SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: Commission file number:
SEPTEMBER 30, 1999 0-23488
CIBER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-2046833
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
5251 DTC PARKWAY
SUITE 1400
ENGLEWOOD, CO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone Number: (303) 220-0100
-----------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X__ No _____
As of September 30, 1999, there were 59,148,049 shares of the Registrant's
common stock ($0.01 par value) outstanding.
CIBER, INC.
FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Statements of Operations
Three months ended September 30, 1999 and 1998 3
Consolidated Balance Sheets
September 30, 1999 and June 30, 1999 4
Consolidated Statements of Cash Flows
Three months ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION 12
SIGNATURES 13
2
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1998 1999
-------- --------
Consulting services $147,601 $176,400
Other revenues 18,057 10,642
-------- --------
Total revenues 165,658 187,042
-------- --------
Cost of consulting services 94,496 119,398
Cost of other revenues 12,501 5,146
Selling, general and administrative expenses 37,284 43,075
Amortization of intangible assets 1,082 3,023
Merger costs 1,535 -
-------- --------
Operating income 18,760 16,400
Interest income 612 712
Other income - 777
-------- --------
Income before income taxes 19,372 17,889
Income tax expense 8,255 7,629
-------- --------
Net income $ 11,117 $ 10,260
======== ========
Earnings per share - basic $ 0.21 $ 0.18
Earnings per share - diluted $ 0.20 $ 0.18
Weighted average shares - basic 52,920 57,464
Weighted average shares - diluted 55,170 58,423
See accompanying notes to consolidated financial statements.
3
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, SEPTEMBER 30,
IN THOUSANDS, EXCEPT PER SHARE DATA 1999 1999
-------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 64,215 $ 51,567
Accounts receivable 150,976 155,033
Inventories 395 461
Prepaid expenses and other assets 2,943 3,520
Deferred income taxes 2,915 3,492
-------- ---------
Total current assets 221,444 214,073
-------- ---------
Property and equipment, at cost 47,997 50,912
Less accumulated depreciation and amortization (22,866) (24,566)
-------- ---------
Net property and equipment 25,131 26,346
-------- ---------
Intangible assets, net 157,012 153,989
Deferred income taxes 1,694 2,119
Other assets 3,351 4,461
-------- ---------
Total assets $408,632 $ 400,988
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables 13,502 13,725
Accrued compensation and payroll taxes 36,845 40,682
Deferred revenues 3,850 1,521
Other accrued expenses and liabilities 10,118 9,388
Income taxes payable 7,181 12,872
-------- ---------
Total current liabilities 71,496 78,188
-------- ---------
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,
58,933,000 and 59,148,000 shares issued and outstanding 589 591
Additional paid-in capital 222,652 224,796
Retained earnings 122,607 132,752
Treasury stock, 500,000 and 2,097,000 shares at cost (8,712) (35,339)
-------- ---------
Total shareholders' equity 337,136 322,800
-------- ---------
Total liabilities and shareholders' equity $408,632 $ 400,988
======== =========
See accompanying notes to consolidated financial statements.
4
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------
IN THOUSANDS 1998 1999
-------- --------
OPERATING ACTIVITIES:
Net income $ 11,117 $ 10,260
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,664 5,037
Deferred income taxes (1,183) (516)
Gain on sale of LogisticsPRO, net of tax - (466)
Other 10 96
Changes in operating assets and liabilities, net of the effects of
acquisitions:
Accounts receivable (10,488) (4,057)
Inventories 13 (66)
Other current and long-term assets (435) (1,683)
Trade payables 4,522 193
Accrued compensation and payroll taxes 3,896 3,837
Deferred revenues (797) (2,329)
Other accrued expenses and liabilities (389) 526
Income taxes payable 7,700 5,382
-------- --------
Net cash provided by operating activities 16,630 16,214
-------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (150) -
Purchases of property and equipment (2,096) (3,683)
-------- --------
Net cash used in investing activities (2,246) (3,683)
-------- --------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 3,498 4,947
Purchases of treasury stock (532) (30,126)
-------- --------
Net cash provided by (used in) financing activities 2,966 (25,179)
-------- --------
Net increase (decrease) in cash and cash equivalents 17,350 (12,648)
Cash and cash equivalents, beginning of period 38,238 64,215
-------- --------
Cash and cash equivalents, end of period $ 55,588 $ 51,567
======== ========
See accompanying notes to consolidated financial statements.
5
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of CIBER, Inc. and
subsidiaries ("CIBER" or the "Company") have been prepared without audit.
Certain information and note disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in CIBER's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999. In the opinion of
management, these unaudited consolidated financial statements include all
adjustments necessary for a fair presentation of the financial position and
results of operations for the periods presented. Interim results of
operations for the three-month period ended September 30, 1999 are not
necessarily indicative of operating results for the full fiscal year.
EARNINGS PER SHARE. 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 CIBER'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. The number of antidilutive stock options omitted from the
computation of weighted average shares was 164,638 and 3,241,549 for the
three months ended September 30, 1998 and 1999, respectively.
(2) SHAREHOLDERS' EQUITY
Changes in shareholders' equity during the three months ended September 30, 1999
were (in thousands):
Common stock Additional Total
---------------- paid-in Retained Treasury shareholders'
Shares Amount capital earnings stock equity
-------------------------------------------------------------------
BALANCES AT JULY 1, 1999 58,933 $ 589 $222,652 $ 122,607 $ (8,712) $ 337,136
Employee stock purchases and options exercised 192 2 1,561 (115) 3,499 4,947
Tax benefit from exercise of stock options - - 487 - - 487
Compensation expense related to stock and stock options 23 - 96 - - 96
Purchases of treasury stock - - - - (30,126) (30,126)
Net income - - - 10,260 - 10,260
------- ----- -------- --------- ---------- ----------
BALANCES AT SEPTEMBER 30, 1999 59,148 $ 591 $224,796 $ 132,752 $ (35,339) $ 322,800
======= ===== ======== ========= ========== ==========
(3) STOCK OPTION PLANS
From July 1, 1999 to September 30, 1999, CIBER granted options for 1,954,500
shares of common stock, at fair market value, to certain employees under the
Employees' Stock Option Plan at exercise prices ranging from $17.00 to $19.13
per share.
6
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(4) REVOLVING LINE OF CREDIT
CIBER had a $35 million unsecured revolving line of credit with a bank that
was renewed and increased to $50 million on November 1, 1999. There were no
outstanding borrowings under this bank line at September 30, 1999 and June
30, 1999. Any outstanding borrowings would bear interest at the London
Interbank Offered Rate ("LIBOR") plus 2%. The credit agreement requires a
commitment fee of .225% per annum on any unused portion of the line of credit
up to $25 million. On July 1, 2000, the amount available under the line of
credit will be reduced to $35 million and the maximum unused portion of the
line of credit on which the commitment fee will be paid will be reduced to
$20 million. The credit agreement expires on January 31, 2001.
(5) SALE OF LOGISTICSPRO
On September 30, 1999, CIBER sold its LogisticsPRO software business
resulting in a $777,000 gain that is included in other income. The after-tax
gain is $466,000 or $.01 per diluted share. As consideration, CIBER received
a $2.0 million interest bearing note, that is secured by CIBER common stock
owned by the buyers and is included in other assets. In addition, CIBER will
receive a percentage of certain future revenues, up to $3.5 million over the
next five years. The software business was sold to an entity owned by the
current management of the business as well as two non-executive officers of
CIBER.
(6) SUBSEQUENT EVENTS
Subsequent to September 30, 1999, CIBER completed the following two business
combinations:
THE ISADORE GROUP, INC. ("ISADORE") - On October 15, 1999, CIBER acquired
certain assets, liabilities and all of the business operations of Isadore for
approximately $18 million. Additionally, the terms of the purchase provide
for additional consideration of up to $10 million based on revenue earned
during the 12-month periods ending December 31, 2000, 2001 and 2002. This
acquisition will be accounted for as a purchase. Accordingly, CIBER's
consolidated financial statements will include the results of operations of
Isadore after the date of acquisition. CIBER will record initial goodwill of
approximately $17 million related to this acquisition, which will be
amortized over 20 years. Any additional consideration paid will be accounted
for as additional goodwill. Isadore, located in Phoenix, Arizona, provided
PeopleSoft higher education consulting services.
WATERSTONE CONSULTING, INC. ("WATERSTONE") - On October 29, 1999, CIBER
acquired certain assets, liabilities and all of the business operations of
Waterstone for approximately $26 million in cash and the issuance of 243,347
shares of its common stock. The aggregate purchase price was approximately
$31 million. CIBER used a portion of its line of credit to fund this
acquisition. This acquisition will be accounted for as a purchase.
Accordingly, CIBER's consolidated financial statements will include the
results of operations of Waterstone after the date of acquisition. CIBER will
record goodwill of approximately $30 million related to this acquisition,
which will be amortized over 20 years. Waterstone, located in Chicago,
Illinois, provided consulting services specializing in electronic commerce
supply chain and customer relationship management solutions.
At the Annual Meeting of Shareholders of CIBER, Inc, held on October 28,
1999, the shareholders voted upon and approved an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock from 80,000,000 to 100,000,000 shares. In addition, it was voted
upon and approved to increase the number of shares of common stock reserved
for issuance pursuant to the Company's Equity Incentive Plan from 8,000,000
to 10,500,000 shares.
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. WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES,"
"ANTICIPATES," "PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY INCLUDE, AMONG OTHERS, YEAR 2000 EFFECTS, GROWTH THROUGH
BUSINESS COMBINATIONS AND INTERNAL EXPANSION, THE ABILITY TO ATTRACT AND
RETAIN QUALIFIED CONSULTANTS, DEPENDENCE ON SIGNIFICANT RELATIONSHIPS AND THE
ABSENCE OF LONG-TERM CONTRACTS, MANAGEMENT OF A LARGE AND RAPIDLY GROWING
BUSINESS, PROJECT RISKS, PRICING AND MARGIN PRESSURES, COMPETITION, POTENTIAL
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS, PRICE VOLATILITY, AND
INTERNATIONAL EXPANSION. MANY OF THESE FACTORS ARE BEYOND THE COMPANY'S
ABILITY TO PREDICT OR CONTROL. PLEASE REFER TO A DISCUSSION OF THESE AND
OTHER FACTORS IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K AND OTHER
SECURITIES AND EXCHANGE COMMISSION FILINGS. THE COMPANY DISCLAIMS ANY INTENT
OR OBLIGATION TO UPDATE PUBLICLY SUCH FORWARD-LOOKING STATEMENTS, WHETHER AS
A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. IN ADDITION, AS A
RESULT OF THESE AND OTHER FACTORS, THE COMPANY'S PAST FINANCIAL PERFORMANCE
SHOULD NOT BE RELIED ON AS AN INDICATION OF FUTURE PERFORMANCE.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
CIBER's revenues for the three months ended September 30, 1999 increased 13%
to $187.0 million from $165.7 million for the quarter ended September 30,
1998. This represents a 20% increase in consulting services revenues offset
by a planned decrease in other revenues, primarily sales of computer hardware
products. Other revenues decreased to $10.6 million for the three months
ended September 30, 1999 from $18.1 million for the same quarter last year.
Management expects that the decrease in other revenues will likely continue
in the future. The increase in consulting services revenues is derived
primarily from an increase in hours billed. Of the 20% increase in consulting
services revenues, approximately 11% was due to revenues from acquired
businesses or immaterial poolings of interests and approximately 9% was due
to organic growth of existing operations. Organic growth for the quarter was
driven by growth in ERP implementation services and was lessened, to some
extent, due to declining direct Year 2000 service revenues. Despite the
period-to-period growth in consulting services revenues, CIBER expects to
continue to experience a moderation in consulting services revenues through
December 31, 1999 due to the reluctance of some customers to commence
significant new IT initiatives until Year 2000 failure risks have passed.
Gross margin percentage decreased to 33.4% of revenues for the three months
ended September 30, 1999 from 35.4% of revenues for the same quarter of last
year. This decrease is due to declining gross margins on consulting services
offset by improved gross margins on other revenues. Consulting services gross
margins declined primarily due to a decrease in the utilization levels of
professional staff.
Selling, general and administrative expenses were 23.0% of revenues for the
three months ended September 30, 1999 compared to 22.5% of revenues for the
same quarter last year. This increase is due primarily to additional costs
incurred for new programs implemented to position the Company for future
growth, including the addition of key senior and executive management team
members, a "One CIBER" branding and marketing initiative, and internal
systems development. As CIBER's focus continues to shift to more
solutions-oriented and project work, selling, general and administrative
expenses will tend to increase as a percentage of sales and partially offset
the generally higher gross margins on such work.
Amortization of intangible assets increased to $3.0 million for the three
months ended September 30, 1999 from $1.1 million for the same quarter last
year. This increase was due to the additional intangible assets resulting
from mergers and acquisitions during the past year.
8
Merger costs, primarily transaction related broker and professional costs, of
$1.5 million were incurred during the three months ended September 30, 1998,
while no merger costs were incurred during the three months ended September
30, 1999.
Interest income increased to $712,000 for the three months ended September
30, 1999 from $612,000 for the same quarter last year due to increased
average cash balances available for investment. Other income for the three
months ended September 30, 1999 of $777,000 represents the gain on the sale
of the LogisticsPRO software business (see Note 5 of Notes to Consolidated
Financial Statements). Management believes the sale of this software business
will help to maintain CIBER's independence and avoid conflicts with
significant partners with whom LogisticsPRO might otherwise compete. The sale
allows CIBER to focus on its IT consulting services business rather than
selling proprietary products. In addition, management believes that CIBER's
profitability in the next 12 months will be favorably impacted as a result of
the sale due to decreased sales, marketing and software development costs. As
part of the sale, the purchaser assumed all agreements for software
maintenance causing a reduction in the balance of deferred revenues.
CIBER's effective tax rate for the three months ended September 30, 1999 and
1998 was 42.6%. CIBER's effective tax rate for the three months ended
September 30, 1999 has increased due to increased nondeductible amortization
resulting from nontaxable acquisitions, primarily during the second half of
fiscal 1999. CIBER's effective tax rate was higher than normal during the
three months ended September 30, 1998 due to nondeductible merger costs.
CIBER's net income decreased to $10.3 million for the three months ended
September 30, 1999 from $11.1 million for the same quarter last year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, CIBER had $135.9 million of working capital, of which
$51.6 million was cash and cash equivalents, and had a current ratio of
2.7:1. CIBER believes that its cash and cash equivalents on hand, its
operating cash flow and its available line of credit will be sufficient to
finance working capital needs during the next twelve months.
In June 1999, CIBER's Board of Directors authorized the repurchase of up to
10% of CIBER's outstanding stock. At September 30, 1999, CIBER had purchased
2,305,000 shares for $38.8 million under this program and may, depending on
circumstances, purchase more. Furthermore, CIBER may use cash to purchase
businesses. As a result, CIBER may borrow to finance such activities. Future
borrowings may include bank, private or public debt. CIBER had a $35 million
revolving line of credit with a bank that was renewed and increased to $50
million on November 1, 1999. There were no outstanding borrowings under this
bank line at September 30, 1999 and June 30, 1999. The credit agreement
expires in January 2001.
Net cash provided by operating activities was $16.2 million and $16.6 million
for the three months ended September 30, 1999 and 1998, respectively.
Included in net cash provided by operating activities was $487,000 and $3.0
million for the three months ended September 30, 1999 and 1998, respectively,
related to the tax benefit from the exercise of stock options.
CIBER's accounts receivable totaled $155.0 million at September 30, 1999
compared to $151.0 million at June 30, 1999. This increase is primarily a
result of CIBER's increase in revenues and also the mix shift to more
solution-oriented engagements which tend to have more lengthy billing and
payment terms.
Net cash used in investing activities was $3.7 million and $2.2 million
during the three months ended September 30, 1999 and 1998, respectively.
CIBER used cash of $150,000 during the three months ended September 30, 1998
for acquisitions. CIBER purchased property and equipment of $3.7 million and
$2.1 million during the three months ended September 30, 1999 and 1998,
respectively.
Net cash (used in) provided by financing activities was ($25.2 million) and
$3.0 million during the three months ended September 30, 1999 and 1998,
respectively. CIBER obtained net cash proceeds from sales of common stock to
employees of $4.9 million and $3.5 million during the three months ended
9
September 30, 1999 and 1998, respectively. This increase is primarily due to
increased participation in CIBER's Employee Stock Purchase Plan. During the
three months ended September 30, 1999, CIBER purchased 1,805,000 shares of
treasury stock for $30.1 million. Of these treasury shares, 208,150 were
reissued as sales of common stock under CIBER's Employee Stock Purchase Plan.
CIBER plans to recapitalize its Application Solutions Provider ("ASP")
subsidiary, CIBER Enterprise Outsourcing, Inc. during fiscal 2000. CIBER
expects this recapitalization to provide additional capital, from other
investors, to expand the ASP business faster. Given the uncertainties of
market conditions, among other things, there can be no assurances that CIBER
will be successful in it attempts to recapitalize this business.
YEAR 2000 COMPLIANCE
THE FOLLOWING STATEMENTS ARE "YEAR 2000 READINESS DISCLOSURES" IN CONFORMANCE
WITH THE YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT OF 1998.
The "Year 2000" issue is the result of computer programs using two digits
rather than four to define the applicable year. Computer software and
hardware and other devices with embedded technology that are date sensitive
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions
of CIBER's operations.
CIBER has instituted various projects to address the Year 2000 issue. CIBER
believes its material internal information technology ("IT") systems,
including payroll, billing and accounting systems, are currently Year 2000
compliant. For significant third-party software applications, CIBER has
obtained confirmation that the software is Year 2000 compliant. CIBER has
completed testing and remediation, if necessary, of all internally developed
software.
CIBER is currently evaluating its non-IT systems, such as building security,
elevators, fire-safety systems, telephones, voice mail and other systems
containing embedded microprocessors as well as evaluating the Year 2000
readiness of its significant suppliers. CIBER relies on the services of the
landlords of its offices, telecommunications companies, banks, utilities,
commercial airlines, and insurance companies, among others. As of September
30, 1999, CIBER has received Year 2000 compliance status information from all
of its significant suppliers. Of these, 60% have indicated that they are
currently Year 2000 compliant. The remainder have indicated that they plan to
be Year 2000 compliant by December 31, 1999. If CIBER determines that a
significant supplier will not be Year 2000 compliant and such noncompliance
would materially affect CIBER's operations, CIBER will devise contingency
plans. There can be no assurance that any contingency plans developed by
CIBER will prevent such service interruption on the part of one or more of
CIBER's vendors from having a material adverse effect on CIBER.
CIBER's principal business is providing IT services. Some of CIBER's services
are directly or indirectly related to the Year 2000 issue, including Year
2000 remediation services. CIBER provides services to clients that assist the
client in their Year 2000 projects. In addition, CIBER provides services to
clients directly related to client systems that may or may not be Year 2000
compliant. Due to the potential significance of the Year 2000 issue upon
client operations and upon any failure of critical client systems to which
CIBER has provided services, CIBER may be subject to claims regardless of
whether the failure is related to the services provided by CIBER. If
asserted, the resolution of such claims, including defense costs, could have
a material adverse effect on CIBER. CIBER generally attempts to include
provisions in client contracts that, among other things, disclaim implied
warranties, limit the duration of any express warranties, limit CIBER's
maximum liability and disclaim any warranties for projects managed by the
client. There can be no assurance that CIBER will be able to obtain these
contractual protections in future client contracts, or that such provisions
will protect CIBER from, or limit the amount of, any liability arising from
claims against CIBER.
As a reseller of certain IT products, CIBER only passes to its customers the
applicable vendors' warranties. CIBER makes no warranties regarding Year 2000
compliance of any of the products it resells. CIBER has developed and
licensed certain warehousing and traffic software products that have
subsequently been modified to be Year 2000 compliant. Year 2000 compliant
versions have been tested both internally and by a
10
third party. CIBER has offered the Year 2000 compliant software versions to
its prior and existing customers at no charge.
As described above, CIBER has identified various potential issues associated
with the Year 2000 issue. CIBER is devoting internal resources and is working
with its suppliers to help ensure that CIBER's business is not substantially
interrupted as a result of the Year 2000. CIBER believes that the total
amounts spent by it to date and that it expects to spend in fiscal 2000
addressing the Year 2000 issue will be less than $250,000. CIBER currently
does not have a contingency plan in the event of a particular system not
being Year 2000 compliant. Such a plan will be developed if it becomes clear
that CIBER is not going to achieve its compliance objectives. Although CIBER
expects to identify and resolve all Year 2000 problems that could materially
adversely affect its business operations, management believes that it is not
possible to determine with absolute certainty that all Year 2000 problems
affecting CIBER, its vendors, or its clients have been identified or
corrected. If CIBER is required to implement any contingency plan, it could
have a material adverse effect on CIBER's operations. In addition, the
business interruption, resulting from Year 2000 issues, of any of CIBER's
significant clients could have a material adverse effect on CIBER. This
discussion of CIBER's Year 2000 efforts, management's expectations relating
to Year 2000 compliance and the possible effects on CIBER are forward-looking
statements.
RECENT AND PROPOSED ACCOUNTING PRONOUNCEMENTS
CIBER believes that recent accounting pronouncements will not have a material
effect on its financial position or results of operations.
The Financial Accounting Standards Board (FASB) has proposed a new statement
that would, among other things, eliminate the pooling of interests method of
accounting for business combinations. The proposed statement would require
all business combinations to be recorded using the purchase method of
accounting and any resulting excess purchase price over the fair value of
acquired net assets ("goodwill") would be charged to earnings over a period
of not more than 20 years. The proposal would also allow the reporting of
earnings per share excluding amortization of goodwill. The proposed
accounting would be effective for business combinations after the effective
date. The actual pronouncement, when issued, will likely have changes from
the exposure draft. If issued, management believes this pronouncement would
increase the amount of goodwill recorded for subsequent business combinations
(as CIBER has historically completed a large percentage of business
combinations as poolings of interests) and also increase the amortization
charge against earnings. As a result, management believes its internal
operating metrics, excluding amortization of intangibles, should also be
considered when evaluating CIBER's performance. Management also expects
investors to place increasing emphasis on "Cash EPS. "
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CIBER has no activities in derivative financial or commodity instruments.
CIBER'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.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of CIBER, Inc. held on October
28, 1999, the following matters were voted upon with the results as
indicated below.
1) Election of Directors
For Withhold
--- --------
Mac J. Slingerlend 42,416,640 1,957,302
James A. Rutherford 42,428,422 1,945,520
Paul E. Rudolph 42,508,127 1,865,815
The terms of offices as a director of Bobby G. Stevenson, Richard A.
Montoni, Roy L. Burger, James G. Brocksmith, Jr. and Archibald J.
McGill continued after the meeting.
2) The amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of common stock from
80,000,000 to 100,000,000 shares.
For Against Abstain
--- ------- -------
42,315,153 1,989,606 69,183
3) The increase in the number of shares of common stock reserved for
issuance pursuant to the Company's Equity Incentive Plan from
8,000,000 to 10,500,000 shares.
For Against Abstain
--- ------- -------
34,268,178 9,930,156 175,603
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 3(i) Certificate of Amendment to Amended and Restated
Certificate of Incorporation of CIBER, Inc.
Exhibit 3(ii) Amended and Restated Bylaws of the Company as adopted
August 17, 1999
Exhibit 10.1 Unsecured Credit Agreement with UMB Bank Colorado
dated November 1, 1999
Exhibit 10.2 Promissory Note between the Company and Joseph A.
Mancuso
Exhibit 27.1 Financial Data Schedule for the three months ended
September 30, 1999
12
A Report on Form 8-K was filed on July 1, 1999 announcing that the
acquisition of Business Impact Systems, Inc. was to be considered a
significant acquisition. It provided selected consolidated and
supplemental quarterly financial information that was restated for
certain business combinations.
A Report on Form 8-K/A was filed on August 24, 1999 that provided the
required audited financial statements and pro forma financial
information of Business Impact Systems, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned there
unto duly authorized.
CIBER, INC.
(Registrant)
Date November 12, 1999 By /s/ Mac J. Slingerlend
--------------------------------
Mac J. Slingerlend
Chief Executive Officer and President
Date November 12, 1999 By /s/ Richard A. Montoni
--------------------------------
Richard A. Montoni
Chief Financial Officer and Executive
Vice President
13