<PAGE>
Filed pursuant to Rule 424(b)(4)
Registration No. 333-17347
PROSPECTUS
587,555 SHARES
CAMBRIDGE TECHNOLOGY PARTNERS
COMMON STOCK
_______________________
This Prospectus relates to the sale of up to 587,555 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 January 14, 1997 the last reported sale price for the
Common Stock on the Nasdaq National Market was $33.00 per share.
_______________
SEE "RISK FACTORS" ON PAGE 5 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 January 16, 1997.
<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"). Reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at 7 World Trade Center, New York, New York 10048,
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Common Stock of the Company is traded
on the Nasdaq National Market. Reports, proxy statements and other
information concerning the Company may be inspected at the offices of the
National Association of Securities Dealers, Inc. located at 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 necessarily summaries of
such documents, and in each instance reference is made to the copy of such
document filed as an exhibit to the Registration Statement for a more
complete description of the matters involved. 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. In
addition, the Commission maintains a Web site (http://www.sec.gov.) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
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). Requests for such copies
should be directed to Arthur M. Toscanini, Chief Financial Officer,
Cambridge Technology Partners, 304 Vassar Street, Cambridge, Massachusetts
02139.
2
<PAGE>
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, 1996.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
5. The Company's Current Report on Form 8-K dated November 18, 1996.
6. 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.
3
<PAGE>
THE COMPANY
Cambridge Technology Partners (Massachusetts), Inc. ("Cambridge
Technology Partners" or the "Company") 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. The Company provides its software design and development
services on a fixed-price, fixed-timetable basis with client involvement at
all stages of the process. In performing its services, the Company
employs a rapid development methodology utilizing client/server
architectures. Open systems computing environments offer end-users a
computing environment that is more flexible and more easily accessible than
centralized, mainframe-based computer systems. As client/server has become
the preferred computing environment, the Company believes that businesses
will continue to migrate to open systems and continue to utilize
information technology service organizations to address the challenges
presented by this move.
The Company's information technology and management consulting
services are offered at the enterprise-wide, specific business process and
application software levels of an organization, and include Business
Renewal(TM), a proprietary methodology developed by Axiom Management
Consulting, Inc., a wholly-owned subsidiary of the Company, for evaluating
strategic business change. Upon the completion of consulting services, the
Company typically designs and develops one or more strategic software
applications, which may include custom and third-party package software,
and then rolls-out such applications to the organization's end-users. These
software applications are selected and 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. Cambridge
Technology Partners provides network analysis, design and deployment
services to assist its clients in successfully implementing the
applications in an open systems environment. The Company also provides
package software evaluation and implementation as independent service
offerings. To date, revenues have been generated principally from the
Company's custom 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.
4
<PAGE>
RECENT DEVELOPMENTS
On October 15, 1996, the Company acquired all of the outstanding
shares of capital stock of NatSoft S.A. ("NatSoft"), a Swiss corporation
(the "NatSoft Acquisition"), pursuant to a Stock Purchase Agreement dated
as of October 15, 1996 (the "NatSoft Acquisition Agreement"), among the
Company, the stockholders of NatSoft and the other parties named therein.
The NatSoft Acquisition was accomplished through an exchange of 271,714
shares of the Company's common stock for all outstanding shares of capital
stock of NatSoft. The NatSoft Acquisition has been accounted for under the
pooling-of-interests method.
Formed in 1986, NatSoft had 1995 revenues of $12.3 million for the 12
months ended December 31, 1995 and has approximately 105 employees at its
office in Geneva, Switzerland. NatSoft is an information technology
consulting and software implementation firm. NatSoft will be operated as a
wholly-owned subsidiary of the Company.
On October 31, 1996, the Company entered into a definitive agreement
to acquire all of the outstanding capital stock of Ramos & Associates, Inc.
("Ramos"), a California corporation (the "Ramos Acquisition"). The
acquisition was completed on November 18, 1996 and was accomplished through
a merger of the Company's acquisition subsidiary and Ramos in an exchange
of 1,175,119 shares of the Company's common stock for all the outstanding
shares of capital stock of Ramos.
Ramos, founded in 1991 and based in San Ramon, California, is an
information technology consulting and software implementation firm which
specializes in the Enterprise Resource Planning service market. With
offices in San Ramon, Dallas, Islia, New Jersey, and Chicago, Ramos has
approximately 215 employees worldwide. This acquisition has been accounted
for using the pooling of interests method of accounting.
RISK FACTORS
This Prospectus includes forward-looking statements which involve risks and
uncertainties, particularly as to capital expenditures, future liquidity
needs, working capital needs, and projected personnel costs, general and
administrative expenses, sales and marketing expenses, and other costs as a
percentage of net revenues. The Company's actual future results may differ
significantly from those stated in any forward-looking statements. While
it is impossible to identify each factor and event that could affect the
Company's results, 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 NatSoft Acquisition was
---------------------------------------
completed on October 15, 1996 and the Ramos Acquisition was completed on
November 18, 1996. The successful integration of the Company, NatSoft and
Ramos is important to the future financial performance
5
<PAGE>
of the combined enterprise. The anticipated benefits of the NatSoft
Acquisition and Ramos Acquisition may not be achieved unless, among other
things, the operations of NatSoft and Ramos 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 NatSoft or Ramos into the Company's
operations.
Management of Growth. The Company is currently experiencing a period of
--------------------
growth 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
-------------------------------------
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
------------------------------------------
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,
6
<PAGE>
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
1997 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 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, IBM, 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, and Electronic Data Systems
Corporation. The Company also faces competition from information services
organizations within potential clients. Many participants in the
information technology consulting and software development market have
significantly greater 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 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.
International Operations. The Company derived approximately $40.8 million
------------------------
and $40.7 million, or 26% and 27% of its total revenues, from customers
outside of the United States in 1995 and in the nine months ended September
30, 1996, 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
7
<PAGE>
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
----------------------------
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.
8
<PAGE>
PRICE RANGE OF COMMON STOCK
From April 12, 1993, until May 24, 1993, CTP's common stock traded on
the Nasdaq SmallCap Market. On May 24, 1993, CTP's Common Stock began
trading on the Nasdaq National Market. The following table sets forth, on
a per share basis for the periods shown, the range of high and low sale
prices of CTP's Common Stock as reported by Nasdaq. All share prices prior
to June 19, 1996 have been adjusted to reflect a three-for-one stock split
completed on June 19, 1996.
<TABLE>
<CAPTION>
1993 High Low
- -------------------------------------------------------------------------------
<S> <C> <C>
Second Quarter (from April 12, 1993) $ 3.92 $ 2.33
Third Quarter 5.33 3.08
Fourth Quarter 5.91 4.92
- -------------------------------------------------------------------------------
1994
- -------------------------------------------------------------------------------
First Quarter $ 6.08 $ 4.92
Second Quarter 5.91 4.67
Third Quarter 5.91 4.83
Fourth Quarter 7.92 4.67
- -------------------------------------------------------------------------------
1995
- -------------------------------------------------------------------------------
First Quarter $10.00 $ 7.08
Second Quarter 12.00 9.08
Third Quarter 17.58 10.33
Fourth Quarter 20.33 13.83
- -------------------------------------------------------------------------------
1996
- -------------------------------------------------------------------------------
First Quarter $19.25 $14.625
Second Quarter 30.75 17.75
Third Quarter 37.25 22.25
Fourth Quarter 35.75 22.50
- -------------------------------------------------------------------------------
1997
- -------------------------------------------------------------------------------
First Quarter (through January 14, 1997) $33.00 $30.50
- --------------------------------------------------------------------------------
</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.
9
<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
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jeanne M. Bauhart 10,851 5,425 5,426 *
William D. Catalano 32,553 16,276 16,277 *
Chester A. Ciccarelli 94,780 47,389 47,391 *
Charles F. Decker 16,271 8,135 8,136 *
John Harless 5,992 2,996 2,996 *
Catherine Conner Ramos(2) 50,191 25,095 25,096 *
Timothy A. Ramos(3) 953,630 476,814 476,816 1.0%
Steven D. Rothschild 10,851 5,425 5,426 *
TOTAL 1,175,119 587,555 587,564 *
</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 described below.
(2) Does not include Shares beneficially owned by Catherine Conner Ramos'
husband, Timothy A. Ramos.
(3) Does not include Shares beneficially owned by Timothy A. Ramos' wife,
Catherine Conner Ramos.
All of the Selling Stockholders acquired his or her Shares in connection
with the Ramos Acquisition described under "Recent Developments." 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
under "Recent Developments".
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 Ramos Acquisition, 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 November 18, 1998 or the sale of all of the
Shares pursuant to Rule 144 under the Securities Act or the
10
<PAGE>
Registration Statement. The Company will prepare and file such amendments
and supplements to the Registration Statement as may be necessary to keep
it effective during such period.
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.
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, LLP, Boston,
Massachusetts.
11
<PAGE>
EXPERTS
The supplemental consolidated financial statements of the Company included
in this Prospectus have been included herein 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.
12
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(A) SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants F-2
Supplemental Consolidated Balance Sheets as of December 31, 1995 and 1994 F-3
Supplemental Consolidated Statements of Operations for the
Years Ended December 31, 1995, 1994, and 1993 F-4
Supplemental Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1995, 1994, and 1993 F-5
Supplemental Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995, 1994, and 1993 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, 1996
and December 31, 1995 S-1
Supplemental Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 1996 and 1995 S-2
Supplemental Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 S-3
Notes to Supplemental Interim Consolidated Financial Statements S-4
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Cambridge Technology Partners (Massachusetts), Inc.:
We have audited the accompanying supplemental consolidated balance sheets of
Cambridge Technology Partners (Massachusetts), Inc. as of December 31, 1995 and
1994, 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, 1995. 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 consolidated financial statements give retroactive effect to
the merger of Cambridge Technology Partners (Massachusetts), Inc. and Ramos &
Associates, Inc. completed on November 18, 1996, 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 method 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 supplemental consolidated financial position of
Cambridge Technology Partners (Massachusetts), Inc., as of December 31, 1995 and
1994, and the supplemental consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 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 M of notes to the supplemental consolidated financial
statements, effective January 1, 1993, the Company changed its method of
accounting for income taxes.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 18, 1996
F-2
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
---------------------------------------------------
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,490 $ 4,021
Investments held to maturity 8,544 10,311
Accounts receivable, less allowance of $787 and $552
at December 31, 1995 and 1994, respectively 39,945 21,087
Unbilled revenue on contracts 2,045 2,620
Prepaid expenses and other current assets 2,453 2,230
------- -------
Total current assets 60,477 40,269
Property and equipment, net 12,042 6,026
Other assets 1,716 1,535
Deferred income taxes - 112
Goodwill, net 3,311 4,109
------- -------
Total assets $77,546 $52,051
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,693 $ 3,933
Accrued expenses 12,455 8,711
Deferred revenue 2,993 2,295
Deferred income taxes 786 483
Borrowings under revolving credit facility 325 1,581
Income taxes payable 2,176 870
Obligations under capital leases, current 181 139
Other current liabilities 29 461
------- -------
Total current liabilities 25,638 18,473
Obligations under capital leases 221 94
Other liabilities 4 1,031
Deferred income taxes 89 -
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.01 par value, authorized 120,000,000 shares;
issued and outstanding 45,595,451 and 44,480,348
at December 31, 1995 and 1994, respectively 456 445
Additional paid-in capital 23,734 15,760
Unamortized portion of deferred compensation - (9)
Note receivable from officer - (8)
Retained earnings 26,885 16,215
Foreign currency translation adjustment 519 50
------- -------
Total stockholders' equity 51,594 32,453
------- -------
Total liabilities and stockholders' equity $77,546 $52,051
======= =======
</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,
-------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Net revenues $ 156,266 $94,287 $56,205
Costs and expenses
Project personnel 73,386 44,331 27,061
General and administration 20,078 11,949 7,313
Sales and marketing 15,610 10,908 7,017
Other costs 25,338 14,829 8,530
Business combination costs 1,333 - -
-------- --------- --------
Total operating expenses 135,745 82,017 49,921
-------- --------- --------
Income from operations 20,521 12,270 6,284
Other income (expense)
Interest income 712 368 102
Interest expense (365) (154) (123)
Gain on sale of AdValue 909 - -
Foreign exchange gain 106 42 7
-------- --------- --------
Income before income taxes 21,883 12,526 6,270
Provision for income taxes 8,535 4,604 2,261
-------- --------- --------
Income before cumulative effect of change in
accounting principle 13,348 7,922 4,009
Cumulative effect of change in accounting for
income taxes - - 1,204
-------- --------- --------
Net income $ 13,348 $ 7,922 $ 5,213
======== ========= ========
Net income per share:
Income before cumulative effect of change in
accounting principle $ .25 $ .16 $ .09
Cumulative effect of change in accounting for
income taxes - - .03
-------- --------- --------
Net income $ .25 $ .16 $ .12
======== ========= ========
Pro forma data (unaudited) (Note M):
Historical income before income taxes $ 21,883 $ 12,526 $ 6,270
Provision for income taxes:
Historical income taxes 8,535 4,604 2,261
Pro forma increase to historical income taxes 215 517 225
-------- --------- --------
Income before cumulative effect of change in
accounting principle 13,133 7,405 3,784
Cumulative effect of change in accounting for
income taxes - - 1,204
-------- --------- --------
Pro forma net income $ 13,133 $ 7,405 $ 4,988
======== ========= ========
Pro forma net income per share (unaudited):
Income before cumulative effect of change in
accounting principle $ .25 $ .15 $ .08
Cumulative effect of change in accounting for
income taxes - - .03
-------- -------- --------
Pro forma net income $ .25 $ .15 $ .11
======== ======== ========
Weighted average number of common and
common equivalent shares outstanding 51,862 48,127 44,179
======== ======== ========
</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 per share data)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL RECEIVABLE CURRENCY
NUMBER OF PAR VALUE PAID-IN UNEARNED FROM OFFICER TRANSLATION RETAIN
SHARES CAPITAL COMPENSATION ADJUSTMENT EARNINGS
---------- ---------- ---------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 12,460,400 $124 $ 577 $(122) $(115) $ - $ 3,182
1992, as reported
Pooling of interests 1,175,119 12 (10) - - - 6
with Ramos &
Associates Inc.
Pooling of interests 271,714 3 82 - - (33) 631
with NatSoft S.A.
---------- ---- ------- ------------ ------------ ------------- --------
Balance, December 31, 13,907,233 139 649 (122) (115) (33) 3,819
1992, as restated
Issuance of common 800,000 8 3,656 - - - -
stock in rights
offering, net of
issuance cost
Exercise of stock 60,995 1 75 - - -
options
Income tax benefit - - 249 - - - -
related to stock
option exercises
Repayment of notes - - 182 - - - -
receivable from
employees for stock
purchased under
employee stock
purchase plan
Amortization of - - - 56 - -
unearned
compensation
associated with
stock options
Amortization of note - - - - 53 -
receivable from
officer
Foreign currency - - - - - 1
translation
adjustment
Issuance of Axiom - - 6 - - -
stock under
restricted stock plan
Dividend distribution - - - - - - (280)
Axiom's conversion to - - (335) - - - (379)
C Corporation
Net income - - - - - - 5,213
---------- ---- ------- ------------ ------------ ------------- --------
Balance, December 31, 14,768,228 148 4,482 (66) (62) (32) 8,373
1993
Issuance of common 500,000 5 6,895 - - - -
stock in public
offering, net of
issuance cost
Issuance of common 425,000 4 4,217 - - - -
stock through
acquisition of IOS
Group AB, net of
issuance cost
Exercise of stock 98,110 1 304 - - -
options
Income tax benefit 537 - - -
related to stock
option exercises
Repayment of notes - - 14 - - - -
receivable from
employees for stock
purchased under
employee stock
purchase plan
Amortization of - - - 57 - -
unearned
compensation
associated with
stock options
Amortization of note - - - - 54 - -
receivable from offer
Foreign currency - - - - - 82 -
translation
adjustment
Issuance of Axiom - - 25 - - - -
stock under
restricted stock plan
Issuance of Axiom - - 297 - - - -
stock under stock
agreement
Issuance of Ramos - - 1 - - - -
stock under
restricted stock plan
Repurchase of Axiom - - (725) - - - -
common stock
Dividend distribution - - - - - - (80)
Net income - - - - - - 7,922
----------- ---- ------- --------------- ------------- -------------- --------
Balance, December 31, 15,791,338 158 16,047 (9) (8) 50 16,215
1993
Exercise of stock 342,051 4 1,788 - - - -
options
Income tax benefit - - 3,753 - - - -
related to stock
option exercises
Shares issued under 29,650 - 579 - - - -
employee stock
purchase plan
Repurchase of Axiom - - (53) - - - -
common stock
Repayment of note - - (284) - - - -
payable related to
repurchase of Axiom
common stock
Issuance of Axiom - - 66 - - - -
stock under stock
agreement
Issuance of Ramos - - 17 - - - -
stock under
restricted stock plan
Payment on note - - 36 - - - -
receivable from
employees for stock
purchased under
employee stock
purchase plan
Amortization of - - - 9 - - -
unearned
compensation
associated with
stock options
Amortization of note - - - - 8 - -
receivable from
officer
SCG conversion to C - - 2,079 - - - (2,079)
Corporation
Foreign currency - - - - - 469 -
translation
adjustment
Dividend distribution - - - - - - (599)
Net income - - - - - - 13,348
---------- ---- ------- ------------ ------------ ------------- --------
Balance, December 31, 16,163,039 $162 $24,028 $ - $ - $519 $ 26,885
1995 ========== ==== ======= ============= ============= ============= ========
</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,
------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,348 $ 7,922 $ 5,213
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,812 1,833 612
Tax benefit from exercise of stock options 3,753 537 249
Cumulative effect of change in accounting
for income taxes - - (1,204)
Provision for deferred income taxes 425 134 271
Amortization of unearned compensation 9 57 56
Note receivable from officer 8 54 53
Gain on sale of AdValue (909) - -
Increase in accounts receivable (17,422) (7,445) (4,523)
(Increase) decrease in unbilled revenue on contracts (232) (1,636) 187
Increase in prepaid expenses and other current assets (320) (1,060) (93)
Increase in other assets (240) (661) (368)
Increase in accounts payable 2,659 2,066 493
Increase in accrued expenses 3,145 4,452 861
Increase (decrease) in deferred revenue 1,161 1,278 (1,440)
Increase (decrease) in income taxes payable 1,317 (993) 1,683
Other, net (326) 613 (137)
-------- -------- -------
Net cash provided by operating activities 10,188 7,151 1,913
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (8,767) (4,233) (1,436)
Purchase of investments held to maturity (22,140) (23,136) (500)
Maturity of investments held to maturity 24,075 13,376 -
Proceeds from sale of AdValue 909 - -
Cash used in acquisition of business, net of cash acquired - (251) -
-------- -------- -------
Net cash used in investing activities (5,923) (14,244) (1,936)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) under credit arrangements, net (1,256) 181 195
Issuance of common stock, net of issuance costs 17 6,901 3,664
Repayment of promissory note payable to stockholder - - (2,682)
Proceeds from long-term debt - 183 2,500
Repayment of long-term debt and capital leases (1,160) (137) (2,560)
Dividend distributions (599) (80) (280)
Proceeds from repayment of notes under employee
stock purchase plan - - 182
Proceeds from employee stock purchase plan 579 - -
Proceeds from exercise of stock options 1,792 305 76
Other, net (235) (50) -
-------- -------- -------
Net cash (used in) provided by financing activities (862) 7,303 1,095
-------- -------- -------
Effect of foreign exchange rate changes on cash 66 39 (4)
Net increase in cash and cash equivalents 3,469 249 1,068
Cash and cash equivalents at beginning of period 4,021 3,772 2,704
-------- -------- -------
Cash and cash equivalents at end of period $ 7,490 $ 4,021 $ 3,772
======== ======== =======
</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. BASIS OF REPORTING
------------------
The accompanying supplemental consolidated financial statements of Cambridge
Technology Partners (Massachusetts), Inc. (the "Company") have been prepared to
give retroactive effect to the acquisition of Ramos & Associates, Inc.
("Ramos"), an information technology consulting and software implementation
firm. 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.
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 after financial
statements covering the date of consummation of the business combination are
issued.
The accompanying supplemental consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated. Certain prior period amounts
have been reclassified to conform with current period presentation. 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.
In June 1996, the Company completed a three-for-one stock split via a 200% stock
dividend to stockholders of record on May 29, 1996. Accordingly, stockholders'
equity in the supplemental consolidated balance sheets has been restated to give
retroactive recognition to the stock split for all periods presented by
reclassifying from paid-in-capital to common stock the par value of the
additional shares arising from the stock split. All references in the
accompanying footnotes to supplemental consolidated financial statements to
applicable share and per share data, stock option data, and market prices of the
Company's common stock, for all periods presented, have been retroactively
restated to reflect the stock split (see Note J).
B. POOLING OF INTERESTS
--------------------
On November 18, 1996, the Company completed the acquisition of Ramos. This
acquisition was accomplished through a merger of the Company's acquisition
subsidiary and Ramos in an exchange of 1,175,119 shares of the Company's common
stock for all outstanding shares of capital stock of Ramos. Ramos, founded in
1991 and based in San Ramon, California, specializes in the Enterprise Resource
Planning service market. With offices in San Ramon, Dallas, Islia, New Jersey,
and Chicago, Ramos has approximately 215 employees worldwide at October 31,
1996. This acquisition has been accounted for using the pooling of interests
method of accounting. Costs, which consist primarily of accounting and legal
fees and business integration costs, related to this acquisition approximated
$700,000, are not included in the accompanying supplemental consolidated results
of operations as they will be charged to operating expenses in the fourth
quarter of 1996. Ramos currently operates as a wholly owned subsidiary of the
Company.
F-7
<PAGE>
On October 15, 1996, the Company acquired NatSoft S.A. ("NatSoft"), a
Switzerland-based information technology consulting and software implementation
firm. This acquisition was accomplished through an exchange of 271,714 shares
of the Company's common stock for all outstanding shares of capital stock of
NatSoft. With approximately 105 employees at the time of acquisition, NatSoft
establishes the Company's entry into the Swiss market and provides the Company
with a pool of multi-lingual professionals who can support projects in Southern
Europe. This acquisition has been accounted for using the pooling of interests
method of accounting. NatSoft currently operates as a wholly owned subsidiary
of the Company. Costs related to this acquisition of approximately $500,000,
which consist primarily of accounting and legal fees, are not included in the
accompanying supplemental consolidated results of operations as they will be
charged to operating expenses in the fourth quarter of 1996.
On October 17, 1995, the Company acquired Axiom Management Consulting, Inc.
("Axiom"). This acquisition was accomplished through an exchange of 1,007,898
shares (consisting of 978,360 shares of the Company's common stock and options
to purchase 29,538 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 with approximately 100 employees at the time of acquisition and
specializes in business process renewal services for primarily Fortune 1000
companies. Axiom currently operates as a wholly owned subsidiary of the
Company.
On August 14, 1995, the Company acquired the Systems Consulting Group, Inc.
("SCG"). The acquisition was accomplished through an exchange of 2,273,994
shares (consisting of 2,168,292 shares of the Company's common stock and an
option to purchase 105,702 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, had offices in Miami and Chicago
and approximately 200 employees at the time of acquisition. SCG focused 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 specialized in emerging
technologies and techniques, such as imaging, cooperative processing, and
wireless communications. SCG operated as a wholly owned subsidiary of the
Company in 1995. Effective January 1996, the Company integrated SCG into its
operational structure and service offering, and therefore, it is no longer
operating as a subsidiary.
The Company's previously issued historical consolidated financial statements
include the financial position, results of operations, and cash flows of SCG and
Axiom in accordance with pooling of interests requirements. Costs related to the
acquisitions of SCG and Axiom totaling $1,330,000 have been charged as business
combination costs in the consolidated statement of operations.
The following information presents certain statement of operations data of the
Company, SCG, Axiom, NatSoft, and Ramos for the periods prior to the
acquisitions. SCG and Axiom
F-8
<PAGE>
information are presented through September 30, 1995, which represents the
interim period end nearest to the date of the combinations.
<TABLE>
<CAPTION>
Cambridge
Technology Combined
Partners SCG Axiom NatSoft Ramos Total
---------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues for:
Year ended
December 31, 1993 $ 32,719 $ 5,500 $11,742 $ 5,342 $ 902 $ 56,205
December 31, 1994 $ 59,679 $10,315 $13,483 $ 7,825 $ 2,985 $ 94,287
Nine months ended
September 30, 1995 $ 70,052 $13,484 $10,723 $ 9,211 $ 7,651 $111,121
Year ended
December 31, 1995 $132,416 12,254 $11,596 $156,266
Net income (loss) for:
Year ended
December 31, 1993 $ 4,574 $ 563 $ (96) $ 125 $ 47 $ 5,213
December 31, 1994 $ 6,611 $ 1,261 $ (315) $ 336 $ 29 $ 7,922
Nine months ended
September 30, 1995 $ 7,632 $ 1,381 $ 57 $ 141 $ 203 $ 9,414
Year ended
December 31, 1995 $ 12,683 $ 205 $ 460 $ 13,348
</TABLE>
C. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
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 carrying
amount approximate market value due to the short maturity of the investments.
INVESTMENTS
The Company accounts for its investments under the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Company's investments are classified as
investments held to maturity and mature within one year from the date of
purchase. At December 31, 1995 and 1994, amortized cost of investments
approximate market value and consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1995 1994
------ -------
<S> <C> <C>
Municipal bonds $8,544 $ 7,271
Certificates of deposit - 1,551
Treasury bills - 1,489
------ -------
$8,544 $10,311
====== =======
</TABLE>
F-9
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment 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. For each of the years ended December 31, 1995,
1994, and 1993, the Company recorded amortization expense of $25,000. At
December 31, 1995 and 1994, accumulated amortization was $119,000 and $94,000,
respectively.
Goodwill, related to the acquisition of CTP Scandinavia in February 1994, is
being amortized over six years on a straight-line basis. For the years ended
December 31, 1995 and 1994, the Company recorded amortization expense of
$798,000 and $682,000, respectively. As of December 31, 1995 and 1994,
accumulated amortization was $1.5 million and $682,000, respectively. The
carrying value of goodwill is subject to periodic review of realizability.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121"). FAS 121
requires that an impairment loss be recognized for long-lived assets and certain
identified intangibles when the carrying amount of these assets may not be
recoverable. The Company has adopted FAS 121 in 1996 and the adoption did not
have a material impact on the consolidated results of operations or financial
position of the Company. Additionally, adoption of FAS 121 will have no cash
flow impact on the Company.
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 and implementation 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 period 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 business process consulting and package 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 of services
to be provided which will be recognized upon performance and amounts invoiced
in excess of revenue recognized to date.
F-10
<PAGE>
TRANSLATION OF FOREIGN CURRENCIES AND FOREIGN EXCHANGE TRANSACTIONS
For non-U.S. operations, the functional currency is the applicable local
currency. The translation of the functional 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
substantially liquidated. Gains or losses resulting from foreign currency
transactions are included in the results of operations.
FOREIGN EXCHANGE CONTRACTS
The Company maintains monthly foreign exchange forward contracts to hedge
against the risk of changes in foreign exchange rates associated with
intercompany balances. The related gains and losses are recorded as exchange
rate gain or loss in the consolidated statements of operations. The Company
does not hold foreign exchange contracts or other derivative financial
instruments for trading or any other purpose. As of December 31, 1995, the
Company held foreign exchange forward contracts of approximately $3.9 million.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to provide estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and would impact future results
of operations and cash flows.
The Company provides its services primarily to Fortune 1000 companies. The
Company performs ongoing credit evaluations of its major customers and maintains
reserves for potential credit losses, and such losses have been immaterial and
are within management's expectation. No single customer accounted for 10% or
more of total net revenues for the years ended 1995, 1994, and 1993.
D. ACQUISITION
-----------
In February 1994, the Company acquired all of the outstanding capital stock of
IOS Group AB (now CTP Scandinavia) for 1,275,000 shares of the Company's common
stock, valued on the date of acquisition at $4.2 million 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 1,275,000 shares of common stock issued were 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 statements of
operations from the date of acquisition. In connection with the acquisition,
the Company guaranteed the payment of bank loans of two senior managers in
principal amounts totaling $3.0 million due February 1996. The bank loans were
collateralized by 675,000 shares
F-11
<PAGE>
of the Company's common stock issued at the time of the acquisition. In February
1996, these bank loans were repaid in full and the Company's guarantees are no
longer in effect.
The Company has allocated the purchase price of $4.6 million, 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 $4.8 million) of the purchase price over
the fair value of net assets acquired is being amortized on a straight-line
basis over six years.
The following unaudited pro forma information combines the consolidated results
of operations of the Company and CTP Scandinavia as if the acquisition had
occurred at the beginning of the periods. 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.
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------
1994 1993
------------- -----------
(in thousands)
<S> <C> <C>
Net revenues $95,101 $62,214
======= =======
Income before cumulative effect of
change in accounting principle $ 7,736 $ 3,438
Cumulative effect of change in
accounting for income taxes - 1,204
------- -------
Net income $ 7,736 $ 4,642
======= =======
Net income per share:
Income before cumulative effect of
change in accounting principle $ .16 $ .08
Cumulative effect of change in
accounting for income taxes - .03
------- -------
Net income $ .16 $ .11
======= =======
E. ACCOUNTS RECEIVABLE
-------------------
Accounts receivable consist of the following (in thousands):
December 31,
-------------------
1995 1994
------- -------
Contracts in process $28,334 $16,150
Completed contracts 12,398 5,489
------- -------
40,732 21,639
Less: Allowance for doubtful accounts 787 552
------- -------
$39,945 $21,087
======= =======
</TABLE>
In accordance with state government practices, a governmental client withholds a
percentage of invoiced receivables as retention. At December 31, 1995 and 1994,
retention receivable totaled $1.4 million and $1.3 million, respectively, and
were included in other assets. Due to the contractual time period given to the
governmental client for final review of completed projects,
F-12
<PAGE>
the Company expects to receive payments in 1997 on the retention receivable
outstanding as of December 31, 1995.
F. 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, 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 for $909,000
in cash. The investment balance in AdValue at the time of the sale was zero,
and accordingly, the Company recognized a gain of $909,000 for the period ended
December 31, 1995.
G. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1995 1994
------- ------
<S> <C> <C>
Equipment $12,715 $7,422
Furniture and fixtures 3,895 1,212
Leasehold improvements 1,382 434
Motor vehicles 366 446
Computer software 230 145
------- ------
Total cost 18,588 9,659
Less accumulated depreciation 6,546 3,633
------- ------
$12,042 $6,026
======= ======
</TABLE>
Depreciation expense for 1995, 1994, and 1993 was $3.0 million, $1.1 million,
and $589,000, respectively.
Equipment under capital leases, included in property and equipment, amounted to
$763,000 and $406,000 at December 31, 1995 and 1994, respectively, and the
related accumulated depreciation was $310,000 and $166,000 at December 31, 1995
and 1994, respectively.
H. ACCRUED EXPENSES
----------------
Accrued expenses consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1995 1994
------- ------
<S> <C> <C>
Accrued payroll and payroll related expenses $ 7,691 $4,545
Other accrued expenses 3,218 3,195
Accrued value added tax 1,034 677
Deferred rent 512 294
------- ------
$12,455 $8,711
======= ======
</TABLE>
F-13
<PAGE>
I. REVOLVING CREDIT FACILITY
-------------------------
The Company maintained a $10.0 million uncollateralized revolving credit
facility (the "Facility"), with Fleet National Bank ("Fleet Bank"). The
Facility bore 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. The Facility carried a facility fee of .25% and expired on June 30,
1996. The Facility required, among other things, the Company to maintain
certain financial ratios. Failure to maintain compliance would entitle Fleet
Bank to demand immediate repayment of any amounts drawn on the Facility. As of
December 31, 1995 and 1994, no borrowings had been made under the Facility and
the Company was in compliance with all financial ratio requirements. In June
1996, the Company amended the Facility, among other things, to increase the
amount available under the Facility and to extend the expiration through June
1998 (see Note S).
In connection with the Company's initial revolving credit facility with Fleet
Bank entered into on February 1, 1993, 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 $2.7 million promissory note to Safeguard
Scientifics, Inc. ("Safeguard") (a stockholder of the Company). 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. SCG was in compliance with these
financial ratio requirements for all periods presented. At December 31, 1994,
amounts outstanding under this revolving credit facility were $1.0 million. 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. In
September 1995, the Company terminated this revolving credit facility and repaid
all outstanding amounts.
Axiom maintained a $1.25 million revolving credit facility with Wells Fargo
Bank, N.A. This revolving credit facility bore 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 was collateralized by all accounts receivable
and equipment and certain former stockholders of Axiom had extended personal
guarantees. Upon consummation of the acquisition, the personal guarantees were
no longer in effect. The revolving credit facility also subjected 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. Axiom was in compliance with these
financial restrictions and covenants for all periods presented. At December 31,
1994, amounts outstanding under Axiom's revolving credit facility was $501,000.
In December 1995, the Company repaid all outstanding amounts and terminated this
revolving credit facility.
F-14
<PAGE>
Ramos maintains a $600,000 revolving credit facility with Westamerica Bank.
This credit facility bears interest at a rate per annum equal to Westamerica
Bank's index rate plus 2.25% (10.75% at December 31, 1995), payable monthly.
The credit facility is collateralized by Ramos' accounts receivable and
personally guaranteed by two Ramos executives. The credit facility subjects
Ramos to certain restrictions and covenants related to, among other things,
tangible net worth and working capital. At December 31, 1995 and 1994, amounts
outstanding under this credit facility were $325,000 and $80,000, respectively.
The Company expects to terminate this credit facility in December 1996.
J. STOCKHOLDERS' EQUITY AND OTHER STOCK RELATED INFORMATION
--------------------------------------------------------
STOCK SPLIT
In March 1996, the Board of Directors approved a three-for-one stock split of
the Company's common stock and an amendment to the Company's corporate charter
to increase authorized common stock from 30 million to 120 million shares. Upon
stockholder approval in May 1996, the stock split was completed on June 19,
1996, via a 200% stock dividend to stockholders of record on May 29, 1996.
Accordingly, stockholders' equity in the supplemental consolidated balance
sheets has been restated to give retroactive recognition to the stock split for
all periods presented by reclassifying from paid-in-capital to common stock the
par value of the additional shares arising from the stock split. All references
in the accompanying footnotes to supplemental consolidated financial statements
to applicable share and per share data, stock option data, and market prices of
the Company's common stock, for all periods presented, have been retroactively
restated to reflect the stock split.
RIGHTS OFFERING
On May 24, 1993, the Company and its principal stockholder completed a rights
offering involving the sale of 2,400,000 shares of the Company's common stock
which were issued by the Company and approximately 5.4 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 2,400,000 shares
of common stock sold by the Company were $3.7 million 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 1,500,000 shares of the
Company's common stock issued by the Company and six million shares of the
Company's common stock held by the existing stockholders. The net proceeds to
the Company from the sale of the 1,500,000 shares of common stock sold by the
Company were $6.9 million. The Company has invested the proceeds since the
offering primarily in investment grade municipal bonds and 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.
F-15
<PAGE>
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.
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, 1992 4,094,250 $ .03-$ 1.33
Granted 2,213,910 $1.67-$ 5.92
Exercised 182,985 $ .33-$ .67
Canceled 336,327 $ .33-$ 5.71
---------- -------------
Outstanding at December 31, 1993 5,788,848 $ .03-$ 5.92
Granted 3,301,713 $4.92-$ 6.31
Exercised 294,330 $ .33-$ 5.17
Canceled 247,251 $ .33-$ 5.50
---------- -------------
Outstanding at December 31, 1994 8,548,980 $ .03-$ 6.31
Granted 3,860,175 $10.00-$17.25
Exercised 1,025,820 $ .33-$ 6.31
Canceled 283,215 $ .33-$17.25
---------- -------------
Outstanding at December 31, 1995 11,100,120 $ .03-$17.25
========== =============
</TABLE>
At December 31, 1995, 1994, and 1993, 4,288,638, 3,116,247, and 1,609,104
options were exercisable, respectively, under the Option Plan. In December 1993
and 1994, the Company's Board of Directors amended the Option Plan, with
subsequent stockholder approval, to increase the number of shares of common
stock authorized for issuance under the Option Plan from six million to nine
million shares in 1993 and nine million to twelve million shares in 1994. On
December 14, 1995, the Company's Board of Directors further amended the Option
Plan, which was approved by stockholders, to increase the number of shares of
common stock authorized for issuance under the Option Plan from twelve million
to fifteen million.
During 1991, the Company granted, under the Option Plan, 750,000 nonqualified
stock options to a key employee at an exercise price of $.03 per share, which
vested over a four year period. Upon grant, unearned compensation equivalent to
the market value of these options at the date of grant was charged to
stockholders' equity and subsequently amortized over the vesting period.
Amortization expense of $9,000, $57,000, and $56,000 was recorded for the years
ended December, 1995, 1994, and 1993, respectively.
F-16
<PAGE>
In October 1995, the Financial Accounting Standards Board issued statement No.
123 "Accounting for Stock-Based Compensation" ("FAS 123"), which will be
effective for the year ending December 31, 1996. FAS 123 encourages, but does
not require companies to recognize compensation expense for employee stock based
compensation arrangements using a fair value method of accounting. The Company
has determined that it will elect the disclosure only alternative and,
accordingly, will be required to disclose the pro forma net income or loss and
per share amounts in the notes to the consolidated financial statements using
the fair value based method beginning in 1996. The adoption of FAS 123 will
have no cash flow impact to the Company.
SCG entered into a stock option agreement with one employee during 1989. This
agreement granted an option to purchase thirty-nine shares of SCG common stock
at an exercise price equal to the fair market value of the stock on the date of
grant, which was $50 per share. This option vested ratably over four years and
was fully vested at December 31, 1993. In connection with the Company's
acquisition of SCG, the Company assumed all outstanding options to purchase
shares of capital stock of SCG and such option was converted into an option to
purchase 105,702 shares of the Company's common stock at an exercise price of
$.02 per share. As of December 31, 1995, this option was outstanding.
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 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 years ended
December 31, 1994 and 1993 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 29,538 shares of the Company's common stock, as of
October 17, 1995, at an exercise price of $.16 per share. As of December 31,
1995, options to purchase 24,684 shares of the Company's
F-17
<PAGE>
common stock were exercisable. A summary of the option activity for options
converted from the Axiom Option Plan is presented below:
<TABLE>
<CAPTION>
Option Option
Shares Price
------ ------
<S> <C> <C>
Converted from Axiom options 29,538 $.16
Exercised 1,086 $.16
Canceled - -
------ ----
Outstanding at December 31, 1995 28,452 $.16
====== ====
</TABLE>
During 1995, the Company established the 1995 Non-employee Director Stock Option
Plan ("Non-employee Director Option Plan"). The Non-employee Director Option
Plan authorizes the grant of options for up to 150,000 shares of the Company's
common stock. Each member of the Company's Board of Directors who is neither
(i) an employee nor an officer of the Company or Safeguard, nor (II) an
affiliate of Technology Leaders II L.P. or any related entity serving on the
Board of Directors on March 21, 1995, was granted an option to purchase 30,000
shares of the Company's common stock. Each person who is neither (I) an
employee nor an officer of the Company or Safeguard nor (II) an affiliate of
Technology Leaders II L.P. or any related entity who is first elected to the
Board of Director after March 21, 1995, shall be automatically granted, on the
date of such election without further action by the Board of Directors, an
option to purchase 30,000 shares of the Company's common stock. The options
were granted with an exercise price equal to the fair value on the date of
grant. Options generally vest ratably over a four year period and expire ten
years from the date of grant. As of December 31, 1995, options to purchase
120,000 shares of common stock were granted and outstanding and none were
exercisable.
EMPLOYEE STOCK PURCHASE PLAN
On December 14, 1994, the Board of Directors adopted the Company's 1994 Employee
Stock Purchase Plan (the "Stock Purchase Plan"), which was subsequently approved
by stockholders in the annual meeting of stockholders in May 1995. The Company
has authorized 1,500,000 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 1,500 shares of common stock per payment period,
subject to limitations provided by Section 423(b) of the Internal Revenue Code,
through accumulated payroll deductions. The purchases are made twice per year
at a price equal to the lesser of (i) 85% of the average market price of the
Company' 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.
NOTE RECEIVABLE FROM OFFICER
During 1991, the Company issued 1,578,948 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 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
F-18
<PAGE>
through February 28, 1995, as the officer had received a bonus of $153,000 for
continued employment through such date.
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 two million
shares of preferred stock, par value $.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
900,000 shares of common stock at a price of $2.00 per share. The warrants are
exercisable for a five year period from the date of issuance. As of December
31, 1995, 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 Fleet 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, prior to the acquisition, were principally
for reimbursement of income tax liabilities of its former stockholders due to
SCG's S-Corporation tax status. Effective in January 1996, the Company has
integrated SCG into its operational structure and service offering, and
therefore, future earnings will be retained for use in the Company's business.
K. 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, which began 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>
Minimum future lease commitments under noncancelable operating leases for
buildings and equipment in effect at December 31, 1995, are presented as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 $ 4,513
1997 3,765
1998 3,619
1999 3,048
2000 2,977
Thereafter 8,926
-------
Total minimum lease payments $26,848
=======
</TABLE>
For the years ended December 31, 1995, 1994, and 1993, rental expense under all
leases was approximately $4.6 million, $2.9 million, and $1.6 million,
respectively, of which approximately $765,000, $775,000, and $752,000,
respectively, related to the trust described above.
Minimum future lease commitments under noncancelable capital leases for
equipment at December 31, 1995, are presented as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 $ 224
1997 84
1998 76
1999 76
2000 31
------
Total minimum payments 491
Less amounts representing interest (89)
------
Present value of minimum lease payments 402
Current portion 181
------
Long-term obligation $ 221
======
</TABLE>
L. OTHER COSTS
-----------
<TABLE>
<CAPTION>
Other costs consist of the following (in thousands):
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
Facility costs and related expenses $12,481 $ 6,153 $3,352
Non-billable project expenses 5,892 4,338 3,351
Non-billable staff travel 5,696 3,758 1,478
Education and training 1,269 580 258
Third party commissions - - 91
------- ------- ------
$25,338 $14,829 $8,530
======= ======= ======
</TABLE>
M. 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
F-20
<PAGE>
the adoption of FAS 109 as of January 1, 1993, was to increase net income by
$1.2 million, or $.03 per share. The adoption of FAS 109 had no cash flow impact
to the Company.
The components of income before income taxes and the related provision for
income taxes for the years ended December 31, 1995, 1994, and 1993, are
presented below (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Income before income taxes:
Domestic $19,800 $12,049 $6,610
Foreign 2,083 477 (340)
------- ------- ------
$21,883 $12,526 $6,270
======= ======= ======
Provision for income taxes:
Current:
Federal $ 5,860 $ 3,499 $1,463
Foreign 655 61 27
State 1,595 910 500
------- ------- ------
8,110 4,470 1,990
Deferred:
Federal 363 57 224
Foreign 28 70 (15)
State 34 7 62
------- ------- ------
425 134 271
------- ------- ------
Total $ 8,535 $ 4,604 $2,261
======= ======= ======
</TABLE>
The Company's deferred tax assets and (liabilities) are comprised of the
following as of December 31, 1995 and 1994, respectively (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Tax basis of software technology $ 50 $ 296
Fixed asset depreciation (388) (315)
Cash to accrual adjustments and other items (537) (352)
----- -----
$(875) $(371)
===== =====
</TABLE>
The table below reconciles the expected U.S. federal income tax provision to the
recorded income tax provision (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected"
tax provision $7,659 35.0% $4,259 34.0% $2,131 34.0%
State income taxes, net of
federal income tax benefit 1,185 5.4 548 4.4 355 5.7
Goodwill amortization 240 1.1 191 1.5 - -
Change in valuation allowance - - - - (101) (1.6)
Non-taxable S-Corporation income (215) (1.0) (517) (4.1) (225) (3.6)
Other, net (334) (1.5) 123 1.0 101 1.6
------ ---- ------ ---- ------ ----
$8,535 39.0% $4,604 36.8% $2,261 36.1%
====== ==== ====== ==== ====== ====
</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-21
<PAGE>
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 in the pro forma data section of the accompanying consolidated
statements of operations. In addition, SCG's S-Corporation tax reporting status
was terminated on the date of the acquisition and therefore, the undistributed
earnings of $2.1 million as of the date of acquisition has been reclassified to
additional paid-in-capital.
The provision for income taxes on a pro forma basis is as follows (in thousands)
(unaudited):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Current:
Federal $6,029 $3,560 $1,570
Foreign 655 61 27
State 1,641 917 517
------ ------ ------
8,325 4,538 2,114
Deferred:
Federal 363 440 310
Foreign 28 70 (15)
State 34 73 77
------ ------ ------
425 583 372
------ ------ ------
Total $8,750 $5,121 $2,486
====== ====== ======
</TABLE>
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 of
$714,000 at December 31, 1992, were recorded with a charge to additional paid-
in-capital of $335,000 and a charge to retained earnings of $379,000 in 1993.
N. 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), and the assumed issuance of a stock dividend
at the beginning of each period to effect a stock split (see Notes J and S).
Net income per share data also reflects, when applicable, the assumed issuance,
at the beginning of each period, of 2,168,292 shares of common stock and an
option to purchase 105,702 shares of the Company's common stock in connection
with the acquisition of SCG, the assumed issuance, at the beginning of the
period, of 978,360 shares of common stock and options to purchase 29,538 shares
of the Company's common stock in connection with the acquisition of Axiom, the
assumed issuance, at the beginning of the period, of 271,714 shares of the
Company's common stock in relation to the acquisition of NatSoft, and the
assumed issuance, at the beginning of the period, of 1,175,119 shares of the
Company's common stock in relation to the acquisition of Ramos. Primary and
fully diluted income per share are the same for each period presented.
F-22
<PAGE>
O. EMPLOYEE BENEFIT PLANS
----------------------
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, the 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 $215,000 and $135,000 in 1995
and 1994, respectively.
In 1990, SCG established 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 could elect to make contributions under the SCG Profit-
sharing Plan. Company matching contributions amounted to $156,000, $71,000, and
$53,000 in 1995, 1994, and 1993, respectively. Effective January 1996, all
participants of the SCG Profit-sharing Plan are now participating in the 401(k)
Plan. The Company completed the rollover of assets held under the SCG Profit-
sharing Plan to the 401(k) Plan in the second quarter of 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 $128,000, $123,000,
and $104,000 in 1995, 1994, and 1993, respectively. Effective January 1996, all
participants of the Axiom Profit-sharing Plan are now participating in the
401(k) Plan. The Company completed the rollover of assets held under the Axiom
Profit-sharing Plan to the 401(k) Plan in the second quarter of 1996.
NatSoft sponsors a defined contribution retirement plan (the "NatSoft Plan") for
its employees. Under the NatSoft Plan, employees can contribute between 5% to
11% of insured salary depending on age and other factors. All employee
contributions are matched by NatSoft. Employer matching contribution amounted
to $180,591, $98,805, and $78,502 for the years ended December 31, 1995, 1994,
and 1993, respectively. NatSoft also sponsors a defined contribution retirement
plan for three executives who are also stockholders. NatSoft's contribution to
this plan amounted to $149,999, $295,892, and $230,271 for the years ended
December 31, 1995, 1994, and 1993, respectively.
In 1992, Ramos established a savings and profit-sharing plan (the "Ramos Profit-
sharing Plan") covering substantially all of Ramos' employees. The Ramos
Profit-sharing Plan is qualified under Section 401 (a) of the Internal Revenue
Code of 1986, as amended. Ramos may elect to make contributions under the Ramos
Profit-sharing Plan. Ramos elected to make matching contributions based on a
percentage of employees' contributions. Ramos' matching contributions amounted
to $227,101, $82,233, and $90,094 for the years ended December 31, 1995, 1994,
and 1993, respectively. The Company expects to rollover assets held under the
Ramos Profit-sharing Plan to the 401(k) Plan by the second quarter of 1997.
F-23
<PAGE>
P. COMMITMENTS AND CONTINGENCIES
-----------------------------
In connection with the acquisition of CTP Scandinavia, the Company guaranteed
the payment of bank loans totaling $3.0 million, which are no longer in effect
beginning in February 1996 (see Note D).
In December 1994, Axiom repurchased 200,000 shares of its common stock from a
former officer for an aggregate purchase price of $1.0 million. 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 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. Following the acquisition of
Axiom, the Company repaid the remaining balances of these obligations totaling
$1.0 million, in accordance with the terms of the related agreements. The
amount representing interest of approximately $284,000 was recorded as a
reduction to additional paid-in-capital.
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 was obligated to purchase $200,000 of product per quarter through
the second quarter of 1996. As of December 31, 1995, this agreement is no
longer in effect.
See Note S for discussion of legal matters.
Q. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Supplemental disclosures of cash flow information are presented as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -----
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 343 $ 189 $ 237
Income taxes 3,146 4,897 70
</TABLE>
During 1995, capital lease obligations of $357,000 were incurred by SCG, Axiom,
and Ramos for the acquisition of certain equipment. During 1994, capital lease
obligations of $50,000 were incurred by Ramos for the acquisition of certain
equipment. In addition, the Company exchanged 1,275,000 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 P).
During 1993, capital lease obligations of $356,000 were incurred by Axiom for
the acquisition of certain equipment.
F-24
<PAGE>
R. GEOGRAPHIC INFORMATION
----------------------
Information about the Company's operations and total assets in North America and
Europe is presented as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Net revenues:
North America $115,430 $74,649 $50,688
Europe 40,836 19,638 5,517
-------- ------- -------
Consolidated $156,266 $94,287 $56,205
======== ======= =======
Income (loss) from operations:
North America $ 18,429 $11,753 $ 6,627
Europe 2,092 517 (343)
-------- ------- -------
Consolidated $ 20,521 $12,270 $ 6,284
======== ======= =======
Total assets at December 31:
North America $ 60,135 $38,515 $20,363
Europe 17,411 13,536 2,053
-------- ------- -------
Consolidated $ 77,546 $52,051 $22,416
======== ======= =======
</TABLE>
North American operations consist primarily of information technology consulting
and software development and implementation services in the United States.
European operations consist of information technology consulting and software
development services principally in the United Kingdom, the Netherlands,
Switzerland, Sweden, Norway, Ireland, and Germany, which have similar business
environments. There are no intraenterprise sales for the periods presented.
S. SUBSEQUENT EVENTS
-----------------
In March 1996, the Board of Directors approved a three-for-one stock split of
the Company's common stock and an amendment to the Company's corporate charter
to increase authorized common stock from 30 million to 120 million shares. Upon
stockholder approval in May 1996, the stock split was completed on June 19,
1996, via a 200% stock dividend to stockholders of record on May 29, 1996.
Accordingly, stockholders' equity in the supplemental consolidated balance
sheets has been restated to give retroactive recognition to the stock split for
all periods presented by reclassifying from paid-in-capital to common stock the
par value of the additional shares arising from the stock split. All references
in the accompanying footnotes to supplemental consolidated financial statements
to applicable share and per share data, stock option data, and market prices of
the Company's common stock, for all periods presented, have been retroactively
restated to reflect the stock split.
On June 26, 1996, the Company amended the Facility with Fleet Bank, among other
things, to increase the amount available under the Facility from $10.0 million
to $20.0 million, to extend the expiration date to June 30, 1998, from June 30,
1996, and to decrease the facility cost to .15% from .25%. In addition, the
Facility was also amended to permit the Company to elect an interest rate of
either, Fleet Bank's prime rate in effect from time to time or a eurodollar
rate, as defined, payable monthly in arrears commencing with the advance of
funds. The Facility requires, among other things, the Company to maintain
certain financial ratios. At September 30, 1996, and
F-25
<PAGE>
December 31, 1995, the Company was in compliance with these financial ratio
requirements and no borrowings have been made under the Facility.
In July 1996, a suit was filed against the Company in the United States District
Court for the District of Colorado in Denver by Rocky Mountain Healthcare
Corporation ("RMHC"). RMHC is seeking, among other things, a refund of
$1,772,212 of contract payments and related damages arising from the Company's
alleged breach of an agreement pursuant to which the Company provided software
system design and consulting services to RMHC. The suit includes breach of
contract and tort claims. The Company plans to vigorously defend itself against
the suit and anticipates bringing counterclaims against RMHC.
In July 1996, Axiom was served a demand for arbitration by a former shareholder
of Axiom. The American Arbitration Association arbitration is currently pending
in northern California. The claims arise from Axiom's alleged failure to inform
such shareholder of the Company's interest in acquiring Axiom at the time he
sold his stock back to Axiom. The demand seeks damages in excess of $3.3
million plus punitive damages, costs and attorney's fees. The Company plans to
vigorously defend itself in this arbitration.
As discussed in Note B, the Company acquired all outstanding shares of capital
stock of NatSoft on October 15, 1996.
As discussed in Note A, the Company acquired all outstanding shares of capital
stock of Ramos on November 18, 1996.
T. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
-------------------------------------------
The following table presents the unaudited quarterly financial information for
the years 1995 and 1994 (in thousands, except per share data):
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------------------------
March 31, June 30, September 30, December 31,
---------------- -------- ---------------- ----------------
1995 1994 1995 1994 1995 1994 1995 1994
------- ------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $31,681 $18,919 $38,172 $21,476 $41,268 $24,953 $45,145 $28,939
Income from operations 4,063 3,143 4,915 3,057 5,146 3,166 6,397 2,904
Income before income taxes 4,367 3,153 5,847 3,161 5,225 3,277 6,444 2,935
Net income 2,573 1,979 3,605 2,089 3,236 2,126 3,934 1,728
Net income per share .05 .04 .07 .04 .06 .04 .07 .04
</TABLE>
F-26
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
-------------- ------------
1996 1995
-------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,206 $ 7,490
Investments held to maturity 12,248 8,544
Accounts receivable, less allowance of $981 and $787 at
September 30, 1996 and December 31, 1995, respectively 67,834 39,945
Unbilled revenue on contracts 4,265 2,045
Prepaid expenses and other current assets 2,354 2,453
-------- -------
Total current assets 98,907 60,477
Property and equipment, net 18,821 12,042
Other assets 2,676 1,716
Goodwill, net 2,712 3,311
-------- -------
Total assets $123,116 $77,546
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,530 $ 6,693
Accrued expenses 17,022 12,455
Deferred revenue 9,327 2,993
Borrowings under revolving credit facility - 325
Deferred income taxes 1,240 786
Income taxes payable 3,600 2,176
Other current liabilities 165 210
-------- -------
Total current liabilities 43,884 25,638
Other liabilities 127 225
Deferred income taxes 56 89
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.01 par value, authorized 120,000,000
shares; issued and outstanding 47,523,655 and 45,595,451
at September 30, 1996 and December 31, 1995, respectively 475 456
Additional paid-in capital 36,874 23,734
Retained earnings 41,929 26,885
Foreign currency translation adjustment (229) 519
-------- -------
Total stockholders' equity 79,049 51,594
-------- -------
Total liabilities and stockholders' equity $123,116 $77,546
======== =======
</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,
--------------------------------- --------------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $63,869 $41,268 $167,405 $111,121
Costs and expenses:
Project personnel 29,406 18,542 77,954 52,941
General and administration 7,773 5,040 20,617 14,277
Sales and marketing 4,722 4,674 12,409 11,303
Other costs 12,755 7,166 31,809 17,776
Business combination costs - 700 - 700
------- ------- -------- --------
Total operating expenses 54,656 36,122 142,789 96,997
------- ------- -------- --------
Income from operations 9,213 5,146 24,616 14,124
Other income (expense):
Interest income 255 210 655 520
Interest expense (10) (154) (44) (279)
Gain on sale of AdValue - - - 909
Foreign exchange (loss) gain (66) 23 (82) 165
------- ------- -------- --------
Income before income taxes 9,392 5,225 25,145 15,439
Provision for income taxes 3,786 1,989 10,087 6,025
------- ------- -------- --------
Net income $ 5,606 $ 3,236 $ 15,058 $ 9,414
======= ======= ======== ========
Net income per share $ .10 $ .06 $ .28 $ .18
======= ======= ======== ========
Pro forma data:
Historical income before taxes $ 9,392 $ 5,225 $ 25,145 $ 15,439
Provision for income taxes:
Historical income taxes 3,786 1,989 10,087 6,025
Pro forma increase to
historical income taxes - 107 - 215
------- ------- -------- --------
Pro forma net income $ 5,606 $ 3,129 $ 15,058 $ 9,199
======= ======= ======== ========
Pro forma net income per share $ .10 $ .06 $ .28 $ .18
======= ======= ======== ========
Weighted average number of
common and common
equivalent shares outstanding 55,305 51,985 54,231 51,303
======= ======= ======== ========
</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,
---------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,058 $ 9,414
Amounts that reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,071 2,755
Tax benefit from exercise of stock options 5,498 2,936
Provision for deferred income taxes 451 (71)
Gain on Sale of AdValue - (909)
Increase in accounts receivable (28,295) (15,354)
Increase in unbilled revenue on contracts (2,060) (2,153)
Increase in prepaid expenses and other current assets (713) (437)
Increase in accounts payable 5,884 1,788
Increase in accrued expenses 4,762 7,066
Increase in deferred revenue 6,358 716
Increase in income taxes payable 1,424 839
Other, net (215) (223)
-------- --------
Net cash provided by operating activities 11,223 6,367
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (9,354) (7,660)
Purchase of investments held to maturity (15,450) (13,429)
Maturity of investments held to maturity 11,746 15,201
Proceeds from Sale of AdValue - 909
-------- --------
Net cash used in investing activities (13,058) (4,979)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit arrangements (325) (291)
Obligations under capitalized leases (139) (132)
Proceeds from employee stock purchase plan 2,071 579
Dividend distributions (15) (599)
Proceeds from exercise of stock options 5,584 1,302
Other, net 4 17
-------- --------
Net cash provided by financing activities 7,180 876
-------- --------
Effect of foreign exchange rate changes on cash (629) 128
Net increase in cash and cash equivalents 4,716 2,392
Cash and cash equivalents at beginning of period 7,490 4,021
-------- --------
Cash and cash equivalents at end of period $ 12,206 $ 6,413
======== ========
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
S-3
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. BASIS OF REPORTING
------------------
The accompanying supplemental consolidated financial statements of Cambridge
Technology Partners (Massachusetts), Inc. (the "Company") have been prepared to
give retroactive effect to the acquisition of Ramos & Associates, Inc.
("Ramos"), an information technology consulting and software implementation
firm. 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.
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 after financial
statements covering the date of consummation of the business combination are
issued.
The accompanying supplemental consolidated financial statements of the Company
include the accounts of all of the Company's wholly owned subsidiaries. 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 months ended September
30, 1996, are not necessarily indicative of results for the full year.
In June 1996, the Company completed a three-for-one stock split via a 200% stock
dividend to stockholders of record on May 29, 1996. Accordingly, stockholders'
equity in the supplemental consolidated balance sheets has been restated to give
retroactive recognition to the stock split for all periods presented by
reclassifying from paid-in-capital to common stock the par value of the
additional shares arising from the stock split. All references in the
accompanying footnotes to supplemental consolidated financial statements to
applicable share and per share data of the Company's common stock, for all
periods presented, have been retroactively restated to reflect the stock split
(see note D).
B. POOLING OF INTERESTS
--------------------
On November 18, 1996, the Company completed the acquisition of Ramos. This
acquisition was accomplished through a merger of the Company's acquisition
subsidiary and Ramos in an exchange of 1,175,119 shares of the Company's common
stock for all outstanding shares of capital stock of Ramos. Ramos, founded in
1991 and based in San Ramon, California,
S-4
<PAGE>
specializes in the Enterprise Resource Planning service market. With offices in
San Ramon, Dallas, Islia, New Jersey, and Chicago, Ramos has approximately 215
employees worldwide at October 31, 1996. This acquisition has been accounted for
using the pooling of interests method of accounting. Costs, which consist
primarily of accounting and legal fees and business integration costs, related
to this acquisition approximated $700,000, are not included in the accompanying
supplemental consolidated results of operations as they will be charged to
operating expenses in the fourth quarter of 1996.
On October 15, 1996, the Company acquired NatSoft S.A. ("NatSoft"), a
Switzerland-based information technology consulting and software implementation
firm. This acquisition was accomplished through an exchange of 271,714 shares
of the Company's common stock for all outstanding shares of capital stock of
NatSoft. With approximately 105 employees at the time of acquisition, NatSoft
establishes the Company's entry into the Swiss market and provides the Company
with a pool of multi-lingual professionals who can support projects in Southern
Europe. This acquisition has been accounted for using the pooling of interests
method of accounting. NatSoft currently operates as a wholly owned subsidiary
of the Company. Costs related to this acquisition of approximately $500,000,
which consist primarily of accounting and legal fees, are not included in the
accompanying supplemental consolidated results of operations as they will be
charged to operating expenses in the fourth quarter of 1996.
The Company's previously issued historical consolidated financial statements
have been prepared to give retroactive effect to the Company's 1995 acquisitions
of The Systems Consulting Group, Inc. ("SCG") and Axiom Management Consulting,
Inc. ("Axiom"), in accordance with pooling of interests requirements.
C. REVOLVING CREDIT FACILITY
-------------------------
On June 26, 1996, the Company amended its uncollateralized revolving credit
facility (the "Facility") with Fleet National Bank, the successor to Fleet Bank
of Massachusetts, N.A. ("Fleet Bank"). The Facility was amended, among other
things, to increase the amount available under the Facility from $10.0 million
to $20.0 million, to extend the expiration date to June 30, 1998, from June 30,
1996, and to decrease the facility cost to .15% from .25%. In addition, the
Facility was also amended to permit the Company to elect an interest rate of
either, Fleet Bank's prime rate in effect from time to time or a eurodollar
rate, as defined, payable monthly in arrears commencing with the advance of
funds. The Facility requires, among other things, the Company to maintain
certain financial ratios. At September 30, 1996, and December 31, 1995, the
Company was in compliance with these financial ratio requirements and no
borrowings have been made under the Facility.
D. STOCK SPLIT
-----------
In March 1996, the Board of Directors approved a three-for-one stock split of
the Company's common stock and an amendment to the Company's corporate charter
to increase authorized common stock from 30 million to 120 million shares. Upon
stockholder approval in May 1996, the stock split was completed on June 19,
1996, via a 200% stock dividend to stockholders of record on May 29, 1996.
Accordingly, stockholders' equity in the supplemental consolidated balance
sheets has been restated to give retroactive recognition to the stock split for
all periods presented by reclassifying from paid-in-capital to common stock the
par value of the additional
S-5
<PAGE>
shares arising from the stock split. All references in the accompanying
footnotes to supplemental consolidated financial statements to applicable share
and per share data of the Company's common stock, for all periods presented,
have been retroactively restated to reflect the stock split.
E. 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), and the assumed issuance of a stock dividend
at the beginning of each period to effect a stock split. Net income per share
data also reflects, when applicable, the assumed issuance, at the beginning of
each period, of 2,168,292 shares of common stock and an option to purchase
105,702 shares of the Company's common stock in connection with the acquisition
of SCG, the assumed issuance, at the beginning of the period, of 978,360 shares
of common stock and options to purchase 29,538 shares of the Company's common
stock in connection with the acquisition of Axiom, the assumed issuance, at the
beginning of the period, of 271,714 shares of the Company's common stock in
relation to the acquisition of NatSoft, and the assumed issuance, at the
beginning of the period, of 1,175,119 shares of the Company's common stock in
relation to the acquisition of Ramos. Primary and fully diluted income per
share are the same for each period presented.
F. LEGAL PROCEEDINGS
-----------------
In July 1996, a suit was filed against the Company in the United States District
Court for the District of Colorado in Denver by Rocky Mountain Healthcare
Corporation ("RMHC"). RMHC is seeking, among other things, a refund of
$1,772,212 of contract payments and related damages arising from the Company's
alleged breach of an agreement pursuant to which the Company provided software
system design and consulting services to RMHC. The suit includes breach of
contract and tort claims. The Company plans to vigorously defend itself against
the suit and anticipates bringing counterclaims against RMHC.
In July 1996, Axiom was served a demand for arbitration by a former shareholder
of Axiom. The American Arbitration Association arbitration is currently pending
in northern California. The claims arise from Axiom's alleged failure to inform
such shareholder of the Company's interest in acquiring Axiom at the time he
sold his stock back to Axiom. The demand seeks damages in excess of $3.3
million plus punitive damages, costs and attorney's fees. The Company plans to
vigorously defend itself in this arbitration.
G. SUBSEQUENT EVENTS
-----------------
As discussed in Note B, the Company acquired all outstanding shares of capital
stock of NatSoft on October 15, 1996.
As discussed in Note B, the Company acquired all outstanding shares of capital
stock of Ramos on November 18, 1996.
S-6
<PAGE>
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations other than those 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, any Selling Stockholder or any other person.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer in any jurisdiction in which such offer or solicitation would be
unlawful or to any person to whom it is unlawful. Neither the delivery of this
Prospectus nor offer of any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company or that information contained herein is correct as of
any time subsequent to this date hereof.
___________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Available Information 2
Incorporation of Certain Information by Reference 3
The Company 4
Recent Developments 5
Risk Factors 5
Use of Proceeds 8
Price Range of Common Stock 9
Dividend Policy 9
Selling Stockholders 10
Plan of Distribution 11
Legal Matters 11
Experts 11
Index to Consolidated
Financial Statements F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
587,555 SHARES
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
COMMON STOCK
------------
PROSPECTUS
------------
January 16, 1997
- --------------------------------------------------------------------------------
