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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):
February 12, 1999 (December 2, 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)
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This amends the Form 8-K filed on December 17, 1998 to provide financial
statements and pro forma financial information.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
MIDAS Computer Software Limited
Report of Independent Auditors
Balance Sheets as of February 28, 1998 and November 29, 1998 (unaudited)
Statements of Income for the year ended February 28, 1998 and the period
from March 1, 1998 to November 29, 1998 (unaudited)
Statement of Shareholders' Equity for the year ended February 28, 1998
and the period from March 1, 1998 to November 29, 1998 (unaudited)
Statements of Cash Flows for the year ended February 28, 1998 and the
period from March 1, 1998 to November 29, 1998 (unaudited)
Notes to Financial Statements for the year ended February 28, 1998
(b) Pro forma financial information.
Introduction
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1998
(unaudited)
Pro Forma Condensed Consolidated Statement of Income for the twelve
months ended September 30, 1998 (unaudited)
Notes to Pro Forma Condensed Consolidated Financial Information
(unaudited)
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
23.1 Consent of Grant Thornton, 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: February 12, 1999
2
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
MIDAS Computer Software Limited
We have audited the accompanying balance sheet of MIDAS Computer Software
Limited as of February 28, 1998 and the related statements of income,
shareholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States 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 statements presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MIDAS Computer Software
Limited as of February 28, 1998 and the results of its operations and its
cash flows for the year then ended in conformity with United States
generally accepted accounting principles.
/s/ Grant Thornton
Grant Thornton
Chartered Accountants
Birmingham, England
January 29, 1999
F-1
MIDAS COMPUTER SOFTWARE LIMITED
BALANCE SHEETS
November 29, 1998
Unaudited February 28, 1998
Assets
Current assets:
Cash $ 120,942 $ 476
Inventories - 6,628
Accounts receivable 1,114,345 2,252,858
Prepaid expenses 74,110 30,758
---------- ----------
Total current assets 1,309,397 2,290,720
Motor vehicles and equipment, net 477,349 357,669
Cost in excess of net assets acquired, net 51,997 51,868
Investment - 2
---------- ----------
Total assets $1,838,743 $2,700,259
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Cash overdraft $ - $ 287,880
Accounts payable 477,310 724,155
Accrued and other liabilities 399,171 404,403
Debt financing loan 552,935 920,092
---------- ----------
Total current liabilities 1,429,416 2,336,530
Other liabilities 238,666 192,767
Commitments and contingencies - -
Shareholders' equity:
Ordinary shares -- (Pounds)1 per share
50,000 shares authorized, 35,000 issued and 53,582 53,582
outstanding
Retained earnings 111,900 112,629
Cumulative foreign currency translation adjustment 5,179 4,751
---------- ----------
Total shareholders' equity 170,661 170,962
---------- ----------
Total liabilities and shareholders' equity $1,838,743 $2,700,259
========== ==========
The accompanying notes are an integral part of these financial statements.
F-2
MIDAS COMPUTER SOFTWARE LIMITED
STATEMENTS OF INCOME
Period from
March 1, 1998
to November 29, Year ended
1998 February 28,
Unaudited 1998
Revenue $4,617,496 $5,148,706
Cost of revenue 1,988,472 2,751,868
----------- ----------
Gross profit 2,629,024 2,396,838
Operating expenses:
General and administrative 2,518,372 2,098,679
Depreciation and amortization 94,286 53,654
----------- ----------
Income from operations 16,366 244,505
Interest expense 15,279 26,604
----------- ----------
Income before income taxes 1,087 217,901
Income tax provision 1,816 48,061
----------- ----------
Net income (loss) $ (729) $ 169,840
=========== ==========
Net income (loss) per share--Basic and Dilutive $ (0.02) $ 4.85
=========== ==========
Weighted average number of shares outstanding--Basic and Dilutive 35,000 35,000
=========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
MIDAS COMPUTER SOFTWARE LIMITED
STATEMENT OF SHAREHOLDERS' EQUITY
Cumulative Total
Ordinary Foreign Retained Shareholders'
Shares Amount Currency Earnings Equity
Translation
Adjustment
March 1, 1997 35,000 $ 53,582 $ 3,097 $ 8,301 $ 64,980
Net income - - - 169,840 169,840
Dividends paid - - - (65,512) (65,512)
Foreign currency translation adjustment - - 1,654 - 1,654
------- -------- ------- -------- --------
February 28, 1998 35,000 53,582 4,751 112,629 170,962
Net income (unaudited) for the period from
March 1, 1998 to November 29, 1998 - - - (729) (729)
Foreign currency translation adjustment
(unaudited) - - 428 - 428
------- -------- ------- -------- --------
November 29, 1998 (unaudited) 35,000 $ 53,582 $ 5,179 $111,900 $170,661
======= ======== ======= ======== ========
The accompanying notes are an integral part of this financial statement.
F-4
MIDAS COMPUTER SOFTWARE LIMITED
STATEMENTS OF CASH FLOWS
Period from
March 1, 1998
to November Year ended
29, 1998 February 28,
Unaudited 1998
Cash flows from operating activities:
Net income (loss) $ (729) $ 169,840
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Gain on sale of fixed assets 1,279 4,062
Depreciation and amortization 94,286 53,654
Deferred tax expense - 9,525
----------- -----------
94,836 237,081
Changes in assets and liabilities:
Accounts receivable 1,150,848 (1,517,669)
Inventories 6,683 (6,592)
Other assets (43,529) 67,903
Accounts payable (250,109) 268,845
Accrued and other liabilities (332,170) 938,639
----------- -----------
Net cash provided by (used in) operating activities 626,559 (11,793)
Cash flows from investing activities:
Capital expenditures (215,053) (256,481)
Investment - (2)
----------- -----------
Net cash used in investing activities (215,053) (256,483)
----------- -----------
Cash flows from financing activities:
Dividends paid - (65,512)
Cash overdraft (290,293) 286,341
----------- -----------
Net cash provided by (used in) financing activities (290,293) 220,829
----------- -----------
121,213 (47,447)
Effects of exchange rate on cash (747) 3
----------- -----------
Net increase (decrease) in cash and cash equivalents 120,466 (47,444)
Cash at beginning of year 476 47,920
----------- -----------
Cash at end of year $ 120,942 $ 476
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 15,279 $ 26,604
Income taxes 22,275 23,640
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
MIDAS COMPUTER SOFTWARE LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED FEBRUARY 28, 1998
1. Business and Significant Accounting Policies
Organization and Basis of Presentation
The company is principally engaged in computer software development,
installation and consultancy.
MIDAS Computer Software Limited was incorporated on February 29, 1996 under
the laws of England and Wales as a private limited company.
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles (US GAAP).
The financial statements do not comprise statutory accounts of MIDAS
Computer Software Limited within the meaning of section 240 of the
Companies Act 1985, as amended, of Great Britain.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Revenue Recognition
Revenue is derived from time and material contracts and recognized during
the period in which the services are provided.
Inventory
Inventories are stated at the lower of cost and net realisable value.
Income Tax
Income taxes are computed using the liability method, in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes". Under this method, deferred income tax assets and liabilities are
determined based on temporary differences between the financial reporting
and tax bases of assets and liabilities and are measured using enacted tax
rates and laws.
Net Income Per Share
The Company computes net income per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128")
and Securities and Exchange Commission Staff Accounting Bulletin No. 98
("SAB 98"). Under FAS 128, basic net income per share is computed by
dividing the net income available to common stockholders for the period by
the weighted average number of common shares outstanding during the period.
Diluted net income per share is computed by dividing the net income for the
period by the weighted average number of common and common equivalent
shares outstanding during the period. Common equivalent shares, composed of
unvested restricted common stock, incremental common shares issuable upon
the exercise of stock options and warrants and upon conversion of preferred
stock, are included in diluted net income per share to the extent such
shares are dilutive.
F-6
MIDAS COMPUTER SOFTWARE LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED FEBRUARY 28, 1998
Foreign Currency Translation
The Company maintains its accounting records in its local currency, Great
Britain, sterling pounds. The financial statements have been presented
herein, converted to United States dollars and the effect of the foreign
currency translation is reflected as a component of shareholders' equity in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation".
Concentration of Credit Risks
Financial instruments that potentially subject the Company to significant
levels of credit risk are accounts receivable. The Company extends credit
based on the evaluation of its clients' financial condition. The Company's
historical credit losses have not been significant.
Impact of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income", which is effective for fiscal
years beginning after December 15, 1997. The Statement addresses the
reporting and displaying of comprehensive income and its components. The
adoption of SFAS No. 130 relates to disclosure within the financial
statements and is not expected to have a material effect on the Company's
financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997. The Statement changes the way public
companies report information about segments of their business in their
annual financial statements and requires them to report selected segment
information in their quarterly reports. Adoption of SFAS No. 131 is not
expected to have a material effect on the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning
after June 15, 1999. The new standard requires that all companies record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently
assessing whether there will be any impact of SFAS No. 133 on the Company's
consolidated financial statements upon adoption, which is required in
October 1999.
Fair Value of Financial Instruments
The carrying amount of cash and receivables approximates fair value because
of their short-term nature. The fair value of the Company's credit line
and debt financing loan are based on current rates at which the Company
could borrow funds with similar maturities.
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term investments with
original maturities of not more than 90 days.
F-7
MIDAS COMPUTER SOFTWARE LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED FEBRUARY 28, 1998
2. Motor vehicles and equipment
Motor vehicles, fixtures and fittings and computer equipment are recorded
at cost. Depreciation is provided using the reducing balance method at 25%
for motor vehicles. The straight line method is used for fixtures and
fittings and computer equipment over their estimated useful lives. The
assets, stated at cost, were as follows:
February 28, 1998
Audited
GBP USD
Computer equipment 30,966 50,989
Fixtures and fittings 16,961 27,928
Motor vehicles 186,269 306,711
------- -------
234,196 385,628
Less: accumulated depreciation (16,980) (27,959)
------- -------
217,216 357,669
======= =======
Depreciation expense for the year ended February 28, 1998 was (Pounds)31,010
(USD 50,788).
3. Cost in excess of net assets acquired
Purchased goodwill is recorded at cost. Amortization is provided using the
straight line method over the estimated useful economic life of 20 years.
Purchased goodwill, stated at cost, was as follows:
February 28, 1998
Audited
GBP USD
Purchased goodwill 35,000 57,631
Less: accumulated amortization (3,500) (5,763)
------- -------
31,500 51,868
======= =======
Amortization expense for the year ended February 28, 1998 was (Pounds)1,750
(USD 2,866)
4. Accrued and Other Liabilities
Accrued and other liabilities consist of the following:
February 28, 1998
Audited
GBP USD
Income tax authorities 13,415 22,089
Accrued expenses 65,501 107,854
Social security taxes and VAT 133,288 219,472
Hire purchase and finance lease obligations 33,395 54,988
------- -------
245,599 404,403
======= =======
F-8
MIDAS COMPUTER SOFTWARE LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED FEBRUARY 28, 1998
5. Debt financing loan
February 28, 1998
Audited
GBP USD
Debt financing loan 558,783 920,092
======= =======
The debt financing loan is provided by Alex Lawrie Factors Limited, a subsidiary
of Lloyds Bank plc. The loan is secured on the accounts receivable of the
company and is repayable on demand. The factoring charge levied on the balance
advanced to the company amounts to 1% over UK bank base rate for the period from
March 1997 to September 1997 and 2.25% over UK bank base rate thereafter.
6. Other liabilities after one year
Other liabilities consist of the following:
February 28, 1998
Audited
GBP USD
Deferred tax provision 6,100 10,044
Hire purchase and finance lease obligations 110,970 182,723
------- -------
117,070 192,767
======= =======
7. Income Taxes
MIDAS Computer Software Limited is subject to taxes in the United Kingdom. The
income tax expense for the year ended February 28, 1998 consists of a current
charge of (Pounds)23,529 (USD 38,536) computed at the United Kingdom Statutory
Rate applicable for small companies, which was 21% for the year ending
February 28, 1998, and deferred taxes of (Pounds)5,816 (USD 9,525) calculated
at the same rate.
8. Credit Facility
The company has a revolving line of credit facility with a bank which provides
the company with (Pounds)100,000 of revolving credit. The credit facility
matures on March 31, 1998.
F-9
MIDAS COMPUTER SOFTWARE LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED FEBRUARY 28, 1998
9. Commitments and Contingencies
The company leases its facilities under noncancelable operating lease
agreements. Total future minimum lease commitments as of February 28, 1998 are
as follows:
February 28, 1998
Audited
GBP USD
1999 91,448 150,578
2000 91,448 150,578
2001 48,428 79,742
2002 27,368 45,064
------- -------
258,692 425,962
======= =======
Rent expense for the year ended February 28, 1998 was approximately
(Pounds)27,000 (USD 44,221).
10. Pensions
During the year both directors participated in money purchased pension schemes.
The amounts contributed by the company during the year amounted to
(Pounds)12,900 (USD 21,128)
11. Subsequent Event
On November 25, 1998 the shareholders and directors of MIDAS Computer Software
Limited entered into a purchase agreement with Tier Technologies Inc. The
accompanying financial statements do not reflect any adjustments arising from
this agreement.
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 all of the issued and outstanding
capital stock of Midas Computer Software Limited ("Midas") as if the acquisition
occurred on September 30, 1998. The unaudited pro forma condensed consolidated
statement of income data for the twelve months ended September 30, 1998 set
forth below gives effect to the acquisition of certain assets and liabilities of
Sancha Computer Group Pty Limited ("Sancha"), Infact Pty Limited ("Infact") and
Midas, as if they occurred on October 1, 1997. The unaudited pro forma
condensed consolidated financial information set forth below reflects certain
adjustments, including adjustments to reflect the amortization of intangible
assets. 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
Sancha, Infact and Midas 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 SEPTEMBER 30, 1998
(in thousands)
Midas
Pro Forma
Company Midas Business Pro Forma
as of as of Combination as of
September 30, September 30, Adjustments September 30,
1998 1998(1) Combined (4)(7)(9) 1998
------------- ------------ -------- ----------- -------------
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 22,466 $ -- $ 22,466 $(2,462) $ 20,004
Restricted cash................................ 712 -- 712 -- 712
Investments.................................... 16,834 -- 16,834 -- 16,834
Accounts receivable, net....................... 18,335 1,275 19,610 -- 19,610
Prepaid expenses and other current assets...... 1,399 56 1,455 -- 1,455
--------------------------------------------------------
Total current assets........................ 59,746 1,331 61,077 (2,462) 58,615
Equipment and improvements, net................... 2,371 525 2,896 -- 2,896
Notes receivable and accrued interest
from related parties............................. 1,871 -- 1,871 -- 1,871
Acquired intangible assets, net................... 9,794 53 9,847 3,576 13,423
Other assets...................................... 721 -- 721 -- 721
--------------------------------------------------------
Total assets...................................... $ 74,503 $ 1,909 $ 76,412 $ 1,114 $ 77,526
======== ======= ======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings..................................... $ -- $ 680 $ 680 $ -- $ 680
Accounts payable............................... 3,263 269 3,532 -- 3,532
Accrued liabilities............................ 3,437 107 3,544 -- 3,544
Accrued compensation and related liabilities... 2,310 72 2,382 -- 2,382
Deferred income................................ 500 -- 500 -- 500
Capital lease obligations due within one year.. 67 351 418 -- 418
Current income taxes payable................... 450 33 483 -- 483
Other current liabilities...................... 24 -- 24 153 177
--------------------------------------------------------
Total current liabilities................... 10,051 1,512 11,563 153 11,716
Capital lease obligations, less current portion... 163 -- 163 -- 163
Other liabilities................................. 117 -- 117 -- 117
--------------------------------------------------------
Total liabilities................................. 10,331 1,512 11,843 153 11,996
Shareholders' Equity:
Common stock................................... 62,656 59 62,715 1,299 64,014
Deferred compensation.......................... (591) -- (591) -- (591)
Notes receivable from shareholders............. (2,159) -- (2,159) -- (2,159)
Foreign currency translation adjustment........ (1,210) 3 (1,207) (3) (1,210)
Retained earnings.............................. 5,476 335 5,811 (335) 5,476
--------------------------------------------------------
Total shareholders' equity........................ 64,172 397 64,569 961 65,530
--------------------------------------------------------
Total liabilities and shareholders' equity........ $ 74,503 $ 1,909 $ 76,412 $ 1,114 $ 77,526
======== ======= ======== ======= ========
See accompanying notes
F-12
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands)
Company Sancha Infact Midas
for the Twelve for the Five for the Ten for the Twelve
Months Ended Months Ended Months Ended Months Ended
September 30, February 28, July 31, September 30,
1998 1998 (1) 1998 (1) 1998 (1)
------------- ------------- ------------ --------------
Revenues................................................... $ 57,724 $ 3,061 $ 4,840 $ 7,056
Cost of revenues........................................... 37,273 2,042 3,535 4,133
------------- ------------- ------------ --------------
Gross profit............................................... 20,451 1,019 1,305 2,923
Costs and expenses:
Selling and marketing................................ 3,009 -- -- 663
General and administrative........................... 9,743 257 471 1,654
Compensation charge related to
business combinations........................... 736 -- -- --
Depreciation and amortization........................ 1,169 5 27 104
------------- ------------- ------------ --------------
Income from operations..................................... 5,794 757 807 502
Interest income (expense), net............................. 980 5 26 (29)
------------- ------------- ------------ --------------
Income before income taxes................................. 6,774 762 833 473
Provision for income taxes................................. 2,642 75 495 48
------------- ------------- ------------ --------------
Net income................................................. $ 4,132 $ 687 $ 338 $ 425
============= ============= ============ ==============
Pro forma basic net income per share (8)................... $ 0.45
=============
Shares used in computing pro forma
basic net income per share (8)....................... 9,231
=============
Pro forma diluted net income per share (8)................. $ 0.39
=============
Shares used in computing pro forma
diluted net income per share (8)..................... 10,624
=============
Sancha Infact Midas
Pro Forma Pro Forma Pro Forma Pro Forma
Business Business Business for the Twelve
Combination Combination Combination Months Ended
Adjustments Adjustments Adjustments September 30,
Combined (2) (5) (3) (5) (6) (4) (5) (7) 1998
-------------- ------------ ----------- ------------ ---------------
Revenues..................................... $ 72,681 $ -- $ (1,080) -- $ 71,601
Cost of revenues............................. 46,983 -- (826) -- 46,157
-------------- ------------ ----------- ------------ ---------------
Gross profit................................. 25,698 -- (254) -- 25,444
Costs and expenses:
Selling and marketing.................. 3,672 -- -- -- 3,672
General and administrative............. 12,125 -- (70) -- 12,055
Compensation charge related to
business combinations............. 736 -- -- -- 736
Depreciation and amortization.......... 1,305 152 196 447 2,100
-------------- ------------ ----------- ------------ ---------------
Income from operations....................... 7,860 (152) (380) (447) 6,881
Interest income (expense), net............... 982 -- (28) -- 954
-------------- ------------ ----------- ------------ ---------------
Income before income taxes................... 8,842 (152) (408) (447) 7,835
Provision for income taxes................... 3,260 172 (338) (38) 3,056
-------------- ------------ ----------- ------------ ---------------
Net income................................... $ 5,582 $ (324) $ (70) $ (409) $ 4,779
============== ============ =========== ============ ===============
Pro forma basic net income per share (8)..... $ 0.51
===============
Shares used in computing pro forma
basic net income per share (8)......... 9,306
===============
Pro forma diluted net income per share (8)... $ 0.44
===============
Shares used in computing pro forma
diluted net income per share (8)....... 10,792
===============
See accompanying notes.
F-13
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Pro forma adjustments for the consolidated balance sheet as of September 30,
1998 and the consolidated statement of income for the twelve months ended
September 30, 1998 are as follows:
(1) The Sancha, Infact and Midas condensed statement of income and the
Midas condensed balance sheet are presented after translation using
the local currency as the functional currency.
(2) Reflects the amortization of intangible assets acquired in the
Sancha acquisition recorded at $5.2 million amortized over eight to
fifteen year periods.
(3) Reflects the $3.1 million of acquired intangibles in the Infact
acquisition and the associated amortization expense based on
lives ranging from eight to fifteen years.
(4) Reflects the amortization of intangible assets acquired in the
Midas acquisition recorded at approximately $3.6 million amortized
over eight years. Amounts exclude contingent payments of up to 7.9
million Pounds Sterling which may be paid in cash and shares of the
Company's Class B common stock based on the achievement of certain
performance targets over the next three years. It is anticipated
that these payments may result in additional goodwill. The pro
forma financial statements do not include the amortization which
may result from payment of the contingent amounts.
(5) Reflects the tax provision at the effective tax rate of 39% for the
twelve months ended September 30, 1998.
(6) Adjustments were made to give effect to increased salaries as a
result of the acquisition, reversal of the depreciation on the
building not acquired, the addition of building lease payments to
reflect the new lease, reversal of interest income earned on
cash balances not acquired and to exclude the revenues and related
costs associated with the products division which was not acquired.
(7) The pro forma balance sheet reflects the acquisition of the capital
stock of Midas as if the acquisition occurred as of September 30,
1998 for pro forma balance sheet purposes and as of October 1,
1997 for pro forma statement of income purposes. The allocation
of the purchase price for pro forma purposes is as follows (in
thousands):
Cash paid $ 2,462
Stock issued 1,358
Estimated acquisition costs 153
---------------
$ 3,973
===============
Tangible assets $ 1,856
Intangible assets 3,629
Liabilities assumed (1,512)
---------------
$ 3,973
===============
(8) 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 net income per share amounts have been adjusted to reflect
the issuance of 51,213 and 51,076 shares of common stock issued as
part of the Sancha and Midas acquisitions, respectively. Diluted
net income per share reflects the issuance of 51,213, 49,944 and
51,076 shares of common stock issued as part of the Sancha, Infact
and Midas acquisitions, respectively. Given the contingent nature
of Infact's restricted stock, these shares have been included as a
common stock equivalent for purposes of diluted net income per
share only. For diluted net income per share purposes, an
additional 51,076 shares issued as part of the Midas acquisition
have been included as a common stock equivalent due to the
guaranteed share value pursuant to the Midas business purchase
agreement. The 51,213, 49,944 and 51,076 shares of common stock
have been included in the weighted average shares as if the shares
had been outstanding for all periods shown.
(9) Reflects the accounting adjustment to reflect acquired intangibles
of approximately $3.6 million, accrual of estimated acquisition
costs, stock issued and the reversal of Midas' shareholders'
equity.
F-14
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
23.1 Consent of Grant Thornton, independent accountants.