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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED JUNE 30, 1998.
Commission File Number 0-23488
CIBER, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-2046833
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5251 DTC PARKWAY, SUITE 1400, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices) (Zip Code)
(303) 220-0100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of exchange on which registered
----------------------- ------------------------------------
COMMON STOCK $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
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. X Yes No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. X
---
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant as of September 11, 1998 was $1,172,952,799
based upon the closing price of $28.625 per share as reported on the New York
Stock Exchange on that date.
As of September 11, 1998, there were 53,628,547 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1998 Annual Meeting of
Shareholders are incorporated by reference into Part III hereof.
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<PAGE>
CIBER, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
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<S> <C>
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for the Company's Common Stock and Related
Shareholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 18
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 37
PART III
Item 10. Directors and Executive Officers 37
Item 11. Executive Compensation 39
Item 12. Security Ownership of Certain Beneficial Owners
and Management 39
Item 13. Certain Relationships and Related Transactions 39
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 39
Signatures 41
</TABLE>
2
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PART I
ITEM 1. BUSINESS
GENERAL
CIBER, Inc. and Subsidiaries ("CIBER" or the "Company") is a nationwide provider
of system integration consulting services. Employing approximately 5,700
employees located in approximately 80 branch offices in more than 20 states plus
Canada, CIBER offers 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.
The Company began operations in 1974 to assist companies in need of computer
programming support. In the mid-1980s, the Company initiated a growth strategy
that included expanding its range of computer-related services, developing a
professional sales force and selectively acquiring or merging established
complementary companies. Since fiscal 1994, after restating 1994 results for
subsequent business combinations on a pooling of interests basis, the Company's
revenues have increased from $158.4 million to $550.4 million in fiscal 1998, a
compound annual growth rate of 37%. Over the same period, pro forma net income
increased from $5.8 million in fiscal 1994 to $34.3 million in fiscal 1998, a
compound annual growth rate of 56%.
BUSINESS STRATEGY
The Company's strategy is to expand its business by continuing to build
long-term relationships with major clients based on high-quality information
technology services tailored to meet client needs. The Company's traditional
time and material application software programming services have been expanded
to include a comprehensive array of management consulting, information systems
design, development, integration and implementation, as well as project
management services. The Company's strategy includes the following key elements:
- - BUILD STRONG CLIENT RELATIONSHIPS. The Company is committed to providing
quality custom software application and development services that meet the
demands of large companies with substantial data processing operations.
Management believes the Company's emphasis on building long-term relationships
with major clients has been a primary reason for the Company's success. Most of
the Company's largest clients have been clients for many years.
- - GROW THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION. The Company intends
to expand by acquiring companies that broaden the Company's array of consulting
services, that have strategic client relationships or that are located in
attractive geographic locations. The Company also intends to expand the
operations of existing offices primarily by providing additional information
technology services to existing clients. The Company may also start new branches
in attractive markets with its own personnel.
- - EXPAND INTEGRATION AND IMPLEMENTATION SERVICES. The Company's concentrated
effort on providing time and material programming services has expanded to
include management level strategic systems solutions, as well as the
implementation of clients' long-term information technology strategies, from
design and development of their
3
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information systems through testing and implementation, to migration from
mainframe to client/server architectures, as well as package software project
implementation. As a result of these efforts, the Company is taking greater
responsibility for projects and providing greater value-added services to its
clients. This expansion of focus, combined with the Company's processes,
methodologies, tools and templates, help position the Company as a
full-service provider for its existing and new clients' information
technology and application needs. The Company believes that, as ERP package
software companies, such as PeopleSoft, Lawson, J. D. Edwards, Oracle and
Baan, continue to enhance the functionality and performance of their products
and such products become more widely used, ERP implementation services can
present an increasing opportunity for the Company.
- - FOCUS ON QUALITY SERVICE. The Company seeks to be a leader in providing
quality services and processes to its clients. The Company's CIS Division
operations have received ISO 9001 certification, an international standard for
consistency in operating procedures. The Company believes that it is currently
the sole provider of computer-related services with ISO 9001 certification on a
national basis. ISO 9001 certification has enhanced the Company's ability (i) to
achieve preferred supplier status from larger companies, (ii) to satisfy current
and prospective clients who insist on a documented quality assurance system and
(iii) to improve its operations by facilitating cost controls and other
efficiencies on a continuing basis. The CIS Division has also achieved Ford
Motor Company "Q-1" status.
SERVICES
CIBER INFORMATION SERVICES DIVISION
The CIS Division supports the life cycle of computer systems, from strategy and
design to development and implementation and, finally, to maintenance and
support. The Company's technical staff performs a wide variety of tasks to
identify, analyze and solve clients' data processing and computing problems.
Generally, these services are provided on-site to clients whose personnel do not
have the requisite technical skills or to clients with specific projects
requiring additional staffing that do not justify permanent personnel increases.
The scope of the work performed by the Company ranges from specific, minor tasks
of short duration to large, complex tasks that require a large number of
consultants for a year or longer. Examples of larger tasks include developing
new systems and maintaining mature mainframe systems that cannot be quickly
replaced. Typically, the Company's professional staff augments and becomes part
of the clients' software development team on a specific application or project.
A key element of the CIS strategy is to maintain offices in those geographic
locations where the Company has significant client relationships. CIBER
Associates, a group dedicated entirely to IBM support, which is CIBER's largest
client at 5% of fiscal 1998 revenues, is part of the CIS Division. Currently,
the CIS Division operates out of over 40 branch offices.
CIBER SOLUTIONS DIVISION
SPECTRUM TECHNOLOGY GROUP, INC. Spectrum focuses its services on executive
management level, strategic systems solutions to business problems, including
data modeling, data warehousing and enterprise architecture. Spectrum also
develops systems on a project basis and is responsible for the Company's
Microsoft technology-based consulting group. Spectrum assists clients in
aligning their technology platforms with their strategic business objectives. As
the marketplace continues to evolve, the Company intends to assist clients in
customizing their technology platforms, which the Company believes will help
grow its integrated application solutions business.
BUSINESS INFORMATION TECHNOLOGY, INC. 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. Approximately 9% of the CIBER's fiscal 1998 revenues were
generated from clients implementing PeopleSoft software.
THE SUMMIT GROUP, INC. Summit is a multi-line ERP implementor specializing in
software products from Lawson, J.D. Edwards, Oracle, BAAN and others. In
addition, Summit licenses and implements Logistics Pro(C), a propriety
integrated warehouse and transportation software package. Summit also provides
hardware sizing solutions for clients implementing new systems. As an industry
remarketer for IBM and Hewlett Packard, Summit evaluates the client's systems
requirements and recommends the appropriate hardware to meet the new systems
needs, and procures and arranges delivery of the appropriate hardware to the
client.
4
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CIBER NETWORK SERVICES, INC. CNSI provides cross-platform, multi-vendor
computer system integration, complete network solutions and other related
services to clients with networking needs. CNSI operates from five offices.
Networking services provided by CNSI include strategic planning, network
design and configuration, technical support services, hardware procurement,
project management, installation, and network administration and support.
BUSINESS COMBINATIONS
The Company has expanded its geographic breadth, diversified its technical
expertise, expanded its client base and believes it has achieved other
competitive advantages through business combinations. Following each CIS
Division merger or acquisition, the Company seeks to add value to the operations
acquired by implementing the Company's automated office information systems and
ISO 9001 processes, and by providing national recruiting support to its new
offices. Given the highly fragmented nature of the information technology
services industry, the Company intends to pursue business combinations as part
of its growth and operation strategy. 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 personnel and to retain
clients of acquired or merged companies. In reviewing potential business
combinations, the Company focuses on the target company's geographic area,
client base, reputation in specific software services, acquisition availability,
cost, anticipated financial performance, sales, management and recruiting
personnel and potential client demand, among other factors. Since July 1, 1995,
the Company has completed the following business combinations:
<TABLE>
<CAPTION>
APPROXIMATE CONSULTANTS
CONSIDERATION, AT
DATE NAME MAIN OFFICE IN MILLIONS (1) ACQUISITION
- ------------------- ------------------------------------ --------------------------- ----------------- --------------
<S> <C> <C> <C> <C>
August 1998 The Cushing Group, Inc. Nashua, New Hampshire $24.3 22
August 1998 EJR Computer Associates, Inc. Hoboken, New Jersey $36.0 196
May 1998 The Summit Group, Inc. Mishawaka, Indiana $133.7 262
April 1998 Step Consulting, Inc. Greensboro, North Carolina $4.6 32
March 1998 Computer Resource Associates, Inc. Harrisburg, Pennsylvania $14.6 177
March 1998 Advanced Systems Engineering, Inc. Aurora, Colorado $10.9 150
November 1997 Techware Consulting, Inc. Irving, Texas $16.2 107
November 1997 Financial Dynamics, Inc. McLean, Virginia $26.3 166
October 1997 The Constell Group, Inc. Elmwood Park, New Jersey $11.0 97
October 1997 Bailey & Quinn, Inc. Norcross, Georgia $3.3 49
August 1997 SoftwarExpress, Inc. - d/b/a Menlo Park, California $21.6 40
Reliant Integration Services, Inc.
July 1997 KCM Computer Consulting, Inc. Calverton, Maryland $15.2 151
March 1997 Davis, Thomas & Associates, Inc. Minneapolis, Minnesota $13.5 117
December 1996 CIBER Network Services, Inc. (2) Edison, New Jersey $5.7 50
November 1996 Technical Support Group, Inc. Chicago, Illinois $13.5 70
November 1996 Technology Management Group, Inc. Seattle, Washington $13.7 108
September 1996 Spectrum Technology Group, Inc. Somerville, New Jersey $16.6 110
July 1996 DataFocus, Inc. (3) Fairfax, Virginia $5.0 45
May 1996 Practical Business Solutions, Inc. Boston, Massachusetts $12.9 125
March 1996 OASYS, Inc. Columbus, Ohio $1.0 18
September 1995 Broadway & Seymour, Inc. (4) Rochester, Minnesota $1.0 45
</TABLE>
(1) APPROXIMATE CONSIDERATION INCLUDES THE VALUE OF CIBER COMMON STOCK AND
OPTIONS FOR CIBER COMMON STOCK ISSUED, IF A MERGER, OR CASH PAID, COMMON
STOCK ISSUED AND LIABILITIES ASSUMED, IF AN ACQUISITION.
(2) IF THE ACQUIRED BUSINESS ACHIEVES CERTAIN LEVELS OF REVENUE OR NET INCOME,
THE COMPANY WILL BE REQUIRED TO PAY ADDITIONAL CONSIDERATION OF UP TO $1.4
MILLION IN CASH OR COMMON STOCK.
(3) THE COMPANY ACQUIRED ONLY THE BUSINESS SYSTEMS DEVELOPMENT DIVISION OF THIS
COMPANY.
(4) THE COMPANY ACQUIRED ONLY ONE BRANCH OFFICE OF THIS COMPANY.
5
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CLIENTS
The Company focuses its marketing efforts on larger companies with substantial
needs for supplemental programmer staffing, ERP software implementation and
systems integration services and other computer-related professional services.
Such clients afford the Company opportunities to develop long-term relationships
based on the high quality, consistent services the Company has provided for 24
years. Although most consultant assignments are from three to twelve months,
many of the Company's client relationships have continued for more than 10
years. Client assignments within the Solutions Division tend to be less of a
recurring nature than within the CIS Division. This is due to the often one-time
implementation focused assignments.
The ability to serve large clients in diverse industries demonstrates the
Company's adaptability to a wide variety of client environments. Whether clients
are in the services or manufacturing sector, the Company recruits and provides
consultants having skills matching the requirements of each client's project.
The Company routinely satisfies the diverse information technology needs of
clients in a wide variety of industries.
Since approximately 1990, larger clients have started to limit the number of
information technology vendors they use. In order to achieve the reduction in
the number of vendors used, companies often review and screen both existing and
potential vendors and generate select lists of approved vendors. The factors
considered for placement of a company on a vendor list include geographic and
technical breadth of operations, quality assurance programs, reliability and
cost effectiveness.
Certain customers account for a significant portion of the Company's revenues.
The Company's five largest clients represented approximately 19%, 16%, 14% of
the Company's total revenues for the years ended June 30, 1996, 1997, and 1998,
respectively. Some of the Company's significant clients include: American
Express Company, AT&T, Fidelity Investments, Inc., Ford Motor Company, GTE
Corporation, IBM, MCI Telecommunications Corporation, Monsanto Corp., US West
Communications, Inc., and Xerox Corporation; each of which has been a client for
over five years.
The Company normally offers professional services through agreements that
specify that services are rendered on a best-efforts basis, that the Company
makes no express or implied warranties and that the client must continue to pay
all charges incurred prior to the termination of the agreement. Because services
are typically rendered on an as-required basis, the Company does not consider
the backlog of unfinished assignments significant in understanding its business.
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. 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 the
Company's business relationship with any of its significant clients could have a
material adverse effect on the Company's operating results.
Through BIT, the Company has a significant relationship with PeopleSoft as an
implementation partner. In fiscal 1998, approximately 9% of the Company's total
revenues was derived from clients who purchased implementation services for
their PeopleSoft software. In the event PeopleSoft products become obsolete or
non-competitive, or if BIT should lose its "implementation partner" status with
PeopleSoft, the Company could suffer a material adverse effect.
The Company generally prices its services to clients on a time-and-materials
basis and maintains price ranges that reflect the technical skills and
experience levels of the Company's consultants. The Company has provided and
intends to continue to provide increased project services to its clients.
Projects are distinguishable from the Company's core business of
time-and-material consulting by the level of responsibility assumed by the
Company. In a typical project, the Company independently develops a program or
maintains a system, whereas, for time-and-materials contracts, the Company's
clients generally maintain responsibility for the overall task. The failure of a
project or the failure of the Company to provide project services in a
satisfactory manner could have a material adverse effect on the Company.
Further, 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 such projects could
have a material adverse effect on the Company's results of operations.
6
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SALES FORCE
The Company maintains an experienced sales force of approximately 225
employees who market the Company's services to senior business executives,
chief information officers, information systems managers, other users of
programming services and purchasing/buying groups. The purchasing departments
of the Company's larger CIS Division clients commonly select a limited list
of preferred vendors. Once on the vendor list, the Company's sales
representatives are eligible to work directly with managers of projects or
application systems seeking consultant assistance. New client contacts are
generated through a variety of methods, including client referrals, personal
sales calls, direct mailings to targeted clients and telemarketing.
OFFICES
The Company's CIS Division branch office network is integral to its business
strategy. Through the branch office network, the Company can (i) offer a broad
range of consulting services on a local basis, (ii) respond to changing market
demands for information technology services through a variety of contacts in
many industries and geographic areas and (iii) maintain a quality professional
staff because of its nationwide reputation and its training programs.
Additionally, the offices can market their services as being provided by a
company with a national presence and a long history in the information
technology services business.
The Company believes its operating procedures and financial controls are two of
its primary strengths. Business plans, generally at the office level, are
prepared annually and include monthly projections for the ensuing fiscal year.
Results are tracked monthly to compare actual performance to projected results.
The Company has centralized accounting and cash management functions to help
ensure integrity of data and control of information flow. Operating data is
available on a weekly basis. The Company believes that these practices enhance
results from acquired businesses as well.
The Company established its office network through the internal start-up and
staffing of offices in new geographic locations and through the acquisition of
information technology services companies, their professional staffs and client
relationships. The Company's network of offices currently consists of
approximately 80 offices in over 20 states plus Canada. The number of
consultants working out of any office ranges from as few as 10 to over 200.
CONSULTANT RECRUITMENT
The Company's future success will depend in part on its ability to hire
adequately trained personnel who address the increasingly sophisticated needs of
its clients. The Company's on-going consultant needs arise from (i) increasing
demand for the Company's services, (ii) turnover, which is generally high in the
industry, and (iii) the clients' requests for programmers trained in the newest
software technologies. Few of the Company's employees are bound by non-compete
agreements. Competition for personnel 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
personnel. In particular, competition for the limited number of qualified
project managers and professionals with certain specialized skills, such as a
working knowledge of certain sophisticated software, is intense. Because of
this, the recruitment of the Company's skilled consultant group is a critical
element to the Company's success. The Company devotes significant resources to
meeting its personnel requirements. The Company currently has approximately 210
full-time recruiters in its offices and approximately 25 in its National
Recruiting Group. The National Recruiting Group maintains a national,
proprietary database of relocatable and harder to find consultants (due to
unique or specialized skill sets), augments local recruiting, advertises
nationally and over the Internet for new consultants, travels to branches to
train new recruiters and performs related tasks.
The Company offers a number of programs designed to retain its trained
personnel. The Company offers a tuition reimbursement program and provides
technical training courses that are available for home study. The Company also
makes available to employees an employee stock purchase plan, a matching
provision as part of its 401(k) savings plan, and stock options.
It is often difficult to match the availability of consultants with client
requirements. Pre-marketing and lead times from clients help, but consultant
availability remains a significant factor in determining whether the Company or
a
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competitor will obtain the available business. The Company believes that
careful coordination of its recruiting and sales activities gives it an
advantage over many of its smaller competitors.
COMPETITION
The information technology services industry is extremely competitive. A number
of companies compete with the Company in select markets with substantially
similar services. In most of the markets in which the Company competes, the
Company believes that there are participants that have significantly greater
financial, technical and marketing resources than the Company. The Company
believes, however, that no one competitor dominates any of its markets.
There are few very large competitors with annual revenues over $500 million.
There are, however, according to The Updata Group, an independent consulting
firm, over 3,000 software service firms with yearly revenues over $1 million
competing for market share. Most of these firms participate in just one
geographic area. The Company's competition, therefore, varies significantly from
office to office. Often, local competitors are the Company's primary
competition. At certain offices, particularly those with major clients, national
competitors are the Company's significant competition. Each office must adapt to
the circumstances under which it operates.
In particular, the Company believes that its CIS Division competes most directly
with the following national companies: Keane, Inc., Analysts International
Corporation, Computer Horizons Corporation and Computer Task Group, Inc. For
project management services, Electronic Data Systems Corporation, Andersen
Consulting, Computer Sciences Corporation, Cambridge Technology Partners, Inc.
and others are competitors. Many of these companies are national and
international in scope and have greater resources than the Company. BIT, Summit
and Spectrum often compete with "Big Five" accounting firms, as well as larger
systems consulting firms. CNSI typically competes against private, regional
companies. The Company also competes with the internal data processing staffs of
its clients, which clients can add to their employee base as an alternative to
using a consulting firm. Additionally, many large accounting and management
consulting firms offer services that overlap with a significant portion of the
Company's services. Also, computer hardware and software companies are
increasingly becoming involved in systems integration projects. Recently,
temporary placement agencies have begun expanding their businesses to provide
computer-related services to their customers. 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 outsourcing their business to competitors in
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.
In order to remain on its clients' vendor lists and to develop new client
relationships, the Company must satisfy 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 as the Company at similar or lower costs.
Additionally, certain of the Company's clients require that their vendors reduce
rates after services have commenced. There can be no assurance that the Company
will be able to compete effectively on pricing or other requirements and, as a
result, the Company could lose clients or be unable to maintain historic gross
margin levels or to operate profitably. With respect to the Company's
implementation services for software packages, the manufacturers of such
software may have training requirements that inhibit the Company from competing
effectively with other packaged software implementation providers.
EMPLOYEES
As of August 31, 1998, the Company had approximately 5,700 full-time employees,
including approximately 1,000 personnel in administrative positions and
approximately 4,700 billable consultants. Administrative personnel are
principally branch managers, sales representatives, recruiters and
administrative assistants located throughout the Company's offices. None of the
Company's employees are subject to a collective bargaining arrangement. The
Company has entered into employment agreements with its executive officers. The
Company believes its relations with its employees are good.
8
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ITEM 2. PROPERTIES
The Company's executive offices are located at 5251 DTC Parkway, Suite 1400,
Englewood, Colorado 80111. The Company leases approximately 28,600 square feet
of office space in Denver for its corporate offices. The lease expires in
November 2002.
The Company leases office space at various other locations under leases ranging
from month-to-month up to ten-year terms. The Company had leases totaling
approximately 518,000 square feet at June 30, 1998. Total office rent expense
for the year ended June 30, 1998 was $8.5 million for all offices. The Company's
facilities are adequate for its current level of operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of the Company's fiscal year ended June 30, 1998.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock has been listed on the New York Stock Exchange under
the symbol "CBR" since June 19, 1997 and was, prior to that date, on the Nasdaq
National Market. The table below sets forth the high and low sales price per
share of the Company's common stock for the periods indicated.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Fiscal Year Ended June 30, 1997
First Quarter $ 19.50 $ 6.63
Second Quarter 20.88 14.63
Third Quarter 17.13 11.00
Fourth Quarter 22.44 11.00
Fiscal Year Ended June 30, 1998
First Quarter 24.25 16.56
Second Quarter 29.00 19.75
Third Quarter 35.63 23.41
Fourth Quarter 38.00 28.38
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended June 30 1994* 1995* 1996* 1997* 1998
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 158,409 216,491 275,576 390,817 550,421
Merger Costs $ - 1,075 901 1,218 4,538
Operating income $ 9,069 13,465 19,134 32,334 57,756
Net income $ 7,538 9,628 14,380 20,696 36,510
Pro forma net income $ 5,765 8,015 12,068 19,893 34,303
Pro forma income per share - basic $ .17 .20 .28 .43 .68
Pro forma income per share - diluted $ .15 .18 .26 .40 .65
Cash dividends $ - - - - -
- --------------------------------------------------------------------------------------------------------------------------
Weighted average shares - basic 34,163 39,395 43,084 46,738 50,199
Weighted average shares - diluted 38,327 43,357 46,555 49,457 52,687
- --------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $ 57,635 72,591 107,406 161,291 216,412
Total long-term liabilities $ 400 350 460 1,075 -
Total shareholders' equity $ 29,894 37,172 71,612 114,998 163,286
Shares outstanding at year end 39,335 39,587 45,551 48,391 51,092
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL PERFORMANCE:
Revenue growth 24.9% 36.7% 27.3% 41.8% 40.8%
Operating income margin 5.7% 6.2% 6.9% 8.3% 10.5%
Pro forma net income margin 3.6% 3.7% 4.4% 5.1% 6.2%
Stock price at year end $ 2.19 4.44 11.00 17.09 38.00
Pro forma income per share - diluted,
excluding merger costs $ .15 .21 .27 .43 .74
</TABLE>
* RESTATED FOR POOLING OF INTERESTS BUSINESS COMBINATIONS THROUGH JUNE 30, 1998.
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ITEM 7. 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:
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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>
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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
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<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.
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<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.
15
<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
16
<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
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<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.
ITEM 7A. 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.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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
19
<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.
20
<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.
21
<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.
22
<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.
23
<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
24
<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
25
<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.
26
<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,
27
<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.
28
<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.
29
<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>
<S> <C>
Year ending June 30:
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>
30
<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.
31
<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.
32
<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>
33
<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.
34
<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.
35
<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>
36
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Certain information required by Part III is omitted from this Report because the
registrant will file a definitive Proxy Statement pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
SERVED AS
OFFICER OR
DIRECTOR
NAME AGE POSITIONS 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 Financial 1996 Class III
Officer, Treasurer and Director
Donald R. Hahl 48 Senior Vice President and President 1997 -
/CIBER Solutions Division
Joseph A. Mancuso 52 Senior Vice President and President 1994 -
/CIBER Information Services Division
James G. Brocksmith, Jr. 57 Director 1998 Class I
Roy L. Burger 43 Director 1995 Class I
Archibald J. McGill 67 Director 1998 Class III
James A. Rutherford 52 Director 1994 Class II
James C. Spira* 55 Director 1994 Class I
</TABLE>
* Mr. Spira is not standing for re-election to the Board when his term expires
October 29, 1998.
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.
37
<PAGE>
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.
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 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.
ROY L. BURGER. Mr. Burger has been a director of the Company since November
1995. Mr. Burger has approximately 20 years of experience in the equipment
leasing and finance industry and has arranged the financing of more than $1.5
billion of equipment. Mr. Burger currently serves as Chairman and Chief
Executive Officer of Boulder Capital Group, a company founded by him in 1986
that specializes in equipment leasing. 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.
38
<PAGE>
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.
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.
Additional information is incorporated herein by reference to the Company's 1998
Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance".
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated herein by reference to the Company's
1998 Proxy Statement under the caption, "Executive Compensation", except the
Compensation Committee's Report on Executive Compensation which is not
incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is incorporated herein by reference to the Company's
1998 Proxy Statement under the caption "Securities Ownership of Certain
Beneficial Owners and Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is incorporated herein by reference to the Company's
1998 Proxy Statement under the caption "Certain Relationships and Related
Transactions".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements are filed as part of this report:
Independent Auditors' Report
Consolidated Statements of Operations - Years Ended June 30, 1996,
1997 and 1998
Consolidated Balance Sheets - June 30, 1997 and 1998
Consolidated Statements of Shareholders' Equity - Years Ended June 30,
1996, 1997 and 1998
Consolidated Statements of Cash Flows - Years Ended June 30, 1996, 1997
and 1998
Notes to Consolidated Financial Statements
39
<PAGE>
(2) Financial Statement Schedules
None
(3) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
--------- -----------------------
<C> <S>
3(i) Amended and Restated Certificate of Incorporation of CIBER,
Inc.; Certificate of Amendment to Amended and Restated
Certificate of Incorporation of CIBER, Inc. dated October 29,
1996; Certificate of Amendment to Amended and Restated
Certificate of Incorporation of CIBER, Inc. dated March 4, 1998
incorporated by reference to the Quarterly Report on form 10-Q
for the quarter ended March 31, 1998
3(ii) Bylaws of the Company (1)
4.1 Form of Common Stock Certificate (1)
4.2 Rights Agreement, dated as of August 31, 1998, between the
Company and UMB Bank, N. A., and exhibits, incorporated by
reference to the Form 8-K filed by the Company on September 16,
1998
10.1 1989 CIBER, Inc. Employee Stock Option Plan (1)
10.2 Form of CIBER, Inc. Non-Employee Directors' Stock Option Plan
(1)
10.3 Implementation Partners Agreement dated September 1, 1993, by
and between Business Information Technology, Inc. and
PeopleSoft, Inc. (2)
10.4 Salary Continuation Retirement Plan for Mac J. Slingerlend,
incorporated by reference to the Annual Report on Form 10-K for
the year ended June 30, 1996
10.5 Employment Agreement between the Company and Richard A. Montoni
(3)
10.6 CIBER, Inc. Salary Continuation Retirement Plan for Richard A.
Montoni (3)
10.7 Credit Agreement with UMB Bank Colorado dated December 1, 1997,
incorporated by reference to the Quarterly Report on form 10-Q
for the quarter ended December 31, 1997
10.8 CIBER, Inc. Equity Incentive Plan (Amended and restated as of
May 4, 1998)
10.9 CIBER, Inc. Non-Employee Directors' Stock Compensation Plan (as
amended July 1, 1997)
21.1 Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
Financial Data Schedules:
27.1 Restated for the year ended June 30, 1996.
27.2 Restated for: the three months ended September 30, 1996; the six
months ended December 31, 1996; the nine months ended March 31,
1997: and the year ended June 30, 1997.
27.3 Restated for: the three months ended September 30, 1997; the six
months ended December 31, 1997; and the nine months ended March
31, 1998.
27.4 For the fiscal year ended June 30, 1998.
(1) Incorporated by reference to the Registration Statement on Form
S-1, as amended (File No. 33-74774), as filed with the
Commission on February 2, 1994.
(2) Incorporated by reference to the Registration Statement on Form
S-1, as amended (File No. 33-96988), on September 15, 1995.
(3) Incorporated by reference to the Current Report on Form 8-K
filed with the Commission on December 12, 1996.
</TABLE>
(b) REPORTS ON FORM 8-K DURING THE LAST QUARTER OF THE FISCAL YEAR ENDED
JUNE 30, 1998
None
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CIBER, INC.
(Registrant)
Date: September 24, 1998 By /s/ Mac J. Slingerlend
-----------------------------------
Mac J. Slingerlend
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------- ------- ------
<S> <C> <C>
/s/ Bobby G. Stevenson
----------------------- Chairman September 24, 1998
Bobby G. Stevenson
/s/ Mac J. Slingerlend President, Chief Executive Officer,
---------------------- Secretary and Director September 24, 1998
Mac J. Slingerlend
/s/ Richard A. Montoni Executive Vice President, Chief
---------------------- Financial Officer, Treasurer and
Richard A. Montoni Director (Principal Financial Officer) September 24, 1998
/s/ Christopher L. Loffredo Vice President/Chief Accounting Officer
--------------------------- (Principal Accounting Officer) September 24, 1998
Christopher L. Loffredo
/s/ James G. Brocksmith, Jr.
- ---------------------------- Director September 24, 1998
James G. Brocksmith, Jr.
/s/ Roy L. Burger
----------------- Director September 24, 1998
Roy L. Burger
----------------------- Director September , 1998
Archibald J. McGill
/s/ James A. Rutherford
----------------------- Director September 24, 1998
James A. Rutherford
/s/ James C. Spira
------------------ Director September 24, 1998
James C. Spira
</TABLE>
41
<PAGE>
Exhibit 10.8
CIBER, INC.
EQUITY INCENTIVE PLAN
(Amended and Restated as of May 4, 1998)
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. CIBER, Inc. hereby amends and restates the
CIBER, Inc. Equity Incentive Plan (the "Plan") for certain officers, employees
and consultants of the Company.
1.2 PURPOSES. The purposes of the Plan are to provide the
officers, employees and consultants of the Company selected for participation in
the Plan with added incentives to continue in the long-term service of the
Company and to create in such persons a more direct interest in the future
success of the operations of the Company by relating incentive compensation to
increases in stockholder value, so that the income of such persons is more
closely aligned with the income of the Company's stockholders. The Plan is also
designed to enhance the ability of the Company to attract, retain and motivate
officers, employees and consultants by providing an opportunity for investment
in the Company.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set
forth below:
(a) "AFFILIATED CORPORATION" means (i) any corporation or
other entity (including but not limited to a partnership) that directly, or
through one or more intermediaries controls, is controlled by, or is under
common control with, CIBER, Inc., or (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(b) "AWARD" means a grant made under this Plan in the form
of Stock, Options, Restricted Stock, Performance Shares, or Performance Units.
(c) "BOARD" means the Board of Directors of the Company.
(d) "COMMITTEE" means (i) the Board, or (ii) one or more
committees of the Board to whom the Board has delegated all or part of its
authority under this Plan. Any committee under clause (ii) hereof which makes
grants to "officers" of the Company (as that term is defined in Rule 16a-1(f)
promulgated under the Exchange Act) shall be composed of not less than the
minimum number of persons from time to time required by Rule 16b-3, each of
whom, to the extent necessary to comply with Rule 16b-3 only, shall be a
"non-employee director" within the meaning of Rule 16b-3(b)(3)(i).
(e) "COMPANY" means CIBER, Inc., a Delaware corporation,
together with its Affiliated Corporations except where the context otherwise
requires.
<PAGE>
(f) "EFFECTIVE DATE" means January 31, 1994.
(g) "ELIGIBLE EMPLOYEES" means full-time key employees
(including, without limitation, officers and directors who are also employees)
of the Company or any Affiliated Corporation or any division thereof, upon whose
judgment, initiative and efforts the Company is, or will be, important to the
successful conduct of its business.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act
of 1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of
the Stock determined as follows:
(i) If the Stock is listed on any established stock
exchange or a national market system, its Fair Market Value shall be the
closing sales price for such Stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Committee deems reliable;
(ii) If the Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share shall be the mean between the high bid and low asked
prices for the Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Committee deems reliable;
(iii) In the absence of an established market for the
Stock, the Fair Market Value shall be determined in good faith by the
Committee.
(j) "INCENTIVE STOCK OPTION" means any Option designated
as such and granted in accordance with the requirements of Section 422 of the
Internal Revenue Code.
(k) "INTERNAL REVENUE CODE" means the Internal Revenue
Code of 1986, as it may be amended from time to time, and the rules and
regulations promulgated thereunder.
(l) "NON-STATUTORY OPTION" means any Option other than an
Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock at a stated
price for a specified period of time.
(n) "OPTION PRICE" means the price at which shares of
Stock subject to an Option may be purchased, determined in accordance with
Section 7.2(b).
-2-
<PAGE>
(o) "PARTICIPANT" means an Eligible Employee or part-time
employee of, or consultant to, the Company designated by the Committee from time
to time during the term of the Plan to receive one or more Awards under the
Plan.
(p) "PERFORMANCE CYCLE" means the period of time as
specified by the Committee over which Performance Share or Performance Units are
to be earned.
(q) "PERFORMANCE SHARES" means an Award made pursuant to
Section 9 which entitles a Participant to receive Shares, their cash equivalent
or a combination thereof based on the achievement of performance targets during
a Performance Cycle.
(r) "PERFORMANCE UNITS" means an Award made pursuant to
Section 9 which entitles a Participant to receive cash, Stock or a combination
thereof based on the achievement of performance targets during a Performance
Cycle.
(s) "PLAN YEAR" means each 12-month period beginning
July 1 and ending the following June 30, except that for the first year of the
Plan it shall begin on the Effective Date and extend to June 30 of that year.
(t) "RESTRICTED STOCK" means Stock granted under Section 8
that is subject to restrictions imposed pursuant to said Section.
(u) "RULE 16b-3" shall mean Rule 16b-3 as promulgated by
the Securities and Exchange Commission under the Exchange Act, or any successor
rule or regulation thereto as in effect from time to time.
(v) "SERVICE PROVIDER" means an employee of or consultant
to the Company.
(w) "SHARE" means a share of Stock.
(x) "STOCK" means the common stock, $.01 par value, of the
Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
SECTION 3
PLAN ADMINISTRATION
3.1 AUTHORITY OF COMMITTEE. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and
-3-
<PAGE>
authority to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to eligible Participants; (iii) determine the number of
Shares to be covered by, or with respect to which payments, rights, or other
matters are to be calculated in connection with, Awards; (iv) determine the
terms and conditions of any Award; (v) determine whether, to what extent, and
under what circumstances Awards may be settled or exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited, or
suspended and the method or methods by which Awards may be settled,
exercised, canceled, forfeited, or suspended; (vi) determine whether, to what
extent, and under what circumstances cash, shares, other securities, other
Awards, other property, and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) correct any defect, supply any omission,
reconcile any inconsistency and otherwise interpret and administer the Plan
and any instrument or agreement relating to the Plan or any Award hereunder;
(viii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take
any other action that the Committee deems necessary or desirable for the
administration of the Plan. To the extent necessary or appropriate, the
Committee may adopt sub-plans consistent with the Plan to conform to
applicable state or foreign securities or tax laws. A majority of the
members of the Committee may determine its actions and fix the time and place
of its meetings.
3.2 DETERMINATIONS UNDER THE PLAN. Unless otherwise expressly
provided in the Plan all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive, and binding upon all persons, including the Company, any
Affiliated Corporation, any Participant, any holder or beneficiary of any Award,
and any shareholder. No member of the Committee shall be liable for any action,
determination or interpretation made in good faith, and all members of the
Committee shall, in addition to their rights as directors, be fully protected by
the Company with respect to any such action, determination or interpretation.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
Section 4.3, 8,000,000 Shares are authorized for issuance under the Plan in
accordance with the provisions of the Plan and subject to such restrictions or
other provisions as the Committee may from time to time deem necessary;
provided, however, that no Participant may be granted Awards in any one calendar
year with respect to more than 1,000,000 Shares. The Shares may be divided
among the various Plan components as the Committee shall determine. Shares
which may be issued upon the exercise of Options shall be applied to reduce the
maximum number of Shares remaining available for use under the Plan. The
Company shall at all times during the term of the Plan and while any Options are
outstanding retain as authorized and unissued Stock, or as treasury Stock, at
least the number of Shares from time to time required under the provisions of
the Plan, or otherwise assure itself of its ability to perform its obligations
hereunder.
-4-
<PAGE>
4.2 UNUSED AND FORFEITED STOCK. Any Shares that are subject to an
Award under this Plan which are not used because the terms and conditions of the
Award are not met, including any Shares that are subject to an Option which
expires or is terminated for any reason, any Shares which are used for full or
partial payment of the purchase price of Shares with respect to which an Option
is exercised and any Shares retained by the Company pursuant to Section 15.2
shall automatically become available for use under the Plan. Notwithstanding
the foregoing, any Shares used for full or partial payment of the purchase price
of the Shares with respect to which an Option is exercised and any Shares
retained by the Company pursuant to Section 15.2 that were originally Incentive
Stock Option Shares must still be considered as having been granted for purposes
of determining whether the Share limitation provided for in Section 4.1 has been
reached for purposes of Incentive Stock Option grants.
4.3 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC. If the
Company shall at any time increase or decrease the number of its outstanding
Shares of Stock or change in any way the rights and privileges of such Shares by
means of the payment of a stock dividend or any other distribution upon such
Shares payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then in
relation to the Stock that is affected by one or more of the above events, the
numbers, rights and privileges of (i) the shares of Stock as to which Awards
may be granted under the Plan, and (ii) the Shares of Stock then included in
each outstanding Option, Performance Share or Performance Unit granted
hereunder, shall be increased, decreased or changed in like manner as if they
had been issued and outstanding, fully paid and nonassessable at the time of
such occurrence.
4.4 DIVIDEND PAYABLE IN STOCK OF ANOTHER CORPORATION, ETC. If the
Company shall at any time pay or make any dividend or other distribution upon
the Stock payable in securities of another corporation or other property (except
money or Stock), a proportionate part of such securities or other property shall
be set aside and delivered to any Participant then holding an Award for the
particular type of Stock for which the dividend or other distribution was made,
upon exercise thereof in the case of Options, and the vesting thereof in the
case of other Awards. Prior to the time that any such securities or other
property are delivered to a Participant in accordance with the foregoing, the
Company shall be the owner of such securities or other property and shall have
the right to vote the securities, receive any dividends payable on such
securities, and in all other respects shall be treated as the owner. If
securities or other property which have been set aside by the Company in
accordance with this Section are not delivered to a Participant because an Award
is not exercised or otherwise vested, then such securities or other property
shall remain the property of the Company and shall be dealt with by the Company
as it shall determine in its sole discretion.
4.5 OTHER CHANGES IN STOCK. In the event there shall be any
change, other than as specified in Sections 4.3 and 4.4, in the number or kind
of outstanding shares of Stock or of any stock or other securities into which
the Stock shall be changed or for which it shall have been exchanged, and if the
Committee shall in its discretion determine that such change equitably requires
an adjustment in the number or kind of Shares subject to outstanding Awards or
which have been reserved for issuance pursuant to the Plan but are not then
subject to an Award, then such adjustments shall be made by the Committee and
shall be effective for all purposes of the Plan and
-5-
<PAGE>
on each outstanding Award that involves the particular type of stock for
which a change was effected.
4.6 RIGHTS TO SUBSCRIBE. If the Company shall at any time grant
to the holders of its Stock rights to subscribe pro rata for additional shares
thereof or for any other securities of the Company or of any other corporation,
there shall be reserved with respect to the Shares then subject to an Award held
by any Participant of the particular class of Stock involved, the Stock or other
securities which the Participant would have been entitled to subscribe for if
immediately prior to such grant the Participant had exercised his entire Option,
or otherwise vested in his entire Award. If, upon exercise of any such Option
or the vesting of any other Award, the Participant subscribes for the additional
Stock or other securities, the Participant shall pay to the Company the price
that is payable by the Participant for such Stock or other securities.
4.7 GENERAL ADJUSTMENT RULES. If any adjustment or substitution
provided for in this Section 4 shall result in the creation of a fractional
Share under any Award, the Company shall, in lieu of selling or otherwise
issuing such fractional Share, pay to the Participant a cash sum in an amount
equal to the product of such fraction multiplied by the Fair Market Value of a
Share on the date the fractional Share would otherwise have been issued. In the
case of any such substitution or adjustment affecting an Option, the total
Option Price for the shares of Stock then subject to an Option shall remain
unchanged but the Option Price per shall under each such Option shall be
equitably adjusted by the Committee to reflect the greater or lesser number of
shares of Stock or other securities into which the Stock subject to the Option
may have been changed.
4.8 DETERMINATION BY COMMITTEE, ETC. Adjustments under this
Section 4 shall be made by the Committee, whose determinations with regard
thereto shall be final and binding upon all persons.
SECTION 5
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated with
another corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in any
reclassification or change of outstanding Shares), or if all or substantially
all of the assets or more than 50% of the outstanding voting stock of the
Company is acquired by any other corporation, business entity or person
(other than a sale or conveyance in which the Company continues as a holding
company of an entity or entities that conduct the business or businesses
formerly conducted by the Company), or in case of a reorganization (other
than a reorganization under the United States Bankruptcy Code) or liquidation
of the Company, and if the provisions of Section 10 do not apply, the
Committee, or the board of directors of any corporation assuming the
obligations of the Company, shall, have the power and discretion to prescribe
the terms and conditions for the exercise, or modification, of any
outstanding Awards granted hereunder. By way of illustration, and not by way
of limitation, the Committee may provide for the complete or partial
acceleration of the dates of exercise of the Options, or may provide that
such Options will be exchanged or converted into options to acquire
securities of the surviving or acquiring corporation,
-6-
<PAGE>
or may provide for a payment or distribution in respect of outstanding
Options (or the portion thereof that is currently exercisable) in
cancellation thereof. The Committee may remove restrictions on Restricted
Stock and may modify the performance requirements for any other Awards. The
Committee may provide that Stock or other Awards granted hereunder must be
exercised in connection with the closing of such transaction, and that if not
so exercised such Awards will expire. Any such determinations by the
Committee may be made generally with respect to all Participants, or may be
made on a case-by-case basis with respect to particular Participants. The
provisions of this Section 5 shall not apply to any transaction undertaken
for the purpose of reincorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the beneficial
ownership of the Company's capital stock.
SECTION 6
PARTICIPATION
Participants in the Plan shall be those Eligible Employees, part-time
employees or consultants who, in the judgment of the Committee, are performing,
or during the term of their incentive arrangement will perform, important
services in the management, operation and development of the Company, and
significantly contribute, or are expected to significantly contribute, to the
achievement of long-term corporate economic objectives. Participants may be
granted from time to time one or more Awards; provided, however, that the grant
of each such Award shall be separately approved by the Committee, and receipt of
one such Award shall not result in automatic receipt of any other Award, written
notice shall be given to such person, specifying the terms, conditions, rights
and duties related thereto; and further provided that Incentive Stock Options
shall not be granted to (i) consultants, (ii) part-time employees or (iii)
Eligible Employees of any partnership or other entity which is included within
the definition of an Affiliated Corporation but whose employees are not
permitted to receive Incentive Stock Options under the Internal Revenue Code.
Each Participant shall enter into an agreement with the Company, in such form as
the Committee shall determine and which is consistent with the provisions of the
Plan, specifying such terms, conditions, rights and duties. Awards shall be
deemed to be granted as of the date specified in the grant resolution of the
Committee, which date shall be the date of any related agreement with the
Participant. In the event of any inconsistency between the provisions of the
Plan and any such agreement entered into hereunder, the provisions of the Plan
shall govern.
SECTION 7
STOCK OPTIONS
7.1 GRANT OF OPTIONS. Coincident with or following designation
for participation in the Plan, a Participant may be granted one or more
Options. The Committee in its sole discretion shall designated whether an
Option is to be considered an Incentive Stock Option or a Non-Statutory
Option. The Committee may grant both an Incentive Stock Option and a
Non-Statutory Option to the same Participant at the same time or at different
times. Incentive Stock Options and Non-Statutory Options, whether granted at
the same or different times, shall be deemed to have been awarded in separate
grants, shall be clearly identified, and in no event shall the exercise of
one
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Option affect the right to exercise any other Option or affect the number of
Shares for which any other Option may be exercised.
7.2 OPTION AGREEMENTS. Each Option granted under the Plan shall
be evidenced by a written stock option agreement which shall be entered into by
the Company and the Participant to whom the Option is granted (the "Option
Holder"), and which shall contain the following terms and conditions, as well as
such other terms and conditions not inconsistent therewith, as the Committee may
consider appropriate in each case.
(a) NUMBER OF SHARES. Each stock option agreement shall
state that it covers a specified number of Shares, as determined by the
Committee. To the extent that the aggregate Fair Market Value of Shares with
respect to which Options designated as Incentive Stock Options are exercisable
for the first time by any Participant during any year (under all plans of the
Company and any Affiliated Corporation) exceeds $100,000, such Options shall be
treated as not being Incentive Stock Options. The foregoing shall be applied by
taking Options into account in the order in which they were granted. For the
purposes of the foregoing, the Fair Market Value of any Share shall be
determined as of the time the Option with respect to such Share is granted. In
the event the foregoing results in a portion of an Option designated as an
Incentive Stock Option exceeding the $100,000 limitation, only such excess shall
be treated as not being an Incentive Stock Option.
(b) PRICE. The price at which each Share covered by an
Option may be purchased shall be determined in each case by the Committee and
set forth in the stock option agreement, but in no event shall the Option Price
for each Share covered by an Incentive Stock Option be less than the Fair Market
Value of the Stock on the date the Option is granted; provided, however, that
the Option Price for each Share covered by a Non-Statutory Option may be granted
at any price less than Fair Market Value, in the sole discretion of the
Committee; and provided further that the Option Price for each Share covered by
an Incentive Stock Option granted to an Eligible Employee who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company must
be at least 110% of the Fair Market Value of the Stock subject to the Incentive
Stock Option on the date the Option is granted.
(c) DURATION OF OPTIONS. Each stock option agreement
shall state the period of time, determined by the Committee, within which the
Option may be exercised by the Option Holder (the "Option Period"). The Option
Period must expire, in all cases, not more than ten years from the date an
Option is granted; provided, however, that the Option Period of an Incentive
Stock Option granted to an Eligible Employee who then owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company must expire not
more than five years from the date such an Option is granted. Each stock option
agreement shall also state the periods of time, if any, as determined by the
Committee, when incremental portions of each Option shall vest. If any Option
is not exercised during its Option Period, it shall be deemed to have been
forfeited and or no further force or effect.
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(d) TERMINATION OF SERVICE, DEATH, DISABILITY, ETC.
Except as otherwise determined by the Committee, each stock option agreement
shall provide as follows with respect to the exercise of the Option upon an
Option Holder ceasing to be a Service Provider or on the death or disability of
the Option Holder:
(i) If the Option Holder ceases to be a
Service Provider within the Option Period for cause, as determined by the
Company, the Option shall thereafter be void for all purposes. As used in
this Section 7.2(d), "cause" shall mean a gross violation, as determined by
the Company, of the Company's established policies and procedures. The
effect of this Section 7.2(d)(i) shall be limited to determining the
consequences of a termination, and nothing in this Section 7.2(d)(i) shall
restrict or otherwise interfere with the Company's discretion with respect to
the termination of any Service Provider.
(ii) If the Option Holder ceases to be a
Service Provider with the Company in a manner determined by the Board, in its
sole discretion, to constitute retirement (which determination shall be
communicated to the Option Holder within 10 days of such termination), the
Option may be exercised by the Option Holder, or in the case of death by the
persons specified in clause (iii) of this Section 7.2(d), within three months
following his or her retirement if the Option is an Incentive Stock Option or
within twelve months following his or her retirement if the Option is a
Non-Statutory Stock Option (provided in each case that such exercise must
occur within the Option Period), but not thereafter. In any such case, the
Option may be exercised only as to the Shares as to which the Option had
become exercisable on or before the date the Option Holder ceases to be a
Service Provider.
(iii) If the Option Holder dies (A) while he or
she is a Service Provider, (B) within the three-month period referred to in
clause (v) below, or (C) within the three or twelve-month period referred to
in clause (ii) above, the Option may be exercised by those entitled to do so
under the Option Holder's will or by the laws of descent and distribution
within twelve months following the Option Holder's death (provided that such
exercise must occur within the Option Period), but not thereafter. In any
such case, the Option may be exercised only as to the Shares as to which the
Option had become exercisable on or before the date of the Option Holder's
death or at such time as the Option Holder ceased to be a Service Provider,
whichever is earlier.
(iv) If the Option Holder becomes disabled
(within the meaning of Section 22(e) of the Internal Revenue Code) while a
Service Provider, Incentive Stock Options held by the Option Holder may be
exercised by the Option Holder within twelve months following the date the
Option Holder ceases to be a Service Provider (provided that such exercise
must occur within the Option Period), but not thereafter. If the Option
Holder becomes disabled (within the meaning of Section 22(e) of the Internal
Revenue Code) while a Service Provider or within three-month period referred
to in clause (v) below or within the twelve month period following his or her
retirement as provided in clause (ii) above, Non-Statutory Options held by
the Option Holder may be exercised by the Option Holder within twelve months
following the date of the Option Holder's disability (provided that such
exercise must occur within the Option Period), but not thereafter. In any
such case, the Option may be exercised only as to the Shares as to which the
Option had become exercisable on or before the date the Option Holder ceased
to be a Service Provider.
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(v) If the Option Holder ceases to be a
Service Provider (which for this purpose means that the Option Holder is no
longer employed by or consulting with the Company or an Affiliated
Corporation) within the Option Period for any reason other than cause,
retirement as provided in clause (ii) above, disability as provided in clause
(iv) above or the Option Holder's death, the Option may be exercised by the
Option Holder within three months following the date of such cessation
(provided that such exercise must occur within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the
Shares as to which the Option had become exercisable on or before the date
that the Option Holder ceases to be a Service Provider
(e) TRANSFERABILITY. Except as otherwise determined by the
Committee, Options shall not be transferable by the Option Holder except by will
or pursuant to the laws of descent and distribution or pursuant to a "qualified
domestic relations order" as defined by the Internal Revenue Code or Title I of
the Employee Retirement Income Security Act of 1974 ("ERISA"); each Option shall
be exercisable during the Option Holder's lifetime only by him or her, or in the
event of disability or incapacity, by his or her guardian or legal
representative; and Shares issuable pursuant to any Option shall be delivered
only to or for the account of the Option Holder, or in the event of disability
or incapacity, by his or her guardian or legal representative.
(f) EXERCISE, PAYMENTS, ETC.
(i) Each stock option agreement shall provide that the
method for exercising the Option granted therein shall be by delivery to the
Corporate Secretary of the Company of written notice specifying the number of
Shares with respect to which such Option is exercised (which must be in a
minimum amount of 25 Shares) and payment of the Option Price. Such notice shall
be in a form satisfactory to the Committee and shall specify the particular
Option (or portion thereof) which is being exercised and the number of Shares
with respect to which the Option is being exercised. The exercise of the Option
shall be deemed effective upon receipt of such notice by the Corporate Secretary
and payment to the Company. The purchase of such Stock shall take place at the
principal offices of the Company upon delivery of such notice, at which time the
purchase price of the Stock shall be paid in full by any of the methods or any
combination of the methods set forth in (ii) below. A properly executed
certificate or certificates representing the Stock shall be issued by the
Company and delivered to the Option Holder. If certificates representing Stock
are used to pay all or part of the Option Price, separate certificates for the
same number of shares of Stock shall be issued by the Company and delivered to
the Option Holder representing each certificate used to pay the Option Price,
and an additional certificate shall be issued by the Company and delivered to
the Option Holder representing the additional shares, in excess of the Option
Price, to which the Option Holder is entitled as a result of the exercise of the
Option.
(ii) The exercise price shall be paid by any of the
following methods or any combination of the following methods:
(A) in cash;
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(B) by cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates representing
the number of Shares then owned by the Option Holder, the Fair Market Value of
which equals the purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to the Company; provided however, that Shares
used for this purpose must have been held by the Option Holder for such minimum
period of time as may be established from time to time by the Committee; and
provided further that the Fair Market Value of any Shares delivered in payment
of the purchase price upon exercise of the Option shall be the Fair Market Value
as of the exercise date, which shall be the date of delivery of the certificates
for the Stock used as payment of the Option Price; or
(D) by delivery to the Company of a properly executed
notice of exercise together with irrevocable instructions to a broker to deliver
to the Company promptly the amount of the proceeds of the sale of all or a
portion of the Stock or of a loan from the broker to the Option Holder necessary
to pay the exercise price.
(iii) In the discretion of the Committee, the Company may
guaranty a third-party loan obtained by a Participant to pay part or all of the
Option Price of the Shares provided that such loan or the Company's guaranty is
secured by the Shares.
(g) DATE OF GRANT. An option shall be considered as having been
granted on the date specified in the grant resolution of the Committee.
(h) WITHHOLDING.
(A) NON-STATUTORY OPTIONS. Each stock option agreement
covering Non-Statutory Options shall provide that, upon exercise of the Option,
the Option Holder shall make appropriate arrangements with the Company to
provide for the amount of additional withholding required by applicable federal
and state income tax laws, including payment of such taxes through delivery of
Stock or by withholding Stock to be issued under the Option, as provided in
Section 15.
(B) INCENTIVE OPTIONS. In the event that a Participant
makes a disposition (as defined in Section 424(c) of the Internal Revenue
Code) of any Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to the later of (i) the expiration of two years from the date on
which the Incentive Stock Option was granted or (ii) the expiration of one
year from the date on which the Option was exercised, the Participant shall
send written notice to the Company at its principal office in Denver,
Colorado (Attention: Corporate Secretary) of the date of such disposition,
the number of shares disposed of, the amount of proceeds received from such
disposition, and any other information relating to such disposition as the
Company may reasonably request. The Participant shall, in the event of such
a disposition, make appropriate arrangements with the Company to provide for
the amount of additional withholding, if any, required by applicable federal
and state income tax laws.
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(i) ADJUSTMENT OF OPTIONS. Subject to the limitations
contained in Sections 7 and 14, the Committee may make any adjustment in the
Option Price, the number of shares subject to, or the terms of, an outstanding
Option and a subsequent granting of an Option by amendment or by substitution of
an outstanding Option. Such amendment, substitution, or re-grant may result in
terms and conditions (including Option Price, number of shares covered, vesting
schedule or exercise period) that differ from the terms and conditions of the
original Option. The Committee may not, however, adversely affect the rights of
any Participant to previously granted Options without the consent of such
Participant. If such action is affected by amendment, the effective date of
such amendment shall be the date of the original grant.
7.3 STOCKHOLDER PRIVILEGES. No Option Holder shall have any rights as a
stockholder with respect to any Shares covered by an Option until the Option
Holder becomes the holder of record of such Stock, and no adjustments shall be
made for dividends or other distributions or other rights as to which there is a
record date preceding the date such Option Holder becomes the holder of record
of such Stock, except as provided in Section 4.
SECTION 8
RESTRICTED STOCK AWARDS
8.1 AWARDS GRANTED BY COMMITTEE. Coincident with or following designation
for participation in the Plan, a Participant may be granted one or more
Restricted Stock Awards consisting of Shares. The number of Shares granted as a
Restricted Stock Award shall be determined by the Committee.
8.2 RESTRICTIONS. A Participant's right to retain a Restricted Stock
Award granted to him under Section 8.1 shall be subject to such restrictions,
including but not limited to his continuing to perform as a Service Provider for
a restriction period specified by the Committee, or the attainment of specified
performance goals and objectives, as may be established by the Committee with
respect to such Award. The Committee may in its sole discretion require
different periods of service or different performance goals and objectives with
respect to (i) different Participants, (ii) different Restricted Stock Awards,
or (iii) separate, designated portions of the Shares constituting a Restricted
Stock Award.
8.3 PRIVILEGES OF A STOCKHOLDER, TRANSFERABILITY. A Participant shall
have all voting, dividend, liquidation and other rights with respect to Stock in
accordance with its terms received by him as a Restricted Stock Award under this
Section 8 upon his becoming the holder of record of such Stock; provided,
however, that the Participant's right to sell, encumber or otherwise transfer
such Stock shall be subject to the limitations of Section 11.2 hereof.
8.4 ENFORCEMENT OF RESTRICTIONS. The Committee may in its sole discretion
require one or more of the following methods of enforcing the restrictions
referred to in Section 8.2 and 8.3:
(a) placing a legend on the stock certificates referring to the
restrictions;
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(b) requiring the Participant to keep the stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain in effect;
or
(c) requiring that the stock certificates, duly endorsed, be held in
the custody of a third party while the restrictions remain in effect.
8.5 TERMINATION OF SERVICE, DEATH, DISABILITY, ETC. In the event of the
death or disability (within the meaning of Section 22(e) of the Internal Revenue
Code) of a Participant, or the retirement of a Participant as provided in
Section 7.2(d)(ii), all service period and other restrictions applicable to
Restricted Stock Awards then held by him shall lapse, and such Awards shall
become fully nonforfeitable. Subject to Sections 5 and 10, in the event a
Participant ceases to be a Service Provider for any other reason, any Restricted
Stock Awards as to which the service period or other restrictions have not been
satisfied shall be forfeited.
SECTION 9
PERFORMANCE SHARES AND PERFORMANCE UNITS
9.1 AWARDS GRANTED BY COMMITTEE. Coincident with or following designation
for participation in the Plan, a Participant may be granted Performance Shares
or Performance Units.
9.2 AMOUNT OF AWARD. The Committee shall establish a maximum amount of a
Participant's Award, which amount shall be denominated in Shares in the case of
Performance Shares or in dollars in the case of Performance Units.
9.3 COMMUNICATION OF AWARD. Written notice of the maximum amount of a
Participant's Award and the Performance Cycle determined by the Committee shall
be given to a Participant as soon as practicable after approval of the Award by
the Committee.
9.4 AMOUNT OF AWARD PAYABLE. The Committee shall establish maximum and
minimum performance targets to be achieved during the applicable Performance
Cycle. Performance targets established by the Committee shall relate to
corporate, group, unit or individual performance and may be established in terms
of earnings, growth in earnings, ratios of earnings to equity or assets, or such
other measures or standards determined by the Committee. Multiple performance
targets may be used and the components of multiple performance targets may be
given the same or different weighting in determining the amount of an Award
earned, and may relate to absolute performance or relative performance measured
against other groups, units, individuals or entities. Achievement of the
maximum performance target shall entitle the Participant to payment (subject to
Section 9.6) at the full or maximum amount specified with respect to the Award;
provided, however, that notwithstanding any other provisions of this Plan, in
the case of an Award of Performance Shares the Committee in its discretion may
establish an upper limit on the amount payable (whether in cash or Stock) as a
result of the achievement of the maximum performance target. The Committee may
also establish that a portion of a full or maximum amount of a Participant's
Award will be paid (subject to Section 9.6) for performance which exceeds the
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minimum performance target but falls below the maximum performance target
applicable to such Award.
9.5 ADJUSTMENTS. At any time prior to payment of a Performance Share or
Performance Unit Award, the Committee may adjust previously established
performance targets or other terms and conditions to reflect events such as
changes in laws, regulations, or accounting practice, or mergers, acquisitions
or divestitures.
9.6 PAYMENTS OF AWARDS. Following the conclusion of each Performance
Cycle, the Committee shall determine the extent to which performance targets
have been attained, and the satisfaction of any other terms and conditions with
respect to an Award relating to such Performance Cycle. The Committee shall
determine what, if any, payment is due with respect to an Award and whether such
payment shall be made in cash, Stock or some combination. Payment shall be made
in a lump sum or installments, as determined by the Committee, commencing as
promptly as practicable following the end of the applicable Performance Cycle,
subject to such terms and conditions and in such form as may be prescribed by
the Committee.
9.7 TERMINATION OF EMPLOYMENT. If a Participant ceases to be a Service
Provider before the end of a Performance Cycle by reason of his death,
disability as provided in Section 7.2(d)(iv), or retirement as provided in
Section 7.2(d)(ii), the Performance Cycle for such Participant for the purpose
of determining the amount of the Award payable shall end at the end of the
calendar quarter immediately preceding the date on which such Participant ceased
to be a Service Provider. The amount of an Award payable to a Participant to
whom the preceding sentence is applicable shall be paid at the end of the
Performance Cycle and shall be that fraction of the Award computed pursuant to
the preceding sentence the numerator of which is the number of calendar quarters
during the Performance Cycle during all of which said Participant was a Service
Provider and the denominator of which is the number of full calendar quarters in
the Performance Cycle. Upon any other termination of Participant's services as
a Service Provider during a Performance Cycle, participation in the Plan shall
cease and all outstanding Awards of Performance Shares or Performance Units to
such Participant shall be canceled.
SECTION 10
CHANGE IN CONTROL
10.1 OPTIONS, RESTRICTED STOCK. In the event of a change in control of the
Company as defined in Section 10.3, then the Committee may, in its sole
discretion, without obtaining stockholder approval, to the extent permitted in
Section 14, take any or all of the following actions: (a) accelerate the
exercise dates of any outstanding Options or make all such Options fully vested
and exercisable; (b) grant a cash bonus award to any Option Holder in an amount
necessary to pay the Option Price of all or any portion of the Options then held
by such Option Holder; (c) pay cash to any or all Option Holders in exchange for
the cancellation of their outstanding Options in an amount equal to the
different between the Option Price of such Options and the greater of the tender
offer price for the underlying Stock or the Fair Market Value of the Stock on
the date of the cancellation of the Options; (d) make any other adjustments or
amendments to the outstanding
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Options; and (e) eliminate all restrictions with respect to Restricted Stock
and deliver Shares free of restrictive legends to any Participant.
10.2 PERFORMANCE SHARES AND PERFORMANCE UNITS. Under the circumstances
described in Section 10.1, the Committee may, in its sole discretion, and
without obtaining stockholder approval, to the extent permitted in Section 14,
provide for payment of outstanding Performance Shares and Performance Units at
the maximum award level or any percentage thereof.
10.3 DEFINITION. For purposes of the Plan, a "change in control" shall be
deemed to have occurred if: (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
under a trust, the grantor of which is Bobby G. Stevenson, or Bobby G.
Stevenson, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of more than 33 1/3% of the then
outstanding voting stock of the Company; or (b) at any time during any period of
three consecutive years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board (and any
new director whose election by the Board or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof; or (c) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
SECTION 11
RIGHTS OF EMPLOYEES; PARTICIPANTS
11.1 EMPLOYMENT. Nothing contained in the Plan or in any Award granted
under the Plan shall confer upon any Participant any right with respect to the
continuation of his or her services as a Service Provider, or interfere in any
way with the right of the Company, subject to the terms of any separate
employment or consulting agreement to the contrary, at any time to terminate
such services or to increase or decrease the compensation of the Participant
from the rate in existence at the time of the grant of an Award. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute a termination of Participant's services as a Service Provider shall
be determined by the Committee at the time.
11.2 NONTRANSFERABILITY. Except as provided in Section 11.3, no right or
interest of any Participant in an Award granted pursuant to the Plan shall be
assignable or transferable during the lifetime of the Participant except
pursuant to a "qualified domestic relations order" as defined
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by the Internal Revenue Code or Title I of ERISA, either voluntarily or
involuntarily, or be subjected to any lien, directly or indirectly, by
operation of law, or otherwise, including execution, levy, garnishment,
attachment, pledge or bankruptcy. In the event or a Participant's death, a
Participant's rights and interests in Options shall, to the extent provided
in Section 7, be transferable by testamentary will or the laws of descent and
distribution, and payment of any amounts due under the Plan shall be made to,
and exercise of any Options may be made by, the Participant's legal
representatives, heirs or legatees. If, in the opinion of the Committee, a
person entitled to payments or to exercise rights with respect to the Plan is
disabled from caring for his affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights
shall be exercised by, such person's guardian, conservator or other legal
personal representative upon furnishing the Committee with evidence
satisfactory to the Committee of such status. Transfers shall not be deemed
to include transfers to the Company or "cashless exercise" procedures with
third parties who provide financing for the purpose of (or who otherwise
facilitate) the exercise of Awards consistent with applicable laws and the
authorization of the Committee.
11.3 PERMITTED TRANSFERS. Pursuant to conditions and procedures
established by the Committee from time to time, the Committee may permit Awards
to be transferred to, exercised by and paid to certain persons or entities
related to a Participant, including but not limited to members of the
Participant's immediate family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the
Participant's immediate family and/or charitable institutions. In the case of
initial Awards, at the request of the Participant, the Committee may permit the
naming of the related person or entity as the Award recipient. Any permitted
transfer shall be subject to the condition that the Committee receive evidence
satisfactory to it that the transfer is being made for estate and/or tax
planning purposes on a gratuitous or donative basis and without consideration
(other than nominal consideration). Notwithstanding the foregoing, Incentive
Stock Options shall only be transferable to the extent permitted by Section 422
of the Internal Revenue Code and the treasury regulations thereunder.
SECTION 12
GENERAL RESTRICTIONS
12.1 INVESTMENT REPRESENTATIONS. The Company may require any person to
whom an Option or other Award is granted, as a condition of exercising such
Option or receiving Stock under the Award, to give written assurances in
substance and form satisfactory to the Company and its counsel to the effect
that such person is acquiring the Stock subject to the Option or the Award for
his own account for investment and not with any present intention or selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws. Legends evidencing such restrictions may be placed on the
certificates evidencing the Stock.
12.2 COMPLIANCE WITH SECURITIES LAWS. Each Award shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the Shares subject to such Award upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as
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a condition of, or in connection with, the issuance or purchase of Shares
thereunder, such Award may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained on conditions acceptable to the Committee.
Nothing herein shall be deemed to require the Company to apply for or to
obtain such listing, registration or qualification.
12.3 STOCK RESTRICTION AGREEMENT. The Committee may provide that shares of
Stock issuable upon the exercise of an Option shall, under certain conditions,
be subject to restrictions whereby the Company has a right of first refusal with
respect to such shares or a right or obligation to repurchase all or a portion
of such shares, which restrictions may survive a Participant's cessation or
termination as a Service Provider.
SECTION 13
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option or the grant or vesting of any other Award
shall not constitute "earnings" with respect to which any other benefits of such
Participant are determined, including without limitation benefits under any
pension, profit sharing, life insurance or salary continuation plan.
SECTION 14
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time-to-time may amend or
modify, the Plan; provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
stockholders if stockholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements, or if the Company, on the
advice of counsel, determines that stockholder approval is otherwise necessary
or desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Awards theretofore granted under the Plan, without the
consent of the Participant holding such Awards.
SECTION 15
WITHHOLDING
15.1 WITHHOLDING REQUIREMENT. The Company's obligations to deliver Shares
upon the exercise of an Option, or upon the vesting of any other Award, shall be
subject to the Participant's satisfaction of all applicable federal, state and
local income and other tax withholding requirements.
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15.2 WITHHOLDING WITH STOCK. At the time the Committee grants an Award, it
may, in its sole discretion, grant the Participant an election to pay all such
amounts of tax withholding, or any part thereof, by electing to transfer to the
Company, or to have the Company withhold from Shares otherwise issuable to the
Participant, Shares having a value equal to the amount required to be withheld
or such lesser amount as may be elected by the Participant. All elections shall
be subject to the approval or disapproval of the Committee. The value of Shares
to be withheld shall be based on the Fair Market Value of the Stock on the date
that the amount of tax to be withheld is to be determined (the "Tax Date"). Any
such elections by Participants to have Shares withheld for this purpose will be
subject to the following restrictions:
(a) All elections must be made prior to the Tax Date;
(b) All elections shall be irrevocable; and
(c) If the Participant is an officer or director of the Company
within the meaning of Section 16 of the Exchange Act ("Section 16"), the
Participant must satisfy the requirements of such Section 16 and any applicable
rules thereunder with respect to the use of Stock to satisfy such tax
withholding obligation.
SECTION 16
SECTION 162(m) PROVISIONS
16.1 LIMITATIONS. Notwithstanding any other provision of this Plan, if the
Committee determines at the time any Restricted Stock Award or Performance Award
is granted to a Participant that such Participant is, or is likely to be at the
time he or she recognizes income for federal income tax purposes in connection
with such Award, a Covered Employee (within the meaning of Section 162(m)(3) of
the Internal Revenue Code), then the Committee may provide that this Section 16
is applicable to such Award.
16.2 PERFORMANCE GOALS. If an Award is subject to this Section 16, then
the lapsing of restrictions thereon and the distribution of cash, Shares or
other property pursuant thereto, as applicable, shall be subject to the
achievement of one or more objective performance goals established by the
Committee, which shall be based on the attainment of one or any combination of
the following: specified levels of earnings per share from continuing
operations, operating income, revenues, gross margin, return on operating
assets, return on equity, economic value added, stock price appreciation, total
stockholder return (measured in terms of stock price appreciation and dividend
growth), or cost control, of the Company or Affiliated Corporation (or any
division thereof) for or within which the Participant is primarily employed.
Such performance goals also may be based upon the attaining specified levels of
Company performance under one or more of the measures described above relative
to the performance of other corporations. Such performance goals shall be set
by the Committee within the time period prescribed by, and shall otherwise
comply with the requirements of, Section 162(m) of the Internal Revenue Code and
the regulations thereunder.
-18-
<PAGE>
16.3 ADJUSTMENTS. Notwithstanding any provision of the Plan other than
Section 10, with respect to any Award that is subject to this Section 16, the
Committee may not adjust upwards the amount payable pursuant to such Award, nor
may it waive the achievement of the applicable performance goals except in the
case of the death or disability of the Participant.
16.4 OTHER RESTRICTIONS. The Committee shall have the power to impose such
other restrictions on Awards subject to this Section 16 as it may deem necessary
or appropriate to ensure that such Awards satisfy all requirements for
"performance-based compensation" within the meaning of Section 162(m)(4)(B) of
the Internal Revenue Code or any successor thereto.
SECTION 17
BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into arrangements with one or
more banks, brokers or other financial institutions to facilitate the
disposition of shares acquired upon exercise of Stock Options, including,
without limitation, arrangements for the simultaneous exercise of Stock Options
and sale of the Shares acquired upon such exercise.
SECTION 18
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees or consultants generally, or to any class or group
of employees or consultants, which the Company or any Affiliated Corporation now
has lawfully put into effect, including, without limitation, any retirement,
pension, savings and stock purchase plan, insurance, death and disability
benefits and executive short-term incentive plans.
SECTION 19
REQUIREMENTS OF LAW
19.1 REQUIREMENTS OF LAW. The issuance of Stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
19.2 RULE 16b-3. Transactions under the Plan and within the scope of Rule
16b-3 are intended to comply with all applicable conditions of Rule 16b-3. To
the extent any provision of the Plan or any action by the Committee under the
Plan fails to so comply, such provision or action shall, without further action
by any person, be deemed to be automatically amended to the extent necessary to
effect compliance with Rule 16b-3; provided, however, that if such provision or
-19-
<PAGE>
action cannot be amended to effect such compliance, such provision or action
shall be deemed null and void to the extent permitted by law and deemed
advisable by the Committee.
19.3 GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
SECTION 20
DURATION OF THE PLAN
No Award shall be granted under the Plan after ten years from the Effective
Date; provided, however, that any Award theretofore granted may, and the
authority of the Board or the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Award or to waive any conditions or rights
under any such Award shall, extend beyond such date.
Dated: May 4, 1998.
CIBER, Inc.
By: /s/ Mac J. Slingerlend
----------------------------------
Mac J. Slingerlend
President and Chief Executive Officer
-20-
<PAGE>
Exhibit 10.9
CIBER, INC.
SUMMARY OF NON-EMPLOYEE DIRECTORS
STOCK COMPENSATION PLAN
(AS AMENDED EFFECTIVE JULY 1 1997)
Pursuant to the Non-Employee Directors' Stock Compensation Plan (the
"Plan"), CIBER, Inc. (the "Company") will issue to each of the Company's
non-employee directors, for each meeting of the Company's Board of Directors
attended by such non-employee director, the minimum integral number of shares
of the Company's common stock, $.01 par value (the "Common Stock"), that have
an aggregate fair market value of at least $2,500. The fair market value of
such shares will be determined based on the last reported sale price of the
Common Stock on the New York Stock Exchange determined as of the most recent
date, immediately prior to the applicable meeting, that the Company's Common
Stock was traded on the New York Stock Exchange. The Plan is administered
and interpreted by the Company's Board of Directors. The Plan is effective
as of August 6, 1996.
<PAGE>
Exhibit 21.1
CIBER, INC.
LIST OF SUBSIDIARIES
AS OF AUGUST 31, 1998
CIBER Information Services, Inc., a Delaware corporation
CIBER Employee Services, Inc., a Delaware corporation
CIBER Associates, Inc., a Delaware corporation
The Constell Group, Inc., a New Jersey corporation
KCM Computer Consulting, Inc., a Maryland corporation
Technology Management Group, Inc., a Washington corporation
Spectrum Technology Group, Inc., a New Jersey corporation
Business Information Technology, Inc., a Delaware corporation
The Summit Group, Inc., an Indiana corporation
CIBER Network Services, Inc., a Delaware corporation
CNSI California, Inc., a Delaware corporation
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CIBER, Inc.:
We consent to incorporation by reference in the registration statements on
Form S-8 (Nos. 33-81320-3, 33-87978, 33-88046, 33-88048, 33-88050, 333-15091,
333-25543, 333-25545, 333-59015 and 333-61287) and Form S-4 (No. 333-31905)
of CIBER, Inc. of our report dated July 31, 1998, except as to Note 13, which
is as of August 31, 1998, relating to the 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, which
report appears in the June 30, 1998 Annual Report on Form 10-K of CIBER, Inc.
KPMG PEAT MARWICK LLP
Denver, Colorado
September 22, 1998
<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> 23,520
<SECURITIES> 604
<RECEIVABLES> 58,054
<ALLOWANCES> 0
<INVENTORY> 2,269
<CURRENT-ASSETS> 86,280
<PP&E> 13,039
<DEPRECIATION> 6,640
<TOTAL-ASSETS> 107,406
<CURRENT-LIABILITIES> 35,334
<BONDS> 0
0
0
<COMMON> 456
<OTHER-SE> 71,156
<TOTAL-LIABILITY-AND-EQUITY> 107,406
<SALES> 0
<TOTAL-REVENUES> 275,576
<CGS> 0
<TOTAL-COSTS> 187,053
<OTHER-EXPENSES> 69,389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 307
<INCOME-PRETAX> 20,001
<INCOME-TAX> 5,621
<INCOME-CONTINUING> 14,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,380
<EPS-PRIMARY> .28<F1>
<EPS-DILUTED> .26<F2>
<FN>
<F1>EPS IS BASED ON PRO FORMA NET INCOME OF $12,068.
<F2>EPS IS BASED ON PRO FORMA NET INCOME OF $12,068.
</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> 27,438 16,432 23,908 26,471
<SECURITIES> 1,150 1,124 1,718 1,984
<RECEIVABLES> 59,910 67,496 70,507 76,636
<ALLOWANCES> 0 0 0 0
<INVENTORY> 2,567 2,576 1,703 917
<CURRENT-ASSETS> 93,085 92,792 100,967 113,084
<PP&E> 14,264 15,828 17,614 20,184
<DEPRECIATION> 7,170 7,416 8,161 9,188
<TOTAL-ASSETS> 119,511 125,051 147,083 161,291
<CURRENT-LIABILITIES> 42,045 47,589 41,458 45,218
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 252 461 478 484
<OTHER-SE> 75,516 75,328 103,572 114,514
<TOTAL-LIABILITY-AND-EQUITY> 119,511 125,051 147,083 161,291
<SALES> 0 0 0 0
<TOTAL-REVENUES> 83,801 174,662 277,660 390,817
<CGS> 0 0 0 0
<TOTAL-COSTS> 56,373 117,948 187,442 262,648
<OTHER-EXPENSES> 21,408 44,794 68,730 95,835
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 63 173 315 423
<INCOME-PRETAX> 6,286 12,491 22,253 33,363
<INCOME-TAX> 3,008 5,396 8,821 12,667
<INCOME-CONTINUING> 3,278 7,095 13,432 20,696
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 3,278 7,095 13,432 20,696
<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 $3,644
<F2>EPS IS BASED ON PRO FORMA NET INCOME OF $7,348
<F3>EPS IS BASED ON PRO FORMA NET INCOME OF $13,200
<F4>EPS IS BASED ON PRO FORMA NET INCOME OF $19,893
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998 JUN-30-1998
<PERIOD-START> JUL-01-1997 JUL-01-1997 JUL-01-1997
<PERIOD-END> SEP-30-1997 DEC-31-1997 MAR-31-1998
<CASH> 30,583 27,043 39,702
<SECURITIES> 1,381 880 0
<RECEIVABLES> 88,906 102,202 106,030
<ALLOWANCES> 0 0 0
<INVENTORY> 989 917 787
<CURRENT-ASSETS> 127,059 136,592 152,095
<PP&E> 22,677 25,109 27,987
<DEPRECIATION> 10,846 12,199 13,511
<TOTAL-ASSETS> 175,592 185,655 202,651
<CURRENT-LIABILITIES> 50,702 51,203 54,043
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 497 502 508
<OTHER-SE> 123,282 133,900 148,100
<TOTAL-LIABILITY-AND-EQUITY> 175,592 185,655 202,651
<SALES> 0 0 0
<TOTAL-REVENUES> 123,242 258,595 400,206
<CGS> 0 0 0
<TOTAL-COSTS> 81,579 171,192 261,409
<OTHER-EXPENSES> 31,175 64,955 98,645
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 100 164 185
<INCOME-PRETAX> 10,757 23,069 41,162
<INCOME-TAX> 4,267 10,515 17,216
<INCOME-CONTINUING> 6,490 12,554 23,946
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 6,490 12,554 23,946
<EPS-PRIMARY> .13<F1> .26<F2> .48<F3>
<EPS-DILUTED> .12<F1> .25<F2> .45<F3>
<FN>
<F1>EPS IS BASED ON PRO FORMA NET INCOME OF $6,214
<F2>EPS IS BASED ON PRO FORMA NET INCOME OF $13,073
<F3>EPS IS BASED ON PRO FORMA NET INCOME OF $23,735
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEETS
FROM FORM 10-K AS OF JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 37,437
<SECURITIES> 0
<RECEIVABLES> 117,595
<ALLOWANCES> 0
<INVENTORY> 618
<CURRENT-ASSETS> 161,376
<PP&E> 32,203
<DEPRECIATION> 14,951
<TOTAL-ASSETS> 216,412
<CURRENT-LIABILITIES> 53,126
<BONDS> 0
0
0
<COMMON> 511
<OTHER-SE> 162,775
<TOTAL-LIABILITY-AND-EQUITY> 216,412
<SALES> 0
<TOTAL-REVENUES> 550,421
<CGS> 0
<TOTAL-COSTS> 356,874
<OTHER-EXPENSES> 135,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221
<INCOME-PRETAX> 59,286
<INCOME-TAX> 22,776
<INCOME-CONTINUING> 36,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,510
<EPS-PRIMARY> .68<F1>
<EPS-DILUTED> .65<F1>
<FN>
<F1>EPS IS CALCULATED BASED ON PRO FORMA NET INCOME OF $34,303.
</FN>
</TABLE>
