<PAGE>
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
For the quarter ended: Commission file number:
DECEMBER 31, 1997 0-23488
CIBER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-2046833
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
5251 DTC PARKWAY
SUITE 1400
ENGLEWOOD, CO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone Number: (303) 220-0100
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of December 31, 1997, there were 22,512,968 shares of the Registrant's
common stock ($0.01 par value) outstanding.
<PAGE>
CIBER, INC.
FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Statements of Operations
Three and six months ended December 31, 1997 and 1996 3
Consolidated Balance Sheets
December 31, 1997 and June 30, 1997 4
Consolidated Statements of Cash Flows
Six months ended December 31, 1997 and 1996 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
2
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------- --------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1996(1) 1997 1996(1) 1997
------- ---- ------- ----
<S> <C> <C> <C> <C>
Consulting services $66,278 $101,559 $127,585 $194,309
Product sales 10,530 15,115 20,594 27,771
-------- -------- -------- --------
Total revenues 76,808 116,674 148,179 222,080
-------- -------- -------- --------
Cost of consulting services 44,686 66,509 85,664 126,895
Cost of product sales 8,768 12,688 17,134 23,312
Selling, general and administrative expenses 17,105 23,900 33,033 47,061
Amortization of intangible assets 687 970 1,289 1,908
Merger costs 596 1,528 1,218 2,142
-------- -------- -------- --------
Operating income 4,966 11,079 9,841 20,762
Interest and other income 331 331 591 639
Interest expense (104) (48) (159) (127)
-------- -------- -------- --------
Income before income taxes 5,193 11,362 10,273 21,274
Income tax expense 2,362 6,138 5,245 10,277
-------- -------- -------- --------
Net income $ 2,831 $ 5,224 $ 5,028 $ 10,997
-------- -------- -------- --------
-------- -------- -------- --------
Pro forma information (Note 1):
Historical net income $ 2,831 $ 5,224 $ 5,028 $ 10,997
Pro forma adjustment to income tax expense 269 1,071 994 1,007
-------- -------- -------- --------
Pro forma net income $ 3,100 $ 6,295 $ 6,022 $ 12,004
-------- -------- -------- --------
-------- -------- -------- --------
Pro forma income per share - basic $ 0.15 $ 0.28 $ 0.30 $ 0.54
Pro forma income per share - diluted $ 0.14 $ 0.27 $ 0.28 $ 0.51
Weighted average shares - basic 20,402 22,403 20,312 22,226
Weighted average shares - diluted 21,906 23,652 21,773 23,454
</TABLE>
(1) Restated for poolings of interests through December 31, 1997 - See Note 2.
See accompanying notes to consolidated financial statements.
3
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
JUNE 30, DECEMBER 31,
IN THOUSANDS, EXCEPT SHARE DATA 1997(1) 1997
------- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 24,724 $ 26,760
Marketable securities 1,205 -
Accounts receivable 62,167 80,912
Inventories 917 917
Prepaid expenses and other assets 2,012 4,509
Deferred income taxes 4,160 -
-------- --------
Total current assets 95,185 113,098
-------- --------
Property and equipment, at cost 14,039 18,285
Less accumulated depreciation and amortization (6,452) (8,841)
-------- --------
Net property and equipment 7,587 9,444
-------- --------
Intangible assets, net 34,383 33,025
Deferred income taxes 1,112 1,390
Other assets 1,641 1,647
-------- --------
Total assets $139,908 $158,604
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank revolving lines of credit $ 1,550 $ -
Notes payable 1,809 -
Trade payables 5,423 5,878
Accrued compensation and payroll taxes 12,422 17,218
Other accrued expenses and liabilities 6,787 8,275
Income taxes payable 1,701 191
Deferred income taxes 823 795
-------- --------
Total current liabilities 30,515 32,357
Note payable 925 -
Long-term acquisition costs payable 100 -
-------- --------
Total liabilities 31,540 32,357
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, no shares issued - -
Common stock, $0.01 par value, 40,000,000 shares
authorized, 21,607,000 and 22,513,000 shares
issued and outstanding 216 225
Additional paid-in capital 68,869 78,335
Retained earnings 39,283 47,687
-------- --------
Total shareholders' equity 108,368 126,247
-------- --------
Total liabilities and shareholders' equity $139,908 $158,604
-------- --------
-------- --------
</TABLE>
(1) Restated for poolings of interests through December 31, 1997 - See Note 2.
See accompanying notes to consolidated financial statements.
4
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
SIX MONTHS ENDED DECEMBER 31,
-----------------------------
IN THOUSANDS 1996(1) 1997
------- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,028 $ 10,997
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,234 3,935
Deferred income taxes 654 (1,350)
Other 10 40
Changes in operating assets and liabilities,
net of the effects of acquisitions:
Accounts receivable (3,274) (13,243)
Inventories 268 -
Other current and long-term assets (2,101) (2,974)
Trade payables 411 (1,231)
Accrued compensation and payroll taxes 374 3,374
Other accrued expenses and liabilities 854 1,434
Income taxes payable 610 6,204
------- --------
Net cash provided by operating
activities 5,068 7,186
------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (6,071) -
Purchases of property and equipment (2,589) (3,818)
Purchases of marketable securities (28) -
------- --------
Net cash used in investing activities (8,688) (3,818)
------- --------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 1,116 2,924
Net payments on bank lines of credit (1,903) (1,985)
Payments on notes payable (1,120) (1,982)
Borrowings on notes payable 449 239
Distributions by merged company (996) (528)
------- --------
Net cash used in financing activities (2,454) (1,332)
------- --------
Net increase (decrease) in cash and
cash equivalents (6,074) 2,036
Cash and cash equivalents, beginning of period 20,323 24,724
Adjustment to conform fiscal year of merged company (204) -
------- --------
Cash and cash equivalents, end of period $14,045 $ 26,760
------- --------
------- --------
</TABLE>
(1) Restated for poolings of interests through December 31, 1997- 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, 1997. In the opinion of management, these unaudited
consolidated financial statements include all adjustments necessary for a fair
presentation of the financial position and results of operations for the
periods presented.
Pro forma net income has been presented because certain companies, which have
merged with CIBER in business combinations accounted for as poolings of
interests, were S corporations and generally not subject to income taxes.
Accordingly, no provision for income taxes has been included in the
consolidated financial statements for the operations of these companies prior
to their merger with CIBER. The pro forma adjustment to income taxes has been
computed as if the merged companies had been taxable entities subject to income
taxes for all periods prior to their merger with CIBER at the marginal rates
applicable in such periods. In addition, the pro forma adjustment to income tax
expense has been affected to exclude the one-time tax expense or benefit
resulting from changes in the tax status of these merged companies.
For the quarter ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS
128 requires the restatement of all prior-period earnings per share ("EPS")
data. Under SFAS 128, basic EPS excludes dilution for common stock equivalents
and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted
EPS includes the affects of the potential dilution of stock options, determined
using the treasury stock method. The computation of weighted average shares
includes the shares and options issued in connection with business combinations
accounted for as a pooling of interests as if they had been outstanding for all
periods prior to the merger.
(2) POOLINGS OF INTERESTS
From July 1, 1997 to December 31, 1997, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests:
TECHWARE CONSULTING, INC. ("TECHWARE") - On November 26, 1997, the Company
issued 373,918 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
564,027 shares of its common stock, granted options for 48,610 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. FDI, headquartered in McLean, Virginia, provided consulting services
similar to CIBER's subsidiary, Spectrum Technology Group, Inc. ("Spectrum").
THE CONSTELL GROUP, INC. ("CONSTELL") - On October 24, 1997, the Company issued
250,000 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 the CIS Division of CIBER and CIBER's
subsidiary, Spectrum.
6
<PAGE>
BAILEY & QUINN, INC. ("BQI") - On October 22, 1997, the Company issued
approximately 74,000 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 591,638 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 the Company's
subsidiary, CIBER Network Services, Inc.
KCM COMPUTER CONSULTING, INC. ("KCM") - On July 18, 1997, the Company issued
430,850 shares of its common stock in exchange for all of the outstanding
common stock of KCM. KCM, located in Calverton, Maryland, 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 and Techware. Generally, in recording mergers, the fiscal year
ends of merged companies, if different from CIBER's, have been conformed to
CIBER's June 30 fiscal year end. In recording the Constell merger with CIBER,
Constell's operations for the twelve months ended June 30, 1997 were combined
with CIBER's financial statements for the year ended June 30, 1997 and
Constell's operations for the twelve months ended December 31, 1995 and 1994
were combined with CIBER's financial statements for the years ended June 30,
1996 and June 30, 1995, respectively. As a result, Constell's operations for
the six month period from January 1, 1996 to June 30, 1996 (which included
revenues, net loss and pro forma net loss of $5,998,000, $159,000 and $96,000,
respectively) are not included in CIBER's restated combined financial
statements. The poolings of interests with KCM and BQI are considered by
management to be immaterial and therefore the Company's historical financial
statements have not been restated for these business combinations. Selected
financial data of CIBER (as previously reported), Reliant, and of Constell, FDI
and Techware, collectively, prior to their mergers with CIBER, and on a
combined basis, were (in thousands, except per share data):
<TABLE>
CIBER CONSTELL,
(AS PREVIOUSLY FDI, &
REPORTED) RELIANT TECHWARE COMBINED
--------- ------- -------- --------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 1997
Revenues $ 94,539 - $10,867 $105,406
Net income (loss) 5,779 - (6) 5,773
Pro forma net income 5,650 - 59 5,709
Pro forma income per share - diluted $ .26 $ .25
YEAR ENDED JUNE 30, 1997
Revenues $262,274 $35,536 $35,242 $333,052
Net income 14,625 1,801 340 16,766
Pro forma net income 15,933 1,086 278 17,297
Pro forma income per share - diluted $ .78 $ .78
YEAR ENDED JUNE 30, 1996
Revenues $187,653 $30,299 $20,788 $238,740
Net income 10,007 880 493 11,380
Pro forma net income 9,228 528 423 10,179
Pro forma income per share - diluted $ .48 $ .49
</TABLE>
Reliant, Constell and FDI (effective January 1, 1997) had elected S corporation
status for U.S. federal income tax purposes, and therefore, were generally not
subject to income taxes. During the quarter ended December 31, 1997, CIBER
recorded a one-time income tax expense charge of $1,110,000 to record the net
deferred tax liability of Constell and FDI.
7
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(3) SHAREHOLDERS' EQUITY
Changes in shareholder's equity during the six months ended December 31, 1997
were (in thousands):
<TABLE>
Common stock Additional Total
---------------------- paid-in Retained shareholders'
Shares Amount capital earnings equity
------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1997, AS RESTATED (SEE NOTE 2) 21,607 $216 $68,869 $39,283 $ 108,368
Employee stock purchases and options exercised 352 4 2,920 - 2,924
Mergers with KCM and BQI 505 5 352 1,290 1,647
Acquisition 24 - 100 - 100
Note payable paid with stock 25 - 1,105 - 1,105
Tax benefit from exercise of stock options - - 2,964 - 2,964
Termination of S corporation tax status of merged companies - - 1,985 (1,985) -
Compensation expense related to stock and stock options - - 40 - 40
Net income - - - 10,997 10,997
Distributions by merged company - - - (1,898) (1,898)
-----------------------------------------------------------------
BALANCES AT DECEMBER 31, 1997 22,513 $225 $78,335 $47,687 $126,247
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
(4) NOTES PAYABLE AND BANK REVOLVING LINES OF CREDIT
Several companies which have merged with CIBER since July 1, 1997 had
outstanding balances under bank revolving lines of credit and notes payable.
The notes payable were primarily payable to shareholders and a former
shareholder of the merged companies. Upon merger with CIBER, these bank
revolving lines of credit and notes payable were paid in full and cancelled.
In connection with the merger of Techware with CIBER, CIBER issued 25,469
shares of its common stock having a value of $1,105,000 in satisfaction of a
note payable, including accrued interest, to a Techware shareholder.
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 COMPANY'S 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's revenues are generated from two areas, the CIBER Information
Services ("CIS") Division and CIBER Solutions. The CIS Division provides
application software development and maintenance services and, through its
CIBR2000 Division, millenium date change solutions. CIBER Solutions provides
services through the Company's wholly-owned subsidiaries, Spectrum Technology
Group, Inc. ("Spectrum"), Business Information Technology, Inc. ("BIT") and
CIBER Network Services, Inc. ("CNSI"). Spectrum provides information technology
consulting solutions to business problems, specifically in the areas of data
warehousing, data modeling and enterprise architecture, as well as project
management and systems integration services. BIT specializes in the
implementation and integration of human resource and financial software
application products, plus workflow automation and manufacturing/distribution
software systems, primarily for client/server networks. Substantially all of
BIT's revenues are derived from assisting clients implementing PeopleSoft, Inc.
("PeopleSoft") software. CNSI provides a wide range of local-area and wide-
area network solutions, from design and procurement to installation and
maintenance with services including Internet and Intranet connectivity. A large
portion of CNSI's revenues are derived from sales of computer networking
equipment ("product sales").
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, that are 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, 1997 to December 31, 1997, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests.
9
<PAGE>
TECHWARE CONSULTING, INC. ("TECHWARE") - On November 26, 1997, the Company
issued 373,918 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
564,027 shares of its common stock, granted options for 48,610 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. FDI, headquartered in McLean, Virginia, provided consulting services
similar to CIBER's subsidiary, Spectrum.
THE CONSTELL GROUP, INC. ("CONSTELL") - On October 24, 1997, the Company issued
250,000 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 the CIS Division of CIBER and CIBER's
subsidiary, Spectrum.
BAILEY & QUINN, INC. ("BQI") - On October 22, 1997, the Company issued
approximately 74,000 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 591,638 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 the Company's
subsidiary, CNSI.
KCM COMPUTER CONSULTING, INC. ("KCM") - On July 18, 1997, the Company issued
430,850 shares of its common stock in exchange for all of the outstanding
common stock of KCM. KCM, located in Calverton, Maryland, provided consulting
services similar to the CIS Division of CIBER.
THREE MONTHS ENDED DECEMBER 31, 1997 AS COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1996
The Company's total revenues for the three months ended December 31, 1997
increased 52% to $116.7 million from $76.8 million for the quarter ended
December 31, 1996. For the three months ended December 31, 1997, CIS revenues
increased 47% to $70.0 million from $47.6 million for the same quarter of last
year and CIBER Solutions revenues increased 59% to $46.7 million from $29.2
million for the same quarter of last year. Included in CIBER Solutions
revenues, are product sales, which increased 44% to $15.1 million for the three
months ended December 31, 1997 from $10.5 million for the same quarter last
year. CIS revenues accounted for 60% and 62% of total revenues for the three
months ended December 31, 1997 and 1996, respectively.
Of the 52% increase in total revenues for the three months ended December 31,
1997 in comparison to the three months ended December 31, 1996, approximately
20% was due to revenues from purchased 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
code renovation services and increased demand for PeopleSoft implementation
services.
Gross margin percentage improved to 32.1% of revenues for the three months
ended December 31, 1997 from 30.4% of revenues for the same quarter of last
year. This improvement is due to improved gross margins on consulting
services, which resulted from the shift in mix towards greater CIBER solutions
service revenues as a percentage of total revenues.
Selling, general and administrative expenses were 20.5% of revenues for the
three months ended December 31, 1997 compared to 22.3% of revenues for the same
quarter last year. The improvement is due generally to economies of scale
realized from increased revenues on certain costs of a fixed and semi-fixed
nature.
10
<PAGE>
Amortization of intangible assets increased to $970,000 for the three months
ended December 31, 1997 from $687,000 for same quarter last year. This increase
was primarily due to the acquisitions of DTA, CNSI and Spectrum NT in fiscal
1997.
Merger costs, primarily transaction related broker and professional costs, of
$1,528,000 were incurred during the three months ended December 1997 related to
the mergers of Constell, BQI, FDI, and Techware with CIBER. Merger costs of
$596,000 incurred during the three months ended December 31, 1996 related to
the mergers of Technical Support Group, Inc. and Technology Management Group,
Inc. with CIBER.
After the pro forma adjustment to income tax expense, the Company's pro forma
effective tax rates for the three months ended December 31, 1997 and 1996 were
44.6% and 40.3%, respectively. The pro forma effective tax rates are higher
than the Company's "normal" effective tax rates primarily due to non-deductible
merger costs incurred in both periods.
The Company's pro forma net income increased 103% to $6.3 million (5.4% of
revenues) for the three months ended December 31, 1997 from $3.1 million (4.0%
of revenues) for the quarter ended December 31, 1996.
SIX MONTHS ENDED DECEMBER 31, 1997 AS COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996
The Company's total revenues for the six months ended December 31, 1997
increased 50% to $222.1 million from $148.2 million for the six months ended
December 31, 1996. For the six months ended December 31, 1997, CIS revenues
increased 47% to $134.2 million from $91.3 million for the same period of last
year and CIBER Solutions revenues increased 55% to $87.9 million from $56.9
million for the same period of last year. Included in CIBER Solutions
revenues, are product sales, which increased 35% to $27.8 million for the six
months ended December 31, 1997 from $20.6 million for the same period last
year. CIS revenues accounted for 60% and 62% of total revenues for the six
months ended December 31, 1997 and 1996, respectively.
Of the 50% increase in total revenues for the six months ended December 31,
1997 in comparison to the six months ended December 31, 1996, approximately 20%
was due to revenues from purchased 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
code renovation services and increased demand for PeopleSoft implementation
services.
Gross margin percentage improved to 32.4% of revenues for the six months ended
December 31, 1997 from 30.6% of revenues for the same period of last year. This
improvement is due to improved gross margins on consulting services, which
resulted from the shift in mix towards greater CIBER solutions service revenues
as a percentage of total revenues.
Selling, general and administrative expenses were 21.2% of revenues for the six
months ended December 31, 1997 compared to 22.3% of revenues for the same
period last year. The improvement is due generally to economies of scale
realized from increased revenues on certain costs of a fixed and semi-fixed
nature.
Amortization of intangible assets increased to $1,908,000 for the six months
ended December 31, 1997 from $1,289,000 for same quarter last year.
Merger costs, primarily transaction related broker and professional costs, of
$2,142,000 were incurred during the six months ended December 1997 related to
the mergers of KCM, Reliant, Constell, BQI, FDI, and Techware with CIBER.
Merger costs of $1,218,000 incurred during the six months ended December 31,
1996 related to the mergers of Spectrum, Technical Support Group, Inc. and
Technology Management Group, Inc. with CIBER.
After the pro forma adjustment to income tax expense, the Company's pro forma
effective tax rates for the six months ended December 31, 1997 and 1996 were
43.6% and 41.4%, respectively. The pro forma effective tax rates are higher
than the Company's "normal" effective tax rates primarily due to non-deductible
merger costs incurred in both periods.
11
<PAGE>
The Company's pro forma net income increased 99% to $12.0 million (5.4% of
revenues) for the six months ended December 31, 1997 from $6.0 million (4.1% of
revenues) for the six months ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $26.8 million and a current ratio
of 3.5:1 at December 31, 1997. It had total liabilities of $32.4 million
versus total shareholders' equity of $126.2 million. At December 31, 1997 the
Company had no outstanding borrowing under its bank revolving line of credit
and had no long-term debt. Net cash provided by operating activities was $7.2
million and $5.1 million for the six months ended December 31, 1997 and 1996,
respectively. Accounts receivable days sales outstanding ("DSO") was 63 days
at December 31, 1997 as compared to 59 days at June 30, 1997, which increase
management believes is normal and due to seasonality.
Investing activities used cash of $3.8 million and $8.7 million during the six
months ended December 31, 1997 and 1996, respectively. During the six months
ended December 31, 1997 and 1996, the Company used $3.8 million and $2.6
million, respectively, to purchase property and equipment. During the six
months ended December 31, 1996, the Company used $6.1 million in connection
with the acquisitions of Spectrum NT and CNSI.
Financing activities used cash of $1.3 million and $2.5 million during the six
months ended December 31, 1997, and 1996, respectively. The Company obtained
net cash proceeds from sales of common stock of $2.9 million and $1.1 million,
during the six months ended December 31, 1997 and 1996, respectively. In
connection with the mergers and acquisitions during fiscal 1998 and 1997, the
Company paid-off the bank lines of credit and notes payable of these merged and
acquired companies.
During the quarter ended December 31, 1997, the Company renewed its $20 million
unsecured revolving line of credit with a bank. Borrowings bear interest at
the three month London Interbank Offered Rate ("LIBOR") plus 2%. This line of
credit expires December 1998.
The Company's subsidiary, CNSI, has $5.0 million of inventory financing lines
of credit with financial corporations. Amounts outstanding under these lines
of credit, which totaled approximately $2.2 million at December 31, 1997, are
included in accounts payable on the Company's balance sheet.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This section is not applicable to the Company.
12
<PAGE>
PART II - OTHER INFORMATION
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
At the Annual Meeting of Shareholders of CIBER, Inc. held on
October 23, 1997, the following matters were voted upon with
the results as indicated below.
1) Election of Directors
<TABLE>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Bobby G. Stevenson 18,904,657 1,303 119,520
Richard A. Montoni 18,903,302 2,658 119,520
</TABLE>
The terms of offices as a director of James C. Spira, Roy L. Burger,
Mac J. Slingerlend, and James A. Rutherford continued after the
meeting.
2) The increase in the number of shares of common stock reserved for
issuance pursuant to the Company's equity incentive plan from
2,000,000 to 4,000,000.
<TABLE>
For Against Abstain Not Voted
--- ------- ------- ---------
<S> <C> <C> <C>
12,866,752 4,437,506 17,238 1,703,984
</TABLE>
3) The ratification of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending June 30, 1998.
<TABLE>
For Against Abstain
--- ------- -------
<S> <C> <C>
19,010,410 6,156 8,914
</TABLE>
ITEM 5. OTHER INFORMATION
None
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 10.1 - Credit Agreement with UMB Bank Colorado dated
December 1, 1997
Exhibit 27.1 - Financial Data Schedule
A Report on Form 8-K was filed on December 5, 1997 that announced
the mergers of Financial Dynamics, Inc. and Techware Consulting,
Inc. with the Company.
A Report on Form 8-K was filed on November 4, 1997 that announced
the mergers of The Constell Group, Inc. and Bailey & Quinn, Inc. with
the Company.
A Report on Form 8-K was filed on October 15, 1997 that announced the
results of the first quarter of fiscal 1998 ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
CIBER, INC.
(Registrant)
Date February 11, 1998 By /s/ Mac J. Slingerlend
----------------- -------------------------------------
Mac J. Slingerlend
President and Chief Operating Officer
Date February 11, 1998 By /s/ Richard A. Montoni
----------------- -------------------------------------
Richard A. Montoni
Executive Vice President/Chief
Financial Officer
14
<PAGE>
CREDIT AGREEMENT
Whereas UMB Bank Colorado (hereafter "Bank") has agreed to make available a
$20,000,000 credit facility for CIBER, Inc. (hereafter "CIBER"), Bank and CIBER
hereby agree to the following so long as any debt is owing to Bank by CIBER or
any credit is available to CIBER from Bank:
1. FINANCIAL REPORTING
A. CIBER will provide Bank:
i) Its company's prepared consolidated balance sheet and consolidated
income statement within 30 days of the previous month end, unless
prohibited by the "public" ownership status of CIBER, in which case
the statements will be provided quarterly within 45 days of the
quarter end.
ii) Its annual audited consolidated financial statements of within 120
days of the fiscal year end.
iii) A Borrower's Certificate substantially in the form of Exhibit A
attached within 30 days of the month end and an accounts receivable
summary at the end of each calendar quarter.
2. COLLATERAL
The $20,000,000 credit facility for CIBER shall be on an unsecured basis.
3. INTEREST RATE
A) The interest rate on all outstanding borrowings owed to Bank by CIBER
shall be 200 basis points above the three month London Interbank
Offered Rate ("LIBOR") as quoted in the previous day's western edition
of The Wall Street Journal for a term of 90 days.
<PAGE>
CREDIT AGREEMENT
CONTINUED
PAGE 2
4. UNUSED CREDIT FACILITY
CIBER will pay Bank an unused credit facility fee on the first $15,000,000
with no fee required on the remaining portion, quarterly in arrears, equal
to .225% (annualized) of the average unused portion of the revolving credit
facilities in the previous calendar quarter which has been made available
by Bank to CIBER.
5. TERMING OUT OF LOANS MADE FOR ACQUISITION PURPOSES
At the Bank's option any amounts advanced under CIBER's credit facility for
the purpose of making an acquisition may be converted to a one year term
note based on a five year amortization of equal principal plus interest
payments six months following the date of such advances. Any such loan
amounts converted to a one year term loan will be subtracted from the
$20,000,000 and the remaining amount will be available to CIBER as a
revolving credit facility. At all times, any balance owing under the
$20,000,000 credit facility, including any roll out note balances, shall
not exceed 80% of accounts receivable that are less than 90 days past due.
6. CROSS DEFAULT OF DEBT OWED TO BANK
A default by CIBER on any of its debt over $25,000 owing to Bank shall be
considered an event of default on all other debt owing to Bank by CIBER.
7. TANGIBLE NET WORTH
CIBER will maintain a minimum Net Worth of $35,000,000.
8. LEVERAGE RATIO
CIBER's total liabilities divided by Net Worth must not exceed 1.5 to 1.0
at any time.
<PAGE>
CREDIT AGREEMENT
CONTINUED
PAGE 3
9. DEBT SERVICE COVERAGE RATIO
CIBER will maintain a Debt Service Coverage Ratio of 1.5 to 1.0 which
will be measured at the end of each calendar quarter. The numerator
shall be the net income plus amortization for the just completed
calendar quarter multiplied by four divided by a denominator of the
current maturities of long term debt.
10. NO QUARTERLY LOSS
CIBER shall not report a net loss in any calendar quarter.
11. LOANS TO OTHER PARTIES
CIBER will not make loans to any person, corporation, company or
partnership excluding its subsidiaries which exceed in aggregate $500,000.
12. BANK ACCOUNTS AND SERVICE CHARGES
CIBER's primary operating accounts will be maintained with Bank, or its
affiliate banks, into which all CIBER's receipts will be deposited. The
corporate banking services provided by Bank, and its affiliate banks, to
CIBER will be placed on Account Analysis and such services may be paid for
with account balances. If the account balances are not high enough to pay
for the bank services used, CIBER agrees to pay Bank the deficiency amount
for such services following the end of each calendar quarter.
13. EVENT OF DEFAULT
Failure to comply with any of the terms in this Credit Agreement shall
constitute an event of default on the debt of CIBER owing to Bank with Bank
having all the rights and remedies as contained in the loan notes. Bank
shall have no obligation to make additional advances if Bank determines
that CIBER is not in compliance with the terms of this Credit Agreement,
Borrower's Certificate, or any other agreement with the Bank.
<PAGE>
CREDIT AGREEMENT
CONTINUED
PAGE 4
14. OTHER AGREEMENTS
All rights and obligations arising under said other agreements or instruments or
under this Credit Agreement, or both, shall be cumulative and independently
applicable in all respects and shall not be limited in any fashion owing to the
fact that provisions of said other agreements or instruments and this Credit
Agreement may differ.
The undersigned hereby agree to the terms and conditions of this Credit
Agreement as of December 1, 1997.
CIBER, INC.
By: /s/ Mac J. Slingerlend
---------------------------
Name Printed: MAC J. SLINGERLEND
Title: PRESIDENT/CHIEF OPERATING OFFICER
& TREASURER
UMB BANK COLORADO
By: /s/ Ned C. Voth
---------------------------
Name Printed: NED C. VOTH
Title: CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q OF CIBER, INC. FOR THE QUARTER ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 26,760
<SECURITIES> 0
<RECEIVABLES> 80,912
<ALLOWANCES> 0
<INVENTORY> 917
<CURRENT-ASSETS> 113,098
<PP&E> 18,285
<DEPRECIATION> 8,841
<TOTAL-ASSETS> 158,604
<CURRENT-LIABILITIES> 32,357
<BONDS> 0
0
0
<COMMON> 225
<OTHER-SE> 126,022
<TOTAL-LIABILITY-AND-EQUITY> 158,604
<SALES> 27,771
<TOTAL-REVENUES> 222,080
<CGS> 23,312
<TOTAL-COSTS> 150,207
<OTHER-EXPENSES> 51,111
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127
<INCOME-PRETAX> 21,274
<INCOME-TAX> 10,277
<INCOME-CONTINUING> 10,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,997
<EPS-PRIMARY> .54<F1>
<EPS-DILUTED> .51<F1>
<FN>
<F1>CALCULATED BASED ON PRO FORMA NET INCOME OF $12,004.
</FN>
</TABLE>
