<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CIBER, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO OF CIBER, INC.]
CIBER, Inc.
5251 DTC Parkway, Suite 1400
Englewood, Colorado 80111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 23, 1997
TO THE SHAREHOLDERS OF CIBER, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders (the
"Meeting") of CIBER, Inc., a Delaware corporation (the "Company"), will be held
on Thursday, October 23, 1997 at 10:00 a.m. Mountain time, at the Hyatt Regency
Tech Center, 7800 East Tufts Avenue, Denver, CO 80237, for the following
purposes:
(1) To elect two Class III Directors of the Company to serve for a term of
three years, who will serve until their successors have been duly
elected and qualified.
(2) To approve an increase in the number of shares of common stock
reserved for issuance pursuant to the Company's Equity Incentive Plan
from 2,000,000 to 4,000,000.
(3) To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending June 30, 1998.
(4) To transact such other business as may properly come before the
Meeting or any adjournment or postponements thereof.
The foregoing items of business are more fully described in the
accompanying Proxy Statement. The Board of Directors of the Company fixed the
close of business on September 5, 1997 as the record date for the determination
of shareholders entitled to notice of and to vote at the Meeting and at any
adjournment or postponement thereof. Consequently, only holders of the
Company's common stock at the close of business on September 5, 1997 will be
entitled to notice of and to vote at the Meeting. A complete list of
shareholders entitled to vote at the Meeting will be available for examination
during business hours by any shareholder, for purposes related to the Meeting,
for a period of ten days prior to the Meeting at the Company's corporate offices
at 5251 DTC Parkway, Suite 1400, Englewood, Colorado 80111.
Whether or not you plan to attend the Meeting in person, please complete,
date and sign the accompanying proxy card and return it promptly in the enclosed
envelope to ensure your representation at the Meeting. You are cordially
invited to attend the Meeting and, if you do so, you may personally vote,
regardless of whether you have signed a proxy.
By order of the Board of Directors
Bobby G. Stevenson
Chairman of the Board,
Chief Executive Officer and Secretary
Englewood, Colorado
September 19, 1997
<PAGE>
CIBER, INC.
---------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 23, 1997
---------------
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by and on behalf of the Board of
Directors (the "Board") of CIBER, Inc., a Delaware corporation (the "Company"),
to be used at the 1997 Annual Meeting of Shareholders of the Company (the
"Meeting") to be held on Thursday, October 23, 1997 at 10:00 a.m. Mountain time,
at the Hyatt Regency Tech Center, 7800 East Tufts Avenue, Denver, Colorado, and
at any adjournment or postponement thereof. This Proxy Statement and the
accompanying proxy card are first being mailed to the holders of record of the
Company's common stock, $.01 par value per share (the "Common Stock"), on or
about September 19, 1997.
Shareholders of the Company represented at the Meeting will consider and
vote upon (i) the election of two Class III Directors to serve on the Board
until the 2000 Annual Meeting of Shareholders or until their successors have
been duly elected and qualified, (ii) an increase in the number of shares of
Common Stock reserved for issuance pursuant to the Company's Equity Incentive
Plan from 2,000,000 to 4,000,000, (iii) the ratification of the appointment of
KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year
ending June 30, 1998, and (iv) such other business as may properly come before
the Meeting of any adjournment of adjournments thereof. The Company is not
aware of any other business to be presented for consideration at the Meeting.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Common Stock at the close of business on
September 5, 1997 (the "Record Date") will be entitled to notice of and to vote
at the Meeting. As of the Record Date, 20,986,220 shares of Common Stock were
outstanding. Each shareholder is entitled to one vote for each share of Common
Stock held of record on the Record Date for each proposal submitted for
shareholder consideration at the Meeting. The presence, in person or by proxy,
of the holders of not less than one-third of the shares of Common Stock entitled
to vote at the Meeting is necessary to constitute a quorum for the conduct of
business at the Meeting. The act of the majority of such quorum will be the act
of the shareholders.
All shares represented by properly executed proxies will, unless such
proxies have previously been revoked, be voted at the Meeting in accordance with
the directions on the proxies. A proxy may be revoked at any time prior to
final tabulation of the votes. Shareholders may revoke proxies by written
notice to the Secretary of the Company, by delivery of a proxy bearing a later
date, or by personally appearing at the Meeting and casting a contrary vote. If
no direction is indicated, the shares will be voted in favor of the Board of
Directors' nominees for director, for the increase in the number of shares
reserved for issuance pursuant to the Company's Equity Incentive Plan and for
the ratification of KPMG Peat Marwick LLP as independent auditors, as listed in
this Proxy Statement. The persons named in the proxies will have discretionary
authority to vote all proxies with respect to additional matters that are
properly presented for action at the Meeting.
The executive officers and directors of the Company as a group own or may
be deemed to control approximately 31% of the outstanding shares of Common Stock
of the Company. Each of the executive officers and directors has indicated his
intent to vote all shares of Common Stock owned or controlled by him in favor of
each item set forth herein.
The proxy solicitation is made by and on behalf of the Board of Directors.
Solicitation of proxies for use at the Meeting may be made in person or by mail,
telephone or telegram, by directors, officers and regular employees of the
Company. Such persons will receive no additional compensation for any
solicitation activities. Copies of solicitation materials will be furnished to
banks, brokerage houses, fiduciaries and custodians holding in their names
shares of Common Stock beneficially owned by others to forward to such
beneficial owners. The Company may reimburse persons representing beneficial
owners of Common Stock for their costs of forwarding solicitation materials
-1-
<PAGE>
to such beneficial owners. The Company will bear the entire cost of
solicitation of proxies, including the preparation, assembly, printing and
mailing of this Proxy Statement, the proxy and any additional information
furnished to shareholders.
PROPOSAL 1 - ELECTION OF DIRECTORS
Directors constituting one-third of the Board of Directors are elected each
year for a three-year term at the Company's Annual Meeting of Shareholders or
serve until their successors are duly elected by the shareholders. The terms of
Messrs. Bobby G. Stevenson and Richard A. Montoni expire in 1997 (the "Class III
Directors"); the terms of Messrs. James C. Spira and Roy L. Burger expire in
1998 (the "Class I Directors") and the terms of Messrs. Mac J. Slingerlend and
James A. Rutherford expire in 1999 (the "Class II Directors"). The Board has
nominated Messrs. Bobby G. Stevenson and Richard A. Montoni to serve for three-
year terms to expire at the 2000 Annual Meeting of Shareholders or until their
successors are elected and qualified. Vacancies on the Board may be filled by
the affirmative vote of a majority of the remaining directors then in office. A
director elected to fill a vacancy (including a vacancy created by an increase
in the Board of Directors) shall serve for the remainder of the full term of the
new directorship or of the class of directors in which the vacancy occurred.
Officers are elected by and serve at the discretion of the Board.
Shares represented by all proxies received by the Board and not marked so
as to withhold authority to vote for Messrs. Bobby G. Stevenson and Richard A.
Montoni will be voted for the election of Messrs. Bobby G. Stevenson and Richard
A. Montoni. If any of the nominees is unavailable or unwilling to serve as
director, persons named in the proxy intend to cast votes for which they hold
proxies in favor of the election of such other person as the Board of Directors
may designate. The Board of Directors knows of no reason why either Mr. Bobby
G. Stevenson or Mr. Richard A. Montoni should be unable or unwilling to serve on
the Board. See "Directors and Executive Officers" below for biographical
information on the person nominated as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES
-2-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Company's directors and executive
officers, their ages, positions and offices currently held with the Company, the
year elected as director or appointment as officer and Class of directorship or
director nominee. For information about the ownership of the Company's voting
securities held by each director, director nominee or executive officer, see
"Security Ownership of Certain Beneficial Owners and Management."
<TABLE>
<CAPTION>
SERVED AS
OFFICER OR
DIRECTOR
NAME AGE POSITIONS SINCE CLASS
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bobby G. Stevenson 55 Chairman, Chief Executive 1974 Class III
Officer, Secretary and
Founder
Mac J. Slingerlend 50 President, Chief Operating 1989 Class II
Officer, Treasurer and
Director
Richard A. Montoni 46 Executive Vice President, 1996 Class III
Chief Financial Officer and
Director
Lawrence D. Greenwood 46 Senior Vice President; 1996 -
President/Solutions Consulting
Group
William E. Storrison 38 Senior Vice President; 1992 -
President/CIBER Information
Services Division
John B. Maitland, Jr. 54 Vice President; President of 1995 -
Business Information Technology,
Inc. ("BIT")
James A. Rutherford 51 Director 1994 Class II
James C. Spira 54 Director 1994 Class I
Roy L. Burger 42 Director 1995 Class I
</TABLE>
BOBBY G. STEVENSON. Mr. Stevenson is Chairman of the Board of Directors,
Chief Executive Officer, Secretary and one of the original three founders of the
Company. Mr. Stevenson was Vice President in charge of recruiting and
management of the technical staff from 1974 until November 1977 when he became
Chief Executive Officer. He has been responsible for all operations of the
Company since 1977.
MAC J. SLINGERLEND. Mr. Slingerlend joined the Company in January 1989 as
Executive Vice President/Chief Financial Officer, became Treasurer and a
director in 1994 and President and Chief Operating Officer in 1996. Prior to
joining the Company, Mr. Slingerlend spent 15 years in the banking industry,
primarily as a commercial lender, and five years in corporate financial
positions in the cable television and hospitality industries.
RICHARD A. MONTONI. Mr. Montoni has been the Company's Executive Vice
President/Chief Financial Officer and a director since October 1996. Prior to
joining the Company, Mr. Montoni was a partner with KPMG Peat Marwick LLP, where
he worked for over 20 years with companies in the high technology,
manufacturing, merchandising and distribution industries. Mr. Montoni is a
member of the American Institute of Certified Public Accountants and the
Colorado Society of Certified Public Accountants.
LAWRENCE D. GREENWOOD. Mr. Greenwood has been President of the Company's
Solutions Consulting Group since August 1997. Mr. Greenwood joined CIBER as
Vice President in 1996 when Spectrum Technology Group, Inc. ("Spectrum") merged
into the Company. Mr. Greenwood was a co-founder of Spectrum in 1979 and served
as its President when the merger occurred.
-3-
<PAGE>
WILLIAM E. STORRISON. Mr. Storrison has been President of the CIBER
Information Services Division since 1996. Mr. Storrison was Senior Vice
President/Operations of the Company from 1994 to 1996 and, from 1992 to 1994,
served as the Company's Vice President/Eastern Operations. Mr. Storrison has
been with the Company since 1987 and was previously Branch Manager and Regional
Vice President of several of the Company's eastern branch offices.
JOHN B. MAITLAND, JR.. Mr. Maitland joined the Company in 1995 as Vice
President and President of BIT when BIT merged with the Company. Mr.
Maitland is responsible for the strategic initiatives, organizational
development, business growth and overall profitability of BIT. From 1969 to
1981, Mr. Maitland held several positions in management and consulting, lastly
as Consulting Manager and Director of Consulting at Integral Systems, Inc., a
human resource management systems and financial software producer and consulting
firm. In 1981, Mr. Maitland co-founded BIT and became its Executive Vice
President and Chief Operating Officer. In 1987, he was promoted to President
and Chief Executive Officer of BIT.
JAMES A. RUTHERFORD. Mr. Rutherford has been a director of the Company
since February 1994. He is currently a managing director of Wingset Investments
Ltd., a private venture capital company located in New Albany, Ohio. Prior to
forming Wingset in 1995, Mr. Rutherford was one of the founders of Goal Systems
International Inc., serving in various executive positions including Chief
Executive Officer and as a director from its incorporation in 1977 until its
sale in 1992. Mr. Rutherford is also a trustee of Case Western Reserve
University and a director of Symix Systems, Inc., Columbus, Ohio, as well as
several private corporations.
JAMES C. SPIRA. Mr. Spira has been a director of the Company since
September 1994. Since 1995, he has been managing partner with Chicago, Illinois
based Diamond Technology Partners, Inc., a management consulting firm providing
program management services to design and deploy technology-enabled business
strategies. From 1991 to 1995, Mr. Spira was Group Vice President of The
Tranzonic Companies, a Cleveland-based holding company. From 1974 through 1991,
Mr. Spira was founder, President and Chief Executive Officer of Cleveland
Consulting Associates, an operations and systems management consulting firm
doing business with large multi-national companies.
ROY L. BURGER. Mr. Burger has been a director of the Company since
November 1995. Mr. Burger has approximately 20 years of experience in the
equipment leasing and finance industry and has arranged the financing of more
than $1.5 billion of equipment. Mr. Burger currently serves as Chairman and
Chief Executive Officer of Boulder Capital Group, a company founded by him in
1986 that specializes in equipment leasing.
BOARD COMMITTEES AND MEETINGS
The Board of Directors met four times during the Company's 1997 fiscal
year. Five of the directors participated in each of the board meetings and
committee meetings (of which such director was a member) held during fiscal
1997; one of the directors was unable to attend one meeting. The Board has an
Audit Committee and a Compensation Committee, but does not have a Nominating
Committee or any committee performing a similar function.
COMPENSATION COMMITTEE. The principal responsibilities of the Compensation
Committee are the administration and grant of awards under the Employees' Plan
and the Stock Purchase Plan (each as defined below), as well as the
recommendation of annual salaries for senior management to the Company's Board
of Directors. The current members of the Compensation Committee are
Messrs. Rutherford, Spira and Burger. The Compensation Committee met once in
fiscal 1997.
AUDIT COMMITTEE. The principal responsibilities of the Audit Committee are
to meet periodically with representatives of the Company's independent auditors
to review the general scope of audit coverage, including consideration of the
Company's accounting practices and procedures and system of internal accounting
controls, and to review any transactions that may involve a conflict of
interest, and to report to the Board with respect thereto. The Audit Committee
also recommends to the Board of Directors the appointment of the Company's
independent auditors. The current members of the Audit Committee are
Messrs. Rutherford, Spira and Burger. The Audit Committee met once in fiscal
1997.
-4-
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who beneficially own greater than 10% of a registered class of the
Company's equity securities to file initial reports of ownership and changes in
ownership of such securities with the Securities and Exchange Commission (the
"Commission"), New York Stock Exchange and the Company. Based solely upon its
review of copies of the Section 16(a) reports the Company has received and
written representations from certain reporting persons, the Company believes
that during its fiscal year ended June 30, 1997, all of its directors, executive
officers and greater than 10% beneficial owners were in compliance with their
filing requirements.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock at September 5, 1997, and stock options
exercisable for shares of Common Stock within sixty days of such date, held by
(i) each person or group of persons known by the Company to own beneficially
more than five percent (5%) of the outstanding Common Stock, (ii) each director
and nominee for director of the Company, (iii) each Named Executive Officer (as
defined under "Executive Compensation" below) and (iv) all executive officers
and directors of the Company as a group. All information is taken from or based
upon ownership filings made by such persons with the Commission or upon
information provided by such persons to the Company. Unless otherwise
indicated, the shareholders listed below have sole voting and investment power
with respect to the shares reported as owned.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
---------------- -------------------- ----------
<S> <C> <C>
Bobby G. Stevenson(1) 6,094,544 29%
Mac J. Slingerlend(2) 430,287 2%
Richard A. Montoni(3) 9,904 *
John B. Maitland, Jr.(4) 13,909 *
William E. Storrison(5) 80,835 *
James A. Rutherford(6) 24,371 *
James C. Spira(6) 14,291 *
Roy L. Burger(6) 5,371 *
--------- --
All directors and executive
officers as a group (8 persons)(7) 6,673,512 31%
--------- --
--------- --
</TABLE>
------------------------
*less than 1%
(1) The address of Mr. Stevenson is c/o CIBER, Inc., 5251 DTC Parkway, Suite
1400, Englewood, CO 80111. Includes shares held by the Bobby G. Stevenson
Revocable Trust, of which Mr. Stevenson is the settlor, trustee and
beneficiary and options to purchase 60,000 shares of Common Stock. Excludes
94,700 shares of Common Stock held in the Irrevocable First Stevenson
Charitable Remainder Unitrust, of which shares Mr. Stevenson disclaims
beneficial ownership.
(2) Includes options to purchase 416,667 shares of Common Stock.
(3) Includes options to purchase 9,804 shares of Common Stock.
(4) Includes shares currently held by John B. Maitland, Jr. and by the John B.
Maitland, Jr. Trust, of which Mr. Maitland is the settlor, trustee and
beneficiary and includes options to purchase 13,334 shares of Common Stock.
(5) Includes options to purchase 78,125 shares of Common Stock.
(6) Includes options to purchase 14,000, 14,000 and 5,000 shares of Common Stock
for Messrs. Rutherford, Spira and Burger, respectively.
(7) Includes options to purchase 610,930 shares of Common Stock.
-5-
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
On August 6, 1996, the Board of Directors resolved to issue shares of
Common Stock in lieu of cash to each non-employee director, the value of which
shares would equal approximately $2,500 for each meeting attended. All non-
employee directors are reimbursed for their expenses in attending board and
committee meetings. These directors also receive stock options under the Non-
employee Directors' Stock Option Plan for serving on the Board of Directors.
Employee directors do not receive any cash compensation for serving on the Board
of Directors.
Under the terms of the Non-employee Directors' Stock Option Plan (the
"Director' Plan"), the Company may grant to non-employee directors awards of
stock options. The Directors' Plan provides for an initial authorization of
100,000 shares of Common Stock and is administered by the Board of Directors.
Each option granted under the Directors' Plan expires ten years from the date of
grant. The Director's Plan provides for an initial grant of options to purchase
10,000 shares of Common Stock to each non-employee director when such director
takes office, which options vest in equal annual installments over two years.
Additionally, after each year of service, each non-employee director receives a
grant of options to purchase 2,000 shares of Common Stock; such options vest one
year after the date of grant.
COMPENSATION COMMITTEE INTERLOCKS
There were no Compensation Committee Interlocks existing in fiscal 1997.
-6-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth compensation information with respect to Mr.
Stevenson, the Company's Chief Executive Officer, and the Company's four most
highly paid executive officers with annual compensation in excess of $100,000
(the "Named Executive Officers"), for services rendered for the fiscal years
ended June 30, 1997, 1996 and 1995. See "Employment Agreements."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------------
Securities All Other
Name and Fiscal Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($)(1)
- ------------------ ------ ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Bobby G. Stevenson 1997 330,000 117,885 -- 4,481
Chairman, Chief 1996 315,000 34,134 -- 5,041
Executive Officer, 1995 300,000 93,000 -- 5,987
and Secretary
Mac J. Slingerlend 1997 300,000 140,000 10,000 7,163
President, Chief 1996 230,000 82,654 20,000 8,442
Operating Officer 1995 200,000 73,500 -- 7,470
and Treasurer
Richard A. Montoni 1997 163,461 100,000 50,000 3,228
Executive Vice 1996 -- -- -- --
President, Chief 1995 -- -- -- --
Financial Officer
John B. Maitland, Jr. 1997 225,000 127,805 10,000 4,363
Vice President, 1996 225,000 53,004 50,000 6,075
President of 1995 -- -- -- --
Business Information
Technology, Inc.
William E. Storrison 1997 200,000 131,049 20,000 5,032
Senior Vice President, 1996 150,000 41,780 20,000 4,989
President/CIBER 1995 125,000 90,000 30,000 5,255
Information
Services Division
</TABLE>
- --------------------
(1) Consists of amounts contributed by the Company under the Company's 401(k)
Savings Plan and life insurance premiums paid by the Company. Savings Plan
contributions were $4,123, $4,781 and $5,237 for Mr. Stevenson and $4,175,
$5,538 and $5,470 for Mr. Slingerlend for the years ended June 30, 1997,
1996 and 1995, respectively. Savings Plan contributions were $1,250 for
the year ended June 30, 1997 for Mr. Montoni. Savings Plan contributions
were $3,850 and $6,075 for Mr. Maitland for the years ended June 30, 1997
and 1996, respectively. Savings Plan contributions were $4,674, $4,723 and
$5,080 for Mr. Storrison for the years ended June 30, 1997, 1996 and 1995,
respectively. The remaining amounts represent life insurance premiums.
-7-
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information regarding options granted to the
Named Executive Officers during the fiscal year ended June 30, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
PERCENT OF STOCK PRICE APPRECIATION FOR
NUMBER OF TOTAL OPTION TERM(1)
SECURITIES OPTIONS ----------------------------
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
-------- ---------- ------------ ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Bobby G. Stevenson -- -- -- -- -- --
Mac J. Slingerlend(2) 10,000 2% $22.00 7 / 2006 138,357 350,623
Richard A. Montoni(3) 50,000 10% $34.00 10 / 2006 1,069,121 2,709,362
John B. Maitland, Jr.(2) 10,000 2% $22.00 7 / 2006 138,357 350,623
William E. Storrison(2) 20,000 4% $22.00 7 / 2006 276,714 701,247
</TABLE>
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises will depend on future performance of the
Common Stock. No assurance can be made that the amounts reflected in these
columns will be achieved.
(2) Options were granted on July 1, 1996. The options vest and are exercisable
in equal installments over three years commencing July 1, 1997.
(3) Options were granted October 30, 1996. Options for 20,590 vest and are
exercisable in equal installments over three years commencing October 30,
1997 and options for 29,410 vest and are exercisable in equal installments
over ten years commencing October 30, 1997.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning outstanding options
held by the Named Executive Officers during the fiscal year ended June 30, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END (#) FISCAL YEAR END($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-------- --------------- ------------ ------------------------------ -------------------------
<S> <C> <C> <C> <C>
Bobby G. Stevenson -- -- 60,000 / 40,000 1,787,250 / 1,191,500
Mac J. Slingerlend 50,000 1,950,775 406,666 / 23,334 13,657,927 / 459,392
Richard A. Montoni -- -- -- / 50,000 -- / 9,375
John B. Maitland, Jr. 10,000 208,750 -- / 50,000 -- / 1,134,375
William E. Storrison 93,312 3,187,437 98,353 / 43,333 3,135,224 / 878,742
</TABLE>
-8-
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of its Named Executive
Officers. Except in the case of John Maitland, whose employment agreement was
entered into in conjunction with the merger with BIT, each employment agreement
has a term of one year and is annually renewable. In the case of Mr. Maitland,
the initial term is through June 30, 1998 and is annually renewable for one-year
terms thereafter, however, employment is not guaranteed for such three year
period ending June 1998. Each employment agreement provides that an officer's
compensation will include a base salary and a bonus. In the event that any
officer's employment is terminated upon a change of control of the Company, upon
death or disability of the officer or without cause, such officer will be
entitled to a severance payment. In the event of termination upon a change of
control of the Company or other than for cause by the Company, the severance
payment due the Chief Executive Officer is equal to three times his base salary,
with such amounts payable in equal installments over a period of 36 months
following termination. In the event of death of the Chief Executive Officer,
the payment is equal to one-half of such officer's base salary, with such amount
payable in equal installments over a period of 24 months. The severance payment
for each other officer (other than Mr. Montoni, who is discussed below) in the
event of termination upon a change in control of the Company, other than for
cause by the Company or in the event of death of such officer, is equal to one-
half of such officer's base salary, with such amounts payable in equal
installments over a period of 24 months following termination (other than Mr.
Storrison, whose severance payment in the event of death will be paid over a
period of 12 months). In addition, in the event of termination upon a change of
control of the Company, other than for cause by the Company, voluntary
termination, or termination for disability, Mr. Maitland would be entitled to an
additional lump sum payment of $25,000 if such termination occurred before June
30, 1998. In the event of termination of an executive officer upon a change of
control of the Company, other than for cause by the Company or in the event of
disability, the Company will pay such officer's medical, life and disability
premiums for the first 12 months following termination. For fiscal 1998, the
base salaries of Messrs. Stevenson, Slingerlend, Storrison and Maitland are
$400,000, $300,000, $225,000 and $240,000, respectively.
Effective November 1, 1996, the Company employed Richard A. Montoni as its
Executive Vice President and Chief Financial Officer. The initial term of
employment terminates on June 30, 1998 and will be automatically renewable for
one year periods thereafter. Mr. Montoni's base salary and bonus for fiscal
1997 was $325,000. Mr. Montoni was also paid a $25,000 signing bonus. For
fiscal 1998, Mr. Montoni will be paid a base salary of $250,000 and will be
entitled to an annual bonus of one percent (1%) of the increase in the Company's
net income from the prior year's net income. In the event of a termination upon
a change of control of the Company, Mr. Montoni will receive a severance payment
equal to his base salary for an additional two years plus an amount equal to his
bonus for the two years preceding the termination. In the event of a
termination other than for cause, Mr. Montoni will receive a severance payment
of his base salary for an additional year.
LONG-TERM DEFERRED COMPENSATION PLAN
The Company has agreed to make certain post-employment payments to Mr.
Slingerlend, or his designated beneficiary except in the event of a term for
cause. The payments will be made for 15 years after Mr. Slingerlend's
termination of employment with the Company and will range from $40,000 to
$100,000 annually, based on Mr. Slingerlend's age at the time of termination of
employment. The benefits are also subject to certain vesting provisions.
The Company has agreed to make certain post-employment payments to Mr.
Montoni or his designated beneficiary except in the event of a termination for
cause. The payments will be made for 15 years after Mr. Montoni's termination
of employment with the Company and will range from $30,000 to $75,000 annually,
based on the date of termination of employment. The benefits are also subject
to certain vesting provisions.
THE COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES
The Compensation Committee (the "Committee") of the Board of Directors
consists of its independent non-employee directors. The purpose of the
Committee is to develop policies and make specific recommendations with respect
to the compensation of the Company's executive officers, with the objective that
a fair relationship exists between executive pay and the creation of shareholder
value.
-9-
<PAGE>
The Committee, among other things, considers the performance of the
Company's operations, compensation of executive officers of competitors, salary
surveys of industry related positions, the salary history of the particular
officer and other compensation in place, including stock option awards. There
is no singular objective formula by which compensation is determined and the
decisions are ultimately subjective.
FISCAL 1997 COMPENSATION
With respect to the Company's chief executive officer and the other Named
Executive Officers, the Committee focused principally upon establishing
appropriate base salary and incentive compensation. The chief executive officer
and each of the other Named Executive Officers are parties to employment
agreements with the Company that provide for base salary increases and bonuses
at stipulated performance levels for Messrs. Stevenson, Slingerlend, Montoni,
Maitland and Storrison. The base salary and bonuses granted the chief executive
officer and the other Named Executive Officers with respect to fiscal 1997 are
consistent with the Committee's objectives.
The Company has periodically granted stock options in order to provide
certain of its executives with a competitive total compensation package and
reward them for their contribution to the Company's long-term performance, as
well as to align a portion of their compensation with the market value of the
Common Stock. Mr. Stevenson has a substantial share holding interest in the
Company and was granted options in fiscal 1994. During fiscal 1997, stock
options were granted to Messrs. Slingerlend, Montoni, Maitland and Storrison and
to other members of management based upon their actual and potential
contributions to the Company.
Compensation Committee
James A. Rutherford
James C. Spira
Roy L. Burger
-10-
<PAGE>
PERFORMANCE GRAPH
The following graph provides a comparison of the 39 month cumulative total
return* among CIBER, Inc., the Nasdaq Stock Market (U.S.) Index, the Russell
2000 Index, the Nasdaq Computer & Data Processing Index and the S & P MidCap 400
Index.
[PERFORMANCE GRAPH]
* $100 invested on March 17, 1994 in the Company's Common Stock, Nasdaq Stock
Market (U.S.) and Nasdaq Computer & Data Processing or on February 28, 1998
in other indices including reinvestment of dividends. Fiscal year ended
June 30.
Corresponding index value and Common Stock price values are given below:
<TABLE>
<CAPTION>
3/17/94 6/30/94 6/30/95 6/30/96 6/30/97
------- ------- ------- ------- -------
<S> <S> <S> <S> <S> <S>
CIBER, Inc. $100 104 212 525 816
Nasdaq Stock Market (U.S.) 100 88 118 151 184
Russell 2000 100 91 109 135 158
Nasdaq Computer & Data
Processing 100 89 146 194 245
S & P MidCap 400 100 92 112 137 169
CIBER, Inc. Closing Stock Price(1) $4.188 4.375 8.875 22.000 34.188
</TABLE>
(1) The Company's Common Stock has been listed on the New York Stock Exchange
under the symbol "CBR" since June 19, 1997 and was, prior to that date,
traded on the Nasdaq National Market.
-11-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bobby G. Stevenson, the Company's largest shareholder, Chief Executive
Officer and Chairman, Mac J. Slingerlend, the Company's President and Chief
Operating Officer, and Prasong Suvarnasorn, an officer of the Company, directly
and through their children, owned 85% of CIBER Network Services, Inc. ("CNSI"),
which commenced operations in July 1992. CNSI is engaged in the computer
network integration business, which business includes the procurement of
computer hardware and the installation of local and wide area computer networks
and related services. On December 2, 1996, the Company acquired CNSI for
consideration of approximately $3.7 million, consisting of 68,631 shares of
Common Stock and approximately $1.2 million in cash. In addition, the Company
assumed net liabilities of approximately $800,000, resulting in a total purchase
price of approximately $4.5 million. Approximately $898,000 was paid by the
Company at closing to Bobby G. Stevenson and members of his family for a debt
owed to them by CNSI. The acquisition was approved by a majority of the
disinterested board members of the Company, with Mr. Stevenson and Mr.
Slingerlend abstaining, after full disclosure by Mr. Stevenson, Mr. Slingerlend
and Mr. Suvarnasorn of their respective interests in CNSI and the interests of
their families. In determining the purchase price of the transaction, the Board
relied, in part, on independent valuations. Mr. Stevenson owned 10% of CNSI
and received $375,000 in cash upon the sale and he and members of his family
were repaid approximately $898,000 for an outstanding obligation owed to them by
CNSI. Mr. Slingerlend and members of his family owned, collectively, 60% of
CNSI and received 39,166 shares of Common Stock and $784,024 in cash upon the
sale. Mr. Suvarnasorn and his family owned, collectively, 15% of CNSI and
received 15,332 shares of Common Stock. Additionally, the terms of purchase
provide for contingent consideration of up to $2.6 million if CNSI achieves
certain performance objectives in each of the 12 month periods ending October
31, 1997, 1998 and 1999. Any contingent consideration earned will be payable at
the sellers' option, in Common Stock (at the then prevailing market price for
Common Stock) or in cash. The contingent consideration, if earned, will be paid
to the sellers in accordance with their historical percentage ownership interest
in CNSI. In order to increase the likelihood that the contingent consideration
would be earned, the Company agreed to establish a management compensation plan
for the five CNSI managers (who were also shareholders of CNSI), pursuant to
which such managers could earn additional compensation for meeting or exceeding
the revenue and earnings' thresholds that trigger payment of the contingent
consideration.
The Company was a guarantor on a $3.0 million inventory purchase line of
credit with AT&T Capital Corporation to CNSI. In connection with the
acquisition, the Company assumed CNSI's liability under this line of credit
which had an outstanding balance of approximately $1.1 million at December 2,
1996. Messrs. Stevenson and Slingerlend had guaranteed this line of credit and
indemnified the Company against losses that could have been incurred as a result
of its guaranty. These personal guaranties were released at the closing of the
purchase of CNSI. In addition, CNSI had a $2.5 million bank line of credit with
UMB Bank Colorado. This line of credit was secured by Mr. Stevenson's pledge of
250,000 shares of Common Stock. These shares were released by the bank upon the
sale of CNSI to the Company and were returned to Mr. Stevenson.
During the years ended June 30, 1995 and 1996 and for the period from July
1, 1996 to December 2, 1996, the Company purchased from CNSI several local area
networks and various computer equipment and software for approximately $268,000,
$923,000 and $558,000, respectively. In addition, from January 1994 to December
2, 1996, the Company provided accounting and other administrative services to
CNSI at a monthly cost of $2,500.
PROPOSAL 2 - AMENDMENT TO THE EQUITY INCENTIVE PLAN
The demand for skilled information technology consultants has increased
significantly in recent years and management expects this trend to continue. As
an integral element of the Company's approach to attracting, motivating and
retaining employees in such a competitive labor market, it has issued and plans
to continue to issue Common Stock based incentives, primarily stock options, to
employees. In addition, management believes additional options to purchase
Common Stock will be required for issuance to employees of companies that may be
merged with or acquired by the Company in the future, in part to replace
existing options of merged or acquired companies that may exist. As of
September 5, 1997, the Company had 223,761 options available for future issuance
under its Equity Incentive Plan (the "Employees' Plan"). Therefore, to ensure
the continued availability of the Employees' Plan to attract, motivate and
retain employees, on August 5, 1997, the Board of Directors approved an
amendment to the Employees' Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 2,000,000 shares to 4,000,000
shares, subject to the approval by the Company's shareholders at the Meeting.
Assuming no unusual matter to the contrary (such as a significant business
combination), management expects the increase in the number of
-12-
<PAGE>
shares reserved under the Employees' Plan to be sufficient through fiscal
1999. The affirmative vote of a majority of the shares of the Company's
Common Stock represented at the Meeting will be required to approve the
amendment to the Employees' Plan.
EMPLOYEES' EQUITY INCENTIVE PLAN
The Employees' Plan was adopted by the Board of Directors and shareholders
of the Company in January 1994. A total of 2,000,000 shares of Common Stock are
currently reserved for issuance under the Employees' Plan. The purpose of the
Employees' Plan is to provide long-term incentives to the Company's officers,
employees and consultants and to encourage and enable such participants who are
in a position to make significant contributions to the success of the Company to
acquire a closer identification of their interests with those of the Company.
The Employees' Plan is administered by a committee which is comprised of
disinterested non-employee members of the Board of Directors (the "Committee").
Subject to the terms of the Employees' Plan, the Committee determines the
persons to whom awards are granted, the type of award granted, the number of
shares granted, the vesting schedule, the type of consideration to be paid to
the Company upon exercise of options and the term of any option (which cannot
exceed ten years). Under the Employees' Plan, the Committee may grant awards of
restricted stock, stock options and supplemental bonuses or any combination
thereof.
Under the Employees' Plan, the Committee may grant both incentive stock
options ("ISOs") intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and options that are not qualified as
incentive stock options ("NSOs"). ISOs may only be granted to persons who are
employees of the Company. ISOs may not be granted under the Employees' Plan at
an exercise price of less than the fair market value of the Common Stock on the
date of grant and the term of these options cannot exceed ten years. The
exercise price of an ISO granted to a holder of more than 10% of the Common
Stock must be at least 110% of the fair market value of the Common Stock on the
date of grant, and the term of these options cannot exceed five years. The
exercise price of NSOs may, at the discretion of the Committee, be granted at
less than the fair market value of the Common Stock on the date of grant. No
options under the Employees' Plan may be granted after January 2004.
Under the performance award component of the Employees' Plan, participants
may be granted an award denominated in shares of Common stock or in dollars.
Achievement of the performance targets, or multiple performance target,
established by the Committee relating to corporate, group, unit or individual
performance, based upon standards set by the Committee, will entitle the
participant to payment of the full amount specified with respect to the award,
subject to adjustment at the discretion of the Committee in the event of
performance exceeding the minimum performance target, but below the maximum
performance target applicable to such award. Payment may be made in cash,
Common Stock or any combination thereof, as determined by the Committee, and
will be adjusted in the event the participant ceases to be an employee of the
Company before the end of a performance cycle by reason of death, disability or
retirement.
Under the restricted stock component of the Employees' Plan, the Committee
may, in selected cases, issue to a participant a given number of shares of
restricted stock. Restricted stock under the Employees' Plan is Common Stock
restricted as to sale pending fulfillment of such vesting schedule and
employment requirements as the Committee determines. Prior to the fulfilling of
the restrictions, the participant will nevertheless be entitled to receive
distributions in liquidation and dividends on, and to vote the shares of, the
restricted stock. The Employees' Plan provides for forfeiture of restricted
stock for breach of conditions of grant. No restricted stock or performance
awards have been granted under the Employees' Plan.
The Board may amend or terminate the Employees' Plan at any time without
approval of the shareholders. However, shareholder approval is required for any
amendment to the Employees' Plan that increases the number of shares for which
options may be granted, changes the designation of the class of persons eligible
to participate or changes in any material respect the limitations or provisions
of the options subject to the Plan. However, no action by the Board or
shareholders may alter or impair any award previously granted without the
consent of the award holder.
-13-
<PAGE>
Through September 5, 1997, options to purchase up to an aggregate of
1,924,591 shares of Common Stock have been granted under the Employees' Plan, of
which options to purchase 340,591 shares of Common Stock have been exercised and
options for 148,352 shares have been canceled. Options to purchase shares of
Common Stock issued under the Employees' Plan to all Named Executive Officers as
a group during fiscal years 1995, 1996 and 1997 were as follows for the years
indicated: 1995 - 30,000 shares; 1996 - 90,000 shares; and 1997 - 90,000
shares.
FEDERAL INCOME TAX CONSEQUENCES OF THE EMPLOYEES' PLAN
The following is a general summary of the federal income tax consequences
that may apply to recipients of options, restricted stock, performance shares
and performance units under the Employees' Plan. Because the application of the
tax laws may vary according to individual circumstances, a participant should
seek professional tax advice concerning the tax consequences to him or her of
participation in the Employees' Plan, including the potential application and
effect of state, local and foreign tax laws and estate and gift tax
considerations.
INCENTIVE STOCK OPTIONS. A participant who is granted an ISO recognizes no
taxable income when the ISO is granted and generally recognizes no taxable
income upon exercise of the ISO, but will recognize alternative minimum income
upon such exercise (see below). A participant who exercises an ISO recognizes
taxable gain or loss when he sells the shares purchased pursuant to the ISO.
Any gain or loss recognized on the sale of shares acquired upon exercise of an
ISO is taxed as capital gain or loss if the shares have been held for at least
18 months from the date the option was exercised and for at least two years
after the option was granted. In this event, the Company receives no deduction
with respect to the ISO shares. If the participant disposes of the shares
before the required holding periods have elapsed (a "disqualifying
disposition"), he is taxed as though he exercised an NSO (see below), except
that the compensation income on exercise of the option is recognized in the year
of the disqualifying disposition, and the compensation income may not exceed the
excess of the amount realized on the sale of the stock over the exercise price
for such stock.
EFFECT OF ALTERNATIVE MINIMUM TAX. For purposes of determining the
alternative minimum taxable income ("AMTI") of an individual, ISOs exercised
during a taxable year will give rise to AMTI to the extent of the excess of the
fair market value of the shares acquired pursuant to such ISO over the exercise
price paid. Therefore, although generally an individual will have no regular
taxable income associated with the exercise of an ISO, such individual may have
AMTI and, depending upon his specific facts and circumstances for such tax year,
a resulting tax liability.
NON-STATUTORY STOCK OPTIONS. The tax treatment of NSOs differs
significantly from the tax treatment of ISOs. Although similar to an ISO, no
taxable income is recognized when an NSO is granted. However, upon the exercise
of an NSO, the difference between the fair market value of the shares on the
date of exercise and the exercise price of the option is taxable as ordinary
compensation income to the recipient. In addition, subject to certain
limitations attributable to payments of excess compensation, the Company is
entitled to a compensation deduction for the amount of ordinary income
recognized by the option holder.
WITHHOLDING. The Company may withhold any taxes required by any law or
regulation of any governmental authority, whether federal, state or local, in
connection with any stock option or other award under the Employees' Plan,
including, but not limited to withholding of any portion of any payment or
withholding from other compensation payable to the participant, unless such
person reimburses the Company for such amount.
IMPLEMENTATION. If the proposed amendment to the Employees' Plan is
adopted by the shareholders, it will become effective immediately and be
reflected in the amended Employees' Plan, which plan will be filed in the
Company's minutes book.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE EMPLOYEES' PLAN
FROM 2,000,000 TO 4,000,000
-14-
<PAGE>
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP served as independent auditors of the
Company for the year ended June 30, 1997 and, upon recommendation of the Audit
Committee, the Board of Directors has appointed KPMG Peat Marwick LLP to serve
for the current fiscal year ending June 30, 1998. The Board of Directors is
requesting ratification by the shareholders of the appointment of KPMG Peat
Marwick LLP. Representatives of KPMG Peat Marwick LLP are expected to attend
the Meeting. The representatives will have an opportunity to make a statement
and will be available to respond to appropriate questions.
In the event this proposal is defeated, the vote will be considered as a
direction to the Board of Directors to select other auditors for the next fiscal
year. However, because of the difficulty and expense of making any substitution
of auditors after the beginning of a fiscal year, KPMG Peat Marwick LLP's
appointment for the 1998 fiscal year will be permitted to stand unless the Board
of Directors finds other reasons for making a change.
Services to be performed by KPMG Peat Marwick LLP for the 1998 fiscal year
will include, among other things, audit of annual financial statements, and
consultation in connection with various financial reporting, accounting and tax
matters. Ratification of KPMG Peat Marwick LLP's appointment requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present at the Meeting, in person or by proxy, and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for shareholder
action at the Company's annual shareholder meetings. Such proposals must be
received by the Company not later than August 1, 1998 to be considered for
inclusion in the proxy statement and proxy relating to the 1998 Annual Meeting
of Shareholders. Any such proposals should be addressed to: Corporate
Secretary, CIBER, Inc., 5251 DTC Parkway, Suite 1400, Englewood, Colorado 80111.
ANNUAL REPORT TO SHAREHOLDERS, MANAGEMENT'S DISCUSSION
AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS
The 1997 Annual Report of the Company, as filed with the Commission, is
being mailed to the shareholders with this Proxy Statement. The 1997 Annual
Report is not to be considered part of the soliciting material.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Company's audited consolidated financial statements and notes
thereto, as contained in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997, is included herein on pages P-1 through P-26.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Meeting except the matters set forth in the Notice and described in this Proxy
Statement. If any other matters properly come before the Meeting, the persons
designated as agents in the enclosed proxy will vote on such matters in
accordance with their best judgment.
By order of the Board of Directors
Bobby G. Stevenson
Chairman of the Board,
Chief Executive Officer and Secretary
Englewood, Colorado
September 19, 1997
-15-
<PAGE>
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. 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 ABILITY
TO ATTRACT AND RETAIN QUALIFIED CONSULTANTS, DEPENDENCE ON SIGNIFICANT
RELATIONSHIPS AND THE ABSENCE OF LONG-TERM CONTRACTS, MANAGEMENT OF A LARGE AND
RAPIDLY GROWING BUSINESS, PROJECT RISKS, PRICING AND MARGIN PRESSURE AND
COMPETITION, WHICH ARE DISCUSSED HEREIN UNDER THE CAPTION "FACTORS THAT MAY
AFFECT FUTURE RESULTS". MANY OF THESE FACTORS ARE BEYOND THE COMPANY'S ABILITY
TO PREDICT OR CONTROL. IN ADDITION, AS A RESULT OF THESE AND OTHER FACTORS, THE
COMPANY'S PAST FINANCIAL PERFORMANCE SHOULD NOT BE RELIED ON AS AN INDICATION OF
FUTURE PERFORMANCE.
OVERVIEW
The Company's revenues have increased from $81.4 million in fiscal 1993 to
$262.3 million in fiscal 1997. The Company's revenues are generated from two
areas, the CIBER Information Services ("CIS") Division and the Solutions
Consulting Group ("SCG"). The CIS Division accounted for approximately 71% of
the Company's total revenues in fiscal 1997, while SCG accounted for the
remainder. The CIS Division provides application software development and
maintenance services and, through its CIBR2000 Division, millenium date change
solutions. SCG is comprised of the Company's wholly-owned subsidiaries,
Spectrum Technology Group, Inc. ("Spectrum"), Business Information Technology,
Inc. ("BIT") and CIBER Network Services, Inc. ("CNSI"). Spectrum provides
information technology 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. BIT specializes in
the implementation and integration of human resource and financial software
application products, plus workflow automation and manufacturing/distribution
software systems, primarily for client/server networks. 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. A large portion of CNSI's revenues is derived from sales of
computer networking equipment ("product sales").
The Company has grown significantly through mergers and acquisitions as well as
through internal growth. Growth in revenues from internal operations ("organic
growth") was approximately 27% in fiscal 1997. For purposes of this report, the
term "acquisition" refers to business combinations accounted for as a purchase
and the term "merger" refers to business combinations accounted for as a pooling
of interests. The Company's acquisitions involve the capitalization of
intangible assets, which intangible assets are generally amortized over periods
of up to 15 years for financial reporting purposes. The Company's consolidated
financial statements include the results of operations of an 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. The Company's consolidated financial statements are
restated for all periods prior to a merger to include the results of operations,
financial position and cash flows of the merged company. 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.
From July 1, 1994 to June 30, 1997, the Company completed the following
acquisitions: The Phoenix branch of Eurosystems International, Inc., July 1994;
Interface Systems, Inc. ("ISI"), January 1995; the Minnesota Branch of Broadway
& Seymour, Inc. (the "Minnesota Branch"), September 1995; OASYS, Inc. (the
"Columbus Branch"), March 1996; the Business Systems Development division of
DataFocus, Inc. ("Spectrum NT"), July 1996; CIBER Network Services, Inc.,
December 1996; and, Davis, Thomas & Associates Inc. ("DTA"), March 1997. In
addition, the Company has completed the following mergers: Spencer & Spencer
Systems, Inc. ("SSSI"), May 1995; Business Information Technology, Inc., June
1995; Practical Business Solutions, Inc. ("PBSI"), May 1996; Spectrum Technology
Group, Inc., September 1996; Technology Management Group, Inc. ("TMG"), November
1996; and Technical Support Group, Inc. ("TSG"), November 1996. The Company's
June 30, 1997 consolidated financial statements include the accounts of these
merged companies for all periods prior to their respective merger.
P-1
<PAGE>
In addition, subsequent to June 30, 1997, the Company completed the following
two mergers:
KCM COMPUTER CONSULTING, INC. ("KCM") - On July 18, 1997, KCM merged with CIBER
in a business combination to be accounted for as a pooling of interests. The
Company issued 430,850 shares of its common stock in exchange for all of the
outstanding common stock of KCM. KCM, located in Calverton, Maryland, provides
consulting services similar to the CIS Division of CIBER. The effects of this
merger on the Company's revenues, pro forma net income and pro forma income per
share would not have been material. As a result, management does not intend to
restate the Company's historical financial statements for this business
combination.
SOFTWAREXPRESS, INC. D/B/A RELIANT INTEGRATION SERVICES, INC. ("RELIANT") - On
August 21, 1997, Reliant merged with CIBER in a business combination to be
accounted for as a pooling of interests. The Company issued 591,638 shares of
its common stock and assumed all of Reliant's liabilities in exchange for all of
the assets of Reliant. Reliant, located in Menlo Park, California, provides
network integration services and equipment. The Company's consolidated
financial statements included herein, have not been restated for the Reliant
merger. The Company's consolidated financial statements issued in the future
will be restated to include the results of operations, financial position, and
cash flows of Reliant. Reliant had revenues of approximately $32 million, $30
million and $36 million during the years ended June 30, 1995, 1996 and 1997,
respectively. The effects of this merger on the Company's pro forma net income
and pro forma income per share are not expected to be material.
In general, except for CNSI's product sales, the Company's SCG revenues provide
higher gross margins than its CIS revenues, however, the SCG activities also
involve higher selling, general and administrative expenses as a percentage of
revenues. Consequently, fluctuations in gross margin and selling, general and
administrative expenses as a percentage of revenues may be due to changes in the
mix of revenues between CIS and SCG. Management believes that operating income
before amortization and merger costs, as a percentage of revenues, is a
meaningful indicator of company performance because it reflects the effects of
revenue mix.
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, certain items from the
Company's consolidated statements of operations, expressed as a percentage of
revenues and percentage change in the dollar amount of such items compared to
the prior year:
<TABLE>
<CAPTION>
Dollar % Increase
Percentage of Revenues (Decrease)
Year Ended June 30, Year to Year
--------------------------- ----------------------
1995 1996 1997 1995:1996 1996:1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 30.5% 39.8%
---------------------------
---------------------------
Gross margin 31.8% 31.4% 32.4% 28.8 44.1
Selling, general and administrative expenses 24.0 22.2 21.0 20.5 32.3
---------------------------
Operating income before amortization
and merger costs 7.8 9.2 11.4 54.4 72.5
Amortization of intangible assets 1.0 .9 1.1 28.7 54.3
Merger costs .7 .5 .5 (16.2) 35.2
---------------------------
Operating income 6.1 7.8 9.8 67.2 77.1
Interest income (expense), net (.2) .2 .4 - 87.7
---------------------------
Income before income taxes 5.9 8.0 10.2 76.9 77.4
Income tax expense 2.3 2.7 4.6 52.7 139.3
---------------------------
Net income 3.6% 5.3% 5.6% 92.3 46.1
---------------------------
---------------------------
Pro forma net income 3.5% 4.9% 6.1% 81.2 72.7
---------------------------
---------------------------
</TABLE>
P-2
<PAGE>
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
The Company's total revenues for fiscal 1997 increased 39.8% to $262.3 million
from $187.7 million for fiscal 1996. In fiscal 1997, CIS revenues increased
29.5% to $186.5 million from $144.0 million in fiscal 1996 and SCG revenues
increased 73.4% to $75.7 million from $43.7 million in fiscal 1996. CIS
revenues represented 71.1% and 76.7% of total revenues in fiscal 1997 and fiscal
1996, respectively. The increase in the Company's 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. In addition, the acquisition of DTA
accounted for approximately $2.5 million of additional CIS revenues in fiscal
1997 as compared to fiscal 1996. SCG revenues increased approximately $21.7
million due to the acquisitions of DTA, CNSI and Spectrum NT, of which $12.2
million was CNSI product revenues. The remaining increase in SCG revenues is
primarily due to increased volume of customers implementing PeopleSoft, Inc.
software, and to a lesser extent, increases in other consulting services and
increases in billing rates.
Gross margin increased 44.1% to $84.9 million (32.4% of revenues) in fiscal 1997
from $58.9 million (31.4% of revenues) in fiscal 1996. This improvement is due
to greater SCG revenues as a percentage of total revenues and due to improved
pricing.
Selling, general and administrative expenses increased 32.3% to $55.1 million
(21.0% of revenues) in fiscal 1997 from $41.7 million (22.2% of revenues) in
fiscal 1996. The decrease as a percentage of revenues is primarily due to
greater economies of scale at the administrative level of the Company.
Amortization of intangible assets increased 54.3% to $2.8 million in fiscal 1997
from $1.8 million in fiscal 1996. This increase was due primarily to the
Company's acquisitions of DTA, CNSI, and Spectrum NT in fiscal 1997.
Merger costs, primarily transaction closing costs, of $1.2 million were
incurred in fiscal 1997 related to the mergers of TSG, TMG and Spectrum with
CIBER. Merger costs of $901,000 in fiscal 1996 related to the merger of PBSI.
Net interest income increased to $946,000 (0.4% of revenues) in fiscal 1997 from
$504,000 (0.2% of revenues) in fiscal 1996 due to increased average cash
balances available for investment. As a result of the Company's November 1995
public sale of common stock, the Company reduced 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.
After the pro forma adjustment to income tax expense, the Company's pro forma
effective tax rates for fiscal 1997 and 1996 were 40.4% and 38.7%, respectively.
This increase was due to increased nondeductible merger costs, an increase in
the Company's statutory federal tax rate from 34% to 35%, and increased state
and other taxes. The pro forma adjustment to income tax expense reflects the
exclusion of the one-time income tax effects related to changes in the tax
status of certain merged companies and imputes income tax expense for S
corporation operations which were not subject to income taxes. The effective tax
rates on a historical basis for fiscal 1997 and 1996 were 45.3% and 33.6%,
respectively. The Company's fiscal 1997 historical effective tax rate is
unusually high due to one-time income tax expense charges of $1.7 million
related to the termination of the S corporation status of TSG and Spectrum upon
their merger with CIBER, and to a lesser extent, nondeductible merger costs,
which were partially offset by nontaxable S corporation income. In fiscal
1996, Spectrum converted to an S corporation and recognized a one-time tax
benefit of $818,000, which lowered the Company's effective rate.
The Company's pro forma net income increased 72.7% to $15.9 million (6.1% of
revenues) in fiscal 1997 from $9.2 million (4.9% of revenues) in fiscal 1996.
FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995
The Company's total revenues for fiscal 1996 increased 30.5% to $187.7 million
from $143.8 million for fiscal 1995. In fiscal 1996, CIS revenues increased
26.6% to $144.0 million from $113.8 million in fiscal 1995 and SCG revenues
increased 45.2% to $43.7 million from $30.0 million in fiscal 1995. CIS
revenues represented 76.7% and 79.1% of total revenues in fiscal 1996 and fiscal
1995, respectively. The increase in the Company's CIS revenues was derived
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<PAGE>
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. Acquisitions accounted for approximately $6.0
million of additional CIS revenues in fiscal 1996 as compared to fiscal 1995.
SCG revenues increased primarily due to increased volume of customers
implementing PeopleSoft, Inc. software, and to a lesser extent, increases in
other consulting services and increases in billing rates.
Gross margin increased 28.8% to $58.9 million in fiscal 1996 from $45.8 million
in fiscal 1995. Gross margin as a percentage of revenues remained relatively
constant at 31.4% in fiscal 1996 compared to 31.8% in fiscal 1995.
Selling, general and administrative expenses increased 20.5% to $41.7 million
(22.2% of revenues) in fiscal 1996 from $34.6 million (24.0% of revenues) in
fiscal 1995. The decrease as a percentage of revenues is primarily due to
greater economies of scale at the administrative level of the Company.
Amortization of intangible assets increased 28.7% to $1.8 million in fiscal 1996
from $1.4 million in fiscal 1995. This increase was due primarily to the
Company's acquisitions of the Minnesota Branch and the Columbus Branch in fiscal
1996 and the acquisition of ISI during fiscal 1995.
Merger costs of $901,000 were incurred in fiscal 1996 related to the merger of
PBSI with CIBER. Merger costs of $1.1 million in fiscal 1995 related to the
mergers of BIT and SSSI.
Net interest income was $504,000 (0.2% of revenues) in fiscal 1996 as compared
to net interest expense of $193,000 (0.2% of revenues) in fiscal 1995. As a
result of the Company's November 1995 public sale of common stock, the Company
reduced 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. Net interest income
increased due to increased average cash balances available for investment.
After the pro forma adjustment to income tax expense, the Company's pro forma
tax effective tax rates for fiscal 1996 and 1995 were 38.7% and 40.2%,
respectively. This decrease was due to decreased nondeductible merger costs,
which was partially offset by increased state and local taxes. The pro forma
adjustment to income tax expense reflects the exclusion of the one-time income
tax effects related to changes in the tax status of certain merged companies and
imputes income tax expense for S corporation operations which were not subject
to income taxes. The effective tax rates on a historical basis for fiscal 1996
and 1995 were 33.6% and 38.9%, respectively. The Company's fiscal 1996
historical effective tax rate is unusually low due to a one-time income tax
benefit of $818,000 as a result of Spectrum's conversion to an S corporation.
The Company's pro forma net income increased 81.2% to $9.2 million (4.9% of
revenues) in fiscal 1996 from $5.1 million (3.5% of revenues) in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had $60.8 million of working capital, of which
$23.0 million was cash and cash equivalents, and had a current ratio of 4:1.
The Company has primarily used its operating cash flow and the net proceeds from
public offerings to finance working capital needs and acquisitions. The Company
believes that its cash and cash equivalents, its operating cash flow and the
availability of credit under its bank revolving line of credit will be
sufficient to finance working capital needs through at least fiscal 1998.
Net cash provided by operating activities was $11.4 million, $4.4 million and
$2.4 million in fiscal 1997, 1996 and 1995, respectively. Net income excluding
noncash items (primarily depreciation, amortization and deferred income taxes)
provided cash of $18.4 million, $11.4 million and $7.6 million in fiscal 1997,
1996 and 1995, respectively. This was partially offset by changes in operating
assets and liabilities, which used cash of $7.0 million, $7.0 million and $5.2
million in fiscal 1997, 1996 and 1995, respectively. Changes in operating
assets and liabilities have used significant amounts of cash primarily as a
result of increases in accounts receivable. The Company's accounts receivable
have increased 37.3% and 32.9% as a result of the Company's 39.8% and 30.5%
increase in revenues in fiscal 1997 and 1996, respectively. Accounts receivable
days sales outstanding ("DSO") was 60 days at June 30, 1997 as compared to 63
days at June 30, 1996.
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<PAGE>
Net cash used in investing activities in fiscal 1997, 1996 and 1995 was $22.4
million, $3.6 million and $4.8 million, respectively. The Company used cash of
$19.3 million, $1.7 million, and $4.9 million for acquisitions during fiscal
1997, 1996 and 1995, respectively. The Company also purchased property and
equipment, primarily computer equipment, of $3.1 million, $1.8 million, and $1.0
million during fiscal 1997, 1996 and 1995, respectively.
Net cash provided by financing activities in fiscal 1997, 1996 and 1995 was
$16.5 million, $12.7 million and $4.1 million, respectively, The Company
obtained net cash proceeds from sales of common stock of $20.3 million, $20.3
million and $223,000 in fiscal 1997, 1996 and 1995, respectively. In connection
with the Company's acquisition of CNSI in fiscal 1997, the Company assumed
CNSI's $1.9 million outstanding balance under a bank line of credit and $1.1
million of notes payable. The Company repaid these debt obligations and canceled
CNSI's bank line of credit. The Company used $5.8 million in fiscal 1996 to
reduce its borrowings under bank lines of credit, while in fiscal 1995 the
Company borrowed $4.1 million on the lines of credit.
For the years ended June 30, 1997 and 1996, the Company recognized $6,366,000
and $2,643,000, respectively, as a direct increase to additional paid-in capital
for the income tax benefits resulting from the exercise of stock options by
employees.
The Company has a $20 million revolving line of credit with a bank. 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's subsidiary, CNSI, also has a $3.0 million inventory financing line
of credit with AT&T Capital Corporation. This line of credit expires in October
1997 and is secured 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 $940,000 at June 30, 1997,
are included in accounts payable on the Company's balance sheet.
ASSET MANAGEMENT
The Company's accounts receivable have increased 37.3% and 32.9% as a result of
the Company's 39.8% and 30.5% increase in revenues in fiscal 1997 and 1996,
respectively. The Company's accounts receivable totaled $51.7 million at June
30, 1997. Clients are generally billed weekly, bi-weekly or monthly for
services. Due to the high quality and large size of the Company's clients, bad
debt expenses have averaged less than 0.1% of revenue for the last several
years. During the last three fiscal years, approximately 85% of the Company's
receivables have been collected within 60 days of invoice. Delays in collection
of accounts receivable generally relate to missing time sheets, delayed receipt
of purchase order numbers and payables procedures of the Company's clients. The
Company believes substantially all accounts receivable on its June 30, 1997
balance sheet will be collected, although there can be no assurance that all
accounts receivable will be collected.
SEASONALITY
The Company experiences a moderate amount of seasonality. Typically, operating
income as a percentage of revenues is lowest in the last quarter of each
calendar year (the Company's second fiscal quarter) because more holidays and
vacations are taken at that time of year resulting in fewer hours billed in that
period.
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<PAGE>
The following table sets forth certain statement of operations data for each of
the Company's last eight quarters and, in the opinion of management of the
Company, contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation thereof. See Note 14 of Notes to
Consolidated Financial Statements for additional quarterly financial
information.
<TABLE>
<CAPTION>
FISCAL 1996 - THREE MONTHS ENDED FISCAL 1997 - THREE MONTHS ENDED
------------------------------------------ -----------------------------------------
IN THOUSANDS SEPT. 30 DEC. 31 MAR. 31 JUNE 30(1) SEPT. 30(1) DEC. 31(1) MAR. 31 JUNE 30
-------- ------- ------- ---------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $41,943 $43,066 $48,291 $54,353 $54,030 $59,720 $69,651 $78,873
Operating income, excluding
merger costs 3,306 3,135 3,978 5,041 5,029 5,112 7,913 8,942
Operating income, excluding merger
costs, as a percentage of revenues 7.9% 7.3% 8.2% 9.3% 9.3% 8.6% 11.4% 11.3%
</TABLE>
(1) OPERATING INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1996, SEPTEMBER 30,
1996 AND DECEMBER 31, 1996 EXCLUDES MERGER COSTS OF $901,000, $622,000 AND
$596,000,RESPECTIVELY, RELATING TO POOLINGS OF INTERESTS.
RECENT ACCOUNTING PRONOUNCEMENTS
For the quarter ended December 31, 1997, the Company will be required to adopt
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS
128"). SFAS 128 requires the restatement of all prior-period earnings per share
("EPS") data. SFAS 128 replaces the presentation of primary EPS, with a
presentation of basic EPS and diluted EPS. Under SFAS 128, basic EPS excludes
dilution for common stock equivalents and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Upon adopting SFAS 128,
the Company's diluted EPS will be the same as the income per share as currently
reported by the Company while the Company's basic EPS will be greater than the
income per share as currently reported.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Included in this report and elsewhere from time to time in other written reports
and oral statements, including but not limited to, the Annual Report to
Shareholders, quarterly shareholder letters, news releases, and investor
presentations, are forward-looking statements about the Company's business
strategies, market potential, future financial performance and other matters
which reflect management's current expectations. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects" and similar
expressions are intended to identify forward-looking statements. The Company
disclaims any intent or obligation to update publicly such forward-looking
statements. Actual results may differ materially from those projected in any
such forward-looking statements due to a number of factors, including, without
limitation, those set forth below.
The Company operates in a dynamic and rapidly changing environment that involves
numerous risks and uncertainties. The following section lists some, but not all,
of the risks and uncertainties that may have a material adverse affect on the
Company's business, financial condition or results of operations.
GROWTH THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION - As an integral
part of its business strategy, the Company intends to continue to expand by
acquiring application software consulting businesses in attractive markets or
with desirable client relationships, as well as businesses with complementary
information technology consulting and system integration activities. The Company
continuously evaluates potential business combinations and aggressively pursues
attractive transactions. From June 1994 through August 1997, the Company
completed 16 business combinations. The success of this strategy depends not
only upon the Company's ability to identify and acquire businesses on a
cost-effective basis, but also upon its ability to integrate acquired operations
into its organization effectively, to retain and motivate key personnel and to
retain clients of acquired businesses. Business combinations involve numerous
risks, including the ability to manage geographically remote offices, the
diversion of management's
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<PAGE>
attention from other business concerns and the risks of entering markets in
which the Company has limited or no direct experience. In addition,
acquisitions may involve the expenditure of significant funds and the
incurrence of significant charges associated with the amortization of
goodwill or other intangible assets or future write-downs of the recorded
values of assets acquired. There can be no assurance that any business
combination will result in long-term benefits to the Company or that
management will be able to manage effectively the resulting business.
Additionally, the Company experiences competition for acquisitions. The
Company may open new offices in attractive markets with its own personnel.
Many of the Company's branch offices were originally start-up operations. Not
all branch offices, whether start-up or acquired, have been successful.
There can be no assurance that the Company will be able to start-up,
identify, acquire, or integrate what will ultimately be successful branch
office operations.
The Company's internal growth rate has been in excess of 20% for the past
several years and is due in part to the growth of industry demand for
information technology professional services, including the recent increase in
demand resulting from year 2000 millenium date change service needs. There can
be no assurance that this increased industry demand will continue in future
years and, in particular, beyond the year 2000.
ABILITY TO ATTRACT AND RETAIN QUALIFIED CONSULTANTS - The Company's future
success will depend in part on its ability to hire and provide adequately
trained consultants who can fulfill the increasingly sophisticated needs of its
clients. The Company's on-going personnel needs arise from: (i) increased
demand for the Company's services, (ii) turnover, which is generally high in the
industry, and (iii) client requests for consultants trained in the newest
software and hardware technologies. Few of the Company's employees are bound by
non-compete agreements. Competition for consultants in the information
technology services industry is significant and the Company has had and expects
to continue to have difficulty in attracting and retaining an optimal level of
qualified consultants. In particular, competition is intense for the limited
number of qualified project managers and professionals with specialized skills,
such as a working knowledge of certain sophisticated software. There can be no
assurance that the Company will be successful in attracting and retaining the
personnel it requires to continue to grow.
DEPENDENCE ON SIGNIFICANT RELATIONSHIPS AND THE ABSENCE OF LONG-TERM CONTRACTS -
The Company's five largest clients accounted for 22% of the Company's total
revenues for the fiscal year ended June 30, 1997. No one client accounted for
more than 10% of the Company's total revenues in fiscal 1997, while in fiscal
1996, AT&T Corp. accounted for approximately 11% of the Company's total
revenues. The typical client contract term is one to three years and there can
be no assurance that a client will renew its contract when it terminates. In
addition, the Company's contracts are generally cancelable by the client at any
time and clients may unilaterally reduce their use of the Company's services
under such contracts without penalty. The termination or significant reduction
of its business relationship with any of its significant clients would have a
material adverse effect on the Company. Additionally, the Company has a
significant relationship with PeopleSoft, Inc. ("PeopleSoft") as a PeopleSoft
implementation partner. In fiscal 1997, the Company derived 12% of its total
revenues from clients who purchased implementation services for their PeopleSoft
systems. In the event PeopleSoft products become obsolete or non-competitive or
if the Company should lose its "implementation partner" status with PeopleSoft,
the Company would suffer a material adverse effect.
MANAGEMENT OF A LARGE AND RAPIDLY GROWING BUSINESS - The Company's rapid growth
could place a substantial strain on its operational, administrative and
financial 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
consultants. If the Company's management is unable to manage growth effectively
or its consultants are unable to achieve anticipated performance levels, or if
the integration of new businesses results in a material diversion of
management's attention to the day-to-day operations of the business, the
Company's results of operations would be materially adversely affected.
PROJECT RISKS - The Company has provided and intends to continue to provide
increased project services to its clients. Projects are distinguishable from the
Company's time and material contracts by the level of responsibility assumed by
the Company and the potentially longer and more costly sales cycle of a project.
These factors may cause fluctuations in quarterly results. In a typical
project, the Company independently develops a program or maintains a system,
whereas with time and material contracts, the Company's clients generally
maintain responsibility for the overall task. The failure of a project or the
failure of the Company to provide project services in a satisfactory manner
could have a material adverse effect on the Company. Further, because the
Company may undertake projects on a fixed price basis and guarantee performance
based upon defined operating specifications, cost overruns, unsatisfactory
performance or
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<PAGE>
unanticipated difficulties in completing such projects could have a material
adverse effect on the Company's results of operations.
PRICING AND MARGIN PRESSURE - Many of the Company's larger clients purchase
information technology services primarily from a limited number of pre-approved
vendors. In order to remain on its clients' vendor lists and to develop new
client relationships, the Company must satisfy client requirements at
competitive rates. Although the Company continually attempts to lower its
costs, there are other software services organizations and temporary placement
agencies that provide the same or similar services at equal or lower costs.
Furthermore, as competition intensifies between information technology service
providers, there may be increased demand for qualified consultants resulting in
upward market pressure on consultant compensation. Additionally, certain of the
Company's clients require that their vendors reduce rates after services have
commenced. There can be no assurance that the Company will be able to compete
effectively on pricing or other requirements and, as a result, the Company could
lose clients or be unable to maintain historic gross margin levels or to operate
profitably. With respect to the Company's implementation services for software
packages, the manufacturers of such software may have training requirements that
inhibit the Company from competing effectively with other packaged software
implementation providers. In addition, as the Company expands its service
offerings to include a greater number of fixed price projects, the Company may
experience a decrease in margins as a result of unanticipated cost overruns
resulting from the inability to meet various project requirements.
COMPETITION - The Company operates in a highly competitive and rapidly changing
industry and competes with a variety of companies for positions on the vendor
lists of particular clients. Most of these competing companies, many of which
are significantly larger and have greater financial, technical and marketing
resources, provide the same services as those offered by, and some offer a wider
variety of services than, the Company. Many large accounting and management
consulting firms offer services that overlap with a significant portion of the
Company's services, and the Company competes with the internal information
technology staffs of its clients and potential clients. Also, computer hardware
and software companies are increasingly becoming involved in systems integration
projects. Recently, temporary placement agencies, such as CoreStaff, Olsten and
Interim, have begun expanding their businesses to provide computer-related
services. There can be no assurance that the Company will be able to continue
to compete successfully with its existing competitors or will be able to compete
successfully with new competitors. Additionally, over the past several years
there has been an influx of foreign nationals who provide skilled computer
programming services at lower pay scales than other domestic programmers. Some
of these foreign nationals are being hired as consultants directly by the
Company's clients and potential clients, as well as by certain of the Company's
competitors. Moreover, in an attempt to decrease costs, some of the Company's
clients and potential clients are awarding business to competitors with
operations in "low cost" foreign countries, including Ireland, India and the
former Soviet Union. An increase in the use of skilled foreign national labor at
lower rates or foreign software service firms by the Company's competitors or
clients could have a material adverse effect on the Company.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS - The Company's quarterly
operating results may fluctuate significantly in the future as a result of a
variety of factors, many of which are outside the Company's control. Factors
that may affect the Company's quarterly revenues or operating results generally
include: costs relating to the expansion of the Company's business, the extent
and timing of business acquisitions, the incurrence of merger costs, the timing
of assignments from customers, the seasonal nature of the Company's business due
to variations in holidays and vacation schedules, the introduction of new
services by the Company or its competitors, price competition or price changes
and general economic conditions specific to the information technology,
consulting, or information technology staffing industries. Quarterly sales and
operating results can be difficult to forecast even in the short term. Due to
all of the foregoing factors, it is possible that the Company's revenues or
operating results in one or more future quarters will fail to meet or exceed the
expectations of security analysts or investors. In such event, the trading
price of the Company's common stock would likely be materially adversely
affected.
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
CIBER, Inc.:
We have audited the accompanying consolidated balance sheets of CIBER, Inc. and
subsidiaries as of June 30, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended June 30, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CIBER, Inc. and
subsidiaries as of June 30, 1997 and 1996, and the results of their operations
and their cash flows for each of the years in the three-year period ended June
30, 1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
August 1, 1997, except as to Note 13(b),
which is as of August 21, 1997
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<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA 1995(1) 1996(1) 1997
-------- -------- --------
<S> <C> <C>
Revenues $143,845 $187,653 $262,274
Salaries, wages and other direct costs 98,075 128,724 177,373
Selling, general and administrative expenses 34,591 41,674 55,135
Amortization of intangible assets 1,395 1,795 2,770
Merger costs 1,075 901 1,218
-------- -------- --------
Operating income 8,709 14,559 25,778
Interest income 98 720 946
Interest expense (291) (216) -
-------- -------- --------
Income before income taxes 8,516 15,063 26,724
Income tax expense 3,311 5,056 12,099
-------- -------- --------
Net income $ 5,205 $ 10,007 $ 14,625
-------- -------- --------
-------- -------- --------
Pro forma information (unaudited) (Note 1(i)):
Historical net income $ 5,205 $ 10,007 $ 14,625
Pro forma adjustment to income tax expense (113) (779) 1,308
-------- -------- --------
Pro forma net income $ 5,092 $ 9,228 $ 15,933
-------- -------- --------
-------- -------- --------
Pro forma income per share $ .29 $ .48 $ .78
-------- -------- --------
-------- -------- --------
Weighted average common and common equivalent shares 17,653 19,065 20,329
-------- -------- --------
-------- -------- --------
</TABLE>
(1) Restated for poolings of interests through June 30, 1997 - See Note 2.
See accompanying notes to consolidated financial statements.
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<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT SHARE DATA 1996(1) 1997
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $17,465 $ 22,997
Accounts receivable 37,671 51,736
Inventories - 330
Prepaid expenses and other assets 760 1,615
Deferred income taxes 417 4,160
------- --------
Total current assets 56,313 80,838
------- --------
Property and equipment, at cost 5,475 9,500
Less accumulated depreciation and amortization (2,745) (4,316)
------- --------
Net property and equipment 2,730 5,184
------- --------
Intangible assets, net 12,801 34,383
Deferred income taxes 458 1,112
Other assets 964 1,201
------- --------
Total assets $73,266 $122,718
------- --------
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables $ 1,555 $ 3,502
Accrued compensation 8,242 10,111
Other accrued expenses and liabilities 2,741 4,746
Income taxes payable 642 1,723
Deferred income taxes 467 -
------- --------
Total current liabilities 13,647 20,082
Long-term acquisition costs payable 200 100
------- --------
Total liabilities 13,847 20,182
------- --------
Commitments and contingencies
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 19,823,000 shares issued and outstanding 184 198
Additional paid-in capital 37,248 68,606
Retained earnings 21,987 33,732
------- --------
Total shareholders' equity 59,419 102,536
------- --------
Total liabilities and shareholders' equity $73,266 $122,718
------- --------
------- --------
</TABLE>
(1) Restated for poolings of interests through June 30, 1997 - See Note 2.
See accompanying notes to consolidated financial statements.
P-11
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN RETAINED SHAREHOLDERS'
IN THOUSANDS SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1994 (1) 15,669 $157 $11,799 $10,236 $ 22,192
Employee stock purchases and options exercised 102 1 131 - 132
Acquisition 24 - 100 - 100
Sale of common stock by merged companies - - 91 - 91
Tax benefit from exercise of stock options - - 422 - 422
Termination of S corporation tax status of merged company - - 854 (854) -
Reversal of deferred compensation liability - - 86 - 86
Compensation expense related to stock options - - 19 - 19
Net income - - - 5,205 5,205
Distributions by merged company - - - (187) (187)
-----------------------------------------------------------
BALANCES AT JUNE 30, 1995 (1) 15,795 158 13,502 14,400 28,060
Public offering, net of offering costs of $1,532 1,912 19 18,971 - 18,990
Employee stock purchases and options exercised 672 7 1,241 - 1,248
Acquisition 24 - 100 - 100
Sale of common stock by merged companies - - 36 - 36
Tax benefit from exercise of stock options - - 2,643 - 2,643
Termination of S corporation tax status of merged company - - 736 (736) -
Compensation expense related to stock options - - 19 - 19
Net income - - - 10,007 10,007
Distributions by merged company - - - (1,684) (1,684)
-----------------------------------------------------------
BALANCES AT JUNE 30, 1996 (1) 18,403 184 37,248 21,987 59,419
Public offering, net of offering costs of $1,390 610 6 16,921 - 16,927
Employee stock purchases and options exercised 716 7 3,323 - 3,330
Acquisitions 93 1 2,568 - 2,569
Sale of common stock by merged companies - - 77 - 77
Tax benefit from exercise of stock options - - 6,366 - 6,366
Termination of S corporation tax status of merged company - - 2,041 (2,041) -
Compensation expense related to stock and stock options 1 - 62 - 62
Net income - - - 14,625 14,625
Distributions by merged company - - - (839) (839)
-----------------------------------------------------------
Balances at June 30, 1997 19,823 $198 $68,606 $33,732 $102,536
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
(1) Restated for poolings of interests through June 30, 1997 - See Note 2.
See accompanying notes to consolidated financial statements.
P-12
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
IN THOUSANDS 1995(1) 1996(1) 1997
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,205 $10,007 $14,625
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,998 2,649 4,526
Deferred income taxes 342 (1,224) (811)
Compensation expense related to stock and stock options 19 19 62
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Accounts receivable (8,211) (9,331) (10,867)
Other current and long-term assets (598) (531) (1,356)
Trade payables 523 (58) 28
Accrued compensation 1,810 432 1,433
Other accrued expenses and liabilities 667 1,035 216
Income taxes payable 637 1,449 3,561
------- ------- -------
Net cash provided by operating activities 2,392 4,447 11,417
------- ------- -------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (4,948) (1,725) (19,290)
Purchases of property and equipment (1,009) (1,845) (3,094)
Sales of short-term investments 1,140 - -
------- ------- -------
Net cash used in investing activities (4,817) (3,570) (22,384)
------- ------- -------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 223 20,274 20,334
Net borrowings (payments) on bank lines of credit 4,131 (5,800) (1,900)
Payments on notes payable (55) (110) (1,096)
Distributions by merged company (187) (1,684) (839)
------- ------- -------
Net cash provided by financing activities 4,112 12,680 16,499
------- ------- -------
Net increase in cash and cash equivalents 1,687 13,557 5,532
Cash and cash equivalents, beginning of year 2,221 3,908 17,465
------- ------- -------
Cash and cash equivalents, end of year $ 3,908 $17,465 $22,997
------- ------- -------
------- ------- -------
</TABLE>
(1) Restated for poolings of interests through June 30, 1997 - See Note 2.
See accompanying notes to consolidated financial statements.
P-13
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995, 1996 AND 1997
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF OPERATIONS
CIBER, Inc. and Subsidiaries ("CIBER" or the "Company") is a nationwide provider
of information technology consulting services, including application software
staff supplementation, management consulting for "business/IT" problems, package
software implementation services, system life-cycle project responsibility,
millennium date change conversion services, and networking procurement and
engineering services. At June 30, 1997, CIBER had approximately 2,750
consultants operating out of over 50 branch offices in over 20 states plus
Canada.
The Company's CIBER Information Services ("CIS") Division provides application
software development and maintenance services and, through its CIBR2000
Division, millenium date change solutions. The CIBER Solutions Consulting Group
("SCG") is comprised of the Company's wholly-owned subsidiaries, Spectrum
Technology Group, Inc. ("Spectrum"), Business Information Technology, Inc.
("BIT") and CIBER Network Services, Inc. ("CNSI"). Spectrum provides
information technology 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. BIT specializes in
the implementation and integration of human resource and financial software
application products, plus workflow automation and manufacturing/distribution
software systems, primarily for client/server networks. A substantial portion
of BIT's revenues are derived from assisting clients implementing PeopleSoft,
Inc. software. 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.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated.
(c) CASH EQUIVALENTS
All highly liquid investments purchased with a maturity of three months or less
are considered to be cash equivalents. Cash equivalents consist of money market
funds and investment grade commercial paper.
(d) INVENTORIES
Inventories consist of computer networking equipment and supplies and are stated
at the lower of cost or market using the first-in, first-out method.
(e) PROPERTY AND EQUIPMENT
Property and equipment, which consists primarily of equipment and furniture, is
stated at cost. Depreciation is computed using the straight-line and
accelerated methods over the estimated useful lives, ranging primarily from five
to seven years. Depreciation expense was $603,000, $854,000 and $1,756,000 for
the years ended June 30, 1995, 1996 and 1997, respectively.
(f) INTANGIBLE ASSETS
Intangible assets consist of goodwill, client lists, noncompete agreements, and
software license costs. Goodwill is amortized over 12 to 15 years. Client lists
are amortized over the estimated useful lives ranging from two to eight years.
Noncompete agreements and software license costs are amortized over the terms of
the contracts that range from one to six years. Amortization is recorded using
the straight-line method.
P-14
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Intangible assets are reviewed for impairment when events indicate the carrying
amount of intangible assets may not be recoverable. Impairments would be
considered to exist when the estimated non-discounted future cash flows expected
to result from the use of the intangible asset are less than the carrying amount
of the asset. Impairment, if any, will be measured based on forecasted future
discounted operating cash flows.
(g) REVENUE RECOGNITION
The Company recognizes revenue as services are rendered and as product is
shipped. Product revenues were $12,206,000 for the year ended June 30, 1997.
Revenues also include reimbursable expenses directly incurred in providing
services to clients, that totaled $3,896,000, $4,610,000 and $5,906,000 for the
years ended June 30, 1995, 1996 and 1997, respectively.
(h) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A tax benefit or expense
is recognized for the net change in the deferred tax asset or liability during
the period. The effect on deferred tax assets and liabilities due to a change
in tax rates is recognized in income tax expense in the period that includes the
enactment date.
Certain companies, which have merged with CIBER in business combinations
accounted for as poolings of interests, had elected S corporation status for
U.S. federal income tax purposes, and therefore, were generally not subject to
income taxes. Accordingly, no income tax expense is included in the historical
consolidated financial statements for the operations of these companies prior to
their merger with CIBER. The related net deferred tax liability of these
companies at the date of their merger with CIBER has been recorded as income tax
expense. Specifically, prior to their merger with CIBER, Spectrum, Technical
Support Group, Inc. ("TSG"), Practical Business Solutions, Inc. ("PBSI") and
Spencer & Spencer Systems, Inc. ("SSSI") were S corporations. Spectrum had
elected S corporation status during the quarter ended December 31, 1995, and as
a result, income tax expense for the quarter ended December 31, 1995 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 in the consolidated financial statements for the operations of Spectrum
prior to its merger with CIBER. Upon the mergers of Spectrum and TSG with CIBER,
CIBER recorded one-time income tax expense charges of $1,202,000 and $515,000,
respectively, to record the net deferred tax liability of Spectrum and TSG at
the respective merger dates. See note 1(i).
(i) PRO FORMA NET INCOME
To properly reflect the Company's pro forma net income, the net income of
Spectrum, TSG, PBSI, and SSSI prior to their merger with CIBER, which was not
subject to income taxes because of their S corporation status, has been tax
effected and included in the pro forma adjustment to income tax expense in the
accompanying consolidated statements of operations. This adjustment was computed
as if these merged companies had been taxable entities subject to federal and
state income taxes for all periods prior to their merger with CIBER at the
marginal rates applicable in such periods.
P-15
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In addition, the pro forma adjustment to income tax expense for the years ended
June 30, 1995, 1996 and 1997 has been effected to exclude income tax expense of
$284,000, $475,000, and $1,717,000, respectively, representing the one-time
income tax expense resulting from the termination of the S corporation status of
these companies. Also, the pro forma adjustment to income tax expense for the
year ended June 30, 1996 has been effected to exclude the income tax benefit of
$818,000 resulting from Spectrum's conversion to an S corporation.
(j) PRO FORMA INCOME PER SHARE
Pro forma income per share is computed on the basis of the weighted average
number of common and common equivalent shares outstanding during the period.
Common equivalent shares of 1,954,000, 1,709,000 and 1,333,000 in fiscal 1995,
1996 and 1997, respectively, consist of stock options, determined using the
treasury stock method. The shares and the options issued in connection with
business combinations accounted for as poolings of interests have been treated
as if they had been issued and outstanding for all periods prior to the merger.
(k) STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with the
provisions of Accounting Principles Board Opinion 25, and related
interpretations ("APB 25"). The Company uses the intrinsic value-based method
for measuring stock-based compensation cost which measures compensation cost as
the excess, if any, of the quoted market price of CIBER common stock at the
grant date over the amount the employee must pay for the stock. CIBER generally
grants stock options at fair market value at the date of grant.
In fiscal 1997, the Company adopted Statement of Financial Accounting Standards
No. 123 ("SFAS 123") which allows entities to continue to apply the provisions
of APB 25 and to provide pro forma disclosures of net income and income per
share as if the fair-value based method defined in SFAS 123 had been applied.
The pro forma disclosures required by SFAS 123 are included in Note 8.
(l) ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent 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.
(m) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximate their carrying
amounts due to the relatively short periods to maturity of the instruments
and/or variable interest rates of the instruments which approximate current
market rates.
(n) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year presentation.
P-16
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) POOLINGS OF INTERESTS
From July 1, 1996 through June 30, 1997, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests
("mergers"). 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.
TECHNICAL SUPPORT GROUP, INC. - 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 the CIS Division of CIBER.
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, provided consulting services similar to the
CIS Division of CIBER.
SPECTRUM TECHNOLOGY GROUP, INC. - 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 is located in Somerville, New Jersey.
Revenues, net income and pro forma net income of CIBER and of TSG, TMG and
Spectrum collectively, prior to their merger with CIBER, and on a combined basis
were (in thousands):
<TABLE>
<CAPTION>
TSG,
TMG AND
CIBER SPECTRUM COMBINED
-------- -------- --------
<S> <C> <C> <C>
Six months ended December 31, 1996
(unaudited) (1)
Revenues $102,467 $11,283 $113,750
Net income/(loss) 4,700 (517) 4,183
Pro forma net income 4,700 791 5,491
Year Ended June 30, 1996
Revenues $156,873 $30,780 $187,653
Net income 8,142 1,865 10,007
Pro forma net income 8,531 697 9,228
Year Ended June 30, 1995
Revenues $120,151 $23,694 $143,845
Net income 4,175 1,030 5,205
Pro forma net income 4,296 796 5,092
</TABLE>
(1) Information for TSG, TMG and Spectrum, collectively, is through the date of
the mergers.
In fiscal 1997, the Company incurred merger costs of $1,218,000 in connection
with the mergers of TSG, TMG and Spectrum.
In May 1996, the Company issued 959,035 shares of its common stock and stock
options to purchase 72,185 shares of common stock in connection with the merger
of PBSI with CIBER. In fiscal 1995, the Company issued 2,024,796 shares of its
common stock and stock options to purchase 134,268 shares of common stock in
connection with the mergers of BIT and SSSI with CIBER.
P-17
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(3) ACQUISITIONS
From July 1, 1994 through June 30, 1997, CIBER made certain asset purchases, or
"acquisitions", as set forth below. Each of these acquisitions has been
accounted for under the purchase method of accounting for business combinations
and accordingly, the accompanying consolidated financial statements include the
results of operations of each acquired business since the date of acquisition.
DAVIS, THOMAS & ASSOCIATES, INC. ("DTA") - On March 14, 1997 the Company
acquired the business operations and certain assets of DTA for $13.5 million,
consisting of $13.2 million in cash and the assumption of $339,000 of
liabilities. 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 occurred at the beginning of the
respective periods, revenues for the years ended June 30, 1996 and 1997 would
have been increased by approximately $12.9 million and $9.0 million,
respectively. The effects on pro forma net income and pro forma income per
share would not have been material.
CIBER NETWORK SERVICES, INC. ("CNSI") - On December 2, 1996, the Company
acquired 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, the terms of purchase provide for contingent consideration of up
to $2.6 million if CNSI achieves certain performance objectives in each of the
12 month periods ending October 31, 1997, 1998 and 1999. Any contingent
consideration earned will be payable at the sellers' option in the Company's
common stock, at the then prevailing market price, or in cash. At June 30,
1997, the Company believes that the contingent consideration for the period
ended October 31, 1997 will be earned, and therefore has recorded additional
goodwill and an accrued liability of $1.2 million. The Company has recorded
goodwill of $5.7 million, which is being amortized over 15 years. Any
additional contingent consideration paid will be accounted for as additional
goodwill. For income tax purposes, this acquisition was a non-taxable
transaction. 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 1997,
respectively. The effects on pro forma net income and pro forma income per
share would not have been material.
BUSINESS SYSTEMS DEVELOPMENT DIVISION - 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. 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 operation is now part of Spectrum and provides Microsoft
technology based computer software consulting services. The effects on revenues,
pro forma net income and pro forma income per share would not have been
material.
OASYS, INC. - In March 1996, the Company acquired certain assets and all of
the business operations of Oasys, Inc., located near Columbus, Ohio , for
$769,000 in cash. The Company recorded goodwill of $740,000 related to this
acquisition. In addition, if the operations acquired achieve certain levels of
revenue, the Company would be required to pay through December 31, 1998,
additional cash consideration to the former owners. The Company would record
such additional consideration paid, if any, as additional goodwill. At December
31, 1996, the Company paid additional consideration of $45,000 related to the
acquisition.
MINNESOTA BRANCH - In September 1995, the Company acquired certain assets and
liabilities and all of the business operations of the Rochester, Minnesota
branch office of Broadway & Seymour, Inc. The consideration paid for this
acquisition was $956,000 in cash and the assumption of $16,000 of net
liabilities. The Company recorded goodwill of $972,000 related to this
acquisition.
P-18
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INTERFACE SYSTEMS, INC. ("ISI") - In January 1995, the Company acquired certain
assets and all of the business operations of ISI, located in Holmdel, NJ. The
consideration for the acquisition was $3.4 million. In addition, if the
operations acquired achieve certain levels of income, the Company would be
required to pay annually through December 31, 1997, additional consideration in
the form of shares of common stock to the former owners. The Company would
record such additional consideration paid, if any, as additional goodwill.
(4) INTANGIBLE ASSETS
Intangible assets consist of the following at June 30, 1996 and 1997 (in
thousands):
1996 1997
-------- -------
Goodwill $ 7,687 $31,255
Client lists 6,801 6,801
Noncompete agreements 1,360 2,144
Software license costs 255 255
-------- -------
16,103 40,455
Less accumulated amortization (3,302) (6,072)
-------- -------
$12,801 $34,383
-------- -------
-------- -------
(5) REVOLVING LINES OF CREDIT
The Company has a $20 million revolving line of credit with a bank. 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's subsidiary, CNSI, also has a $3.0 million inventory financing line
of credit with AT&T Capital Corporation. This line of credit expires in October
1997 and is secured by certain assets of the Company. 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 $940,000 at June 30, 1997,
are included in accounts payable on the Company's balance sheet.
P-19
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) LEASES
The Company has several noncancelable operating leases for office space. Rental
expense for operating leases totaled $1,911,000, $2,007,000 and $2,834,000 for
the years ended June 30, 1995, 1996 and 1997, respectively.
Future minimum lease payments as of June 30, 1997 are (in thousands):
Year ending June 30:
1998 $ 3,200
1999 3,018
2000 2,216
2001 1,622
2002 1,256
Thereafter 179
-------
Total minimum lease payments $11,491
-------
-------
(7) INCOME TAXES
Income tax expense (benefit) for the years ended June 30, 1995, 1996 and 1997
consists of the following (in thousands):
1995 1996 1997
------ ------ -------
Current:
Federal $2,555 $5,249 $10,413
State and local 355 921 2,023
Foreign 59 110 474
------ ------ -------
2,969 6,280 12,910
------ ------ -------
Deferred:
Federal 300 (1,030) (679)
State and local 42 (194) (132)
------ ------ -------
342 (1,224) (811)
------ ------ -------
Income tax expense $3,311 $5,056 $12,099
------ ------ -------
------ ------ -------
P-20
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Income tax expense differs from the amounts computed by applying the statutory
U.S. federal income tax rate (34% for the years ended June 30, 1995 and 1996 and
35% for the year ended June 30, 1997) to income before income taxes as a result
of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Tax at federal statutory rate $2,895 $5,121 $ 9,353
Increase (decrease) in income taxes resulting from:
State and local income taxes, net of federal income tax benefit 258 568 1,073
Nondeductible merger costs 236 38 383
Termination of S corporation status of merged companies, including
state income taxes, net of federal income tax benefit 284 475 1,717
Conversion of merged company to an S corporation - (818) -
S corporation income of merged companies (295) (380) (443)
Other (67) 52 16
------ ------ -------
Income tax expense $3,311 $5,056 $12,099
------ ------ -------
------ ------ -------
Effective tax rate 38.9% 33.6% 45.3%
------ ------ -------
------ ------ -------
</TABLE>
TAX BENEFIT OF STOCK OPTIONS EXERCISED - For the years ended June 30, 1996 and
1997, the Company recognized $2,643,000 and $6,366,000, respectively, as a
direct increase to additional paid-in capital for the income tax benefit
resulting from the exercise of stock options by employees. At June 30, 1996 and
1997, the Company has recorded $1,043,000 and $4,929,000, respectively, as a
deferred tax asset, for the portion of the income tax benefit resulting from the
exercise of stock options in the current fiscal year that will reduce income
taxes payable in the following fiscal year.
The components of the net deferred tax asset or liability at June 30, 1996 and
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Deferred tax assets:
Intangible assets, due to differences in amortization periods $ 458 $ 1,112
Accounts payable 186 176
Accrued expenses, not currently tax deductible 536 1,373
Future tax benefit of stock options exercised 1,043 4,929
Other - 102
------- -------
2,223 7,692
Deferred tax liabilities:
Accounts receivable (1,815) (2,420)
------- -------
Net deferred tax asset $ 408 $ 5,272
------- -------
------- -------
Balance sheet classification of net deferred tax asset (liability):
Deferred tax asset-current $ 417 $ 4,160
Deferred tax asset-long term 458 1,112
Deferred tax liability-current (467) -
------- -------
Net deferred tax asset $ 408 $ 5,272
------- -------
------- -------
</TABLE>
Deferred taxes related to accounts payable and accounts receivable are primarily
related to certain merged companies utilizing the cash basis of accounting for
income tax purposes prior to their merger with CIBER.
P-21
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Based on its evaluation of current and anticipated future taxable income, the
Company believes sufficient taxable income will be generated to realize the
benefit of the deferred tax assets.
(8) STOCK PURCHASE AND STOCK OPTION PLANS
The Company has five stock-based compensation plans, which are described below.
EMPLOYEE STOCK PURCHASE PLAN - The Company has a stock purchase plan that allows
eligible employees to purchase, through payroll deductions, shares of the
Company's common stock at 85% of the fair market value at specified dates. Up to
1,000,000 shares of common stock may be issued under the Employee Stock Purchase
Plan. During the years ended June 30, 1995, 1996 and 1997 employees purchased
16,880, 90,268 and 89,720 shares of common stock, respectively.
1989 STOCK OPTION PLAN - The Company established a stock option plan in 1989
that was discontinued during fiscal 1994. The options are 100% vested as of July
1, 1995 and are subject to certain restrictions. The options expire twenty
years after the date of grant through 2013.
EMPLOYEES' STOCK OPTION PLAN - The Company has a stock option plan for employees
and up to 2,000,000 shares of the Company's common stock are authorized for
issuance under this plan. The plan administrators may grant to officers,
employees and consultants, restricted stock, stock options, performance bonuses
or any combination thereof. The number and nature of awards granted is
determined by the compensation committee of the Board of Directors. Options
become exercisable as determined at the date of grant by the Board of Directors
and expire within 10 years from the date of grant. No portion of an option may
vest before six months after the date of grant.
DIRECTORS' STOCK OPTION PLAN - The Company established in fiscal 1995, a stock
option plan for non-employee directors. Up to 100,000 shares of the Company's
common stock are authorized for issuance under this plan. Such stock options are
non-discretionary and granted annually at the fair market value of the Company's
common stock on the date of grant. The number of options granted annually is
fixed by the plan. Options expire 10 years from the date of grant.
DIRECTORS' STOCK COMPENSATION PLAN - The Company established in fiscal 1997, a
stock compensation plan for non-employee directors. Up to 25,000 shares of the
Company's common stock are authorized for issuance under this plan. Under this
plan, each non-employee director is issued shares for their attendance at each
meeting of the Company's Board of Directors. The number of shares issued is
based on the quoted price of the Company's common stock immediately prior to the
date of the applicable meeting. During the year ended June 30, 1997, the
Company issued 832 shares of common stock under this plan.
At June 30, 1997, there were 3,531,000 shares of common stock reserved for
future issuance under the Company's stock-based compensation plans. At June 30,
1997, the Company had 700,320 shares of common stock available for future option
grants under its stock option plans.
P-22
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company applies APB Opinion 25 in accounting for its stock-based
compensation plans. The compensation cost that has been charged against income
for these plans for the years ended June 30, 1995, 1996 and 1997 was $19,000,
$19,000, and $62,000, respectively. Had the Company determined compensation
cost for its stock-based compensation plans based on the fair-value at the grant
date, as calculated in accordance with SFAS 123, the Company's net income, pro
forma net income, and pro forma income per share for the years ended June 30,
1996 and 1997, would have been reduced to the pro forma amounts indicated below
(in thousands, except per share data):
1996 1997
------- -------
Net income As reported $10,007 $14,625
Pro forma 9,130 12,420
Pro forma net income As reported 9,228 15,933
Pro forma 8,351 13,728
Pro forma income per share As reported .48 .78
Pro forma .44 .68
The affect of applying SFAS 123 in this disclosure may not be indicative of the
affect on reported net income for future years. SFAS 123 does not apply to
options granted prior to July 1, 1995 and additional option grants are
anticipated in future years.
The fair value of options at the date of grant was estimated using the Black-
Scholes option pricing model with the following weighted-average assumptions:
1996 1997
------- -------
Expected life 5 years 5 years
Risk free interest rate 6.1% 6.3%
Expected volatility 50% 50%
Dividend yield 0% 0%
A summary of the status of the Company's stock option plans as of June 30, 1995,
1996 and 1997, and changes during the years ending on those dates is presented
below (shares in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------------------ ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,340 $1.11 2,369 $1.29 2,203 $3.31
Granted 132 4.42 415 11.31 526 24.48
Exercised (85) 0.71 (580) 0.78 (626) 2.51
Canceled (18) 4.38 (1) 16.38 (100) 16.87
----- ----- -----
Outstanding at end of year 2,369 $1.29 2,203 $3.31 2,003 $8.43
----- ----- -----
----- ----- -----
Options exercisable at year end 2,018 1,552 1,108
----- ----- -----
----- ----- -----
</TABLE>
The weighted average fair value of options granted during fiscal 1996 and 1997
were $5.73 and $12.85, respectively.
P-23
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the range of exercise prices and the weighted-average contractual
life of outstanding stock options at June 30, 1997, is as follows (shares in
thousands):
<TABLE>
<CAPTION>
WEIGHTED
NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED
RANGE OF OUTSTANDING AVERAGE REMAINING EXERCISABLE AVERAGE
EXERCISE PRICES JUNE 30, 1997 EXERCISE PRICE LIFE (YEARS) JUNE 30, 1997 EXERCISE PRICE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.01 - $ 4.00 977 $ 0.63 12.5 904 $ 0.68
4.17 - 8.88 469 6.57 7.4 181 5.78
11.25 - 22.00 421 21.14 9.0 23 17.02
25.25 - 38.00 136 31.57 9.5 - -
- ---------------------------------------------------------------------------------------------
$ 0.01 - $38.00 2,003 $ 8.43 10.4 1,108 $ 1.85
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
(9) RELATED PARTY TRANSACTIONS
Prior to the acquisition of CNSI on December 2, 1996 (see note 3), CNSI was 85%
owned by certain officers of the Company. These officers and their families
received $1,159,000 in cash and 54,498 shares of CIBER common stock as
consideration for their ownership interests in CNSI. Additionally, the terms of
purchase provide for contingent consideration of up to $2.6 million, of which
$1.2 million has been accrued for at June 30, 1997, if CNSI achieves certain
performance objectives in each of the 12 month periods ending October 31, 1997,
1998 and 1999. Any additional consideration will be payable in cash or CIBER
common stock, The Company also repaid approximately $898,000 to the Company's
Chairman and members of his family for outstanding obligations owed to them by
CNSI.
Certain officers of the Company also guaranteed CNSI's $3.0 million inventory
financing line of credit (see note 5), which had an outstanding balance of
approximately $1.1 million at December 2, 1996. These personal guarantees were
released upon the acquisition of CNSI. In addition, CNSI had a $2.5 million
bank line of credit, with an outstanding balance of $1.9 million at December 2,
1996, that was guaranteed by the Company's Chairman. Upon the acquisition of
CNSI, the Company repaid and canceled this bank line of credit and the personal
guarantee of the Chairman was released.
During the years ended June 30, 1995 and 1996 and for the period from July 1,
1996 to December 2, 1996, CIBER purchased from CNSI several local area networks
and various computer equipment and software for approximately $268,000, $923,000
and $558,000, respectively. In addition, from January 1994 to November 1996,
the Company provided accounting and other administrative services to CNSI at a
monthly charge of $2,500.
(10) 401(k) SAVINGS PLAN AND OTHER RETIREMENT PLANS
The Company has a savings plan under Section 401(k) of the Internal Revenue
Code. Company contributions are determined based on the employee's completed
years of service, the employee's contribution and the Company's matching
contribution percentage. In addition, certain companies which have merged with
CIBER in business combinations accounted for as poolings of interests also have
had defined contribution retirement plans.
The Company recorded expense of approximately $764,000, $1,196,000 and
$1,580,000 for the years ended June 30, 1995, 1996 and 1997, respectively,
related to these plans.
P-24
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(11) BUSINESS AND CREDIT CONCENTRATIONS
The Company's clients are located principally throughout the United States. Its
revenue and accounts receivable are concentrated with large companies in several
industries. The Company's largest client accounted for 9%, 11% and 7% of total
revenues for the years ended June 30, 1995, 1996 and 1997, respectively. In
addition, the Company's five largest clients accounted for, in the aggregate,
22%, 26% and 22% of the Company's total revenues for the years ended June 30,
1995, 1996 and 1997, respectively. The Company has a policy to regularly
monitor the creditworthiness of its clients and generally does not require
collateral. Historically, the Company has not had the need to provide for
material uncollectible amounts. Through BIT, the Company has a concentration of
revenues related to clients purchasing software from PeopleSoft, Inc.
("PeopleSoft"). Approximately 12%, 14% and 12% of the Company's total revenues
for the years ended June 30, 1995, 1996 and 1997, respectively, were generated
from over 100 clients implementing PeopleSoft software.
The Company also has concentrations of credit risk in cash and cash equivalents,
which are invested in high quality financial institutions or companies.
(12) SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION
Supplemental statement of cash flow information for the years ended June 30,
1995, 1996 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Noncash investing and financing activities:
Cash paid for acquisitions:
Fair value of assets acquired $3,350 $1,750 $28,899
Liabilities assumed - (25) (5,965)
Common stock issued in connection with acquisitions - - (2,469)
Accrued acquisition costs payable - - (1,175)
Payment of acquisition costs payable 1,598 - -
------ ------ -------
Cash paid for acquisitions $4,948 $1,725 $19,290
------ ------ -------
------ ------ -------
Issuance of common stock in satisfaction of acquisition costs payable $ 100 $ 100 $ 100
Decrease in liabilities due to reversal of deferred compensation liability $ 86 - -
Cash paid for interest $ 293 $ 219 -
Cash paid for income taxes $1,948 $4,751 $ 8,738
</TABLE>
(13) SUBSEQUENT EVENTS
Subsequent to June 30, 1997, the Company completed the following two business
combinations:
(a) KCM COMPUTER CONSULTING, INC. ("KCM") - On July 18, 1997, KCM merged with
CIBER in a business combination to be accounted for as a pooling of interests.
The Company issued 430,850 shares of its common stock in exchange for all of the
outstanding common stock of KCM. KCM, located in Calverton, Maryland, provides
consulting services similar to the CIS Division of CIBER. The effects of this
merger on the Company's revenues, pro forma net income and pro forma income per
share would not have been material. As a result, management does not intend to
restate the Company's historical financial statements for this business
combination.
P-25
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(b) SOFTWAREXPRESS, INC. D/B/A RELIANT INTEGRATION SERVICES, INC. ("RELIANT") -
On August 21, 1997, Reliant merged with CIBER in a business combination to be
accounted for as a pooling of interests. The Company issued 591,638 shares of
its common stock and assumed all of Reliant's liabilities in exchange for all of
the assets of Reliant. Reliant, located in Menlo Park, California, provides
network integration services and equipment. The accompanying consolidated
financial statements have not been restated for the Reliant merger. The
Company's consolidated financial statements issued in the future will be
restated to include the results of operations, financial position, and cash
flows of Reliant. Reliant had revenues (unaudited) of approximately $32
million, $30 million and $36 million during the years ended June 30, 1995, 1996
and 1997, respectively. The effects of this merger on the Company's pro forma
net income and pro forma income per share is not expected to be material.
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth certain statements of operations data for each of
the quarters indicated below and, in the opinion of management, contains all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation thereof. The first and second quarters of fiscal 1997 and
fourth quarter 1996 include merger costs of $622,000, $596,000 and $901,000,
respectively, related to poolings of interests (see note 2). All information has
been restated for pooling of interest business combinations through June 30,
1997.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
IN THOUSANDS, EXCEPT PER SHARE DATA QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1997
Revenues $54,030 $59,720 $69,651 $78,873 $262,274
Operating income 4,407 4,516 7,913 8,942 25,778
Net income 1,794 2,389 4,882 5,560 14,625
Pro forma net income 2,682 2,809 4,882 5,560 15,933
Pro forma income per share $0.14 $0.14 $0.24 $0.27 $0.78
YEAR ENDED JUNE 30, 1996
Revenues $41,943 $43,066 $48,291 $54,353 $187,653
Operating income 3,306 3,135 3,978 4,140 14,559
Net income 2,023 2,942 2,781 2,261 10,007
Pro forma net income 1,963 1,979 2,583 2,703 9,228
Pro forma income per share $0.11 $0.10 $0.13 $0.14 $0.48
</TABLE>
P-26
<PAGE>
CIBER, INC.
5251 DTC Parkway, Suite 1400
Englewood, Colorado 80111
The undersigned hereby appoints Bobby G. Stevenson and Mac J. Slingerlend, or
either of them, with full power of substitution, as attorneys-in-fact, agents
and proxies (the "Proxies") to vote on behalf of the undersigned all shares
of common stock, $.01 par value, of CIBER, Inc. (the "Company"), that the
undersigned is entitled to vote at the 1997 Annual Meeting of Shareholders
(the "Meeting"), to be held at the Hyatt Regency Tech Center, 7800 East Tufts
Avenue, Denver, Colorado, on Thursday, October 23, 1997, at 10:00 a.m., and
at any and all adjournments thereof, as follows:
1. The election as director of the following nominees in the Classes specified:
Bobby G. Stevenson -- Class III and Richard A. Montoni -- Class III.
INSTRUCTIONS: To withhold your vote for any individual nominee, strike out
the nominee's or nominees' name(s) above.
/ / FOR / / AGAINST / / ABSTAIN
2. The increase in the number of shares of Common Stock reserved for issuance
pursuant to the Company's Equity Incentive Plan from 2,000,000 to 4,000,000.
/ / FOR / / AGAINST / / ABSTAIN
3. The ratification of KPMG Peat Marwick LLP as the Company's independent
auditors for the fiscal year ending June 30, 1998.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, such Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE
ABOVE LISTED PROPOSITIONS.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
PROXIES IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS PROXY IS
SOLICITED BY THE BOARD OF DIRECTORS.
Should the undersigned be present and elect to vote at the Meeting, or at any
adjournments thereof, and after notification to the Secretary of the Company
at the Meeting of the shareholder's decision to terminate this proxy, the
power of the Proxies shall be deemed terminated and of no further force and
effect. The undersigned may also revoke this proxy by filing a subsequently
dated proxy or by notifying the Secretary of the Company of his or her
decision to terminate this proxy prior to the final tabulation of the votes.
The undersigned acknowledges receipt from the Company prior to the execution
of this proxy of the Notice of the Meeting and a Proxy Statement dated
September 19, 1997.
Dated:__________________________, 1997
______________________________________
______________________________________
Please sign exactly as your name
appears on this Proxy card. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If
shares are held jointly, each holder
should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE PREPARED ENVELOPE.
/ / Please check here if you plan to attend the Meeting.
