<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: Commission file number:
MARCH 31, 1997 0-23488
CIBER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-2046833
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
5251 DTC PARKWAY
SUITE 1400
ENGLEWOOD, CO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone Number: (303) 220-0100
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
As of March 31, 1997, there were 19,527,682 shares of the Registrant's common
stock ($0.01 par value) outstanding.
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CIBER, INC.
FORM 10-Q
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Statements of Operations
Three and nine months ended March 31, 1997 and 1996 2
Consolidated Balance Sheets
March 31, 1997 and June 30, 1996 3
Consolidated Statements of Cash Flows
Nine months ended March 31, 1997 and 1996 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 13
SIGNATURES 13
1
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CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1996(1) 1997 1996(1) 1997
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues $48,291 $69,651 $133,300 $183,401
Salaries, wages and other direct costs 33,449 47,142 91,413 124,617
Selling, general and administrative expenses 10,404 13,892 30,110 38,897
Amortization of intangible assets 460 704 1,358 1,833
Merger costs - - - 1,218
------- ------- ------- --------
Operating income 3,978 7,913 10,419 16,836
Interest income 224 229 416 668
Interest expense (8) - (194) -
------- ------- ------- --------
Income before income taxes 4,194 8,142 10,641 17,504
Income tax expense 1,413 3,260 2,895 8,439
------- ------- ------- --------
Net income $ 2,781 $ 4,882 $ 7,746 $ 9,065
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------- ------- ------- --------
Pro forma information (Note 1):
Historical net income $ 2,781 $ 4,882 $ 7,746 $ 9,065
Pro forma adjustment to income tax expense (198) - (1,221) 1,308
------- ------- ------- --------
Pro forma net income $ 2,583 $ 4,882 $ 6,525 $ 10,373
------- ------- ------- --------
------- ------- ------- --------
Pro forma income per common and common
equivalent share $ 0.13 $ 0.24 $ 0.35 $ 0.52
------- ------- ------- --------
------- ------- ------- --------
Weighted average common and common
equivalent shares 19,575 20,492 18,847 20,139
------- ------- ------- --------
------- ------- ------- --------
</TABLE>
(1) Restated for poolings of interests- See Note 2.
See accompanying notes to consolidated financial statements.
2
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CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, MARCH 31,
IN THOUSANDS, EXCEPT SHARE DATA 1996(1) 1997
-------- ---------
ASSETS
Current assets:
Cash and cash equivalents $17,465 $ 18,386
Accounts receivable 37,671 50,267
Inventories - 381
Prepaid expenses and other assets 760 1,897
Deferred income taxes 417 -
------- --------
Total current assets 56,313 70,931
Property and equipment, at cost 5,475 8,759
Less accumulated depreciation and amortization (2,745) (3,742)
------- --------
Net property and equipment 2,730 5,017
Intangible assets, net 12,801 34,147
Deferred income taxes 458 858
Other assets 964 1,119
------- --------
Total assets $73,266 $112,072
------- --------
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables $ 1,555 $ 2,971
Accrued compensation 8,242 12,326
Other accrued expenses and liabilities 2,741 3,651
Income taxes payable 642 71
Deferred income taxes 467 262
------- --------
Total current liabilities 13,647 19,281
Long-term acquisition costs payable 200 100
------- --------
Total liabilities 13,847 19,381
------- --------
Shareholders' equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized,
no shares issued - -
Common stock, $0.01 par value,
40,000,000 shares authorized,
18,403,000 and 19,528,000 shares
issued and outstanding 184 195
Additional paid-in capital 37,248 64,324
Retained earnings 21,987 28,172
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Total shareholders' equity 59,419 92,691
------- --------
Commitments and contingencies
Total liabilities and shareholders' equity $73,266 $112,072
------- --------
------- --------
(1) Restated for poolings of interests - See Note 2.
See accompanying notes to consolidated financial statements.
3
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CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
---------------------------
IN THOUSANDS 1996(1) 1997
------- --------
OPERATING ACTIVITIES:
Net income $ 7,746 $ 9,065
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,865 2,946
Deferred income taxes (362) (22)
Compensation expense related to stock
and stock options 14 50
Changes in operating assets and liabilities,
net of the effects of acquisitions:
Accounts receivable (6,789) (9,398)
Inventories - 194
Intangible assets (127) (675)
Other current and long-term assets (802) (1,147)
Trade payables 543 (502)
Accrued compensation 2,223 3,648
Income taxes payable (1,509) (571)
Other accrued expenses and liabilities 892 352
------- --------
Net cash provided by operating activities 3,694 3,940
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INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (1,725) (19,293)
Purchases of property and equipment (1,112) (2,319)
------- --------
Net cash used in investing activities (2,837) (21,612)
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FINANCING ACTIVITIES:
Net payments on bank lines of credit (5,200) (1,900)
Proceeds from sales of common stock, net 19,848 19,488
Payments on notes payable (110) (1,096)
Current portion of tax benefit from
exercise of stock options 1,600 2,940
Distributions by merged company (1,382) (839)
------- --------
Net cash provided by financing activities 14,756 18,593
------- --------
Net increase in cash and cash equivalents 15,613 921
Cash and cash equivalents, beginning of period 3,908 17,465
------- --------
Cash and cash equivalents, end of period $19,521 $ 18,386
------- --------
------- --------
Supplemental cash flow information:
Cash paid for interest $ 190 $ -
Cash paid for income taxes 3,114 5,811
(1) Restated for poolings of interests - See Note 2.
See accompanying notes to consolidated financial statements.
4
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CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of CIBER, Inc. and
subsidiaries ("CIBER" or the "Company") have been prepared without audit.
Certain information and note disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Current
Report on Form 8-K dated December 12, 1996. However, such audited
consolidated financial statements included in Form 8-K have not been restated
for the Technology Management Group, Inc. and Technical Support Group, Inc.
poolings of interests discussed in Note 2. In the opinion of management,
these unaudited consolidated financial statements include all adjustments
necessary for a fair presentation of the financial position and results of
operations for the periods presented.
Pro forma net income has been presented because certain companies, which have
merged with CIBER in business combinations accounted for as poolings of
interests, were S corporations and generally not subject to income taxes.
Accordingly, no provision for income taxes has been included in the
consolidated financial statements for the operations of these companies prior
to their merger with CIBER. The pro forma adjustment to income taxes has
been computed as if the merged companies had been taxable entities subject to
income taxes for all periods prior to their merger with CIBER at the marginal
rates applicable in such periods. In addition, the pro forma adjustment to
income tax expense has been affected to exclude the one-time tax expense or
benefit resulting from changes in the tax status of these merged companies.
The computation of weighted average common and common equivalent shares
includes the shares and options issued in connection with business
combinations accounted for as a pooling of interests as if they had been
outstanding for all periods prior to the merger.
Inventories, which consist of computer networking equipment and supplies, are
stated at the lower of cost or market using the first-in, first-out method.
(2) POOLINGS OF INTERESTS
Since June 30, 1996, the following companies have merged with CIBER in
business combinations accounted for as poolings of interests. Accordingly,
the Company's financial statements have been restated for all periods prior
to the respective merger to include the results of operations, financial
position, and cash flows of the merged companies.
TECHNOLOGY MANAGEMENT GROUP, INC. ("TMG") - On November 26, 1996, the Company
issued 242,179 shares of its common stock and granted options for 163,007
shares of the Company's common stock (at an aggregate exercise price of
$547,000) in exchange for all of the outstanding shares of common stock and
the cancellation of options of TMG. The CIBER stock options replaced
existing TMG stock options. TMG, located in Seattle, Washington, provides
consulting services similar to CIBER.
TECHNICAL SUPPORT GROUP, INC. ("TSG") - On November 27, 1996, the Company
issued 370,376 shares of its common stock and assumed all of TSG's liabilities
in exchange for all of the assets of TSG. TSG, located in Chicago, Illinois,
provided consulting services similar to CIBER. Prior to its merger with the
Company, TSG had elected S Corporation status for federal income tax purposes
and was generally not subject to income taxes. Upon TSG's merger with CIBER,
CIBER has recorded a one-time income tax expense of $515,000 to record the
net deferred tax liability of TSG at the merger date.
5
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CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
SPECTRUM TECHNOLOGY GROUP, INC. ("SPECTRUM") - On September 3, 1996, the
Company issued 853,116 shares of its common stock in exchange for all of the
outstanding common stock of Spectrum. Spectrum, located in Somerville, New
Jersey, provides management consulting solutions to business problems,
specifically in the areas of data warehousing, data modeling and enterprise
architecture, as well as project management and systems integration services.
During the quarter ended December 31, 1995, Spectrum elected S corporation
status for federal income tax purposes, effective for its tax year ended
December 31, 1995. As an S corporation, Spectrum was generally not subject
to income taxes. As a result of the change in Spectrum's tax status, income
tax expense for the year ended June 30, 1996 includes a one-time tax benefit
of $818,000, resulting from the elimination of Spectrum's net deferred tax
liability. Thereafter, no provision for income taxes is included for the
operations of Spectrum prior to its merger with CIBER. Upon Spectrum's
merger with CIBER, Spectrum's S corporation status was terminated and CIBER
has recorded a one-time income tax expense of $1,202,000 to record the net
deferred tax liability of Spectrum at the merger date.
(3) ACQUISITIONS
On March 14, 1997 the Company acquired the business operations and certain
assets of Davis, Thomas & Associates, Inc. ("DTA") for $13.5 million,
consisting of $13.2 million in cash and the assumption of $277,000 of
liabilities. The acquisition has been accounted for as a purchase.
Accordingly, the Company's consolidated financial statements include the
results of operations of this acquired business since the date of
acquisition. The Company has recorded goodwill of $13.1 million related to
this acquisition, which will be amortized over 15 years. DTA, with offices
in Minneapolis, Minnesota and Chicago, Illinois provided services similar to
CIBER. The Minneapolis office has become part of the Company's CIS division
while the Chicago office has become part of the Company's subsidiary, CIBER
Network Services, Inc.
Had the acquisition of DTA occured at the beginning of the respective periods,
revenues would have been increased by approximately $12.9 million and $9.0
million, for the year ended June 30, 1996 and for the nine months ended March
31, 1997, respectively. The effects on pro forma net income and pro forma
income per common share would not have been material.
On December 2, 1996, the Company acquired CIBER Network Services, Inc.
("CNSI"), which was majority owned by certain officers of the Company, for
consideration of $3.7 million, consisting of 68,631 shares of the Company's
common stock and $1.2 million in cash. In addition, the Company assumed net
liabilities of $772,000, resulting in a total purchase price of $4.5 million.
Additionally, contingent consideration of up to $2.6 million will be paid to
the sellers if CNSI achieves certain performance objectives in each of the
12-month periods ending October 31, 1997, 1998 and 1999. The contingent
consideration, if earned, will be payable at the sellers' option in the
Company's common stock, at the then prevailing market price, or in cash.
This acquisition has been accounted for as a purchase. The Company has
recorded goodwill of $4.5 million, which will be amortized over 15 years.
Any contingent consideration paid will be accounted for as additional
goodwill. For income tax purposes, this acquisition was a non-taxable
transaction. CNSI, which has offices in Edison, NJ, Denver, CO, and San
Francisco, CA, provides local and wide-area networking solutions, including
design, procurement, installation, testing, and maintenance. The results of
operations of CNSI after the acquisition date are included in the Company's
consolidated statement of operations.
Had the acquisition of CNSI occurred at the beginning of the respective
periods, revenues would have been increased by approximately $18.3 million
and $8.1 million, for the year ended June 30, 1996 and for the nine months
ended March 31, 1997, respectively. The effects on pro forma net income and
pro forma income per common share would not have been material.
In July 1996, the Company acquired certain assets, liabilities and all of the
business operations of the Business Systems Development division of
DataFocus, Inc., Fairfax, Virginia, a subsidiary of KTI, Inc. This
acquisition has been accounted for as a purchase. Pro forma results of
operations have not been presented because the
6
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CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
effects were not material to revenues or net income. The aggregate purchase
price was $5.0 million, of which $4.8 million has been allocated to goodwill
and $229,000 has been allocated to other net assets. This division, now
known as Spectrum NT, provides Microsoft technology-based computer software
consulting services.
A summary of cash paid for acquisitions during the nine months ended March 31,
1997 is as follows (in thousands):
Goodwill $22,504
Fair value of other assets acquired 5,245
Liabilities assumed (5,987)
Value of common stock issued (2,469)
-------
Cash paid, net of cash acquired $19,293
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-------
(4) SHAREHOLDERS' EQUITY
Changes in shareholder's equity during the nine months ended March 31, 1997 were
(in thousands):
<TABLE>
Common stock Additional Total
---------------- paid-in Retained shareholders'
Shares Amount capital earnings equity
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1996, AS RESTATED (SEE NOTE 2) 18,403 $184 $37,248 $21,987 $59,419
Issuance of common stock for options exercised 357 3 1,215 - 1,218
Sale of common stock under employee stock purchase plan 63 1 1,207 - 1,208
Common stock sold in public offering, net of offering costs 611 6 16,979 - 16,985
Sale of common stock by merged companies - - 77 - 77
Tax benefit from exercise of stock options - - 2,939 - 2,939
Compensation expense related to stock and stock options 1 - 50 - 50
Termination of S corporation tax status of merged companies - - 2,041 (2,041) -
Issuance of common stock in connection with acquisitions 93 1 2,568 - 2,569
Net income - - - 9,065 9,065
Distributions by merged company - - - (839) (839)
------ ---- ------- ------- -------
BALANCES AT MARCH 31, 1997 19,528 $195 $64,324 $28,172 $92,691
------ ---- ------- ------- -------
------ ---- ------- ------- -------
</TABLE>
(5) REVOLVING LINES OF CREDIT
In March 1997 the Company renewed its bank revolving line of credit. Under
the terms of the new credit agreement the Company may borrow up to $20
million. Outstanding borrowings bear interest at the three month London
Interbank Offered Rate ("LIBOR") plus 2%. Borrowings are unsecured. The
credit agreement requires a commitment fee of 0.225% per annum on any unused
portion of the line of credit up to $15 million. The credit agreement
expires in December 1997. The terms and conditions of the credit agreement
include several covenants, including those whereby the Company agrees to the
maintenance of a certain tangible net worth and debt service coverage ratios
among other things. Amounts advanced under the line of credit can be used to
consummate an acquisition and may be required by the bank to be converted
into a five-year term note payable in equal amounts of interest and
principal; in such event, the line of credit would be reduced by the amount
of the term note.
The Company also has $3.0 million inventory financing line of credit with
AT&T Capital Corporation. This line of credit expires in October 1997 and is
guaranteed by certain assets of the Company. The Company's subsidiary, CNSI,
purchases inventory from various vendors who obtain payment directly from
AT&T Capital Corporation. CNSI then pays AT&T Capital Corporation within 30
days of invoice. Amounts outstanding under this line of credit, which
totaled $1.2 million at March 31, 1997, are included in accounts payable on
the Company's balance sheet.
7
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CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(6) RELATED PARTY TRANSACTIONS
Prior to the acquisition of CNSI on December 2, 1996 (see note 3), the Company
was a guarantor on a $3.0 million inventory wholesale financing line of credit
with AT&T Capital Corporation to CNSI. CNSI was majority owned by certain
officers of the Company. In connection with the acquisition, the Company
assumed CNSI's liability under this line of credit that had an outstanding
balance of approximately $1.1 million at December 2, 1996. Certain officers of
the Company had also guaranteed this line of credit and had indemnified the
Company against losses that might be incurred as a result of its guaranty. As a
result of the acquisition of CNSI by CIBER, the officers of CIBER were released
from the guarantees and indemnifications related to this line of credit. The
Company's Chairman had also guaranteed CNSI's $2.5 million bank revolving line
of credit. In connection with the acquisition, the Company repaid and canceled
CNSI's bank revolving line of credit, which had an outstanding balance of $1.9
million at December 2, 1996. The Company also repaid approximately $898,000 of
notes payable by CNSI to the Company's Chairman and his family.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE HEREIN. WITH THE EXCEPTION OF
HISTORICAL MATTERS AND STATEMENTS OF CURRENT STATUS, CERTAIN MATTERS DISCUSSED
BELOW ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM TARGETS
OR PROJECTED RESULTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY INCLUDE, AMONG OTHERS, GROWTH THROUGH BUSINESS COMBINATIONS AND
INTERNAL EXPANSION, THE COMPANY'S ABILITY TO ATTRACT AND RETAIN QUALIFIED
CONSULTANTS, DEPENDENCE ON SIGNIFICANT RELATIONSHIPS AND THE ABSENCE OF LONG-
TERM CONTRACTS, PROJECT RISKS, THE COMPANY'S ABILITY TO EFFECTIVELY MANAGE A
LARGE AND RAPIDLY CHANGING BUSINESS, PRICING AND MARGIN PRESSURES, AND
COMPETITION. PLEASE REFER TO A DISCUSSION OF THESE AND OTHER FACTORS IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-K AND OTHER SECURITIES AND EXCHANGE
COMMISSION FILINGS. THE COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE
PUBLICLY THESE FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
OVERVIEW
The Company's revenues are generated from two services groups, the CIBER
Information Services group ("CIS") and the Strategic Technology Consulting group
("STC"). CIS revenues in fiscal 1996 accounted for approximately 77% of the
Company's total revenues, while STC revenues accounted for the remainder. CIS
revenues are derived from the application software development and maintenance
services that are provided from the branch offices of the CIS division and the
Company's work in millennium date change solutions under its "CIBR2000"
division. STC revenues are derived from services provided by the Company's
wholly-owned subsidiaries, Spectrum Technology Group, Inc. ("Spectrum"),
Business Information Technology, Inc. ("BIT") and CIBER Network Services, Inc.
("CNSI"). Spectrum provides management consulting solutions to business
problems, specifically in the areas of data warehousing, data modeling and
enterprise architecture. Spectrum also has responsibility for the Company's
Microsoft-based technology consulting, now known as Spectrum NT. BIT provides
package software implementation services, primarily for customers of PeopleSoft,
Inc. CNSI provides a wide range of local-area and wide-area network solutions,
from design and procurement to installation and maintenance with services
including Internet and intranet connectivity.
BUSINESS COMBINATIONS
Over the past several years, the Company has grown significantly through mergers
and acquisitions, as well as through internal growth. Growth from internal
operations (measured in terms of number of employees) has averaged approximately
22% per year since fiscal 1992 and was 23% in fiscal 1996. The Company's
acquisitions involve the capitalization of intangible assets, which intangible
assets are generally amortized over two to 15 years for financial reporting
purposes and 15 years for tax purposes, provided that the acquisition is not a
tax-free reorganization. In the event of a tax-free reorganization, the Company
may not be able to amortize goodwill for income tax purposes. In addition, the
Company's consolidated financial statements included the results of operations
of each acquired business since the date of acquisition. Mergers result in a
one-time charge in the period in which the transaction is completed for costs
associated with the business combination. In addition, selling, general and
administrative expenses may vary as a percentage of revenues depending on the
fluctuations in the selling, general and administrative expenses of merged
companies, if any, during any given period. The Company's consolidated
financial statements are restated for all periods prior to the merger to include
the results of operations, financial position and cash flows of the merged
company.
Since December 31, 1996, the Company completed the following business
combination:
On March 14, 1997 the Company acquired the business operations and certain
assets of Davis, Thomas & Associates, Inc. ("DTA") for $13.5 million, consisting
of $13.2 million in cash and the assumption of $277,000 of liabilities. The
acquisition has been accounted for as a purchase. The company has recorded
goodwill of $13.1 million related to this acquisition, which will be amortized
over 15 years. DTA, with offices in Minneapolis, MN and Chicago, IL provided
services similar to CIBER. The Minneapolis office has become a branch office of
the Company's CIS division while the Chicago office has become part of CNSI.
9
<PAGE>
Had the acquisition of DTA occurred at the beginning of the respective periods,
revenues would have been increased by approximately $12.9 million and $9.0
million, for the year ended June 30, 1996 and for the nine months ended March
31, 1997, respectively. The effects on pro forma net income and pro forma
earnings per common share would not have been material.
THREE AND NINE MONTHS ENDED MARCH 31, 1997 AS COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996
The Company's total revenues for the three months ended March 31, 1997 increased
44% to $69.7 million from $48.3 million for the quarter ended March 31, 1996.
For the three months ended March 31, 1997, CIS revenues increased 29% to $47.4
million from $36.8 million for the same quarter of last year and STC revenues
increased 94% to $22.3 million from $11.5 million for the same quarter of last
year. CIS revenues accounted for 68.0% and 76.1% of total revenues for the
three months ended March 31, 1997 and 1996, respectively.
The Company's total revenues for the nine months ended March 31, 1997 increased
36% to $183.4 million from $133.3 million for the same period last year. CIS
revenues increased 29% to $132.4 million from $102.4 million for the same period
last year and STC revenues increased 65% to $51.0 million from $30.9 million for
the same period last year. CIS revenues accounted for 72.2% and 76.8% of total
revenues for the nine months ended March 31, 1997 and 1996, respectively.
The increase in CIS revenues was derived primarily from increases in hours
billed and, to a lesser extent, an increase in average billing rates. The
increase in hours billed was due primarily to internal growth in branch offices
and the inclusion, for all of fiscal 1997 to date, of the operations of the
Minnesota branch and the Columbus branch, which were acquired during fiscal
1996, and the inclusion of the Minneapolis branch which was acquired with DTA in
March 1997. These branches accounted for approximately $1.0 million and $3.0
million of additional revenues for the three and nine month periods ended March
31, 1997, respectively, as compared to the corresponding periods in the prior
year. STC revenues have increased primarily due to increased volume of customers
implementing PeopleSoft, Inc. software, increased national management level
consulting sales, increased project responsibilities for existing clients and
the acquisitions of Spectrum NT in July 1996 and CNSI in December 1996.
Spectrum NT and CNSI (including the CNSI Chicago office that was acquired with
the acquisition of DTA in March 1997) accounted for additional revenues of
approximately $12.2 million and $8.2 million during the three and nine month
periods ended March 31, 1997, respectively.
Salaries, wages and other direct costs, which consist primarily of consultant
wages, payroll taxes, direct benefits and related costs, were 67.7% of revenues
for the three months ended March 31, 1997 as compared to 69.3% of revenues for
the same quarter last year and were 67.9% of revenues for the nine months ended
March 31, 1997 as compared to 68.6% of revenues for the same period last year.
This decrease in salaries, wages and other direct costs as a percentage of
revenues is primarily due to increased STC revenues with higher gross margins.
Selling, general and administrative expenses were 19.9% of revenues for the
three months ended March 31, 1997 compared to 21.5% of revenues for the same
quarter last year and were 21.2% of revenues for the nine months ended March 31,
1997 as compared to 22.6% of revenues for the same period last year. This
decrease in selling, general and administrative expenses as a percentage of
revenues was due primarily to the Company's ability to spread fixed costs over
greater revenues.
Amortization of intangible assets increased 53% to $704,000 for the three months
ended March 31, 1997 from $460,000 for same quarter last year and increased 35%
to $1.8 million for the nine months ended March 31, 1997 from $1.4 million for
the same period of last year. Amortization of intangibles assets has increased
primarily due to the approximately $9.3 million of goodwill related to the
Company's acquisitions of Spectrum NT (July 1996) and CNSI (December 1996).
In connection with the mergers of Spectrum, TMG and TSG with the Company in
fiscal 1997, the Company has incurred merger costs of $1.2 million during the
nine months ending March 31, 1997. Merger costs consist primarily of broker and
professional fees. The Company did not incur any merger costs during the nine
months ended March 31, 1996.
10
<PAGE>
Net interest income was $229,000 and $668,000 for the three and nine month
periods ended March 31, 1997, respectively, as compared to $216,000 and $222,000
for the three and nine month periods ended March 31, 1996, respectively. As a
result of the Company's November 1995 public sale of common stock, the Company
paid off its borrowings under its bank line of credit and increased its
investment in interest earning cash equivalent instruments. Generally, since
November 1995, the Company has not borrowed money. During the quarter ended
March 31, 1997 the Company obtained additional cash of $17.0 million from the
January public sale of common stock which was offset partially by the use of
$13.2 million of cash in March for the acquisition of DTA. Future net interest
income will vary based on the average invested cash equivalent balance during
the quarter. Significant fluctuations in average cash equivalent balances are
primarily due to cash provided by or used in operating activities, cash used for
acquisitions, and cash provided by the sale of common stock.
The Company's effective tax rates were 40.0% and 33.6% for the three months
ended March 31, 1997 and 1996, respectively, and were 48.2% and 27.2% for the
nine months ended March 31, 1997 and 1996, respectively. The Company's fiscal
1997 to date effective tax rate is unusually high due to a one-time charge of
$1.2 million to income tax expense related to Spectrum's termination of its S
corporation status upon its merger with CIBER and a one-time charge of $515,000
to income tax expense related to TSG's termination of its S corporation status
upon its merger with CIBER, and to a lesser extent, nondeductible merger costs,
which were partially offset by nontaxable S corporation income. During the
quarter ended December 31, 1995, Spectrum converted to an S corporation, and
accordingly, recognized a one-time tax benefit of $818,000.
After the pro forma adjustment to income tax expense to reflect the exclusion of
the one-time income tax effects related to changes in the tax status of certain
merged companies and to impute income tax expense for S corporation operations
which were not subject to income taxes, the Company's pro forma net income
increased 89% to $4.9 million (7.0% of revenues) for the three months ended
March 31, 1997 from $2.6 million (5.3% of revenues) for the three months ended
March 31, 1996 and increased 59% to $10.4 million (5.7% of revenues) for the
nine months ended March 31, 1997 from $6.5 million (4.9% of revenues) for the
same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $18.4 million and a current ratio
of 3.7:1 at March 31, 1997. It had total liabilities of $19.4 million versus
total shareholders' equity of $92.7 million. Net cash provided by operating
activities was $3.9 million and $3.7 million for the nine months ended March 31,
1997 and 1996, respectively. Net income, excluding noncash charges (primarily
depreciation, amortization and deferred income taxes) provided cash of $12.0
million and $9.3 million during the nine months ended March 31, 1997 and 1996,
respectively. This was partially offset by changes in operating assets and
liabilities that used cash of $8.1 million and $5.6 million during the nine
months ended March 31, 1997 and 1996, respectively. Changes in operating assets
and liabilities have used significant amounts of cash primarily because the
Company's accounts receivable increased as a result of the Company's increase in
revenues.
Investing activities used cash of $21.6 million and $2.8 million during the nine
months ended March 31, 1997 and 1996, respectively. During the nine months
ended March 31, 1997, the Company used $19.3 million in connection with the
acquisitions of DTA, CNSI and Spectrum NT, while during the nine months ended
March 31, 1996, the Company used $1.7 million for the acquisitions of the
Rochester, Minnesota and Columbus, Ohio branch offices.
Financing activities provided cash of $18.6 million and $14.8 million during the
nine months ended March 31, 1997 and 1996, respectively. The Company obtained
net cash proceeds from the sale of common stock of $19.5 million and $19.8
million, during the nine months ended March 31, 1997, and 1996, respectively.
The current tax benefits resulting from the exercise of stock options provided
cash of $2.9 million and $1.6 million during the nine months ended March 31,
1997 and 1996, respectively. In connection with the Company's acquisition of
CNSI, the Company assumed CNSI's $1.9 million outstanding balance under a bank
line of credit and $1.1 million of notes payable, primarily due to the Company's
Chairman and his family. The Company repaid these debt obligations and canceled
CNSI's bank line of credit. During the nine months ended March 31, 1996, the
Company used cash of $5.2 million to reduce its borrowings under its lines of
credit. Prior to its merger with the Company, TSG had made distributions to its
shareholders.
11
<PAGE>
In connection with the Company's acquisition of CNSI, the Company assumed CNSI's
liability under a $3.0 million inventory wholesale financing line of credit with
AT&T Capital Corporation. This line of credit expires in October 1997 and is
guaranteed by certain assets of the Company. CNSI obtains inventory from various
vendors who obtain payment directly from AT&T Capital Corporation. CNSI then
pays AT&T Capital Corporation within 30 days of invoice. Amounts outstanding
under this line of credit, which totaled $1.2 million at March 31, 1997, are
included in accounts payable on the Company's balance sheet.
In March 1997 the Company renewed its bank revolving line of credit. Under the
terms of the new credit agreement the Company may borrow up to $20 million.
Outstanding borrowings bear interest at the three month London Interbank Offered
Rate ("LIBOR") plus 2%. Borrowings are unsecured. The credit agreement
requires a commitment fee of 0.225% per annum on any unused portion of the line
of credit up to $15 million. The credit agreement expires in December 1997.
The terms and conditions of the credit agreement include several covenants,
including those whereby the Company agrees to the maintenance of a certain
tangible net worth and debt service coverage ratios among other things. Amounts
advanced under the line of credit can be used to consummate an acquisition and
may be required by the bank to be converted into a five-year term note payable
in equal amounts of interest and principal; in such event, the line of credit
would be reduced by the amount of the term note.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27.1 - Financial Data Schedule
Exhibit 99.1 - Credit Agreement with UMB Bank Colorado dated
March 25, 1997
A Report on Form 8-K was filed on January 16, 1997 that announced
the Company's second quarter results.
A Report on Form 8-K was filed on March 27, 1997 that provided
notice of the Company's acquisition of Davis, Thomas & Associates.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned there
unto duly authorized.
CIBER, INC.
(Registrant)
Date MAY 1, 1997 By /s/ MAC J. SLINGERLEND
-------------------------------------
Mac J. Slingerlend
President and Chief Operating Officer
Date MAY 1, 1997 By /s/ RICHARD A. MONTONI
-------------------------------------
Richard A. Montoni
Executive Vice President/Chief
Financial officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 18,386
<SECURITIES> 0
<RECEIVABLES> 50,267
<ALLOWANCES> 0
<INVENTORY> 381
<CURRENT-ASSETS> 70,931
<PP&E> 8,759
<DEPRECIATION> 3,742
<TOTAL-ASSETS> 112,072
<CURRENT-LIABILITIES> 19,281
<BONDS> 0
0
0
<COMMON> 195
<OTHER-SE> 92,496
<TOTAL-LIABILITY-AND-EQUITY> 92,691
<SALES> 0
<TOTAL-REVENUES> 183,401
<CGS> 0
<TOTAL-COSTS> 124,617
<OTHER-EXPENSES> 41,948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (668)
<INCOME-PRETAX> 17,504
<INCOME-TAX> 8,439
<INCOME-CONTINUING> 9,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,065
<EPS-PRIMARY> .52<F1>
<EPS-DILUTED> 0
<FN>
<F1>EPS IS CALCULATED BASED ON PRO FORMA NET INCOME OF $10,373 (SEE FORM 10-Q)
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
CREDIT AGREEMENT
Whereas UNM Bank Colorado (hereafter "Bank") has agreed to make available a
$20,000,000 credit facility for CIBER, Inc. (hereafter "CIBER"), Bank and CIBER
hereby agree to the following so Iong as any debt is owing to Bank by CIBER or
any credit is available to CIBER from Bank:
1. FINANCIAL REPORTING
A. CIBER will provide Bank:
i) Its company's prepared consolidated balance sheet and consolidated
income statement within 30 days of the previous month end, unless
prohibited by the "public" ownership status of CIBER, in which case
the statements will be provided quarterly within 4-5 days of the
quarter end.
ii) Its annual audited consolidated financial statements of within 120
days of the fiscal year end.
iii) A Borrower's Certificate substantially in the form of Exhibit A
attached within 30 days of the month end and an accounts receivable
summary at the end of each calendar quarter.
2. COLLATERAL
The $20,000,000 credit facility for CIBER shall be on an unsecured
basis.
3. INTEREST RATE
A) The interest rate on all outstanding borrowings owed to Bank by CIBER
shall be 200 basis points above the three month London Interbank
Offered Rate ("LIBOR") as quoted in the previous day's western edition
of The Wall Street Journal for a term of 90 days.
<PAGE>
CREDIT AGREEMENT
CONTINUED
PAGE 2
4. UNUSED CREDIT FACILITY
CIBER will pay Bank an unused credit facility fee on the first $15,000,000
with no fee required on the remaining portion, quarterly in arrears, equal
to .225% (annualized) of the average unused portion of the revolving credit
facilities in the previous calendar quarter which has been made available
by Bank to CIBER.
5. TERMING OUT OF LOANS MADE FOR ACQUISITION PURPOSES
At the Bank's option any amounts advanced under CIBER's credit facility for
the purpose of making an acquisition may be converted to a five year term
note six months following the date of such advances. Such loan amount will
be repayable in sixty (60) monthly payments of equal principal plus
interest. Any such loan amounts converted to a five year term loan will be
subtracted from $20,000,000 and the remaining amount will be available to
CIBER as a revolving credit facility.
6. CROSS DEFAULT OF DEBT OWED TO BANK
A default by CIBER on any of its debt over $25,000 owing to Bank shall be
considered an event of default on all other debt owing to Bank by CIBER.
7. TANGIBLE NET WORTH
CIBER will maintain a minimum Tangible Net Worth of $35,000,000. Tangible
Net Worth is defined as the reported net worth less assets generally
considered to be intangible, as determined by Bank, such as but not
limited to, goodwill, covenants not to compete and customer lists.
8. LEVERAGE RATIO
CIBER'S total liabilities divided by Tangible Net Worth must not exceed
1.5 to 1.0 at any time.
<PAGE>
CREDIT AGREEMENT
CONTINUED
PAGE 3
9. DEBT SERVICE COVERAGE RATIO
CIBER will maintain a Debt Service Coverage Ratio of 1.5 to 1.0 which will
be measured at the end of each calendar quarter. The numerator shall be
the net income plus amortization for the just completed calendar quarter
multiplied by four divided by a denominator of the current maturities of
long term debt.
10. NO OUARTERLY LOSS
CIBER shall not report a net loss in any calendar quarter.
11. LOANS TO OTHER PARTIES
CIBER will not make loans to any person, corporation, company or
partnership excluding its subsidiaries which exceed in aggregate $500,000.
12. BANK ACCOUNTS AND SERVICE CHARGES
CIBER's primary operating accounts will be maintained with Bank, or its
affiliate banks, into which all CIBER's receipts will be deposited. The
corporate banking services provided by Bank, and its affiliate banks, to
CIBER will be placed on Account Analysis and such services may be paid for
with account balances. If the account balances are not high enough to pay
for the bank services used, CIBER agrees to pay Bank the deficiency amount
for such services following the end of each calendar quarter.
13. EVENT OF DEFAULT
Failure to comply with any of the terms in this Credit Agreement shall
constitute an event of default on the debt of CIBER owing to Bank with Bank
having all the rights and remedies as contained in the loan notes. Bank
shall have no obligation to make additional advances if Bank determines
that CIBER is not in compliance with the terms of this Credit Acreement,
Borrower's Certificate, or any other agreement with the Bank.
<PAGE>
CREDIT AGREEMENT
CONTINUED
PAGE 4
14. OTHER AGREEMENTS
All rights and obligations arising under said other agreements or instruments or
under this Credit Agreement, or both, shall be cumulative and independently
applicable in all respects and shall not be limited in any fashion owing to the
fact that provisions of said other agreements or instruments and this Credit
Agreement may differ.
The undersigned hereby agree to the terms and conditions of this Credit
Agreement as of March 25, 1997.
CIBER, INC.
By: /s/ MAC J. SLINGERLEND
--------------------------------
Name Printed: Mac J. Slingerlend
------------------
Title: PRESIDENT/CHIEF OPERATING OFFICER
---------------------------------
& TREASURER
-----------
UMB BANK COLORADO
By: /s/ NED C. VOTH
--------------------------------
Name Printed: NED C. VOTH
-----------
Title: DIVISIONAL EXECUTIVE VICE PRESIDENT
-----------------------------------
& CHIEF LENDING OFFICER
-----------------------
