<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1998
Registration No. 333-________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 06-1320610
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
304 VASSAR STREET, CAMBRIDGE, MA 02139 (617) 374-9800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
ARTHUR M. TOSCANINI
Chief Financial Officer
304 VASSAR STREET
CAMBRIDGE, MA 02139
(617) 374-9800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
__________
COPY TO:
STEVEN C. BROWNE, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
125 HIGH STREET
HIGH STREET TOWER
BOSTON, MASSACHUSETTS 02110
(617) 248-7000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the securities act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
__________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SHARES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCK, $.01 PAR VALUE 1,512,392 SHARES $23.15625 $35,021,327.25 $10,331.29
- --------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK PURCHASE RIGHTS(3) - - - -
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933.
(2) Pursuant to Rule 457(c) of the Securities Act of 1933, the registration fee
has been calculated based upon the average of the high and low prices per
share of the Common Stock of Cambridge Technology Partners (Massachusetts),
Inc. (the "Company") on the Nasdaq National Market on September 29, 1998.
(3) Pursuant to the Company's Rights Agreement, as amended, one right to
purchase a unit of preferred stock of the Company (each a "Preferred Stock
Purchase Right" or "Right") is deemed to be delivered with each share of
Common Stock issued by the Company. The Rights currently are not separately
transferable apart from the Common Stock, nor are they exercisable until the
occurrence of certain events. Accordingly, no independent value has been
attributed to the Rights.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1998
PROSPECTUS
1,512,392 SHARES
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
COMMON STOCK
_______________________
This Prospectus relates to the sale of up to 1,512,392 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 September 29, 1998, the last reported sale price for
the Common Stock of the Company on the Nasdaq National Market was $21.375 per
share.
_______________
SEE "RISK FACTORS" BEGINNING ON PAGE 6 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.
_______________
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
The date of this Prospectus is October _____, 1998.
<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 (telephone: (617) 374-9800).
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, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998.
3. The Company's Current Reports on Form 8-K dated February 17, 1998 and
September 11, 1998.
4. 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 with the Commission on December 24, 1992, including
any amendment or report filed for the purpose of updating such
description.
5. The description of the preferred stock purchase rights which accompany
each share of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A/A (Amendment No. 1) filed under the
Exchange Act with the Commission on September 30, 1998, 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
The Company is an international management consulting and systems
integration firm. The Company combines management consulting, information
technology ("IT") strategy, process innovation and implementation, custom and
package software deployment, network services, and educational services to
rapidly deliver end-to-end business solutions for clients. The Company provides
the majority of its services on a fixed-price, fixed-timetable model with client
involvement at all stages of the process. In performing its services, the
Company employs a rapid development methodology that features an iterative
approach and conducts facilitated workshops that bring together key client
users, executives, and IT professionals to achieve consensus on the business
case, strategic objectives, and functionality of a business solution. The
Company believes that this approach permits the delivery of results in
unprecedented time frames, typically within three to twelve months.
The Company's principal offices are located at 304 Vassar Street,
Cambridge, Massachusetts 02139 and the Company's telephone number is (617)
374-9800.
4
<PAGE>
RECENT DEVELOPMENTS
On August 31, 1998, the Company acquired Excell Data Corporation, a
Washington corporation ("Excell"), pursuant to an Agreement and Plan of Merger,
dated as of August 31, 1998 (the "Acquisition Agreement"), by and among the
Company, Cambridge/Washington Acquisition Corp., a Washington corporation and
wholly-owned subsidiary of the Company, Excell, and the shareholders of Excell
(the "Acquisition"). In connection with the Acquisition, the Company issued a
total of 1,680,416 shares of Common Stock to the former Excell shareholders. Of
the 1,680,416 shares of Common Stock issued in connection with the Acquisition,
168,024 shares are being held in escrow until August 31, 1999 to cover any
reimbursable claims under the Acquisition Agreement and related agreements.
The Acquisition will be accounted for under the pooling-of-interests
method. Under the pooling-of-interests method, the expenses of the transaction
are recorded in the period in which the Acquisition occurs. As a result, the
Company expects to incur expenses in the third quarter of 1998 of approximately
$1.7 million for the transaction and $6.7 million for payments to discharge
Excell's obligations under an Excell employee benefit plan. The terms of the
Acquisition are more fully described in the Acquisition Agreement, a
Registration Rights Agreement and an Escrow Agreement, copies of which were
filed as exhibits to the Current Report on Form 8-K filed by the Company with
the Commission on September 11, 1998.
Excell, which is based in Bellevue, Washington, is a systems integrator of
Microsoft-centric solutions. The Acquisition provides the Company with
additional resources for its Rapid Application Deployment business, augmenting
its existing Microsoft-specific application development capabilities. The
Acquisition will also extend the Company's capabilities in the network services
market and expand the Company's existing offerings in network assessment,
development, and design to include implementation of multi-vendor applications,
messaging systems and network systems in heterogeneous network environments. As
a result of the Acquisition, the Company will add approximately 510 employees in
Bellevue, Washington, Portland, Oregon, and Denver, Colorado.
5
<PAGE>
RISK FACTORS
This Prospectus includes or incorporates by reference forward-looking statements
(statements that are not historical facts) which involve risks and
uncertainties, particularly as to future net revenues and profits, capital
expenditures, liquidity sources and needs, working capital needs, increases in
personnel and related costs, opening additional offices, and project 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 risk factors should be considered carefully in evaluating the Company
and its business before purchasing the Common Stock offered hereby.
Risks Associated with Acquisitions. The Company has completed, and may in the
- ----------------------------------
future pursue, acquisitions of companies, technologies or assets that complement
the Company's business. The Acquisition was completed on August 31, 1998. The
successful integration of acquired companies, technologies and assets, including
Excell, is important to the future financial performance of the Company. The
anticipated benefits of such acquisitions may not be achieved unless, among
other things, the operations of acquired companies, technologies and assets,
including Excell, 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 such
acquisitions, including Excell, into the operations of the Company.
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 an
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 technical 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
6
<PAGE>
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 a significant number of the Company's
project managers, client managers and other senior personnel or the failure to
attract new, highly skilled employees 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, employee
hiring, retention, and utilization rates, acceptance and profitability of the
Company's services in new territories, and integration of acquired companies.
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. In addition, the Company believes that the purchasing
patterns of clients and potential clients may be affected by Year 2000 issues.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase information technology services
such as those offered by the Company. The Company's engagements generally are
terminable without client penalty. An unanticipated termination of a major
project or a client's decision not to proceed to the stage of a project
anticipated by the Company could require the Company to maintain or terminate
under-utilized employees, resulting in a higher than expected number of
unassigned persons or higher severance expenses. While professional staff must
be adjusted to reflect active projects, the Company must maintain a sufficient
number of senior professionals to oversee existing client projects and
participate with the Company's sales force in securing new client assignments.
Because substantially all of the Company's engagements are performed 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 the remainder of 1998 and in 1999. Although the Company's plans to
open offices and hire personnel are driven in response to increased demand for
the Company's management consulting and systems integration 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 management and 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,
IBM, and Compaq, facilities management and MIS
7
<PAGE>
outsourcing companies, "Big Five" accounting firms, and general management
consulting firms. The Company's competitors also include companies such as
Andersen Consulting, Technology Solutions Corporation, American Management
Systems, Cap Gemini America, the consulting division of Computer Sciences
Corporation, Electronic Data Systems Corporation, Sapient Corporation,
Renaissance Worldwide, Inc. and Complete Business Solutions, Inc. The Company
also faces competition from information services organizations within potential
clients. Some participants in the management and information technology
consulting and software development market have significantly greater financial,
technical and marketing resources and greater name recognition than Cambridge
Technology Partners, and generate greater management and information technology
consulting and systems 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 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 $130.8 million and
- ------------------------
$87.5 million, or 29.8% and 29.3% of its total revenues, from customers outside
of the United States and Canada for the year ended December 31, 1997 and in the
six months ended June 30, 1998, respectively (giving effect to the Acquisition,
as if it had been completed at the beginning of the reported periods). 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, market acceptances of the
Company's services, fluctuations in the value of foreign currencies, and
unexpected regulatory, economic or political changes in foreign markets. There
can be no assurance that these factors will not adversely affect the Company and
its financial results.
Intellectual Property Rights. The Company's success is dependent upon its
- ----------------------------
software development and consulting 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
8
<PAGE>
application development and 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
such Selling Stockholder. The Company will not receive any of the proceeds from
such sales of the Shares.
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder, the
number of shares of Common Stock of the Company beneficially owned before this
offering by each Selling Stockholder and the maximum number of Shares that each
Selling Stockholder may offer and sell pursuant to this Prospectus. Other than
Leonard J. Pacheco, who owns approximately 1.5% of the outstanding shares of the
Company's Common Stock prior to this offering, each of the Selling Stockholders
owns less than 1% of all of the outstanding shares of Common Stock of the
Company prior to this offering. Since the Selling Stockholders may sell all,
some or none of their Shares, no estimate can be made of the aggregate number or
percentage of shares of Common Stock of the Company that each Selling
Stockholder will own upon completion of the offering to which this Prospectus
relates. Accordingly, each Selling Stockholder has been presumed to sell all of
his, her or its Shares offered hereby for purposes of calculating the "Shares
Beneficially Owned After the Offering" in the table below. See "Plan of
Distribution."
The Shares offered by this Prospectus may be offered from time to time by
and for the respective accounts of the Selling Stockholders named below.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES OFFERED
OWNED BEFORE PURSUANT TO THIS SHARES BENEFICIALLY
SELLING STOCKHOLDERS OFFERING PROSPECTUS OWNED AFTER OFFERING
- -------------------------- ----------------------- ---------------- --------------------
<S> <C> <C> <C>
Leonard J. Pacheco 891,570 802,413 89,157
James Beebe 234,479 211,032 23,447
Clint Shinkle 175,051 157,546 17,505
H. Carvel Moore(1) 46,831 42,148 4,683
Tari Eastman 23,415 21,074 2,341
Richard Schwartz(2) 23,415 21,074 2,341
Cara T. Shinkle 4,683 4,215 468
Eric Shinkle 4,683 4,215 468
Diane Pacheco(3) 2,809 2,529 280
Miguelangel Aponte-Rios 2,341 2,107 234
Linda Pacheco 1,873 1,686 187
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES OFFERED
OWNED BEFORE PURSUANT TO THIS SHARES BENEFICIALLY
SELLING STOCKHOLDERS OFFERING PROSPECTUS OWNED AFTER OFFERING
- -------------------------- ----------------------- ---------------- --------------------
<S> <C> <C> <C>
James A. Pacheco(4) 2,809 2,529 280
John M. Pacheco(5) 2,809 2,529 280
Michael Resler 2,809 2,529 280
Christina M. Shinkle 4,683 4,215 468
Neil O. Shinkle 4,683 4,215 468
Mary T. Pacheco Trust, dated October 20, 1997 468 422 46
FE & Mary T. Pacheco Trust, dated October 20, 1997 3,278 2,951 327
Michael T. Pacheco Trust, dated October 20, 1997 749 675 74
Andrew Pacheco Trust, dated October 20, 1997 1,217 1,096 121
Timothy Pacheco Trust, dated October 20, 1997 1,779 1,602 177
Heather Pacheco Trust, dated October 20, 1997 1,873 1,686 187
Thomas Pacheco Trust, dated October 20, 1997 1,873 1,686 187
Danny Pacheco Trust, dated October 20, 1997 1,685 1,517 168
Joseph B. Pacheco Trust, dated October 20, 1997 2,809 2,529 280
Sarah Pacheco Trust, dated October 20, 1997 1,404 1,264 140
Gina Lynn Young Trust, dated December 1, 1997 1,873 1,686 187
Sierra Trust, dated October 20, 1997 2,341 2,107 234
Buruka Trust, dated December 1, 1997 51,514 46,363 5,151
Bravo Trust, dated October 20, 1997 2,341 2,107 234
Alex Paterson Trust, dated October 20, 1997 1,592 1,433 159
Tori Paterson Trust, dated October 20, 1997 1,404 1,264 140
Michael Beebe Trust, dated October 15, 1997 39,806 35,826 3,980
Patrick J. Beebe Irrevocable Trust, dated October 15, 1997 39,806 35,826 3,980
Margaret Donovan Trust, dated October 20, 1997 2,341 2,107 234
Crocodile Rock Trust, dated December 1, 1997 46,831 42,148 4,683
Inca Trust, dated October 20, 1997 2,341 2,107 234
Morigan Trust, dated December 1, 1997 42,148 37,934 4,214
</TABLE>
_____________________
(1) H. Carvel Moore is a Vice President of the Company.
(2) Richard Schwartz is an officer of Excell.
(3) Does not include 468 and 3,278 Shares held by the Mary T. Pacheco Trust,
dated October 20, 1997, and the Ms. FE & Mary Pacheco Trust, dated
October 20, 1997 respectively, as to which voting and investment power is
shared by trustees Diane Pacheco, James A. Pacheco and John M. Pacheco.
Diane Pacheco disclaims beneficial ownership of such Shares.
10
<PAGE>
(4) Does not include 468 and 3,278 Shares held by the Mary T. Pacheco Trust,
dated October 20, 1997, and the Ms. FE & Mary Pacheco Trust, dated
October 20, 1997 respectively, as to which voting and investment power is
shared by trustees Diane Pacheco, James A. Pacheco and John M. Pacheco.
James A. Pacheco disclaims beneficial ownership of such Shares. Does not
include 749 Shares held by the Michael T. Pacheco Trust, dated October 20,
1997, as to which James A. Pacheco holds the sole voting and investment
power as trustee of such trust. James A. Pacheco disclaims beneficial
ownership of such Shares.
(5) Does not include 468 and 3,278 Shares held by the Mary T. Pacheco Trust,
dated October 20, 1997, and the Ms. FE & Mary Pacheco Trust, dated
October 20, 1997, respectively, as to which voting and investment power is
shared by trustees Diane Pacheco, James A. Pacheco and John M. Pacheco.
John M. Pacheco disclaims beneficial ownership of such Shares. Does not
include 1,873, 1,873, 1,873 and 1,217 Shares held by the Michael T. Pacheco
Trust, dated October 20, 1997, the Gina Lynn Young Trust, dated December 1,
1997, the Thomas Pacheco Trust, dated October 20, 1997, and the Andrew
Pacheco Trust, dated October 20, 1997, respectively, as to which John M.
Pacheco holds the sole voting and investment power as trustee of each such
trust. John M. Pacheco disclaims beneficial ownership of all such Shares.
All of the Selling Stockholders acquired his, her or its Shares offered
hereby in connection with the Acquisition described under "Recent Developments."
Upon the closing of the Acquisition, H. Carvel Moore (an officer of Excell)
became a Vice President of the Company.
Each Selling Stockholder represented to the Company that such Selling
Stockholder was acquiring his, her or its Shares without any present intention
of effecting a distribution of those Shares. In recognition of the fact,
however, that the Selling Stockholders may desire the ability to sell their
Shares when they consider it appropriate, in connection with the 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 August 31, 1999 or the
sale of all of the Shares pursuant to Rule 144 under the Securities Act or the
Registration Statement. The Company will prepare and file such amendments and
supplements to the Registration Statement as may be necessary to keep it
effective during such period.
11
<PAGE>
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 relating to
sales of Shares under 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 sale 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 through private sale, through put or call options transactions, short sales,
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 may sell as principal, or both (which compensation
to a particular broker-dealer might be in excess of customary commissions). The
Shares covered by this Prospectus could be placed by broker-dealers in one or
more block trades in which such broker-dealers would act as principal, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In connection which such trades, such
broker-dealers may receive compensation in the form of discounts, concessions,
commissions, or fees from the Selling Stockholders and/or purchasers of the
Shares to whom such broker-dealers may sell as principal (which compensation
might be in excess of customary commissions). Any broker-dealers that
participate with the Selling Stockholders in the sale 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 this 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.
12
<PAGE>
EXPERTS
The supplemental consolidated balance sheets as of December 31, 1997 and
1996 and the supplemental consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997 of the Company included in this Prospectus have been included herein in
reliance on the report of PricewaterhouseCoopers LLP, 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 PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
13
<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, 1997 and 1996 F-3
Supplemental Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996, and 1995 F-4
Supplemental Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1997, 1996, and 1995 F-5
Supplemental Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996, and 1995 F-6
Notes to Supplemental Consolidated Financial Statements F-7
</TABLE>
(B) SUPPLEMENTAL UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Supplemental Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 S-1
Supplemental Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1998 and 1997 S-2
Supplemental Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 S-3
Notes to Supplemental Interim Consolidated Financial Statements S-4
</TABLE>
F-1
<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, 1997 and
1996, 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, 1997. 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 Excell
Data Corporation completed on August 31, 1998, 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 consolidated financial position of Cambridge
Technology Partners (Massachusetts), Inc. as of December 31, 1997 and 1996, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles applicable after the financial statements are
issued for a period which includes the date of consummation of the business
combination.
/s/ PricewaterhouseCoopers LLP
---------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 18, 1998
F-2
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,649 $ 26,456
Investments held to maturity 15,824 12,727
Accounts receivable, less allowance of $2,757 and $1,756
at December 31, 1997 and 1996, respectively 105,206 61,623
Unbilled revenue on contracts 9,048 4,584
Deferred income taxes 950 161
Prepaid expenses and other current assets 27,878 17,893
-------- --------
Total current assets 198,555 123,444
Property and equipment, net 36,027 21,135
Other assets 5,745 3,497
Goodwill, net 2,094 2,512
-------- --------
Total assets $242,421 $150,588
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,134 $ 13,086
Accrued expenses 40,018 25,959
Deferred revenue 9,502 5,453
Income taxes payable 19,361 6,356
Obligations under capital leases, current 207 176
Other current liabilities 2,032 80
-------- --------
Total current liabilities 90,254 51,110
Obligations under capital leases 377 211
Deferred income taxes 923 471
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 120,000,000 shares;
issued and outstanding 56,649,420 and 53,367,636 shares
at December 31, 1997 and 1996, respectively 567 534
Additional paid-in capital 75,400 49,532
Retained earnings 77,361 48,605
Foreign currency translation adjustment (2,461) 125
-------- --------
Total stockholders' equity 150,867 98,796
-------- --------
Total liabilities and stockholders' equity $242,421 $150,588
======== ========
</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,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net revenues $438,329 $294,527 $194,094
Costs and expenses:
Project personnel 203,928 138,706 92,924
General and administration 47,445 34,239 24,348
Sales and marketing 40,668 25,270 20,041
Other costs 84,582 55,544 30,739
Business combination costs 4,760 1,195 1,333
-------- -------- --------
Total operating expenses 381,383 254,954 169,385
-------- -------- --------
Income from operations 56,946 39,573 24,709
Other income (expense):
Interest income 2,323 1,009 817
Interest expense (311) (132) (453)
Gain on sale of AdValue - - 909
Foreign exchange (loss) gain (122) (141) 92
-------- -------- --------
Income before income taxes 58,836 40,309 26,074
Provision for income taxes 25,054 16,317 10,145
-------- -------- --------
Net income $ 33,782 $ 23,992 $ 15,929
======== ======== ========
Basic net income per share $.62 $.46 $.32
======== ======== ========
Diluted net income per share $.55 $.40 $.28
======== ======== ========
Weighted average number of
common shares outstanding 54,632 52,054 49,992
======== ======== ========
Weighted average number of common and
common equivalent shares outstanding 60,775 59,573 56,798
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
F-4
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Additional
Number of Par Paid-In
Shares Value Capital
------------------- -------------- --------------
<S> <C> <C> <C>
Balance, December 31, 1994, as reported 19,047,069 $ 191 $ 16,218
Pooling of interests with Excell Data Corporation 1,680,416 17 147
------------------- -------------- --------------
Balance, December 31, 1994, as restated 20,727,485 208 16,365
Exercise of stock options 342,051 4 1,788
Income tax benefit related to stock option exercises - - 3,753
Shares issued under employee stock purchase plan 29,650 - 579
Repurchase of Axiom common stock - - (53)
Repayment of note payable related to
repurchase of Axiom common stock - - (284)
Issuance of Axiom stock under stock agreement - - 66
Issuance of Ramos stock under restricted stock plan - - 17
Effect of Peter Chadwick recapitalization, net - - 3,763
Excercise of Peter Chadwick stock options - - 12
Foreign currency translation adjustment - - -
Payment on note receivable from employees for stock
purchased under employee stock purchase plan - - 36
Amortization of unearned compensation associated
with stock options - - -
Amortization of note receivable from officer - - -
SCG conversion to C Corporation - - 2,079
Dividend distribution (Peter Chadwick) - - -
Dividend distribution (SCG) - - -
Net income - - -
------------------- -------------- --------------
Balance, December 31, 1995 21,099,186 212 28,121
Excercise of stock options 1,776,193 18 8,297
Income tax benefit related to stock option exercises - - 10,555
Shares issued under employee stock purchase plan 124,123 1 2,070
Issuance of Ramos stock under restricted stock plan - - 5
Shares to effect stock split 30,368,134 303 (303)
Foreign currency translation adjustment - - -
Accretion of Peter Chadwick preferred stock - - 787
Dividend distribution (Peter Chadwick) - - -
Dividend distribution (NatSoft) - - -
Net income - - -
------------------- -------------- --------------
Balance, December 31, 1996 53,367,636 534 49,532
Exercise of stock options 2,170,050 22 12,690
Income tax benefit related to stock option exercises - - 5,807
Shares issued under employee stock purchase plan 211,734 2 4,994
Exercise of stock warrants 900,000 9 1,791
Exercise of Peter Chadwick stock option - - 89
Foreign currency translation adjustment - - -
Accretion of Peter Chadwick preferred stock - - 557
Dividend distribution (Peter Chadwick) - - -
Dividend distribution (Excell) - - -
Net Income - - -
=================== ============== ==============
Balance, December 31, 1997 56,649,420 $ 567 $ 75,400
=================== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Foreign
Receivable Currency Receivable
Unearned from Translation Retained
Compensation Officer Adjustment Earnings
------------ ---------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994, as reported
Pooling of interests with Excell Data Corporation $ (9) $ (8) $ (187) $ 18,461
- - - 209
------------ ---------------- ------------------- ---------------
Balance, December 31, 1994, as restated (9) (8) (187) 18,670
Exercise of stock options
Income tax benefit related to stock option exercises - - - -
Shares issued under employee stock purchase plan - - - -
Repurchase of Axiom common stock - - - -
Repayment of note payable related to
repurchase of Axiom common stock - - - -
Issuance of Axiom stock under stock agreement - - - -
Issuance of Ramos stock under restricted stock plan - - - -
Effect of Peter Chadwick recapitalization, net - - - (3,763)
Excercise of Peter Chadwick stock options - - - -
Foreign currency translation adjustment - - 447 -
Payment on note receivable from employees for stock
purchased under employee stock purchase plan - - - -
Amortization of unearned compensation associated
with stock options 9 - - -
Amortization of note receivable from officer - 8 - -
SCG conversion to C Corporation - - - (2,079)
Dividend distribution (Peter Chadwick) - - - (744)
Dividend distribution (SCG) - - - (599)
Net income - - - 15,929
------------ ---------------- ------------------- ---------------
Balance, December 31, 1995 - - 260 27,414
Excercise of stock options
Income tax benefit related to stock option exercises - - - -
Shares issued under employee stock purchase plan - - - -
Issuance of Ramos stock under restricted stock plan - - - -
Shares to effect stock split - - - -
Foreign currency translation adjustment - - - -
Accretion of Peter Chadwick preferred stock - - (135) -
Dividend distribution (Peter Chadwick) - - - (787)
Dividend distribution (NatSoft) - - - (1,999)
Net income - - - (15)
- - - 23,992
Balance, December 31, 1996 ------------ ---------------- ------------------- ---------------
- - 125 48,605
Exercise of stock options
Income tax benefit related to stock option exercises - - - -
Shares issued under employee stock purchase plan - - - -
Exercise of stock warrants - - - -
Exercise of Peter Chadwick stock option - - - -
Foreign currency translation adjustment - - (2,586) -
Accretion of Peter Chadwick preferred stock - - - (557)
Dividend distribution (Peter Chadwick) - - - (4,085)
Dividend distribution (Excell) - - - (384)
Net Income - - - 33,782
Balance, December 31, 1997 ============ ================ =================== ===============
$ - $ - $ (2,461) $ 77,361
============ ================ =================== ===============
</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,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,782 $ 23,992 $ 15,929
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,762 6,795 4,517
Tax benefit from exercise of stock options 5,807 10,555 3,753
(Benefit) provision for deferred income taxes (337) (566) 425
Gain on sale of AdValue - - (909)
Changes in assets and liabilities:
Increase in accounts receivable (45,346) (21,733) (14,730)
Increase in unbilled revenue on contracts (4,756) (1,422) (597)
Increase in prepaid expenses and other current assets (10,533) (9,355) (5,473)
Increase in other assets (2,646) (1,829) (244)
Increase in accounts payable 6,483 5,429 3,308
Increase in accrued expenses 13,680 8,721 4,819
Increase in deferred revenue 4,217 2,371 807
Increase in income taxes payable 12,741 2,211 2,417
Other, net 1,129 124 (309)
-------- -------- --------
Net cash provided by operating activities 22,983 25,293 13,713
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (23,089) (13,282) (9,548)
Purchase of investments held to maturity (18,261) (18,467) (22,140)
Maturity of investments held to maturity 15,164 14,284 24,075
Proceeds from sale of AdValue - - 909
-------- -------- --------
Net cash used in investing activities (26,186) (17,465) (6,704)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under credit arrangements, net - (325) (1,256)
Issuance of common stock, net of issuance costs - 5 17
Issuance of Peter Chadwick stock under recapitalization - - 4,350
Acquisition of stock from Peter Chadwick recapitalization - - (4,350)
Proceeds from long-term loan arrangement 875 12 132
Repayment of long-term debt and capital leases (250) (271) (1,227)
Dividend distributions (3,340) (2,014) (1,343)
Proceeds from employee stock purchase plan 4,936 2,071 579
Proceeds from exercise of stock options 12,801 8,315 1,804
Proceeds from exercise of warrants 1,800 - -
Other, net - - (235)
-------- -------- --------
Net cash provided by (used in) financing activities 16,822 7,793 (1,529)
-------- -------- --------
Effect of foreign exchange rate changes on cash (426) (341) 21
Net increase in cash and cash equivalents 13,193 15,280 5,501
Cash and cash equivalents at beginning of period 26,456 11,176 5,675
-------- -------- --------
Cash and cash equivalents at end of period $ 39,649 $ 26,456 $ 11,176
======== ======== ========
</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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
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 Excell Data Corporation, a systems
integrator of Microsoft-centric solutions headquartered in Bellevue, Washington.
Generally accepted accounting principles proscribe giving effect to consummated
business combinations accounted for using 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
accounts and balances have been eliminated in consolidation. Certain prior
period amounts have also been reclassified to conform with current period
presentation.
BUSINESS DESCRIPTION
The Company is an international management consulting and systems integration
firm. The Company combines management consulting, IT strategy, process
innovation and implementation, custom and package software deployment, network
services, and educational services to rapidly deliver end-to-end business
solutions for clients. The Company provides the majority of its services on a
fixed-price, fixed-timetable model with client involvement at all stages of the
process. In performing its services, the Company employs a rapid development
methodology that features an iterative approach and conducts facilitated
workshops that bring together key client users, executives, and IT professionals
to achieve consensus on the business case, strategic objectives, and
functionality of a business solution.
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 approximates market value due to the short maturity of the investments.
During 1996, in accordance with the terms of a client contract, the Company
received a prepayment for services being performed, which is included in cash
and cash equivalents in the amount of $790,000 and $900,000 at December 31, 1997
and 1996, respectively. The use of this cash was restricted pending completion
of the project. In the second quarter of 1998, this project was completed and
the related cash restriction was released.
F-7
<PAGE>
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, 1997 and 1996, the Company held investment grade
municipal bonds of $15.8 million and $12.7 million, respectively, which are
carried at amortized cost, which approximates market value.
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 assets, which range from three to fifteen years for
equipment, furniture and fixtures, leasehold improvements, and motor vehicles.
Buildings are being depreciated over an estimated useful life of forty years.
Upon retirement or disposal, the cost of the asset disposed of and the related
accumulated depreciation is removed from the accounts and any gain or loss is
reflected in income.
INTANGIBLE ASSETS
Goodwill of approximately $4.8 million, related to the acquisition of IOS Group
AB (now CTP Scandinavia) in February 1994, is being amortized over six years on
a straight-line basis. The Company recorded amortization expense of $798,000
for each of the years ended December 31, 1997, 1996, and 1995. As of December
31, 1997 and 1996, accumulated amortization was $3.1 million and $2.3 million,
respectively.
In April 1997, the Company acquired the assets of a training facility located in
the United Kingdom. The purchase price of approximately $1.9 million was
allocated to land and buildings and the Company recorded goodwill of $404,000,
which is being amortized on a straight-line basis over ten years. For the year
ended and as of December 31, 1997, amortization expense and accumulated
amortization were each $31,260.
The carrying values of goodwill are subject to periodic review of realizability.
REVENUE RECOGNITION
The Company operates in one industry segment, the design, development, and
implementation of information technology solutions. Revenues derived from any
software maintenance and support services are immaterial to the consolidated
financial statements of the Company. Revenues from software design,
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.
Revenues from management consulting and package software evaluation and
implementation services are recognized as the service is provided, principally
on a time and materials basis. Net revenues exclude reimbursable expenses
charged to clients.
F-8
<PAGE>
Deferred revenue consists of amounts received or billed in advance of services
to be provided. Unbilled revenue represents amounts recognized based on
services performed in advance of billings in accordance with contract terms.
EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings per Share," ("SFAS 128") for the year ended December 31, 1997, which
included retroactively restating earnings per share for all prior periods for
which earnings per share ("EPS") data is presented. SFAS 128 requires the
presentation of basic and diluted EPS. Basic net income per share is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted net income per
share data is computed using the weighted average number of common shares
outstanding plus the dilutive effect of common stock equivalents (using the
treasury stock method).
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 foreign exchange contracts to mitigate the risk of changes
in foreign exchange rates associated with intercompany balances. The contracts
relate primarily to European currencies and generally have maturities of one
month. The impact of exchange rate movements on contracts is recorded in other
income in the period in which the exchange rates change, generally consistent
with the term of the contract. As of December, 31, 1997, the Company held
foreign exchange forward contracts of approximately $4.1 million and there were
no related deferred gains and losses. The Company does not hold foreign
exchange contracts for trading purposes.
CONCENTRATION OF CREDIT RISK
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. Such losses have been immaterial and are
within management's expectation. No single customer accounted for 5% or more of
total net revenues for the years ended 1997, 1996, and 1995.
The Company may be exposed to credit-related losses in the event of
nonperformance by counterparties to hedging instruments. The counterparties to
these contracts are major financial institutions. The Company continually
monitors its positions and credit ratings of its counterparties and limits the
amount of contracts it enters into with any one party.
F-9
<PAGE>
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which is effective for fiscal years beginning after December 15, 1997,
including interim periods. SFAS 130 requires the presentation of comprehensive
income and its components. Comprehensive income presents a measure of all
changes in equity that result from recognized transactions and other economic
events during the period other than transactions with stockholders. SFAS 130
requires restatement of all prior-period statements presented after the
effective date. The Company has elected to disclose this information in its
annual Statement of Stockholders' Equity for its 1998 annual financial
statements. The impact of such adoption is expected to be primarily related to
the inclusion of foreign currency translation adjustments in comprehensive
income.
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal
years beginning after December 15, 1997. Interim reporting disclosures are not
required in the first year of adoption. SFAS 131 specifies revised guidelines
for determining an entity's operating segments and the type and level of
financial information to be disclosed. SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting and
expands the required disclosures for each segment. The Company will adopt SFAS
131 in the fourth quarter of 1998 and is currently determining the impact of
such adoption on its reporting as currently presented.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded for each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Company is currently
determining the impact of the adoption of SFAS 133 on the Company's results of
operations and financial position.
B. ACQUISITIONS
------------
On August 31, 1998, the Company acquired all of the outstanding capital stock of
Excell Data Corporation ("Excell"). This acquisition was accomplished through
a merger of the Company's
F-10
<PAGE>
acquisition subsidiary and Excell in an exchange of 1,680,416 shares of the
Company's common stock for all outstanding shares of capital stock of Excell.
The acquisition has been accounted for using the pooling of interests method of
accounting. Founded in 1991, Excell had approximately 510 employees at the time
of the acquisition, located in Bellevue, Washington, Portland, Oregon, and
Denver, Colorado. Costs, which consist primarily of investment banking fees,
accounting fees, legal fees and business integration costs, related to this
acquisition approximated $1.7 million and are not included in the accompanying
supplemental consolidated results of operations as they will be charged to
operating expenses in the third quarter of 1998, which represents the period in
which the acquisition was consummated (see Note M).
On November 24, 1997, the Company acquired all of the outstanding capital stock
of Peter Chadwick Holding Limited ("Peter Chadwick"). This acquisition was
accomplished through an exchange of 3,255,731 shares of the Company's common
stock for all outstanding shares of capital stock and options to purchase
ordinary shares of Peter Chadwick. The acquisition has been accounted for using
the pooling of interests method of accounting. Founded in 1987 and based in the
United Kingdom, Peter Chadwick specializes in change implementation strategies
and performance improvement programs. Peter Chadwick currently has offices in
the U.K, Germany, Holland, France, and the U.S. and had approximately 325
employees at the time of the acquisition.
On November 18, 1996, the Company acquired all the outstanding capital stock of
Ramos & Associates, Inc. ("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.
This acquisition has been accounted for using the pooling of interests method of
accounting. Ramos was renamed Cambridge Technology Partners - Enterprise
Resource Solutions, Inc. in March 1997.
On October 15, 1996, the Company acquired all the outstanding capital stock of
NatSoft S.A. ("NatSoft"), a Swiss-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. This acquisition established the Company's
entry into the Swiss market and provided the Company with a pool of multi-
lingual professionals who can support projects in Southern Europe. The
acquisition of NatSoft has been accounted for using the pooling of interests
method of accounting. In March 1997, NatSoft was renamed Cambridge Technology
Partners Switzerland, S.A.
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 currently operates under the name Cambridge
Management Consulting.
F-11
<PAGE>
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 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. In 1996, the Company integrated SCG into its operational structure.
The accompanying supplemental consolidated financial statements of the Company
have been prepared to give retroactive effect to the acquisitions of Excell,
Peter Chadwick, Ramos, NatSoft, Axiom, and SCG in accordance with the pooling of
interests requirements. All prior period historical supplemental consolidated
financial statements presented herein have been restated to include the
financial position, results of operations, and cash flows of these acquisitions.
Costs related to these acquisitions have been charged to business combination
costs in the consolidated statements of operations for the period in which the
transaction was consummated. Costs related to the acquisition of Excell will be
charged to operating expenses in the third quarter of 1998.
F-12
<PAGE>
The following information presents certain statement of operations data (in
thousands) of the Company, SCG, Axiom, NatSoft, Ramos, Peter Chadwick, and
Excell for the periods prior to the acquisitions. SCG and Axiom information is
presented through September 30, 1995, which represents the interim period end
nearest to the date of the acquisitions. NatSoft and Ramos information are
presented through September 30, 1996, which represents the interim period end
nearest to the date of these acquisitions. Peter Chadwick information is
presented through September 30, 1997. Excell information is presented through
December 31, 1997.
<TABLE>
<CAPTION>
CAMBRIDGE
TECHNOLOGY PETER COMBINED
PARTNERS SCG AXIOM NATSOFT RAMOS CHADWICK EXCELL TOTAL
----------- ------- ------- -------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues for the:
Nine months ended
September 30, 1995 $ 70,052 $13,484 $10,723 $9,211 $ 7,651 $ 16,531 $ 10,572 $138,224
Year ended
December 31, 1995 $132,416 12,254 $ 11,596 $ 23,401 $ 14,427 $194,094
Nine months ended
September 30, 1996 $141,862 8,046 $ 17,497 $ 26,384 $ 15,635 $209,424
Year ended
December 31, 1996 $236,554 36,324 $ 21,649 $294,527
Nine months ended
September 30, 1997 $250,501 36,841 $ 22,217 $309,559
Year ended
December 31, 1997 $406,672 $ 31,657 $438,329
Net income for the:
Nine months ended
September 30, 1995 $ 7,632 $ 1,381 $ 57 $ 141 $ 203 $ 1,408 $ 281 $ 11,103
Year ended
December 31, 1995 $ 12,683 $ 205 $ 460 $ 2,310 $ 271 $ 15,929
Nine months ended
September 30, 1996 $ 14,042 $ 163 $ 853 $ 2,049 $ 408 $ 17,515
Year ended
December 31, 1996 $ 21,100 $ 2,925 $ (33) $ 23,992
Nine months ended
September 30, 1997 $ 24,623 $ 2,365 $ 962 $ 27,950
Year ended
December 31, 1997 $ 32,929 $ 853 $ 33,782
</TABLE>
C. ACCOUNTS RECEIVABLE
-------------------
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
----------- -----------
<S> <C> <C>
Contracts in process $69,995 $50,057
Completed contracts 37,968 13,322
----------- ------------
107,963 63,379
Less: Allowance for doubtful accounts 2,757 1,756
----------- ------------
$105,206 $61,623
=========== ============
</TABLE>
F-13
<PAGE>
In accordance with state government practices, a governmental client withholds a
percentage of invoiced receivables as retention until final review of completed
projects. At December 31, 1997 and 1996, this retention receivable totaled $2.4
million and $1.8 million, respectively, and was included in other assets. The
Company expects payments to be received in 1999. The Company does not include
client reimbursable expenses or other non-trade receivables as a component of
net revenues. At December 31, 1997 and 1996, approximately $14.0 million and
$5.9 million, respectively, of client reimbursable expenses and other non-trade
receivables were included in prepaid expenses and other current assets.
D. INVESTMENT IN AFFILIATES
------------------------
The Company had a 6.3% investment interest in AdValue Media Technologies, Inc.
("AdValue"). 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 and
recognized a gain of $909,000 for the period ended December 31, 1995.
E. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Equipment $38,121 $23,853
Furniture and fixtures 8,618 6,067
Leasehold improvements 7,611 3,707
Motor vehicles 1,137 1,238
Other 1,501 24
------- -------
Total cost 56,988 34,889
Less accumulated depreciation 20,961 13,754
------- -------
$36,027 $21,135
======= =======
</TABLE>
Depreciation expense for 1997, 1996, and 1995 was $7.2 million, $5.8 million,
and $3.7 million, respectively.
Equipment under capital leases, included in property and equipment, amounted to
$1.1 million at December 31, 1997 and 1996, and the related accumulated
depreciation was $885,000 and $687,000 at December 31, 1997 and 1996,
respectively.
F-14
<PAGE>
F. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
----------------------------------------------
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
-------- -------
<S> <C> <C>
Accrued payroll and payroll related expenses $21,106 $11,837
Other accrued expenses 15,864 9,551
Accrued value added tax 3,048 4,571
------- -------
$40,018 $25,959
======= =======
</TABLE>
In April 1997, Peter Chadwick acquired the assets of a training facility located
in the United Kingdom for $1.9 million (see Note A). Peter Chadwick entered
into a Loan Agreement with National Westminister Bank (the "Loan Agreement") to
finance this acquisition. As of December 31, 1997, the principal amount due
under the Loan Agreement was $823,000. Interest payments, at a rate of 2% above
the Bank of England base rate (7.25% at December 31, 1997), are payable in
monthly installments. A balloon payment for the entire outstanding balance was
due in 2005. This amount is included in other current liabilities in the
accompanying supplemental consolidated balance sheets. In the first quarter of
1998, the Company repaid the outstanding amount of approximately $823,000 and
terminated this Loan Agreement.
G. REVOLVING CREDIT FACILITY
-------------------------
The Company maintained an uncollateralized revolving credit facility (the
"Facility") with Fleet National Bank ("Fleet Bank"), which was amended on June
26, 1996, 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%. 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 required, among other things, the Company to
maintain certain financial ratios including tangible net worth, debt to equity,
and operating profitability. At December 31, 1997 and 1996, the Company was in
compliance with these financial ratio requirements and no borrowings had been
made under the Facility.
In September 1998, the Company obtained a $50.0 million unsecured senior
revolving credit facility (the "New Facility") through a syndication arrangement
committed equally by The Chase Manhattan Bank ("Chase") and Fleet Bank. The New
Facility expires on September 10, 2001 and replaces the Facility, which expired
on June 30, 1998. The New Facility is administered by Chase and carries a
commitment fee, payable quarterly in arrears, calculated based on the unused
portion of the New Facility and a price grid as set forth in the credit
agreement. The New Facility permits the Company to elect any of three possible
interest rate formulas as defined in the credit agreement. Interest is payable
in arrears based on an interest period determined by the interest rate elected
by the Company. The New Facility requires, among other things, the Company to
maintain certain financial ratios, including debt service coverage, debt to
capital, and net worth.
F-15
<PAGE>
H. 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.
Following stockholder approval in May 1996, the stock split was completed on
June 19, 1996, in the form of a 200% stock dividend to stockholders of record on
May 29, 1996. All references in the supplemental consolidated financial
statements and the related notes to applicable share and per share data, stock
option data, and market prices per share of the Company's common stock, for all
periods presented, have been retroactively restated to reflect the stock split.
STOCK OPTION PLANS
Under the Company's amended 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, subject to approval by the Board of Directors with respect to certain
matters. Options granted under the Option Plan prior to 1997 generally vest
ratably over a four-year period and expire ten years from the date of grant.
Options granted under the Option Plan in 1997 generally vest ratably over a
four-year period and expire in installments five to eight years from the date of
grant. At December 31, 1997, 1996, and 1995, options to purchase 4,063,342,
4,014,783, and 4,288,638 shares, respectively, were exercisable under the Option
Plan. In December 1995, 1996, and 1997, 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 twelve million to fifteen million in 1995, fifteen million to nineteen
million in 1996, and nineteen million to twenty-three million in 1997.
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 nonqualified options for up to 150,000 shares of
the Company's common stock. Each member of the Company's Board of Directors who
was neither (I) an employee nor an officer of the Company or Safeguard
Scientific, Inc. ("Safeguard"), nor (II) an affiliate of Technology Leaders II
L.P. or any related entity and was 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 Directors after March 21,
1995, is 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. Options generally vest ratably over a four-year period
and expire ten years from the date of grant. At December 31, 1997, 1996 and
1995, options to purchase 73,121, 43,122, and zero shares, respectively, were
exercisable.
F-16
<PAGE>
In November 1997, the Board of Directors adopted the 1997 Stock Option Plan (the
"1997 Option Plan") under which the Company may grant nonqualified stock options
to purchase up to 450,000 shares of common stock to employees (other than
officers) and consultants of the Company. Options granted under the 1997 Option
Plan generally vest ratably over a four-year period and expire in installments
five to eight years from the date of grant. At December 31, 1997, no options
under the 1997 Option Plan were exercisable.
Stock option activity under the Company's stock option plans is summarized as
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTION EXERCISE PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994 8,548,980 $ 3.45
Granted 4,115,352 14.64
Exercised 1,026,906 1.75
Canceled 283,215 5.98
---------- ------
Outstanding at December 31, 1995 11,354,211 7.48
Granted 2,922,675 25.71
Exercised 2,660,679 3.18
Canceled 902,252 10.97
---------- ------
Outstanding at December 31, 1996 10,713,955 13.27
Granted 6,281,988 29.89
Exercised 2,170,050 5.86
Canceled 2,768,753 26.31
---------- ------
Outstanding at December 31, 1997 12,057,140 $20.16
========== ======
</TABLE>
The above table reflects the cancellation and re-issuance of options to purchase
2,051,286 shares of common stock under the Option Plan. These options were
granted in April 1997 at fair market value in exchange for options granted from
October 1996 through March 1997 with exercise prices above April 1997 fair
market values. Vesting schedules for those options re-started at April 1997 and
option lives were shortened compared to the original grants.
F-17
<PAGE>
The following summarizes information about the Company's stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------- ---------------------
WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICE AT 12/31/97 LIFE PRICE AT 12/31/97 PRICE
- ----------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ .16 - $ 1.34 695,329 4.2 Years $ .59 695,329 $ .59
1.67 - 6.32 2,083,326 6.5 Years $ 5.59 1,678,435 $ 5.47
10.00 - 17.30 3,212,700 7.8 Years $15.10 1,609,878 $14.95
22.88 - 28.13 2,530,025 6.0 Years $23.51 152,821 $25.46
31.15 - 36.00 3,535,760 5.8 Years $34.78 -- $ --
--------------- ---------- ----------- ------ --------- -----
$ .16 - $36.00 12,057,140 6.4 Years $20.16 4,136,463 $9.08
=============== ========== =========== ====== ========= =====
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations in accounting for its
option plans. Accordingly, no compensation expense has been recognized. Had
compensation expense for the Company's stock option plans and employee stock
purchase plan been determined based on the fair value at the grant date for
awards under these plans consistent with the methodology proscribed under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), the Company's supplemental consolidated net income
and net income per share would have been reduced to the pro forma amounts
indicated as follows for the years ended December 31, 1997, 1996, and 1995 (in
thousands except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
As reported net income $33,982 $23,992 $15,729
Pro forma net income for SFAS 123 $27,092 $18,692 $14,624
Net income per share:
As reported basic net income per share $ .63 $ .46 $ .31
Pro forma basic net income per
share for SFAS 123 $ .50 $ .36 $ .29
As reported diluted net income per share $ .56 $ .40 $ .28
Pro forma diluted net income per
share for SFAS 123 $ .45 $ .31 $ .26
</TABLE>
F-18
<PAGE>
The following assumptions were used by the Company to determine the fair value
of stock options granted using the Black-Scholes options-pricing model:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Expected volatility 45% 45% 45%
Average expected option life 4 Years 5 Years 5 Years
Average expected life for employee
stock purchase plan shares .5 Year .5 Year .5 Year
Risk-free interest rate 6.2% 6.2% 5.9%
Dividend yield 0% 0% 0%
</TABLE>
Pro forma net income reflects only options granted and shares issued under the
employee stock purchase plan in 1995, 1996, and 1997. Consistent with the
requirements of SFAS 123, the full impact of calculating the compensation cost
of stock options and shares issued under the employee stock purchase plan under
SFAS 123 is not reflected in the pro forma net income and pro forma net income
per share amounts presented above because compensation cost is recognized over
an option's vesting period and compensation cost for options granted prior to
January 1, 1995 is not considered.
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 at 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 shares of common stock, subject to limitations provided by
Section 423(b) of the Internal Revenue Code, through accumulated payroll
deductions. Each participating employee may purchase up to 1,500 shares per
payment period and purchases by any one employee may not exceed $25,000 in fair
market value of the stock purchased in any one year. 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 consist of two six-
month periods, January 15 through July 14 and July 15 through January 14. For
the years ended December 31, 1997, 1996, and 1995, 211,734, 124,123, and 29,650
shares, respectively, were issued under the Stock Purchase Plan.
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, except pursuant to the preferred stock purchase
rights described in the Rights Plan section of this note, has no present plans
to issue any shares of preferred stock.
F-19
<PAGE>
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 were
exercisable for a five-year period from the date of issuance. In December 1997,
all warrants were exercised for common stock.
Dividends
The Facility and the New Facility prohibit the Company from paying any dividends
or making any distributions either in cash or in kind on any class of its
capital stock without 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 Peter Chadwick were made in accordance with the
Peter Chadwick shareholder agreements in effect prior to the acquisition, and
amounted to $3.0 million, $2.0 million, and $744,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. At December 31, 1997, an
additional $1.1 million of dividend distribution payable in the first quarter of
1998 is included in other current liabilities reflecting Peter Chadwick's
dividend obligations up to the date of acquisition in accordance with the Peter
Chadwick shareholder agreements in effect prior to the acquisition.
Dividend distributions made by Excell and SCG, prior to the respective
acquisitions, were principally for reimbursement of income tax liabilities of
its former stockholders due to Excell and SCG's S-Corporation tax status.
RIGHTS PLAN
On June 23, 1997, the Board of Directors of the Company approved and adopted a
Rights Plan pursuant to a Rights Agreement, and in connection therewith,
declared a dividend of one preferred stock purchase right for each outstanding
share of the Company's common stock, which dividend was paid on July 3, 1997 to
holders of record of the Company at the close of business on July 3, 1997. One
preferred stock purchase right will also be attached to each share of the
Company's common stock issued after July 3, 1997. The rights are not presently
transferable separate from the share of common stock with respect to which they
were issued. The rights are subject to adjustment and become exercisable upon
the occurrence of certain events described in the Rights Agreement. In general,
the Company is entitled to redeem the rights at $.01 per right. The rights will
expire on June 23, 2007, unless earlier redeemed or exchanged. As part of the
Rights Plan, the Company designated 100,000 shares of its preferred stock as
Series A Junior Participating Preferred Stock and reserved such shares for
issuance upon exercise of the rights.
Recapitalization
In November 1995, Peter Chadwick effected a recapitalization, which included the
exchange of 14,000,000 outstanding ordinary shares for 10,061,615 Class B
Preference Shares, 1,044,837 ordinary shares and $4,350,000 in cash. In
addition, Peter Chadwick issued 256,250 Preferred Shares and 2,543,750 Class A
Preference Shares to a new investor for total consideration of $4,350,000.
F-20
<PAGE>
The effect of the recapitalization on the supplemental statement of
stockholders' equity includes a reclassification of $3,763,000 from retained
earnings to additional paid-in capital, primarily related to an increase in the
par value amounts for the shares issued to effect the recapitalization. In
addition, the issuance of the Preferred Shares and Class A Preference Shares and
corresponding purchase of ordinary shares have been reflected as a net activity
due to the offsetting effect on additional paid-in capital.
The classes of preferred shares had various redemption and conversion
privileges, and rights to cumulative dividends. All classes of ordinary and
preferred shares were exchanged for common stock of the Company in connection
with the combination (see Note B).
I. 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 Board of Directors 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").
In January 1998, the Company entered into an agreement with Boston Properties
Limited Partnership ("Boston Properties") to lease a building to be constructed
and developed by Boston Properties. This approximately 177,000 square foot
building, which is located in Cambridge, Massachusetts, will house the Company's
Northeast operations, new employee training facility, and corporate departments.
The lease agreement is for a ten-year period, which is expected to commence in
June 1999. Pursuant to the terms of the lease agreement, the Company paid a
$1.3 million security deposit in January 1998. The Company's current building
is expected either to continue to be used for project development and other
activities or subleased through its remaining lease term.
Minimum future lease commitments under noncancelable operating leases for
buildings and equipment in effect at December 31, 1997, are presented as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 $11,605
1999 10,433
2000 8,619
2001 7,806
2002 6,871
Thereafter 15,264
-------
Total minimum lease payments $60,598
=======
</TABLE>
F-21
<PAGE>
For the years ended December 31, 1997, 1996, and 1995, rental expense under all
leases was approximately $11.0 million, $6.6 million, and $5.3 million,
respectively, of which approximately $859,000, $785,000, and $765,000,
respectively, related to the trust described above.
Minimum future lease commitments under noncancelable capital leases for
equipment at December 31, 1997, are presented as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 $232
1999 163
2000 99
2001 78
2002 67
----
Total minimum payments 639
Less amounts representing interest 55
----
Present value of minimum lease payments 584
Current portion 207
----
Long-term obligation $377
====
J. OTHER COSTS
-----------
Other costs consist of the following (in thousands):
1997 1996 1995
------- ------- -------
Facility costs and related expenses $43,920 $31,846 $14,875
Non-billable project expenses 19,080 11,818 7,935
Non-billable staff travel 15,479 7,473 5,696
Education and training 6,103 4,407 2,233
------- ------- -------
$84,582 $55,544 $30,739
======= ======= =======
</TABLE>
F-22
<PAGE>
K. INCOME TAXES
------------
The components of income before income taxes and the related provision for
income taxes for the years ended December 31, 1997, 1996, and 1995, are
presented below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Income before income taxes:
Domestic $49,340 $33,220 $20,248
Foreign 9,496 7,089 5,826
------- ------- -------
$58,836 $40,309 $26,074
======= ======= =======
Provision for income taxes:
Current:
Federal $17,769 $10,430 $ 5,924
Foreign 3,881 3,420 2,192
State 3,741 3,033 1,604
------- ------- -------
25,391 16,883 9,720
Deferred:
Federal (308) (311) 363
Foreign 10 (207) 28
State (39) (48) 34
------- ------- -------
(337) (566) 425
------- ------- -------
Total $25,054 $16,317 $10,145
======= ======= =======
</TABLE>
The Company's deferred tax assets and (liabilities) are comprised of the
following as of December 31, 1997 and 1996, respectively (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Bad debt reserves $ 442 $ 339
Vacation accrual 177 262
Fixed asset depreciation (923) (471)
Cash to accrual adjustments (476) (829)
Other accruals 807 389
----- -----
$ 27 $(310)
===== =====
</TABLE>
F-23
<PAGE>
The table below reconciles the expected U.S. federal statutory income tax rate
to the recorded income tax rate:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
- -
U.S. Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal income tax benefit 5.0 5.5 5.4
Goodwill amortization 0.4 0.7 1.1
Non-taxable S-Corporation income (0.6) - (1.0)
Other, net (0.9) (0.7) (1.6)
---- ---- ----
Effective tax rate before non-
deductible pooling costs 38.9 40.5 38.9
Non-deductible pooling costs 3.7 - -
---- ---- ----
Effective tax rate 42.6% 40.5% 38.9%
==== ==== ====
</TABLE>
During the period from April 1, 1996 through August 31, 1998 (the date of the
Company's acquisition of Excell), Excell elected to be treated as an S-
Corporation for income tax reporting purposes. Under this election, Excell's
individual stockholders are deemed to have received a pro rata distribution of
taxable income of Excell (whether or not an actual distribution was made), which
is included in each stockholder's taxable income. Accordingly, Excell did not
provide for income taxes during the period from April 1, 1996 through August 31,
1998. Excell's S-Corporation tax reporting status was terminated on the date of
acquisition and therefore, the undistributed earnings of Excell, as of the date
of acquisition, will be reclassifed to additional paid-in-capital as of August
31, 1998. Pro forma net income per share data is presented below to reflect the
pro forma increase to historical income taxes related to Excell as if Excell was
a C-Corporation for tax reporting purposes during those periods.
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Pro forma data (unaudited):
Historical income before income taxes $58,836 $40,309
Provision for income taxes:
Historical income taxes 25,054 16,317
Pro forma increase to historical income taxes 437 64
------- -------
Pro forma net income $33,345 $23,928
======= =======
Pro forma basic net income per share $ .62 $ .46
======= =======
Pro forma diluted net income per share $ .55 $ .40
======= =======
Weighted average number of
common shares outstanding 54,632 52,054
======= =======
Weighted average number of common and
common equivalent shares outstanding 60,775 59,573
======= =======
</TABLE>
F-24
<PAGE>
L. NET INCOME PER SHARE
--------------------
The following table presents the calculation of per share earnings for the years
ended December 31, 1997, 1996, and 1995 (see Note A) (in thousands except per
share data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income $33,782 $23,992 $15,929
======= ======= =======
Basic:
Weighted average common shares outstanding 54,632 52,054 49,992
======= ======= =======
Net income per common share $ .62 $ .46 $ .32
======= ======= =======
Diluted:
Weighted average common shares outstanding 54,632 52,054 49,992
Dilutive effects of stock options and warrants 6,143 7,519 6,806
------- ------- -------
Weighted average common and common
equivalent shares outstanding 60,775 59,573 56,798
======= ======= =======
Net income per common and common
equivalent share $ .55 $ .40 $ .28
======= ======= =======
</TABLE>
M. 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.
Starting 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. In 1996, the Company completed the rollover of assets held under
the SCG Profit-sharing Plan and the Axiom Profit-sharing Plan to the 401(k)
Plan. In January, 1998, the Company completed the rollover of assets held under
the Ramos profit sharing plan to the 401 (k) Plan. Company matching
contributions amounted to $1.5 million, $845,000, and $499,000 in 1997, 1996,
and 1995, respectively.
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 salary depending on age and other factors. All employee contributions
are matched by NatSoft. Employer matching contribution amounted to $249,000,
$202,000, and $181,000 for the years ended December 31, 1997, 1996, and 1995,
respectively. NatSoft also sponsored a defined contribution retirement plan for
three executives who were also stockholders of NatSoft. NatSoft's contribution
to this plan amounted to $150,000 for the year ended December 31, 1995. In June
1996, the defined contribution retirement plan for these executives was
terminated.
F-25
<PAGE>
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 $538,000, $455,000, and $227,000 for the years ended December 31, 1997,
1996, and 1995, respectively. The Company completed the rollover of assets held
under the Ramos Profit-sharing Plan to the 401(k) Plan in January 1998.
In November 1995, Peter Chadwick Limited Employee Trust (the "Trust") was formed
for the purpose of providing benefits to Peter Chadwick employees and
facilitating the acquisition of Peter Chadwick shares by, or for the benefit of,
employees. The Trust is controlled by an independent trustee and, accordingly,
the Trust is not reflected in the supplemental consolidated financial statements
presented. As a result of the acquisition of Peter Chadwick, the trustees
terminated and dissolved the Trust.
Excell maintains a qualified deferred compensation plan under Section 401(a) of
the Internal Revenue Code of 1986, as amended. Under this plan, employees may
elect to defer a portion of their compensation subject to Internal Revenue Code
defined limitations. Employees are eligible to participate in the plan after
they have worked for Excell for 90 days. Currently, Excell does not provide any
matching based on employee contributions.
Excell maintained a 1996 Class I Phantom Stock Plan ("Phantom Plan") under which
Excell granted nonqualified phantom stock units to qualifying employees. The
Phantom Plan entitled a holder to surrender the units for cash equal to the
defined per-unit amount derived from net income of Excell over the holding
period of the units. The Phantom Plan also provided for a five-year vesting
period along with other restrictions regarding redemption. The total liability
based on the per-unit calculation at December 31, 1997 and 1996 was
approximately $291,000 and $137,000 respectively, of which approximately $67,000
and $25,000, respectively, was vested to employees. The Phantom Plan also
contained provisions related to payments to holders of units based on a defined
market value if Excell was sold or a major change in ownership (collectively
"change in control") occurred as defined under the Phantom Plan agreement. The
acquisition of Excell by the Company qualified as a change in control under the
Phantom Plan. As a result, upon consummation of the acquisition, the Company
recorded a charge to operations of $6.7 million in the quarter ended September
30, 1998, representing amounts to be paid to Phantom Plan participants
subsequent to the closing. In accordance with the Phantom Plan, as a result of
the acquisition, the Phantom Plan was terminated.
N. COMMITMENTS AND CONTINGENCIES
-----------------------------
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 was seeking, among other things, a refund of $1.7
million 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 included
F-26
<PAGE>
breach of contract and tort claims. In April 1997, the Company and RMHC agreed
to dismiss with prejudice all claims and counterclaims. The terms of the
dismissal agreement did not have a material adverse effect on the Company's
financial position, results of operations, or liquidity.
In July 1996, Axiom was served a demand for arbitration by a former shareholder
of Axiom. The claims arose 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 sought damages in excess of $3.3 million plus
punitive damages, costs and attorney's fees. The American Arbitration
Association (the "AAA") arbitration was conducted in April and October 1997.
Upon completion of the arbitration, the AAA determined that there was no failure
to inform and no compensable damages resulting from breach of contract. The AAA
also determined that Axiom was the prevailing party in the arbitration and was
entitled to compensation from such shareholder for attorneys' fees and costs.
The Company is involved in litigation and various other legal matters, which
have arisen in the ordinary course of business. The Company does not believe
that the ultimate resolution of any existing matter will have a material adverse
effect on its financial condition, results of operations, or cash flows.
O. CAMBRIDGE TECHNOLOGY CAPITAL FUND I L.P.
----------------------------------------
Cambridge Technology Capital Fund I L.P. (the "Fund") was formed in October 1997
as a limited partnership with committed capital of approximately $25.3 million
at December 31, 1997. The Fund intends to invest in expansion-stage, private
companies providing products and services within areas of the Company's
strategic expertise. A wholly owned subsidiary of the Company acts as the sole
general partner of the Fund's general partner. The Company's capital commitment
to the Fund is approximately $6.0 million. No more than two-thirds of the
Fund's committed capital may be called before October 1999 without approval of
the Fund's partners. The balance of the Fund's capital has been provided by
institutional investors and directors and employees of the Company. At December
31, 1997, the Company's investment in the Fund amounted to $307,500. The Fund's
operating results for the period ended December 31, 1997 were immaterial.
P. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Supplemental disclosures of cash flow information are presented as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 232 $ 107 $ 423
Income taxes 5,503 4,505 3,682
</TABLE>
During 1995, capital lease obligations of $743,000 in the aggregate were
incurred by SCG, Axiom, Ramos, and Excell for the acquisition of certain
equipment.
F-27
<PAGE>
Q. GEOGRAPHIC INFORMATION
----------------------
Information about the Company's operations and total assets in North America,
Europe, Latin America, and the Pacific Rim is presented as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Net revenues:
North America $307,512 $198,959 $129,857
Europe 121,630 93,578 64,237
Latin America 8,852 1,990 -
Pacific Rim 335 - -
-------- -------- --------
Consolidated $438,329 $294,527 $194,094
======== ======== ========
Income (loss) from operations:
North America $ 46,150 $ 29,875 $ 18,853
Europe 13,470 10,526 5,856
Latin America (827) (828) -
Pacific Rim (1,847) - -
-------- -------- --------
Consolidated $ 56,946 $ 39,573 $ 24,709
======== ======== ========
Total assets at December 31:
North America $176,106 $108,710 $ 62,198
Europe 62,215 41,878 28,037
Latin America 3,318 - -
Pacific Rim 782 - -
-------- -------- --------
Consolidated $242,421 $150,588 $ 90,235
======== ======== ========
</TABLE>
North American operations consist of services provided in the United States and
Canada. European operations consist of services delivered principally in the
United Kingdom, the Netherlands, Switzerland, Sweden, Norway, Ireland, Germany,
France, and Austria, which have similar business environments. Latin American
operations include services provided primarily in Mexico, Brazil, and Venezuela.
Pacific Rim represents operations principally in Japan, Australia, and India.
There are no intra-enterprise sales for the periods presented.
F-28
<PAGE>
R. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
-------------------------------------------
The following table presents unaudited supplemental quarterly financial
information for the years ended 1997 and 1996 (in thousands, except per share
data):
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------------------------------------
March 31, June 30, September 30, December 31,
---------------- -------- ----------------- -----------------
1997 1996 1997 1996 1997 1996 1997 1996
------- ------- -------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $88,498 $60,100 $104,032 $70,744 $117,029 $78,580 $128,770 $85,103
Income from operations 13,008 9,001 15,103 9,489 16,570 10,374 12,265 10,709
Income before income taxes 13,263 9,150 15,736 9,740 17,085 10,594 12,752 10,825
Net income 7,893 5,392 9,605 5,781 10,452 6,342 5,832 6,477
Basic net income per share .15 .11 .18 .11 .19 .12 .10 .12
Diluted net income per share .13 .09 .16 .10 .17 .10 .09 .11
</TABLE>
F-29
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 52,377 $ 39,649
Investments held to maturity 21,712 15,824
Accounts receivable, less allowance of $3,651 and $2,757
at June 30, 1998 and December 31, 1997, respectively 136,453 105,206
Unbilled revenue on contracts 10,999 9,048
Deferred income taxes 950 950
Prepaid expenses and other current assets 36,788 27,878
-------- --------
Total current assets 259,279 198,555
Property and equipment, net 42,738 36,027
Other assets 6,690 5,745
Goodwill, net 1,675 2,094
-------- --------
Total assets $310,382 $242,421
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,965 $ 19,134
Accrued expenses 50,670 40,018
Deferred revenue 14,356 9,502
Income taxes payable 21,980 19,361
Obligations under capital leases, current 156 207
Other current liabilities 80 2,032
-------- --------
Total current liabilities 106,207 90,254
Obligations under capital leases 253 377
Deferred income taxes 923 923
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 250,000,000
shares; issued and outstanding 58,251,538 and 56,571,122 shares
at June 30, 1998 and December 31, 1997, respectively 583 567
Additional paid-in capital 102,938 75,400
Retained earnings 103,375 77,361
Accumulated other comprehensive loss (3,897) (2,461)
-------- --------
Total stockholders' equity 202,999 150,867
-------- --------
Total liabilities and stockholders' equity $310,382 $242,421
======== ========
</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 June 30, Six Months Ended June 30,
1998 1997 1998 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $156,578 $104,032 $298,801 $192,530
Costs and expenses:
Project personnel 71,852 48,239 137,387 88,990
General and administration 17,664 12,079 33,552 22,095
Sales and marketing 15,722 9,269 29,030 17,885
Other costs 29,262 19,342 56,637 35,449
-------- -------- -------- --------
Total operating expenses 134,500 88,929 256,606 164,419
-------- -------- -------- --------
Income from operations 22,078 15,103 42,195 28,111
Other income (expense):
Interest income 571 659 1,173 1,001
Interest expense (48) (62) (105) (118)
Foreign exchange (loss) gain (24) 36 (157) 5
-------- -------- -------- --------
Income before income taxes 22,577 15,736 43,106 28,999
Provision for income taxes 9,043 6,131 17,092 11,501
-------- -------- -------- --------
Net income $ 13,534 $ 9,605 $ 26,014 $ 17,498
======== ======== ======== ========
Basic net income per share $.23 $.18 $.45 $.33
======== ======== ======== ========
Diluted net income per share $.21 $.16 $.41 $.29
======== ======== ======== ========
Weighted average number of
common shares outstanding 57,986 54,224 57,581 53,954
======== ======== ======== ========
Weighted average number of
common and common
equivalent shares outstanding 63,403 60,218 63,014 59,688
======== ======== ======== ========
The accompanying notes are an integral part of the supplemental
consolidated financial statements.
</TABLE>
S-2
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1998 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,014 $ 17,498
Amounts that reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 6,474 3,789
Tax benefit from exercise of stock options 10,189 4,984
Changes in assets and liabilities:
Increase in accounts receivable (31,571) (27,103)
(Increase) decrease in unbilled revenue on contracts (2,040) 601
Increase in prepaid expenses and other current assets (9,058) (2,342)
(Decrease) increase in accounts payable (156) 5,061
Increase in accrued expenses 9,506 10,469
Increase in deferred revenue 4,846 7,890
Increase in income taxes payable 2,588 2,684
Other, net (875) (1,671)
-------- --------
Net cash provided by operating activities 15,917 21,860
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (12,865) (10,682)
Purchase of investments held to maturity (13,557) (9,255)
Maturity of investments 7,669 7,511
-------- --------
Net cash used for investing activities (18,753) (12,426)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loan (823) -
Obligations under capital leases (185) (41)
Dividend distribution (1,129) (2,201)
Proceeds from employee stock purchase plan 3,390 2,140
Proceeds from exercise of stock options 13,975 4,564
-------- --------
Net cash provided by financing activities 15,228 4,462
-------- --------
Effect of foreign exchange rate changes on cash 336 (235)
Net increase in cash and cash equivalents 12,728 13,661
Cash and cash equivalents at beginning of period 39,649 26,456
-------- --------
Cash and cash equivalents at end of period $ 52,377 $ 40,117
======== ========
The accompanying notes are an integral part of the supplemental consolidated financial statements.
</TABLE>
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 Excell Data Corporation
("Excell"), a systems integrator of Microsoft-centric solutions headquartered in
Bellevue, Washington. Generally accepted accounting principles proscribe giving
effect to consummated business combinations accounted for using 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
accounts and balances have been eliminated in consolidation. Certain prior
period amounts have also been reclassified to conform to 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 supplemental
consolidated financial statements included in this prospectus 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 six months ended June 30, 1998 are not necessarily indicative of
results for the full year.
B. ACQUISITION
-----------
On August 31, 1998, the Company acquired all of the outstanding capital stock of
Excell. This acquisition was accomplished through a merger of the Company's
acquisition subsidiary and Excell in an exchange of 1,680,416 shares of the
Company's common stock for all outstanding shares of capital stock of Excell.
The acquisition has been accounted for using the pooling of interests method of
accounting. Founded in 1991, Excell had approximately 510 employees at the time
of the acquisition, located in Bellevue, Washington, Portland, Oregon, and
Denver, Colorado. Costs, which consist primarily of investment banking fees,
accounting fees, legal fees and business integration costs, related to this
acquisition approximated $1.7 million and are not included in the accompanying
supplemental consolidated results of operations as they will be charged to
operating expenses in the third quarter of 1998.
S-4
<PAGE>
C. REVOLVING CREDIT FACILITY
-------------------------
In September 1998, the Company obtained a $50.0 million unsecured senior
revolving credit facility (the "Facility") through a syndication arrangement
committed equally by The Chase Manhattan Bank ("Chase") and Fleet National Bank.
The Facility expires on September 10, 2001 and replaces the Company's previously
maintained $20.0 million revolving credit facility that expired on June 30,
1998. The Facility is administered by Chase and carries a commitment fee,
payable quarterly in arrears, calculated based on the unused portion of the new
Facility and a price grid as set forth in the credit agreement. The Facility
permits the Company to elect any of three possible interest rate formulas as
defined in the credit agreement. Interest is payable in arrears based on an
interest period determined by the interest rate elected by the Company. The
Facility requires, among other things, the Company to maintain certain financial
ratios, including debt service coverage, debt to capital, and net worth. At
June 30, 1998 and December 31, 1997, the Company had no balance outstanding
under its revolving credit facility.
D. NET INCOME PER SHARE
--------------------
The Company adopted Statement of Financial Accounting Standard No. 128,
"Earnings per Share," ("SFAS 128") beginning with the year ended December 31,
1997, which includes retroactively restating earnings per share for all prior
periods for which earnings per share ("EPS") data is presented. SFAS 128
requires the presentation of basic and diluted EPS. Basic net income per share
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted net income
per share is computed using the weighted average number of common shares
outstanding plus the dilutive effect of common stock equivalents (using the
treasury stock method). The following table presents the calculation of earnings
per share for the three and six months ended June 30, 1998 and 1997 (in
thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -------------------
1998 1997 1998 1997
------- -------- ------- -------
<S> <C> <C> <C> <C>
Net income $13,534 $ 9,605 $26,014 $17,498
======= ======= ======= =======
Basic:
Weighted average common
shares outstanding 57,986 54,224 57,581 53,954
======== ======= ======= =======
Net income per share $.23 $.18 $.45 $.33
======== ======= ======= =======
Diluted:
Weighted average common
shares outstanding 57,986 54,224 57,581 53,954
Dilutive effects of stock options
and warrants 5,417 5,994 5,433 5,734
------- ------- ------- -------
Weighted average common and
common equivalent shares
outstanding 63,403 60,218 63,014 59,688
======= ======= ======= =======
Net income per share $.21 $.16 $.41 $.29
======= ======= ======= =======
</TABLE>
S-5
<PAGE>
During the period from April 1, 1996 through August 31, 1998 (the date of the
Company's acquisition of Excell), Excell elected to be treated as an S-
Corporation for income tax reporting purposes. Under this election, Excell's
individual stockholders are deemed to have received a pro rata distribution of
taxable income of Excell (whether or not an actual distribution was made), which
is included in each stockholder's taxable income. Accordingly, Excell did not
provide for income taxes during the period from April 1, 1996 through August 31,
1998. Excell's S-Corporation tax reporting status was terminated on the date of
acquisition and therefore, the undistributed earnings of Excell, as of the date
of acquisition, will be reclassifed to additional paid-in-capital as of August
31, 1998. Pro forma net income per share data is presented below to
reflect the pro forma increase to historical income taxes related to Excell as
if Excell was a C-Corporation for tax reporting purposes for the periods
presented.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Pro forma data (unaudited):
Historical income before income taxes $22,577 $15,736 $43,106 $28,999
Provision for income taxes:
Historical income taxes 9,043 6,131 17,092 11,501
Pro forma increase (decrease) to
historical income taxes (13) 222 159 217
------- ------- ------- -------
Pro forma net income $13,547 $ 9,383 $25,855 $17,281
======= ======= ======= =======
Pro forma basic net income per share $ .23 $ .17 $ .45 $ .32
======= ======= ======= =======
Pro forma diluted net income per share $ .21 $ .16 $ .41 $ .29
======= ======= ======= =======
Weighted average number of
common shares outstanding 57,986 54,224 57,581 53,954
======= ======= ======= =======
Weighted average number of
common and common equivalent
shares outstanding 63,403 60,218 63,014 59,688
======= ======= ======= =======
</TABLE>
E. FOREIGN EXCHANGE CONTRACTS
--------------------------
The Company maintains foreign exchange contracts to mitigate the risk of changes
in foreign exchange rates associated with intercompany balances. The contracts
generally have maturities of one month. The impact of exchange rate movements
on contracts is recorded in other income in the period in which the exchange
rates change, generally consistent with the term of the contract. As of June
30, 1998, the Company held foreign exchange forward contracts of approximately
$10.2 million and there were no related deferred gains and losses. The Company
does not hold foreign exchange contracts for trading purposes.
F. COMPREHENSIVE INCOME
--------------------
S-6
<PAGE>
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires the
presentation of comprehensive income and its components. Comprehensive income
presents a measure of all changes in equity that result from recognized
transactions and other economic events during the period other than transactions
with stockholders. SFAS 130 requires restatement of all prior period financial
statements presented and is effective for the periods beginning after December
15, 1997. The Company has elected to disclose this information in its annual
Statement of Stockholders' Equity. The following table presents the calculation
of comprehensive income and its components for the three and six months ended
June 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- ----------------------------
1998 1997 1998 1997
--------- -------- --------- -----------------
<S> <C> <C> <C> <C>
Comprehensive income:
Net income $13,534 $9,605 $26,014 $17,498
Foreign currency translation
adjustments 237 (849) (1,436) (2,024)
------- ------ ------- -------
Comprehensive income $13,771 $8,756 $24,578 $15,474
======= ====== ======= =======
</TABLE>
G. EXCELL PHANTOM STOCK PLAN
-------------------------
Excell maintained a 1996 Class I Phantom Stock Plan ("Phantom Plan") under which
Excell granted nonqualified Phantom stock units to qualifying employees. The
Phantom Plan entitled a holder to surrender the units for cash equal to the
defined per-unit amount derived from net income of Excell over the holding
period of the units. The Phantom Plan also provided for a five-year vesting
period along with other restrictions regarding redemption. The Phantom Plan
also contained provisions related to payments to holders of units based on a
defined market value if Excell was sold or a major change in ownership
(collectively "change in control") occurred as defined under the Phantom Plan
agreement. The acquisition of Excell by the Company qualified as a change in
control under the Phantom Plan. As a result, upon consummation of the
acquisition, the Company recorded a charge to operations of $6.7 million in the
quarter ended September 30, 1998, representing amounts to be paid to Phantom
Plan participants subsequent to the closing. In accordance with the Phantom
Plan, as a result of the acquisition, the Phantom Plan was terminated.
H. NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In March 1998, Statement of Position 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), was issued. SOP
98-1 provides guidance on applying generally accepted accounting principles in
addressing whether and under what condition the costs of internal-use software
should be capitalized. SOP 98-1 is effective for transactions entered into in
fiscal years beginning after December 15, 1998, however earlier adoption is
encouraged. The Company adopted the guidelines of SOP 98-1 as of January 1,
1998.
S-7
<PAGE>
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal
years beginning after December 15, 1997. Interim reporting disclosures are not
required in the first year of adoption. SFAS 131 specifies revised guidelines
for determining an entity's operating segments and the type and level of
financial information to be disclosed. SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting and
expands the required disclosures for each segment. The Company will adopt SFAS
131 in the fourth quarter of 1998 and is currently determining the impact of
such adoption on its reporting as currently presented.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded for each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Company is currently
determining the impact of the adoption of SFAS 133 on the Company's results of
operations and financial position.
S-8
<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 to buy 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 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 the date hereof.
----------
TABLE OF CONTENTS
Page
- ---------------------------------------------------
Available Information 2
Incorporation of Certain Information
by Reference 3
The Company 4
Recent Developments 5
Risk Factors 6
Use of Proceeds 9
Selling Stockholders 9
Plan of Distribution 12
Legal Matters 12
Experts 13
Index to Supplemental Consolidated
Financial Statements F-1
- ---------------------------------------------------
- ---------------------------------------------------
1,512,392 SHARES
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
COMMON STOCK
----------
PROSPECTUS
----------
October ___, 1998
- ----------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the Common Stock offered hereby are as
follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee..................... 10,331.29
Legal fees and expenses.................. 20,000.00
Accounting fees and expenses............. 10,000.00
---------
TOTAL.................................... 40,333.29
</TABLE>
The Company will bear all expenses shown above.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Company's Amended and Restated
Certificate of Incorporation, as amended, provide for indemnification of the
Company's directors and officers for liabilities and expenses that they may
incur in such capacities. In general, directors and officers are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of the Company, and with respect to
any criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. Reference is made to the Company's Amended and
Restated Certificate of Incorporation, as amended, filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1998. The Company maintains directors' and officers' liability insurance to
insure the directors and certain officers of the Company against certain
liabilities and certain expenses in connection therewith which arise out of or
in connection with their capacities as such.
ITEM 16. EXHIBITS.
4.1 Amended and Restated Certificate of Incorporation of the Company, as
amended (incorporated herein by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1998, and filed on August 14, 1998).*
4.2 Rights Agreement, dated as of June 23, 1997, by and between Cambridge
Technology Partners (Massachusetts), Inc. and ChaseMellon Shareholder
Services, LLC, as Rights Agent (incorporated herein by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K, dated June
23, 1997, and filed on July 1, 1997) (the "Rights Agreement").*
II-1
<PAGE>
4.3 Amendment No. 1 to Rights Agreement, dated as of September 30, 1998,
by and between Cambridge Technology Partners (Massachusetts), Inc. and
ChaseMellon Shareholder Services, LLC, as Rights Agent.**
5 Opinion of Testa, Hurwitz & Thibeault, LLP**
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants**
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5)**
24 Power of Attorney (included on signature page)**
27 Restated Financial Data Schedules**
________________________
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to the
Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or
II-2
<PAGE>
15(d) of the Securities Exchange Act of 1934 (and, where appropriate, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Cambridge, Massachusetts on September 30, 1998.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
BY: /s/ James K. Sims
---------------------------
JAMES K. SIMS
PRESIDENT
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned Officers and Directors of Cambridge Technology Partners
(Massachusetts), inc., hereby severally constitute and appoint James K. Sims and
Arthur M. Toscanini, and each of them singly, our true and lawful attorneys,
with full power to them and each of them singly, to sign for us in our names in
the capacities indicated below, all pre-effective and post-effective amendments
to this Registration Statement, and generally do all things in our names and on
our behalf in such capacities to enable Cambridge Technology Partners
(Massachusetts), Inc. to comply with the provisions of the Securities Act of
1933 and all requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ----------------------------------- ------------------------------------------------- ---------------------------
<S> <C> <C>
/s/ James K. Sims PRESIDENT (CHIEF EXECUTIVE OFFICER) AND DIRECTOR SEPTEMBER 30, 1998
- --------------------------
JAMES K. SIMS
/s/ Arthur M. Toscanini EXECUTIVE VICE PRESIDENT - FINANCE AND TREASURER SEPTEMBER 30, 1998
- -------------------------- (CHIEF FINANCIAL OFFICER AND CHIEF ACCOUNTING
ARTHUR M. TOSCANINI OFFICER)
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
SIGNATURE TITLE(S) DATE
- --------- -------- ----
/s/ Warren V. Musser DIRECTOR SEPTEMBER 30, 1998
- -----------------------------------
WARREN V. MUSSER
/s/ Jack L. Messman DIRECTOR SEPTEMBER 30, 1998
- -----------------------------------
JACK L. MESSMAN
/s/ John W. Poduska, Sr. DIRECTOR SEPTEMBER 30, 1998
- -----------------------------------
JOHN W. PODUSKA, SR.
/s/ James I. Cash, Jr. DIRECTOR SEPTEMBER 30, 1998
- -----------------------------------
JAMES I. CASH, JR.
/s/ Robert E. Keith, Jr. DIRECTOR SEPTEMBER 30, 1998
- -----------------------------------
ROBERT E. KEITH, JR.
/s/ James D. Robinson III DIRECTOR SEPTEMBER 30, 1998
- -----------------------------------
JAMES D. ROBINSON III
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------------------ ----------------------------------------------------------------------------------------
<C> <S>
4.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED
(INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 3.1 TO THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998, AND FILED ON AUGUST 14, 1998).*
4.2 RIGHTS AGREEMENT, DATED AS OF JUNE 23, 1997, BY AND BETWEEN CAMBRIDGE TECHNOLOGY
PARTNERS (MASSACHUSETTS), INC. AND CHASEMELLON SHAREHOLDER SERVICES, LLC, AS RIGHTS
AGENT (INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.1 TO THE COMPANY'S CURRENT REPORT
ON FORM 8-K, DATED JUNE 23, 1997, AND FILED ON JULY 1, 1997) (THE "RIGHTS AGREEMENT").*
4.3 AMENDMENT NO. 1 TO RIGHTS AGREEMENT, DATED AS OF SEPTEMBER 30, 1998, BY AND BETWEEN
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC. AND CHASEMELLON SHAREHOLDER
SERVICES, LLC, AS RIGHTS AGENT.**
5 OPINION OF TESTA, HURWITZ & THIBEAULT, LLP**
23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS**
23.2 CONSENT OF TESTA, HURWITZ & THIBEAULT, LLP (INCLUDED IN EXHIBIT 5)**
24 POWER OF ATTORNEY (INCLUDED ON SIGNATURE PAGE)**
27 RESTATED FINANCIAL DATA SCHEDULES**
</TABLE>
________________________
* NOT FILED HEREWITH. IN ACCORDANCE WITH RULE 411 PROMULGATED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, REFERENCE IS MADE TO THE DOCUMENTS
PREVIOUSLY FILED WITH THE COMMISSION, WHICH ARE INCORPORATED BY REFERENCE
HEREIN.
** FILED HEREWITH.
<PAGE>
EXHIBIT 4.3
-----------
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 to Rights Agreement ("Amendment No. 1") is made by and
between Cambridge Technology Partners (Massachusetts), Inc., a Delaware
corporation (the "Company"), and ChaseMellon Shareholder Services, LLC, as
Rights Agent (the "Rights Agent") as of the 30th day of September, 1998.
Reference is made to the Rights Agreement dated as of June 23, 1997 (the
"Agreement") between the parties. Capitalized terms not defined herein shall
have the respective meaning ascribed to them in the Agreement.
In accordance with Section 27 of the Agreement, the Company hereby amends the
Agreement as follows:
1. Effective immediately, the Rights Agreement is hereby amended to (i)
delete all references to "Continuing Director" or "Continuing Directors" and
insert in place thereof "Director" or "Directors", as appropriate; (ii) delete
Section 1(o) in its entirety and replace Section 1(o) with the following: "(o)
"Director" shall mean any member of the Board, and "Directors" shall mean the
-------- ---------
members of the Board."; and (iii) delete from Section 29 in each place that it
appears the phrase "(with, where specifically provided for herein, the
concurrence of the Continuing Directors)".
2. Effective immediately, the Form of Rights Certificate attached to the
Agreement as Exhibit B is hereby amended (i) to delete, immediately following
the words "subject to the terms, provisions and conditions of the Rights
Agreement" in the first paragraph, the words "dated as of March 13, 1997", and
to insert in their place the words "dated as of June 23, 1997, as amended"; and
(ii) to delete in its entirety the second sentence of the seventh paragraph
"Under certain circumstances set forth in the Rights Agreement, the decision to
redeem shall require the concurrence of a majority of the Continuing Directors."
3. Except as specifically amended and set forth herein, the Agreement
shall remain unchanged and in full force and effect in accordance with its
terms.
4. By execution of this Amendment No. 1, the Company hereby certifies to
the Rights Agent that the amendments to the Agreement reflected herein comply
with Section 27 of the Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be
executed and delivered as of the date first written above.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By: /s/ Arthur M. Toscanini
Title: Executive Vice President-Finance, Treasurer,
Chief Financial Officer
CHASEMELLON SHAREHOLDER SERVICES, LLC
By: /s/ Lynore LeConche
Title: Vice President
<PAGE>
EXHIBIT 5
---------
TESTA, HURWITZ & THIBEAULT, LLP
September 29, 1998
Cambridge Technology Partners (Massachusetts), Inc.
304 Vassar Street
Cambridge, Massachusetts 02139
Re: S-3 Registration Statement
--------------------------
Ladies and Gentlemen:
We are counsel to Cambridge Technology Partners (Massachusetts), Inc.,
a Delaware corporation (the "Company"), and have represented the Company in
connection with the preparation and filing of the Company's Form S-3
Registration Statement (the "Registration Statement"), covering the sale to the
public of up to 1,512,392 shares of the Company's Common Stock, $.01 par value
per share (the "Shares"), being sold by certain stockholders of the Company.
We have reviewed the corporate proceedings taken by the Board of
Directors of the Company with respect to the authorization and issuance of the
Shares. We have also examined and relied upon originals or copies, certified or
otherwise authenticated to our satisfaction, of all corporate records,
documents, agreements or other instruments of the Company and have made all
investigations of law and have discussed with the Company's officers all
questions of fact that we have deemed necessary or appropriate.
Based upon and subject to the foregoing, we are of the opinion that
the Shares are legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/ Testa, Hurwitz & Thibeault, LLP
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE>
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
our reports dated February 2, 1998, on our audits of the consolidated financial
statements and financial statement schedule of Cambridge Technology Partners
(Massachusetts), Inc. as of December 31, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997, which reports are included in
the Company's 1997 Annual Report on Form 10-K.
We consent to the inclusion in this registration statement of our report dated
September 18, 1998, on our audits of the supplemental consolidated financial
statements of Cambridge Technology Partners (Massachusetts), Inc. as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997.
We also consent to the references to our Firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 13,299 17,146 18,415 26,456
<SECURITIES> 9,256 10,126 12,248 12,727
<RECEIVABLES> 49,900 60,584 77,304 63,379
<ALLOWANCES> 1,387 1,635 1,927 1,756
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 80,609 96,383 116,356 123,444
<PP&E> 23,693 26,937 32,475 34,889
<DEPRECIATION> 8,459 9,461 11,858 13,754
<TOTAL-ASSETS> 100,716 119,124 142,400 150,588
<CURRENT-LIABILITIES> 34,972 42,371 55,126 51,110
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 511 521 526 534
<OTHER-SE> 0 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 100,716 119,124 142,400 150,588
<SALES> 0 0 0 0
<TOTAL-REVENUES> 60,100 130,844 209,424 294,527
<CGS> 0 0 0 0
<TOTAL-COSTS> 51,099 112,354 180,560 254,954
<OTHER-EXPENSES> (176) (488) (738) (868)
<LOSS-PROVISION> 250 499 789 604
<INTEREST-EXPENSE> 27 88 118 132
<INCOME-PRETAX> 9,150 18,890 29,484 40,309
<INCOME-TAX> 3,758 7,717 11,969 16,317
<INCOME-CONTINUING> 5,392 11,173 17,515 23,992
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 5,392 11,173 17,515 23,992
<EPS-PRIMARY> .11 .22 .34 0.46
<EPS-DILUTED> 0.09 0.19 0.29 0.40
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 24,896 40,117 45,684 39,649
<SECURITIES> 13,653 14,470 15,251 15,824
<RECEIVABLES> 80,879 90,545 96,895 107,963
<ALLOWANCES> 2,725 3,076 3,446 2,757
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 140,434 165,871 186,280 198,555
<PP&E> 37,891 44,257 50,252 56,988
<DEPRECIATION> 14,777 16,349 18,806 20,961
<TOTAL-ASSETS> 169,451 201,112 225,190 242,421
<CURRENT-LIABILITIES> 58,948 76,345 78,825 90,254
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 540 546 552 567
<OTHER-SE> 0 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 169,451 201,112 225,190 242,421
<SALES> 0 0 0 0
<TOTAL-REVENUES> 88,498 192,530 309,559 438,329
<CGS> 0 0 0 0
<TOTAL-COSTS> 75,490 164,419 264,878 381,383
<OTHER-EXPENSES> (311) (1,006) (1,573) (2,201)
<LOSS-PROVISION> 444 795 1,182 1,001
<INTEREST-EXPENSE> 56 118 170 311
<INCOME-PRETAX> 13,263 28,999 46,084 58,836
<INCOME-TAX> 5,370 11,501 18,134 25,054
<INCOME-CONTINUING> 7,893 17,498 27,950 33,782
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 7,893 17,498 27,950 33,782
<EPS-PRIMARY> 0.15 0.33 0.52 0.62
<EPS-DILUTED> 0.13 0.29 0.46 0.55
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998
<CASH> 36,721 52,377
<SECURITIES> 20,031 21,712
<RECEIVABLES> 122,956 140,104
<ALLOWANCES> 3,331 3,651
<INVENTORY> 0 0
<CURRENT-ASSETS> 219,760 259,279
<PP&E> 62,924 69,674
<DEPRECIATION> 23,131 26,936
<TOTAL-ASSETS> 267,315 310,382
<CURRENT-LIABILITIES> 90,485 106,207
<BONDS> 0 0
0 0
0 0
<COMMON> 578 583
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 267,315 310,382
<SALES> 0 0
<TOTAL-REVENUES> 142,223 298,801
<CGS> 0 0
<TOTAL-COSTS> 122,106 256,606
<OTHER-EXPENSES> (469) (1,016)
<LOSS-PROVISION> 254 574
<INTEREST-EXPENSE> 57 105
<INCOME-PRETAX> 20,529 43,106
<INCOME-TAX> 8,049 17,092
<INCOME-CONTINUING> 12,480 26,014
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 12,480 26,014
<EPS-PRIMARY> 0.22 0.45
<EPS-DILUTED> 0.20 0.41
</TABLE>
