<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 30, 1998
(March 30, 1998)
CIBER, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-23488 38-2046833
- ----------------------------- ------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5251 DTC Parkway, Suite 1400, Englewood, Colorado 80111
- -------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 220-0100
------------------
<PAGE>
CIBER, INC.
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
The supplemental consolidated financial statements included in exhibit
99.1, have been restated to reflect poolings of interests business
combinations occurring through March 2, 1998. These restated financial
statements are provided pursuant to item 10 of the requirements of Form S-4,
which requires that such restated financial statements be provided upon the
cumulative significance of poolings of interests business combinations
exceeding a certain threshold. The accompanying supplemental consolidated
financial statements have also been restated for the two-for-one stock split
payable March 31, 1998.
ITEM 7 (c). EXHIBITS.
23.1 Consent of KPMG Peat Marwick LLP.
99.1 Supplemental consolidated financial statements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CIBER, INC.
Date: March 30, 1998 By: /s/ Christopher L. Loffredo
------------------------------
Christopher L. Loffredo
V.P./Chief Accounting Officer
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CIBER, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-31905) on Form S-4 and (Nos. 33-81320-3, 33-87978, 33-88046, 33-88048,
33-88050, 333-15091, 333-25543, 333-25545) on Form S-8 of CIBER, Inc. of our
report dated March 27, 1998, relating to the supplemental consolidated
balance sheets of CIBER, Inc. and subsidiaries as of June 30, 1997 and 1996,
and the related supplemental consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1997 which report appears in the Form 8-K dated March
30, 1998 of CIBER, Inc.
KPMG PEAT MARWICK LLP
Denver, Colorado
March 27, 1998
<PAGE>
Exhibit 99.1
CIBER, INC.
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Page
-----
Independent Auditors' Report 2
Supplemental Consolidated Statements of Operations
Years ended June 30, 1995, 1996 and 1997 3
Supplemental Consolidated Statements of Operations (unaudited)
Three and six months ended December 31, 1996 and 1997 4
Supplemental Consolidated Balance Sheets
June 30, 1996 and 1997 and December 31, 1997 (unaudited) 5
Supplemental Consolidated Statements of Shareholders' Equity
Years ended June 30, 1995, 1996 and 1997 and six months
ended December 31, 1997 (unaudited) 6
Supplemental Consolidated Statements of Cash Flows
Years ended June 30, 1995, 1996 and 1997 7
Supplemental Consolidated Statements of Cash Flows
Six months ended December 31, 1996 and 1997 (unaudited) 8
Notes to Supplemental Consolidated Financial Statements 9
1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
CIBER, Inc.:
We have audited the accompanying supplemental consolidated balance sheets of
CIBER, Inc. and subsidiaries as of June 30, 1997 and 1996, and the related
supplemental consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended June 30,
1997. These supplemental consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these supplemental 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.
The supplemental consolidated financial statements give retroactive effect to
the March 2, 1998 mergers of Advanced Systems Engineering, Inc. and Computer
Resource Associates, Inc., with CIBER, Inc., which have been accounted for as
poolings of interests as described in Note 3 to the supplemental consolidated
financial statements. Generally accepted accounting principles proscribe
giving effect to a consummated business combination accounted for by the
pooling of interests method in financial statements that do not include the
date of consummation. These financial statements do not extend through the
date of consummation of the mergers. However, they will become the
historical consolidated financial statements of CIBER, Inc. and subsidiaries
after financial statements covering the date of consummation of the business
combinations are issued.
In our opinion, the supplemental 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 applicable after financial statements are issued for a period
which includes the date of consummation of the business combinations.
KPMG PEAT MARWICK LLP
Denver, Colorado
March 27, 1998
2
<PAGE>
CIBER, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA 1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Consulting services $166,343 $222,030 $310,080
Product sales 31,219 29,734 47,101
-------- -------- --------
Total revenues 197,562 251,764 357,181
-------- -------- --------
Cost of consulting services 112,644 151,351 207,749
Cost of product sales 25,461 24,280 40,094
Selling, general and administrative expenses 45,423 56,277 74,930
Amortization of intangible assets 1,395 1,795 3,087
Merger costs 1,075 901 1,218
-------- -------- --------
Operating income 11,564 17,160 30,103
Interest and other income 200 1,009 1,311
Interest expense (326) (275) (311)
-------- -------- --------
Income before income taxes 11,438 17,894 31,103
Income tax expense 3,806 5,621 12,667
-------- -------- --------
Net income $ 7,632 $ 12,273 $ 18,436
-------- -------- --------
-------- -------- --------
Pro forma information (unaudited) (Note 1(k)):
Historical net income $ 7,632 $ 12,273 $ 18,436
Pro forma adjustment to income tax expense (815) (1,469) 101
-------- -------- --------
Pro forma net income $ 6,817 $ 10,804 $ 18,537
-------- -------- --------
-------- -------- --------
Pro forma income per share - basic $ .19 $ .28 $ .44
Pro forma income per share - diluted $ .17 $ .26 $ .41
Weighted average shares - basic 35,132 38,821 42,475
Weighted average shares - diluted 39,094 42,292 45,194
</TABLE>
Restated for poolings of interests through March 2, 1998 (see Note 3) and for
the stock split payable March 31, 1998.
See accompanying notes to supplemental consolidated financial statements.
3
<PAGE>
CIBER, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ ----------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Consulting services $72,211 $108,089 $138,492 $207,962
Product sales 10,530 15,115 20,594 27,771
-------- -------- -------- --------
Total revenues 82,741 123,204 159,086 235,733
-------- -------- -------- --------
Cost of consulting services 49,152 70,870 93,769 136,449
Cost of product sales 8,768 12,688 17,134 23,312
Selling, general and administrative expenses 18,282 25,736 34,958 50,328
Amortization of intangible assets 687 970 1,289 1,908
Merger costs 596 1,573 1,218 2,187
-------- -------- -------- --------
Operating income 5,256 11,367 10,718 21,549
Interest and other income 361 403 643 758
Interest expense (107) (58) (164) (144)
-------- -------- -------- --------
Income before income taxes 5,510 11,712 11,197 22,163
Income tax expense 2,388 6,248 5,396 10,515
-------- -------- -------- --------
Net income $ 3,122 $ 5,464 $ 5,801 $ 11,648
-------- -------- -------- --------
-------- -------- -------- --------
Pro forma information (Note 1(k)):
Historical net income $ 3,122 $ 5,464 $ 5,801 $ 11,648
Pro forma adjustment to income tax expense 165 1,035 771 881
-------- -------- -------- --------
Pro forma net income $ 3,287 $ 6,499 $ 6,572 $ 12,529
-------- -------- -------- --------
-------- -------- -------- --------
Pro forma income per share - basic $ 0.08 $ 0.14 $ 0.16 $ 0.28
Pro forma income per share - diluted $ 0.07 $ 0.13 $ 0.15 $ 0.26
Weighted average shares - basic 41,718 45,720 41,538 45,365
Weighted average shares - diluted 44,726 48,218 44,460 47,821
</TABLE>
Restated for poolings of interests through March 2, 1998 (see Note 3) and for
the stock split payable March 31, 1998.
See accompanying notes to supplemental consolidated financial statements.
4
<PAGE>
CIBER, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
------------------ ------------
IN THOUSANDS, EXCEPT SHARE DATA 1996 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $20,802 $ 25,854 $ 26,518
Investments 604 1,984 880
Accounts receivable 50,476 66,375 86,895
Inventories 2,269 917 917
Prepaid expenses and other assets 1,227 2,089 4,606
Deferred income taxes 417 4,160 -
------- -------- --------
Total current assets 75,795 101,379 119,816
------- -------- --------
Property and equipment, at cost 9,415 14,839 19,461
Less accumulated depreciation and amortization (4,814) (6,758) (9,275)
------- -------- --------
Net property and equipment 4,601 8,081 10,186
------- -------- --------
Intangible assets, net 12,801 34,383 33,025
Deferred income taxes 458 1,112 1,390
Other assets 1,411 1,689 1,701
------- -------- --------
Total assets $95,066 $146,644 $166,118
------- -------- --------
------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank revolving lines of credit $ 1,150 $ 1,550 $ -
Notes payable 391 1,809 -
Trade payables 8,140 6,190 6,202
Accrued compensation and payroll taxes 9,627 13,957 18,899
Other accrued expenses and liabilities 6,111 7,115 8,828
Income taxes payable 718 2,104 1,011
Deferred income taxes 1,729 1,214 983
------- -------- --------
Total current liabilities 27,866 33,939 35,923
Notes payable, net of current portion 260 975 50
Long-term acquisition costs payable 200 100 -
------- -------- --------
Total liabilities 28,326 35,014 35,973
------- -------- --------
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, 80,000,000 shares
authorized, 41,288,000, 44,128,000 and 45,939,000
shares issued and outstanding 413 441 459
Additional paid-in capital 37,366 68,710 78,167
Retained earnings 28,961 42,479 51,519
------- -------- --------
Total shareholders' equity 66,740 111,630 130,145
------- -------- --------
Total liabilities and shareholders' equity $95,066 $146,644 $166,118
------- -------- --------
------- -------- --------
</TABLE>
Restated for poolings of interests through March 2, 1998 (see Note 3) and for
the stock split payable March 31, 1998.
See accompanying notes to supplemental consolidated financial statements.
5
<PAGE>
CIBER, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<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 17,536 $176 $12,009 $15,625 $ 27,810
Retroactive effect of March 1998 two-for-one stock split 17,536 175 (175) - -
------- ------ ------- ------- ---------
BALANCES AT JULY 1, 1994 - RESTATED FOR STOCK SPLIT 35,072 351 11,834 15,625 27,810
------- ------ ------- ------- ---------
Employee stock purchases and options exercised 204 2 130 - 132
Acquisition 48 - 100 - 100
Sale of common stock by merged companies - - 101 - 101
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 - - - 7,632 7,632
Distributions by merged companies - - - (2,887) (2,887)
------- ------ ------- ------- ---------
BALANCES AT JUNE 30, 1995 35,324 353 13,546 19,516 33,415
Public offering, net of offering costs of $1,532 3,824 38 18,952 - 18,990
Employee stock purchases and options exercised 1,344 14 1,234 - 1,248
Acquisition 48 - 100 - 100
Sale of common stock by merged companies 748 8 36 (8) 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 - - 119 - 119
Net income - - - 12,273 12,273
Distributions by merged companies - - - (2,084) (2,084)
------- ------ ------- ------- ---------
BALANCES AT JUNE 30, 1996 41,288 413 37,366 28,961 66,740
Public offering, net of offering costs of $1,390 1,220 12 16,915 - 16,927
Employee stock purchases and options exercised 1,432 14 3,316 - 3,330
Acquisitions 186 2 2,567 - 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 companies - - 2,041 (2,041) -
Compensation expense related to stock and stock options 2 - 62 - 62
Net income - - - 18,436 18,436
Distributions by merged companies - - - (2,176) (2,176)
Adjustment to conform year end of merged companies - - - (701) (701)
------- ------ ------- ------- ---------
BALANCES AT JUNE 30, 1997 44,128 441 68,710 42,479 111,630
Note payable paid with stock 51 1 1,104 - 1,105
Employee stock purchases and options exercised 702 7 2,917 - 2,924
Acquisition 48 - 100 - 100
Immaterial poolings of interests 1,009 10 347 1,290 1,647
Tax benefit from exercise of stock options - - 2,964 - 2,964
Termination of S corporation tax status of merged companies - - 1,985 (1,985) -
Compensation expense related to stock and stock options 1 - 40 - 40
Net income - - - 11,648 11,648
Distributions by merged companies - - - (1,913) (1,913)
------- ------ ------- ------- ---------
BALANCES AT DECEMBER 31, 1997 45,939 $459 $78,167 $51,519 $130,145
------- ------ ------- ------- ---------
------- ------ ------- ------- ---------
</TABLE>
Restated for poolings of interests through March 2, 1998 (see Note 3) and for
the stock split payable March 31, 1998.
See accompanying notes to supplemental consolidated financial statements.
6
<PAGE>
CIBER, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
IN THOUSANDS 1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $7,632 $12,273 $18,436
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,252 3,141 5,668
Deferred income taxes 557 (686) (859)
Other 5 119 32
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Accounts receivable (8,455) (13,461) (12,217)
Inventories 1,576 (1,026) 1,927
Other current and long-term assets (606) (1,094) (1,637)
Trade payables (1,237) 1,970 (3,849)
Accrued compensation and payroll taxes 2,840 63 3,618
Other accrued expenses and liabilities 272 1,801 (254)
Income taxes payable 762 1,395 3,866
------- -------- --------
Net cash provided by operating activities 5,598 4,495 14,731
------- -------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (4,948) (1,725) (19,290)
Purchases of property and equipment (2,154) (2,241) (5,467)
Purchases of investments (446) (34) (2,039)
Sales of investments 3,960 - 1,111
------- -------- --------
Net cash used in investing activities (3,588) (4,000) (25,685)
------- -------- --------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 233 20,274 20,334
Net borrowings (payments) on bank lines of credit 4,176 (5,200) (1,568)
Payments on notes payable (55) (519) (1,507)
Borrowings on notes payable 600 460 1,344
Distributions by merged companies (2,887) (2,084) (2,176)
------- ------- --------
Net cash provided by financing activities 2,067 12,931 16,427
------- ------- --------
Net increase in cash and cash equivalents 4,077 13,426 5,473
Cash and cash equivalents, beginning of year 3,299 7,376 20,802
Adjustment to conform fiscal year of merged
companies - - (421)
------- -------- --------
Cash and cash equivalents, end of year $7,376 $20,802 $25,854
------- -------- --------
------- -------- --------
</TABLE>
Restated for poolings of interests through March 2, 1998 (see Note 3).
See accompanying notes to supplemental consolidated financial statements.
7
<PAGE>
CIBER, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
-----------------------------
IN THOUSANDS 1996 1997
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,801 $11,648
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,276 4,063
Deferred income taxes 874 (1,636)
Other 2 29
Changes in operating assets and liabilities,
net of the effects of acquisitions:
Accounts receivable (5,056) (15,018)
Inventories 268 -
Other current and long-term assets (2,075) (3,000)
Trade payables 730 (1,674)
Accrued compensation and payroll taxes 540 3,520
Other accrued expenses and liabilities 987 1,659
Income taxes payable 532 6,704
------------- --------------
Net cash provided by operating activities 4,879 6,295
------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (6,071) -
Purchases of property and equipment (2,742) (4,194)
Purchases of investments (353) (905)
Sales of investments 275 815
------------- --------------
Net cash used in investing activities (8,891) (4,284)
------------- --------------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 1,116 2,924
Net payments on bank lines of credit (1,554) (1,985)
Payments on notes payable (1,120) (1,982)
Borrowings on notes payable 449 239
Distributions by merged company (1,204) (543)
------------- --------------
Net cash used in financing activities (2,313) (1,347)
------------- --------------
Net increase (decrease) in cash and cash
equivalents (6,325) 664
Cash and cash equivalents, beginning of period 20,802 25,854
Adjustment to conform fiscal year of merged companies (421) -
------------- --------------
Cash and cash equivalents, end of period $14,056 $26,518
------------- --------------
------------- --------------
</TABLE>
Restated for poolings of interests through March 2, 1998 (see Note 3).
See accompanying notes to supplemental consolidated financial statements.
8
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL 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 March 2, 1998, CIBER had
approximately 4,000 consultants operating out of over 60 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
Division 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 AND INTERIM FINANCIAL INFORMATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated.
The supplemental consolidated financial statements as of December 31, 1997
and for the three and six months ended December 31, 1996 and 1997 are
unaudited but, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, which are necessary for a
fair presentation of the consolidated financial condition, results of
operations and cash flows.
(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) INVESTMENTS
Investments primarily consist of mutual funds. Investments are classified as
available-for-sale and are recorded at fair value. Unrealized holding gains
and losses were not material at June 30, 1996 and 1997. Realized gains and
losses on the sale of investments were not material.
(e) 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.
9
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(f) 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 $857,000, $1,346,000 and
$2,581,000 for the years ended June 30, 1995, 1996 and 1997, respectively.
(g) 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.
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.
(h) REVENUE RECOGNITION
The Company recognizes revenue as services are rendered and as product is
shipped. Service revenues also include reimbursable expenses directly
incurred in providing services to clients, that totaled $3,932,000,
$4,971,000 and $6,553,000 for the years ended June 30, 1995, 1996 and 1997,
respectively.
(i) 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. 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. See note 1(j).
(j) PRO FORMA NET INCOME
To properly reflect the Company's pro forma net income, the net income of
certain companies 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. 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. In addition, the pro
forma adjustment to income tax expense for the years ended June 30, 1995,
1996 and 1997 and the six months ended December 31, 1997 have been effected
to exclude income tax expense of $284,000, $475,000, $1,717,000 and
$1,110,000, 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.
10
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(k) PRO FORMA INCOME PER SHARE
The Company has adopted 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. 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 includes the affects
of the potential dilution of stock options, determined using the treasury
stock method. The computation of weighted average shares includes the shares
and options issued in connection with business combinations accounted for as
a pooling of interests as if they had been outstanding for all periods prior
to the merger.
(l) 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 9.
(m) STOCK SPLIT
On March 4, 1998 CIBER increased its authorized shares of common stock to
80,000,000 from 40,000,000 and the Board of Directors approved a two-for-one
stock split to be effected in the form of a stock dividend. The stock split
has a record date of March 18, 1998 and a payable date of March 31, 1998.
All agreements concerning stock options and other commitments paid in shares
provide for the issuance of additional shares due to the declaration of the
stock split. The stock split has been reflected in the Supplemental
Consolidated Statement of Changes in Shareholders' Equity as of July 1, 1994
and all references to number of shares and to per share information in the
supplemental consolidated financial statements have been adjusted to reflect
the stock split on a retroactive basis.
(n) 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.
(o) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximates 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.
(p) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year presentation.
11
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(2) BASIS OF PRESENTATION
The supplemental consolidated financial statements give retroactive effect to
the March 2, 1998 mergers of Advanced Systems Engineering, Inc. and Computer
Resource Associates, Inc., with CIBER, Inc., which mergers have been
accounted for as poolings of interests as described in Note 3. Generally
accepted accounting principles prohibits giving effect to a consummated
business combination accounted for by the pooling of interests method in
financial statements that do not include the date of consummation. The
accompanying consolidated financial statements do not extend through the date
of consummation of the mergers. However, they will become the historical
consolidated financial statements of CIBER, Inc. and subsidiaries after
financial statements covering the date of consummation of the business
combinations are issued.
(3) POOLINGS OF INTERESTS
From July 1, 1997 to March 2, 1998, the following companies have merged with
CIBER in business combinations accounted for as poolings of interests
("mergers"):
COMPUTER RESOURCE ASSOCIATES, INC. ("CRA") - On March 2, 1998, CIBER, Inc.
issued 530,910 shares of its common stock and assumed substantially all of
CRA's liabilities in exchange for all of the assets of CRA. CRA,
headquartered in Harrisburg, Pennsylvania, provided consulting services
similar to the CIS Division of CIBER.
ADVANCED SYSTEMS ENGINEERING, INC. ("ASE") - On March 2, 1998, CIBER, Inc.
issued 382,602 shares of its common stock and assumed substantially all of
ASE's liabilities in exchange for all of the assets of ASE. ASE located in
Aurora, Colorado, provided consulting services similar to the CIS Division of
CIBER.
TECHWARE CONSULTING, INC. ("TECHWARE") - On November 26, 1997, the Company
issued 747,836 shares of its common stock and assumed substantially all of
Techware's liabilities in exchange for all of the assets of Techware.
Techware, headquartered in Irving, Texas, provided consulting services
similar to the CIS Division of CIBER.
FINANCIAL DYNAMICS, INC. ("FDI") - On November 24, 1997, the Company issued
1,128,054 shares of its common stock, granted options for 97,220 shares of
its common stock (at an aggregate exercise price of $217,000) and assumed
substantially all of FDI's liabilities in exchange for all of the assets of
FDI. The CIBER stock options replaced existing FDI stock options. FDI,
headquartered in McLean, Virginia, provided consulting services similar to
Spectrum.
THE CONSTELL GROUP, INC. ("CONSTELL") - On October 24, 1997, the Company
issued 500,000 shares of its common stock in exchange for all of the
outstanding common stock of Constell. Constell, headquartered in Elmwood
Park, New Jersey, provided consulting services similar to Spectrum and the
CIS Division of CIBER.
BAILEY & QUINN, INC. ("BQI") - On October 22, 1997, the Company issued
approximately 148,000 shares of its common stock and assumed substantially
all of BQI's liabilities in exchange for all of the assets of BQI. BQI,
located in Norcross, Georgia, provided consulting services similar to the CIS
Division of CIBER.
SOFTWAREXPRESS, INC. D/B/A RELIANT INTEGRATION SERVICES, INC. ("RELIANT") -
On August 21, 1997, the Company issued 1,183,276 shares of its common stock
and assumed substantially all of Reliant's liabilities in exchange for all of
the assets of Reliant. Reliant, located in Menlo Park, California, provided
network integration services and equipment, and has become part of CNSI.
KCM COMPUTER CONSULTING, INC. ("KCM") - On July 18, 1997, the Company issued
861,700 shares of its common stock in exchange for all of the outstanding
common stock of KCM. KCM, located in Calverton, Maryland, provided
consulting services similar to the CIS Division of CIBER.
The Company's consolidated financial statements have been restated to include
the results of operations, financial position, and cash flows of Reliant,
Constell, FDI, Techware, ASE and CRA. Generally, in recording mergers, the
fiscal year ends of merged companies, if different from CIBER's, have been
conformed to CIBER's June 30 fiscal year end. In recording the Constell and
ASE mergers with CIBER, Constell's and ASE's operations for the twelve
12
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
months ended June 30, 1997 were combined with CIBER's financial statements
for the year ended June 30, 1997 and Constell's and ASE's operations for the
twelve months ended December 31, 1995 and 1994 were combined with CIBER's
financial statements for the years ended June 30, 1996 and June 30, 1995,
respectively. As a result, Constell's operations for the six month period
from January 1, 1996 to June 30, 1996 (which included revenues, net loss and
pro forma net loss of $5,998,000, $159,000 and $96,000, respectively) are not
included in CIBER's restated consolidated financial statements and ASE's
operations for the six month period from January 1, 1996 to June 30, 1996
(which included revenues, net income and pro forma net income of $5,226,000,
$430,000 and $258,000, respectively) are not included in CIBER's restated
consolidated financial statements. The poolings of interests with KCM and
BQI are considered by management to be immaterial and therefore the Company's
historical financial statements have not been restated for these business
combinations. Selected financial data of CIBER, Reliant, and of Constell, FDI
and Techware, collectively, and of ASE and CRA, collectively, prior to their
merger with CIBER, and on a combined basis, were (in thousands, except per
share data):
<TABLE>
<CAPTION>
PRIOR TO MERGER WITH CIBER
--------------------------
CONSTELL, ASE
FDI, & &
CIBER RELIANT TECHWARE CRA COMBINED
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED DECEMBER 31, 1997*
Revenues $220,746 - - $14,987 $235,733
Net income 10,997 - - 651 11,648
Pro forma net income 12,004 - - 525 12,529
Pro forma income per share - diluted $ .26 $ .26
THREE MONTHS ENDED SEPTEMBER 30, 1997*
Revenues $ 94,539 - $10,867 $ 7,123 $112,529
Net income (loss) 5,779 - (6) 411 6,184
Pro forma net income 5,650 - 59 321 6,030
Pro forma income per share - diluted $ .13 $ .13
YEAR ENDED JUNE 30, 1997
Revenues $262,274 $35,536 $35,242 $24,129 $357,181
Net income 14,625 1,801 340 1,670 18,436
Pro forma net income 15,933 1,086 278 1,240 18,537
Pro forma income per share - diluted $ .39 $ .41
YEAR ENDED JUNE 30, 1996
Revenues $187,653 $30,299 $20,788 $13,024 $251,764
Net income 10,007 880 493 893 12,273
Pro forma net income 9,228 528 423 625 10,804
Pro forma income per share - diluted $ .24 $ .26
YEAR ENDED JUNE 30, 1995
Revenues $143,845 $32,072 $13,508 $ 8,137 $197,562
Net income 5,205 998 757 672 7,632
Pro forma net income 5,092 614 555 556 6,817
Pro forma income per share - diluted $ .14 $ .17
</TABLE>
All per share information has been restated for the stock split payable March
31, 1998.
* Information for the three months ended September 30, 1997 and for the six
months ended December 31, 1997 is unaudited.
13
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
From July 1, 1996 through June 30, 1997, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests.
Accordingly, the Company's consolidated 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
740,752 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 484,358 shares of its common stock and granted options for 326,014
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
1,706,232 shares of its common stock in exchange for all of the outstanding
common stock of Spectrum. Spectrum is located in Somerville, New Jersey.
Selected financial data of CIBER and of TSG, TMG and Spectrum collectively,
prior to their merger with CIBER, and on a combined basis were (in thousands,
except per share data):
<TABLE>
<CAPTION>
TSG,
TMG AND
CIBER SPECTRUM COMBINED
--------- -------- ---------
<S> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) (1)
Revenues $ 49,489 $ 4,541 $ 54,030
Net income 1,634 160 1,794
Pro forma net income 2,603 79 2,682
Pro forma income per share - diluted $ .07 $ .07
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
Pro forma income per share - diluted $ .24 $ .24
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
Pro forma income per share - diluted $ .13 $ .14
</TABLE>
All per share information has been restated for the stock split payable March
31, 1998.
(1) Information for three months ended September 30, 1996 is for TMG and TSG
only.
In May 1996, the Company issued 1,918,070 shares of its common stock and
stock options to purchase 144,370 shares of common stock in connection with
the merger of PBSI with CIBER. In fiscal 1995, the Company issued 4,049,592
shares of its common stock and stock options to purchase 268,536 shares of
common stock in connection with the mergers of BIT and Spencer and Spencer
Systems, Inc. with CIBER.
14
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(4) 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 CNSI. 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. - 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 137,262 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 initial purchase price of $4.5
million. Additionally, the terms of purchase provided 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 believed that the contingent
consideration for the period ended October 31, 1997 would be earned, and
recorded additional goodwill and an accrued liability of $1.2 million. In
January 1998, the Company paid additional consideration of $1.2 million,
consisting of 48,692 shares of the CIBER common stock and $124,000 in cash.
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 years
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. In
January 1997 and 1998, the Company paid additional consideration of $45,000
and $227,000 respectively, related to this 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.
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.
15
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) INTANGIBLE ASSETS
Intangible assets consist of the following at June 30, 1996 and 1997 (in
thousands):
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
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
-------- ---------
-------- ---------
</TABLE>
(6) REVOLVING LINES OF CREDIT AND NOTES PAYABLE
The Company has a $20 million revolving line of credit with a bank. There
were no outstanding borrowings under this bank line of credit at June 30,
1996 and 1997 and December 31, 1997. 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 was renewed in December 1997 and expires in December 1998.
The terms and conditions of the credit agreement include several covenants,
including those whereby the Company agrees to the maintenance of a certain
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 $5.0 million of inventory financing
lines of credit with financial corporations. These lines of credit are
secured by certain assets of the Company. Amounts outstanding under these
lines of credit, which totaled approximately $2.2 million at June 30, 1997,
are included in accounts payable on the Company's balance sheet.
Several companies which have merged with CIBER since July 1, 1997 had
outstanding balances under revolving lines of credit and notes payable.
These lines of credit and notes payable were secured by certain assets of the
merged companies. Upon merger with CIBER, these revolving lines of credit and
notes payable were paid in full and cancelled. In connection with the merger
of Techware with CIBER, CIBER issued 50,938 shares of its common stock having
a value of $1,105,000 in satisfaction of a note payable, including accrued
interest, to a Techware shareholder.
(7) LEASES
The Company has several noncancelable operating leases for office space.
Rental expense for operating leases totaled $2,533,000, $2,958,000 and
$4,614,000 for the years ended June 30, 1995, 1996 and 1997, respectively.
16
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Future minimum lease payments as of June 30, 1997 are (in thousands):
<TABLE>
<S> <C>
Year ending June 30:
1998 $ 5,166
1999 4,917
2000 3,821
2001 3,008
2002 2,171
Thereafter 2,681
-------
Total minimum lease payments $21,764
-------
-------
</TABLE>
(8) INCOME TAXES
Income tax expense (benefit) for the years ended June 30, 1995, 1996 and 1997
consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $2,754 $5,278 $10,880
State and local 436 919 2,172
Foreign 59 110 474
-------- -------- --------
3,249 6,307 13,526
-------- -------- --------
Deferred:
Federal 546 (612) (721)
State and local 11 (74) (138)
-------- -------- --------
557 (686) (859)
-------- -------- --------
Income tax expense $3,806 $5,621 $12,667
-------- -------- --------
-------- -------- --------
</TABLE>
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 $3,889 $6,084 $10,886
Increase (decrease) in income taxes resulting from:
State and local income taxes, net of federal income tax benefit 355 643 1,171
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 companies to S corporation (93) (818) -
S corporation income of merged companies (833) (949) (1,521)
Other (32) 148 31
-------- -------- ---------
Income tax expense $3,806 $5,621 $12,667
-------- -------- ---------
-------- -------- ---------
Effective tax rate 33.3% 31.4% 40.7%
-------- -------- ---------
-------- -------- ---------
</TABLE>
17
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 330 683
Accrued expenses, not currently tax deductible 797 1,977
Future tax benefit of stock options exercised 1,043 4,929
Other - 181
-------- ---------
2,628 8,882
Deferred tax liabilities:
Accounts receivable (3,482) (4,824)
-------- ---------
Net deferred tax asset (liability) $ (854) $ 4,058
-------- ---------
-------- ---------
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 (1,729) (1,214)
-------- ---------
Net deferred tax asset (liability) $ (854) $ 4,058
-------- ---------
-------- ---------
</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.
Based on its evaluation of current and anticipated future taxable income, the
Company believes sufficient taxable income will be generated to realize the
deferred tax assets.
(9) 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 2,000,000 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 33,760, 180,536 and 179,440 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 4,000,000 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.
18
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DIRECTORS' STOCK OPTION PLAN - Up to 200,000 shares of the Company's common
stock are authorized for issuance to non-employee directors 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 50,000
shares of the Company's common stock are authorized for issuance under this
plan. Each non-employee director is issued shares for 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 1,664 shares of common stock under this plan.
At June 30, 1997, there were 7,062,000 shares of common stock reserved for
future issuance under the Company's stock-based compensation plans. At June
30, 1997, the Company had 1,400,640 shares of common stock available for
future option grants under its stock option plans.
The Company applies APB Opinion 25 in accounting for its stock-based
compensation plans. The compensation cost that has been expensed for these
plans for the years ended June 30, 1995, 1996 and 1997 was $19,000, $119,000
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):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Net income As reported $12,273 $18,436
Pro forma 11,396 16,231
Pro forma net income As reported 10,804 18,537
Pro forma 9,927 16,332
Pro forma income per share - basic As reported .28 .44
Pro forma .26 .38
Pro forma income per share - diluted As reported .26 .41
Pro forma .24 .36
</TABLE>
The effect of applying SFAS 123 in this disclosure may not be indicative of
the effect 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:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Expected life 5 years 5 years
Risk free interest rate 6.1% 6.3%
Expected volatility 50% 50%
Dividend yield 0% 0%
</TABLE>
19
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 4,680 $0.56 4,738 $0.65 4,503 $1.67
Granted 264 2.21 927 5.30 1,052 12.24
Exercised (170) 0.36 (1,160) 0.39 (1,252) 1.26
Canceled (36) 2.19 (2) 8.19 (200) 8.44
------ ------- -------
Outstanding at end of year 4,738 $0.65 4,503 $1.67 4,103 $4.17
------ ------- -------
------ ------- -------
Options exercisable at year end 4,036 3,201 2,313
------ ------- -------
------ ------- -------
</TABLE>
The weighted average fair value of options granted during fiscal 1996 and
1997 were $2.87 and $6.43, respectively.
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>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- -------------------------------
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 - $ 2.00 1,954 $0.32 12.5 1,808 $0.34
2.09 - 4.44 1,035 3.19 7.4 459 2.75
5.63 - 11.00 842 10.57 9.0 46 8.51
12.63 - 19.00 272 15.79 9.5 - -
- -------------------------------------------------------------------------------------------------------------
$ 0.01 - $19.00 4,103 $4.17 10.4 2,313 $0.98
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(10) RELATED PARTY TRANSACTIONS
Prior to the acquisition of CNSI on December 2, 1996 (see note 4), CNSI was
85% beneficially owned by certain officers of the Company. These officers
and their families received $1,159,000 in cash and 108,996 shares of CIBER
common stock as consideration for their ownership interests in CNSI. In
January 1998, additional consideration of $1.2 million was paid to the
selling shareholders, of which certain officers of the Company and members of
their families received 40,832 shares of CIBER common stock and cash of
$118,000. Additionally, the terms of purchase provide for additional
contingent consideration of up to $1.4 million if CNSI achieves certain
performance objectives in each of the 12 month periods ending October 31,
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 a $3.0 million inventory
financing line of credit to CNSI 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
20
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
$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.
(11) 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 similar defined contribution retirement plans.
The Company recorded expense of approximately $894,000, $1,332,000 and
$1,778,000 for the years ended June 30, 1995, 1996 and 1997, respectively,
related to these plans.
(12) 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 approximately
6%, 8% and 5% 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, approximately 17%, 21% and 18% 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 9%, 10% and 9% 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.
(13) 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 $ 330 $ 278 $ 241
Cash paid for income taxes $2,197 $4,951 $8,755
</TABLE>
21
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth certain statements of operations and
supplemental data for each of the quarters through December 31, 1997, as
indicated below, which, in the opinion of management, contains all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation thereof. All information has been restated for pooling of
interest business combinations through March 2, 1998 and for the stock split
payable March 31, 1998.
<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, 1998 TO DATE
Revenues $112,529 $123,204 N/A N/A $235,733
Merger costs 614 1,573 N/A N/A 2,187
Operating income 10,182 11,367 N/A N/A 21,549
Net income 6,184 5,464 N/A N/A 11,648
Pro forma net income 6,030 6,499 N/A N/A 12,529
Pro forma income per share - basic $0.13 $0.14 N/A N/A $0.28
Pro forma income per share - diluted $0.13 $0.13 N/A N/A $0.26
Pro forma income per share - diluted, excluding
merger costs $0.14 $0.17 N/A N/A $0.31
YEAR ENDED JUNE 30, 1997
Revenues $ 76,345 $ 82,741 $94,479 $103,616 $357,181
Merger costs 622 596 - - 1,218
Operating income 5,462 5,256 9,094 10,291 30,103
Net income 2,679 3,122 5,915 6,720 18,436
Pro forma net income 3,285 3,287 5,599 6,366 18,537
Pro forma income per share - basic $0.08 $0.08 $0.13 $0.15 $0.44
Pro forma income per share - diluted $0.07 $0.07 $0.12 $0.14 $0.41
Pro forma income per share - diluted, excluding
merger costs $0.09 $0.08 $0.12 $0.14 $0.44
YEAR ENDED JUNE 30, 1996
Revenues $ 55,094 $ 57,145 $65,975 $ 73,550 $251,764
Merger costs - - - 901 901
Operating income 4,285 3,545 4,203 5,127 17,160
Net income 2,748 3,283 3,058 3,184 12,273
Pro forma net income 2,540 2,241 2,724 3,299 10,804
Pro forma income per share - basic $0.07 $0.06 $0.07 $0.08 $0.28
Pro forma income per share - diluted $0.06 $0.05 $0.06 $0.08 $0.26
Pro forma income per share - diluted, excluding
merger costs $0.06 $0.05 $0.06 $0.09 $0.27
</TABLE>
22
