SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
OCTOBER 20, 1998 (AUGUST 7, 1998)
TIER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 000-23195 94-3145844
(State or other jurisdiction of (Commission (IRS Employer Identification No.)
incorporation) File Number)
1350 TREAT BOULEVARD, SUITE 250 94596
WALNUT CREEK, CALIFORNIA (Zip Code)
(Address of principal executive offices)
(925) 937-3950
(Registrant's telephone number, including area code)
This amends the Form 8-K filed on August 21, 1998 to provide financial
statements and pro forma financial information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
Infact Pty Limited
Report of Independent Accountants
Balance Sheets as of June 30, 1998 and June 30, 1997
Statements of Income for the Years Ended June 30, 1998 and June 30, 1997
Statements of Unitholders' Equity for the Years Ended June 30, 1998
and June 30, 1997
Statements of Cash Flows for the Years ended June 30, 1998 and June 30,
1997
Notes to the Financial Statements
(b) Pro forma financial information.
Introduction
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1998
(unaudited)
Pro Forma Condensed Consolidated Statement of Income for the nine months
ended June 30, 1998 (unaudited)
Pro Forma Condensed Consolidated Statement of Income for the nine months
ended September 30, 1997 (unaudited)
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)
(c) Exhibits.
Exhibit No. Description
----------- -----------
23.1 Consent of PricewaterhouseCoopers, independent
accountants
1
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 hereunto duly authorized.
TIER TECHNOLOGIES, INC.
By: /s/George K. Ross
--------------------------------
George K. Ross
Executive Vice President and Chief Financial Officer
Date: October 20, 1998
2
Report of Independent Accountants
---------------------------------
The Unitholders
Infact Unit Trust
In our opinion, the accompanying balance sheets and the related statements of
income, of unitholders' equity and of cash flows present fairly, in all material
respects, the financial position of Infact Unit Trust at June 30, 1998 and 1997,
and the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management,
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Sydney, Australia
October 15, 1998
F-1
INFACT UNIT TRUST
BALANCE SHEETS
Year ended June 30,
-------------------------------
1998 1997
-------------------------------
Assets
Current assets:
Cash.................................... $ 419,772 $ 382,755
Accounts receivable..................... 935,180 752,348
Other receivables....................... 7,235 --
Inventories............................. 11,194 9,307
---------- ----------
Total current assets......................... 1,373,381 1,144,410
Property, equipment and furniture, net....... 244,890 324,226
---------- ----------
Total assets................................. $1,618,271 $1,468,636
========== ==========
Liabilities and unitholders' equity
Current liabilities:
Accounts payable........................ $ 237,663 $ 34,396
Accrued liabilities..................... 101,859 40,844
Unearned revenue........................ 49,318 73,583
Accrued compensation and related
liabilities........................... 220,042 262,522
Income tax payable...................... 284,717 247,089
Distribution payable to unitholders..... 282,651 315,690
---------- ----------
Total current liabilities.................... 1,176,250 974,124
---------- ----------
Bank Loan.................................... -- 111,420
---------- ----------
Unitholders' equity:
Units $0.79 par (A$1 par value);
issued and outstanding units -
850 in 1998 and 1997.................. 668 668
A Class units $0.78 par (A$1 par value);
issued and outstanding units -
nil in 1998 and 9 in 1997............. -- 7
Translation adjustment.................. (135,405) (47,850)
Undistributed income.................... 576,758 430,267
---------- ----------
Total unitholders' equity.................... 442,021 383,092
Total liabilities and unitholders' equity.... $1,618,271 $1,468,636
========== ==========
See accompanying notes.
F-2
INFACT UNIT TRUST
STATEMENTS OF INCOME
Year ended June 30,
--------------------------------
1998 1997
------------ -----------
Revenues:
Consulting fees....................... $4,247,658 $3,147,529
Product revenue....................... 1,485,313 1,439,995
---------- ----------
5,732,971 4,587,524
---------- ----------
Cost of revenues:
Consulting fees....................... 2,965,306 2,147,714
Product revenue....................... 1,011,422 915,945
---------- ----------
3,976,728 3,063,659
---------- ----------
Gross profit............................. 1,756,243 1,523,865
General and administrative
expense............................. 564,218 655,656
---------- ----------
Operating income......................... 1,192,025 868,209
Interest income.......................... 30,210 34,418
Interest expense......................... -- 11,698
---------- ----------
Income before income taxes............... 1,222,235 890,929
Provision for income taxes............... 439,417 186,447
---------- ----------
Net income............................... $ 782,818 $ 704,482
========== ==========
See accompanying notes.
F-3
INFACT UNIT TRUST
STATEMENTS OF UNITHOLDERS' EQUITY
Foreign
Units A Class units Currency Total
-------------------------- ----------------------- Translation Undistributed Unitholders'
Units Amount Units Amount Adjustment Income Equity
------------- ---------- -------- ------------ ------------- -------------- ---------------
Balance June 30, 1996.......... 850 $ 668 8 $ 6 $ 222,347 $ 223,021
Distributions paid/
payable..................... -- -- -- -- -- (496,562) (496,562)
A Class unit issued........... -- -- 1 1 -- -- 1
Net income.................... -- -- -- -- -- 704,482 704,482
Foreign currency translation
adjustment................... -- -- -- -- $ (47,850) -- (47,850)
----- ---- ---- ---- --------- --------- --------
Balance June 30, 1997.......... 850 668 9 7 (47,850) 430,267 383,092
Distributions paid/
payable..................... -- -- -- -- -- (636,327) (636,327)
A Class units bought back..... -- -- (9) (7) -- -- (7)
Net income.................... -- -- -- -- -- 782,818 782,818
Foreign currency translation
adjustment................... -- -- -- -- (87,555) -- (87,555)
----- ---- ---- ---- --------- -------- --------
Balance June 30, 1998.......... 850 $668 -- $ -- $(135,405) $576,758 $442,021
===== ==== ==== ==== ========= ======== ========
See accompanying notes.
F-4
INFACT UNIT TRUST
STATEMENTS OF CASH FLOWS
Year Ended June 30,
----------------------------------
1998 1997
---------- -----------
OPERATING ACTIVITIES
Net income.................................................... $ 782,818 $ 704,482
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation................................................ 32,003 33,029
Amortization................................................ -- 10,823
Changes in operating assets and liabilities:
Accounts receivable....................................... (363,173) (253,333)
Other receivables......................................... (8,140) 1,054
Inventories............................................... (4,070) 1,736
Accounts payable.......................................... 235,883 (76,415)
Accrued liabilities....................................... 77,195 19,227
Unearned revenue.......................................... (11,897) 21,895
Accrued compensation and related liabilities.............. 7,158 105,674
Income tax payable........................................ 94,053 99,064
---------- ----------
Net cash provided by operating activities..................... 841,830 667,236
INVESTING ACTIVITIES
Purchase of property, equipment and furniture................. (10,611) (32,723)
Sale of equipment............................................. -- 30,415
---------- ----------
Net cash (used in) investing activities....................... (10,611) (2,308)
FINANCING ACTIVITIES
Distributions paid............................................ (607,419) (489,657)
Units sold.................................................... -- 1
Units repurchased............................................. (7) --
Repayments of bank loan....................................... (102,030) (78,220)
Repayment of lease liability.................................. -- (45,544)
---------- ----------
Net cash used by financing activities......................... (709,456) (613,420)
Effect of exchange rate changes on cash....................... (84,746) (22,189)
---------- ----------
Net increase in cash.......................................... 37,017 29,319
Cash at beginning of period................................... 382,755 353,436
---------- ----------
Cash at end of period......................................... $ 419,772 $ 382,755
========== ==========
Supplemental cash flow information:
Interest paid............................................... $ -- $ 11,698
========== ==========
Income tax paid............................................. $ 230,516 $ 73,069
========== ==========
See accompanying notes.
F-5
INFACT UNIT TRUST
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Infact Unit Trust ("Infact") is organized under the laws of Australia and is
in the business of providing strategic project management consultancy
services to large corporations and government departments primarily in
Victoria, Australia. Infact also has a distribution agreement to sell
software products and maintenance agreements with an unrelated third party.
Consulting services related to product sales are generated from the
implementation of the software products.
Basis of Presentation
The Infact Unit Trust was established pursuant to a trust deed, constituted
on June 26, 1984. Distributions made to unit holders are in accordance with
the provisions of the Trust Deed.
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States.
Infact operates primarily in Australia and conducts all transactions in
Australian dollars. These financial statements have been translated into U.S.
dollars, unless otherwise denoted. The exchange rates between the U.S. dollar
and the Australian dollar were $0.6046 and $0.7428 at June 30, 1998 and June
30, 1997, respectively. The average exchange rates between the U.S. dollar
and the Australian dollar for the periods ended June 30, 1998 and 1997 were
$.6802 and $.7822, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of certain assets, liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual amounts could differ from those estimates.
Cash
Cash consists of a demand deposit held with a major financial institution.
F-6
INFACT UNIT TRUST
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
Consultancy revenue from project management services is recognized as the
service is performed, if the resulting receivable is deemed probable and
provided no significant obligations remain outstanding.
Product revenue is generated from the sale of software licenses, maintenance
agreements and product related consultancy services. License revenue is
recognized upon delivery of the product to the customer provided that no
significant vendor obligations remain and collection is considered probable.
Revenue from maintenance agreements is recognized straight-line over a twelve
month period. Revenue from product related consulting services is recognized
as the service is performed, if the resulting receivable is deemed probable
and no significant obligations remain outstanding.
Cost of Revenues
For the purpose of these financial statements, Infact has segregated its cost
of revenues into two categories : "Consulting fees" and "Product revenue."
Cost of revenues - Consulting fees includes : all related employment and
contractor expenses arising from the provision of project management
services.
Cost of revenues - Product revenue includes: royalties related to the sale of
product licenses, all related employment and contractor expenses incurred in
fulfilling the maintenance agreements and providing product related
consultancy services.
Inventories
Inventories comprise finished goods and are stated at the lower of cost and
net realizable value. Cost is calculated on a first in first out basis and
net realizable value is the estimated market value less selling costs.
Property, Equipment and Furniture
Property, equipment and furniture are stated at cost. Depreciation of
property, equipment and furniture is computed using the straight-line and
declining balance methods over the estimated useful lives of individual
classes of assets, which range from three to forty years. The cost and
accumulated depreciation of fixed assets sold or otherwise disposed are
removed from the accounts and the resulting gain or loss is
F-7
INFACT UNIT TRUST
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
included in income in the period realized.
Income Taxes
Under Australian Taxation Law, Infact is not subject to income tax provided
the taxable income is distributed in full to the unitholders. Income tax
payable is calculated on undistributed income after adjusting for permanent
differences and is subject to personal income tax rates at 48.5%.
Functional Currency
The functional currency of Infact is the Australian dollar. All assets and
liabilities are translated into U.S. dollars at the exchange rate at the end
of the period except for changes in unitholders' equity which are translated
into U.S. dollars at historical rates. Income and expense items are
translated into U.S. dollars using the average rate for the period. Resulting
translation adjustments are included in unitholders' equity.
Fair Value of Financial Instruments
The carrying value of Infact's financial instruments, including cash,
accounts receivable, accounts payable and accrued liabilities approximate
their fair values due to their relatively short maturities. Infact does not
hold or issue financial instruments for trading purposes.
Concentration of Credit Risk
Financial instruments that potentially subject Infact to a concentration of
credit risk consist of cash and accounts receivable. Infact's accounts
receivable are derived from revenue earned from customers located in
Australia.
In the normal course of business, Infact provides unsecured credit terms to
its customers. Accordingly, Infact performs ongoing credit evaluations of its
customers and has a policy to maintain an allowance for possible losses.
Losses, when realized, have been within the range of management's
expectations.
F-8
INFACT UNIT TRUST
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Dependence on Third Party Customers
During the years ended June 30, 1998 and 1997, Infact generated approximately
55% and 68% of its consultancy revenues from two and four customers,
respectively. The loss of any of these customers may have a material adverse
effect on Infact's business, financial condition and results of operations.
Employee Entitlements
Provision is made for Infact's liability for employee entitlements arising
from services rendered by employees to the period end. These entitlements are
payable pursuant to Australian employment legislation and have been
calculated in accordance with generally accepted accounting principles.
Bank Facilities
In June 1996, Infact Pty Limited, as trustee for Infact Unit Trust, entered
into a fixed rate loan with a bank. This facility provides for working
capital advances of up to AUD 250,000. The facility is a revolving interest
only loan with rate fixed (8.020%) for a maximum of 3 years. This borrowing
was secured by substantially all of the assets of Infact. This loan was
repaid in full on June 30, 1998.
F-9
INFACT UNIT TRUST
NOTES TO THE FINANCIAL STATEMENTS
2. PROPERTY, EQUIPMENT AND FURNITURE
The components of property, equipment and furniture are as follows:
JUNE 30,
---------------------
1998 1997
--------- ---------
Property............................. $ 210,851 $ 259,048
Leasehold improvements............... 12,532 15,397
Motor vehicles....................... 7,256 8,914
Furniture............................ 85,044 104,107
Equipment............................ 97,494 108,566
--------- ---------
413,177 496,032
Less accumulated depreciation........ (168,287) (171,806)
--------- ---------
$ 244,890 $ 324,226
========= =========
3. RETIREMENT PLAN
Infact has a statutory obligation under the laws of Australia to
contribute certain amounts into a regulated superannuation fund on behalf of
all employees, except where certain exemptions apply. Infact has no
involvement with the management, control or organization of the fund. The
participants are fully vested at all times in both employee contributions and
statutory employer contributions. Employer contributions to superannuation
funds expensed in the financial statements for the years ended June 30, 1998
and 1997 were $208,667 and $195,251, respectively.
4. SUBSEQUENT EVENTS
Pursuant to a Business Purchase Agreement dated August 1, 1998, Infact sold
substantially all of the assets relating to its project management consulting
business to Tier Technologies (Australia) Pty Limited, a subsidiary of Tier
Technologies, Inc. which is incorporated in the United States. The effective
date of the sale is August 1, 1998. These financial statements do not include
any adjustments to the recorded amounts of assets and liabilities which may
result from this transaction.
F-10
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet set forth
below gives effect to the acquisition of certain assets and liabilities of
Infact Pty Limited ("Infact") as if the acquisition occurred on June 30, 1998.
The unaudited pro forma condensed consolidated statements of income data for the
nine months ended June 30, 1998 and the nine months ended September 30, 1997 set
forth below give effect to the acquisition of certain assets and liabilities of
Albanycrest Limited ("Albanycrest"), Sancha Computer Group Pty Limited
("Sancha") and Infact, as if they occurred on January 1, 1997. The unaudited pro
forma condensed consolidated financial information set forth below reflects
certain adjustments, including adjustments to reflect the amortization of the
intangible assets and the elimination of the Infact products division which was
not acquired. The unaudited pro forma condensed consolidated financial
information set forth below does not purport to represent what the consolidated
results of operations or financial condition of the Company would actually have
been if the Albanycrest, Sancha and Infact acquisitions and related transactions
had in fact occurred on such date or to project the future consolidated results
of operations or financial condition of the Company.
F-11
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
INFACT
INFACT PRO FORMA
COMPANY AS OF BUSINESS PRO FORMA
AS OF JUNE 30, COMBINATION AS OF
JUNE 30, 1998 ADJUSTMENTS JUNE 30,
1998 (1) COMBINED (4)(6) 1998
--------- ------- --------- ------------ ----------
(RESTATED)
ASSETS
Current Assets:
Cash and cash equivalents .............................. $ 33,136 $ 420 $ 33,556 $ (3,856) $ 29,700
Cash in escrow ......................................... -- -- -- 726 726
Investments ............................................ 10,220 -- 10,220 -- 10,220
Accounts receivable, net ............................... 12,530 942 13,472 (942) 12,530
Inventory .............................................. -- 11 11 (11) --
Income taxes receivable ................................ 27 -- 27 -- 27
Prepaid expenses and other current assets .............. 902 -- 902 -- 902
-------- -------- -------- -------- --------
Total current assets ................................ 56,815 1,373 58,188 (4,083) 54,105
Equipment and improvements, net ........................... 1,708 245 1,953 (222) 1,731
Notes receivable from related parties ..................... 1,203 -- 1,203 -- 1,203
Acquired intangible assets, net ........................... 7,058 -- 7,058 3,060 10,118
Other assets .............................................. 1,005 -- 1,005 -- 1,005
-------- -------- -------- -------- --------
Total assets .............................................. $ 67,789 $ 1,618 $ 69,407 $ (1,245) $ 68,162
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ....................................... $ 1,233 $ 238 $ 1,471 $ (238) $ 1,233
Accrued liabilities .................................... 2,393 102 2,495 51 2,546
Accrued compensation and related liabilities ........... 1,531 220 1,751 -- 1,751
Deferred income ........................................ 335 49 384 (49) 335
Notes payable to current and former shareholders ....... 26 -- 26 -- 26
Capital lease obligations due within one year .......... 72 -- 72 -- 72
Current income taxes payable ........................... -- 285 285 (285) --
Distribution payable ................................... -- 283 283 (283) --
-------- -------- -------- -------- --------
Total current liabilities ........................... 5,590 1,177 6,767 (804) 5,963
Accrued royalties ......................................... 59 -- 59 -- 59
Notes payable to current and former shareholders, less
current portion ........................................ 45 -- 45 -- 45
Capital lease obligations, less current portion ........... 163 -- 163 -- 163
Shareholders' equity:
Common stock ........................................... 61,904 -- 61,904 -- 61,904
Deferred compensation .................................. (701) -- (701) -- (701)
Notes receivable from shareholders ..................... (2,159) -- (2,159) -- (2,159)
Foreign currency translation adjustment ................ (649) (88) (737) 88 (649)
Retained earnings ...................................... 3,537 529 4,066 (529) 3,537
-------- -------- -------- -------- --------
Total shareholders' equity ................................ 61,932 441 62,373 (441) 61,932
-------- -------- -------- -------- --------
Total liabilities and shareholders' equity ................ $ 67,789 $ 1,618 $ 69,407 $ (1,245) $ 68,162
======== ======== ======== ======== ========
See accompanying notes.
F-12
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME FOR THE NINE MONTHS ENDED JUNE 30, 1998
SANCHA INFACT
COMPANY FOR THE FIVE FOR THE NINE
FOR THE NINE MONTHS ENDED MONTHS ENDED
MONTHS ENDED FEBRUARY 28, JUNE 30,
JUNE 30, 1998 1998
1998 (1) (1) COMBINED
------------ ------------ ------------ ----------
(RESTATED)
Revenues ................................................ $36,713 $ 3,061 $ 4,244 $44,018
Cost of revenues ........................................ 23,678 2,042 3,100 28,820
------- ------- ------- -------
Gross profit ............................................ 13,035 1,019 1,144 15,198
Costs and expenses:
Selling and marketing .............................. 2,217 -- -- 2,217
General and administrative ......................... 6,428 257 413 7,098
Compensation charge related to
business combinations............................. 646 -- -- 646
Depreciation and amortization ...................... 706 5 24 735
------- ------- ------- -------
Income from operations .................................. 3,038 757 707 4,502
Interest income (interest expense), net ................. 544 5 23 572
------- ------- ------- -------
Income before income taxes .............................. 3,582 762 730 5,074
Provision for income taxes .............................. 1,390 75 434 1,899
------- ------- ------- -------
Net income .............................................. $ 2,192 $ 687 $ 296 $ 3,175
======= ======= ======= =======
Pro forma basic net income per share (7) ................
Shares used in computing pro forma
basic net income per share (7) .....................
Pro forma diluted net income per share (7) ..............
Shares used in computing pro forma
diluted net income per share (7) ...................
SANCHA INFACT
PRO FORMA PRO FORMA PRO FORMA
BUSINESS BUSINESS FOR THE NINE
COMBINATION COMBINATION MONTHS ENDED
ADJUSTMENTS ADJUSTMENTS JUNE 30,
(3)(5) (4)(5)(6) 1998
----------- ----------- ----------
Revenues ................................................ $ -- $ (900) $43,118
Cost of revenues ........................................ -- (689) 28,131
-------- ------- -------
Gross profit ............................................ -- (211) 14,987
Costs and expenses:
Selling and marketing .............................. -- -- 2,217
General and administrative ......................... -- (58) 7,040
Compensation charge related to
business combinations.............................. -- -- 646
Depreciation and amortization ...................... 152 164 1,051
-------- ------- -------
Income from operations .................................. (152) (317) 4,033
Interest income (interest expense), net ................. -- (23) 549
-------- ------- -------
Income before income taxes .............................. (152) (340) 4,582
Provision for income taxes .............................. 172 (282) 1,789
-------- ------- -------
Net income .............................................. $ (324) $ (58) $ 2,793
======= ======= =======
Pro forma basic net income per share (7) ................ $ 0.33
=======
Shares used in computing pro forma
basic net income per share (7) ..................... 8,460
=======
Pro forma diluted net income per share (7) .............. $ 0.28
=======
Shares used in computing pro forma
diluted net income per share (7) ................... 9,842
=======
See accompanying notes.
F-13
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
ALBANYCREST SANCHA INFACT
COMPANY FOR THE SIX FOR THE NINE FOR THE NINE
FOR THE NINE MONTHS ENDED MONTHS ENDED MONTHS ENDED
MONTHS ENDED JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, 1997 1997 1997
1997 (1) (1) (1) COMBINED
------------ ------------ ------------- ------------- ----------
(RESTATED)
Revenues ........................................... $ 22,479 $ 1,367 $ 5,260 $ 3,978 $ 33,084
Cost of revenues ................................... 14,917 1,282 3,474 2,530 22,203
-------- -------- -------- -------- --------
Gross profit ....................................... 7,562 85 1,786 1,448 10,881
Costs and expenses:
Selling and marketing ......................... 1,836 -- -- -- 1,836
General and administrative .................... 4,397 7 671 459 5,534
Compensation charge related to
business combinations ...................... 470 -- -- -- 470
Depreciation and amortization ................. 259 -- 5 34 298
-------- -------- -------- -------- --------
Income from operations ............................. 600 78 1,110 955 2,743
Interest income (interest expense), net ............ (99) -- 12 16 (71)
-------- -------- -------- -------- --------
Income before income taxes ......................... 501 78 1,122 971 2,672
Provision for income taxes ......................... 201 18 161 187 567
-------- -------- -------- -------- --------
Net income ......................................... $ 300 $ 60 $ 961 $ 784 $ 2,105
======== ======== ======== ======== ========
Pro forma basic net income per share (7) ...........
Shares used in computing pro forma
basic net income per share (7) ................
Pro forma diluted net income per share (7) .........
Shares used in computing pro forma
diluted net income per share (7) ..............
ALBANYCREST SANCHA INFACT
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
BUSINESS BUSINESS BUSINESS FOR THE NINE
COMBINATION COMBINATION COMBINATION MONTHS ENDED
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS SEPTEMBER 30,
(2)(5) (3)(5) (4)(5)(6) 1997
----------- ----------- ----------- -------------
Revenues ................................................ $ -- $ -- $ (1,355) $ 31,729
Cost of revenues ........................................ -- -- (846) 21,357
-------- -------- -------- --------
Gross profit ............................................ -- -- (509) 10,372
Costs and expenses:
Selling and marketing .............................. -- -- -- 1,836
General and administrative ......................... -- -- (136) 5,398
Compensation charge related to
business combinations.............................. -- -- -- 470
Depreciation and amortization ...................... 21 273 183 775
-------- -------- -------- --------
Income from operations .................................. (21) (273) (556) 1,893
Interest income (interest expense), net ................. -- -- (16) (87)
-------- -------- -------- --------
Income before income taxes .............................. (21) (273) (572) 1,806
Provision for income taxes .............................. 5 178 (27) 723
-------- -------- -------- --------
Net income .............................................. $ (26) $ (451) $ (545) $ 1,083
======== ======== ======== ========
Pro forma basic net income per share (7) ................ $ 0.20
========
Shares used in computing pro forma
basic net income per share (7) ..................... 5,501
========
Pro forma diluted net income per share (7) .............. $ 0.18
========
Shares used in computing pro forma
diluted net income per share (7) ................... 5,895
========
See accompanying notes.
F-14
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The financial statements of the Company for the nine months ended June 30, 1998
and 1997 have been restated to reflect changes in accounting for certain
payments made in connection with two business combinations.
Pro forma adjustments for the consolidated balance sheet as of June 30, 1998 and
the consolidated statements of income for the nine months ended June 30, 1998
and the nine months ended September 30, 1997 are as follows:
(1) The Albanycrest, Sancha and Infact condensed statements of
income are presented after translation using the local currency
as the functional currency.
(2) Reflects the amortization of intangible assets acquired in the
Albanycrest acquisition recorded at $246,207 amortized over a
six-year period.
(3) Reflects the amortization of intangible assets acquired in the
Sancha acquisition recorded at $5.2 million amortized over eight to
fifteen year periods.
(4) Reflects $3.1 million of intangibles acquired in the Infact
acquisition and the associated amortization expense based on lives
ranging from eight to fifteen years. Amounts exclude contingent
payments of up to $2.2 million (AUD) in cash and approximately
50,000 shares of the Company's Class B common stock which may be
paid to Infact based on achievement of performance targets over the
next two years. Approximately 71% of such payments will be
amortized as goodwill over its remaining useful life. The remaining
29% of such payments will be accrued and expensed over a vesting
period when payment of such amounts are deemed probable. The pro
forma financial statements do not include the amortization or
compensation charges, which may result from payment of the
contingent amounts.
(5) Reflects the tax provision at the effective tax rate of 39% for the
nine months ended June 30, 1998 and 40% for the nine months
ended September 30, 1997.
(6) The pro forma balance sheet reflects the acquisition of certain
assets and liabilities of Infact as if the acquisition occurred as
of June 30, 1998 for pro forma balance sheet purposes and as of the
beginning of the respective periods for pro forma statement of
income purposes. The allocation of the purchase price for pro forma
purposes is as follows (in thousands):
Cash paid....................... $2,682
Estimated acquisition costs..... 181
------
$2,863
======
Tangible assets................. $ 23
Intangible assets............... $3,060
Liabilities assumed............. (220)
------
$2,863
======
The pro forma balance sheet also reflects the elimination of assets
not acquired and liabilities not assumed as part of the Infact
acquisition. Assets not acquired consist mainly of the assets
related to the products division of Infact, the Infact building and
cash. Liabilities assumed relate to certain employee benefit
related amounts. The pro forma balance sheet also reflects a
reclassification of $726,000 of cash which is held in escrow for
payment of potential contingent amounts. The pro forma statements
of income reflect adjustments to give effect to increased salaries
as a result of the acquisition, elimination of depreciation on the
building, the addition of building lease payments and reversal of
interest income earned on cash balances. Amortization expense
related to the acquisition is described in (4) above.
(7) Basic net income per share is computed using the weighted average
number of shares of common stock outstanding. Diluted net income
per share is computed using the weighted average number of shares
of common stock outstanding plus all common stock equivalents.
Basic and diluted net income per share amounts have been adjusted
to reflect the issuance of 51,213 and 49,944 shares of Class B
common stock issued as part of the Sancha and Infact acquisitions,
respectively. The 51,213 and 49,944 shares of Class B common stock
have been included in the weighted average shares as if the shares
had been outstanding for all periods shown.
F-15
EXHIBIT INDEX
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Exhibit No. Description
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23.1 Consent of PricewaterhouseCoopers