<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For the quarter
ended: Commission file number:
SEPTEMBER 30, 1998 0-23488
</TABLE>
------------------------
CIBER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 38-2046833
(STATE OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION) NO.)
</TABLE>
5251 DTC PARKWAY
SUITE 1400
ENGLEWOOD, CO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone Number: (303) 220-0100
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
As of September 30, 1998, there were 53,619,620 shares of the Registrant's
common stock ($0.01 par value) outstanding.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
CIBER, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I. FINANCIAL INFORMATION.....................................................
Item 1. Financial Statements (unaudited):
Consolidated Statements of Operations
Three months ended September 30, 1998 and 1997.......................... 3
Consolidated Balance Sheets
September 30, 1998 and June 30, 1998.................................... 4
Consolidated Statements of Cash Flows
Three months ended September 30, 1998 and 1997.......................... 5
Notes to Consolidated Financial Statements................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk................ 12
PART II. OTHER INFORMATION......................................................... 13
SIGNATURES................................................................ 14
</TABLE>
2
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1997(1) 1998
--------- ---------
<S> <C> <C>
Consulting services..................................................... $ 114,690 $ 147,601
Other revenues.......................................................... 14,644 18,057
--------- ---------
Total revenues........................................................ 129,334 165,658
--------- ---------
Cost of consulting services............................................. 75,123 94,496
Cost of other revenues.................................................. 10,964 12,501
Selling, general and administrative expenses............................ 31,183 37,284
Amortization of intangible assets....................................... 938 1,082
Merger costs............................................................ 614 1,535
--------- ---------
Operating income...................................................... 10,512 18,760
Interest and other income............................................... 375 612
Interest expense........................................................ (103) --
--------- ---------
Income before income taxes............................................ 10,784 19,372
Income tax expense...................................................... 4,300 8,255
--------- ---------
Net income............................................................ $ 6,484 $ 11,117
--------- ---------
--------- ---------
Pro forma information (Note 1):
Historical net income................................................. $ 6,484 $ 11,117
Pro forma adjustment to income tax expense............................ (276) --
--------- ---------
Pro forma net income.................................................. $ 6,208 $ 11,117
--------- ---------
--------- ---------
Pro forma net income per share--basic................................. $ 0.12 $ 0.21
Pro forma net income per share--diluted............................... $ 0.12 $ 0.20
Weighted average shares--basic.......................................... 50,428 52,920
Weighted average shares--diluted........................................ 52,842 55,170
</TABLE>
- - ------------------------
(1) Restated for poolings of interests through September 30, 1998--See Note 2.
See accompanying notes to consolidated financial statements.
3
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER
IN THOUSANDS, EXCEPT PER SHARE DATA 1998(1) 30, 1998
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 38,238 $ 55,588
Accounts receivable................................................ 121,538 133,532
Inventories........................................................ 618 605
Prepaid expenses and other assets.................................. 4,792 4,609
Deferred income taxes.............................................. 1,458 2,259
--------- -----------
Total current assets............................................. 166,644 196,593
--------- -----------
Property and equipment, at cost...................................... 32,561 34,982
Less accumulated depreciation and amortization....................... (15,219) (17,071)
--------- -----------
Net property and equipment....................................... 17,342 17,911
--------- -----------
Intangible assets, net............................................... 33,597 32,734
Deferred income taxes................................................ 2,068 2,450
Other assets......................................................... 2,134 2,577
--------- -----------
Total assets..................................................... $ 221,785 $ 252,265
--------- -----------
--------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables..................................................... 10,989 15,584
Accrued compensation and payroll taxes............................. 25,720 29,858
Deferred revenues.................................................. 4,097 3,300
Other accrued expenses and liabilities............................. 11,859 11,254
Income taxes payable............................................... 3,276 8,390
--------- -----------
Total current liabilities........................................ 55,941 68,386
--------- -----------
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,
52,247,000 and 53,620,000 shares issued and outstanding.......... 522 536
Additional paid-in capital......................................... 93,889 101,325
Retained earnings.................................................. 71,433 82,550
Treasury stock, 20,000 shares at cost.............................. -- (532)
--------- -----------
Total shareholders' equity....................................... 165,844 183,879
--------- -----------
Total liabilities and shareholders' equity....................... $ 221,785 $ 252,265
--------- -----------
--------- -----------
</TABLE>
- - ------------------------
(1) Restated for poolings of interests through September 30, 1998--See Note 2.
See accompanying notes to consolidated financial statements.
4
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------
IN THOUSANDS 1997(1) 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................................. $ 6,484 $ 11,117
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization......................................... 2,252 2,664
Deferred income taxes................................................. 169 (1,183)
Other................................................................. 12 10
Changes in operating assets and liabilities, net of the effects of
acquisitions:
Accounts receivable................................................. (7,796) (10,488)
Inventories......................................................... (72) 13
Other current and long-term assets.................................. (175) (435)
Trade payables...................................................... (3,327) 4,522
Accrued compensation and payroll taxes.............................. 7,023 3,896
Deferred revenues................................................... 14 (797)
Other accrued expenses and liabilities.............................. 879 (389)
Income taxes payable................................................ 2,260 7,700
--------- ---------
Net cash provided by operating activities......................... 7,723 16,630
--------- ---------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired...................................... -- (150)
Purchases of property and equipment..................................... (2,121) (2,096)
Purchases of investments................................................ (602) --
--------- ---------
Net cash used in investing activities............................. (2,723) (2,246)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net................................ 1,463 3,498
Purchase of treasury stock.............................................. -- (532)
Net payments on bank lines of credit.................................... (735) --
Payments on notes payable............................................... (1,272) --
Borrowings on notes payable............................................. 247 --
Distributions by merged company......................................... (555) --
--------- ---------
Net cash provided by (used in) financing activities............... (852) 2,966
--------- ---------
Net increase in cash and cash equivalents......................... 4,148 17,350
Cash and cash equivalents, beginning of period.......................... 27,257 38,238
--------- ---------
Cash and cash equivalents, end of period................................ $ 31,405 $ 55,588
--------- ---------
--------- ---------
</TABLE>
- - ------------------------
(1) Restated for poolings of interests through September 30, 1998--See Note 2.
See accompanying notes to consolidated financial statements.
5
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of CIBER, Inc. and
subsidiaries ("CIBER" or the "Company") have been prepared without audit.
Certain information and note disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998. In the opinion of management, these unaudited consolidated
financial statements include all adjustments necessary for a fair presentation
of the financial position and results of operations for the periods presented.
Interim results of operations for the three month period ended September 30,
1998 are not necessarily indicative of operating results for the full fiscal
year.
PRO FORMA NET INCOME. Pro forma net income has been presented because
certain companies, which have merged with CIBER in business combinations
accounted for as poolings of interests, were S corporations and generally not
subject to income taxes. Accordingly, no provision for income taxes has been
included in the historical consolidated financial statements for the operations
of these companies prior to their merger with CIBER. The pro forma adjustment to
income taxes has been computed as if the merged companies had been taxable
entities subject to income taxes for all periods prior to their merger with
CIBER at the marginal rates applicable in such periods. In addition, the pro
forma adjustment to income tax expense eliminates the one-time tax expense or
benefit resulting from changes in the tax status of these merged companies.
COSTS OF DEVELOPING COMPUTER SOFTWARE FOR INTERNAL USE. Direct costs of
time and material incurred for the development of software for internal use are
capitalized as property and equipment. These costs are depreciated using the
straight-line method over the estimated useful life of the software.
(2) POOLINGS OF INTERESTS
From July 1, 1998 to September 30, 1998, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests:
EJR COMPUTER ASSOCIATES ("EJR")--On August 11, 1998, CIBER issued 1,154,914
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,
provided data processing consulting and project management services similar to
the Company's CIS Division. The Company's consolidated financial statements have
been restated for all periods prior to the merger to include the results of
operations, financial position and cash flows of EJR.
6
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
(2) POOLINGS OF INTERESTS (CONTINUED)
Selected financial data of CIBER and of EJR, prior to its merger with CIBER,
and on a combined basis, were (in thousands, except per share data):
<TABLE>
<CAPTION>
CIBER EJR COMBINED
---------- --------- ----------
<S> <C> <C> <C>
YEAR ENDED JUNE 30, 1998
Revenues..................................................................... $ 550,421 $ 26,067 $ 576,488
Net income (loss)............................................................ 36,510 (33) 36,477
Pro forma net income (loss).................................................. 34,303 (33) 34,270
Pro forma income per share - diluted......................................... $ .65 $ .64
YEAR ENDED JUNE 30, 1997
Revenues..................................................................... $ 390,817 $ 22,563 $ 413,380
Net income................................................................... 20,696 530 21,226
Pro forma net income......................................................... 19,893 530 20,423
Pro forma income per share - diluted......................................... $ .40 $ .40
YEAR ENDED JUNE 30, 1996
Revenues..................................................................... $ 275,576 $ 20,389 $ 295,965
Net income................................................................... 14,380 401 14,781
Pro forma net income......................................................... 12,068 401 12,469
Pro forma income per share - diluted......................................... $ .26 $ .26
</TABLE>
THE CUSHING GROUP ("CUSHING")--On August 31, 1998, CIBER issued 961,135
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, provided distributed object technology consulting
services. The merged business operates within the Company's Spectrum Technology
Group, Inc. subsidiary. The effects of this merger on the Company's revenues,
pro forma net income and pro forma income per share would not have been
material. As a result, the Company's historical financial statements have not
been restated for this business combination.
7
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
(UNAUDITED)
(3) SHAREHOLDERS' EQUITY
Changes in shareholder's equity during the three months ended September 30,
1998 were (in thousands):
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------------- PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
--------- ----------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1998, AS RESTATED (SEE
NOTE 2)..................................... 52,247 $ 522 $ 93,889 $ 71,433 $ -- $ 165,844
Employee stock purchases and options
exercised................................... 364 4 3,494 -- -- 3,498
Immaterial pooling of interests............... 961 10 806 -- -- 816
Acquisition consideration..................... 48 -- 100 -- -- 100
Tax benefit from exercise of stock options.... -- -- 3,026 -- -- 3,026
Compensation expense related to stock
issuances................................... -- -- 10 -- -- 10
Purchase of treasury stock.................... -- -- -- -- (532) (532)
Net income.................................... -- -- -- 11,117 -- 11,117
--------- ----- ---------- --------- ----- -------------
BALANCES AT SEPTEMBER 30, 1998................ 53,620 $ 536 $ 101,325 $ 82,550 $ (532) $ 183,879
--------- ----- ---------- --------- ----- -------------
--------- ----- ---------- --------- ----- -------------
</TABLE>
(4) 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 September 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................................ $ 129,334 $ 141,661 $ 148,093 $ 157,400 $ 576,488
Merger costs............................ 614 1,573 504 1,847 4,538
Operating income........................ 10,512 11,989 17,728 17,639 57,868
Net income.............................. 6,484 6,056 11,387 12,550 36,477
Pro forma net income.................... 6,208 6,851 10,657 10,554 34,270
Pro forma income per share--basic....... $ 0.12 $ 0.13 $ 0.21 $ 0.20 $ 0.67
Pro forma income per share--diluted..... $ 0.12 $ 0.13 $ 0.20 $ 0.19 $ 0.64
YEAR ENDED JUNE 30, 1997
Revenues................................ $ 88,990 $ 96,552 $ 108,480 $ 119,358 $ 413,380
Merger costs............................ 622 596 -- -- 1,218
Operating income........................ 6,330 6,164 9,695 11,179 33,368
Net income.............................. 3,420 3,960 6,407 7,439 21,226
Pro forma net income.................... 3,786 3,847 5,922 6,868 20,423
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>
8
<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 INCLUDED ELSEWHERE HEREIN. WITH THE
EXCEPTION OF HISTORICAL MATTERS AND STATEMENTS OF CURRENT STATUS, CERTAIN
MATTERS DISCUSSED BELOW ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM TARGETS OR PROJECTED RESULTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY INCLUDE, AMONG OTHERS, GROWTH THROUGH BUSINESS COMBINATIONS
AND INTERNAL EXPANSION, THE 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 PRESSURES, AND COMPETITION. MANY OF THESE FACTORS ARE BEYOND THE
COMPANY'S ABILITY TO PREDICT OR CONTROL. PLEASE REFER TO A DISCUSSION OF THESE
AND OTHER FACTORS IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K AND OTHER
SECURITIES AND EXCHANGE COMMISSION FILINGS. THE COMPANY DISCLAIMS ANY INTENT OR
OBLIGATION TO UPDATE PUBLICLY SUCH FORWARD-LOOKING STATEMENTS, WHETHER AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. 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 operates the CIBER Information Services ("CIS") Division and the
CIBER Solutions ("Solutions") Division. The CIS Division accounted for
approximately 60% 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.
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.
BUSINESS COMBINATIONS
The Company has grown significantly through mergers and acquisitions as well
as through internal growth. 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
9
<PAGE>
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, 1998 to September 30, 1998, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests.
EJR COMPUTER ASSOCIATES ("EJR")--On August 11, 1998, CIBER issued 1,154,914
shares of its common stock and assumed substantially all of EJR's liabilities in
exchange for all of the assets of EJR. The Company's consolidated financial
statements have been restated for all periods prior to the merger to include the
results of operations, financial position and cash flows of EJR.
THE CUSHING GROUP ("CUSHING")--On August 31, 1998, CIBER issued 961,135
shares of its common stock and assumed substantially all of Cushing's
liabilities in exchange for all of the assets of Cushing. The effects of this
merger on the Company's revenues, pro forma net income and pro forma income per
share would not have been material. As a result, the Company's historical
financial statements have not been restated for this business combination.
THREE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
The Company's revenues for the three months ended September 30, 1998
increased 28.1% to $165.7 million from $129.3 million for the quarter ended
September 30, 1997. This 28.1% increase represents a 28.7% increase in
consulting revenues and a 23.3% increase in other revenues. For the three months
ended September 30, 1998, CIS consulting revenues increased 23.6% to $95.6
million from $77.3 million for the same quarter of last year and the Solutions
Division consulting revenues increased 39.2% to $52.0 million from $37.4 million
for the same quarter of last year. Other revenues increased to $18.1 million for
the three months ended September 30, 1998 from $14.6 million for the same
quarter last year. CIS consulting revenues accounted for 64.8% and 67.4% of
total consulting revenues, and 57.7% and 59.8% of total revenues for the three
months ended September 30, 1998 and 1997, respectively. The increase in the 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 28.7% increase in consulting revenues for the three months ended
September 30, 1998 in comparison to the three months ended September 30, 1997,
approximately 2.6% was due to revenues from acquired businesses or from mergers
accounted for as 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 35.4% of revenues for the three months
ended September 30, 1998 from 33.4% of revenues for the same quarter of last
year. This improvement is due to improved gross margins on both consulting
services and other revenues.
Selling, general and administrative expenses were 22.5% of revenues for the
three months ended September 30, 1998 compared to 24.1% of revenues for the same
quarter last year. 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 $1.1 million for the three
months ended September 30, 1998 from $938,000 for the same quarter last year.
This increase was due to the additional intangible assets resulting from mergers
and acquisitions in fiscal 1998 and 1997.
10
<PAGE>
Merger costs, primarily transaction related broker and professional costs,
of $1.5 million were incurred during the three months ended September 30, 1998
compared to $614,000 for the same quarter last year.
Net interest and other income increased to $612,000 for the three months
ended September 30, 1998 from $272,000 for the same quarter last year 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 the three months ended September 30, 1998 and 1997
were 42.6% and 42.4%, respectively. The Company's effective tax rate is higher
than its normal effective tax rate due to 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 which were
not subject to income taxes.
The Company's pro forma net income increased 79.1% to $11.1 million for the
three months ended September 30, 1998 from $6.2 million for the quarter ended
September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had $128.2 million of working capital, of
which $55.6 million was cash and cash equivalents, and had a current ratio of
2.9:1. 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 $16.6 million and $7.7 million
for the three months ended September 30, 1998 and 1997, respectively.
The Company's accounts receivable totaled $133.5 million at September 30,
1998 compared to $121.5 million at June 30, 1998. This increase is primarily a
result of the Company's increase in revenues and also the mix shift to more
solution oriented engagements. 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 74 days at September 30, 1998 as compared to 71 days at June 30,
1998, which management believes is in line with industry standards.
Net cash used in investing activities was $2.2 million and $2.7 million
during the three months ended September 30, 1998 and 1997, respectively. The
Company used cash of $150,000 during the three months ended September 30, 1998
for additional consideration related to a previous acquisition. The Company also
purchased property and equipment of $2.1 million during the three months ended
September 30, 1998 and 1997.
Net cash provided by (used in) financing activities was $3.0 million and
($852,000) during the three months ended September 30, 1998 and 1997,
respectively. The Company obtained net cash proceeds from sales of common stock
of $3.5 million and $1.5 million during the three months ended September 30,
1998 and 1997, respectively.
The Company has a $20 million revolving line of credit with a bank. There
were no outstanding borrowings under this bank line at September 30, 1998 and
June 30, 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 .0225% 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. The amount outstanding
totaled approximately $2.6 million at September 30, 1998 and is included in
trade payables on the Company's balance sheet.
11
<PAGE>
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.
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 annual financial statements. Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income" and Statement of
Position 97-2 "Software Revenue Recognition" were effective for the quarter
ended September 30, 1998 and had no affect on the Company's financial
statements. In addition, the Company believes the future adoption of FASB
Statements No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" and No. 133, "Accounting for Derivative Instruments and
Hedging Activities" will not have a material affect on its financial statements.
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.
12
<PAGE>
PART II--OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27.1--Financial Data Schedule
A Report on Form 8-K was filed on August 17, 1998 that announced the merger of EJR
Computer Associates, Inc. with the Company.
A Report on Form 8-K was filed on September 16, 1998 that announced the
declaration of a dividend of one preferred stock purchase right for each
outstanding share of common stock and provided a copy of the Rights Agreement as
an exhibit.
A Report on Form 8-K was filed on September 21, 1998 that announced the merger of
the Cushing Group, Inc. with the Company.
</TABLE>
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
<TABLE>
<S> <C>
CIBER, INC.(Registrant)
Date November 6, 1998 By /s/ MAC J. SLINGERLEND
---------------------------------------------
Mac J. Slingerlend
President and Chief Executive Officer
Date November 6, 1998 By /s/ RICHARD A. MONTONI
---------------------------------------------
Richard A. Montoni
Executive Vice President/Chief Financial
Officer
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 24,398
<SECURITIES> 604
<RECEIVABLES> 61,243
<ALLOWANCES> 0
<INVENTORY> 2,269
<CURRENT-ASSETS> 90,264
<PP&E> 13,338
<DEPRECIATION> 6,858
<TOTAL-ASSETS> 111,486
<CURRENT-LIABILITIES> 37,306
<BONDS> 0
0
0
<COMMON> 467
<OTHER-SE> 73,253
<TOTAL-LIABILITY-AND-EQUITY> 111,486
<SALES> 0
<TOTAL-REVENUES> 295,965
<CGS> 0
<TOTAL-COSTS> 201,442
<OTHER-EXPENSES> 74,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 336
<INCOME-PRETAX> 20,795
<INCOME-TAX> 6,014
<INCOME-CONTINUING> 14,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,781
<EPS-PRIMARY> .28<F1>
<EPS-DILUTED> .26<F1>
<FN>
<F1>EPS is based on Pro Forma Net Income of $12,469
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997 JUN-30-1997 JUN-30-1997
<PERIOD-START> JUL-01-1996 JUL-01-1996 JUL-01-1996 JUL-01-1996
<PERIOD-END> SEP-30-1996 DEC-31-1996 MAR-31-1997 JUN-30-1997
<CASH> 27,863 17,222 24,477 27,257
<SECURITIES> 1,150 1,124 1,718 1,984
<RECEIVABLES> 62,613 69,918 73,620 79,755
<ALLOWANCES> 0 0 0 0
<INVENTORY> 2,567 2,567 1,703 917
<CURRENT-ASSETS> 96,287 95,984 104,632 117,034
<PP&E> 14,577 16,150 17,947 20,525
<DEPRECIATION> 7,392 7,645 8,396 9,431
<TOTAL-ASSETS> 122,819 128,351 150,861 165,354
<CURRENT-LIABILITIES> 43,103 48,518 42,795 46,665
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 263 472 489 495
<OTHER-SE> 77,755 77,688 106,002 117,119
<TOTAL-LIABILITY-AND-EQUITY> 122,819 128,351 150,861 165,354
<SALES> 0 0 0 0
<TOTAL-REVENUES> 88,990 185,542 294,022 413,380
<CGS> 0 0 0 0
<TOTAL-COSTS> 60,201 125,590 199,106 278,406
<OTHER-EXPENSES> 22,459 47,458 72,727 101,606
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 69 179 321 434
<INCOME-PRETAX> 6,596 13,069 22,962 34,401
<INCOME-TAX> 3,176 5,689 9,175 13,175
<INCOME-CONTINUING> 3,420 7,380 13,787 21,226
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 3,420 7,380 13,787 21,226
<EPS-PRIMARY> .08<F1> .16<F2> .29<F3> .43<F4>
<EPS-DILUTED> .08<F1> .15<F2> .27<F3> .40<F4>
<FN>
<F1>EPS is based on Pro Forma Net Income of $3,786
<F2>EPS is based on Pro Forma Net Income of $7,633
<F3>EPS is based on Pro Forma Net Income of $13,555
<F4>EPS is based on Pro Forma Net Income of $20,423
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998 JUN-30-1998 JUN-30-1998
<PERIOD-START> JUL-01-1997 JUL-01-1997 JUL-01-1997 JUL-01-1997
<PERIOD-END> SEP-30-1997 DEC-31-1997 MAR-31-1998 JUN-30-1998
<CASH> 31,405 27,685 40,351 38,238
<SECURITIES> 1,381 880 0 0
<RECEIVABLES> 92,369 105,636 110,169 121,538
<ALLOWANCES> 0 0 0 0
<INVENTORY> 989 917 787 618
<CURRENT-ASSETS> 131,469 140,794 157,087 166,644
<PP&E> 23,017 25,458 28,342 32,561
<DEPRECIATION> 11,094 12,453 13,772 15,219
<TOTAL-ASSETS> 180,109 189,967 207,752 221,785
<CURRENT-LIABILITIES> 52,609 52,938 56,572 55,941
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 508 513 519 522
<OTHER-SE> 125,881 136,466 150,661 165,322
<TOTAL-LIABILITY-AND-EQUITY> 180,109 189,967 207,752 221,785
<SALES> 0 0 0 0
<TOTAL-REVENUES> 129,334 270,995 419,088 576,488
<CGS> 0 0 0 0
<TOTAL-COSTS> 86,087 180,158 275,021 375,506
<OTHER-EXPENSES> 32,735 68,336 103,838 143,114
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 103 170 193 232
<INCOME-PRETAX> 10,784 23,125 41,244 59,403
<INCOME-TAX> 4,300 10,585 17,317 22,926
<INCOME-CONTINUING> 6,484 12,540 23,927 36,477
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 6,484 12,540 23,927 36,477
<EPS-PRIMARY> .12<F1> .26<F2> .46<F3> .67<F4>
<EPS-DILUTED> .12<F1> .25<F2> .44<F3> .64<F4>
<FN>
<F1>EPS is based on Pro Forma Net Income of $6,208
<F2>EPS is based on Pro Forma Net Income of $13,059
<F3>EPS is based on Pro Forma Net Income of $23,716
<F4>EPS is based on Pro Forma Net Income of $34,270
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 55,588
<SECURITIES> 0
<RECEIVABLES> 133,532
<ALLOWANCES> 0
<INVENTORY> 605
<CURRENT-ASSETS> 196,593
<PP&E> 34,982
<DEPRECIATION> 17,071
<TOTAL-ASSETS> 252,265
<CURRENT-LIABILITIES> 68,386
<BONDS> 0
0
0
<COMMON> 536
<OTHER-SE> 183,343
<TOTAL-LIABILITY-AND-EQUITY> 252,265
<SALES> 0
<TOTAL-REVENUES> 165,658
<CGS> 0
<TOTAL-COSTS> 106,997
<OTHER-EXPENSES> 39,901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,372
<INCOME-TAX> 8,255
<INCOME-CONTINUING> 11,117
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,117
<EPS-PRIMARY> .21
<EPS-DILUTED> .20
</TABLE>
