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EXHIBIT 99(b)
ADVANCED COMMUNICATION SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial statements
give effect to the acquisition of SEMCOR, Inc. ("SEMCOR"), as described below.
Effective June 10, 1998, Advanced Communication Systems, Inc. ("ACS"), acquired
all of the outstanding common stock of SEMCOR for the preliminary purchase price
of $38 million, which consisted of $37 million in cash and $1 million in ACS
common stock. In addition, ACS will pay the shareholders up to $1.2 million for
certain income tax liabilities incurred as a result of the acquisition. The
preliminary purchase price is subject to adjustment based on the net equity
shown on the closing date balance sheet. The acquisition has been accounted for
as a purchase, and accordingly, the total purchase price has been allocated
among the acquired assets in accordance with the provisions of Accounting
Principles Board Opinion No. 16. The excess of the purchase price over the net
fair market value of the assets acquired is being classified as intangible
assets, principally goodwill, which will be amortized over its estimated useful
life.
The unaudited pro forma condensed consolidated balance sheet as of March 31,
1998, has been prepared to reflect the acquisition of SEMCOR as if it had
occurred on March 31, 1998, by combining the consolidated balance sheet of ACS
as of March 31, 1998, with the balance sheet of SEMCOR as of March 31, 1998. The
unaudited pro forma condensed consolidated statement of operations for the year
ended September 30, 1997, with appropriate adjustments, has been prepared by
combining the consolidated statement of operations of ACS for the period ended
September 30, 1997, with the historical results of operations of RF
Microsystems, Inc. ("RFM") for the nine months ended June 30, 1997, the audited
statement of income of Integrated Systems Control, Inc. ("ISC") for the twelve
months ended September 30,1997, the audited statement of operations of AMI for
the twelve months ended December 31, 1997, and the audited statement of income
of SEMCOR for the twelve months ended December 31, 1997, to reflect the
acquisitions of AMI, ISC, RFM and SEMCOR as if they had occurred at the
beginning of the period presented. The unaudited pro forma condensed
consolidated statement of operations for the nine months ended June 30, 1998,
with appropriate adjustments, has been prepared by combining the consolidated
statement of operations of ACS for the nine months ended June 30, 1998, with the
historical pre-acquisition results of operations of AMI for the four months
beginning October 1, 1997 through January 31, 1998, and the historical
pre-acquisition results of operations of SEMCOR for the period beginning October
1 1997 through June 9, 1998, to reflect the acquisitions of AMI and SEMCOR as if
they had occurred at the beginning of the period presented.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the ACS's management and should be read in conjunction with the
historical financial statements of ACS and AMI and the related notes thereto.
The unaudited pro forma condensed consolidated statements of operations are not
necessarily indicative of the results of operations that may have actually
occurred had the acquisition occurred on the dates specified, or of the future
results of the combined companies. The pro forma adjustments are based upon
available information and certain adjustments that the management of ACS
believes are reasonable. In the opinion of ACS's management, all adjustments
have been made that are necessary to present fairly the unaudited pro forma
condensed consolidated financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
(UNAUDITED)
ACS SEMCOR PRO FORMA
HISTORICAL (1) HISTORICAL (2) ADJUSTMENTS COMBINED
-------------- -------------- ----------- --------
ASSETS
Current assets:
Cash and cash equivalents $802 $410 $0 $1,212
Cash-restricted - 2 - 2
Contract receivables 27,440 20,572 - 48,012
Other receivables 621 - - 621
Income taxes receivable - - - -
Inventories 677 - - 677
Prepaid expenses 805 636 - 1,441
-------- -------- -------- ---------
Total current assets 30,345 21,620 - 51,965
-------- -------- -------- ---------
Property and equipment, net 5,157 1,939 - 7,096
Other assets:
Other related party receivables 152 - - 152
Software development costs, net 1,568 - - 1,568
Intangibles, net 19,333 525 25,371 (3) 45,229
Other assets 233 175 - 408
-------- -------- -------- ---------
Total other assets 21,286 700 25,371 47,357
-------- -------- -------- ---------
Total assets $56,788 $24,259 $25,371 $106,418
======== ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $84 $0 $0 $84
Accounts payable 2,325 1,623 - 3,948
Accrued expenses 9,224 13,058 1,500 (4) 20,813
(2,969) (5)
Billings in excess of revenue 245 449 - 694
Income taxes payable 331 - - 331
Deferred income tax liability - 33 - 33
Current portion of capital lease obligation - 795 - 795
Related party notes payable - 1,000 - 1,000
-------- -------- -------- ---------
Total current liabilities 12,209 16,958 (1,469) 27,698
Long-term debt 24,846 - 34,000 (4) 58,846
Deferred income taxes 778 - 778
Long-term portion of capital lease obligation - 258 - 258
-------- -------- -------- ---------
Total liabilities 37,833 17,216 32,531 87,580
Total stockholders' equity 18,955 7,043 2,969 (5) 18,838
- - (10,129) (6) -
-------- -------- -------- ---------
Total liabilities and stockholders' equity $56,788 $24,259 $25,371 $106,418
======== ======== ======== =========
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
MARCH 31, 1998
(1) Information obtained from the historical unaudited balance sheet of the
Company.
(2) Information obtained from the unaudited March 31, 1998, balance sheet of
SEMCOR.
(3) Reflects intangible assets, principally goodwill, resulting from the
purchase of all of the outstanding stock of SEMCOR, and the allocation of
the purchase price using the purchase method of accounting for the
transaction after adjusting the assets acquired and the liabilities
assumed to their respective fair values.
(4) Reflects the borrowings under a bank line of credit facility to fund the
acquisition and represents the cash consideration paid for SEMCOR.
Additionally, $1.5 million of incremental costs, primarily investment
banking, legal and accounting fees, were incurred directly related to the
acquisition and is shown as a pro forma adjustment to accrued expenses
and the purchase price.
(5) Reflects the settlement of a liability by the stockholders of SEMCOR
prior to the acquisition.
(6) Eliminates the equity of SEMCOR upon consolidation with the Company.
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ADVANCED COMMUNICATION SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
ACS RFM ISC AMI
HISTORICAL (1) HISTORICAL (2) HISTORICAL (3) HISTORICAL (4)
-------------- -------------- -------------- --------------
Revenues $52,194 $4,614 $12,180 $23,165
Direct Costs 37,687 3,237 6,505 14,794
Indirect, general and
administrative expenses 11,128 1,150 4,975 4,720
Write-off of in-process
R & D costs 1,910 - - -
-------- -------- -------- --------
Income from operations
1,469 227 700 3,651
Interest expense (136) - (218) (1)
Other income, net 153 - - 1,219
-------- -------- -------- --------
Income before taxes 1,486 227 482 4,869
Pro forma tax provision 571 92 183 1,850
-------- -------- -------- --------
Net income $915 $135 $299 $3,019
======== ======== ======== ========
Pro forma net income
per share-basic $0.20
=====
Pro forma net income
per share-diluted $0.19
=====
Pro forma weighted average
shares outstanding-basic 4,682
=====
Pro forma weighted average
shares outstanding-diluted 4,767
=====
RFM, ISC
AND AMI SEMCOR
PRO FORMA SEMCOR PRO FORMA
ADJUSTMENTS (5) HISTORICAL (6) ADJUSTMENTS (14) COMBINED
----------------- -------------- ------------------ --------
Revenues (3,533) (7) $92,826 $181,446
Direct Costs (1,898) (7) 63,947 124,272
Indirect, general and
administrative expenses (521) (8) 27,495 (2,114) (15) 47,467
634 (16)
Write-off of in-process
R & D costs (1,910) (9) - - -
-------- -------- -------- --------
Income from operations
796 1,384 1,480 9,707
Interest expense (1,692) (10) (357) (2,788) (17) (5,192)
Other income, net (1,219) (11) 182 - 335
-------- -------- -------- --------
Income before taxes (2,115) 1,209 (1,308) 4,850
Pro forma tax provision (813) (12) 464 (502) (12) 1,845
-------- -------- -------- --------
Net income ($1,302) $745 ($806) $3,005
======== ======== ======== ========
Pro forma net income
per share-basic $0.57
=====
Pro forma net income
per share-diluted $0.56
=====
Pro forma weighted average
shares outstanding-basic 475 (13) 89 (18) 5,246
=== == =====
Pro forma weighted average
shares outstanding-diluted 475 (13) 89 (18) 5,331
=== == =====
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(1) Represents the historical results of operations of the Company.
(2) Represents the historical results of operations of RFM for the nine
months ended June 30, 1997.
(3) Represents the historical results of operations, derived from the audited
statement of income of ISC for the twelve months ended September 30,
1997.
(4) Represents the historical results of operations, derived from the audited
statement of income of AMI for the year ended December 31, 1997.
(5) Gives effect to the acquisition of AMI, ISC and RFM assuming such
transactions had occurred on October 1, 1996, and the exclusion of a
one-time non-cash charge reflecting the write-off of acquired in-process
research and development costs in connection with the acquisition of RFM
totaling $1.9 million.
(6) Represents the historical results of operations, derived from the audited
statement of operations of SEMCOR for the year ended December 31, 1997.
(7) Elimination of intercompany transactions between the Company and RFM and
ISC.
(8) Reflects (a) elimination of intercompany transactions between the Company
and RFM and ISC of $1,438,000, (b) increase in amortization of intangible
assets, principally goodwill, totaling $552,000 resulting from the
acquisitions of AMI, ISC and RFM and (c) an increase in indirect expenses
totaling $365,000 relating to additional compensation of $65,000 payable
pursuant to employment contracts with key employees and corporate
allocation of $300,000 of costs previously billable under cost-plus
contracts which are no longer billable under time-and-materials
contracts.
(9) Reflects the reversal of the write-off of acquired in-process research
and development costs.
(10) Represents the increase in interest expense resulting from the borrowings
under the credit facility used for the acquisition of AMI.
(11) Represents the elimination of interest and investment income relating to
assets distributed to the stockholder of AMI prior to the AMI
acquisition.
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(12) Represents the income tax effect of the pro forma adjustments.
(13) Reflects the issuance of 475,000 shares of the Company's common stock in
exchange for all of the outstanding common stock of ISC.
(14) Gives effect to the acquisition of SEMCOR assuming such transactions had
occurred on October 1, 1996.
(15) Reflects the reduction of compensation to the former owners of SEMCOR
pursuant to the post acquisition employment agreement.
(16) Reflects the amortization of intangible assets, principally goodwill,
resulting from the acquisition of SEMCOR.
(17) Represents the increase in interest expense due to the borrowings under
the credit facility used for the acquisition of SEMCOR.
(18) Reflects the issuance of 89,000 shares of the Company's common stock,
being the non-cash portion of the SEMCOR purchase price.
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ADVANCED COMMUNICATION SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
SEMCOR
AMI AMI PRO FORMA SEMCOR PRO FORMA
COMPANY (1) HISTORICAL (2) ADJUSTMENTS (3) HISTORICAL (4) ADJUSTMENTS (9) COMBINED
----------- ---------------- ---------------- ---------------- ------------------ --------
Revenues $58,398 $8,085 $71,922 $138,405
Direct Costs 37,364 4,970 49,713 92,047
Indirect, general and
administrative expenses 16,130 2,210 305 (5) 19,523 438 (10) 38,606
-------- -------- -------- -------- -------- --------
Income from operations 4,904 905 (305) 2,686 (438) 7,752
Interest expense (787) - (564) (6) (8) (1,928) (11) (3,287)
Other income, net 47 1,065 (1,065) (7) 49 - 96
-------- -------- -------- -------- -------- --------
Income before taxes 4,164 1,970 (1,934) 2,727 (2,366) 4,561
Pro forma tax provision 1,505 729 (716) (8) 1,064 (923) (8) 1,659
-------- -------- -------- -------- -------- --------
Net income $2,659 $1,241 ($1,218) $1,663 ($1,443) $2,902
======== ======== ======== ======== ======== ========
Pro forma net income per
share-basis $0.40 $0.43
===== =====
Pro forma net income per
share-diluted $0.39 $0.42
===== =====
Pro forma weighted average
shares outstanding-basic 6,729 89 <12> 6,818
===== == =====
Pro forma weighted average
shares outstanding-diluted 6,855 89 <12> 6,944
===== == =====
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
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ADVANCED COMMUNICATION SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1998
(1) Represents the historical results of the operations of the Company.
(2) Represents the historical pre-acquisition results of operations of AMI
for the four-month period beginning October 1, 1997, through January 31,
1998.
(3) Adjustments to reflect the Company's acquisition of AMI as if it had
occurred on October 1, 1997.
(4) Represents the historical results of operations of SEMCOR for the period
beginning October 1, 1997, through June 9, 1998.
(5) Includes the amortization of intangible assets ($181,000), principally
goodwill, resulting from the acquisition of AMI and reflects an increase
in indirect expenses relating to additional compensation ($22,000)
payable pursuant to employment contracts with key employees and corporate
allocation ($102,000) of costs, previously billable under cost-plus
contracts, which are no longer billable under time-and-material
contracts.
(6) Represents the increase in interest expense due to the borrowings under
the credit facility used for the acquisition of AMI.
(7) Represents the elimination of interest and investment income relating to
assets distributed to the stockholder of AMI prior to the acquisition.
(8) Represents the tax effect of the pro forma adjustments.
(9) Adjustments to reflect the Company's acquisition of SEMCOR as if it had
occurred on October 1, 1997.
(10) Reflects amortization of intangible assets, principally goodwill,
resulting from the acquisition of SEMCOR.
(11) Reflects the increase in interest expense due to the borrowings under
the credit facility used for the acquisition of SEMCOR.
(12) Reflects the issuance of 89,000 shares of the Company's common stock
being the non-cash portion of the SEMCOR purchase price.