UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
June 18, 1999
Date of Report (date of earliest event reported)
Commission File Number: 0-25674
CBT GROUP PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
Republic of Ireland 0-25674 Not Applicable
------------------- ------- --------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
900 Chesapeake Drive
Redwood City, California 94063
(Address of principal executive offices, including zip code)
(650) 817-5900
(Registrant's telephone number, including area code)
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ITEM 2. Acquisition or Disposition of Assets
As reported on Form 8-K filed with the Securities and Exchange commission on
July 6, 1999, CBT Group PLC, a public limited company organized under the laws
of the Republic of Ireland ("CBT" or the "Company"), closed its acquisition of
Knowledge Well Group Limited and Knowledge Well Limited, two private companies
formed under the laws of the Ireland (collectively "Knowledge Well"), pursuant
to the terms of a Share Purchase Agreement, dated as of November 30, 1998 as
amended and restated as of March 30, 1999 (the "Share Purchase Agreement"),
among CBT, Knowledge Well and the shareholders of Knowledge Well (the "Share
Exchange").
The Company is amending its Form 8-K dated June 18, 1999 and filed on July 6,
1999 to provide the Financial Statements and Pro Forma Financial Information
required under Item 7.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of the Business Acquired
The following audited financial statements of Knowledge Well together with the
report thereon by Caplin Meehan, Independent Auditors, appear as Exhibit 20.1 to
this Current Report on Form 8-K/A and are incorporated herein by this reference.
(i) Combined Balance Sheets as of October 31, 1997 and 1998..................
(ii) Combined Statements of Operations for the period August 7, 1996 (date of
inception) to October 31, 1996, the years ended October 31, 1997 and
1998 and the period August 7, 1996 (date of inception) to October 31,
1998.....................................................................
(iii) Combined Statements of Changes in Shareholders' Equity (Deficit) for the
period August 7, 1996 (date of inception) to October 31, 1996 and the
years ended October 31, 1997 and 1998 ...................................
(iv) Combined Statements of Cashflows for the period August 7, 1996 (date of
inception) to October 31, 1996, the years ended October 31, 1997 and
1998 and the period August 7, 1996 (date of inception) to October 31,
1998.....................................................................
(v) Notes to the Combined Financial Statements...............................
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(b) Pro Forma Financial Information
The following unaudited Pro Forma Condensed Consolidated Financial Statements
have been prepared to illustrate the effects of the acquisitions by CBT of
Knowledge Well Limited and Knowledge Well Group Limited, combined herein as
Knowledge Well Group, as though such acquisitions had occurred on January 1,
1998 for the purposes of presenting the pro forma statements of operations and
on March 31, 1999, for the purposes of presenting the pro forma balance sheet.
The Unaudited Pro Forma Condensed Consolidated Financial Statements are based
on, and should be read in conjunction with, the audited historical financial
statements and the notes thereto of CBT included in the fiscal 1998 Annual
Report on Form 10-K, as amended by Form 10-K/A, and the unaudited financial
statements and notes thereto for the three months ended March 31, 1999, included
in CBT's Quarterly Report on Form 10-Q for the three month period then ended,
filed with the Securities and Exchange Commission, and the audited historical
financial statements and the notes thereto of Knowledge Well included herein.
For financial accounting purposes, the acquisition of Knowledge Well will be
accounted for using the purchase method of accounting in accordance with APB
Opinion No. 16. Accordingly, Knowledge Well's assets and liabilities have been
adjusted to reflect their fair values in the pro forma condensed consolidated
balance sheet as of January 31, 1999. The effects resulting from these
adjustments have been reflected in the pro forma condensed consolidated
statements of operations. The pro forma adjustments include, in the opinion of
management, all adjustments necessary to give pro forma effect to the
acquisition as though such transaction had occurred on January 1, 1998 for the
purpose of presenting the pro forma statements of operations and on March 31,
1999 for the purposes of presenting the pro forma balance sheet.
The unaudited pro forma consolidated financial information is not necessarily
indicative of how the Company's balance sheet and results of operations would
have been presented had the transaction referenced above actually been
consummated at the assumed dates, nor is it necessarily indicative of
presentation of the Company's balance sheet and results of operations for any
future period.
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CBT GROUP PLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
March 31, 1999 January 31, 1999
Knowledge Well Pro Forma
CBT Group Adjustments Pro Forma
-------- --------------- ----------- ---------
ASSETS
Current assets
Cash $ 57,603 $ 3,076 $ -- $ 60,679
Short term investments 38,550 -- -- 38,550
Accounts receivable, net 41,642 53 -- 41,695
Inventories 180 -- -- 180
Deferred tax assets, net 142 -- -- 142
Prepaid expenses 8,675 82 -- 8,757
-------- ------- ------- --------
Total current assets 146,792 3,211 150,003
Intangibles, net 3,977 35,450 (e) 58,451
-- 19,024 (f)
Property and equipment, net 17,414 759 -- 18,173
Investment 550 -- -- 550
Other assets 17,702 -- -- 17,702
-------- ------- ------- --------
Total assets $186,435 $ 3,970 $54,474 $244,879
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 4,604 25 -- 4,629
Accrued payroll and related expenses 4,722 997 -- 5,719
Other accrued liabilities 17,597 447 2,530 (d) 20,574
Deferred revenues 2,631 -- -- 2,631
-------- ------- ------- --------
Total current liabilities 29,554 1,469 2,530 33,553
Non-current liabilities
Minority equity interest 383 -- -- 383
Other accrued liabilities 57 164 -- 221
-------- ------- ------- --------
Total non-current liabilities 440 164 -- 604
Shareholders' equity
Ordinary shares 6,747 3,334 605 (a) 7,352
(3,334)(c)
Preferred shares -- 15 (15)(c) --
Additional paid-in capital 128,672 6,943 59,576 (a) 188,248
(6,943)(c)
Accumulated profit (deficit) 20,621 (7,519) (5,900)(b) 14,721
7,519 (c)
Capital redemption reserve 231 -- -- 231
Other comprehensive income 172 (436) 436 (c) 172
Treasury stock, 25,769 shares at cost (2) -- -- (2)
-------- ------- ------- --------
Total shareholders' equity 156,441 2,337 51,944 210,722
======== ======= ======= ========
Total liabilities and shareholders' equity $186,435 $ 3,970 $54,474 $244,879
======== ======= ======= ========
See accompanying notes to the Unaudited Pro Forma
Condensed Consolidated Financial Statements
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CBT GROUP PLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
12 Months Ended 12 Months Ended
December 31, 1998 October 31, 1998
----------------- ----------------
Knowledge Well Pro Forma
CBT Group Adjustments Pro Forma
-------- -------------- ----------- ---------
Revenues $162,232 $ 48 $ -- $162,280
Cost of revenues 25,137 -- -- 25,137
-------- ------- ------- --------
Gross profit 137,095 48 -- 137,143
Operating expenses:
Research and development 25,832 3,027 -- 28,859
Sales and marketing 75,395 1,088 -- 76,483
General and administrative 15,893 352 -- 16,245
Amortization of acquired intangibles -- -- 5,312 (h) 5,312
Acquired research and development -- -- 1,080 (g) 1,080
Costs of acquisition 5,505 -- -- 5,505
-------- ------- ------- --------
Total operating expenses 122,625 4,467 6,392 133,484
======== ======= ======= ========
Income (loss) from operations 14,470 (4,419) (6,392) 3,659
Other Income (expense), net 4,734 (3) -- 4,731
-------- ------- ------- --------
Income before provision for income taxes 19,204 (4,422) (6,392) 8,390
Provisions for income taxes (2,666) -- -- (i) (2,666)
-------- ------- ------- --------
Net income (Loss) 16,538 (4,422) (6,392) 5,724
-------- ------- ------- --------
Net income per Share - Basic (1) $0.38 $0.12
-------- --------
Shares used in computing net income per share - Basic (1) 43,630 48,467
-------- --------
Net income per Share - Diluted (1) $0.36 $0.11
-------- --------
Shares used in computing net income per share - Diluted (1) 45,979 50,816
-------- --------
(1) The per share data has been restated to reflect the effects of the Ordinary
Share Split (i) and the Knowledge Well Share Split (ii).
(i) On May 22, 1998, CBT effected a split of each of its issued and
outstanding ordinary shares of IR37.5p into four ordinary shares of
IR9.375p, "Ordinary Share Split". As a consequence of this ordinary
share split, each American Depositary Share represents and is
exchangeable for one ordinary share.
(ii) On August 31, 1998, Knowledge Well Limited effected a split of each of
its issued and outstanding ordinary shares of $1.00 into four ordinary
shares of $0.25 each, "Knowledge Well Share Split".
See accompanying notes to the Unaudited Pro Forma
Condensed Consolidated Financial Statements
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CBT GROUP PLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
3 Months Ended 3 Months Ended
March 31, 1999 January 31, 1999
-------------- ----------------
Knowledge Well Pro Forma
CBT Group Adjustments Pro Forma
------- -------------- ----------- ---------
Revenues $40,197 $ 10 $ -- $40,207
Cost of revenues 6,330 -- -- 6,330
------- ------- ------- -------
Gross profit 33,867 10 -- 33,877
Operating expenses:
Research and development 7,387 793 -- 8,180
Sales and marketing 20,973 545 -- 21,518
General and administrative 4,478 96 -- 4,574
Amortization of acquired intangibles -- -- 1,328 (h) 1,328
Acquired research and development -- -- 270 (g) 270
------- ------- ------- -------
Total operating expenses 32,838 1,434 1,598 35,870
======= ======= ======= =======
Income (loss) from operations 1,029 (1,424) (1,598) (1,993)
Other Income (expense), net 533 (20) -- 513
------- ------- ------- -------
Income before provision for income taxes 1,562 (1,444) (1,598) (1,480)
Provisions for income taxes (234) -- -- (i) (234)
------- ------- ------- -------
Net income (Loss) 1,328 (1,444) (1,598) (1,714)
------- ------- ------- -------
Net income (loss) per Share - Basic (1) $ 0.03 $ (0.03)
------- -------
Shares used in computing net income (loss) per share - Basic (i) 44,476 49,313
------- -------
Net income (loss) per Share - Diluted (1) $ 0.03 $ (0.03)
------- -------
Shares used in computing net income (loss) per share - Diluted (1) 47,484 49,313
------- -------
(1) The per share data has been restated to reflect the effects of the Ordinary
Share Split and the Knowledge Well Share Split.
See accompanying notes to the Unaudited Pro Forma
Condensed Consolidated Financial Statements
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CBT GROUP PLC
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States after eliminating all material intercompany accounts and
transactions. The acquisition of Knowledge Well is being accounted for under the
purchase method of accounting.
The purchase price of Knowledge Well is $60.2 million and has been allocated as
follows:
Dollars In Thousands
--------------------
Current and tangible assets 3,970
Liabilities assumed (1,633)
-------
Net Assets 2,337
-------
Core developed technology 5,400
In-process technology 5,900
-------
Technology 11,300
-------
Assembled workforce 1,150
Hamilton college license agreement 2,900
Kansas State License agreement 26,000
-------
Other identifiable intangible assets 30,050
-------
Capitalized transaction costs (2,530)
Implied Goodwill $19,024
-------
Purchase consideration $60,181
=======
The purchase consideration has been arrived at by calculating the fair market
value of the shares to be issued and the fair value of the options using
a Black-Scholes option pricing model. The fair market value per share used in
the valuation was $12.93, which was CBT's average share price for the period
beginning five days prior to, and ending five days following, the announcement
of the acquisition.
The following pro forma adjustments have been recorded to reflect the
acquisition:
Condensed Consolidated Balance Sheet - adjustments to reflect the occurrence of
the acquisition on March 31, 1999
(a) The issuance of 4.8 million CBT ordinary shares for the issued and
outstanding ordinary shares of Knowledge Well at a purchase consideration
of $60.2 million. The ordinary shares of CBT Group PLC will increase by
approximately $605,000 and Additional Paid In Capital will increase by the
remainder of the purchase consideration, approximately $59.6 million.
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(b) The $5.9 million of acquired in-process research and development will be
written off to expense in the three months ended June 30, 1999, the period
in which the closing of the acquisition occurred. This write off of in-
process research and development is not reflected in the Unaudited Pro
Forma Consolidated Statements of Operations as pro forma adjustments are
limited to those events that are expected to have a continuing impact.
The $5.9 million of acquired in-process research and development represents
our management's estimate of the current fair value of those specifically
identified Knowledge Well research and development projects for which
technological feasibility has not been established and for which
alternative future uses do not exist. In estimating such current fair
value, management considered the estimated future after-tax cash flows
attributable to these projects, which were then discounted to present value
utilizing appropriate discount rates commensurate with the risks of
reaching technological feasibility, completing the in-process projects, and
achieving the estimated cash flows (the discount rate was 25%).
(c) Elimination of Knowledge Well pre acquisition shareholder's equity, as
follows:
Dollars In Thousands
--------------------
Ordinary shares $ 3,334
Preference shares 15
Additional paid-in capital 6,943
Accumulated deficit (7,519)
Other comprehensive income (436)
-------
Total Knowledge Well shareholders equity $ 2,337
=======
(d) Direct transaction costs incurred of $2.5 million representing primarily
financial advisor, legal and other professional fees. There can be no
assurance that the Company will not incur additional charges in
subsequent periods to reflect costs associated with the acquisition or
that management will be successful in their efforts to integrate the
operations of the two companies.
(e) Identifiable Intangible Assets
Dollars In Thousands Amortization Period
-------------------- -------------------
Years
-----
Assembled workforce $ 1,150 5
Hamilton College license agreement 2,900 5
Core developed technology 5,400 5
Kansas State license agreement 26,000 10
-------
$35,450
=======
(f) Excess purchase price of $19.0 million as goodwill. The final figure for
goodwill will be increased by any reduction in net assets at June 18, 1999,
the date of closure of the acquisition, currently estimated to be $4.7
million.
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Statements of Operations - adjustments to reflect the acquisition as if it had
occurred on January 1, 1998
(g) Amortization of core developed technology.
(h) Amortization of Acquired Intangibles:
Dollars In Thousands Dollars In Thousands
-------------------- --------------------
Twelve Months Three Months
------------- ------------
Assembled workforce $ 230 $ 57
Hamilton College license agreement 580 145
Kansas State license agreement 2,600 650
Implied goodwill 1,902 476
------ ------
$5,312 $1,328
====== ======
The following are the assumptions used in determining the method and term
of amortization of each of the intangibles noted above:
(i) The assembled workforce intangible will be amortized on a straight-
line basis over a period of five years. The assembled workforce has
been allocated a useful life of five years based on an expected
employee turnover rate of 20% per year, which is a rate consistent
with historical turnover rates for CBT employees;
(ii) The Kansas State University license agreement intangible will be
amortized on a straight-line basis over a period of ten years. We
have conservatively allocated a useful life of ten years to this
license based on its initial ten-year term;
(iii) The Hamilton College license agreement intangible will be amortized
on a straight-line basis over a period of five years. We have
conservatively allocated a useful life of five years to this license
based on its initial five year term;
(iv) The implied goodwill will be amortized on a straight-line basis over
a period of ten years. The goodwill has been allocated a useful life
of ten years consistent with the period allocated to the Kansas State
University license, which is the most significant of the acquired
intangibles.
(i) Amortization of goodwill and other identifiable assets are non-tax
deductible.
The actual financial position and results of operations may differ from the pro
forma amounts reflected herein because of various factors, including, without
limitation, access to additional information, changes in value and changes in
operating results between the date of preparation of the unaudited pro forma
consolidated financial information and the date on which the acquisition closes.
However, in the opinion of management any final adjustments will not be material
to the future financial position and/or results of operation.
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(c) Exhibits
The following exhibits are filed herewith:
20.1 Knowledge Well audited combined financial statements for the years ended
October 31, 1997 and 1998.
23.1 Consent of Caplin Meehan, Independent Auditors.
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SIGNATURE
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 thereunto duly authorized.
CBT GROUP PLC
Date: July 16, 1999 By: /s/ Gregory M. Priest
----------------------------
Gregory M. Priest
President and Chief Executive Officer
Date: July 16, 1999 By: /s/ David C. Drummond
----------------------------
David C. Drummond
Executive Vice President of Finance
and Chief Financial Officer
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