<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>
CIBER, Inc.
5251 DTC Parkway, Suite 1400
Englewood, Colorado 80111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 29, 1998
TO THE SHAREHOLDERS OF CIBER, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the
"Meeting") of CIBER, Inc., a Delaware corporation (the "Company"), will be
held on Thursday, October 29, 1998 at 9:30 a.m. local time, at The
Metropolitan Club, 7800 East Orchard Road, Greenwood Village, Colorado, for
the following purposes:
(1) To elect two Class I 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 ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending
June 30, 1999.
(3) 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 11, 1998 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
11, 1998 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. Thank you.
By order of the Board of Directors
/s/ Bobby G. Stevenson
Bobby G. Stevenson
Chairman of the Board
Englewood, Colorado
September 25, 1998
<PAGE>
CIBER, INC.
---------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 29, 1998
---------
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 1998 Annual Meeting of Shareholders of the
Company (the "Meeting") to be held on Thursday, October 29, 1998 at 9:30 a.m.
local time, at The Metropolitan Club, 7800 East Orchard Road, Greenwood
Village, 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 25, 1998.
Shareholders of the Company represented at the Meeting will
consider and vote upon (i) the election of two Class I Directors to serve on
the Board until the 2001 Annual Meeting of Shareholders or until their
successors have been duly elected and qualified, (ii) the ratification of the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors
for the fiscal year ending June 30, 1999, and (iii) 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. 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.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Common Stock at the close of business
on September 11, 1998 (the "Record Date") will be entitled to notice of and
to vote at the Meeting. As of the Record Date, 53,628,547 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. To be elected, a director
must receive a plurality of the votes present in person or represented by
proxy and entitled to vote on the election. With respect to all other
matters, the affirmative vote of the majority of such quorum will be the act
of the shareholders. Abstentions will have the same effect as a vote against
such proposals and broker non-votes will have no impact on the outcome of
such proposals. "Broker non-votes" are proxies with respect to shares held
in record name by brokers or nominees, as to which (i) instructions have not
been received from the beneficial owners or persons entitled to vote and (ii)
the broker or nominee does not have discretionary voting power under
applicable national securities exchange rules or the instrument under which
it serves in such capacity.
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 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 25% 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.
-1-
<PAGE>
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 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 approximately 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. Roy L. Burger and James C. Spira
expire in 1998 (the "Class I Director"); the terms of Messrs. Mac J.
Slingerlend and James A. Rutherford expire in 1999 (the "Class II Directors")
and the terms of Messrs. Bobby G. Stevenson, Richard A. Montoni and
Archibald J. McGill expire in 2000 (the "Class III Directors"). The Board
has nominated Messrs. Roy L. Burger and James G. Brocksmith to serve for
three-year terms to expire at the 2001 Annual Meeting of Shareholders or
until their successors are elected and qualified. Due to other commitments,
Mr. James Spira has decided not to stand for reelection to the Board.
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 served 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. Roy L. Burger and
James G. Brocksmith, Jr. will be voted for the election of Messrs. Roy L.
Burger and James G. Brocksmith, Jr. To be elected, each nominee must receive
the favorable vote of a plurality of the votes cast. 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. Roy L. Burger or Mr. James G.
Brocksmith, Jr. should be unable or unwilling to serve on the Board. See
"Directors and Executive Officers" below for biographical information on the
persons nominated as directors.
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 currently held with the Company,
the year elected as director or appointment as officer and Class of
directorship. 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
NAME AGE POSITIONS DIRECTOR SINCE CLASS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bobby G. Stevenson 56 Chairman and Founder 1974 Class III
Mac J. Slingerlend 51 President, Chief Executive Officer, 1989 Class II
Secretary and Director
Lawrence D. Greenwood 47 Executive Vice President/Co-Chief 1996 -
Operating Officer
William E. Storrison 39 Executive Vice President/Co-Chief 1992 -
Operating Officer
Richard A. Montoni 47 Executive Vice President/Chief 1996 Class III
Financial Officer, Treasurer and Director
Donald R. Hahl 48 Senior Vice President and 1997 -
President/CIBER Solutions Division
Joseph A. Mancuso 52 Senior Vice President and 1994 -
President/CIBER Information Services
Division
James A. Rutherford 52 Director 1994 Class II
James C. Spira* 55 Director 1994 Class I
Roy L. Burger 43 Director 1995 Class I
James G. Brocksmith, Jr. 57 Director 1998 Class I
Archibald J. McGill 67 Director 1998 Class III
</TABLE>
* Due to other commitments, Mr. Spira is not standing for re-election to the
Board when his term expires.
BOBBY G. STEVENSON. Mr. Stevenson is Chairman of the Board of
Directors and one of the original 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. As
Chief Executive Officer, he had been responsible for all operations of the
Company from 1977 to 1998.
MAC J. SLINGERLEND. Mr. Slingerlend joined the Company in January
1989 as Executive Vice President/Chief Financial Officer and was elected a
director in 1994. He was made President and Chief Operating Officer in 1996
and was promoted to Chief Executive Officer in March 1998 and became
Secretary in 1998. 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.
LAWRENCE D. GREENWOOD. Mr. Greenwood was previously
President/CIBER Solutions Division from August 1997 until he became an
Executive Vice President/Co-Chief Operating Officer in March 1998. 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 was President/CIBER
Information Services Division from 1996 until he became an Executive Vice
President/Co-Chief Operating Officer in March 1998. 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.
RICHARD A. MONTONI. Mr. Montoni has been the Company's Executive
Vice President/Chief Financial Officer and a director since October 1996. He
became Treasurer in 1998. Prior to joining the Company, Mr. Montoni was a
partner with KPMG Peat Marwick LLP, where he worked for approximately 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.
DONALD R. HAHL. Mr. Hahl was President of Spectrum Technology
Group, Inc. from August 1997 until he became President/CIBER Solutions
Division in March 1998. Mr. Hahl joined CIBER in 1996 when Spectrum merged
into the Company. Mr. Hahl was a co-founder of Spectrum in 1979 and served
as Vice President/Consulting Services when the merger occurred.
JOSEPH A. MANCUSO. Mr. Mancuso has been President of the CIBER
Information Services Division since March of 1998. Previously, Mr. Mancuso
was Divisional Vice President in charge of Eastern Operations from 1996 to
1998. Mr. Mancuso joined CIBER as a result of CIBER acquiring CPU, Inc. in
1994 and served as Regional Vice President from 1994 to 1996 in charge of
Southeast Branch Operations. From 1993 to 1994 Mr. Mancuso was a Vice
President for CPU, Inc.
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 President and
Chief Executive Officer of Boulder Capital Group, a company founded by him in
1986 that specializes in equipment leasing. In May 1998, Boulder Capital
Group, together with 11 other leasing companies, merged and consolidated to
become part of UniCapital Corporation ("UniCapital"). Mr. Burger has served
on the board of directors of UniCapital since its IPO and listing on the New
York Stock Exchange in May 1998.
JAMES G. BROCKSMITH, JR. Mr. Brocksmith has been a director of the
Company since July 1998. Mr. Brocksmith served as a partner of KPMG Peat
Marwick LLP from 1971 to January 1997. From 1990 to October 1996, Mr.
Brocksmith served as the Deputy Chairman of the Board and Chief Operating
Officer of KPMG Peat Marwick LLP. Since January 1997, Mr. Brocksmith has been
a self-employed business consultant for several companies. Mr. Brocksmith is
a member of the board of directors of two publicly traded companies;
Nationwide Financial Services, Inc., a provider of life insurance, mutual
funds and pension products, and Vistana, Inc., a leading developer and
operator of vacation ownership resorts.
ARCHIBALD J. MCGILL. Mr. McGill has been a director of the Company
since September 1998. Mr. McGill has served in executive capacities at IBM,
AT&T and was President of Rothschild Venture Capital. He is on the board of
directors of several small high technology companies. He is currently the
President of Chardonnay, Inc., a venture capital investment company with
which he has been associated since 1985.
-4-
<PAGE>
BOARD COMMITTEES AND MEETINGS
The Board of Directors met five times during the Company's 1998
fiscal year. Four of the directors participated in each of the board
meetings and committee meetings (of which such director was a member) held
during fiscal 1998; two of the directors were 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, 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 three times in fiscal 1998.
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 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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,
1998, all of its directors, executive officers and greater than 10%
beneficial owners were in compliance with their filing requirements.
-5-
<PAGE>
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 1, 1998, 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) 12,315,668 23%
Mac J. Slingerlend(2) 807,373 2%
Lawrence D. Greenwood(3) 205,495 *
William E. Storrison(4) 146,002 *
Richard A. Montoni(5) 42,364 *
Donald R. Hahl(6) 227,195 *
Joseph A. Mancuso(7) 25,860 *
James A. Rutherford(8) 46,226 *
James C. Spira(8) 33,939 *
Roy L. Burger(8) 20,099 *
James G. Brocksmith -- *
Archibald J. McGill -- *
Pilgrim Baxter & Associates(9) 3,948,400 7%
Putnam Investments, Inc.(10) 2,549,800 5%
All directors and executive officers
as a group (10 persons)(11) 13,770,221 25%
---------- ---
---------- ---
</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 settler, trustee and
beneficiary and options to purchase 146,500 shares of Common Stock. Excludes
85,200 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 735,558 shares of Common Stock.
(3) Includes options to purchase 3,466 shares of Common Stock.
-6-
<PAGE>
(4) Includes options to purchase 80,002 shares of Common Stock.
(5) Includes options to purchase 41,884 shares of Common Stock.
(6) Includes options to purchase 3,466 shares of Common Stock.
(7) Includes options to purchase 24,315 shares of Common Stock.
(8) Includes options to purchase 32,000, 32,000 and 19,000 shares of Common
Stock for Messrs. Rutherford, Spira and Burger, respectively.
(9) Address: 825 Duportail Road, Wayne, PA 19087.
(10) Address: 1 Post Office Square, Boston, MA 02109.
(11) Includes options to purchase 1,118,191 shares of Common Stock.
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS
On August 6, 1996, the Board of Directors resolved to issue shares
of Common Stock to each non-employee director, the value of which shares
would equal approximately $2,500 for each meeting attended. Effective July
1, 1998, a $6,000 semi-annual retainer was added. 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 additional compensation for serving on the Board of Directors.
Under the terms of the Non-employee Directors' Stock Option Plan
(the "Directors' Plan"), the Company may grant to non-employee directors
awards of stock options. The Directors' Plan provides for an initial
authorization of 200,000 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 20,000 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
4,000 shares of Common Stock; such options vest one year after the date of
grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no Compensation Committee Interlocks existing in fiscal
1998.
-7-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth compensation information with
respect to Mr. Stevenson, the Company's Chairman and former Chief Executive
Officer, Mr. Slingerlend, the Company's Chief Executive Officer, and the
Company's four most highly paid executive officers with annual compensation
in excess of $100,000 (the "Named Executive Officers"), for services rendered
for the fiscal years ended June 30, 1998, 1997 and 1996. See "Employment
Agreements."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
Securities All Other
Name and Fiscal Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($) (2)
------------------ ------ ---------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Bobby G. Stevenson(1) 1998 240,000 -- -- 194
Chairman, Former Chief 1997 330,000 117,885 -- 4,481
Executive Officer 1996 315,000 34,134 -- 5,041
Mac J. Slingerlend 1998 325,000 150,000 400,000 6,864
President, Chief 1997 300,000 140,000 20,000 7,163
Executive Officer and 1996 230,000 82,654 40,000 8,442
Secretary
Lawrence D. Greenwood 1998 256,250 84,423 210,400 11,173
Executive Vice 1997 -- -- -- --
President/ Co-Chief 1996 -- -- -- --
Operating Officer
William E. Storrison 1998 237,500 138,654 240,000 3,345
Executive Vice 1997 200,000 131,049 40,000 5,032
President/ Co-Chief 1996 150,000 41,780 40,000 4,989
Operating Officer
Richard A. Montoni 1998 250,000 98,846 20,000 6,394
Executive Vice 1997 163,461 100,000 100,000 3,228
President/Chief 1996 -- -- -- --
Financial
Officer and Treasurer
Donald R. Hahl 1998 185,000 41,621 10,400 5,665
Senior Vice President 1997 -- -- -- --
1996 -- -- -- --
</TABLE>
(1) Bobby G. Stevenson served as Chief Executive Officer through March 1998,
at which time Mr. Slingerlend was appointed Chief Executive Officer.
(2) Consists of amounts contributed by the Company under the Company's 401(k)
Savings Plan and amounts paid by the Company for automobile allowances,
life insurance premiums and other expenses. Savings Plan contributions
were $0, $4,123 and $4,781 for Mr. Stevenson and $2,615, $4,175 and
$5,538 for Mr. Slingerlend for the years ended June 30, 1998, 1997 and
1996, respectively. Savings Plan contributions and automobile allowance
paid by the Company for Mr. Greenwood were $3,462 and $4,538,
respectively, for the year ended June 30, 1998. Savings Plan
contributions were $3,000, $4,674 and $4,723 for Mr. Storrison for the
years ended June 30, 1998, 1997 and 1996, respectively. Savings Plan
contributions were $4,319 and $1,250 for Mr. Montoni for the years ended
June 30, 1998 and 1997, respectively. Savings Plan contributions and
automobile allowance paid by the Company for Mr. Hahl were $3,655 and
$1,665, respectively, for the year ended June 30, 1998. The remaining
amounts represent life insurance premiums and other expenses paid by the
Company.
-8-
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information regarding options granted to
the Named Executive Officers during the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(1)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- -------------------- ------- ----------- --------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Bobby G. Stevenson -- -- -- -- -- --
Mac J. Slingerlend(2) 400,000 16% $17.0938 7/2007 4,300,080 10,897,246
Lawrence D. Greenwood(3) 210,400 8% $17.0938 7/2007 2,261,842 5,731,951
William E. Storrison(4) 240,000 9% $17.0938 7/2007 2,580,048 6,538,348
Richard A. Montoni(5) 20,000 < 1% $17.0938 7/2007 215,004 544,862
Donald R. Hahl(5) 10,400 < 1% $17.0938 7/2007 111,802 283,328
</TABLE>
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises will depend on future performance of the
Common Stock. No assurance can be made that the amounts reflected in
these columns will be achieved.
(2) Options were granted on August 5, 1997. The options vest and are
exercisable in equal installments over three years commencing July 1,
2000.
(3) Options for 10,400 shares were granted July 1, 1997 and options for
200,000 shares were granted August 5, 1997. Options for 10,400 shares
vest and are exercisable in equal installments over three years
commencing July 1, 1998 and options for 200,000 shares vest and are
exercisable in equal installments over three years commencing July 1,
2000.
(4) Options for 40,000 shares were granted July 1, 1997 and options for
200,000 shares were granted August 5, 1997. Options for 40,000 shares
vest and are exercisable in equal installments over three years commencing
July 1, 1998 and options for 200,000 shares vest and are exercisable in
equal installments over three years commencing July 1, 2000.
(5) Options were granted on July 1, 1997. The options vest and are
exercisable in equal installments over three years commencing July 1,
1998.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning outstanding
options held by the Named Executive Officers during the fiscal year ended
June 30, 1998.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
ACQUIRED UNEXERCISED OPTIONS AT FISCAL YEAR MONEY OPTIONS AT FISCAL YEAR
ON VALUE END (#) END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Bobby G. Stevenson -- -- 160,000 / 40,000 5,728,000 / 1,432,000
Mac J. Slingerlend 76,666 2,115,456 756,667 / 426,667 28,505,784 / 9,169,993
Lawrence D. Greenwood -- -- -- / 210,400 -- / 4,398,664
William E. Storrison 203,372 4,646,988 53,336 / 266,664 1,615,081 / 5,824,907
Richard A. Montoni 4,000 61,500 15,609 / 100,391 327,789 / 2,106,335
Donald R. Hahl -- -- -- / 10,400 -- / 217,424
</TABLE>
-9-
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has agreements with the Named Executive Officers that
have a term of one year and is annually renewable. Each employment agreement
provides that an officer's compensation will include a base and a bonus. In
the event that an officer's employment is terminated upon a change in control
of the Company, upon death or disability of the officer or without cause, the
officer will be entitled to a severance payment of up to three times their
annual compensation which varies based upon the cause of termination and
officer position. Officers are also entitled to receive continuance of
medical, dental and disability benefits for 12 months following termination.
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
termination for cause. The payments will be made for 15 years after Mr.
Slingerlend's termination of employment with the Company and will range from
$50,000 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.
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 1998 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. Slingerlend,
Greenwood, Storrison, Montoni and Hahl. The base salary and bonuses granted
the chief executive officer and the other Named Executive Officers with
respect to fiscal 1998 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. During fiscal 1998, stock options were
granted to Messrs. Slingerlend, Greenwood, Storrison, Montoni and Hahl 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 51 month
cumulative total return* among CIBER, Inc., their Peer Group Index, the S&P
500 Index, and the Russell 2000 Index.
For EDGAR representation of data points used in printed graphic
see table below.
Since the S&P Index and the Russell 2000 Index are both broad equity market
indices, the Company determined that it would be appropriate and more
meaningful to investors to replace the Russell 2000 Index with an index
comprised of peer issuers within the Company's industry. The peer group
includes: Cambridge Technology Partners, Inc., Computer Horizons Corp.,
Computer Task Group, Inc., Keane, Inc., Renaissance Worldwide Inc., Sapient
Corporation, Technology Solutions Company and Whittman-Hart, Inc.
* Assumes $100 invested on March 17, 1994 and 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 6/30/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CIBER, Inc. 100.00 104.48 211.94 525.36 816.40 1,814.88
Peer Group Index 100.00 94.52 153.65 382.61 607.64 942.34
S&P 500 Index 100.00 100.42 126.60 159.52 214.88 279.68
Russell 2000 Index 100.00 96.11 115.40 143.10 166.47 193.91
CIBER, Inc. Closing Stock Price $2.094 2.188 4.438 11.000 17.094 38.000
</TABLE>
-11-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 2, 1996, the Company purchased CIBER Network Services,
Inc. ("CNSI"), which was 85% owned by Bobby G. Stevenson, Mac J. Slingerlend
and Prasong Suvarnasorn, each of whom were and remain officers and/or
directors of the Company. Mr. Stevenson is also the Company's largest
shareholder. In January 1998, additional contingent consideration of $1.2
million was paid to the selling shareholders, of which Messrs. Stevenson,
Slingerlend and Suvarnasorn and members of their families received an
aggregate of 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.
PROPOSAL 2 - 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, 1998 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, 1999. 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 1999 fiscal year will be permitted to stand
unless the Board of Directors finds other reasons for making a change.
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, 1999 to be
considered for inclusion in the proxy statement and proxy relating to the
1999 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 1998 Annual Report of the Company, as filed with the
Commission, is being mailed to the shareholders with this Proxy Statement.
The 1998 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, 1998, is included herein on
pages P-1 through P-26.
By order of the Board of Directors
/s/ Bobby G. Stevenson
Bobby G. Stevenson
Chairman of the Board
Englewood, Colorado
September 25, 1998
-12-
<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, COMPETITION, POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS, AND PRICE VOLATILITY, 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 $158.4 million in fiscal 1994 to
$550.4 million in fiscal 1998. The Company operates the CIBER Information
Services ("CIS") Division and the CIBER Solutions ("Solutions") Division.
The CIS Division accounted for approximately 58% of the Company's total
revenues in fiscal 1998, while the Solutions Division accounted for the
remainder. The CIS Division provides application software development and
maintenance services and millenium date change solutions. The Solutions
Division is comprised of the Company's wholly-owned subsidiaries, Spectrum
Technology Group, Inc. ("Spectrum"), Business Information Technology, Inc.
("BIT"), The Summit Group, Inc. ("Summit") 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 PeopleSoft, Inc. software, including Human Resource, Financial
Management and Accounting, Student Administration, Government, Manufacturing
and Distribution products. Summit provides Lawson, J. D. Edwards, Oracle,
Baan and other software implementation services, strategic consulting
services, proprietary warehousing and traffic software, and is an industry
remarketer of certain third party computer products. 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.
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 33% in fiscal 1998. 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. Unless the
effects are immaterial, 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, 1995 to June 30, 1998, the Company completed 19 business
combinations. In addition, subsequent to June 30, 1998, the Company completed
the following two mergers:
P-1
<PAGE>
EJR COMPUTER ASSOCIATES, INC. ("EJR") - On August 11, 1998, EJR merged with
CIBER in a business combination to be accounted for as a pooling of
interests. The Company issued approximately 1,150,000 shares of its common
stock and assumed substantially all of EJR's liabilities in exchange for all
of the assets of EJR. EJR, located in Hoboken, New Jersey, provides data
processing consulting and project management services similar to the
Company's CIS Division. The Company's consolidated financial statements
included herein, have not been restated for the EJR 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 EJR.
EJR had revenues of approximately $20 million, $23 million and $26 million
during the years ended June 30, 1996, 1997 and 1998, respectively. The
effects of this merger on the Company's historical pro forma net income and
pro forma income per share are not expected to be material.
THE CUSHING GROUP, INC. ("CUSHING") - On August 31, 1998, Cushing merged with
CIBER in a business combination to be accounted for as a pooling of
interests. The Company issued approximately 950,000 shares of its common
stock and assumed substantially all of Cushing's liabilities in exchange for
all of the assets of Cushing. Cushing, headquartered in Nashua, New
Hampshire, provides distributed object technology consulting services and
will operate within Spectrum. The effects of this merger on the Company's
historical 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.
In general, except for CNSI's product sales, the Solutions Division revenues
provide higher gross margins than the CIS Division. However, the Solutions
Division 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 the CIS
Division and the Solutions Division. Management believes that operating
income before amortization and merger costs, as a percentage of revenues, is
a more meaningful indicator because it reflects the effects of revenue mix.
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>
Percentage of Revenues Dollar % Increase
Year Ended June 30, Year to Year
------------------------------------ ------------------------
1996 1997 1998 1996:1997 1997:1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 41.8% 40.8%
Gross margin 32.1% 32.8% 35.1% 44.8 51.0
Selling, general and administrative expenses 24.2 23.4 23.1 37.2 39.1
------------------------------------
Operating income before amortization
and merger costs 7.9 9.4 12.0 67.8 80.8
Amortization of intangible assets .7 .8 .7 72.0 27.5
Merger costs .3 .3 .8 35.2 272.6
------------------------------------
Operating income 6.9 8.3 10.5 69.0 78.6
Interest and other income, net .3 .2 .3 18.7 48.7
------------------------------------
Income before income taxes 7.2 8.5 10.8 66.8 77.7
Income tax expense 2.0 3.2 4.2 125.4 79.8
------------------------------------
Net income 5.2% 5.3% 6.6% 43.9 76.4
------------------------------------
------------------------------------
Pro forma net income 4.4% 5.1% 6.2% 64.8 72.4
------------------------------------
------------------------------------
</TABLE>
P-2
<PAGE>
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
The Company's revenues for fiscal 1998 increased 40.8% to $550.4 million from
$390.8 million for fiscal 1997. This 40.8% revenue increase represents a
46.1% increase in consulting revenues and an 8.8% increase in other revenues.
In fiscal 1998, CIS consulting revenues increased 41.1% to $317.1 million
from $224.8 million in fiscal 1997 and the Solutions Division consulting
revenues increased 56.2% to $173.5 million from $111.1 million in fiscal
1997. Other revenues increased to $59.8 million in fiscal 1998 from $54.9
million in fiscal 1997. CIS consulting revenues accounted for 64.6% and
66.9% of total consulting revenues, and 57.6% and 57.5% of total revenues in
fiscal 1998 and 1997, respectively. The increase in CIS Division revenues is
derived primarily from an increase in hours billed and, to a lesser extent,
an increase in average billing rates. The increase in hours billed is due
primarily to internal growth in branch offices. Solutions Division revenues
increased primarily due to increased software implementation services and, to
a lesser extent, increases in other consulting services and increases in
billing rates.
Of the 46.1% increase in consulting revenues for fiscal 1998 in comparison to
fiscal 1997, approximately 9.0% was due to revenues from acquired businesses
or immaterial poolings of interests. The remainder of the increase was due
to increased revenues from existing operations. Management believes this
growth is reflective of increased demand for IT services, including an
increased demand for year 2000 related services and increased demand for
enterprise resource planning ("ERP") software implementation services.
Gross margin percentage improved to 35.1% of revenues in fiscal 1998 from
32.8% in fiscal 1997. This improvement is due to improved gross margins on
both consulting services and other revenues.
Selling, general and administrative expenses were 23.1% of revenues for
fiscal 1998 compared to 23.4% of revenues for fiscal 1997. 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 to $3.9 million in fiscal 1998
from $3.1 million in fiscal 1997. This increase was due to the additional
intangible assets resulting from mergers and acquisitions in fiscal 1998 and
1997.
Merger costs, primarily transaction related broker and professional costs, of
$4.5 million were incurred in fiscal 1998 compared to $1.2 million in fiscal
1997.
Net interest and other income increased to $1.5 million in fiscal 1998 from
$1.0 million in fiscal 1997 due to increased average cash balances available
for investment.
After the pro forma adjustment to income tax expense, the Company's pro forma
effective tax rates for fiscal 1998 and 1997 were 42.1% and 40.4%,
respectively. This increase was due to increased nondeductible merger costs.
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
that were not subject to income taxes.
The Company's pro forma net income increased 72.4% to $34.3 million in fiscal
1998 from $19.9 million in fiscal 1997.
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
The Company's revenues for fiscal 1997 increased 41.8% to $390.8 million from
$275.6 million for fiscal 1996. This 41.8% revenue increase represents a
38.9% increase in consulting revenues and a 62.4% increase in other revenues.
In fiscal 1997, CIS consulting revenues increased 36.1% to $224.8 million
from $165.2 million in fiscal 1996 and the Solutions Division consulting
revenues increased 45.1% to $111.1 million from $76.6 million in fiscal 1996.
Other revenues increased to $54.9 million in fiscal 1997 from $33.8 million
in fiscal 1996. CIS consulting revenues accounted for 66.9% and 68.3% of
total consulting revenues, and 57.5% and 59.9% of total revenues in fiscal
1997 and 1996, respectively. The increase in CIS Division revenues is
derived primarily from an increase in hours billed and, to a lesser extent,
an increase in average billing rates. The increase in hours billed is due
primarily to internal growth in branch offices. Solutions Division total
revenues increased approximately $21.7 million due to
P-3
<PAGE>
acquisitions, of which $12.2 million is other revenue. In addition,
Solutions Division revenues increased due to increased software
implementation services and, to a lesser extent, increases in other
consulting services and increases in billing rates.
Of the 38.9% increase in consulting revenues for fiscal 1997 in comparison to
fiscal 1996, approximately 5% was due to revenues from acquired businesses.
The remainder of the increase was due to increased revenues from existing
operations. Management believes this growth is reflective of increased
demand for IT services, including an increased demand for year 2000 related
services and increased demand for ERP software implementation services.
Gross margin percentage improved to 32.8% of revenues in fiscal 1997 from
32.1% of revenues in fiscal 1996. This improvement is due to improved gross
margins on consulting services.
Selling, general and administrative expenses were 23.4% of revenues for
fiscal 1997 compared to 24.2% of revenues for 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 to $3.1 million in fiscal 1997
from $1.8 million in fiscal 1996. This increase was due primarily to the
Company's acquisitions in fiscal 1997.
Merger costs, primarily transaction related broker and professional costs, of
$1.2 million were incurred in fiscal 1997 compared to $901,000 in fiscal 1996.
Net interest income increased to $1.0 million in fiscal 1997 from $867,000 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 investments in interest earning cash equivalent instruments.
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 39.7%,
respectively. This increase was primarily due to increased nondeductible
merger costs and an increase in the Company's statutory federal rate from 34%
to 35%. 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 that were not subject to income taxes.
The Company's pro forma net income increased 64.8% to $19.9 million in fiscal
1997 from $12.1 million in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had $108.3 million of working capital, of which
$37.4 million was cash and cash equivalents, and had a current ratio of 3:1.
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 1999.
Net cash provided by operating activities was $5.9 million, $17.9 million and
$27.1 million in fiscal 1996, 1997 and 1998, 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 increased 32.0% and 53.5% in fiscal 1997
and 1998, respectively, primarily as a result of the Company's increase in
revenues and also due to the mix shift to more solution oriented engagements.
The Company's accounts receivable totaled $117.6 million at June 30, 1998
compared to $76.6 million at June 30, 1997. Generally, 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. Accounts
receivable days sales outstanding ("DSO") was 71 days at June 30, 1998, which
management believes is in line with industry standards.
P-4
<PAGE>
Net cash used in investing activities in fiscal 1996, 1997 and 1998 was $4.8
million, $27.4 million and $11.2 million, respectively. The Company used
cash of $1.7 million, $19.3 million and $351,000 for acquisitions during
fiscal 1996, 1997 and 1998, respectively. The Company also purchased
property and equipment, primarily computer equipment, of $3.1 million, $7.2
million and $11.6 million during fiscal 1996, 1997 and 1998, respectively.
Net cash provided by (used in) financing activities in fiscal 1996, 1997 and
1998 was $12.0 million, $12.9 million and ($4.9 million), respectively. The
Company obtained net cash proceeds from sales of common stock of $20.7
million, $22.9 million and $5.8 million in fiscal 1996, 1997 and 1998,
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 in fiscal
1997. In addition, various companies that have merged with CIBER have had
outstanding balances on lines of credit and notes payable. Upon merger with
CIBER, these borrowings were paid in full.
For the years ended June 30, 1996, 1997 and 1998, the Company recognized $2.6
million, $6.4 million and $9.1 million, 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. There
were no outstanding borrowings under this bank line at June 30, 1997 and
1998. 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 1998.
The Company's subsidiary, CNSI, has a $7.5 million unsecured inventory
financing line of credit with a financial corporation. Amounts outstanding
totaled approximately $2.2 million and $2.6 million at June 30, 1997 and
1998, respectively, and are included in trade payables on the Company's
balance sheet.
The Company expects, although there can be no assurance, to be able to renew
these lines of credit on similar terms.
Year 2000
The Company has completed an assessment of its internal information systems
and does not believe there are any material issues or costs associated with
preparing its internal systems for the year 2000. The Company believes that
its non-information technology systems are not material to the Company's
operations. The Company currently utilizes various third party computer
software, and has obtained assurances that such software is year 2000
compliant. For purchases of new hardware and software, the Company's
practice is to request year 2000 certification from its vendors. Because
third party failures could have a material impact on the Company's ability to
conduct business, the company is attempting to obtain written assurances from
all material vendors that their systems are or will be year 2000 compliant.
However, if either the Company or any material vendor or supplier experiences
a failure of any critical system it could have a material adverse impact on
the Company's business operations or require the Company to incur
unanticipated expenses. If by January 1, 1999, the Company has not obtained
reasonable assurances from material vendors and suppliers as to year 2000
compliance, the Company will consider alternatives, including the replacement
of material vendors. In addition, the business interruption of any of the
Company's significant clients, resulting from their year 2000 issues, could
have a material adverse impact on the Company's revenues and results of
operations.
Many of the Company's clients need to repair or replace their legacy systems
because of year 2000 issues. The Company believes this is favorably
impacting the demand for its services and products. The Company provides
certain direct year 2000 services, like code renovation, the market for which
the Company expects to diminish over time. The Company also believes that as
companies focus on year 2000 issues, other less critical projects have been
delayed. Therefore, the Company does not expect a decrease in the demand for
its services as the year 2000 draws closer. However, given the lack of
precedent for an issue of this nature, the Company's ability to forecast the
impact of this issue on quarter to quarter operations is limited.
P-5
<PAGE>
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). This
standard requires disclosure of financial and descriptive information about
an entity's reportable operating segments. This standard is effective for
fiscal years beginning after December 15, 1997 and requires restatement of
comparative information for prior periods. The Company will provide the
disclosures required by SFAS 131, if any, in its fiscal year 1999 financial
statements. In addition, the Company believes the future adoption of FASB
Statements No. 130, No. 132, and No. 133 and Statement of Position 97-2
"Software Revenue Recognition" will not have a material affect on its
financial position or results of operations.
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, results of operations
and the market price of its common stock.
GROWTH THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION - As an integral
part of its business strategy, the Company intends to continue to expand by
acquiring information technology businesses. The Company continuously
evaluates potential business combinations and aggressively pursues attractive
transactions. From July 1 1995 through August 1998, the Company completed 21
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 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 the Company will be able
to combine additional business, or that any business combination will result
in benefits to the Company, or that management will be able to manage
effectively the resulting business. Additionally, the Company experiences
competition for business combinations.
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. 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. There can
be
P-6
<PAGE>
no assurance that the Company will be able to successfully start up,
identify, acquire, or integrate what will ultimately be successful branch
office operations.
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 14% of the
Company's total revenues for the fiscal year ended June 30, 1998. No one
client accounted for more than 10% of the Company's total revenues in fiscal
1998. 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 as a
PeopleSoft implementation partner. In fiscal 1998, the Company derived
approximately 9% of its total revenues from clients who purchased
implementation services for their PeopleSoft software. In the event
PeopleSoft products become obsolete or non-competitive or if the Company
should lose its "implementation partner" status with PeopleSoft, the Company
could 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 from 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 tasks. 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 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 may offer 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
P-7
<PAGE>
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 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, general economic conditions
and 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.
PRICE VOLATILITY - The market price of the Company's common stock could be
subject to significant fluctuations in response to variations in quarterly
operating results, the Company's prospects, changes in earnings estimates by
securities analysts and by economic, financial and other factors and market
conditions that can effect the capital markets generally, the industry
segment of which the Company is a part, the NYSE, including the level of, and
fluctuations in, the trading prices of stocks generally and sales of
substantial amounts of the Company's common stock in the market, or the
perception that such sales could occur, and by other events that are
difficult to predict and beyond the Company's control. In addition, the
securities markets have experienced significant price and volume fluctuations
from time to time in recent years that have often been unrelated or
disproportionate to the operating performance of particular companies. These
broad fluctuations may adversely affect the market price of the Company's
common stock.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no activities in derivative financial or commodity
instruments. The Company's exposure to market risks, (i.e, interest rate
risk, foreign currency exchange rate risk, equity price risk) through other
financial instruments, including, among others, cash equivalents, accounts
receivable, lines of credit, is not material.
P-8
<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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year
period ended June 30, 1998, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
July 31, 1998, except as to Note 13,
which is as of August 31, 1998
P-9
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA 1996(1) 1997(1) 1998
--------- --------- ---------
<S> <C> <C> <C>
Consulting services $241,743 $335,874 $490,625
Other revenues 33,833 54,943 59,796
--------- --------- ---------
Total revenues 275,576 390,817 550,421
--------- --------- ---------
Cost of consulting services 162,137 221,496 313,724
Cost of other revenues 24,916 41,152 43,150
Selling, general and administrative expenses 66,693 91,530 127,317
Amortization of intangible assets 1,795 3,087 3,936
Merger costs 901 1,218 4,538
--------- --------- ---------
Operating income 19,134 32,334 57,756
Interest and other income 1,174 1,452 1,751
Interest expense (307) (423) (221)
--------- --------- ---------
Income before income taxes 20,001 33,363 59,286
Income tax expense 5,621 12,667 22,776
--------- --------- ---------
Net income $ 14,380 $ 20,696 $ 36,510
--------- --------- ---------
--------- --------- ---------
Pro forma information (unaudited) (Note 1(j)):
Historical net income $ 14,380 $ 20,696 $ 36,510
Pro forma adjustment to income tax expense (2,312) (803) (2,207)
--------- --------- ---------
Pro forma net income $ 12,068 $ 19,893 $ 34,303
--------- --------- ---------
--------- --------- ---------
Pro forma income per share - basic $ .28 $ .43 $ .68
Pro forma income per share - diluted $ .26 $ .40 $ .65
Weighted average shares - basic 43,084 46,738 50,199
Weighted average shares - diluted 46,555 49,457 52,687
</TABLE>
(1) Restated for poolings of interests through June 30, 1998 - See Note 2.
See accompanying notes to consolidated financial statements.
P-10
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND 1998
<TABLE>
<CAPTION>
JUNE 30,
------------------------
IN THOUSANDS, EXCEPT SHARE DATA 1997(1) 1998
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26,471 $ 37,437
Investments 1,984 -
Accounts receivable 76,636 117,595
Inventories 917 618
Prepaid expenses and other assets 2,916 4,268
Deferred income taxes 4,160 1,458
----------- ---------
Total current assets 113,084 161,376
----------- ---------
Property and equipment, at cost 20,184 32,203
Less accumulated depreciation and amortization (9,188) (14,951)
----------- ---------
Net property and equipment 10,996 17,252
----------- ---------
Intangible assets, net 34,383 33,597
Deferred income taxes 1,112 2,068
Other assets 1,716 2,119
----------- ---------
Total assets $161,291 $216,412
----------- ---------
----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank revolving lines of credit $ 1,550 $ -
Notes payable 2,419 -
Trade payables 11,310 10,989
Accrued compensation and payroll taxes 16,519 23,314
Deferred revenues 2,063 4,097
Other accrued expenses and liabilities 8,039 11,450
Income taxes payable 2,104 3,276
Deferred income taxes 1,214 -
----------- ---------
Total current liabilities 45,218 53,126
Notes payable, net of current portion 975 -
Long-term acquisition costs payable 100 -
----------- ---------
Total liabilities 46,293 53,126
----------- ---------
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, 48,391,000 and 51,092,000 shares
issued and outstanding 484 511
Additional paid-in capital 73,033 93,882
Retained earnings 41,481 68,893
----------- ---------
Total shareholders' equity 114,998 163,286
----------- ---------
Total liabilities and shareholders' equity $161,291 $216,412
----------- ---------
----------- ---------
</TABLE>
(1) Restated for poolings of interests through June 30, 1998 - 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, 1996, 1997 AND 1998
<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, 1995 (1) 19,794 $198 $15,082 $21,892 $ 37,172
Retroactive effect of March 1998 two-for-one stock split 19,793 198 (198) - -
------------------------------------------------------------------
BALANCES AT JULY 1, 1995 - RESTATED FOR STOCK SPLIT 39,587 396 14,884 21,892 37,172
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 consideration 48 - 100 - 100
Sale of common stock by merged companies 748 8 447 (8) 447
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 - - - 14,380 14,380
Distributions by merged companies - - - (3,487) (3,487)
------------------------------------------------------------------
BALANCES AT JUNE 30, 1996 (1) 45,551 456 39,115 32,041 71,612
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
Acquisition consideration 186 2 2,567 - 2,569
Sale of common stock by merged companies - - 2,651 - 2,651
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 2 - 62 - 62
Net income - - - 20,696 20,696
Distributions by merged companies - - - (8,514) (8,514)
Adjustment to conform year end of merged companies - - - (701) (701)
------------------------------------------------------------------
BALANCES AT JUNE 30, 1997 (1) 48,391 484 73,033 41,481 114,998
Note payable paid with stock 51 1 1,105 - 1,106
Employee stock purchases and options exercised 1,407 14 5,752 - 5,766
Acquisition consideration 96 1 1,150 - 1,151
Immaterial poolings of interests 1,145 11 347 1,834 2,192
Tax benefit from exercise of stock options - - 9,149 - 9,149
Termination of S corporation tax status of merged companies - - 3,287 (3,287) -
Compensation expense related to stock and stock options 2 - 59 - 59
Net income - - - 36,510 36,510
Distributions by merged companies - - - (7,645) (7,645)
------------------------------------------------------------------
BALANCES AT JUNE 30, 1998 51,092 $511 $93,882 $68,893 $163,286
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>
(1) Restated for poolings of interests through June 30, 1998 - 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, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
IN THOUSANDS 1996(1) 1997(1) 1998
-------- -------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $14,380 $20,696 $36,510
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,753 6,272 9,443
Deferred income taxes (686) (859) (4,672)
Other 119 32 48
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Accounts receivable (18,026) (14,900) (34,618)
Inventories (1,026) 1,927 299
Other current and long-term assets (1,107) (2,245) (3,327)
Trade payables 3,694 (1,322) (2,072)
Accrued compensation and payroll taxes 762 3,826 5,294
Deferred revenues 1,214 156 2,034
Other accrued expenses and liabilities 1,430 409 3,350
Income taxes payable 1,395 3,866 14,783
-------- -------- -------
Net cash provided by operating activities 5,902 17,858 27,072
-------- -------- -------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (1,725) (19,290) (351)
Purchases of property and equipment (3,081) (7,188) (11,648)
Purchases of investments (34) (2,039) (905)
Sales of investments - 1,111 1,695
-------- -------- -------
Net cash used in investing activities (4,840) (27,406) (11,209)
-------- -------- -------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 20,685 22,908 5,766
Net payments on bank lines of credit (5,200) (1,568) (1,985)
Payments on notes payable (1,512) (3,451) (2,650)
Borrowings on notes payable 1,497 3,545 247
Distributions by merged companies (3,487) (8,514) (6,275)
-------- -------- -------
Net cash provided by (used in) financing
activities 11,983 12,920 (4,897)
-------- -------- -------
Net increase in cash and cash equivalents 13,045 3,372 10,966
Cash and cash equivalents, beginning of year 10,475 23,520 26,471
Adjustment to conform fiscal year of merged companies - (421) -
-------- -------- -------
Cash and cash equivalents, end of year $23,520 $26,471 $37,437
-------- -------- -------
-------- -------- -------
</TABLE>
(1) Restated for poolings of interests through June 30, 1998 - See Note 2.
See accompanying notes to consolidated financial statements.
P-13
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1997 AND 1998
(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 system integration consulting services in four principal areas:
management consulting for business/IT solutions, Enterprise Resource Planning
("ERP") implementation services, information technology consulting services
and network technology design/integration consulting.
The CIBER Information Services ("CIS") Division provides application software
development and maintenance services and millenium date change solutions. The
CIBER Solutions ("Solutions") Division is comprised of the Company's
wholly-owned subsidiaries, Spectrum Technology Group, Inc. ("Spectrum"),
Business Information Technology, Inc. ("BIT"), The Summit Group, Inc.
("Summit") 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 PeopleSoft, Inc.
software, including Human Resource, Financial Management and Accounting,
Student Administration, Government, Manufacturing and Distribution products.
Summit provides Lawson, J. D. Edwards, Oracle, Baan and other software
implementation services, strategic consulting services, proprietary
warehousing and traffic software, and is an industry remarketer of certain
third party computer products. 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.
(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 of $3,900,000 and $10,199,000 at June 30, 1997 and 1998,
respectively, and investment grade commercial paper of $14,742,000 and
$21,179,000 at June 30, 1997 and 1998, respectively.
(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, 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.
(F) PROPERTY AND EQUIPMENT
Property and equipment, which consists primarily of computer 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
P-14
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
to seven years. Depreciation expense was $1,958,000, $3,185,000 and
$5,507,000 for the years ended June 30, 1996, 1997 and 1998, 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 provides consulting services under time-and-material and
fixed-price contracts. The Company recognizes revenue under
time-and-material contracts as hours and costs are incurred. For fixed-price
contracts, revenue is recognized on the basis of the estimated percentage of
completion based on costs incurred relative to total estimated costs.
Losses, if any, on fixed-price contracts are recognized when the loss is
determined.
Other revenues include sales of computer hardware products, software license
and maintenance fees, and commissions on computer product sales. Revenues
related to the sale of computer products are recognized when the product is
shipped. Software license fee revenues are recognized over the period of the
software implementation and revenues from maintenance agreements are
recognized ratably over the maintenance period.
Consulting services revenues also include reimbursable expenses directly
incurred in providing services to clients, of approximately $7,179,000,
$9,424,000 and $14,843,000 for the years ended June 30, 1996, 1997 and 1998,
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
bases 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 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 S
corporation companies prior to their merger with CIBER. The related net
deferred tax asset or liability of these companies at the date of their
respective merger with CIBER is recorded as income tax benefit or 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.
(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 income taxes for all periods prior to their merger with CIBER at the
P-15
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
marginal rates applicable in such periods. In addition, the pro forma
adjustments to income tax expense for the years ended June 30, 1996, 1997 and
1998 eliminate the income tax expense (benefit) of $475,000, $1,717,000 and
($135,000), respectively, representing the one-time income tax expense
(benefit) 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 eliminates the income tax benefit of $818,000 resulting
from Spectrum's conversion to an S corporation.
(K) PRO FORMA INCOME PER SHARE
At December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings Per Share." All prior-period earnings per share
("EPS") data has been restated. Basic EPS 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 effects of the
potential dilution of the Company's 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 poolings of interests as if they had been outstanding for
all periods prior to the merger.
(L) STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123 ("SFAS
123"), 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 measures stock-based 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.
The pro forma disclosures of net income and income per share, as if the
fair-value based method defined in SFAS 123 had been applied, are provided in
Note 8.
(M) STOCK SPLIT
In March 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 (effected in the form of a stock dividend) that was effective
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 Consolidated Statement of Shareholders' Equity as of July 1, 1995 and all
references to number of shares and to per share information in the
consolidated financial statements and notes thereto, have been adjusted to
reflect the stock split on a retroactive basis.
(N) ESTIMATES
The preparation of these financial statements 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.
P-16
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) POOLINGS OF INTERESTS
From July 1, 1997 to June 30, 1998 the following companies merged with CIBER
in business combinations accounted for as poolings of interests ("mergers"):
THE SUMMIT GROUP, INC. ("SUMMIT") - On May 4, 1998, CIBER, Inc. issued
4,262,860 shares of its common stock in exchange for all of the outstanding
common stock of Summit. Summit, headquartered in Mishawaka, Indiana,
provides software implementation and strategic consulting services,
proprietary warehousing and traffic software, and is an industry remarketer
of certain third party computer products.
STEP CONSULTING, INC. ("STEP") - On April 30, 1998, CIBER, Inc. issued
131,242 shares of its common stock and assumed substantially all of Step's
liabilities in exchange for all of the assets of Step. Step, headquartered
in Greensboro, North Carolina, provided consulting services similar to
Spectrum.
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, CRA and Summit. 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 restating for the
Constell and ASE mergers, their operations for the twelve months ended June
30, 1997 were combined with CIBER's for the year ended June 30, 1997 and
their operations for the twelve months ended December 31, 1995 were combined
with CIBER's for the year ended June 30, 1996. As a result,
P-17
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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, BQI and Step 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, collectively of Constell, FDI and
Techware, collectively of ASE and CRA and of Summit 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 SUMMIT COMBINED
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NINE MONTHS ENDED 3/31/98*
Revenues $361,783 - - - $38,423 $ 400,206
Net income 20,567 - - - 3,379 23,946
Pro forma net income 21,707 - - - 2,028 23,735
Pro forma income per share-diluted $ .45 $ .45
SIX MONTHS ENDED 12/31/97*
Revenues $220,746 - - $14,987 $22,862 $ 258,595
Net income 10,997 - - 651 906 12,554
Pro forma net income 12,004 - - 525 544 13,073
Pro forma income per share-diluted $ .26 $ .25
THREE MONTHS ENDED 9/30/97*
Revenues $ 94,539 - $10,867 $7,123 $10,713 $ 123,242
Net income (loss) 5,779 - (6) 411 306 6,490
Pro forma net income 5,650 - 59 321 184 6,214
Pro forma income per share-diluted $ .13 $ .12
YEAR ENDED 6/30/97
Revenues $262,274 $35,536 $35,242 $24,129 $33,636 $ 390,817
Net income 14,625 1,801 340 1,670 2,260 20,696
Pro forma net income 15,933 1,086 278 1,240 1,356 19,893
Pro forma income per share-diluted $ .39 $ .40
YEAR ENDED 6/30/96
Revenues $187,653 $30,299 $20,788 $13,024 $23,812 $ 275,576
Net income 10,007 880 493 893 2,107 14,380
Pro forma net income 9,228 528 423 625 1,264 12,068
Pro forma income per share-diluted $ .24 $ .26
</TABLE>
* Information for the three months ended September 30, 1997, the six months
ended December 31, 1997 and the nine months ended March 31, 1998 is unaudited.
In fiscal 1997, the following companies merged with CIBER in business
combinations accounted for as poolings of interests:
TECHNICAL SUPPORT GROUP, INC.("TSG") - On November 27, 1996, the Company
issued 740,752 shares of its common stock in connection with the merger of
TSG with 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 connection with the merger of TMG with CIBER.
P-18
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
SPECTRUM TECHNOLOGY GROUP, INC. ("SPECTRUM") - On September 3, 1996, the
Company issued 1,706,232 shares of its common stock in connection with the
merger of Spectrum with CIBER.
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 Practical Business Solutions, Inc. with CIBER.
(3) ACQUISITIONS
From July 1, 1995 through June 30, 1998, CIBER made certain acquisitions for
cash or cash and stock, 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 recorded goodwill of $13.1 million related to this
acquisition.
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 based on certain performance objectives of CNSI in each of the
12-month periods ending October 31, 1997, 1998 and 1999. Any contingent
consideration earned is 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 this
additional consideration of $1.2 million, consisting of 48,692 shares of the
CIBER common stock and $124,000 in cash. In addition, at June 30, 1998, the
Company believes the contingent consideration for the period ending October
31, 1998 will be earned, and has recorded additional goodwill and an accrued
liability of $1.2 million. Up to $200,000 of contingent consideration may be
earned in the 12-month period ending October 31, 1999. The Company has
recorded total goodwill of $6.9 million related to this acquisition at June
30, 1998. Any additional contingent consideration paid will be accounted for
as additional goodwill. For income tax purposes, this acquisition was a
non-taxable transaction.
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.
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 initial goodwill of $740,000 related
to this acquisition. In addition, if the operations acquired achieve certain
levels of revenue through December 31, 1998, the Company would be required to
pay 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.
P-19
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) INTANGIBLE ASSETS
Intangible assets consist of the following at June 30 (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Goodwill $31,255 $ 32,715
Client lists 6,801 6,801
Noncompete agreements 2,144 3,834
Software license costs 255 255
-------- ---------
40,455 43,605
Less accumulated amortization (6,072) (10,008)
-------- ---------
$34,383 $ 33,597
-------- ---------
-------- ---------
</TABLE>
(5) 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,
1997 and 1998. 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 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, has a $7.5 million unsecured inventory
financing line of credit with a financial corporation. Amounts outstanding
totaled approximately $2.2 million and $2.6 million at June 30, 1997 and
1998, respectively, and are included in trade payables 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 $1,106,000 in satisfaction of a note payable, including accrued
interest, to a Techware shareholder.
(6) LEASES
The Company has several noncancelable operating leases for office space.
Rental expense for operating leases totaled $3,950,000, $5,883,000 and
$8,543,000 for the years ended June 30, 1996, 1997 and 1998, respectively.
Future minimum lease payments as of June 30, 1998 are (in thousands):
<TABLE>
<CAPTION>
Year ending June 30:
<S> <C>
1999 $ 8,835
2000 7,834
2001 6,252
2002 4,906
2003 3,434
Thereafter 5,080
-------
Total minimum lease payments $36,341
-------
-------
</TABLE>
P-20
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) INCOME TAXES
Income tax expense (benefit) for the years ended June 30 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Current:
Federal $5,278 $10,880 $23,085
State and local 919 2,172 3,960
Foreign 110 474 403
------- -------- --------
6,307 13,526 27,448
------- -------- --------
Deferred:
Federal (612) (721) (3,988)
State and local (74) (138) (684)
------- -------- --------
(686) (859) (4,672)
------- -------- --------
Income tax expense $5,621 $12,667 $22,776
------- -------- --------
------- -------- --------
</TABLE>
Income tax expense differs from the amounts computed by applying the
statutory U.S. federal income tax rate (34% for the year ended June 30, 1996
and 35% for the years ended June 30, 1997 and 1998) to income before income
taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Tax at federal statutory rate $ 6,800 $11,677 $20,750
Increase (decrease) in income taxes resulting from:
State and local income taxes, net of federal income tax benefit 643 1,171 2,140
Nondeductible merger costs 38 383 1,540
Termination of S corporation status of merged companies, including
state income taxes, net of federal income tax benefit 475 1,717 (135)
Conversion of merged company to S corporation (818) - -
S corporation income of merged companies (1,665) (2,312) (1,568)
Other 148 31 49
------- ------- -------
Income tax expense $5,621 $12,667 $22,776
------- ------- -------
------- ------- -------
Effective tax rate 28.1% 38.0% 38.4%
------- ------- -------
------- ------- -------
</TABLE>
TAX BENEFIT OF STOCK OPTIONS EXERCISED - For the years ended June 30, 1996,
1997 and 1998, the Company recognized $2,643,000, $6,366,000 and $9,149,000,
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, 1997, the Company recorded $4,929,000 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 reduced income taxes payable
in the following fiscal year. The tax benefit from the exercise of stock
options in fiscal 1998 reduced income taxes payable for fiscal 1998.
P-21
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The components of the net deferred tax asset or liability at June 30 are as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Intangible assets, due to differences in amortization periods $ 1,112 $ 2,068
Accounts payable 683 206
Accrued expenses, not currently tax deductible 1,977 2,101
Deferred revenue - 1,240
Future tax benefit of stock options exercised 4,929 -
Other 181 -
-------- --------
8,882 5,615
Deferred tax liabilities:
Accounts receivable (4,824) (2,089)
-------- --------
Net deferred tax asset $ 4,058 $ 3,526
-------- --------
-------- --------
Balance sheet classification of net deferred tax asset (liability):
Deferred tax asset-current $ 4,160 $ 1,458
Deferred tax asset-long term 1,112 2,068
Deferred tax liability-current (1,214) -
-------- --------
Net deferred tax asset $ 4,058 $ 3,526
-------- --------
-------- --------
</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.
(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 2,000,000 shares of common stock may be issued under the
Employee Stock Purchase Plan. During the years ended June 30, 1996, 1997 and
1998 employees purchased 180,536, 179,440 and 197,565 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 8,000,000 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.
DIRECTORS' STOCK OPTION PLAN - Up to 200,000 shares of the Company's common
stock are authorized for issuance to non-employee, non-affiliate 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.
P-22
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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 having a value of approximately $2,500
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. During the years ended June 30, 1997 and 1998, the Company issued
1,664 and 1,233 shares, respectively, of common stock under this plan.
At June 30, 1998, there were 9,647,000 shares of common stock reserved for
future issuance under the Company's stock-based compensation plans.
The Company applies APB 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, 1996, 1997 and 1998 was $119,000, $62,000 and $59,000,
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 would
have been reduced to the pro forma amounts indicated below (in thousands,
except per share data):
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C> <C>
Net income As reported $14,380 $20,696 $36,510
Pro forma 13,503 18,491 31,549
Pro forma net income As reported 12,068 19,893 34,303
Pro forma 11,191 17,688 29,342
Pro forma income per share - basic As reported .28 .43 .68
Pro forma .26 .38 .58
Pro forma income per share - diluted As reported .26 .40 .65
Pro forma .24 .36 .55
</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 1998
------------------------
<S> <C> <C> <C>
Expected life 5 years 5 years 5 years
Risk free interest rate 6.1% 6.3% 6.0%
Expected volatility 50% 50% 50%
Dividend yield 0% 0% 0%
</TABLE>
P-23
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
A summary of the status of the Company's stock option plans as of June 30 and
changes during the years ending on those dates is presented below (shares in
thousands):
<TABLE>
<CAPTION>
1996 1997 1998
--------------------- --------------------- ---------------------
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 4,738 $0.65 4,503 $1.67 4,103 $ 4.17
Granted 927 5.30 1,052 12.24 2,541 21.04
Exercised (1,160) 0.39 (1,252) 1.26 (1,215) 2.11
Canceled (2) 8.19 (200) 8.44 (244) 16.61
------ ------ ------
Outstanding at end of year 4,503 $1.67 4,103 $4.17 5,185 $12.34
------ ------ ------
------ ------ ------
Options exercisable at year end 3,201 2,313 1,850
------ ------ ------
------ ------ ------
</TABLE>
The weighted average fair values of options granted during fiscal 1996, 1997
and 1998 were $2.87, $6.43 and $11.45, respectively.
A summary of the range of exercise prices and the weighted-average
contractual life of outstanding stock options at June 30, 1998 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, 1998 EXERCISE PRICE LIFE (Years) JUNE 30, 1998 EXERCISE PRICE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.23 - $ 2.19 1,299 $ 0.45 11.0 1,259 $ 0.40
2.20 - 4.44 574 3.42 6.2 342 2.99
5.63 - 11.00 679 10.63 8.0 199 10.21
12.63 - 17.09 1,795 16.94 8.9 41 15.43
17.67 - 35.25 838 28.40 9.6 9 18.68
- ----------------------------------------------------------------------------------------------------
$ 0.23 - $35.25 5,185 $12.34 9.1 1,850 $ 2.35
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(9) RELATED PARTY TRANSACTIONS
Prior to the acquisition of CNSI on December 2, 1996 (see note 3), 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. 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
of which $1.2 million has been accrued for at June 30, 1998. 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 an 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. CNSI had a 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
cancelled this bank line of credit and the personal guarantee of the Chairman
was released.
P-24
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(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 similar defined contribution retirement plans. The Company
recorded expense of approximately $1,832,000, $2,535,000 and $4,239,000 for
the years ended June 30, 1996, 1997 and 1998, respectively, related to these
plans.
(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 approximately
8%, 5% and 5% of total revenues for the years ended June 30, 1996, 1997 and
1998, respectively. In addition, the Company's five largest clients
accounted for, in the aggregate, approximately 19%, 16% and 14% of the
Company's total revenues for the years ended June 30, 1996, 1997 and 1998,
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%, 8% and 9% of the Company's total revenues
for the years ended June 30, 1996, 1997 and 1998, respectively, were
generated from 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
is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Noncash investing and financing activities:
Cash paid for acquisitions:
Fair value of assets acquired $1,750 $28,854 $ -
Liabilities assumed (25) (5,965) -
Common stock issued in connection with acquisitions - (2,469) -
Accrued acquisition costs payable - (1,175) -
Additional cash consideration on previous acquisitions - 45 351
-------- -------- --------
Cash paid for acquisitions $1,725 $19,290 $ 351
-------- -------- --------
-------- -------- --------
Issuance of common stock in satisfaction of acquisition costs payable $ 100 $ 100 $ 100
Property and other assets distributed by merged company $ - $ - $ 1,370
Cash paid for interest $ 310 $ 353 $ 171
Cash paid for income taxes $4,951 $ 8,755 $11,701
</TABLE>
(13) SUBSEQUENT EVENTS
EJR COMPUTER ASSOCIATES, INC. ("EJR") - On August 11, 1998, EJR merged with
CIBER in a business combination to be accounted for as a pooling of
interests. The Company issued approximately 1,150,000 shares of its common
stock and assumed substantially all of EJR's liabilities in exchange for all
of the assets of EJR. EJR, located in Hoboken, New Jersey, provides data
processing consulting and project management services similar to the
Company's CIS Division. The Company's consolidated financial statements
included herein have not been restated for the EJR 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 EJR.
EJR had revenues of approximately $20 million, $23 million and $26 million
during the years ended June 30, 1996, 1997 and 1998, respectively. The
effects of this merger on the Company's historical pro forma net income and
pro forma income per share are not expected to be material.
P-25
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
THE CUSHING GROUP, INC. ("CUSHING") - On August 31, 1998, Cushing merged with
CIBER in a business combination to be accounted for as a pooling of
interests. The Company issued approximately 950,000 shares of its common
stock and assumed substantially all of Cushing's liabilities in exchange for
all of the assets of Cushing. Cushing, headquartered in Nashua, New
Hampshire, provides distributed object technology consulting services and
will operate within Spectrum. The effects of this merger on the Company's
historical 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.
On August 31, 1998, the Company declared a dividend distribution of one
preferred stock purchase right (a "Right") for each outstanding share of
CIBER common stock payable on September 21, 1998 to shareholders of record on
that date. The holders of any additional shares of CIBER common stock issued
after September 21, 1998, and before the expiration or redemption of the
Rights, are also entitled to one Right for each such additional share. The
Rights are intended to prevent a takeover of the Company without the prior
approval of CIBER's Board of Directors. The Rights will become exercisable
only in the event, with certain exceptions, a person or group acquires
ownership of, or commences a tender offer for, 15% or more of CIBER's common
stock. The Rights will expire on August 31, 2008, unless redeemed by the
Company at $.001 per Right at any time prior to such time a person or group
acquires 15% of CIBER's common stock. In the event the Rights become
exercisable, each Right will entitle the holder, other than the "acquiring"
person or group, to purchase either CIBER common stock (or CIBER preferred
stock having similar rights) or shares in the "acquiring" company at a 50%
discount of the then market price. The Company's has reserved 1,000,000
shares of its $.01 par value preferred stock, which shares are designated as
Series A Junior Participating Preferred Stock, for issuance upon the exercise
of the Rights.
(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. All information has been restated for
pooling of interests business combinations through June 30, 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
Revenues $123,242 $135,353 $141,611 $150,215 $550,421
Merger costs 614 1,573 504 1,847 4,538
Operating income 10,488 11,960 17,704 17,604 57,756
Net income 6,490 6,064 11,392 12,564 36,510
Pro forma net income 6,214 6,859 10,662 10,568 34,303
Pro forma income per share - basic $0.13 $0.14 $0.21 $0.21 $0.68
Pro forma income per share - diluted $0.12 $0.13 $0.20 $0.20 $0.65
YEAR ENDED JUNE 30, 1997
Revenues $83,801 $90,861 $102,998 $113,157 $390,817
Merger costs 622 596 - - 1,218
Operating income 6,020 5,900 9,568 10,846 32,334
Net income 3,278 3,817 6,337 7,264 20,696
Pro forma net income 3,644 3,704 5,852 6,693 19,893
Pro forma income per share - basic $0.08 $0.08 $0.12 $0.14 $0.43
Pro forma income per share - diluted $0.08 $0.08 $0.12 $0.13 $0.40
</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 1998 Annual Meeting of Shareholders
(the "Meeting"), to be held at The Metropolitan Club, 7800 East Orchard Road,
Greenwood Village, Colorado, on Thursday, October 29, 1998, at 9:30 a.m.
(local time), and at any and all adjournments thereof, as follows:
1. The election of director of the following nominees in the Classes
specified: Roy L. Burger - Class I and James G. Brocksmith, Jr. - Class I.
INSTRUCTIONS: To withhold your vote for any individual nominee,
strike out the nominee's or nominees' name(s) above.
/ / FOR / / WITHHOLD
2. The ratification of KPMG Peat Marwick LLP as the Company's independent
auditors for the fiscal year ending June 30, 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. 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 25, 1998.
Dated: , 1998
-----------------------------------
------------------------------------------------
------------------------------------------------
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 PROMPTLY IN THE ENCLOSED
POSTAGE PREPARED ENVELOPE.
/ / PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING
