market have significantly greater
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<PAGE>
financial, technical and marketing resources and, given the Company's brief
history, greater name recognition than Cambridge Technology Partners, and
generate greater systems consulting and integration revenues than does Cambridge
Technology Partners. In addition, the custom software development and systems
integration market is highly fragmented and served by numerous firms, many of
which serve only their respective local markets. The Company believes that the
principal competitive factors in the information technology consulting and
software development industry include responsiveness to client needs, speed of
application software development, quality of service, price, project management
capability and technical expertise. The Company believes that its ability to
compete also depends in part on a number of competitive factors outside its
control, including the ability of its competitors to hire, retain and motivate
senior project managers, the ownership by competitors of software used by
potential clients, the development by others of software that is competitive
with the Company's products and services, the price at which others offer
comparable services, and the extent of its competitors' responsiveness to
customer needs.
Foreign Operations. The Company derived approximately $11.8 million and $19.1
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million, or 14.1% and 21.1% of its total revenues, from customers outside of the
United States in 1994 and in the nine months ended September 30, 1995,
respectively. The Company's international business is subject to a number of
risks, including difficulties in building and managing foreign operations,
difficulties in translating its methodologies into foreign languages,
fluctuations in the value of foreign currencies, and unexpected regulatory,
economic or political changes in foreign markets. There can be no assurance
that these factors will not adversely affect the Company and its financial
results.
Intellectual Property Rights. The Company's success is dependent upon its
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software development methodology and other proprietary intellectual property
rights. The Company relies upon a combination of trade secret, nondisclosure
and other contractual arrangements and technical measures, and copyright and
trademark laws to protect its proprietary rights. The Company presently holds
no patents or registered copyrights. The Company generally enters into
confidentiality agreements with its employees, consultants, clients and
potential clients and limits access to, and distribution of, its proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of its proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights. The Company's
business includes the development of custom software in connection with specific
client engagements. Ownership of such software is generally assigned to the
client. The Company also develops object-oriented software components that can
be reused in software application development, certain foundation and
application software projects, or software "tools," most of which remain the
property of the Company. Although the Company believes that its services and
products do not infringe on the intellectual property rights of others, there
can be no assurance that such a claim will not be asserted against the Company
in the future.
USE OF PROCEEDS
The proceeds from the sale of each Selling Stockholder's Shares will belong to
the Selling Stockholder. The Company will not receive any of the proceeds from
such sales of the Shares.
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<PAGE>
PRICE RANGE OF COMMON STOCK
From April 12, 1993, until May 24, 1993, the Company's common stock traded on
the Nasdaq SmallCap Market. On May 24, 1993, the Company's common stock began
trading on the Nasdaq National Market System. The following table sets forth,
on a per share basis for the periods shown, the range of high and low sale
prices of the Company's common stock as reported by Nasdaq.
<TABLE>
<CAPTION>
1993 High Low
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<S> <C> <C>
Second Quarter (from April 12, 1993) $ 3.92 $ 2.33
Third Quarter 5.33 3.08
Fourth Quarter 5.92 4.92
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1994
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First Quarter $ 6.08 $ 4.92
Second Quarter 5.92 4.67
Third Quarter 5.92 4.83
Fourth Quarter 7.92 4.67
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1995
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First Quarter $10 $ 7.08
Second Quarter 12 9.08
Third Quarter 17.58 10.33
Fourth Quarter 20.33 13.83
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1996
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First Quarter 19.14 14.63
Second Quarter 30.75 17.75
</TABLE>
DIVIDEND POLICY
The Company has never paid any cash dividends on its common stock. The
Company's current borrowing arrangements prohibit the payment of dividends
without the lender's prior consent. The Company currently intends to retain
future earnings for use in its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.
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<PAGE>
SELLING STOCKHOLDERS
The Shares are to be offered by and for the respective accounts of the Selling
Stockholders. The number of Shares which each Selling Stockholder may offer is
as follows:
<TABLE>
<CAPTION>
Shares Shares Shares Percentage
Beneficially Offered Beneficially of
Owned Pursuant Owned Ownership
before to this after after the
Selling Stockholders Offering Prospectus Offering/(1)/ Offering
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<S> <C> <C> <C> <C>
William Dudziak 542,073 271,035 271,038 *
Jeffrey Manchester 542,073 271,035 271,038 *
Thomas Richardson 542,073 271,035 271,038 *
Augusto Vidauretta 542,073 271,035 271,038 *
Sandra Strauss(2) 105,702 52,851 52,851 *
Brian Bouren 252,417 129,945 122,472 *
Robert Gifford 12,618 6,495 6,123 *
Michael Korchinsky 315,522 162,432 153,090 *
Dermot McCauley 50,481 25,986 24,495 *
Paul McNabb 315,522 162,432 153,090 *
Paul Sanabria 50,481 25,986 24,495 *
Robert E. Keith, Jr. 158,667 75,000 83,667 *
--------- --------- --------- ----------
TOTAL 3,429,702 1,725,267 1,704,435 4.0%
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</TABLE>
* Less than 1%
/(1)/ Assumes that all of the Shares owned by each Selling Stockholder and
registered under this registration statement are sold during the
distribution period.
/(2)/ Includes 105,702 shares issuable upon the exercise of outstanding
currently exercisable options.
All of the Selling Stockholders except Mr. Keith acquired his or her Shares in
connection with either the SCG Acquisition or Axiom Acquisition described under
"Recent Developments." Mr. Keith acquired his Shares from Safeguard
Scientifics, Inc. ("Safeguard") in March 1995 upon the exercise of an option
granted by Safeguard. None of the Selling Stockholders has had any material
relationship with the Company or any of its affiliates within the past three
years except as described below and under "Recent Developments".
Mr. Keith has been a director of the Company since March 1991. As described
below, he is also affiliated with Safeguard, an affiliate of the Company and
Technology Leaders L.P., Technology Leaders Offshore C.V. and Radnor Venture
Partners, L.P., prior affiliates of the Company.
Radnor Venture Management Company, a general partnership, is the sole general
partner of Radnor Venture Partners, L.P., a venture capital fund. SSI
Management Company, Inc., one of the general partners of Radnor Venture
Management Company, is a wholly-owned subsidiary of Safeguard. PMG Management
Advisors, the other general partner of Radnor Venture Management Company is not
affiliated with Safeguard or the Company. Radnor Venture Management Company is
managed and controlled by its executive committee which currently consists of
seven persons including (i) Warren V. Musser, Robert E. Keith, Jr. and Ira M.
Lubert, each of whom may be deemed to be designees of SSI Management Company,
Inc., (ii) two designees of PMG Management Advisors, and (iii) two designees of
other investors in Radnor Venture Partners, L.P., SSI Management Company, Inc.
also has the right to designate one additional member of the executive
committee. Mr. Keith and Mr. Lubert
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<PAGE>
are the Managing Directors of Radnor Venture Management Company, and manage the
day-to-day operations of Radnor Venture Partners, L.P., subject to the control
and direction of the executive committee.
Technology Leaders Management, L.P., a limited partnership, is the sole general
partner of Technology Leaders L.P. and a co-general partner of Technology
Leaders Offshore C.V. Technology Leaders L.P. and Technology Leaders Offshore
C.V. are venture capital funds that are required by their governing documents to
make all investment, voting and disposition actions in tandem. Technology
Leaders L.P. and Technology Leaders Offshore C.V. are referred to collectively
in this Prospectus as "Technology Leaders-I." Technology Leaders Management,
L.P. has sole responsibility for all investment, voting and disposition
decisions for Technology Leaders-I. The general partners of Technology Leaders
Management, L.P. are (i) Technology Leaders Management, Inc., a wholly-owned
subsidiary of Safeguard, (ii) TL Partner I, a general partnership among
Technology Leaders Management, Inc. and the Managing Directors of Technology
Leaders Management, Inc., other than Mark J. DeNino, and (iii) four other
corporations (the "TLA Corporations") owned by individuals, one of whom serves
as a director of Safeguard, one of whom serves as a director and officer of a
majority-owned subsidiary of Safeguard and two of whom are not currently
otherwise affiliated with Safeguard or the Company. Technology Leaders
Management, L.P. is managed by an executive committee, by whose decisions the
general partners have agreed to be bound, that consists of seven voting members
including (i) Warren V. Musser, Robert E. Keith, Jr. and Gary J. Anderson, M.D.,
each of whom are designees of Technology Leaders Management, Inc., and (ii) one
designee of each of the TLA Corporations and (as a non-voting member) Clayton S.
Rose. Technology Leaders Management, Inc. is the administrative manager of
Technology Leaders-I, subject to the control and direction of the executive
committee of Technology Leaders Management, L.P. Mr. Musser is the Chief
Executive Officer and Mr. Keith is President and Chief Operating Officer of
Technology Leaders Management, Inc. and Mr. Keith, Mr. Lubert, Dr. Anderson,
Jean C. Tempel, Mr. DeNino and Christopher Moller Ph.D., are the Managing
Directors of Technology Leaders Management, Inc. Mr. Keith, Mr. Lubert, Dr.
Anderson and Ms. Tempel are former officers of Safeguard.
Safeguard Scientifics (Delaware), Inc. a wholly-owned subsidiary of Safeguard,
is a limited partner in each of Radnor Venture Partners, L.P. and Technology
Leaders L.P., holding 13.7% of the limited partnership interests in Radnor
Venture Partners, L.P. and 3.3% of the aggregate limited partnership interests
in Technology Leaders L.P. SSI Management Company, Inc. owns approximately 60%
of Radnor Venture Management Company. Technology Leaders Management, Inc. holds
30% of the general partnership interests in Technology Leaders Management, L.P.
and 50% of the general partnership interests of Technology Leaders Curacao, N.V.
Each Selling Stockholder represented to the Company that it was acquiring its
Shares without any present intention of effecting a distribution of those
Shares. In recognition of the fact, however, that investors may want to be able
to sell their shares when they consider it appropriate, in connection with the
SCG Acquisition Agreement and Axiom Acquisition Agreement, the Company agreed to
file the Registration Statement with the Commission to permit the public sale of
the Shares and to use all reasonable efforts to keep the Registration Statement
effective until the earlier of October 17, 1997 or the sale of all of the Shares
pursuant to Rule 144 under the Securities Act or the Registration Statement.
The Company will prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep it effective until all of the
Shares have been sold pursuant to the Registration Statement or until
registration of the Shares is no longer required by reason of Rule 144(k) under
the Securities Act or other rules of similar effect.
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time by the Selling
Stockholders for their own accounts, subject to any contractual agreements by
the Selling Stockholders with respect to sales and the requirements for the
"pooling-of-interests" accounting method. The Company will receive none of the
proceeds from this offering. The Selling Stockholders will pay or assume
brokerage commissions or other charges and expenses incurred in the sale of the
Shares.
-9-
<PAGE>
The distribution of the Shares by the Selling Stockholders is not subject to any
underwriting agreement. The Shares covered by this Prospectus may be sold by
the Selling Stockholders or by pledgees, donees, transferees or other successors
in interest. The Shares offered by the Selling Stockholders may be sold from
time to time at market prices prevailing at the time of sale, at prices relating
to such prevailing market prices or at negotiated prices. In addition, the
Selling Stockholders may sell their Shares covered by this Prospectus through
customary brokerage channels, either through broker-dealers acting as agents or
brokers, or through broker-dealers acting as principals, who may then resell the
Shares, or at private sale or otherwise, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Stockholders may effect such transactions by selling
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions, commissions, or
fees from the Selling Stockholders and/or purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). Any broker-dealers that participate with the Selling
Stockholders in the distribution of Shares may be deemed to be underwriters and
any commissions received by them and any profit on the resale of Shares placed
by them might be deemed to be underwriting discounts and commissions within the
meaning of the Securities Act, in connection with such sales.
Any shares covered by the Prospectus that qualify for sale pursuant to Rule 144
under the Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Testa, Hurwitz & Thibeault, Boston, Massachusetts.
EXPERTS
The supplemental consolidated financial statements of the Company included in
this Prospectus have been included in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The consolidated financial statements and schedule of the Company incorporated
by reference in this Prospectus have been so incorporated in reliance on the
reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The financial statements of SCG incorporated by reference in this Prospectus and
elsewhere have been so incorporated in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The financial statements of Axiom incorporated by reference in this Prospectus
and elsewhere have been so incorporated in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
-10-
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(a) Supplemental Consolidated Financial Statements
----------------------------------------------
Report of Independent Accountants F-2
Supplemental Consolidated Balance Sheets as of December 31,
1994, and 1993 F-3
Supplemental Consolidated Statements of Operations for the
Years Ended December 31, 1994, 1993, and 1992 F-4
Supplemental Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1994, 1993, and 1992 F-5
Supplemental Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1993, and 1992 F-6
Notes to Supplemental Consolidated Financial Statements F-7
(b) Supplemental Unaudited Interim Consolidated Financial Statements
----------------------------------------------------------------
Supplemental Consolidated Balance Sheets as of September 30,
1995 and December 31, 1994 S-1
Supplemental Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1995 and 1994 S-2
Supplemental Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994 S-3
Notes to Supplemental Interim Consolidated Financial
Statements S-4
F-1
<PAGE>
Report of Independent Accountants
The Board of Directors and Stockholders of
Cambridge Technology Partners (Massachusetts), Inc.:
We have audited the supplemental consolidated balance sheets of Cambridge
Technology Partners (Massachusetts), Inc., as of December 31, 1994 and 1993, and
the related supplemental consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The supplemental financial statements give retroactive effect to the merger of
Cambridge Technology Partners (Massachusetts), Inc. and Axiom Management
Consulting, Inc., on October 17, 1995, which has been accounted for as a pooling
of interests as described in Note A to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect to
a consummated business combination accounted for by the pooling of interests
methods in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation;
however, they will become the historical consolidated financial statements of
Cambridge Technology Partners (Massachusetts), Inc. after financial statements
covering the date of consummation of the business combination are issued.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cambridge
Technology Partners (Massachusetts), Inc., at December 31, 1994 and 1993, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles applicable after financial statements are issued
for a period which includes the date of consummation of the business
combination.
As discussed in Note L to the supplemental consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
November 6, 1995
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,365 $ 3,512
Investments held to maturity 10,311 500
Accounts receivable, less allowance of $449 and $400
at December 31, 1994 and 1993, respectively 19,566 11,997
Unbilled revenue on contracts 1,298 155
Prepaid expenses and other current assets 2,191 724
------- -------
Total current assets 36,731 16,888
Property and equipment, net 5,344 2,182
Other assets 1,482 827
Deferred income taxes 215 510
Goodwill, net 4,109 -
------- -------
Total assets $47,881 $20,407
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,293 $ 1,437
Accrued expenses 7,127 2,542
Deferred revenue 2,295 887
Deferred income taxes 280 525
Borrowings under revolving credit facility 1,501 1,009
Income taxes payable 858 1,721
Obligations under capital leases, current 123 104
Other current liabilities 193 -
------- -------
Total current liabilities 15,670 8,225
Obligations under capital leases 72 192
Other liabilities 1,023 -
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.01 par value, authorized 30,000,000
shares; issued and outstanding 14,350,737 and
13,327,627 at December 31, 1994 and 1993, respectively 143 133
Additional paid-in capital 15,974 4,410
Unamortized portion of deferred compensation (9) (66)
Note receivable from officer (8) (62)
Retained earnings 15,041 7,564
Foreign currency translation adjustment (25) 11
------- -------
Total stockholders' equity 31,116 11,990
------- -------
Total liabilities and stockholders' equity $47,881 $20,407
======= =======
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
F-3
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1994 1993 1992
---------- ------------ ----------
<S> <C> <C> <C>
Net revenues $83,477 $49,961 $82,119
Costs and expenses:
Project personnel 34,690 20,782 13,499
General and administration 13,230 8,034 4,515
Sales and administration 10,233 7,117 5,117
Other costs 13,585 7,951 5,387
------- ------- -------
Total operating expenses 71,738 43,884 28,518
------- ------- -------
Income from operations 11,739 6,077 3,601
Other income (expense):
Interest income 368 97 27
Interest expense (145) (120) (346)
Equity in net loss of affiliate - - (123)
Foreign exchange gain 48 - -
------- ------- -------
Income before income taxes 12,010 6,054 3,159
Provision for income taxes 4,453 2,217 975
------- ------- -------
Income before cumulative effect of change in
accounting principle 7,557 3,837 2,184
Cumulative effect of change in account for
income taxes - 1,204 -
------- ------- -------
Net income $ 7,557 $ 5,041 $ 2,184
======= ======= =======
Net income per share:
Income before cumulative effect of change in
accounting principle $ .49 $ .27 $ .17
Cumulative effect of change in accounting for
income taxes - .08 -
------- ------- -------
Net income $ .49 $ .35 $ .17
======= ======= =======
Pro forma data (unaudited) (Note L):
Historical income before taxes $12,010 $ 6,054 $ 3,159
Provision for income taxes:
Historical income taxes 4,453 2,217 975
Pro forma increase to historical income taxes 517 225 393
------- ------- -------
Income before cumulative effect of change in
accounting principle 7,040 3,612 1,791
Cumulative effect of change in accounting for
income taxes - 1,204 -
------- ------- -------
Pro forma net income $ 7,040 $ 4,816 $ 1,791
======= ======= =======
Pro forma net income per share (unaudited):
Income before cumulative effect of change in
accounting principle $ .46 $ .26 $ .14
Cumulative effect of change in accounting for
income taxes - .08 -
------- ------- -------
Pro forma net income $ .46 $ .34 $ .14
======= ======= =======
Weighted average number of common and
common equivalent shares outstanding 15,566 14,250 12,666
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
F-4
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Additional
Number of Par Paid-In Unearned
Shares Value Capital Compensation
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1991, as reported 10,526,316 $ 105 $ (3,040) $ (178)
Pooling of interests with The Systems Consulting Group, Inc. 722,764 7 (6) -
Pooling of interests with Axiom Management Consulting, Inc, 332,352 3 55 -
---------- ------------ ------------ ------------
Balance, December 31, 1991, as restated 11,581,432 115 (2,991) (178)
Conversion of debt into common stock 500,000 5 995 -
Issuance of common stock 50,000 - 200 -
Exercise of stock options 160,500 2 50 -
Notes receivable from employees for stock purchased
under stock option plan - - (50) -
Issuance of common stock under employee stock purchase plan 174,700 2 347 -
Notes receivable from employees for stock purchased under
employee stock purchased plan - - (182) -
Amortization of unearned compensation associated with
stock options - - - 56
Notes receivable from officer - - - -
Amortization of note receivable from officer - - - -
Settlement of royalty obligation - - 1,187 -
Income tax benefit - - 686 -
Axiom's conversion to S-Corporation - - 335 -
Dividend distribution - - - -
Net income - - - -
---------- ------------ ------------ ------------
Balance, December 31, 1992 12,466,632 124 577 (122)
Issuance of common stock in rights offering, net of issuance cost 800,000 8 3,656 -
Exercise of stock options 60,995 1 76 -
Income tax benefit related to stock option exercises - - 249 -
Repayment of notes receivable from employees for
stock purchased under employee stock purchase plan - - 182 -
Amortization of unearned compensation
associated with stock options - - - 56
Amortization of note receivable from officer - - - -
Foreign currency translation adjustment - - - -
Issuance of Axiom stock under restricted stock plan - - 6 -
Dividend distribution - - - -
Axiom's conversion to C-Corporation - - (335) -
Net income - - - -
---------- ------------ ------------ ------------
Balance, December 31, 1993 13,327,627 133 4,410 (66)
Issuance of common stock in rights offering, net of issuance cost 500,000 6 6,895 -
Issuance of common stock through acquisition of IOS
Group AB, net of issuance costs 425,000 4 4,217
Exercise of stock options 98,110 1 304 -
Income tax benefit related to stock option exercises - - 537 -
Repayment of notes receivable from employees for
stock purchased under employee stock purchase plan - - 14 -
Amortization of unearned compensation associated with
stock options - - - 57
Amortization of note receivable from officer - - - -
Foreign currency translation adjustment - - - -
Issuance of Axiom stock under restricted stock plan - - 26 -
Issuance of Axiom stock under stock agreement - - 297 -
Repurchase of Axiom common stock - - (725) -
Dividend distribution - - - -
Net income - - - -
---------- ------------ ------------ ------------
Balance, December 31, 1994 14,350,737 $ 143 $ 16,974 $ (9)
========== ============ ============ ============
<CAPTION>
Foreign
Receivable Currency
from Translation Retained
Officer Adjustment Earnings
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1991, as reported $ (104) $ - $ 274
Pooling of interests with The Systems Consulting Group, Inc. - - 333
Pooling of interests with Axiom Management Consulting, Inc, - - 412
------------ ------------ ------------
Balance, December 31, 1991, as restated (104) - 1,019
Conversion of debt into common stock - - -
Issuance of common stock - - -
Exercise of stock options - - -
Notes receivable from employees for stock purchased
under stock option plan - - -
Issuance of common stock under employee stock purchase plan - - -
Notes receivable from employees for stock purchased under
employee stock purchased plan - - -
Amortization of unearned compensation associated with
stock options - - -
Notes receivable from officer (49) - -
Amortization of note receivable from officer 33 - -
Settlement of royalty obligation - - -
Income tax benefit - - -
Axiom's conversion to S-Corporation - - -
Dividend distribution - - (21)
Net income - - 2,184
------------ ------------ ------------
Balance, December 31, 1992 (115) - 3,182
Issuance of common stock in rights offering, net of issuance cost - - -
Exercise of stock options - - -
Income tax benefit related to stock option exercises - - -
Repayment of notes receivable from employees for
stock purchased under employee stock purchase plan - - -
Amortization of unearned compensation
associated with stock options - - -
Amortization of note receivable from officer 53 - -
Foreign currency translation adjustment - 11 -
Issuance of Axiom stock under restricted stock plan - - -
Dividend distribution - - (280)
Axiom's conversion to C-Corporation - - (379)
Net income - - 5,041
------------ ------------ ------------
Balance, December 31, 1993 (62) 11 7,564
Issuance of common stock in rights offering, net of issuance cost - - -
Issuance of common stock through acquisition of IOS
Group AB, net of issuance costs
Exercise of stock options - - -
Income tax benefit related to stock option exercises - - -
Repayment of notes receivable from employees for
stock purchased under employee stock purchase plan - - -
Amortization of unearned compensation associated with
stock options - - -
Amortization of note receivable from officer 54 - -
Foreign currency translation adjustment - (35) -
Issuance of Axiom stock under restricted stock plan - - -
Issuance of Axiom stock under stock agreement - - -
Repurchase of Axiom common stock - - -
Dividend distribution - - (80)
Net income - - 7,557
------------ ------------ ------------
Balance, December 31, 1994 $ (8) $ (25) $ 15,041
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
F-5
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,557 $ 5,041 $ 2,184
Amounts that reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,708 556 279
Amortization of imputed interest - - 271
Cumulative effect of change in accounting
for income taxes - (1,204) -
Provision for deferred income taxes 51 255 249
Amortization of unearned compensation 57 56 56
Note receivable from officer 54 53 (11)
Equity in net loss of affiliate - - 123
Income tax benefit - - 686
Increase in accounts receivable (6,674) (4,274) (4,238)
(Increase) decrease in unbilled revenue on contracts (1,228) 400 (342)
Increase in prepaid expenses and other current assets (1,041) (84) (184)
Increase in other assets (647) (848) (408)
Increase in accounts payable 1,633 516 459
Increase in accrued expenses 3,744 338 1,418
Increase (decrease) in deferred revenue 1,278 (1,440) 1,413
Increase (decrease) in due to stockholders - (134) 134
Increase (decrease) in income taxes payable (1,005) 1,683 -
Other, net 361 (13) 3
-------- -------- --------
Net cash provided by operating activities 5,848 1,401 2,092
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (3,747) (1,202) (858)
Purchase of investments held to maturity (23,136) (500) -
Maturity of investments held to maturity 13,376 - -
Cash used in acquisition of business, net of cash acquired (251) - -
-------- -------- --------
Net cash used in investing activities (13,758) (1,702) (858)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit arrangements, net 101 195 314
Issuance of common stock, net of issuance costs 6,900 3,664 200
Repayment of promissory note payable to stockholder - (2,682) -
Proceeds from promissory note payable to stockholder - - 2,682
Repayment of royalty obligation - - (3,344)
Proceeds from long-term debt 183 2,500 -
Repayment of long-term debt and capital leases (125) (2,560) -
Dividend distributions (80) (280) (21)
Proceeds from repayment of notes under employee
stock purchase plan - 182 -
Proceeds from exercise of stock options and
related income tax benefits 842 325 2
Other, net (50) - -
-------- -------- --------
Net cash provided by (used in) financing activities 7,771 1,344 (167)
-------- -------- --------
Effect of foreign exchange rate changes on cash (8) - -
Net (decrease) increase in cash and cash equivalents (147) 1,043 1,067
Cash and cash equivalents at beginning of period 3,512 2,469 1,402
-------- -------- --------
Cash and cash equivalents at end of period $ 3,365 $ 3,512 $ 2,469
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
F-6
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
A. Pooling of Interests
--------------------
On October 17, 1995, Cambridge Technology Partners (Massachusetts), Inc. (the
"Company") acquired all of the outstanding shares of capital stock of Axiom
Management Consulting, Inc.("Axiom"). The acquisition was accomplished through
an exchange of approximately 342,000 shares (consisting of approximately 332,000
shares of the Company's common stock and options to purchase approximately
10,000 shares of the Company's common stock) of the Company's common stock for
all of the outstanding shares of capital stock of Axiom and the assumption of
all outstanding options to acquire shares of capital stock of Axiom. This
transaction has been accounted for using the pooling of interests method of
accounting. Axiom, formed in 1988, is a California-based management consulting
firm specializing in business process re-engineering services for primarily
Fortune 1000 companies. Axiom currently operates as a wholly owned subsidiary of
the Company.
On August 14, 1995, the Company acquired all of the outstanding shares of
capital stock of The Systems Consulting Group, Inc. ("SCG"). The acquisition
was accomplished through an exchange of approximately 758,000 shares (consisting
of approximately 723,000 shares of the Company's common stock and an option to
purchase approximately 35,000 shares of the Company's common stock) of the
Company's common stock for all of the outstanding shares of capital stock of SCG
and the assumption of all outstanding options to acquire shares of capital stock
of SCG. This transaction has been accounted for using the pooling of interests
method of accounting. SCG, founded in 1988, has offices in Miami and Chicago and
approximately 200 employees. SCG focuses on evaluation and implementation of
software packages for financial reporting and consolidation, human
resources/payroll, remote work force automation, manufacturing, and retail
distribution. SCG also specializes in emerging technologies and techniques, such
as imaging, cooperative processing, and wireless communications. SCG currently
operates as a wholly owned subsidiary of the Company.
The accompanying supplemental consolidated financial statements of the Company
have been prepared to give retroactive effect to the acquisitions of SCG and
Axiom. Generally accepted accounting principles proscribe giving effect to
consummated business combinations accounted for by the pooling of interests
method in financial statements that do not include the date of consummation.
Therefore, all prior period historical consolidated financial statements
presented herein have been restated to include the financial position, result of
operations, and cash flow of SCG and Axiom. The supplemental consolidated
financial statements presented herein do not extend through the date of
consummation, however, they will become the historical consolidated financial
statements of the Company as filed in any subsequent consolidated financial
statements covering the dates of consummation of these business combinations. In
addition, reference should be made to the unaudited pro forma combined balance
sheet and statements of operations for the Company and SCG as filed in the
Company's Form 8-K dated August 21, 1995, and the unaudited pro forma combined
balance sheet and statements of operations for the Company and Axiom as filed in
the Company's Form 8-K dated October 16, 1995. Costs related to the acquisitions
of SCG and Axiom are not included in the accompanying supplemental consolidated
results of operations.
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
B. Summary of Significant Accounting Policies
------------------------------------------
Basis of Reporting
The Company provides information technology consulting and software development
and implementation services to organizations with large-scale information
processing and distribution needs who are utilizing or migrating to open systems
computing environments. The accompanying supplemental consolidated financial
statements include the accounts of all of the Company's majority-owned
subsidiaries. All intercompany transactions and balances have been eliminated.
Certain prior period amounts have been reclassified to conform with current
period presentation. In February 1994, the Company acquired 100% of the stock
of IOS Group AB, which the Company renamed to Cambridge Technology Partners
Scandinavia AB ("CTP Scandinavia"). CTP Scandinavia carries on the Company's
software development and information technology consulting services in Northern
Europe. In December 1994, Cambridge Technology Partners International, Inc., a
wholly owned subsidiary of the Company, was formed to hold 1%, with the Company
holding 99%, of Cambridge Technology Partners Deutschland GmbH which was formed
in January 1995 to conduct the Company's services in Germany. As discussed in
Note A, the Company acquired all of the outstanding capital stock of SCG and
Axiom in August and October of 1995, respectively.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with
maturities of three months or less from the date of purchase and whose costs
approximate market value due to the short maturity of the investments.
Investments
Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (FAS 115). Under FAS 115, debt securities that the
Company has the positive intent and ability to hold to maturity are classified
as held to maturity and reported at amortized cost; debt and equity securities
that are bought and held principally for the purpose of selling them in the near
term are classified as trading and reported at fair value, with unrealized gains
and losses including in earnings; and debt and equity securities not classified
as either held to maturity or trading are classified as available for sale and
reported at fair value, with unrealized gains and losses excluded from earnings
and reported in a separate component of stockholders' equity. At December 31,
1994 and 1993, reported investments approximated market value. All of the
Company's investments held to maturity at December 31, 1994, matures within one
year from the date of purchase. The adoption of FAS 115 had no impact on the
Company's consolidated statements of operations or stockholders' equity.
F-8
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Property and Equipment
Property and equipment, which consist principally of computer equipment,
furniture and fixtures, and leasehold improvements, are stated at cost. Repairs
and maintenance costs are charged to operations when incurred, while betterments
are capitalized. Depreciation is computed using the straight-line method based
on the estimated useful lives of the various assets which range from four to
fifteen years. Upon retirement or disposal, the cost of the asset disposed of
and the related accumulated depreciation are removed from the accounts and any
gain or loss is reflected in income.
Intangible Assets
Organization costs, included in other assets, are being amortized on a
straight-line basis over five years. At December 31, 1994 and 1993, accumulated
amortization of organization costs were $94,000 and 69,500, respectively.
Goodwill, related to the acquisition of CTP Scandinavia, is being amortized over
six years on a straight-line basis. At December 31, 1994, accumulated
amortization was $682,000.
Revenue Recognition
The Company derives substantially all of its revenues from information
technology consulting and software development and implementation services. The
Company operates in one industry segment, software development and
implementation services. Revenues derived from any maintenance and support
services are immaterial to the consolidated financial statements of the Company.
Revenues from software development contracts are recognized primarily on the
percentage of completion method. The cumulative impact of any revision in
estimates of the percent complete is reflected in the year in which the changes
become known. Losses on projects in progress are recognized when known. Net
revenues exclude reimbursable expenses charged to clients. Revenues from SCG
and Axiom's consulting and implementation services are recognized as the service
is provided, principally on a time and materials basis.
Deferred revenue consists principally of amounts received in advance for
information technology consulting and software development and implementation
services, which will be recognized upon performance, and amounts received from
clients in excess of revenue recognized to date.
Translation of Foreign Currencies and Foreign Exchange Transactions
The functional currency of all of the Company's foreign operations is the
applicable local currency. The translation of the applicable foreign currencies
into U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using average rates of exchange prevailing during the reporting period.
Adjustments resulting from the translation of foreign currency financial
statements are accumulated in a separate component of stockholders' equity until
the entity is sold or
F-9
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
substantially liquidated. Gains or losses resulting from foreign currency
transactions are included in the results of operations.
Supplemental Cash Flow Information
Supplemental disclosures of cash flow information are presented as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cash paid during the period for:
Interest $ 186 $ 234 $ 16
Income taxes 4,817 45 16
</TABLE>
During 1994, the Company exchanged 425,000 shares of its common stock for 100%
of the outstanding shares of CTP Scandinavia. Also in 1994, Axiom repurchased
200,000 shares of its common stock for $725,000 (see Note O).
During 1993, capital lease obligations of $356,000 were incurred by the Company
for the acquisition of certain equipment.
During 1992, the following material noncash financing transactions occurred:
(i) 500,000 shares of common stock issued in consideration of the retirement of
a $1,000,000 note payable; (ii) the Company settled the remaining balance of
$3,869,000 on a royalty obligation payable to Cambridge Technology Group, Inc.
("CTG") for $2,682,000 in cash and the remaining balance of $1,187,000 was
reversed against additional paid-in capital; and (iii) of the aggregate
consideration of $349,000 received for the issuance of 200,000 shares of common
stock under the Employee Stock Purchase Agreements (see Note I), $182,000 of
collateralized promissory notes were entered into and recorded as a reduction of
additional paid-in capital, and $164,000 was included in prepaid and other
current assets at December 31, 1992.
Concentration of Credit Risk
The Company provides its services primarily to Fortune 1000 companies and other
corporations. The Company performs ongoing credit evaluations of its major
customers and maintains reserves for potential credit losses, and such losses
have been within management's expectation. No single customer accounted for 10%
or more of total net revenues for the years ended 1994, 1993, and 1992.
F-10
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
c. Acquisition
-----------
In February 1994, the Company acquired 1% of the stock of IOS Group AB (now CTP
Scandinavia) for 425,000 shares of the Company's common stock, valued on the
date of acquisition at $4,221,000 and $1,000 in cash. CTP Scandinavia is a
Swedish-based corporation which provides open systems information technology and
software development services in an enterprise-wide, client/server environment.
The 425,00 shares of common stock issued are restricted, as to sale or transfer,
for eighteen months from the date of acquisition. The acquisition has been
accounted for as a purchase and, accordingly, the results of CTP Scandinavia
have been included in the Company's consolidated financial statements from the
date of acquisition. At the time of the acquisition, the two senior managers of
CTP Scandinavia entered into employment agreements with CTP Scandinavia
providing for a five-year employment term and a bonus plan based upon the
financial performance of CTP Scandinavia. In connection with the acquisition,
the Company also guaranteed the payment of a bank loan of these managers in the
principal amount of $3.0 million due February 1996. The bank loan is
collateralized by the 225,000 shares issued at the time of the acquisition.
The Company has allocated the purchase price of $4,592,000, which includes
associated costs of $370,000, to the underlying assets and liabilities of CTP
Scandinavia based upon their respective fair values at the time of the
acquisition. The excess (approximately $4,791,000) of the Company's purchase
price over the fair value of CTP Scandinavia's net assets is being amortized
over six years.
The unaudited pro forma information which combines the supplemental consolidated
results of operations of the Company and CTP Scandinavia as if the acquisition
had occurred at the beginning of the periods presented are presented in the
table on the next page. The pro forma results do not purport to be indicative
of what would have occurred had the acquisition been consummated as of the
beginning of the respective periods or of future operations of the combined
company.
F-11
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS-(continued)
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------
<S> <C> <C>
(in thousands) 1994 1993
-------- --------
Net revenues $84,291 $55,970
======== ========
Income before cumulative effect of
change in accounting principle $ 7,371 $ 3,266
Cumulative effect of change in
accounting for income taxes - 1,204
-------- --------
Net income $ 7,371 $ 4,470
======== ========
Net income per share:
Income before cumulative effect of change
in accounting principle $0.47 $0.23
Cumulative effect of change in accounting
for income taxes - 0.08
-------- --------
Net income $0.47 $0.31
======== ========
</TABLE>
D. Accounts Receivable
-------------------
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1994 1993
------- -------
<S> <C> <C>
Contracts in process $14,526 $ 6,104
Completed contracts 5,489 6,293
------- -------
20,015 12,397
Less: Allowance for doubtful
accounts 449 400
------- -------
$19,566 $11,997
======= =======
</TABLE>
In accordance with state government practices, a governmental client withholds a
percentage of invoiced receivables as retention. At December 31, 1994 and 1993,
retention receivable totaled $1,331,000 and $463,000, respectively, and were
included in other assets. Due to the contractual time period given to the
governmental client for final review of completed projects, the Company received
payments of approximately 25% in the July of 1995 on the retention receivable at
December 31, 1994, with the remainder to be received in 1996.
E. Investment in Affiliates
------------------------
The Company had a 6.3% investment interest in AdValue Media Technologies,
Inc.("AdValue") (formerly AdValue Network ("AVN"), a partnership which was
formed in 1991 to develop, test,
F-12
"
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
and market a centralized spot advertising computer software package). AdValue
was incorporated in December 1993 to serve as the successor entity to AVN. The
investment was accounted for using the equity method. On May 19, 1995, the
Company sold its interest in AdValue (see Note P). The balance (in thousands)
was as follows:
Balance at December 31, 1991 $ 123
Equity in net loss of affiliate (123)
-------
Balance at December 31, 1992, 1993, and 1994 $ -
-------
F. Property and Equipment
----------------------
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31
---------------
1994 1993
------ ------
<S> <C> <C>
Equipment $6,922 $2,816
Furniture and fixtures 1,048 947
Motor Vehicles 121 -
Computer software 145 103
Leasehold improvements 434 200
------ ------
Total cost 8,670 4,066
Less accumulated depreciation 3,326 1,884
------ ------
$5,344 $2,182
====== ======
</TABLE>
Depreciation expense for 1994, 1993, and 1992 was $1,019,000, $532,000, and
$255,000, respectively.
G. Accrued Expenses
----------------
Accrued expenses consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1994 1993
------- -------
<S> <C> <C>
Accrued payroll and payroll related expenses $ 3,298 $ 1,477
Accrued other expenses 2,858 847
Accrued value added tax 677 -
Deferred rent 294 218
------- -------
$ 7,127 $ 2,542
======= =======
</TABLE>
F-13
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
H. Revolving Credit Facility
-------------------------
The Company maintains a $10.0 million uncollateralized revolving credit facility
(the "Facility"), with Fleet Bank of Massachusetts, N.A. ("Fleet Bank"). The
Facility bears interest at a rate per annum equal to Fleet Bank's prime rate in
effect from time to time, payable monthly in arrears commencing with the advance
of funds. Amendments to the Facility made in July 1994 included, among other
things, an increase in the amount available under the Facility from $5.0 million
to $10.0 million, extension of the expiration to June 30, 1996, from June 30,
1994, reduction of facility fee from 0.5% to 0.25% of the revolving commitment,
deletion of the borrowing base, and revision of certain financial covenants. The
Facility requires, among other things, the Company to maintain certain financial
ratios. Failure to maintain compliance would entitle the lender to demand
immediate repayment of any amounts drawn down on the Facility. At December 31,
1994 and 1993, the Company was in compliance with these financial ratio
requirements. As of December 31, 1994 and 1993, no borrowings have been made
under the Facility.
In connection with the Company's initial revolving credit facility with Fleet
Bank entered into on February 1, 1993 (amended as of July 11, 1994), the
Company also obtained a $2.5 million term note. The Company used the proceeds
from the $2.5 million term note plus $182,000 in cash to repay a $2,682,000
promissory note to Safeguard Scientifics, Inc. ("Safeguard") (a stockholder of
the Company) (see Note I). In May 1993, the term note was repaid with proceeds
from the Company's public offering of common stock.
SCG maintained a $1.0 million revolving credit facility with Barnett Bank of
South Florida, N.A. ("Barnett Bank"). This revolving credit facility bore
interest at a rate per annum equal to Barnett Bank's prime rate in effect from
time to time plus 1.50%, payable monthly. The maximum borrowing was limited to
seventy-five percent of SCG's eligible accounts receivable, as defined in the
agreement. The revolving credit facility was collateralized by all non-realty
assets of SCG and the former stockholders of SCG had extended joint and several
personal guarantees. The revolving credit facility also subjected SCG to certain
restrictions and covenants related to, among other things, tangible net worth,
leverage ratio, and interest coverage. As of and for the years ended December
31, 1994 and 1993, SGC was in compliance with these financial ratio
requirements. At December 31, 1994 and 1993, amounts outstanding under this
revolving credit facility were $1.0 million and $425,000, respectively. On June
13, 1995, the term under this revolving credit facility was extended to June 30,
1996, with maximum allowable borrowings increased to $2.5 million. On September
29, 1995, the Company terminated SCG's revolving credit facility with Barnett
Bank and repaid all of the outstanding balance under this revolving credit
facility.
Axiom maintains a $1.25 million revolving credit facility with Wells Fargo Bank,
N.A. ("Wells Fargo"). This revolving credit facility bears interest at a rate
per annum equal to the prime rate in effect from time to time plus .25%, payable
monthly. Axiom's revolving credit facility is collateralized by all accounts
receivable and equipment and certain former stockholders of Axiom have extended
personal guarantees. Upon consummation of the acquisition, the personal
F-14
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
guarantees are no longer in effect. The revolving credit facility also subjects
Axiom to certain financial restrictions and covenants related to, among other
things, tangible net worth, debt to tangible net worth, and earnings before
interest, taxes, depreciation, and amortization. As of and for the years ended
December 31, 1994 and 1993, Axiom was in compliance with these financial
restrictions and covenants. At December 31, 1994 and 1993, amounts outstanding
under Axiom's revolving credit facility were $501,000 and $584,000,
respectively. The Company expects to repay all outstanding amounts and
terminate this revolving credit facility in the fourth quarter of 1995.
I. Stockholders' Equity and Other Stock Related Information
--------------------------------------------------------
Rights Offering
On May 24, 1993, the Company and its principal stockholder completed a rights
offering involving the sale of 800,000 shares of the Company's common stock
which were issued by the Company and approximately 1.8 million shares of the
Company's common stock which were held by the principal stockholder. Prior to
this offering, there had been no public market for the Company's common stock or
rights. The net proceeds to the Company from the sale of the 800,000 shares of
common stock sold by the Company were $3,664,000 after deducting offering
expenses of $216,000 allocable to the Company. The Company used a portion of
the proceeds to repay the outstanding principal balance of a $2.5 million term
note with Fleet Bank entered into on February 1, 1993.
Common Stock Offering
On April 6, 1994, the Company and certain stockholders of the Company completed
a public offering of common stock involving the sale of 500,000 shares of the
Company's common stock issued by the Company and two million shares of the
Company's common stock held by the existing stockholders. The net proceeds to
the Company from the sale of the 500,000 shares of common stock sold by the
Company were $6.9 million, after deducting offering expenses. The Company
expects to use the proceeds for general corporate purposes, including working
capital to support the expansion of its North America and international
operations and to fund capital expenditures and possible acquisitions.
Stock Option Plans
Under the Company's 1991 Stock Option Plan (the "Option Plan"), the Company may
grant incentive stock options to employees and nonqualified stock options to
employees, directors, officers, and other key individuals. The Management
Resource Committee of the Board of Directors administers the Option Plan.
Options generally vest ratably over a four year period and expire ten years from
the date of grant.
F-15
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Stock option activity, both incentive and nonqualified, under the Option Plan is
presented as follows:
<TABLE>
<CAPTION>
Option Option
Shares Price
--------- -------------
<S> <C> <C>
Outstanding at December 31, 1991 904,600 $ 0.10-$ 1.00
Granted 702,400 $ 2.00-$ 4.00
Exercised 160,500 $ 0.10-$ 2.00
Canceled 81,750 $ 1.00-$ 2.00
--------- -------------
Outstanding at December 31, 1992 1,364,750 $ 0.10-$ 4.00
Granted 737,970 $ 5.00-$17.75
Exercised 60,995 $ 1.00-$ 2.00
Canceled 112,109 $ 1.00-$17.13
--------- -------------
Outstanding at December 31, 1993 1,929,616 $ 0.10-$17.75
Granted 1,100,571 $14.75-$18.94
Exercised 98,110 $ 1.00-$15.50
Canceled 82,417 $ 1.00-$16.50
--------- -------------
Outstanding at December 31, 1994 2,849,660 $ 0.10-$18.94
========= =============
</TABLE>
At December 31, 1994, 1993, and 1992, 1,038,749, 536,368, and 211,107 options
were exercisable, respectively, under the Option Plan. On December 9, 1993, the
Company's Board of Directors amended the Option Plan to increase the number of
shares of common stock authorized for issuance under the Option Plan from
2,000,000 to 3,000,000. On December 14, 1994, the Company's Board of Directors
further amended the Option Plan, which was subsequently approved by stockholders
in the Company's annual meeting of stockholders in May 1995, to increase the
number of shares of common stock authorized for issuance under the Option Plan
from 3,000,000 to 4,000,000.
SCG entered into a stock option agreement with one employee during 1989. This
agreement granted thirty-nine stock options at an exercise price equal to the
fair market value of the stock on the date of grant, which was $50 per share.
The options vested ratably over four years and were fully vested at December 31,
1993. In connection with the Company acquisition of SCG, the Company assumed
all outstanding options to purchase shares of capital stock of SCG and converted
them into an option to purchase approximately 35,000 shares of the Company's
common stock, as of August 14, 1995, at an exercise price of $.06 per share.
During 1993, Axiom established an Incentive and Non-statutory Stock Option Plan
(the "Axiom Option Plan") to provide selected eligible employees the right to
purchase common stock of Axiom. The Axiom Option Plan provided for the granting
of options to purchase up to 240,000 shares issuable as either Incentive Stock
Options or Non-statutory Stock Options, as approved by
F-16
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Axiom's former Board of Directors. The exercise price, determined by Axiom's
former Board of Directors, could not be less than the fair market value of the
stock at the date of issuance. A summary of the Axiom Option Plan activity for
the three years ended December 31, 1994, 1993, and 1992 is as follows:
<TABLE>
<CAPTION>
Axiom Option
Option Shares Price
------------- ------------
<S> <C> <C>
Outstanding at December 31, 1992 - -
Granted 24,575 $0.20-$5.00
Exercised - -
Canceled - -
------- -----------
Outstanding at December 31, 1993 24,575 $0.20-$5.00
Granted 13,250 $0.20-$5.00
Exercised - -
Canceled 1,075 $0.20-$5.00
------- -----------
Outstanding at December 31, 1994 36,750 $0.20-$5.00
======= ===========
</TABLE>
As of December 31, 1994, 4,915 options were exercisable under the Axiom Option
Plan. No shares were exercisable at December 31, 1993.
In connection with the Company's acquisition of Axiom, the Company assumed all
outstanding options to purchase shares of capital stock of Axiom and converted
them into options to purchase approximately 10,000 shares of the Company's
common stock, as of October 17, 1995, at an exercise price of $.48 per share.
Employee Stock Purchase Plans
On December 14, 1994, the Board of Directors adopted, subsequently approved by
stockholders in the annual meeting of stockholders in May 1995, the Company's
1994 Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Company has
authorized 500,000 shares of the Company's common stock for purchases under the
Stock Purchase Plan. The Stock Purchase Plan permits eligible employees to
purchase up to 500 shares per payment period of common stock of the Company,
subject to limitations provided by Section 423(b) of the Internal Revenue Code,
through accumulated payroll deductions. The purchases can be made twice per
year at a price equal to the lesser of (i) 85% of the average market price of
the Company's common stock on the first business day of the payment period and
(ii) 85% of the average market price of the Company's common stock on the last
day of the payment period. Annual payment periods consists of two six-month
periods, January 15 through July 14 and July 15 through January 14.
In September 1992, the Company authorized the issuance of an aggregate 200,000
shares of common stock to certain employees and members of management pursuant
to Employee Stock
F-17
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS),INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Purchase Agreements at a fair value of $2.00 per share. The $2.00 per share
price was determined to be the fair value of the Company's common stock at the
date of the authorization of the plan. Of the 200,000 shares authorized,
174,700 shares of common stock were purchased at an aggregate consideration of
$349,000. Of this amount, $3,000 was collected in cash prior to December 31,
1992, $164,000, included in prepaid and other current assets at December 31,
1992, was collected subsequent to year end, and $182,000 of collateralized
promissory notes were entered into. The notes bore interest at a rate of 5% per
annum. The notes were recorded as a reduction of additional paid-in capital.
The notes were collected during 1993.
Settlement of Royalty Obligation
As part of the organization of the Company, the Company was obligated to pay to
CTG $5.0 million in quarterly installments through February 1997 beginning after
January 1, 1992. On December 28, 1992, this royalty obligation was settled in
full through the payment of $2,682,000 in cash and the remaining obligation
balance of $1,187,000 was reversed against additional paid-in capital. This
repayment was funded by the proceeds of a promissory note which the Company
issued to Safeguard in December 1992. The promissory note was subsequently
repaid in February 1993 with the proceeds from the Company's term note with
Fleet Bank (see Note H).
Note Receivable from Officer
During 1991, the Company issued 526,316 shares of common stock to an officer of
the Company and charged $347,000 to compensation expense. The Company, at the
date of the issuance and in April 1992, approved a $104,000 note receivable and
a $49,000 note receivable, respectively, to the officer to finance a portion of
the tax liabilities arising from the purchase of the common stock. The notes
are due the earlier of (i) the date of the officer is no longer employed by the
Company or (ii) February 28, 1995. The notes bore interest at an annual rate of
7.1% and 5.2%, respectively, which was payable at maturity. The amount of the
notes was expensed through February 28, 1995 as the officer had received a bonus
of $153,000 for continued employment through such date.
Notes Receivable from Employees
In connection with the exercise of 158,750 options in December 1992, the Company
approved $261,000 of collateralized notes receivable from three employees to
finance both the purchase of the stock and the tax liabilities arising from the
transactions. Principal payments commence July 1, 1996 and are due
semi-annually through January 1, 1998. The notes bear interest at an annual
rate of 6.15% payable annually on the last day of each year commencing December
31, 1993, through the final principal payment on the note. The portion of the
notes receivable to finance the purchase of stock totaling $50,000 has been
recorded as a reduction of additional paid-in capital. At December 31, 1994
and 1993, notes receivable from employees were $22,000 and $227,000,
respectively, and are included in other assets.
F-18
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS-(continued)
Preferred Stock
The certificate of incorporation was amended and restated, in December 1992, to
increase the number of authorized shares of capital stock to include 2,000,000
shares of preferred stock, par value $0.01 per share, in one or more series.
The Board of Directors is authorized, subject to certain limitations prescribed
by law to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series.
The Company has not issued and has no present plans to issue any shares of
preferred stock.
Warrants
In December 1992, the Company issued warrants to Safeguard for the purchase of
300,000 shares of common stock at a price of $6.00 per share. The warrants are
exercisable for a five year period from the date of issuance. As of December
31, 1994, no warrants were exercised. The warrants were issued in consideration
of Safeguard's commitment to guarantee a credit facility and a term note
totaling $3.5 million for the Company. Under the Company's Facility,
Safeguard's guarantee was subsequently released.
Dividends
The Facility with Fleet Bank prohibits the Company from paying any dividends or
making any distributions either in cash or in kind on any class of its capital
stock without the bank's prior consent. The Company currently intends to retain
future earnings for use in its business and, therefore, does not expect to pay
dividends in the foreseeable future.
Dividend distributions made by SCG were principally for reimbursement of income
tax liabilities of its former stockholders due to SCG's S-Corporation tax status
prior to the acquisition. Subsequent to SCG's dividend declaration made in July
1995, the Company intends to retain future earnings of SCG for use in its
business.
J. Lease Commitments
-----------------
On June 4, 1992, the Company entered into, among other building and equipment
leases, a lease for a building in Cambridge, Massachusetts, that is used as its
corporate headquarters. The building is owned by a trust, the sole beneficiary
of which is the Chairman of the Company. The initial lease expires in August
2007, and is renewable for two additional five year terms. The lease provides
for increases, beginning in September 1995, based upon increases in the Consumer
Price Index-Urban Wage Earners and Clerical Workers, U.S. City Average, All
Items ("CPI").
F-19
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Minimum future lease commitments under noncancelable operating leases for
buildings and equipment in effect at December 31, 1994, are presented as follows
(in thousands):
1995 $ 2,848
1996 2,449
1997 1,985
1998 1,825
1999 1,565
Thereafter 6,665
-------
Total minimum lease payments $17,337
=======
For the years ended December 31, 1994, 1993, and 1992, rental expense under all
leases was approximately $2,648,000, $1,456,000 and $844,000, respectively, of
which approximately $775,000, $752,000, and $230,000, respectively, related to
the trust described above.
Minimum future lease commitments under noncancelable capital leases for
equipment at December 31, 1994, are presented as follows (in thousands):
1995 $ 152
1996 62
1997 5
-----
Total minimum payments 219
Less amounts representing interest (24)
-----
Present value of minimum lease payments 195
Current portion 123
-----
Long-term obligation $ 72
=====
Equipment under capital leases, included in property and equipment, amounted to
$356,000 at December 31, 1994 and 1993, and the related accumulated depreciation
was $160,000 and $75,000 at December 31, 1994 and 1993, respectively.
K. Other Costs
-----------
Other costs consist of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Facility costs and related expenses $ 5,180 $ 2,788 $ 1,935
Nonbillable project expenses 5,572 3,343 2,023
Nonbillable staff travel 2,440 1,471 762
Education and training 393 258 136
Third party commissions - 91 531
------- ------- -------
$13,585 $ 7,951 $ 5,387
======= ======= =======
</TABLE>
F-20
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
L. Income Taxes
------------
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (FAS 109) effective January 1,
1993. Deferred income taxes under the liability method required by FAS 109
reflect the net tax effect of temporary differences between the carrying amount
of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. A valuation allowance is recognized if it is more
likely than not that some portion of the deferred tax asset will not be
realized. The cumulative effect of the adoption of FAS 109 as of January 1,
1993, was to increase net income by $1,204,000, or $0.08 per share.
The Company's deferred tax assets and liabilities are comprised of the tax
benefits and (costs) associated with the following items as of December 31, 1994
and 1993, respectively (in thousands):
<TABLE>
<CAPTION>
Assets/(Liabilities) 1994 1993
-------------------- ------ ------
<S> <C> <C>
Tax basis of software technology $ 864 $1,104
Cash to accrual differences (520) (765)
Fixed asset depreciation (211) (70)
Reserves and accruals 351 215
Other, net 19 69
Valuation allowance for deferred tax asset (568) (568)
----- ------
$ (65) $ (15)
===== ======
</TABLE>
The valuation allowance has been established in conjunction with certain tax
deductions generated upon the formation of the Company which were not treated as
expenses for financial statement purposes.
The components of the income tax provision for the years ended December 31,
1994, 1993, and 1992, are presented below (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- ------
<S> <C> <C> <C>
Current:
Federal $ 3,495 $ 1,462 $ 573
State 907 500 153
------- ------- -----
4,402 1,962 726
Deferred:
Federal 45 195 172
State 6 60 77
------- ------- -----
51 255 249
------- ------- -----
Total $ 4,453 $ 2,217 $ 975
======= ======= =====
</TABLE>
F-21
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Upon the formation of the Company, certain deductions were generated for income
tax purposes which are not treated as expenses for financial statement purposes.
The Company's tax payments will be reduced by such additional tax deductions.
For years prior to 1993, the benefit of such tax savings is not reflected as a
benefit to the tax provision. A portion of these benefits for additional tax
deductions were reported as deferred income taxes payable. For the year ended
December 31, 1992, $686,000 was credited to additional paid-in capital as a
result of these tax deductions. Upon the adoption of FAS 109, the future tax
benefit of these deductions was recognized as a deferred tax asset and included
in the cumulative effect of the change in accounting principle. Deferred income
taxes of $249,000 for the year ended December 31, 1992, relate principally to
the difference between book and tax accounting for options and amortization of
assets acquired upon the formation of the Company.
The provision for income taxes on a pro forma basis is as follows (in thousands)
(unaudited):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 3,556 $ 1,569 $ 543
State 914 517 148
------- ------- -------
4,470 2,086 691
Deferred:
Federal 428 281 514
State 72 75 163
------- ------- -------
500 356 677
------- ------- -------
Total $ 4,970 $ 2,442 $ 1,368
======= ======= =======
</TABLE>
The table below reconciles the expected U.S. federal income tax provision (34%
applied to income before income taxes) to the recorded income tax provision
(dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected"
tax provision $4,083 34.0% $2,058 34.0% $1,074 34.0%
State income taxes, net of
federal income tax benefit 545 4.5 349 5.8 152 4.8
Goodwill 191 1.6 - - - -
Nondeductible fees - - - - 46 1.5
Change in valuation allowance - - (101) (1.7) - -
Non-taxable S-Corporation income (428) (3.5) (191) (3.2) (309) (9.8)
Other,net 62 0.5 102 1.7 12 0.4
------ ----- ------ ----- ------ -----
$4,453 37.1% $2,217 36.6% $ 975 30.9%
====== ===== ====== ===== ====== =====
</TABLE>
Prior to the acquisition on August 14, 1995, SCG had elected to be treated as an
S-Corporation for income tax reporting purposes. Under this election, the
individual stockholders are deemed to have received a pro rata distribution of
taxable income of SCG (whether or not an actual
F-22
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
distribution was made), which is included in their taxable income. Accordingly,
SCG did not provide for income taxes. Pro forma net income per share, which
reflects the provision for pro forma income taxes to the net income of SCG, is
presented on the pro forma data section of the accompanying supplemental
consolidated statements of operations.
Axiom elected S-Corporation tax reporting status effective January 1, 1992 and
therefore, no provision for income taxes was provided in 1992 and net deferred
liabilities for Axiom at December 31, 1991 of $335,000 were adjusted to
stockholders' equity in 1992. Effective January 1, 1993, Axiom elected
C-Corporation tax reporting status and the cumulative deferred tax liabilities
at December 31, 1992, of $714,000 were recorded with a charge to stockholders'
equity of $335,000 and retained earnings of $379,000 in 1993. Pro forma net
income per share, which reflects the provision for pro forma income taxes to the
net income of Axiom in 1992, is presented in the pro forma data section of the
accompanying supplemental consolidated statements of operations.
M. Net Income Per Share
--------------------
Net income per share data is computed using the weighted average number of
common shares outstanding, the assumed exercise of stock options and warrants
(using the treasury stock method), the assumed issuance of approximately 723,000
shares of common stock and an option to purchase approximately 35,000 shares of
the Company's common stock in connection with the acquisition of SCG, and the
assumed issuance of approximately 332,000 shares of common stock and options to
purchase approximately 10,000 shares of the Company's common stock in connection
with the acquisition of Axiom. For 1992, stock options issued with exercise
prices below the $5.00 per share initial public offering price for the Company's
common stock during the twelve month period preceding the date of the filing
(December 24, 1992) of the Company's initial Registration Statement on Form S-1,
have been included in the calculation of common stock equivalent shares, using
the treasury stock method, as if they were outstanding for all periods
presented. Primary and fully-diluted net income per common share data are the
same for each period presented.
N. Employee Benefit Plan
---------------------
In 1992, the Company established a savings and profit-sharing plan (the "401(k)
Plan") covering substantially all of the Company's employees. The 401(k) Plan is
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended.
The Company may elect to make contributions under the 401(k) Plan. In 1994,
Company elected to make matching contributions based on a percentage of
employees' contributions, subject to limitations as defined in the 401(k) Plan.
Company matching contributions amounted to $135,000 in 1994.
In 1990, SCG establish a savings and profit-sharing plan (the "SCG
Profit-sharing Plan") covering substantially all of SCG's employees. The SCG
Profit-sharing Plan is qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended. SCG may elect to make contributions under the SCG
Profit-sharing Plan. Company matching contributions amounted to
F-23
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
$71,000, $53,000, and $61,000 for the years ended December 31, 1994, 1993, and
1992, respectively. The Company expects to rollover assets held under the SCG
Profit-sharing Plan to the 401(k) Plan in 1996.
In 1990, Axiom established a savings and profit-sharing plan (the "Axiom
Profit-sharing Plan') covering substantially all employees of Axiom. The Axiom
Profit-sharing Plan is qualified under Section 401 (a) of the Internal Revenue
Code of 1986, as amended. Company matching contributions amounted to $123,000,
$104,000, and $0 for the years ended December 31, 1994, 1993, and 1992. The
company expects to rollover assets held under the Axiom Profit-sharing Plan to
the 401(k) Plan in 1996.
O. Commitments and Contingencies
-----------------------------
In connection with the acquisition of CTP Scandinavia, the Company has
guaranteed the payment of a bank loan in the amount of $3,000,000 (see Note C).
As described in the Company's Form 10-K for the year ended December 31, 1993,
the Company had been a party to an arbitration proceeding with a computer
hardware vendor claiming withheld sales commissions owed to such vendor by the
Company pursuant to the terms of a joint marketing arrangement. on November 8,
1994, the company was notified that the arbitrators have ordered it to pay
approximately $660,000 to the vendor. The Company requested modification of the
arbitration award to correct certain miscalculations. A payment of
approximately $614,000 was made in December of 1994 in disposition of this
material. This payment did not have a material adverse effect on the Company's
financial position or liquidity.
The Company was a defendant in a lawsuit, previously described in the Company's
Form 10-K for the year ended December 31, 1993, by a former employee who claimed
damages for wrongful discharge, withheld commission, defamation, contractual
interference, and sex discrimination. In January 1995, the United States
District Court for the Northern District of Illinois granted the Company's
motion for a summary judgement dismissing this lawsuit and the time period
during which the former employee may appeal such decision has expired.
In 1993, SCG entered into a noncancelable purchase agreement with a vendor to
purchase $1.6 million of package software for resale. Pursuant to this
agreement, SCG is obligated to purchase $200,000 of product per quarter. As of
December 31, 1994, the remaining outstanding commitment under this agreement is
$800,000. In the third quarter of 1995, this commitment was canceled via a
mutual agreement between the vendor and SCG.
In December 1994, Axiom repurchased 200,000 shares of its common stock from a
former officer for an aggregate purchase price of $1,025,000. The purchase
price was based on fair market value of this stock in accordance with terms of
the related agreements. The payments were scheduled to be made in various
installments for a period of eight years. The present value of this obligation
totaled $725,000. Axiom also agreed to pay the former officer $325,000 for
alleged general and compensatory damages arising from tort claims for personal
injury and
F-24
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
claims for a breach of an implied contract of employment. These payments are due
in monthly installments for a period of two years and were expensed in 1994.
Axiom recorded the present value of these obligations using an imputed interest
rate 9.25%. Payments under these obligations at December 31, 1994, are included
in other liabilities and are presented in the table on the next page.
1995 $ 150
1996 150
1997 125
1998 125
1999 125
thereafter 475
------
Total minimum payments 1,150
Less amount representing interest 300
======
Present value of net minimum obligations 850
Less current portion 150
------
Long-term obligations $ 700
======
Amounts outstanding under the above Axiom obligations became due and payable
upon the change in controlling interest of Axiom pursuant to the respective
agreements. Accordingly, the Company has repaid all of the amounts outstanding
under these obligations as of October 17, 1995.
P. Subsequent Events
-----------------
On May 19, 1995, the Company sold its 6.3% interest in AdValue (formed in 1991
to develop, test, and market a centralized spot advertising computer software
package) for $909,000 in cash. The Company accounted for this investment using
the equity method of accounting. The investment balance in AdValue at the time
of the sale was zero. Accordingly, the Company recognized a gain of $909,000 for
the period ended June 30, 1995.
In July 1995, SCG declared a dividend of approximately $559,000, payable to its
former stockholders during 1995. This dividend was paid, in August, for income
tax liabilities to SCG's former stockholders related to the taxable income of
SCG prior to the acquisition.
As discussed in Note A, the Company signed an acquisition agreement with SCG on
August 11, 1995, and completed the acquisition on August 14, 1995.
As discussed in Note A, the Company signed an acquisition agreement with Axiom
on October 16, 1995, and completed the acquisition on October 17, 1995.
F-25
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Q. Geographic Information
----------------------
Information about the Company's operations and total assets in North America and
Europe is presented as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net revenues:
North America $71,664 $49,786 $32,119
Europe 11,813 175 -
------- ------- -------
Consolidated $83,477 $49,961 $32,119
======= ======= =======
Income (loss) from operations:
North America $11,698 $ 6,549 $ 3,601
Europe 41 (472) -
------- ------- -------
Consolidated $11,739 $ 6,077 $ 3,601
======= ======= =======
Total assets at December 31:
North America $37,594 $20,165 $13,015
Europe 10,287 242 -
------- ------- -------
Consolidated $47,881 $20,407 $13,015
======= ======= =======
</TABLE>
North American operations consists primarily of information technology
consulting and software development and implementation services in the United
States. European operations consist of software development services
principally in the United Kingdom, the Netherlands, Sweden, and Germany, which
have similar business environments. There are no intraenterprise sales for the
periods presented.
R. Quarterly Financial Information (unaudited)
-------------------------------------------
The table on the next page presents the unaudited quarterly financial
information for the years 1994 and 1993 (in thousands, except per share data):
F-26
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATD FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
Quarters Ended
---------------------------------------------------------------------------
March 31, June 30, September 30, December 31,
------------------- ----------------- ------------------ ------------------
1994 1993 1994 1993 1994 1993 1994 1993
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $16,877 $10,040 $19,348 $11,220 $22,079 $14,476 $25,173 $14,225
---------------------------------------------------------------------------
Income from operations 3,024 1,865 2,994 1,025 2,974 1,589 2,747 1,598
---------------------------------------------------------------------------
Income before income taxes 3,036 1,820 3,100 1,001 3,087 1,603 2,787 1,630
---------------------------------------------------------------------------
Income before cumulative
effect of change in
accounting principle 1,895 1,215 2,047 598 1,992 1,082 1,623 942
Cumulative effect of change
in accounting for
income taxes - 1,204 - - - - - -
---------------------------------------------------------------------------
Net income $ 1,895 $2,419 $ 2,047 $ 598 $ 1,992 $ 1,082 $1,623 $ 942
---------------------------------------------------------------------------
Net income per share:
Income before cumulative
effect of change in
accounting prinicple $ .13 $ .10 $ .13 $ .04 $ .13 $ .07 $ .10 $ .06
Cumulative effect of change
in accounting for
income taxes - .08 - - - - - -
---------------------------------------------------------------------------
Net income $ .13 $ .18 $ .13 $ .04 $ .13 $ .07 $ .10 $ .06
---------------------------------------------------------------------------
</TABLE>
F-27
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,473 $ 3,365
Investments held to maturity 8,539 10,311
Accounts receivable, less allowance of $475 and $449 at
September 30, 1995 and December 31, 1994, respectively 32,921 19,566
Unbilled revenue on contracts 3,083 1,298
Prepaid expenses and other current assets 2,448 2,191
------- -------
Total current assets 52,464 36,731
Property and equipment, net 10,929 5,344
Other assets 1,444 1,482
Deferred income taxes 390 215
Goodwill, net 3,510 4,109
------- -------
Total assets $68,737 $47,881
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,731 $ 3,293
Accrued expenses 12,514 7,127
Deferred revenue 2,839 2,295
Borrowing under revolving credit facility 628 1,501
Deferred income taxes 273 280
Income taxes payable 2,005 858
Other current liabilities 323 316
------- -------
Total current liabilities 23,313 15,670
Other liabilities 1,034 1,095
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.01 par value, authorized 30,000,000 shares;
issued and outstanding 14,648,232 and 14,350,737 at
September 30, 1995 and December 31, 1994, respectively 146 143
Additional paid-in capital 22,881 15,974
Unamortized portion of deferred compensation - (9)
Note receivable from officer - (8)
Retained earnings 21,433 15,041
Foreign currency translation adjustment (70) (25)
------- -------
Total stockholders' equity 44,390 31,116
------- -------
Total liabilities and stockholders' equity $68,737 $44,881
======= =======
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
S-1
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $ 34,837 $ 22,079 $ 94,259 $ 58,304
Costs and expenses:
Project personnel 14,153 9,294 39,853 23,994
General and administration 4,412 3,613 13,588 9,325
Sales and marketing 4,405 2,620 10,936 6,913
Other costs 6,204 3,578 15,647 9,080
Business combination costs 700 - 700 -
-------- -------- -------- --------
Total operating expenses 29,874 19,105 80,724 49,312
-------- -------- -------- --------
Income from operations 4,963 2,974 13,535 8,992
Other income (expense):
Interest income 210 118 519 253
Interest expense (145) (30) (252) (115)
Gain on sale of AdValue - - 909 -
Foreign exchange gain 23 25 165 93
-------- -------- -------- --------
Income before income taxes 5,051 3,087 14,876 9,223
Provision for income taxes 1,913 1,095 5,806 3,289
-------- -------- -------- --------
Net income $ 3,138 $ 1,992 $ 9,070 $ 5,934
======== ======== ======== ========
Net income per share $ .19 $ .13 $ .55 $ .39
======== ======== ======== ========
Pro forma data:
Historical income before taxes $ 5,051 $ 3,087 $ 14,876 $ 9,223
Provision for income taxes:
Historical income taxes 1,913 1,095 5,806 3,289
Pro forma increase to
historical income taxes 107 178 215 446
-------- -------- -------- --------
Pro forma net income $ 3,031 $ 1,814 $ 8,855 $ 5,488
======== ======== ======== ========
Pro forma net income per share $ .18 $ .12 $ .53 $ .36
======== ======== ======== ========
Weighted average number of
common and common equivalent
shares outstanding 16,846 15,707 16,630 15,473
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
S-2
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1995 1994
---------- ----------
<S> <C> <C>
CAMBRIDGE FLOWS FROM OPERATING ACTIVITES:
Net Income $ 9,070 $ 5,934
Amounts that reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,537 1,163
Provision for deferred income taxes (75) 397
Gain on sale of AdValue (909) -
Increase in accounts receivable (13,060) (5,878)
Increase in unbilled revenue on contracts (1,769) (643)
Increase in accounts payable 1,405 1,846
Increase in accrued expenses 5,215 3,820
Increase in deferred revenue 716 374
Increase (decrease) in income taxes payable 845 (1,484)
Other, net (377) (601)
-------- --------
Net cash provided by operating activies 3,598 4,928
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (7,136) (2,417)
Purchase of investments held to maturity (13,429) (21,303)
Maturity of investments held to maturity 15,201 10,026
Proceeds from sale of AdValue 909 -
Cash used in acquisition of business, net
of cash acquired - (251)
-------- --------
Net cash used in investing activities (4,455) (13,945)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit arrangements (916) (1,144)
Issuance of common stock, net of issuance costs - 6,900
Repayment of long-term debt and capitalized leases (306) (82)
Proceeds from employee stock purchase plan 579 -
Dividend distributions (599) (80)
Proceeds from exercise of stock options and
related income tax benefits 4,238 597
Other, net (58) -
-------- --------
Net cash provided by financing activities 2,943 6,191
-------- --------
Effect of foreign exchange rate changes on cash 22 (91)
Net increase (decrease) in cash and cash equivalents 2,108 (2,917)
Cash and cash equivalents at beginning of period 3,365 3,512
-------- --------
Cash and cash equivalents at end of period $ 5,473 $ 595
======== ========
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
S-3
<PAGE>
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. Pooling of Interests
--------------------
On October 17, 1995, Cambridge Technology Partners (Massachusetts), Inc. (the
"Company") acquired all of the outstanding shares of capital stock of Axiom
Management Consulting, Inc. ("Axiom"). The acquisition was accomplished through
an exchange of approximately 342,000 shares (consisting of approximately 332,000
shares of the Company's common stock and options purchase approximately 10,000
shares of the Company's common stock) of the Company's common stock for all of
the outstanding shares of capital stock of Axiom and the assumption of all
outstanding options to acquire shares of capital stock of Axiom. This
transaction has been accounted for using the pooling of interests method of
accounting. Axiom, formed in 1988, has approximately 100 employees and has
offices in San Francisco, Atlanta, Chicago, Dallas, Los Angeles, New York, and
Seattle. Axiom is a California-based management consulting firm specializing in
business process re-engineering services for primarily Fortune 1000 companies.
Axiom currently operates as a wholly owned subsidiary of the Company.
On August 14, 1995, the Company acquired all of the outstanding shares of
capital stock of The Systems Consulting Group, Inc. ("SCG"). The acquisition
was accomplished through an exchange of approximately 758,000 shares (consisting
of approximately 723,000 shares of the Company's common stock and an option
purchase approximately 35,000 shares of the Company's common stock) of the
Company's common stock for all of the outstanding shares of capital stock of SCG
and the assumption of all outstanding options to acquire shares of capital stock
of SCG. This transaction has been accounted for using the pooling of interests
method of accounting. SCG, founded in 1988, has offices in Miami and Chicago
and approximately 200 employees. SCG focuses on evaluation and implementation
of software packages for financial reporting and consolidation, human
resources/payroll, remote work force automation, manufacturing, and retail
distribution. SCG also specializes in emerging technologies and techniques,
such as imaging, cooperative processing, and wireless communications. SCG
currently operates as a wholly owned subsidiary of the Company.
The accompanying supplemental consolidated financial statements of the Company
have been prepared to give retroactive effect to the acquisitions of SCG and
Axiom. All prior period historical consolidated financial statements presented
herein have been restated to include the financial positions, results of
operations, and cash flows of SCG and Axiom. The supplemental consolidated
financial statements presented herein will become the historical consolidated
financial statements of the Company as filed in any subsequent consolidated
financial statements covering the dates of consummation of the business
combinations. In addition, reference should be made to the unaudited pro forma
combined balance sheet and statements of operations for the Company and SCG as
filed in the Company's Form 8-K dated August 21, 1995, and the unaudited pro
forma combined balance sheet and statements of operations for the Company and
Axiom as filed in the Company's Form 8-K dated October 16, 1995.
Prior to the acquisition, SCG had elected to be treated as an S-Corporation for
income tax reporting purposes. Under this election, the individual
stockholders are deemed to have received a pro rata distribution of taxable
income of SCG (whether or not an actual distribution was made), which is
included in their taxable income. Accordingly, SCG did
S-4
<PAGE>
not provide for income taxes. Pro forma net income per share, which reflects
the provision for pro forma income taxes to the net income of SCG, is presented
in the pro forma data section of the accompanying supplemental consolidated
statements of operations.
SCG's S-Corporation tax reporting status was terminated on the date of the
acquisition and therefore undistributed earnings of $2,079,000 as of the date of
the acquisition has been reclassified to additional paid-in capital.
B. Basis of Presentation
---------------------
The accompanying supplemental consolidated financial statements of the Company
include the accounts of all of the Company's majority-owned subsidiaries. In
January 1995, Cambridge Technology Partners Deutschland GmbH ("CTP Germany") was
formed to conduct the Company's operations in Germany. The Company holds a 99%
interest in CTP Germany (a German partnership) with Cambridge Technology
Partners International, Inc. (a wholly owned subsidiary of the Company) holding
a 1% interest. As discussed in Note A, the Company acquired all of the
outstanding capital stock of SCG and Axiom on August 14 and October 17 of 1995,
respectively.
All significant intercompany transactions and balances have been eliminated.
Certain prior period amounts have been reclassified to conform with current
period presentation. In the opinion of management, the supplemental
consolidated financial statements reflect all normal and recurring adjustments,
which are necessary for a fair presentation of the Company's financial position,
results of operations, and cash flows as of the dates and for the periods
presented. The supplemental consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Consequently, these statements do not include all the
disclosures normally required by generally accepted accounting principles for
annual financial statements nor those normally made in the Company's Annual
Report on Form 10-K. Accordingly, reference should be made to the Company's
Annual Report on Form 10-K for additional disclosures, including a summary of
the Company's accounting policies, which have not changed. The supplemental
consolidated results of operations for the three and nine month periods ended
September 30, 1995, are not necessarily indicative of results for the full year.
C. Net Income Per Share
--------------------
Net income per share data is computed using the weighted average number of
common shares outstanding, the assumed exercise of stock options and warrants
(using the treasury stock method), the assumed issuance of approximately 723,000
shares of common stock and an option to purchase approximately 35,000 shares of
the Company's common stock in connection with the acquisition of SCG, and the
assumed issuance of approximately 332,000 shares of common stock and options to
purchase approximately 10,000 shares of the Company's common stock in connection
with the acquisition of Axiom. Primary and fully diluted net income per share
are the same for each period presented.
D. Sale of Investment in Affiliate
-------------------------------
On May 19, 1995, the Company sold its 6.3% interest in AdValue Media
Technologies, Inc. ("AdValue", formed in 1991 to develop, test, and market a
centralized spot advertising computer software package) for $909,000 in cash.
The Company accounted for this investment using the equity method of accounting.
The investment balance in AdValue at
S-5
<PAGE>
the time of the sale was zero. Accordingly, the Company recognized a gain of
$909,000 in the second quarter of 1995.
E. Revolving Credit Facility
-------------------------
On September 29, 1995, the Company terminated SCG's $2.5 million revolving
credit facility with Barnett Bank of South Florida, N.A. and repaid all of the
outstanding balance under this revolving credit facility.
The Company expects to repay all outstanding amounts and terminate Axiom's $1.25
million revolving credit facility in the fourth quarter of 1995.
Dividend distributions made by SCG prior to the acquisition were principally for
reimbursement of income tax liabilities of its former stockholders due to SCG's
S-Corporation tax status prior to the acquisition. Subsequent to SCG's final
dividend declaration made in July 1995, the Company intends to retain future
earnings of SCG for use in its business. The Company's $10.0 million revolving
credit facility with Fleet Bank of Massachusetts, N.A. prohibits the Company
from paying any dividends or making any distributions either in cash or in kind
on any class of its capital stock without the bank's consent.
F. Subsequent Event
----------------
As discussed in Note A, the Company acquired all of the outstanding shares of
capital stock of Axiom on October 17, 1995.
S-6
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations not contained in this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to sell, any securities other than the registered securities to which it
relates, or an offer to or solicitation of any person in any jurisdiction where
such an offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information............................................. 2
Incorporation of Certain Information
by Reference.................................................... 2
The Company....................................................... 3
Risk Factors...................................................... 4
Use of Proceeds................................................... 6
Selling Stockholders.............................................. 8
Plan of Distribution.............................................. 9
Legal Matters..................................................... 10
Experts........................................................... 10
</TABLE>
================================================================================
================================================================================
1,725,267 Shares
Cambridge Technology Partners (Massachusetts), Inc.
Common Stock
_______________
PROSPECTUS
________________
August 7, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting discounts and commissions) payable
in connection with the sale of the Common Stock offered hereby are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee $ 9,699
Nasdaq Filing Fees 17,500
Legal fees and expenses 20,000
Accounting fees and expenses 20,000
Blue Sky fees and expenses (including legal fees) 2,000
---------
Total $96,199
</TABLE>
The Company will bear all expenses shown above.
Item 15. Indemnification of Directors and Officers.
The Delaware General Corporation Law, the Company's certificate of incorporation
and by-laws provide for indemnification of the Company's directors and officers
for liabilities and expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were unlawful.
Reference is made to the Company's restated certificate of incorporation filed
as Exhibit 3.1 to the Company's Registration Statement on Form S-1 (No. 33-
56338) and the Company's by-laws filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (No. 33-56338).
Item 16. Exhibits.
*5 Opinion of Testa, Hurwitz & Thibeault, LLP
*23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants
*23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5)
**24 Power of Attorney
________________________
* Supersedes previously filed exhibit
** Previously filed
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
II-1
<PAGE>
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where appropriate, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Cambridge, Massachusetts on August 7,
1996.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By: /s/ Arthur M. Toscanini
---------------------------------
Arthur M. Toscanini
Senior Vice President of Finance
Pursuant to the requirements of the Securities Exchange Act of 1933, as amended,
this Post-Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
/s/ James K. Sims President, Chief Executive Officer and Director August 7, 1996
---------------------------
James K. Sims
/s/ Arthur M. Toscanini Senior Vice President of Finance and Treasurer August 7, 1996
---------------------------- (Chief Financial Officer and Accounting
Arthur M. Toscanini Officer)
/s/ Warren V. Musser Director August 7, 1996
---------------------------
Warren V. Musser
/s/ Jean C. Tempel Director August 7, 1996
---------------------------
Jean C. Tempel
/s/ Robert E. Keith, Jr. Director August 7, 1996
---------------------------
Robert E. Keith, Jr.
/s/ Robert L. Gett Director August 7, 1996
---------------------------
Robert L. Gett
/s/ Jack L. Messman Director August 7, 1996
---------------------------
Jack L. Messman
/s/ John W. Poduska, Sr. Director August 7, 1996
---------------------------
John W. Poduska, Sr.
/s/ James I. Cash, Jr., Ph.D. Director August 7, 1996
---------------------------
James I. Cash, Jr., Ph.D.
/s/ James D. Robinson III Director August 7, 1996
---------------------------
James D. Robinson III
*By:/s/ Arthur M. Toscanini August 7, 1996
--------------------------
Arthur M. Toscanini
Attorney-in-Fact
258MCS1306/6.238487-1
</TABLE>
II-3
<PAGE>
-----------------------------
[LETTERHEAD: TESTA, HURWITZ & THIBEAULT APPEARS HERE]
-----------------------------
August 6, 1996
Cambridge Technology Partners
(Massachusetts), Inc.
304 Vassar Street
Cambridge, MA 02139
Re: Post-Effective Amendment No. 1 to Form S-3 Registration Statement
-----------------------------------------------------------------
Ladies and Gentlemen:
We are counsel to Cambridge Technology Partners (Massachusetts), Inc., a
Delaware corporation (the "Company"), and have represented the Company in
connection with the preparation and filing of the Company's Post-Effective
Amendment No. 1 to Form S-3 Registration Statement (the "Registration
Statement"), covering the sale to the public of up to 1,725,267 shares of the
Company's Common Stock, $.01 par value per share (the "Shares"), being sold by
certain stockholders of the Company.
We have reviewed the corporate proceedings taken by the Board of Directors
of the Company with respect to the authorization and issuance of the Shares. We
have also examined and relied upon originals or copies, certified or otherwise
authenticated to our satisfaction, of all corporate records, documents,
agreements or other instruments of the Company and have made all investigations
of law and have discussed with the Company's officers all questions of fact that
we have deemed necessary or appropriate.
Based upon and subject to the foregoing, we are of the opinion that
1,725,267 of the Shares are legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
[SIGNATURE: TESTA, HURWITZ & THIBEAULT
APPEARS HERE]
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Cambridge Technology Partners (Massachusetts), Inc. (the "Company") on Form S-3
of our report dated September 26, 1995, on our audits of the financial
statements of Axiom Management Consulting, Inc. as of December 31, 1994 and
1993, and for the years ended December 31, 1994, 1993 and 1992, which report is
included in the Company's October 16, 1995 filing on Form 8-K.
We consent to the incorporation by reference in this registration statement of
our reports dated January 29, 1996, except as to the information presented in
Note R for which the date is March 19, 1996, on our audits of the consolidated
financial statements and financial statement schedule of Cambridge Technology
Partners (Massachusetts), Inc. as of December 31, 1995 and 1994, and for the
years ended December 31, 1995, 1994 and 1993, which reports are included in the
Company's 1995 Annual Report on Form 10-K.
We consent to the incorporation by reference in this registration statement of
our report dated July 28, 1995, on our audits of the financial statements of The
Systems Consulting Group, Inc. as of December 31, 1994 and 1993, and for the
years ended December 31, 1994, 1993 and 1992, which report is included in the
Company's August 21, 1995 filing on Form 8-K.
We consent to the inclusion in this registration statement of our report dated
November 6, 1995, on our audits of the supplemental consolidated financial
statements of Cambridge Technology Partners (Massachusetts), Inc. as of December
31, 1994 and 1993, and for the years ended December 31, 1994, 1993 and 1992.
We also consent to the four references to our Firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
August 5, 1996
