SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
MARCH 26, 2002
ATLANTIC DATA SERVICES, INC.
(Exact Name of Registrant as Specified in Charter)
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| MASSACHUSETTS | | 000-24193 | | 04-2696393 |
(State or Other
Jurisdiction
of Incorporation) | | (Commission File
Number) | | (I.R.S. Employer
Identification No.) |
ONE BATTERYMARCH PARK
QUINCY, MASSACHUSETTS 02169
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code:
(617) 770-3333
INTRODUCTORY NOTE
On June 29, 2001, Atlantic Data Services, Inc. (the “Company”) acquired substantially all the assets of Cool Springs Associates, Inc. d/b/a EarningsInsights, a Delaware corporation (“EI”) for $2 million in cash and the issuance to EI of a warrant to purchase 300,000 shares of the Company’s common stock at an exercise price of $5.08 per share. The Company was also required to make additional cash payments to EI based on the net income recognized by the Company attributable to the former business of EI.
Item 2: Disposition of a Business to be Accounted For as a Discontinued Operation
| | 2.1 | | Description of the Transaction |
On March 26, 2002, the Board of Directors of Atlantic Data Services, Inc. voted to abandon the operations of EI effective March 29, 2002. The Company expects to take a pre-tax charge from the discontinued operation of up to $2.7 million in its fourth quarter ended March 31, 2002. See the accompanying press release attached as Exhibit 99.1 to this Form 8-K.
The assets of EI abandoned by the Company consist of all intangible property, including without limitation all rights under certain contracts, agreements and licenses specifically related to the EI business, including but not limited to, all intellectual proprietary rights of EI, certain business, marketing and technical records related to EI, and all goodwill associated with the business.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
| | (b) | | Pro Forma Financial Information |
The following unaudited pro forma financial statements give effect to the disposition of EI to be accounted for as a discontinued operation. The unaudited pro forma condensed balance sheet assumes the disposition of EI on December 31, 2001. Such pro forma information is based upon the historical balance sheet data of the Company and EI as of that date. The unaudited pro forma condensed statement of operations gives effect to the disposition of EI for the nine months ended December 31, 2001 as if the disposition occurred on April 1, 2001. No pro forma statements of operations were presented for the year ended March 31, 2001 because the acquisition of EI occurred after that time period. These unaudited pro forma condensed financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company.
| | (c) | | Exhibits |
| |
| | | | 99.1* Press release dated March 29, 2002, “ADS Financial Services Solutions Discontinues Operations of EarningsInsights” |
| |
| | | | *Filed herewith |
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UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 2001
(in thousands, except share data)
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| | | | | Atlantic Data | | Pro Forma | | | | |
| | | | | Services, Inc. | | Adjustments | | Pro Forma |
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ASSETS
Current assets: | | | | | | | | | | | | |
| | Cash and cash equivalents | | $ | 20,349 | | | | — | | | $ | 20,349 | |
| | Short-term investments | | | 12,608 | | | | — | | | | 12,608 | |
| | Accounts receivable, net | | | 1,473 | | | | (8 | ) (A) | | | 1,465 | |
| | Prepaid expenses | | | 177 | | | | (9 | ) (A) | | | 168 | |
| | Deferred taxes | | | — | | | | — | | | | — | |
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| | | Total current assets | | | 34,607 | | | | 17 | | | | 34,590 | |
| Property and equipment, net | | | 756 | | | | (368 | ) (A) | | | 388 | |
| Goodwill | | | 1,291 | | | | (1,291 | ) (A) | | | — | |
| Intangibles, net | | | 917 | | | | (917 | ) (A) | | | — | |
| Other assets | | | 339 | | | | (9 | ) (A) | | | 330 | |
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| Total assets | | $ | 37,910 | | | $ | (2,602 | ) | | $ | 35,308 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: | | | | | | | | | | | | |
| | Accounts payable | | $ | 446 | | | $ | (39 | ) (A) | | $ | 407 | |
| | Accrued expenses and other liabilities | | | 1,563 | | | | (30 | ) (A) | | | 1,533 | |
| | Billings in excess of costs and estimated earnings | | | 613 | | | | — | | | | 613 | |
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| | | Total current liabilities | | | 2,622 | | | | (69 | ) | | | 2,553 | |
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| Stockholders’ equity: | | | | | | | | | | | | |
| | Preferred stock, $.01 par value | | | — | | | | — | | | | — | |
| | Common stock, $.01 par value | | | 131 | | | | — | | | | 131 | |
| | Additional paid-in capital | | | 27,554 | | | | — | | | | 27,554 | |
| | Retained earnings | | | 7,628 | | | | (2,533 | ) (B) | | | 5,095 | |
| | Treasury stock | | | (25 | ) | | | — | | | | (25 | ) |
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| | | Total stockholders’ equity | | | 35,288 | | | | (2,533 | ) | | | 32,755 | |
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| Total liabilities and stockholders’ equity | | $ | 37,910 | | | $ | (2,602 | ) | | $ | 35,308 | |
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See accompanying notes to unaudited pro forma condensed financial statements.
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ATLANTIC DATA SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2001
(in thousands, except per share data)
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| | | | | | Atlantic Data | | Pro Forma | | | | |
| | | | | | Services, Inc. | | Adjustments | | Pro Forma |
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| Services | | $ | 14,683 | | | $ | (45 | ) (C) | | $ | 14,638 | |
| Cost of revenues | | | 10,501 | | | | (229 | ) (C) | | | 10,272 | |
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| Gross profit | | | 4,182 | | | | 184 | | | | 4,366 | |
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| Operating expenses: | | | | | | | | | | | | |
| | Sales and marketing | | | 2,728 | | | | (187 | ) (C) | | | 2,541 | |
| | General and administrative | | | 4,542 | | | | (334 | ) (C) | | | 4,025 | |
| | | | | | | | (183 | ) (D) | | | | |
| | | Restructuring expense | | | 925 | | | | — | | | | 925 | |
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| | | | Total operating expenses | | | 8,195 | | | | (704 | ) | | | 7,491 | |
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| Income (loss) from operations | | | (4,013 | ) | | | (888 | ) (C) | | | (3,125 | ) |
| Interest income, net | | | 868 | | | | 1 | (C) | | | 869 | |
| Write-down of investment | | | (3,000 | ) | | | — | | | | (3,000 | ) |
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| Income (loss) before provision for income taxes | | | (6,145 | ) | | | (889 | ) | | | (5,256 | ) |
| Provision for income taxes | | | 386 | | | | — | | | | 386 | |
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| | | | Net income | | $ | (6,531 | ) | | $ | (889 | ) | | $ | (5,642 | ) |
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| Basic earnings (loss) per share | | $ | (0.50 | ) | | | | | | $ | (0.43 | ) |
| Diluted earnings (loss) per share | | $ | (0.50 | ) | | | | | | $ | (0.43 | ) |
| Shares used in computing earnings per share (basic) | | | 13,026 | | | | | | | | 13,026 | |
| Shares used in computing earnings per share (diluted) | | | 13,026 | | | | | | | | 13,026 | |
See accompanying notes to unaudited pro forma condensed financial statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The transaction to purchase EI was accounted for under the purchase method of accounting. Accordingly, the purchase price was allocated to the tangible and intangible assets purchased, based upon their respective fair values.
Pro forma adjustments to reflect the disposition of EI as a discontinued operation give effect to the following:
(A) To eliminate the net intangibles, goodwill and other assets and liabilities related to EI.
(B) To adjust retained earnings relating to the disposition of EI.
(C) To eliminate the results of operations of EI.
(D) To reduce general and administrative expenses for the amortization of intangibles relating to EI.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | ATLANTIC DATA SERVICES, INC. |
| Date: April 10, 2002 | By: /s/ Robert W. Howe
————————————————
Robert W. Howe
Chairman and Chief Executive Office |
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EXHIBIT INDEX
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| 99.1 | | Press Release Dated March 29, 2002, “ADS Financial Services Solutions Discontinues Operations of EarningsInsights” |
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