1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A#1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (date of earliest event reported): May 29, 1998
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DELTEK SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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VIRGINIA 0-22001 54-1252625
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
8280 GREENSBORO DRIVE, MCLEAN, VIRGINIA 22102
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 734-8606
2
This Amendment No. 1 to the Current Report of Deltek Systems, Inc.
(the "Company" or "Deltek") on Form 8-K dated May 29, 1998 relates to the
Company's completion of the acquisition of Harper & Shuman, Inc. ("H&S")
pursuant to the terms of a certain Agreement and Plan of Reorganization dated
May 27, 1998 (the "Agreement") between the Company, the Purchaser, H&S, Chester
A. Shuman, the Harper and Shuman Employee Stock Ownership Plan and Trust, and
other shareholders of Harper and Shuman, as named in the Agreement. The purpose
of this Amendment is to amend Item 7 to provide the required financial
statements of Harper & Shuman, Inc. and the required pro forma financial
information relating to the business combination between the Company and Harper
& Shuman, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The financial statements of Deltek Systems, Inc. and notes to
financial statements and auditors report are incorporated herein by reference
from the Company's Annual Report on Form 10-K (File no. 0-22001) for the year
ended December 31, 1997 filed with the Securities and Exchange Commission on
March 30, 1998. The March 31, 1998 unaudited quarterly financial statements
are also incorporated herein by reference from the Company's Form 10-Q filed
with the Securities and Exchange Commission.
The financial statements of Harper & Shuman, Inc. ("H&S") and notes
to financial statements and auditors report for the years ended December 31,
1997 and 1996, are submitted herewith. The unaudited Harper & Shuman, Inc.
March 31, 1998 quarterly financial statements are also submitted herewith.
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TABLE OF CONTENTS
Harper and Shuman, Inc. Financial Statements:
4
Independent Auditors' Report
December 31, 1997 and 1996 Financial Statements:
Balance Sheets 5
Statements of Operations 6
Statements of Changes in Shareholders' Equity 7
Statements of Cash Flows 8
Notes to Financial Statements 9
Unaudited March 31, 1998 and 1997 14
Financial Statements
19
Unaudited Pro Forma Financial
Statements
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4
[TOFIAS, FLEISHMAN, SHAPIRO & CO., P.C. LETTERHEAD]
Independent Auditors' Report
The Board of Directors and Shareholders
Harper and Shuman, Inc.
We have audited the accompanying balance sheets of Harper and Shuman, Inc. as of
December 31, 1997 and 1996, and the related statements of operations, changes in
shareholders' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Harper and Shuman, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ TOFIAS, FLEISHMAN, SHAPIRO & CO., P.C.
May 15, 1998
5
HARPER AND SHUMAN, INC.
BALANCE SHEETS
DECEMBER 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 610,634 $ 1,047,518
Accounts receivable, less allowance for doubtful
accounts of $151,000 and $70,000 respectively 1,103,924 1,068,457
Refundable taxes on income 71,000 55,000
Prepaid expenses and other current assets 78,657 172,084
Deferred taxes on income 127,000 103,500
----------- -----------
TOTAL CURRENT ASSETS 1,991,215 2,446,559
----------- -----------
Equipment and improvements:
Furniture and equipment 2,744,932 2,516,563
Leasehold improvements 106,531 106,531
----------- -----------
2,851,463 2,623,094
Less accumulated depreciation 2,510,768 2,332,140
----------- -----------
340,695 290,954
----------- -----------
Software development costs, net of accumulated
amortization of $8,704 in 1997 17,418 26,122
----------- -----------
TOTAL ASSETS $ 2,349,328 $ 2,763,635
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 855,620 $ 627,333
Current maturities of long-term debt 47,500 64,167
Deferred revenue 295,440 -
Income taxes payable 41,002 -
Customer deposits 1,750 1,234,629
----------- -----------
TOTAL CURRENT LIABILITIES 1,241,312 1,926,129
----------- -----------
Long-term debt 38,750 80,000
----------- -----------
Deferred taxes on income 7,000 10,500
----------- -----------
Shareholders' equity:
Common stock, $1 par value
Authorized 150,000 shares
Issued and outstanding 121,610 and 125,892
shares respectively 121,610 125,892
Retained earnings 940,656 621,114
----------- -----------
1,062,266 747,006
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,349,328 $ 2,763,635
=========== ===========
The accompanying notes are an integral part of the financial statements. 5
6
HARPER AND SHUMAN, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
1997 1996
Sales, net $ 8,864,407 $ 6,931,001
Cost of goods sold 2,613,598 2,455,041
----------- -----------
6,250,809 4,475,960
----------- -----------
Operating expenses:
Research and development 681,495 731,824
Selling and administrative 4,883,281 3,781,306
Profit sharing and employee stock ownership
plan contributions 60,500 52,500
----------- -----------
5,625,276 4,565,630
----------- -----------
Income/(loss) from operations 625,533 (89,670)
----------- -----------
Other income/(expense):
Interest income 46,144 23,448
Interest expense (11,054) (13,730)
----------- -----------
35,090 9,718
----------- -----------
Income/(loss) before provision for/(benefit from) taxes on income 660,623 (79,952)
Provision for/(benefit from) taxes on income 264,000 (39,000)
----------- -----------
Net income/(loss) $ 396,623 $ (40,952)
=========== ===========
The accompanying notes are an integral part of the financial statements. 6
7
HARPER AND SHUMAN, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
COMMON STOCK ADDITIONAL
SHARES PAID-IN RETAINED
OUTSTANDING AMOUNT CAPITAL EARNINGS TOTAL
Balance, December 31,
1995 127,672 $ 127,672 $ 28,854 $ 665,252 $ 821,778
Net loss - - - (40,952) (40,952)
Purchase and retirement of
common stock from ESOP (1,780) (1,780) (28,854) (3,186) (33,820)
----------- ----------- ----------- ----------- -----------
Balance, December 31,
1996 125,892 125,892 - 621,114 747,006
Net income - - - 396,623 396,623
Purchase and retirement of
common stock from ESOP (4,282) (4,282) - (77,081) (81,363)
----------- ----------- ----------- ----------- -----------
Balance, December 31,
1997 121,610 $ 121,610 $ - $ 940,656 $ 1,062,266
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. 7
8
HARPER AND SHUMAN, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 396,623 $ (40,952)
------------ ------------
Reconciliation to cash flow:
Bad debt expense 81,000 (2,000)
Depreciation 178,628 127,739
Amortization 8,704 -
Deferred taxes on income (27,000) (42,000)
Change in:
Accounts receivable (116,467) (210,360)
Refundable taxes on income (16,000) 7,000
Prepaid expenses and other current assets 93,427 (170,654)
Accounts payable and accrued expenses 228,287 (240,912)
Deferred revenue 295,440 (19,773)
Income taxes payable 41,002 -
Customer deposits (1,232,879) 1,228,192
------------ ------------
Total adjustments (465,858) 677,232
------------ ------------
Net cash provided by/(used in) operating activities (69,235) 636,280
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Software development costs - (26,122)
Purchase of equipment (228,369) (173,792)
------------ ------------
Net cash used in investing activities (228,369) (199,914)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common stock from ESOP (81,363) (33,820)
Proceeds from notes payable 75,000 100,000
Repayment of notes payable (132,917) (51,666)
------------ ------------
Net cash provided by/(used in) financing activities (139,280) 14,514
------------ ------------
Net increase/(decrease) in cash and cash equivalents (436,884) 450,880
Cash and cash equivalents, beginning 1,047,518 596,638
------------ ------------
Cash and cash equivalents, ending $ 610,634 $ 1,047,518
============ ============
The accompanying notes are an integral part of the financial statements. 8
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HARPER AND SHUMAN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes revenue from sales of software licenses upon
delivery of the software product to a customer, unless the Company has
significant related obligations remaining, such as installation services.
When significant obligations remain after the software product has been
delivered, revenue is not recognized until such obligations have been
completed or are no longer significant.
Revenue from post contract customer support is recognized over the period
the customer support services are provided and software services revenue is
recognized as services are performed.
SOFTWARE DEVELOPMENT COSTS
Capitalization of software development costs begins upon the establishment
of technological feasibility. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized
software development costs requires considerable judgment by management
with respect to certain external factors, including, but not limited to,
technological feasibility, anticipated future gross revenues, estimated
economic life and changes in software and hardware technologies.
Capitalized software development costs are amortized using the
straight-line method over the remaining estimated economic useful life of
the product. Software development costs are being amortized over 36 months.
All other research and development expenditures are charged to research and
development expense in the period incurred.
EQUIPMENT AND IMPROVEMENTS
Equipment and improvements are stated at cost. Major additions and
improvements are capitalized, while repairs and maintenance are charged to
expense as incurred. Depreciation is provided principally by use of an
accelerated method at rates which are intended to amortize the cost of
these assets over their estimated useful lives. A summary of estimated
useful lives is as follows:
CLASSIFICATION ESTIMATED USEFUL LIVES
Computer equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements 31.5 years
CASH AND CASH EQUIVALENTS
Cash equivalents include money market accounts and short-term investments
with maturities of three months or less.
INCOME TAXES
Deferred taxes on income have been recorded to recognize the estimated
future tax consequences attributable to the cumulative temporary
differences between financial statement and tax basis of assets and
liabilities.
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HARPER AND SHUMAN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for 1997
and 1996 totalled $218,400 and $43,500 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 assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could vary from the estimates
that were used.
NOTE 2 - LINE OF BUSINESS
The Company is a Massachusetts corporation that provides computer software and
consulting services to architectural, engineering, environmental and other
professional service companies throughout the United States. Products include
comprehensive system packages for project control and accounting. Systems can be
installed on a customer's hardware, or the Company will supply a complete
turn-key system.
NOTE 3 - LINE OF CREDIT
The Company has a $300,000 revolving line of credit agreement with a bank
extending to June, 1998. Advances bear interest at the bank's prime rate plus
.75%, adjusted by the bank from time to time. Borrowings are limited to 70% of
qualified accounts receivable balances. Principal is due on demand, and the line
is secured by all of the Company's business assets. The agreement contains
certain restrictive covenants including maintenance of certain levels of working
capital and profitability. At December 31, 1997 and 1996, there were no balances
outstanding under this agreement.
NOTE 4 - LONG-TERM DEBT
At December 31, long-term debt consists of the following:
1997 1996
Note payable to a bank at the bank's prime rate plus 1% (9.5% at
December 31, 1997), principal due in monthly instalments of $2,778,
plus interest, to June, 1999, secured by equipment. $ - $83,334
Note payable to a bank at the bank's prime rate plus 1% (9.5% at
December 31, 1997), principal due in monthly instalments of $3,125,
plus interest, to July, 1999, secured by all business assets. 56,250 -
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HARPER AND SHUMAN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4 - LONG-TERM DEBT (CONT'D)
1997 1996
Note payable to former shareholder at the bank's prevailing prime
interest rate (8.5% at December 31, 1997) with principal due in annual
instalments of $10,000, plus interest through June 1, 2000. $30,000 $40,000
Note payable to a bank at the bank's prime rate plus 1.25% (9.75% at
December 31, 1997), principal due in monthly instalments of $2,083,
plus interest, to September, 1997, secured by equipment. - 20,833
------- -------
86,250 144,167
Less current maturities 47,500 64,167
------- -------
$38,750 $80,000
======= =======
Approximate future annual maturities over the remaining period of indebtedness
are as follows:
1998 $ 47,500
1999 28,750
2000 10,000
NOTE 5 - COMMITMENTS
From January 1, 1996 through November 30, 1997, the Company leased its
Massachusetts office facilities from Moulton Street Associates, a partnership of
which a partner is also a shareholder of the Company. During November, 1997 the
building was sold to Moulton Street Realty Trust, an unrelated party. The lease,
which is classified as an operating lease, calls for future minimum annual
rentals of $307,646 through May 31, 2002. In addition to the basic monthly
rental, the lease requires payment of the excess of utilities, taxes and
maintenance costs over the base-year cost of these items. Rent expense for 1997
and 1996 was $330,164 and $357,508 respectively. Rent expense has been reduced
for 1997 and 1996 by $33,309 and $36,458 respectively for sublease rental
income. Rents paid to Moulton Street Associates in 1997 and 1996 totalled
$304,527 and $357,508 respectively.
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HARPER AND SHUMAN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - TAXES ON INCOME
For the years ended December 31, the provision for/(benefit from) taxes on
income consisted of the following:
1997 1996
Current:
State $ 60,000 $ 3,000
Federal 231,000 -
-------- -------
291,000 3,000
-------- -------
Deferred:
State ( 5,400) ( 8,400)
Federal ( 21,600) ( 33,600)
-------- -------
( 27,000) ( 42,000)
-------- -------
Provision for/(benefit from)
taxes on income $264,000 ($39,000)
======== =======
Deferred tax assets result from temporary differences in accounting for bad
debts and accrued vacation for financial reporting and income tax purposes.
Deferred tax liabilities result from differences for accounting for capitalized
software costs. Net operating loss carryforwards of $66,200 were used to offset
taxes in 1997.
NOTE 7 - PROFIT SHARING PLAN
The Company has a profit sharing plan for qualified employees. Contributions to
the plan are authorized annually by the Board of Directors. Contributions to the
plan in both 1997 and 1996 were $50,000.
NOTE 8 - STOCK OPTIONS
The Company's Incentive Stock Option Plan provides for the grant to key
employees of qualified options to purchase the Company's common stock at a
board-determined option price not less than the fair market value at date of
grant. At December 31, 1997 and 1996, options for 750 shares were outstanding
and exercisable to purchase shares of the Company's common stock at $18 per
share. Options expire in 1999. The Company has reserved 750 shares of stock for
issuance upon exercise of these options.
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HARPER AND SHUMAN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 9 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company has in effect an Employee Stock Ownership Plan (ESOP) for qualified
employees. Under the plan, the Company makes annual contributions of cash. The
amount of the annual contribution is at the discretion of the Board of
Directors, except that the minimum amount must be sufficient to enable the trust
to meet its current obligations. Contributed compensation costs were $10,500 and
$2,500 for 1997 and 1996 respectively.
NOTE 10 - CASH FLOWS INFORMATION
During 1997 and 1996, cash paid for the items as indicated was as follows:
1997 1996
Interest $ 11,430 $33,932
Income taxes $280,780 $ 2,650
NOTE 11 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents at several financial
institutions. Balances deposited in commercial banks are insured by the FDIC for
up to $100,000. At times, balances in these accounts exceed federally insured
limits. The Company has not experienced any losses in such accounts and believes
it is not exposed to any significant credit risk on cash and cash equivalents.
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HARPER SHUMAN, INC.
BALANCE SHEETS
MARCH 31, 1998 (UNAUDITED) DECEMBER 31, 1997 (AUDITED)
-------------------------- ---------------------------
ASSETS
Cash and marketable securities $ 891,000 $ 610,000
Accounts receivable, net 963,000 1,104,000
Deferred income taxes 23,000 127,000
Prepaid and other current assets 596,000 150,000
------------------------------------------------------------
Total current assets 2,473,000 1,991,000
Furniture, equipment, and leasehold improvements, net 326,000 341,000
Computer software development costs, net 15,000 17,000
Other assets 16,000 --
------------------------------------------------------------
Total assets $ 2,830,000 $ 2,349,000
============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 754,000 $ 856,000
Income taxes payable 307,000 41,000
Deferred income taxes 7,000 18,000
Deferred revenue 521,000 297,000
Other liabilities 77,000 74,000
------------------------------------------------------------
Total current liabilities 1,666,000 1,286,000
------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock, 122,000 122,000
Retained earnings 1,042,000 941,000
------------------------------------------------------------
1,164,000 1,063,000
------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,830,000 $ 2,349,000
============================================================
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HARPER AND SHUMAN, INC.
STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
-------------------------------------
Revenues: 1998 1997
---- ----
License fees $937,000 $1,155,000
Services 1,252,000 948,000
Third-party equipment and software 253,000 122,000
-------------------------------------
2,442,000 2,225,000
Operating expenses:
Cost of software 78,000 76,000
Cost of services 694,000 530,000
Cost of third-party equipment and software 172,000 77,000
Software development 453,000 352,000
Sales and marketing 611,000 517,000
General and administrative 267,000 331,000
-------------------------------------
Total operating expenses 2,275,000 1,883,000
-------------------------------------
Income from operations 167,000 342,000
Interest income 1,000 2,000
-------------------------------------
Income before income taxes 168,000 344,000
Provision for income taxes 67,000 138,000
-------------------------------------
Net income $101,000 $206,000
=====================================
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HARPER & SHUMAN, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
--------------------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $101,000 $206,000
------------------------------------------
Reconciliation to cash flow:
Depreciation and amortization 48,000 40,000
Change in: - -
Accounts receivable 141,000 250,000
Deferred income taxes 104,000 -
Prepaid expenses and other current assets (446,000) 109,000
Other assets (16,000) -
Accounts payable and accrued expenses (102,000) 23,000
Deferred revenue 224,000 (728,000)
Income taxes payable 266,000 119,000
Deferred income taxes (11,000) -
Other liabilities 3,000 -
------------------------------------------
Total adjustments 211,000 (187,000)
------------------------------------------
Net cash provided by/(used in) operating activities 312,000 19,000
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of marketable securities 245,000 (613,000)
Purchase of property and equipment (31,000) (48,000)
------------------------------------------
Net cash provided by/(used in) investing activities 214,000 (661,000)
------------------------------------------
Net increase/(decrease) in cash and cash equivalents 526,000 (642,000)
------------------------------------------
Cash and cash equivalents, beginning 31,000 1,048,000
------------------------------------------
Cash and cash equivalents, ending $557,000 $406,000
==========================================
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HARPER & SHUMAN, INC.
UNAUDITED NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The condensed financial statements included herein have been prepared by
Harper & Shuman, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the financial statements and notes thereto for the year-ended December 31,
1997, included in the Deltek Systems, Inc. Form 8-K herein.
2. Acquisition by Deltek Systems, Inc.
On May 27, 1998, the Company entered into an agreement and plan of
reorganization with Deltek Systems, Inc ("Deltek"). The transaction was
consummated on May 29, 1998 and resulted in Company shareholders receiving
approximately 690,000 shares of Deltek common stock in exchange for all of the
outstanding shares of the Company. This transaction will be accounted for as a
pooling-of-interests.
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(b) Pro Forma Financial Information
The following unaudited balance sheet as of March 31, 1998 is based on the
historical unaudited financial statements of Deltek (incorporated herein by
reference as noted above) and on the historical audited financial statements of
H&S included in this report. The unaudited pro forma financial statements of
operations for the year ended December 31, 1997 and for the three months ended
March 31, 1998 give effect to the Transaction as if it had occurred at the
beginning of each period and the unaudited pro forma balance sheet has been
prepared as if the Transaction had occurred on that date. The Unaudited Pro
Forma Financial Statements are not intended to be indicative of either future
results of operations or results that might have been achieved had the merger
been consummated at the dates indicated.
The pro forma adjustments are based upon currently available information
and upon certain assumptions that management believes are reasonable. The
Transaction is being accounted for under the pooling of interests method of
accounting and, accordingly, the historical financial statements of Deltek are
retroactively combined with the historical financial statements of Harper &
Shuman. As such, these pro forma financial statements became the historical
financial statements of Deltek at the date of the acquisition.
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
PRO FORMA
ASSETS DELTEK HARPER & SHUMAN ADJUSTMENTS COMBINED HISTORICAL
------ --------------- ----------- --------------------
Cash and marketable securities $ 20,889 $ 891 $ $ 21,780
Restricted cash 5,554 - 5,554
Accounts Receivable, net 11,738 963 12,701
Inventories 195 - 195
Deferred income taxes 963 23 986
Prepaid and other current assets 1,985 596 2,581
------------------------------ --------------------
Total current assets 41,324 2,473 43,797
------------------------------ --------------------
Furniture, equipment, and leaseholds, net 3,042 326 3,368
Computer software development costs, net 2,593 15 2,608
Other assets 128 16 144
------------------------------ --------------------
Total assets $ 47,087 $ 2,830 $ 49,917
============================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 4,778 $ 754 $ 1,096 (a)$ 6,628
Income taxes payable 1,599 307 1,906
Deferred income taxes 1,156 7 1,163
Deferred revenue 11,373 521 11,894
Other liabilities - 77 77
-------------------------------------------------------------------
Total current liabilities 18,906 1,666 1,096 21,668
-------------------------------------------------------------------
Shareholders' equity:
Common stock, 17 122 (121)(b) 18
Paid in capital 18,251 - 121 18,372
Retained earnings 10,299 1,042 (1,096) 10,245
-------------------------------------------------------------------
28,567 1,164 (1,096) 28,635
Less unearned compensation 386 - - 386
-------------------------------------------------------------------
Total shareholders' equity 28,181 1,164 (1,096) 28,249
-------------------------------------------------------------------
Total liabilities and shareholders' equity $ 47,087 $ 2,830 $ - $ 49,917
===================================================================
(a) Pro forma adjustment reflects the estimated legal, accounting,
investment banking and other fees associated with the combining of
the two companies that will be expensed upon closing of the
transaction.
(b) Pro forma adjustment reflects the exchange of 121 shares of Harper
and Shuman at $1.00 par value per share for 686 shares of Deltek at
$0.001 par value per share.
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UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma
Deltek Harper & Shuman Combined Historical
------------------- ----------------- ---------------------
Revenues:
License fees $ 4,946 $ 937 $ 5,883
Services 9,840 1,253 11,093
Third-party equipment and software 525 252 777
-------------------------------------------------------------------
15,311 2,442 17,753
Operating expenses:
Cost of software 453 78 531
Cost of services 4,445 694 5,139
Cost of third-party equipment and software 431 172 603
Software development 2,881 453 3,334
Sales and marketing 1,646 611 2,257
General and administrative 799 267 1,066
-------------------------------------------------------------------
Total operating expenses 10,655 2,275 12,930
-------------------------------------------------------------------
Income from operations 4,656 167 4,823
Interest income 249 1 250
-------------------------------------------------------------------
Income before income taxes 4,905 168 5,073
Provision for income taxes 1,900 67 1,967
-------------------------------------------------------------------
Net income $ 3,005 $ 101 $ 3,106
===================================================================
Basic net income per share $ 0.18 $ 0.18
=================== =====================
Diluted net income per share $ 0.17 $ 0.17
=================== =====================
Weighted average shares outstanding 17,047 17,733
=================== =====================
Weighted average shares outstanding,
including the dilutive impact of stock options 17,500 18,190
=================== =====================
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UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma
Deltek Harper and Shuman Combined Historical
--------------------- ------------------- ---------------------
Revenues:
License fees $ 17,415 $ 3,628 $ 21,043
Services 29,316 3,900 33,216
Third-party equipment and software 2,051 1,336 3,387
--------------------- ------------------- --------------------
48,782 8,864 57,646
--------------------- ------------------- --------------------
Operating expenses:
Cost of software 1,764 315 2,079
Cost of services 11,980 2,395 14,375
Cost of third-party equipment and software 1,690 941 2,631
Software development 9,539 1,675 11,214
Sales and marketing 4,767 1,876 6,643
General and administrative 2,522 1,036 3,558
Acquisition costs 320 - 320
--------------------- ------------------- --------------------
Total operating expenses 32,582 8,238 40,820
--------------------- ------------------- --------------------
Income from operations 16,200 626 16,826
Interest income 746 35 781
--------------------- ------------------- --------------------
Income before income taxes 16,946 661 17,607
Provision for income taxes 5,634 264 5,898
--------------------- ------------------- --------------------
Net income $ 11,312 $ 397 $ 11,709
===================== =================== ====================
Basic net income per share $ 0.68 $ 0.67
Diluted net income per share $ 0.66 $ 0.65
Weighted average shares outstanding 16,699 17,398
===================== ====================
Weighted average shares outstanding,
including the dilutive impact of stock options 17,177 17,882
===================== ====================
Pro forma statement of operations data (unaudited):
Income before provision for income taxes, as
reported 16,946 17,607
Income tax provision 6,516 6,780
--------------------- --------------------
Net income 10,430 10,827
===================== ====================
Pro forma basic net income per share $ 0.62 $ 0.62
===================== ====================
Pro forma diluted net income per share $ 0.61 $ 0.61
===================== ====================
21
22
UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma
Deltek Harper and Shuman Combined Historical
-------------------- ------------------- ---------------------
Revenues:
License fees $ 12,545 $ 1,569 $ 14,114
Services 20,362 3,981 24,343
Third-party equipment and software 1,873 1,381 3,254
-------------------- -------------------- --------------------
34,780 6,931 41,711
-------------------- -------------------- --------------------
Operating expenses:
Cost of software 1,318 259 1,577
Cost of services 8,043 1,801 9,844
Cost of third-party equipment and software 1,536 980 2,516
Software development 6,674 1,706 8,380
Sales and marketing 3,460 1,540 5,000
General and administrative 2,283 735 3,018
Stock option compensation 867 - 867
Purchased in-process research and development 394 - 394
-------------------- -------------------- --------------------
Total operating expenses 24,575 7,021 31,596
-------------------- -------------------- --------------------
Income from operations 10,205 (90) 10,115
Interest income 382 10 392
-------------------- -------------------- --------------------
Income before income taxes 10,587 (80) 10,507
Provision for income taxes 93 (39) 54
-------------------- -------------------- --------------------
Net income $ 10,494 $ (41) $ 10,453
==================== ==================== ====================
Basic net income per share $ 0.70 $ 0.66
==================== ====================
Diluted net income per share $ 0.67 $ 0.64
==================== ====================
Weighted average shares outstanding 15,061 15,777
==================== ====================
Weighted average shares outstanding, 15,560 16,282
==================== ====================
including the dilutive impact of stock options
Pro forma statement of operations data (unaudited):
Income before provision for income taxes, as reported 10,587 10,507
Income tax provision 4,131 4,092
-------------------- --------------------
Net income 6,456 6,415
==================== ====================
Pro forma basic net income per share $ 0.43 $ 0.41
==================== ====================
Pro forma diluted net income per share $ 0.41 $ 0.39
==================== ====================
22
23
UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma
Deltek Harper and Shuman Combined Historical
----------------- ------------------- ---------------------
Revenues:
License fees $ 9,720 $ 1,936 $ 11,656
Services 15,154 3,922 19,076
Third-party equipment and software 1,975 1,599 3,574
---------------- ------------------- ---------------------
26,849 7,457 34,306
---------------- ------------------- ---------------------
Operating expenses:
Cost of software 893 337 1,230
Cost of services 5,151 1,786 6,937
Cost of third-party equipment and software 1,580 1,170 2,750
Software development 4,934 1,643 6,577
Sales and marketing 2,743 1,435 4,178
General and administrative 1,875 915 2,790
----------------- ------------------- ---------------------
Total operating expenses 17,176 7,286 24,462
----------------- ------------------- ---------------------
Income from operations 9,673 171 9,844
Interest income 393 (9) 384
----------------- ------------------- ---------------------
Income before income taxes 10,066 162 10,228
Provision for income taxes 45 57 102
----------------- ------------------- ---------------------
Net income $ 10,021 $ 105 $ 10,126
================= =================== =====================
Basic net income per share $ 0.67 $ 0.64
================= =====================
Diluted net income per share $ 0.64 $ 0.62
================= =====================
Weighted average shares outstanding 15,037 15,759
================= =====================
Weighted average shares outstanding, 15,552 16,279
================= =====================
including the dilutive impact of stock options
Pro forma statement of operations data (unaudited):
Income before provision for income taxes, as reported 10,066 10,228
Income tax provision 3,827 3,884
----------------- ---------------------
Net income 6,239 6,344
================= =====================
Pro forma basic net income per share $ 0.41 $ 0.40
================= =====================
Pro forma diluted net income per share $ 0.40 $ 0.39
================= =====================
23
24
PRO FORMA QUARTERLY DATA FOR DELTEK SYSTEMS, INC. CONSOLIDATED STATEMENT OF
OPERATIONS
($000'S OMITTED-EXCEPT PER SHARE DATA)
1ST QTR 2ND QTR 3RD QTR 4TH QTR 1ST QTR
------- ------- ------- ------- -------
3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
------- ------- ------- -------- -------
STATEMENT OF OPERATIONS DATA:
REVENUES:
License 4,706 4,809 5,141 6,387 5,883
Services 7,523 7,688 8,736 9,269 11,093
Third party equipment/software sales 534 1,106 624 1,123 777
------------ ------------ ------------ ------------ ------------
12,763 13,603 14,501 16,779 17,753
------------ ------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of software 412 511 567 589 531
Cost of services 3,087 3,276 3,928 4,084 5,139
Cost of third party 417 894 479 841 603
Software development 2,605 2,783 2,683 3,143 3,334
Sales and marketing 1,427 1,581 1,551 2,084 2,257
General and administrative 918 880 887 873 1,066
Acquisition costs - - 320 - -
------------ ------------ ------------ ------------ ------------
Total costs and expenses 8,866 9,925 10,415 11,614 12,930
------------ ------------ ------------ ------------ ------------
Operating income 3,897 3,678 4,086 5,165 4,823
Interest income, net 61 253 236 231 250
------------ ------------ ------------ ------------ ------------
Income before income taxes 3,958 3,931 4,322 5,396 5,073
Income Tax provision 684 1,473 1,640 2,101 1,967
------------ ------------ ------------ ------------ ------------
Net Income 3,274 2,458 2,682 3,295 3,106
------------ ------------ ------------ ------------ ------------
Basic net income per share $ 0.20 $ 0.14 $ 0.15 $ 0.19 $ 0.18
------------ ------------ ------------ ------------ ------------
Diluted net income per share $ 0.19 $ 0.14 $ 0.15 $ 0.18 $ 0.17
------------ ------------ ------------ ------------ ------------
Weighted average shares outstanding 16,537 17,636 17,745 17,687 17,746
------------ ------------ ------------ ------------ ------------
Weighted average shares outstanding,
including dilutive effect of stock options 17,002 18,097 18,257 18,157 18,205
------------ ------------ ------------ ------------ ------------
Pro forma operating data:
Income before taxes, as reported 3,958
Income tax provision 1,566
------------
Net income 2,392
------------
Basic net income per share $ 0.14
------------
Diluted net income per share $ 0.14
------------
24
25
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 thereunto duly authorized.
Deltek Systems, Inc.
(Registrant)
Dated: July 23, 1998 By: /s/ ALAN R. STEWART
------------------------------
Alan R. Stewart,
Chief Financial Officer
25