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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1996.
Commission File Number 0-23488
CIBER, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-2046833
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5251 DTC PARKWAY, SUITE 1400, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices) (Zip Code)
(303) 220-0100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $0.01 PAR VALUE
Title of Class
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. / /
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant as of September 3, 1996 was $294,789,908 based
upon the closing price of $27.50 per share as reported on the Nasdaq National
Market for that date.
As of September 3, 1996, there were 17,833,189 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III hereof.
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CIBER, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
TABLE OF CONTENTS
PAGE
PART 1 ----
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 7
PART II
Item 5. Market for the Company's Common Stock and Related Shareholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 9
Item 8. Financial Statements and Supplementary Data . . . . . . . . . .13
Item 9. Changes in and Disagreements with Independent Auditors
on Accounting and Financial Disclosure . . . . . . . . . . . .29
PART III
Item 10. Directors and Executive Officers. . . . . . . . . . . . . . . .29
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . .30
Item 12. Security Ownership of Certain Beneficial Owners and Management.30
Item 13. Certain Relationships and Related Transactions. . . . . . . . .30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . .31
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
PART I
ITEM 1. BUSINESS
GENERAL
CIBER, Inc. and subsidiaries ("CIBER" or the "Company") is a nationwide provider
of information technology consulting services. The Company offers services to
its clients in three principal areas: information technology services, package
software implementation services and millennium date conversion services. The
CIBER Information Services ("CIS") division provides application software staff
supplementation, system life-cycle project responsibility and other
computer-related professional services. CIS historically represented the core of
the Company's business. Package software implementation services are provided by
the Company's wholly-owned subsidiary, Business Information Technology, Inc.
("BIT") which assists clients in understanding and implementing new human
resource and financial application software for client/server systems. A
substantial portion of BIT's revenues are derived from assisting clients
implementing PeopleSoft, Inc. ("PeopleSoft") software. The Company's CIBR2000
division offers services to help clients correct computer systems for the year
2000 date change.
Subsequent to the Company's June 30, 1996 fiscal year end, the Company completed
two business combinations in the management consulting arena. Effective
September 3, 1996, Spectrum Technology Group, Inc. ("Spectrum") merged with
CIBER and simultaneously took responsibility for CIBER's July 1996 acquisition
of the Business Systems Development division of DataFocus, Inc. These
operations, which are presently operating at an approximate annual revenue rate
of $23.5 million, will focus on more strategic information systems consulting.
The Company currently services its clients through a nationwide network of 35
branch offices in 21 states, plus offices in Toronto, Canada and Sydney,
Australia. The Company employs approximately 2,300 employees, approximately
2,000 of whom are billable consultants trained in operating systems, standard
and state-of-the-art programming languages, applications software design
techniques and certain widely-used software packages. These services are
generally provided on-site to large commercial clients with substantial data
processing operations, but may be provided off-site as well.
The Company began operations in 1974 to assist companies in need of computer
programming support. In the mid-1980s, the Company initiated a growth strategy
that included expanding its range of computer-related services, developing a
professional sales force and selectively acquiring established companies. Since
fiscal 1992, the Company's revenues have increased from $51.3 million to $156.9
million in fiscal 1996, a compound annual growth rate of 32%. Additionally, net
income increased from $957,000 in fiscal 1992 to $8.1 million in fiscal 1996, a
compound annual growth rate of 71%.
BUSINESS STRATEGY
The Company's strategic objective is to expand its business by continuing to
build long-term relationships with major clients based on high-quality
information technology services tailored to meet client needs and strategies.
The Company's traditional time and material application software programming
services are evolving to include a comprehensive array of management consulting
software system design, development, integration, implementation and project
management services. The Company's strategy includes the following key elements:
- - BUILD STRONG CLIENT RELATIONSHIPS. The Company is committed to providing
quality custom software application and development services that meet the
demands of large companies with substantial data processing operations.
Management believes the Company's emphasis on building long-term relationships
with major clients has been a primary reason for the Company's success. Most of
the Company's largest clients have been significant clients for many years. For
example, the Company's largest and second largest clients, accounting for
approximately 10% and 7%, respectively of fiscal 1996 revenues, have been
clients for over 12 and 10 years, respectively. The Company focuses significant
resources on qualifying to remain on its clients' vendor lists and, over the
past five years, has regularly qualified as an approved vendor for more than two
dozen Fortune 500 companies.
- - GROW THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION. The Company
intends to expand by acquiring companies that provide consulting services not
yet offered by the Company, have strategic client relationships or are located
in attractive geographic locations. The Company also intends to expand the
operations of existing branch offices primarily by providing incremental
information technology services to existing clients. The Company may also start
new branches in attractive markets with its own personnel.
1
- - EXPAND INTEGRATION AND IMPLEMENTATION SERVICES. The Company's concentrated
effort on providing time and material programming services is expanding to
include the implementation of clients' long-term information technology
strategies, from design and development of their information systems, through
testing and implementation, to migration from mainframe to client/server
architectures, as well as package software project implementation. As a result
of these efforts, the Company is taking greater responsibility for projects and
providing greater value-added services to its clients. This expansion of focus,
combined with the Company's high quality controls, processes, methodologies,
tools and templates, will help position the Company as a full-service provider
for its existing and new clients' information technology and application needs.
- - FOCUS ON QUALITY SERVICE. The Company seeks to be a leader in providing
quality services and processes to its clients. The Company's corporate and CIS
operations have received ISO 9002 certification, an international standard for
consistency in operating procedures. The Company believes that it is currently
the sole provider of computer-related services with ISO 9002 certification on a
national basis. Many of the Company's clients are expected to require this
certification in the next several years. ISO 9002 certification has enhanced the
Company's ability (i) to achieve preferred supplier status from larger
companies, (ii) to satisfy current and prospective clients who insist on a
documented quality assurance system and (iii) to improve its operations by
facilitating cost controls and other efficiencies on a continuing basis. The CIS
and CIBR2000 divisions have also qualified for ISO 9001 certification, which
certification relates to project development activities. The CIS division has
also achieved Ford Motor Company "Q-1" status.
SERVICES
CIBER INFORMATION SERVICES. The CIS division supports the life cycle of computer
systems, from strategy and design to development and implementation and,
finally, to maintenance and support. Approximately 82% of the Company's fiscal
1996 revenues were derived from the CIS division. Although revenues of this
division are expected to increase, the Company believes that the CIS percentage
of total CIBER revenues may decrease in the future. The Company's technical
staff performs a wide variety of tasks to identify, analyze and solve clients'
data processing and computing problems. Generally, these services are provided
on-site to clients with current personnel who do not have the requisite
technical skills or to clients with specific projects requiring additional
staffing that do not justify permanent personnel increases. The scope of the
work performed by the Company ranges from specific, minor tasks of short
duration to large, complex tasks that require a large number of consultants for
a year or longer. Examples of larger tasks include developing new systems and
maintaining mature mainframe systems that cannot be quickly replaced. Typically,
the Company's professional staff augments and becomes part of the clients'
software development team on a specific application or project.
BUSINESS INFORMATION TECHNOLOGY, INC. Package software implementation services
provided by BIT accounted for approximately 18% of the Company's revenues in
fiscal 1996. BIT assists clients in implementing package application software
on client/server systems. Clients seeking these services are generally
businesses that are migrating from the mainframe to, or that are developing or
implementing, client/server architectures. Approximately 16% of the Company's
fiscal 1996 revenues were generated from clients implementing PeopleSoft
software. The Company believes that as package software companies such as
PeopleSoft continue to enhance the functionality and performance of their
products and such products become more widely used, package software
implementation services will present an increasing opportunity for the Company.
The Company anticipates either seeking alliances with other package software
firms or possibly acquiring businesses that act as implementation partners to
various package software companies in order to expand its package software
implementation activities.
CIBR2000. In April 1996, the CIBR2000 division was launched to provide
millennium date conversion services to help clients fix customized computer
programs that can only correctly calculate time up to December 31, 1999.
CIBR2000 solutions include impact assessment, solution plan development,
corrections implementation, and validation/testing.
SPECTRUM TECHNOLOGY GROUP INC. Spectrum was formed in 1979 and merged with
CIBER in September 1996. Spectrum focuses its services on executive management
level, strategic systems solutions to business problems, including data
modeling, data warehousing and enterprise architecture. Spectrum also develops
systems on a project basis and is responsible for the Company's Microsoft
technology based consulting group known as Spectrum's New Technology Practice.
BUSINESS COMBINATIONS
The Company has expanded its geographic breadth, diversified its technical
expertise, expanded its client base and achieved other competitive advantages
through business combinations. Following each merger or acquisition, the Company
seeks to add value to the operations acquired by providing the Company's office
information systems, national recruiting support and ISO 9002 processes to its
new branches. Given the highly fragmented nature of the information
2
technology services industry, the Company intends to pursue business
combinations as part of its growth and operating strategy. The success of
this strategy depends not only upon the Company's ability to identify and
acquire businesses on a cost-effective basis, but also upon its ability to
integrate acquired operations into its organization effectively, to retain
and motivate personnel and to retain clients of acquired firms.
Acquired branches have accounted for approximately 50% of the Company's employee
growth over the past five years. In reviewing potential business combinations,
the Company focuses on the target company's geographic area, client base,
reputation in specific software services, acquisition availability, cost,
anticipated financial performance, sales, management and recruiting personnel
and potential client demand, among other factors.
Since July 1, 1993, the Company has completed the following business
combinations:
TOTAL CONSULTANTS AT
DATE NAME MAIN OFFICE CONSIDERATION ACQUISITION
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June 1994 C.P.U., Inc. Rochester, New York $10,100,000(1) 190
January 1995 Interface Systems, Holmdel, New Jersey $ 3,350,000(2) 48
Inc.
May 1995 Spencer & Spencer St. Louis, Missouri $ 5,330,000(3) 141
Systems, Inc. ("SSSI")
June 1995 Business Information Concord, California $10,319,500(4) 125
Technology, Inc.
September 1995 Broadway & Seymour, Rochester, Minnesota $ 980,000 45
Inc. (5)
March 1996 OASYS, Inc. Columbus, Ohio $ 769,000 14
May 1996 Practical Business Boston, Massachusetts $12,890,250(6) 150
Solutions, Inc.
("PBSI")
July 1996 DataFocus, Inc. (7) Fairfax, Virginia $ 5,000,000 45
September 1996 Spectrum Technology Somerville, New Jersey $16,550,000(8) 110
Group, Inc.
(1) The purchase price excludes balance sheet net assets acquired of $2.3
million.
(2) In addition, if the operations acquired achieve certain levels of income,
the Company will be required to pay additional consideration in the form of
Common Stock annually through December 31, 1997.
(3) The consideration was paid by issuance of 624,284 shares of Common Stock and
an option to purchase 134,268 shares of Common Stock at an exercise price of
$0.005 per share.
(4) The consideration was paid by issuance of 1,400,512 shares of Common Stock.
(5) The Company acquired only one branch office of this company.
(6) The consideration was paid by the issuance of 959,035 shares of Common Stock
and options to purchase 72,185 shares of Common Stock at an exercise price
of $.01 per share.
(7) The Company acquired only the Business Systems Development division of this
Company.
(8) Total consideration was paid by the issuance of 853,116 shares of Common
Stock.
3
The business combinations with SSSI, BIT, PBSI and Spectrum are each
accounted for as a pooling of interests, while the other business
combinations are accounted for as purchases. See Management's Discussion and
Analysis of Financial Condition and Results Operations for additional
information.
CLIENTS
The Company focuses its client marketing efforts on large companies with
substantial needs for supplemental programmer staffing, package software
implementation and systems integration services and other computer-related
professional services. Such clients afford the Company opportunities to
develop long-term relationships based on the high-quality, consistent
services the Company has provided for more than 20 years. Although most
consultant assignments are from three to 12 months, many of the Company's
client relationships have continued for up to 22 years.
The ability to serve large clients in diverse industries demonstrates the
Company's adaptability to a wide variety of client environments. Whether
clients are in the services or manufacturing sector, the Company recruits and
provides consultants having skills matching the requirements of each client's
project. The Company routinely satisfies the diverse information technology
needs of clients in a wide variety of industries.
Since approximately 1990, larger clients have started to limit the number of
information technology vendors they use. In order to achieve the reduction in
the number of vendors used, companies often review and screen both existing
and potential vendors and generate select lists of approved vendors. The
factors considered for placement of a company on a vendor list include
geographic and technical breadth of operations, quality assurance programs,
reliability and cost effectiveness. The Company believes consolidation of
clients' vendor lists will lead to increased consolidation in the industry so
that only the larger, national firms will be serious contenders for the fewer
available positions on key client vendor lists.
Certain customers account for a significant portion of the Company's
revenues. One of the Company's clients, AT&T, accounted for 10% of total
revenues for the year ended June 30, 1996. In addition, the Company's five
largest clients accounted for 25%, 23% and 28% of the Company's total
revenues for the years ended June 30, 1994, 1995 and 1996, respectively.
Some of the Company's significant clients include: American Express Company,
AT&T, Ford Motor Company, IBM, MCI Telecommunications Corp., Mellon Bank,
Monsanto Corp., U S West Communications, Inc. and Xerox Corporation; each of
which has been a client for 10 years or longer.
The Company normally offers professional services through agreements which
specify that services are rendered on a best efforts basis, that the Company
makes no express or implied warranties and that the client must continue to
pay all charges incurred prior to the termination of the agreement. Because
services are typically rendered on an as required basis, the Company does not
consider the backlog of unfinished assignments significant in understanding
its business. The typical client contract term is one to three years and
there can be no assurance that a client will renew its contract when it
terminates. The Company's contracts are generally cancelable by the client at
any time and clients may unilaterally reduce their use of the Company's
services under such contracts without penalty. The termination or
significant reduction of the Company's business relationship with any of its
significant clients could have a material adverse effect on the Company's
operating results.
Through BIT, the Company has a significant relationship with PeopleSoft, both
as a client and as an implementation partner. In fiscal 1996, 16% of the
Company's total revenues was derived from clients who purchased
implementation services for their PeopleSoft software and 1% of the Company's
revenues was derived from PeopleSoft as a client. In the event PeopleSoft
products become obsolete or non-competitive, or if BIT should lose its
"implementation partner" status with PeopleSoft, the Company would suffer a
material adverse effect.
The Company generally prices its services to clients on a time and materials
basis and maintains price ranges which reflect technical skills and
experience levels of the Company's consultants. The Company has provided and
intends to continue to provide increased project services to its clients.
Projects are distinguishable from the Company's core business of time and
material consulting by the level of responsibility assumed by the Company. In
a typical project, the Company independently develops a program or maintains
a system, whereas, in the Company's principal business, the Company's clients
generally maintain responsibility for the overall task. The failure of a
project or the failure of the Company to provide project services in a
satisfactory manner could have a material adverse effect on the Company.
Further, because the Company may undertake projects on a fixed price basis
and guarantee performance based upon defined operating specifications, cost
overruns, unsatisfactory performance or unanticipated difficulties in such
projects could have a material adverse effect on the Company's results of
operations.
CIBR2000 is a new division formed to support an anticipated significant
demand for assistance with clients solving millennium date change (Year 2000)
issues in their computer systems. Failure to obtain market share and
potential errors in solutions are risks to the Company.
4
SALES FORCE
The Company believes that its established reputation and experienced sales
representatives and consultants provide it with competitive advantages. The
Company uses these strengths to obtain repeat business and to reassign
consultants from one task to another based on successful completion of prior
assignments.
The Company maintains a sales force of approximately 100 employees located at
the branch offices and markets to its clients' chief information officers,
information systems managers, other users of programmers and
purchasing/buying groups. The purchasing departments of the Company's largest
CIS division clients commonly select a limited list of preferred vendors.
Once on the vendor list, the Company's sales representatives are eligible to
work directly with managers of projects or application systems seeking
consulting assistance. New client contacts are generated through a variety of
methods, including client referrals, personal sales calls, direct mailings to
targeted clients and telemarketing.
BRANCH OFFICES
The Company's branch office network is integral to its business strategy.
Through the branch office network, the Company can (i) offer a broad range of
consulting services on a local basis, (ii) respond to changing market demands
for information technology services through a variety of contacts in many
industries and geographic areas and (iii) maintain a quality professional
staff because of its nationwide reputation and its training programs.
Additionally, the branches can market their services as being provided by a
company with a national presence and a long history in the information
technology services business.
The Company established its branch office network through the internal
start-up and staffing of branch offices in new geographic locations and
through the acquisition of information technology services companies, their
professional staffs and client relationships. The Company's domestic branch
office network currently consists of 35 offices in 21 states. Additionally,
the Company has branch offices in Toronto, Canada and Sydney, Australia. The
number of consultants working out of any office ranges from as few as 5 to
over 150. The average is approximately 55 consultants per branch office.
The Company believes its operating procedures and financial controls are two
of its primary strengths. Each operation prepares an annual business plan
including monthly projections for the ensuing fiscal year. Results are
tracked monthly to compare actual performance to projected results. The
Company has centralized accounting and cash management functions to help
ensure integrity of data and control of information flow. Operating data is
available on a weekly basis. The Company believes that these practices
enhance results from acquired businesses as well.
EMPLOYEES
On June 30, 1996, the Company had approximately 2,100 full-time employees,
including approximately 300 personnel in administrative positions and
approximately 1,800 billable consultants. Administrative personnel are
principally branch managers, sales representatives, recruiters and
administrative assistants in the Company's branches. None of the Company's
employees are subject to a collective bargaining arrangement. The Company has
entered into employment agreements with its executive officers. The Company
believes its relations with its employees are good.
CONSULTANT RECRUITMENT
The Company's future success will depend in part on its ability to hire
adequately trained personnel who address the increasingly sophisticated needs
of its clients. The Company's on-going consultant needs arise from (i)
increasing demand for the Company's services, (ii) turnover, which is
generally high in the industry, and (iii) the clients' requests for
programmers trained in the newest software technologies. Few of the Company's
employees are bound by non-compete agreements. Competition for personnel in
the information technology services industry is significant and the Company
has had and expects to continue to have difficulty in attracting and
retaining an optimal level of qualified personnel. In particular, competition
for the limited number of qualified project managers and professionals with
certain specialized skills, such as a working knowledge of certain
sophisticated software, is intense. Because of this, the recruitment of the
Company's skilled consultant group is a critical element in the Company's
success. The Company devotes significant resources to meeting its personnel
requirements. The Company has approximately 80 full-time recruiters in its
branches and approximately 20 in its National Recruiting Group. The branches'
recruiters work directly with branch sales representatives to fill client
requests for consultants. The National Recruiting Group maintains a national,
proprietary database of relocatable and harder to find consultants (due to
unique or specialized skill sets), augments local recruiting, advertises
nationally for new consultants, travels to branches to train new recruiters
and performs related tasks.
5
It is often difficult to match the availability of consultants with client
requirements. Pre-marketing and lead times from clients help, but consultant
availability remains a significant factor in determining whether the Company
or a competitor will obtain the available business. The Company believes that
careful coordination of its recruiting and sales activities gives it an
advantage over many of its smaller competitors.
The Company believes that its future success will also depend in part upon
its continued ability to attract and retain highly skilled managerial, sales
and support personnel. There can be no assurance that the Company will be
successful in attracting and retaining the personnel it requires to continue
to grow and operate profitably or that it will be able to identify and hire
technical personnel at costs supportable by billing rates sufficient to
maintain the Company's historic gross profit levels.
COMPETITION
The information technology services industry is extremely competitive. The
Company is not aware of any one competitor that offers the same combination
of services offered by the Company, but believes that a number of companies
compete with the Company in selected markets with substantially similar
services. In most of the markets in which the Company competes, the Company
believes that there are participants that have significantly greater
financial, technical and marketing resources than the Company. The Company
believes, however, that no one competitor dominates any of its markets.
There are few very large competitors with annual revenues over $100 million.
There are, however, according to The Updata Group, an independent consulting
firm, over 3,000 software service firms with yearly revenues over $1 million
competing for market share. Most of these firms participate in just one
geographic area. The Company's competition, therefore, varies significantly
at each of its branches. Often, local competitors are the Company's primary
competition. At certain branches, particularly those with major clients,
national competitors are the Company's significant competition. Each branch
must adapt to the circumstances under which it operates.
In particular, the Company believes that its CIS division competes most
directly with the following national companies: Keane, Inc., Analysts
International Corporation, Adia Information Services, Cambridge Technology
Partners, Inc. and Computer Task Group, Inc. For project management services,
Electronic Data Systems Corporation, Andersen Consulting, Computer Sciences
Corporation and others are potential competitors. Many of these companies are
national and international in scope and have greater resources than the
Company. BIT, CIBR2000 and Spectrum often compete with "Big Six" accounting
firms and boutique systems consulting firms. The Company competes with the
internal data processing staffs of its clients, which can add to their
employee base as an alternative to using a consulting firm. Additionally,
many large accounting and management consulting firms offer services that
overlap with a significant portion of the Company's services. Also, computer
hardware and software companies are increasingly becoming involved in systems
integration projects. Recently, temporary placement agencies, such as
Corestaff, Olsten and Manpower, have begun expanding their businesses to
provide computer-related services to their customers. Additionally, over the
past several years there has been an influx of foreign nationals who provide
skilled computer programming services at lower pay scales than other domestic
programmers. Some of these foreign nationals are being hired as consultants
directly by the Company's clients and potential clients, as well as by
certain of the Company's competitors. Moreover, in an attempt to decrease
costs, some of the Company's clients and potential clients are outsourcing
their business to a number of competitors in foreign countries, often to
India. There can be no assurance that the Company will be able to continue to
compete successfully with existing or new competitors.
Many of the Company's larger CIS clients purchase information technology
services primarily from a limited number of pre-approved vendors. In order
to remain on its clients' vendor lists and to develop new client
relationships, the Company must satisfy client requirements at competitive
rates. Although the Company continually attempts to lower its costs, there
are other software services organizations and temporary placement agencies
that provide the same or similar services as the Company at similar or lower
costs. Additionally, certain of the Company's clients require that their
vendors reduce rates after services have commenced. There can be no
assurance that the Company will be able to compete effectively on pricing or
other requirements and, as a result, the Company could lose clients or be
unable to maintain historic gross margin levels or to operate profitably.
With respect to the Company's implementation services for software packages,
the manufacturers of such software may have training requirements that
inhibit the Company from competing effectively with other packaged software
implementation providers.
6
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Cautionary statement under the "Safe-Harbor" provisions of the Initial
Private Securities Litigation Reform Act of 1995: Included in this report
and other information presented elsewhere by management from time to time,
including, but not limited to, the Annual Report to Shareholders, quarterly
shareholder letters, news releases, and investor presentations, are
forward-looking statements about business strategies, market potential,
future financial performance and other matters which may reflect management's
current expectations. These forward-looking statements involve risks and
uncertainties that could cause actual results to vary materially from those
referred to in such statements. Factors that could cause or contribute to
such variances include, but are not limited to: dependence on significant
clients, continued acceptance and growth of PeopleSoft software, the
Company's ability to attract and retain qualified consultants, project risks,
the Company's ability to effectively manage business combinations and
competition, which are discussed herein in Item 1 "Business" and also in Item
7 "Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, as a result of these and other factors, the
Company's past financial performance should not be relied on as an indication
of future performance.
ITEM 2. PROPERTIES
The Company's executive offices are located at 5251 DTC Parkway, Suite 1400,
Englewood, Colorado 80111. The Company leases approximately 13,500 square
feet of office space in Denver for its corporate offices, which lease expires
on May 31, 1999.
The Company leases office space at various other locations under leases
ranging from month-to-month up to five-year terms. In total, the Company had
32 leases totaling approximately 99,000 square feet at June 30, 1996. Total
office rental expense for the year ended June 30, 1996 was $1.6 million for
all offices. The Company's facilities are adequate for its current level of
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of the Company's fiscal year ended June 30, 1996.
7
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDERS MATTERS
The Company's Common Stock is listed and traded on the Nasdaq National Market
under the symbol "CIBR." The table below sets forth the high and low prices
per share, adjusted for the 2-for-1 split in June 1996, for the periods
indicated.
HIGH LOW
------- -------
Fiscal Year Ended June 30, 1995:
First Quarter.................................... 4-9/16 4-1/16
Second Quarter................................... 5-9/16 4
Third Quarter.................................... 8-3/8 4-9/16
Fourth Quarter................................... 9 6-1/4
Fiscal Year Ending June 30, 1996:
First Quarter.................................... 12-1/2 8-3/8
Second Quarter................................... 17-1/8 9
Third Quarter.................................... 16-7/8 9-5/8
Fourth Quarter................................... 25 14-7/8
Fiscal Year Ending June 30, 1997:
First Quarter (through September 17, 1996)....... 30-1/2 13-1/4
ITEM 6. SELECTED FINANCIAL DATA*
Year Ended June 30, 1992 1993 1994 1995 1996
IN THOUSANDS, EXCEPT PER SHARE DATA
- ------------------------------------------------------------------------------
OPERATING DATA:
Revenues $51,303 63,182 79,810 120,151 156,873
Operating income $ 1,942 2,613 3,746 7,430 13,423
Net income $ 957 1,444 2,262 4,175 8,142
Pro forma net income $ 976 1,392 2,258 4,296 8,531
Pro forma income per share $ .08 .11 .17 .27 .49
Cash dividends $ - - - - -
- ------------------------------------------------------------------------------
Weighted average common and
common equivalent shares
outstanding 12,605 12,721 13,525 16,040 17,452
- ------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $12,781 15,710 30,805 40,888 64,632
Total long-term liabilities $ 2,528 3,000 400 300 200
Total shareholders' equity $ 3,872 5,410 19,106 24,090 55,232
Shares outstanding at
year end 10,733 10,733 14,203 14,329 16,937
- ------------------------------------------------------------------------------
FINANCIAL PERFORMANCE:
Revenue growth 12.5% 23.2% 26.3% 50.5% 30.6%
Operating income (% of
revenue) 3.8% 4.1% 4.7% 6.2% 8.6%
Pro forma net income margin 1.9% 2.2% 2.8% 3.6% 5.4%
Stock price at year end $ N/A N/A 4.375 8.875 22.00
* ALL HISTORIC DATA HAS BEEN RESTATED TO REFLECT A POOLING OF INTERESTS BUSINESS
COMBINATION AND A TWO-FOR-ONE STOCK SPLIT, BOTH OF WHICH OCCURRED IN FISCAL
1996.
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the results of operations and financial condition
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto.
OVERVIEW
The Company's revenues in fiscal 1996 were generated primarily from two
areas: information technology services and package software implementation
services. Fiscal 1996 revenues from the CIBER Information Services division
("CIS") accounted for approximately 82% of the Company's total revenues,
while package software implementation services accounted for the remainder.
Package software implementation services are provided by the Company's
wholly-owned subsidiary, Business Information Technology, Inc., whose
revenues have been generated principally from customers of PeopleSoft, Inc.
The Company achieved an increase in operating income as a percentage of
revenues from 3.8% in fiscal 1992 to 8.6% in fiscal 1996. Excluding merger
costs related to pooling of interests business combinations, fiscal 1995 and
1996 operating income as a percentage of revenues were 7.1% and 9.1%,
respectively. This improvement in operating margins was due to a substantial
reduction in selling, general and administrative ("SG&A") expenses as a
percentage of revenues, partially offset by a slight decline in gross margins
caused by pricing pressures and increases in direct costs.
Over the past several years, the Company has grown significantly through
mergers and acquisitions as well as through internal growth. Growth from
internal operations (measured in terms of number of employees) has averaged
approximately 22% per year since fiscal 1992 and was 23% in fiscal 1996. For
purposes of this report, the term "acquisition" refers to business
combinations accounted for as a purchase and the term "merger" refers to
business combinations accounted for as a pooling of interests. The Company's
acquisitions involve the capitalization of intangible assets, which
intangible assets are generally amortized over two to 15 years for financial
reporting purposes and 15 years for tax purposes. In addition, the Company's
consolidated financial statements included the results of operations of each
acquired business since the date of acquisition. Mergers result in a
one-time charge in the period in which the transaction is completed for costs
associated with the business combination. The Company's consolidated
financial statements are restated for all periods prior to the merger to
include the results of operations, financial position and cash flows of the
merged company.
Since its initial public offering in March 1994, the Company has completed
the following acquisitions: C.P.U., Inc. ("CPU"), June 1994; Interface
Systems, Inc. ("ISI"), January 1995; the Minnesota Branch of Broadway &
Seymour, Inc. (the "Minnesota Branch"), September 1995; and OASYS, Inc. (the
"Columbus Branch"), March 1996. In addition, the Company has completed the
following mergers: Spencer & Spencer Systems, Inc. ("SSSI"), May 1995;
Business Information Technology, Inc. ("BIT"), June 1995; and Practical
Business Solutions, Inc. ("PBSI"), May 1996. Accordingly, the Company's
financial statements include the accounts of SSSI, BIT and PBSI for all
periods prior to the respective merger.
9
RESULTS OF OPERATIONS
The following tables set forth, for the years indicated, certain items from
the Company's statements of operations expressed as a percentage of revenues
and percentage change in the dollar amount of such items compared to the
prior year:
PERCENTAGE INCREASE
PERCENTAGE OF REVENUES (DECREASE)
YEAR ENDED JUNE 30, YEAR TO YEAR
1994(1) 1995(1) 1996 1994:1995 1995:1996
------- ------- ---- --------- ---------
Revenues...................................... 100.0% 100.0% 100.0% 50.5% 30.6%
Salaries, wages and other direct costs........ 68.9 69.2 69.6 51.3 31.3
Selling, general and administrative expenses.. 25.5 22.5 20.1 32.8 16.4
Amortization of intangible assets............. .9 1.2 1.1 99.6 29.0
Merger costs.................................. - .9 .6 - (16.2)
----- ----- ----
Operating income.............................. 4.7 6.2 8.6 98.3 80.7
Interest (expense)/income, net................ (.3) (.2) .3 23.0 (302.6)
----- ----- ----
Income before income taxes.................... 4.4 6.0 8.9 102.4 93.2
Income tax expense............................ 1.6 2.5 3.7 133.6 90.6
----- ----- ----
Net income.................................... 2.8% 3.5% 5.2% 84.6 95.0
----- ----- ----
----- ----- ----
(1) RESTATED FOR A POOLING OF INTERESTS BUSINESS COMBINATION WHICH OCCURRED IN
FISCAL 1996.
FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995
The Company's total revenues for fiscal 1996 increased 30.6% to $156.9
million from $120.2 million for fiscal 1995. In fiscal 1996, CIS revenues
increased 28.0% to $128.5 million from $100.4 million in fiscal 1995 and
package software implementation services revenues increased 43.6% to $28.4
million from $19.8 million in fiscal 1995. CIS revenues represented 81.9%
and 83.5% of total revenues in fiscal 1996 and fiscal 1995, respectively. The
increase in the Company's CIS revenues was derived primarily from increases
in hours billed and to a lesser extent an increase in average billing rates.
The increase in hours billed was due primarily to internal growth in branch
offices, the inclusion of operations of ISI for 12 months in fiscal 1996
compared to six months in fiscal 1995 and the inclusion of operations of the
Minnesota Branch for 10 months and the Columbus Branch for four months in
fiscal 1996. These acquisitions accounted for approximately $6.0 million of
additional revenues in fiscal 1996 as compared to fiscal 1995. Package
software implementation services revenues have increased primarily due to
increased volume of customers implementing PeopleSoft, Inc. software.
Salaries, wages and other direct costs are comprised primarily of consultant
wages, payroll taxes, direct benefits and related costs, and increased 31.3%
to $109.2 million (69.6% of revenues) in fiscal 1996 from $83.2 million
(69.2% of revenues) in fiscal 1995.
SG&A expenses increased 16.4% to $31.5 million (20.1% of revenues) in fiscal
1996 from $27.1 million (22.5% of revenues) in fiscal 1995. The decrease in
SG&A expenses as a percentage of revenues was due primarily to greater
efficiencies and economies of scale of the Company's operations in fiscal
1996. SG&A expenses may vary as a percentage of revenues depending on the
acquisitions and mergers completed, if any, during any given period.
Amortization of intangible assets, which assets include, among other things,
goodwill, client lists and non-compete agreements, increased 29.0% to $1.8
million in fiscal 1996 from $1.4 million in fiscal 1995. This increase was
due primarily to the Company's acquisitions of ISI in January 1995, the
Minnesota Branch in September 1995 and the Columbus Branch in March 1996.
Merger costs of $901,000 in fiscal 1996 related to PBSI's merger with CIBER.
Merger costs of $1.1 million in fiscal 1995 related to the mergers of SSSI
and BIT.
Net interest income was $476,000 (0.3% of revenues) in fiscal 1996 as
compared to net interest expense of $235,000 (0.2% of revenues) in fiscal
1995. As a result of the Company's November 1995 public sale of common
stock, the Company reduced its borrowings under its bank line of credit and
significantly increased its investment in interest earning cash equivalent
instruments.
10
The effective tax rates for fiscal 1996 and fiscal 1995 were 41.4% and 42.0%,
respectively. The decrease was primarily attributable to decreased nondeductible
merger costs in fiscal 1996 partially offset by increased levels of state and
local taxes. In fiscal 1996, the Company recognized $2.6 million as a direct
addition to additional paid in capital and a deduction to income taxes payable
from the tax benefits resulting from the exercise of stock options. Of this
amount, $1.6 million reduced income taxes payable June 30, 1996 and $1.0
million is included in deferred tax assets, which will be used to reduce income
taxes payable for the year ended June 30, 1997. In fiscal 1995, the Company
recognized $422,000 as a direct addition to additional paid in capital for the
tax benefit resulting from the exercise of stock options which reduced income
taxes payable by the same amount.
The Company's net income increased 95.0% to $8.1 million (5.2% of revenues) in
fiscal 1996 from $4.2 million (3.5% of revenues) in fiscal 1995. Prior to their
merger with the Company, PBSI and SSSI were not tax paying entities. The pro
forma adjustment to income tax expense reflects the inclusion of income tax
expense as if PBSI and SSSI had been tax paying entities in each period prior to
their merger with CIBER. The pro forma adjustment to income tax expense in
fiscal 1996 and 1995 has been effected to exclude $475,000 and $284,000,
respectively, representing the one-time income tax expense resulting from the
termination of the S corporation status of PBSI and SSSI, respectively. The pro
forma adjustment to income tax expense increased pro forma net income to
$8.5 million in fiscal 1996 as compared to $4.3 million in fiscal 1995. See
Notes 1(j) and 7 of Notes to Consolidated Financial Statements.
FISCAL YEAR ENDED JUNE 30, 1995 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1994
The Company's total revenues for fiscal 1995 increased 50.5% to $120.2 million
from $79.8 million for fiscal 1994. In fiscal 1995, CIS revenues increased
48.9% to $100.4 million from $67.4 million in fiscal 1994 and package software
implementation services revenues increased 59.3% to $19.8 million from $12.4
million in fiscal 1994. CIS revenues represented 83.5% and 84.5% of total
revenues in fiscal 1995 and fiscal 1994, respectively. The increase in the
Company's CIS revenues was derived primarily from increases in hours billed as
average billing rates remained relatively constant in fiscal 1995. The increase
in hours billed was due primarily to internal growth in branch offices, the
inclusion of operations of CPU for twelve months in fiscal 1995 compared to one
month in fiscal 1994 and the inclusion of operations of ISI for the last six
months of fiscal 1995. These acquisitions accounted for approximately $12.8
million of additional revenues in fiscal 1995 as compared to fiscal 1994.
Salaries, wages and other direct costs are comprised primarily of consultant
wages, payroll taxes, direct benefits and related costs, and increased 51.3% to
$83.2 million (69.2% of revenues) in fiscal 1995 from $55.0 million (68.9% of
revenues) in fiscal 1994.
SG&A expenses increased 32.8% to $27.1 million (22.5% of revenues) in fiscal
1995 from $20.4 million (25.5% of revenues) in fiscal 1994. The decrease in SG&A
expenses as a percentage of revenues was due primarily to greater efficiencies
and economies of scale of the Company's operations in fiscal 1995.
Amortization of intangible assets, which assets include, among other things,
goodwill, client lists and non-compete agreements, increased 99.6% to $1.4
million in fiscal 1995 from $690,000 in fiscal 1994. This increase was due
primarily to the Company's acquisition of CPU in June 1994 and the acquisition
of ISI in January 1995.
Merger costs of $1.1 million in fiscal 1995 consist primarily of professional
fees, brokers' fees and severance payments related to the mergers of SSSI and
BIT with CIBER. No merger costs were incurred in fiscal 1994.
Net interest expense increased 23.0% to $235,000 (0.2% of revenues) in fiscal
1995 from $191,000 (0.3% of revenues) in fiscal 1994 due to overall increased
indebtedness, primarily used to fund acquisitions.
The effective tax rates for fiscal 1995 and fiscal 1994 were 42.0% and 36.4%,
respectively. The increase was primarily attributable to nondeductible merger
costs and the conversion of SSSI to a taxable entity. In fiscal 1995, the
Company recognized $422,000 as a direct addition to additional paid in capital
and a deduction to income taxes payable from the tax benefits resulting from
the exercise of stock options which reduced income taxes payable by the same
amount. No such benefit was obtained in fiscal 1994.
The Company's net income increased 84.6% to $4.2 million (3.5% of revenues) in
fiscal 1995 from $2.3 million (2.8% of revenues) in fiscal 1994. Prior to their
merger with the Company, PBSI and SSSI were not tax paying entities. The pro
forma adjustment to income tax expense reflects the inclusion of income tax
expense as if PBSI and SSSI had been tax paying entities in each period prior to
their merger with CIBER. The pro forma adjustment to income tax expense in
fiscal 1995 has been effected to exclude $284,000, representing the one-time
income tax expense resulting from termination of the S corporation status of
SSSI. The pro forma adjustment to income tax expense increased pro forma net
income to $4.3 million in fiscal 1995 as compared to $2.3 million in fiscal
1994. See Notes 1(j) and 7 of Notes to Consolidated Financial Statements.
11
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had $39.2 million of working capital, of which
$16.7 million was cash and cash equivalents. The Company has used operating cash
flow, its revolving line of credit and the net proceeds from public offerings to
finance working capital needs and acquisitions. The Company believes that its
operating cash flow and the availability of credit under its bank revolving line
of credit will be sufficient to finance working capital needs through at least
fiscal 1997.
Net cash provided by operating activities was $2.4 million, $782,000 and $1.9
million in fiscal 1994, 1995 and 1996, respectively. Net income excluding
noncash charges, primarily depreciation and amortization, provided cash of $3.2
million, $6.1 million and $10.1 million in fiscal 1994, 1995 and 1996,
respectively. This was partially offset by changes in operating assets and
liabilities, which used cash of $752,000, $5.3 million and $8.2 million in
fiscal 1994, 1995 and 1996, respectively. Changes in operating assets and
liabilities have used significant amounts of cash in fiscal 1995 and 1996
primarily because the Company's accounts receivable have increased 44.4% and
31.6%, respectively, as a result of the Company's 50.5% and 30.6% increase in
revenues in fiscal 1995 and 1996, respectively.
Net cash used in investing activities in fiscal 1994, 1995 and 1996 was $10.0
million, $4.9 million and $3.2 million, respectively. Fiscal 1996 investing
activities used $1.7 million for the acquisitions of the Minnesota Branch and
the Columbus Branch and used $1.5 million for purchases of property and
equipment, primarily computer-related office equipment and furniture. The
fiscal 1994 and 1995 cash used in investing activities related principally to
the acquisitions of CPU and ISI, respectively.
Net cash provided by financing activities in fiscal 1994, 1995 and 1996 was $8.3
million, $4.8 million and $15.9 million, respectively. In fiscal 1994 and 1996,
the Company obtained net cash proceeds from the sale of common stock of $11.0
million and $20.2 million, respectively. In fiscal 1994 and 1996, the Company
used $2.3 million and $5.8 million, respectively, to reduce its borrowings under
bank lines of credit, while in fiscal 1995 the Company borrowed $4.1 million on
the line of credit.
The Company currently has available a $15 million revolving line of credit with
UMB Bank Colorado. The line of credit expires on April 1, 1997, and is
collateralized by substantially all assets of the Company. Borrowings under
the line of credit bear interest at the bank's prime rate. The credit agreement
requires that the Company maintain certain tangible net worth and debt service
coverage ratios and imposes limits on the incurrence of additional indebtedness.
Although there can be no assurance that it will be able to do so, the Company
believes that it will be able to renew this credit facility on terms not less
favorable to the Company than the current arrangement.
ASSET MANAGEMENT
The Company's accounts receivable have increased 44.4% and 31.6% as a result of
the Company's 50.5% and 30.6% increase in revenues in fiscal 1995 and 1996,
respectively. Clients are generally billed weekly, bi-weekly or monthly for
services. Due to the high quality and large size of the Company's clients, bad
debt expenses have averaged less than 0.1% of revenue for the last several
years. During the last three fiscal years, approximately 85% of the Company's
receivables have been collected within 60 days of invoice. Delays in collection
of accounts receivable generally relate to missing time sheets, delayed receipt
of purchase order numbers and payables procedures of the Company's clients. The
Company believes all accounts receivable on its June 30, 1996 balance sheet will
be collected, although there can be no assurance that all accounts receivable
will be collected.
SEASONALITY
The Company experiences a moderate amount of seasonality, primarily related to
national holidays. Typically, operating income as a percentage of revenues is
lowest in the last quarter of each calendar year because of a larger number of
holidays and vacations taken in conjunction with the holidays.
12
The following table sets forth certain statement of operations data for each
of the Company's last eight quarters and, in the opinion of management of the
Company, contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation thereof. See Note 13 of Notes
to Consolidated Financial Statements for additional quarterly financial
information.
FISCAL 1995 - THREE MONTHS ENDED FISCAL 1996 - THREE MONTHS ENDED
----------------------------------------- -----------------------------------------
IN THOUSANDS SEPT. 30 DEC. 31 MAR. 31 JUNE 30(1) SEPT. 30 DEC. 31 MAR. 31 JUNE 30(1)
-------- ------- ------- ---------- -------- ------- ------- ----------
Revenues...................... $26,655 $27,913 $31,823 $33,760 $34,869 $36,033 $40,715 $45,256
Operating income.............. 1,734 1,539 2,372 1,785 3,045 2,868 3,707 3,803
Operating income as a
percentage of revenues....... 6.5% 5.5% 7.5% 5.3% 8.7% 8.0% 9.1% 8.4%
(1) OPERATING INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 INCLUDES
MERGER COSTS OF $1,075,000 AND $901,000, RESPECTIVELY, RELATING TO POOLINGS
OF INTERESTS. SEE NOTE 2 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
RECENT ACCOUNTING PRONOUNCEMENTS
During the year ended June 30, 1997, the Company will be required to adopt
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121") and Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" ("SFAS 123"). SFAS 121 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. Adopting SFAS 121 is not
expected to have a significant effect on the Company's financial statements.
SFAS 123 establishes financial accounting and reporting standards for stock-
based compensation plans as well as transactions in which an entity issues its
equity instruments to acquire goods or services from non-employees. SFAS 123
permits stock compensation cost to be measured using either the intrinsic value-
based method or the fair value method. When adopted, CIBER intends to continue
to use the intrinsic value-based method and will provide the expanded
disclosures required by SFAS 123 in the notes to financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets - June 30, 1995 and 1996
Consolidated Statements of Operations - Years Ended June 30, 1994, 1995
and 1996
Consolidated Statements of Shareholders' Equity - Years Ended June 30,
1994, 1995 and 1996
Consolidated Statements of Cash Flows - Years ended June 30, 1994, 1995
and 1996
Notes to Consolidated Financial Statements
The financial statements begin on the following page.
13
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
CIBER, Inc.:
We have audited the accompanying consolidated balance sheets of CIBER, Inc.
and subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of
the years in the three-year period ended June 30, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 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 statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CIBER,
Inc. and subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year
period ended June 30, 1996, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
August 6, 1996, except as to the
second paragraph of Note 12, which
is as of September 3, 1996
14
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1996
IN THOUSANDS, EXCEPT SHARE DATA 1995(1) 1996
------- -----
ASSETS
Current assets:
Cash and cash equivalents $ 2,079 $16,675
Accounts receivable 23,409 30,808
Prepaid expenses and other assets 619 549
Deferred income taxes - 417
-------- -------
Total current assets 26,107 48,449
-------- -------
Property and equipment, at cost 2,619 4,133
Less accumulated depreciation and amortization (1,389) (2,075)
-------- -------
Net property and equipment 1,230 2,058
-------- -------
Intangible assets, net 12,693 12,775
Deferred income taxes 440 458
Other assets 418 892
-------- -------
Total assets $40,888 $64,632
-------- -------
-------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank revolving lines of credit $ 5,800 $ -
Notes payable 110 -
Trade payables 1,590 1,398
Accrued compensation 5,553 4,642
Accrued expenses and other liabilities 1,537 2,520
Income taxes payable 792 640
Deferred income taxes 1,116 -
-------- -------
Total current liabilities 16,498 9,200
Long-term acquisition costs payable 300 200
-------- -------
Total liabilities 16,798 9,400
-------- -------
Shareholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, no shares issued - -
Common stock, $0.01 par value, 20,000,000 shares
authorized, 14,329,000 and 16,937,000 shares
issued and outstanding 143 169
Additional paid in capital 13,397 37,107
Retained earnings 10,550 17,956
-------- -------
Total shareholders' equity 24,090 55,232
-------- -------
Commitments and contingencies
Total liabilities and shareholders' equity $40,888 $64,632
-------- -------
-------- -------
(1) Restated - See Note 2.
See accompanying notes to consolidated financial statements.
15
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1994, 1995 AND 1996
IN THOUSANDS, EXCEPT PER SHARE DATA 1994(1) 1995(1) 1996
------- -------- --------
Revenues $79,810 $120,151 $156,873
Salaries, wages and other direct costs 54,986 83,185 109,235
Selling, general and administrative expenses 20,388 27,084 31,537
Amortization of intangible assets 690 1,377 1,777
Merger costs - 1,075 901
------- -------- --------
Operating income 3,746 7,430 13,423
Interest income 96 48 656
Interest expense (287) (283) (180)
------- -------- --------
Income before income taxes 3,555 7,195 13,899
Income tax expense 1,293 3,020 5,757
------- -------- --------
Net income $ 2,262 $ 4,175 $ 8,142
------- -------- --------
------- -------- --------
Pro forma information (note 1(j)):
Historical net income $ 2,262 $ 4,175 $ 8,142
Pro forma adjustment to income tax expense (4) 121 389
------- -------- --------
Pro forma net income $ 2,258 $ 4,296 $ 8,531
------- -------- --------
------- -------- --------
Pro forma income per common and common equivalent share $ 0.17 $ 0.27 $ 0.49
------- -------- --------
------- -------- --------
Weighted average common and common equivalent shares 13,525 16,040 17,452
------- -------- --------
------- -------- --------
(1) Restated - See Note 2.
See accompanying notes to consolidated financial statements.
16
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1994, 1995 AND 1996
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID IN RETAINED SHAREHOLDERS'
IN THOUSANDS SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ------- -------- ------
BALANCES AT JULY 1, 1993 (1) 5,367 $ 54 $ 356 $ 5,000 $ 5,410
Retroactive effect of June 1996 two-for-one stock split 5,366 53 (53) - -
------ ----- ------- ------- -------
BALANCES AT JULY 1, 1993 - RESTATED FOR STOCK SPLIT 10,733 107 303 5,000 5,410
Stock option redemption - - - (33) (33)
Issuance of common stock for options exercised 400 4 369 - 373
Common stock issued in initial public offering, net of
offering costs of $1,200 2,950 30 10,557 - 10,587
Issuance of common stock in connection with acquisition 120 1 499 - 500
Compensation expense related to stock options - - 7 - 7
Net income - - - 2,262 2,262
------ ----- ------- ------- -------
BALANCES AT JUNE 30, 1994 (1) 14,203 142 11,735 7,229 19,106
Issuance of common stock for options exercised of merged
company - - 85 - 85
Stock redemption of merged company - - (35) - (35)
Issuance of common stock for options exercised 86 1 59 - 60
Sale of common stock under employee stock purchase plan 16 - 72 - 72
Tax benefit from exercise of stock options - - 422 - 422
Termination of S corporation tax status of merged company - - 854 (854) -
Reversal of deferred compensation liability - - 86 - 86
Issuance of common stock in connection with acquisition 24 - 100 - 100
Compensation expense related to stock options - - 19 - 19
Net income - - - 4,175 4,175
------ ----- ------- ------- -------
BALANCES AT JUNE 30, 1995 (1) 14,329 143 13,397 10,550 24,090
Issuance of common stock for options exercised 582 6 444 - 450
Sale of common stock under employee stock purchase plan 90 1 797 - 798
Common stock issued in public offering, net of offering
costs of $1,532 1,912 19 18,971 - 18,990
Tax benefit from exercise of stock options - - 2,643 - 2,643
Termination of S corporation tax status of merged company - - 736 (736) -
Issuance of common stock in connection with acquisition 24 - 100 - 100
Compensation expense related to stock options - - 19 - 19
Net income - - - 8,142 8,142
------ ----- ------- ------- -------
BALANCES AT JUNE 30, 1996 16,937 $ 169 $37,107 $17,956 $55,232
------ ----- ------- ------- -------
------ ----- ------- ------- -------
(1) Restated - See Note 2.
See accompanying notes to consolidated financial statements.
17
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1995 AND 1996
IN THOUSANDS 1994(1) 1995(1) 1996
-------- ------- -------
OPERATING ACTIVITIES:
Net income $ 2,262 $ 4,175 $ 8,142
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 984 1,848 2,481
Deferred income taxes (67) 52 (508)
Compensation expense related to
stock options 7 19 19
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Accounts receivable (2,500) (7,203) (7,399)
Intangible assets - - (127)
Other current and long-term assets (133) (290) (403)
Trade payables 672 552 (192)
Accrued compensation 1,595 745 (936)
Income taxes payable 277 215 (152)
Other liabilities (663) 669 983
-------- ------- -------
Net cash provided by operating
activities 2,434 782 1,908
-------- ------- -------
INVESTING ACTIVITIES:
Acquisitions (9,920) (5,213) (1,725)
Purchases of property and equipment (392) (851) (1,515)
(Purchases)/sales of short-term investments (1,024) 1,140 -
Advances to affiliates (9,083) - -
Payments from affiliates 10,402 - -
-------- ------- -------
Net cash used in investing activities (10,017) (4,924) (3,240)
-------- ------- -------
FINANCING ACTIVITIES:
Net borrowings (payments) on bank lines of
credit (2,280) 4,131 (5,800)
Proceeds from sales of common stock, net 10,960 132 20,238
Proceeds from sale of common stock of
merged company - 85 -
Payments on notes payable-related party (304) - -
Borrowings/(payments) on notes payable (61) 40 (110)
Tax benefit from exercise of stock options - 422 1,600
Redemption of stock or stock option (33) (35) -
-------- ------- -------
Net cash provided by financing
activities 8,282 4,775 15,928
-------- ------- -------
Net increase in cash and cash
equivalents 699 633 14,596
Cash and cash equivalents, beginning of year 747 1,446 2,079
-------- ------- -------
Cash and cash equivalents, end of year $ 1,446 $ 2,079 $16,675
-------- ------- -------
-------- ------- -------
Supplemental cash flow information:
Cash paid for interest $ 194 $ 285 $ 183
Cash paid for income taxes 952 1,946 4,738
Supplemental noncash investing and
financing activities:
Increase in liabilities to acquire
assets in acquisitions 2,093 225 -
Decrease in current liabilities due to
reversal of deferred compensation liability - 86 -
Issuance of common stock in connection
with acquisition 500 100 100
(1) Restated - See Note 2.
See accompanying notes to consolidated financial statements.
18
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994, 1995 AND 1996
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF OPERATIONS
CIBER, Inc. ("CIBER" or the "Company") is a nationwide provider of
information technology consulting services. Through its approximately 2,000
consultants operating out of over 30 branch offices in over 20 states, plus
one office in each of two foreign countries, CIBER offers services to its
clients in three principal areas: information technology consulting services,
package software implementation services and millennium date conversion
services. The CIBER Information Services division provides application
software staff supplementation, system life-cycle project responsibility and
other computer-related professional services primarily to large corporate
clients. Package software implementation services are provided by the
Company's wholly-owned subsidiary, Business Information Technology, Inc.
("BIT"), which specializes in the implementation and integration of human
resource and financial software application products, primarily for
client/server networks. The Company's CIBR2000 division offers services to
help clients correct computer systems for the year 2000 date change.
In May 1996, Practical Business Solutions, Inc. ("PBSI"), which provided
consulting services similar to CIBER, merged with CIBER. The merger has been
accounted for as a pooling of interests, and accordingly, the Company's
financial statements have been restated for all periods prior to the business
combination to include the results of operations, financial position and cash
flows of PBSI.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
(c) CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist of money market funds.
(d) PROPERTY AND EQUIPMENT
Property and equipment, which consists primarily of office equipment and
furniture, is stated at cost. Repair and maintenance costs are charged to
expense. Depreciation is computed using the straight-line and accelerated
methods over the estimated useful lives, ranging primarily from five to seven
years. Depreciation expense was $294,000, $471,000 and $704,000 for the
years ended June 30, 1994, 1995 and 1996, respectively.
(e) INTANGIBLE ASSETS
Intangible assets consist of client lists, goodwill, noncompete agreements
and software license costs. Client lists are amortized over the estimated
useful lives ranging from two to eight years. Goodwill is amortized over 12
to 15 years. Noncompete agreements and software license costs are amortized
over the terms of the contracts which range from two to eight years.
Amortization is recorded using the straight-line method.
19
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Intangible assets will be reviewed for impairment when events indicate the
carrying amount of intangible assets may not be recoverable. Events that may
indicate a need to assess recoverability include significant changes in
business conditions, continuing losses or a forecasted inability to achieve
at least break-even operating results over a long period. Management does not
believe current events or circumstances provide evidence that intangible
assets have been impaired. Impairments would be considered to exist when the
estimated non-discounted future cash flows expected to result from the use of
the intangible asset are less than the carrying amount of the asset.
Impairment, if any, will be measured based on forecasted future discounted
operating cash flows.
(f) REVENUE RECOGNITION
The Company recognizes revenue on contracts as services are rendered.
Revenues include reimbursable expenses directly incurred in providing
services to clients. Reimbursable expenses totaled $2,368,000, $3,896,000 and
$4,610,000 for the years ended June 30, 1994, 1995 and 1996, respectively.
Revenues also include pass-through billings of third parties performed as an
accommodation to certain clients; these represented approximately $458,000,
$639,000 and $3,553,000 for the years ended June 30, 1994, 1995 and 1996,
respectively.
(g) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. A tax benefit
or expense is recognized for the net change in the deferred tax asset or
liability during the period. The effect on deferred tax assets and liabilities
due to a change in tax rates is recognized in income tax expense in the period
that includes the enactment date.
Prior to their merger with the Company, PBSI and Spencer & Spencer Systems,
Inc. ("SSSI") each had elected S corporation status for U.S. federal income
tax purposes; therefore, the tax liability associated with their income was
the responsibility of their stockholders. Accordingly, no provision for
income taxes is included in the historical consolidated financial statements
for the operations of these companies prior to their merger with CIBER. The
related net deferred tax liability at the merger date has been recorded as
income tax expense. See note 1(j).
(h) STOCK SPLIT
The Company's Board of Directors authorized a two-for-one stock split
effected in the form of a 100% stock dividend payable on June 14, 1996, to
shareholders of record on May 31, 1996. As a result of the stock split an
additional 8,468,000 common shares were issued. Shareholders' equity has
been restated to give retroactive recognition to the stock split for all
periods presented by reclassifying from additional paid in capital to common
stock the par value of the additional shares arising from the split. In
addition, all references in the consolidated financial statements to number
of common shares, per share amounts and stock option data have been restated.
(i) STOCK-BASED COMPENSATION
CIBER uses the intrinsic value-based method for measuring stock-based
compensation cost which measures compensation cost as the excess, if any, of
the quoted market price of CIBER common stock at the grant date over the
amount the employee must pay for the stock. CIBER generally grants stock
options at fair market value at the date of grant.
20
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(j) PRO FORMA NET INCOME
To properly reflect the Company's pro forma net income, the net income of
PBSI and SSSI has been tax effected and are included in the pro forma
adjustment to income tax expense in the accompanying consolidated statements
of operations for all periods prior to their merger with CIBER. This
adjustment was computed as if PBSI and SSSI had been taxable entities subject
to federal and state income taxes prior to their merger with CIBER at the
marginal rates applicable in such periods. In addition, the pro forma
adjustment to income tax expense for the years ended June 30, 1995 and 1996
has been effected to exclude $284,000 and $475,000, respectively,
representing the one-time income tax expense resulting from the termination
of the S corporation status of SSSI and PBSI, respectively.
(k) PRO FORMA INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Pro forma income per common and common equivalent share is computed on the
basis of weighted average number of shares outstanding during the year and
common equivalent shares. Common equivalent shares of 1,906,000, 1,806,000
and 1,561,000 in fiscal 1994, 1995 and 1996, respectively, consist of stock
options, determined using the treasury stock method. Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletin, common and
common equivalent shares issued during the twelve-month period prior to the
Company's initial public offering in March 1994 at prices less than the
initial public offering price have been included in the calculation as if
they were outstanding for all periods prior to the initial public offering
(using the treasury stock method and the initial public offering price). In
addition, the shares and the options issued in fiscal 1995 and 1996 in
connection with the poolings of interests discussed in note 2, have been
treated as if they had been issued and outstanding for all periods prior to
the respective merger.
(l) 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 liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(m) FAIR VALUE OF FINANCIAL INSTRUMENTS
Unless otherwise stated, herein, the fair value of the Company's financial
instruments approximate their carrying amounts due to the relatively short
periods to maturity of the instruments and/or variable interest rates of the
instruments which approximate current market rates.
(2) POOLINGS OF INTERESTS
In May 1996, the Company issued 959,035 shares of its common stock and stock
options to purchase 72,185 shares of common stock at $0.01 per share in
exchange for the assets and the assumption of the liabilities of PBSI by
CIBER. The CIBER stock options granted replaced existing PBSI stock options.
The merger has been accounted for as a pooling of interests and, accordingly,
the Company's consolidated financial statements have been restated for all
periods prior to the merger to include the accounts and operations of PBSI
with those of the Company. For income tax purposes, the merger was a
nontaxable transaction.
21
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
RESTATEMENTS
Revenues and net income (loss) of the separate companies were (in thousands):
CIBER PBSI COMBINED
----- ---- --------
Year ended June 30, 1996
Revenues $141,612 $15,261 $156,873
Net income (loss) $ 8,182 $ (40) $ 8,142
Year ended June 30, 1995
Revenues $109,069 $11,082 $120,151
Net income $ 3,854 $ 321 $ 4,175
Year ended June 30, 1994
Revenues $ 72,093 $ 7,717 $ 79,810
Net income $ 2,150 $ 112 $ 2,262
In connection with the merger of PBSI with CIBER in May 1996, the Company
incurred merger costs of $901,000, which were expensed in the quarter ended
June 30, 1996.
In fiscal 1995, SSSI and BIT merged with CIBER in business combinations each
accounted for as a pooling of interests. Accordingly, the Company's consolidated
financial statements include the accounts and operations of SSSI and BIT for all
periods prior to the respective merger. In connection with the mergers of SSSI
and BIT, the Company incurred merger costs of $1,075,000, which were expensed in
the quarter ended June 30, 1995.
(3) ACQUISITIONS
During the three years ended June 30, 1996, CIBER made the acquisitions set
forth below. Each of these acquisitions has been accounted for under the
purchase method of accounting for business combinations and accordingly, the
accompanying consolidated financial statements include the results of operations
of each acquired business since the date of acquisition. Pro forma results of
operations have not been presented because the effects were not material to
revenues or net income. These businesses each provided information technology
services similar to CIBER.
OASYS, INC. - In March 1996, the Company acquired certain assets and all of
the business operations of Oasys, Inc., located near Columbus, Ohio. The
consideration paid for this acquisition was $769,000 in cash. The excess of the
purchase price over the estimated fair value of net assets acquired amounted to
$740,000, which has been accounted for as goodwill. In addition, if the
operations acquired achieve certain levels of revenue, the Company would be
required to pay through December 31, 1998, additional cash consideration to the
former owners. The Company would record such additional consideration paid, if
any, as additional goodwill.
MINNESOTA BRANCH - In September 1995, the Company acquired certain assets and
liabilities and all of the business operations of the Rochester, Minnesota
branch office of Broadway & Seymour, Inc. The consideration paid for this
acquisition was $956,000 in cash and the assumption of $16,000 of net
liabilities. The excess of the purchase price over the estimated fair value of
net assets acquired amounted to $972,000, which has been accounted for as
goodwill.
INTERFACE SYSTEMS, INC. ("ISI") - In January 1995, the Company acquired certain
assets and all of the business operations of ISI, located in Holmdel, NJ. The
consideration for the acquisition was $3,350,000. In addition, if the operations
acquired achieve certain levels of income, the Company would be required to pay
annually through December 31, 1997, additional consideration in the form of
shares of common stock to the former owners. The Company would record such
additional consideration paid, if any, as additional goodwill. The aggregate
purchase
22
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
price was allocated, based upon fair values, to: client lists $1,771,000,
goodwill $1,500,000, noncompete agreements $60,000 and other assets $19,000.
C.P.U., INC. ("CPU") - In June 1994, the Company acquired certain assets and all
of the business operations of CPU, located in Rochester, NY. The total
consideration for this acquisition was $12,359,000, of which $9,859,000 was paid
in cash at closing, $1,500,000 was paid in fiscal 1995, $500,000 was paid
through the issuance of common stock of the Company, and $500,000 of common
stock issuable in equal installments over five years. The first two of these
stock issuances had been made as of June 30, 1996. The aggregate purchase price
was allocated, based upon fair values, to: client lists $5,000,000, goodwill
$4,500,000, noncompete agreements $600,000, accounts receivable $2,163,000 and
other net assets $96,000.
(4) INTANGIBLE ASSETS
Intangible assets consist of the following at June 30, 1995 and 1996 (in
thousands):
1995 1996
------- -------
Goodwill $ 5,975 $ 7,687
Client lists 6,872 6,872
Noncompete agreements 2,725 2,845
Software license costs 310 337
------- -------
15,882 17,741
Less accumulated amortization (3,189) (4,966)
------- -------
$12,693 $12,775
------- -------
------- -------
(5) BANK REVOLVING LINES OF CREDIT
The Company has a revolving line of credit agreement with a bank providing for
outstanding borrowings of up to 80% of eligible accounts receivable with a
maximum borrowing of $15,000,000. Outstanding borrowings bear interest at the
bank's prime rate (8.25% at June 30, 1996). Borrowings under the agreement are
collateralized by substantially all the assets of the Company. The credit
agreement requires a commitment fee of 0.225% per annum on any unused portion.
The terms and conditions of the credit agreement include several covenants,
including those whereby the Company agrees to the maintenance of a certain
tangible net worth and debt service coverage ratios and imposes limits on the
incurrence of additional indebtedness. Amounts advanced under the line of credit
can be used to consummate an acquisition and may be required by the bank to be
converted into a five-year term note payable in equal amounts of interest and
principal; in such event, the line of credit would be reduced by the amount of
the term note.
Prior to its merger with the Company, BIT had a revolving line of credit with
a bank. At June 30, 1995, $2,000,000 was outstanding. In July 1995, the
Company canceled this line of credit and amounts outstanding were paid off
utilizing borrowings under the Company's line of credit described above.
(6) LEASES
The Company has several noncancelable operating leases for office space.
Rental expense for operating leases totaled $1,270,000, $1,610,000 and
$1,644,000 for the years ended June 30, 1994, 1995 and 1996, respectively.
23
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Future minimum lease payments as of June 30, 1996 are (in thousands):
Year ending June 30:
1997 $1,484
1998 1,414
1999 1,216
2000 585
2001 90
------
Total minimum lease payments $4,789
------
------
(7) INCOME TAXES
Income tax expense (benefit) for the years ended June 30, 1994, 1995 and 1996
consists of the following (in thousands):
1994 1995 1996
------ ------ ------
Current:
Federal $1,230 $2,555 $5,246
State and local 95 354 909
Foreign 35 59 110
------ ------ ------
1,360 2,968 6,265
------ ------ ------
Deferred:
Federal (59) 54 (433)
State and local (8) (2) (75)
------ ------ ------
(67) 52 (508)
------ ------ ------
Income tax expense $1,293 $3,020 $5,757
------ ------ ------
------ ------ ------
Actual income tax expense for the years ended June 30, 1994, 1995 and 1996
differed from the amounts computed by applying the expected U.S. federal
income tax rate to income before income taxes as a result of the following
(in thousands):
1994 1995 1996
------ ------ ------
Computed expected tax expense at 34.0% $1,208 $2,446 $4,726
Increase (decrease) in income taxes
resulting from:
State and local income taxes, net
of federal income tax benefit 59 232 549
Nondeductible merger costs - 236 38
Termination of S corporation status
of merged companies (A) - 284 475
S corporation income of merged
companies (4) (96) (73)
Other 30 (82) 42
------ ------ ------
Income tax expense $1,293 $3,020 $5,757
------ ------ ------
------ ------ ------
Effective tax rate 36.4% 42.0% 41.4%
------ ------ ------
------ ------ ------
(A) AS A RESULT OF THE TERMINATION OF THE S CORPORATION STATUS OF SSSI IN
MAY 1995 AND PBSI IN MAY 1996, THE COMPANY INCURRED ONE-TIME INCOME TAX
EXPENSE OF $284,000 AND $475,000, RESPECTIVELY.
24
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
For the year ended June 30, 1996, the Company recognized $2,643,000 as a
direct addition to additional paid in capital for the tax benefit resulting
from the exercise of stock options. Of this amount, $1,600,000 reduced
income taxes payable at June 30, 1996 and $1,043,000 is included in deferred
tax assets, which will be used to reduce income taxes payable for the year
ended June 30, 1997. For the year ended June 30, 1995, the Company
recognized $422,000 as a direct addition to additional paid in capital for
the tax benefit resulting from the exercise of stock options which reduced
income taxes payable by the same amount.
The components of the net deferred tax asset or liability at June 30, 1995
and 1996 consist of the following (in thousands):
1995 1996
------- -------
Deferred tax assets:
Intangible assets, due to differences in
amortization periods $ 176 $ 458
Accounts payable 228 186
Accrued expenses, due to accruals not currently
tax deductible 591 443
Net operating loss carryforwards of BIT 264 -
Future tax benefit of stock options exercised - 1,043
Other 35 -
------- -------
1,294 2,130
Deferred tax liabilities:
Accounts receivable (1,970) (1,255)
------- -------
Net deferred tax asset/(liability) $ (676) $ 875
------- -------
------- -------
Balance sheet classification of net deferred tax
asset/(liability):
Deferred tax asset-current $ - $ 417
Deferred tax asset-long term 440 458
Deferred tax liability-current (1,116) -
------- -------
Net deferred tax asset/(liability) $ (676) $ 875
------- -------
------- -------
Deferred taxes related to accounts payable and accounts receivable are
primarily related to BIT utilizing the cash basis of accounting for income
tax purposes, prior to its merger with CIBER.
(8) SHAREHOLDERS' EQUITY
(a) EMPLOYEE STOCK PURCHASE PLAN
In January 1995, the Company established a stock purchase plan which allows
eligible employees to purchase, through payroll deductions, shares of the
Company's common stock at 85% of the fair market value at specified dates.
The Company has reserved 500,000 shares of common stock for issuance under
the employee stock purchase plan. During the years ended June 30, 1995 and
1996, employees purchased 16,880 and 90,268 shares of common stock,
respectively.
(b) STOCK OPTION PLANS
1989 PLAN - The Company established a stock option plan in 1989 that was
discontinued during fiscal 1994. The options are 100% vested as of July 1,
1995 and are subject to certain restrictions. The options expire twenty
years after the date of grant through 2013.
25
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEES' PLAN - The Company established in 1994 a stock option plan for
employees and has reserved 1,000,000 shares of the Company's authorized but
unissued common stock for granting of options. Under this plan, the plan
administrators may grant to officers, employees and consultants, restricted
stock, stock options, performance bonuses or any combination thereof. The
number of awards granted annually is determined by the compensation committee
of the Board of Directors. Options become exercisable as determined at the
date of grant by the Board of Directors and expire within 10 years from the
date of grant. No portion of the option vests before six months after the
date of grant.
DIRECTORS' PLAN - The Company also established in 1994 a stock option plan
for non-employee directors, and has reserved 100,000 shares of the Company's
authorized but unissued common stock, for granting of options thereto. Under
this plan, stock options are non-discretionary and granted annually at the
fair market value of the Company's common stock on the date of grant. The
number of options granted annually is fixed by the plan. Options become
exercisable as determined at the date of grant by the Board of Directors and
expire 10 years from the date of grant.
SSSI OPTION AGREEMENT - In May 1995, the Company established a stock option
plan for Mr. David T. Pieroni as part of the SSSI merger. The Company
granted an option to purchase 134,268 shares of common stock at $.005 per
share. This option was exercised during the year ended June 30, 1996.
At June 30, 1996, there were 2,329,322 common shares reserved for stock
options and options for 1,360,322 common shares were exercisable under the
Company's stock option plans.
The following summarizes activity under the Company's 1989, Employees' and
Directors' stock option plans:
SHARES UNDER OPTION PER SHARE OPTION PRICE
------------------- ----------------------
1989 PLAN
Outstanding at June 30, 1993 1,904,560 $ 0.46 - 1.06
Granted 290,626 1.29
Redeemed (34,874) 0.77
Exercised (400,000) 0.46 - 1.29
---------
Outstanding at June 30, 1994 1,760,312 0.46 - 1.29
Exercised (85,000) 0.46 - 1.29
---------
Outstanding at June 30, 1995 1,675,312 0.46 - 1.29
Exercised (403,990) 0.46 - 1.29
---------
Outstanding at June 30, 1996 1,271,322 0.46 - 1.29
---------
---------
EMPLOYEES' PLAN
Outstanding at June 30, 1993 - -
Granted 200,000 $ 4.17 - 4.40
---------
Outstanding at June 30, 1994 200,000 4.17 - 4.40
Granted 120,000 4.38
Canceled (18,000) 4.38
---------
Outstanding at June 30, 1995 302,000 4.17 - 4.40
Granted (a) 473,894 0.01 - 19.88
Exercised (42,000) 4.17 - 4.38
Canceled (1,000) 16.38
---------
Outstanding at June 30, 1996 732,894 0.01 - 19.88
---------
---------
(a) INCLUDES OPTIONS GRANTED IN CONNECTION WITH PBSI'S MERGER WITH CIBER, SEE
NOTE 2.
26
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHARES UNDER OPTION PER SHARE OPTION PRICE
------------------- ----------------------
DIRECTORS' PLAN
Outstanding at June 30, 1993 - -
Granted 10,000 $ 4.00
------
Outstanding at June 30, 1994 10,000 4.00
Granted 12,000 4.44 - 6.31
------
Outstanding at June 30, 1995 22,000 4.00 - 6.31
Granted 14,000 10.75 - 11.63
------
Outstanding at June 30, 1996 36,000 4.00 - 11.63
------
------
(9) RELATED PARTY TRANSACTIONS
The Company is a guarantor on a $2,000,000 inventory purchase line of credit
with AT&T Capital Corporation to CIBER Network Services, Inc. ("CNSI"), a
company that is majority owned by certain officers of the Company. As of
June 30, 1996, the outstanding amount for the line of credit was $1,774,000.
The highest amount outstanding under the line of credit was $1,896,000 during
the year ended June 30, 1995 and $2,000,000 during the year ended June 30,
1996. It is not practical to estimate the fair value of this guarantee and
the Company does not expect to incur any losses as a result of this
guarantee. Certain officers of the Company have also guaranteed this line of
credit and have indemnified the Company against losses that might be incurred
as a result of its guaranty.
During the years ended June 30, 1994, 1995 and 1996, CIBER purchased from
CNSI several local area networks and various computer equipment and software
for approximately $160,000, $268,000 and $923,000, respectively. In January
1994, the Company and CNSI entered into a month-to-month management services
agreement which provides that the Company will supply accounting and other
administrative services to CNSI at a monthly cost of $2,500.
(10) 401(K) SAVINGS PLAN
The Company has two savings plans under Section 401(k) of the Internal
Revenue Code. Company contributions are determined based on the employee's
completed years of service, the employee's contribution and the Company's
matching contribution percentage. Company contributions were $418,000,
$615,000 and $932,000 for the years ended June 30, 1994, 1995 and 1996,
respectively.
(11) BUSINESS AND CREDIT CONCENTRATIONS
The Company's clients are located principally throughout the United States.
Its revenue and accounts receivable are concentrated with large companies in
several industries. One of the Company's clients accounted for 10% of total
revenues for the year ended June 30, 1996. In addition, the Company's five
largest clients accounted for 25%, 23% and 28% of the Company's total
revenues for the years ended June 30, 1994, 1995 and 1996, respectively. The
Company has a policy to regularly monitor the creditworthiness of its clients
and generally does not require collateral. Historically the Company has not
had the need to provide for material uncollectible amounts. Through BIT,
the Company has as a concentration of revenues related to clients purchasing
software from PeopleSoft, Inc. ("PeopleSoft"). Approximately 11%, 14% and
16% of the Company's total revenues for the years ended June 30, 1994, 1995
and 1996, respectively, were generated from over 100 clients implementing
PeopleSoft software.
The Company also has concentrations of credit risk in cash and cash
equivalents, which are maintained at recognized financial institutions. The
Company performs ongoing financial evaluations of these institutions.
27
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) SUBSEQUENT EVENTS
In July 1996, CIBER acquired certain assets and the business operations of
the Business Systems Development division of DataFocus, Inc., Fairfax,
Virginia, a subsidiary of KTI, Inc., for approximately $5,000,000. Of the
purchase price, $4,954,000 was paid in cash at the closing from CIBER's
available cash. The acquisition will be accounted for as a purchase. This
division provides Microsoft technology based computer software consulting
services.
On September 3, 1996, Spectrum Technology Group, Inc. ("Spectrum") merged
with CIBER in a business combination to be accounted for as a pooling of
interests. CIBER issued approximately 850,000 shares of common stock in
exchange for all of the outstanding common stock of Spectrum. Spectrum,
located in Somerville, New Jersey, provides management consulting solutions
to business problems, specifically in the areas of data warehousing, data
modeling and enterprise architecture, as well as project management and
system integration services. Spectrum had revenues of approximately $8.4
million (unaudited) for the six month period from January 1, 1996 to June 30,
1996.
(13) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth certain statements of operations data for each
of the Company's last eight quarters and, in the opinion of management,
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation thereof. All previously reported
information has been restated for the effect of the merger with PBSI in May
1996, which was accounted for as a pooling of interests. The fourth quarters
of fiscal 1995 and 1996 include merger costs of $1,075,000 and $901,000,
respectively, related to poolings of interests. See note 2.
FIRST SECOND THIRD FOURTH
IN THOUSANDS, EXCEPT PER SHARE DATA QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
YEAR ENDED JUNE 30, 1996
Revenues $34,869 $36,033 $40,715 $45,256 $156,873
Operating income 3,045 2,868 3,707 3,803 13,423
Net income 1,848 1,855 2,518 1,921 8,142
Pro forma net income 1,798 1,804 2,419 2,510 8,531
Pro forma income per common and common equivalent share $0.11 $0.10 $0.13 $0.14 $0.49
YEAR ENDED JUNE 30, 1995
Revenues $26,655 $27,913 $31,823 $33,760 $120,151
Operating income 1,734 1,539 2,372 1,785 7,430
Net income 1,054 1,038 1,412 671 4,175
Pro forma net income 1,060 933 1,367 936 4,296
Pro forma income per common and common equivalent share $0.07 $0.06 $0.08 $0.06 $0.27
28
ITEM 9. CHANGES AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows:
SERVED AS
OFFICER OR
NAME AGE POSITIONS DIRECTOR SINCE CLASS
- ------------------ --- --------- -------------- ---------
Bobby G. Stevenson 54 Chairman, Chief Executive Officer, 1974 Class III
Secretary and Founder
Mac J. Slingerlend 49 President, Chief Operating Officer, 1989 Class II
Treasurer and Director
William E. Storrison 37 President/CIBER Information 1992 -
Services Division
John B. Maitland 53 Vice President; President of Business
Information Technology, Inc. (BIT) 1995 -
James A. Rutherford 50 Director 1994 Class II
James C. Spira 53 Director 1994 Class I
Roy L. Burger 41 Director 1995 Class I
BOBBY G. STEVENSON. Mr. Stevenson is Chairman of the Board of Directors,
Chief Executive Officer, Secretary and one of the original three founders of
the Company. Mr. Stevenson was Vice President in charge of recruiting and
management of the technical staff from 1974 until November 1977 when he
became Chief Executive Officer. He has been responsible for all operations
of the Company since 1977.
MAC J. SLINGERLEND. Mr. Slingerlend joined the Company in January 1989 as
Executive Vice President/Chief Financial Officer, became Treasurer and a
director in 1994 and President and Chief Operating Officer in 1996. Prior to
joining the Company, Mr. Slingerlend spent 15 years in the banking industry,
primarily as a commercial lender, and five years in corporate financial
positions in the cable television and hospitality industries.
WILLIAM E. STORRISON. Mr. Storrison has been President/CIBER Information
Services Division since 1996. Mr. Storrison was Senior Vice
President/Operations of the Company from 1994 to 1996 and, from 1992 to 1994,
served as the Company's Vice President/Eastern Operations. Mr. Storrison has
been with the Company since 1987 and was previously Branch Manager and
Regional Vice President of several of the Company's eastern branch offices.
JOHN B. MAITLAND. Mr. Maitland joined the Company in 1995 as Vice President
and as President of BIT when BIT merged with the Company. Mr. Maitland is
responsible for the strategic initiatives, organizational development,
business growth and overall profitability of BIT. From 1969 to 1981, Mr.
Maitland held several positions in management and consulting, lastly as
Consulting Manager and Director of Consulting at Integral Systems, Inc., a
human resource management systems and financials software producer and
consulting firm. In 1981, Mr. Maitland co-founded BIT and became its
Executive Vice President and Chief Operating Officer. In 1987, he was
promoted to President and Chief Executive Officer of BIT.
29
JAMES A. RUTHERFORD. Mr. Rutherford has been a director of the Company since
February 1994. He is a managing director of Wingset Investments Ltd., a
private venture capital company located in New Albany, Ohio. Prior to
forming Wingset in 1995, Mr. Rutherford was one of the founders of Goal
Systems International Inc., serving in various executive positions and as a
director from its incorporation in 1977 until its sale in 1992. Mr.
Rutherford is also a director of Symix Systems, Inc., Columbus, Ohio, as well
as several private corporations.
JAMES C. SPIRA. Mr. Spira has been a director of the Company since
September 1994. Since 1995, he has been managing partner with Chicago,
Illinois based Diamond Technology Partners, Inc., a management consulting
firm providing program management services to design and deploy
technology-enabled business strategies. From 1991 to 1995, Mr. Spira was
Group Vice President of The Tranzonic Companies, a Cleveland-based holding
company. From 1974 through 1991, Mr. Spira was founder, President and Chief
Executive Officer of Cleveland Consulting Associates, an operations and
systems management consulting firm doing business with large multi-national
companies.
ROY L. BURGER. Mr. Burger has been a director of the Company since November
1995. Mr. Burger has approximately 20 years of experience in the equipment
leasing and finance industry and has arranged the financing of more than $1.5
billion of equipment. Mr. Burger currently serves as Chairman and Chief
Executive Officer of Boulder Capital Group, a company that specializes in
equipment leasing and was founded by him in 1986.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated herein by reference to the
Company's 1996 Proxy Statement under the caption, "Executive Compensation,"
except the Compensation Committee's Report on Executive Compensation which is
not incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is incorporated herein by reference to the
Company's 1996 Proxy Statement under the caption "Securities Ownership of
Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is incorporated herein by reference to the
Company's 1996 Proxy Statement under the caption "Certain Relationships and
Related Transactions."
30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following financial statements are filed as part of this report:
Independent Auditors' Report
Consolidated Balance Sheets - June 30, 1995 and 1996
Consolidated Statements of Operations - Years Ended June 30, 1994,
1995 and 1996
Consolidated Statements of Shareholders' Equity - Years Ended June 30,
1994, 1995 and 1996
Consolidated Statements of Cash Flows - June 30, 1994, 1995 and 1996
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES
None
(3) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
3(i) Amended and Restated Certificate of Incorporation of the Company (1)
3(ii) Bylaws of the Company (1)
4.1 Form of Common Stock Certificate (1)
10.1 Corporate Guaranty, dated April 14, 1993, executed by the Company
for the benefit of AT&T guaranteeing the payment of CIBER Network
Services, Inc. of borrowings under a loan (1)
10.2 Management Services Agreement, dated effective January 1, 1994,
by and among the Company and CIBER Network Services, Inc. (1)
10.3 Implementation Partners Agreement dated September 1, 1993, by and
between Business Information Technology, Inc. and
PeopleSoft, Inc. (2)
10.4 1989 CIBER, Inc. Employee Stock Option Plan (1)
10.5 Form of CIBER, Inc. Non-employee Directors' Stock Option Plan (1)
10.6 Form of CIBER, Inc. Equity Incentive Plan (1)
10.7 CIBER, Inc. Savings 401(k) Plan effective January 1, 1989 (1)
10.8 Business Information Technology, Inc. Savings 401(k) Plan(2)
10.9 CIBER, Inc. Employee Stock Purchase Plan (2)
10.10 Form of Employment Agreement by and between the Company and
Bobby G. Stevenson (2)
10.11 Form of Employment Agreement by and between the Company and Mac
J. Slingerlend (2)
10.12 Form of Employment Agreement by and between the Company and
William Storrison (2)
10.13 Form of Employment Agreement by and between the Company and
Prasong Suvarnasorn (2)
10.14 Guaranty, dated December 31, 1993, by and among the Company and
certain executive officers of the Company (1)
10.15 Guaranty, dated April 14, 1993, by and among the Company and
certain executive officers of the Company (1)
10.16 Letter Agreement dated May 23, 1994, between the Company and
C.P.U., Inc. (3)
10.17 Non-Competition Agreement dated May 23, 1994, between the Company
and C.P.U., Inc. (3)
10.18 Non-Competition Agreement dated May 23, 1994, between the Company
and James Growney (3)
10.19 Employment Agreement dated May 23, 1994, between the Company and
James Growney (3)
10.20 Letter Agreement dated January 10, 1995, between the Company and
Interface Systems, Inc. (4)
10.21 Non-Competition Agreement dated January 10, 1995, between the
Company and Interface Systems, Inc. (4)
10.22 Non-Competition Agreement dated January 10, 1995, between the
Company and Dennis Nitka (4)
10.23 Employment Agreement dated January 10, 1995, between the Company
and Dennis Nitka (4)
10.24 Agreement and Plan of Reorganization and Liquidation dated
May 10, 1995, among the Company, Spencer & Spencer Systems, Inc.
and others (5)
10.25 Registration Rights Agreement dated May 11, 1995, by and among
the Company and Linda Spencer, Robert Spencer and David Pieroni (5)
31
10.26 Consulting and Non-Competition Agreement dated May 11, 1995 by
and among the Company, Spencer Acquisition Corp. and Linda
Spencer (5)
10.27 Consulting and Non-Competition Agreement dated May 11, 1995, by
and among the Company, Spencer Acquisition Corp. and Robert
Spencer (5)
10.28 Consulting and Non-Competition Agreement dated May 11, 1995, by
and between the Company, Spencer Acquisition Corp. and David
Pieroni (5)
10.29 Option Agreement dated May 11, 1995, by and between the Company
and David Pieroni (5)
10.30 Agreement and Plan of Reorganization and Liquidation dated
June 30, 1995, by and among the Company and Business Information
Technology, Inc. (6)
10.31 Registration Rights Agreement dated June 30, 1995, by and among
the Company, Paul Piper, John Maitland and the BIT Class B
Stockholder Liquidating Trust (6)
10.32 Consulting and Non-Competition Agreement dated June 30, 1995, by
and among the Company, BIT Acquisition Corp. and Paul Piper (6)
10.33 Employment Agreement dated June 30, 1995, by and among the
Company, BIT Acquisition Corp. and John Maitland (6)
10.34 Letter Agreement dated September 1, 1995 by and between Broadway
& Seymour, Inc. and the Company, incorporated by reference to the
Current Report on Form 8-K, dated September 12, 1995
10.35 Revolving Line of Credit Agreement dated March 8, 1996 between
CIBER, Inc. and UMB Bank of Colorado, incorporated by reference
to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996
10.36 Letter Agreement dated February 29, 1996 among CIBER, Inc.,
OASYS, Inc., Tony Andrews and Ronald Oats, incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996
10.37 Agreement and plan of merger by and among Practical Business
Solutions, Inc., CIBER, Inc., William Crafton, Bruce Austin and
Norman Banville, dated April 23, 1996, incorporated by reference
to the Current Report on Form 8-K dated May 7, 1996
10.38 Salary Continuation Retirement Plan for Mac J. Slingerlend
21.1 Subsidiaries (as of September 3, 1996):
1. Business Information Technology, Inc., a Delaware corporation
2. Spectrum Technology Group, Inc., a New Jersey corporation
3. CIBER Employee Services, Inc., a Delaware corporation
4. CIBER Client Services, Inc., a Delaware corporation
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule
_________________________
(1) Incorporated by reference to the Registration Statement on Form
S-1, as amended (File No. 33-74774), as filed with the Commission on
February 2, 1994.
(2) Incorporated by reference to the Registration Statement on
Form S-1, as amended (File No. 33-96988), on September 15, 1995.
(3) Incorporated by reference to the Current Report on Form 8-K filed
with the Commission on June 6, 1994.
(4) Incorporated by reference to the Current Report on Form 8-K filed
with the Commission on January 23, 1995.
(5) Incorporated by reference to the Current Report on Form 8-K filed
with the Commission on May 25, 1995.
(6) Incorporated by reference to the Current Report on Form 8-K filed
with the Commission on July 14, 1995.
(b) REPORTS ON FORM 8-K DURING THE LAST QUARTER OF THE FISCAL YEAR ENDED
JUNE 30, 1996
The Company filed a Current Report on Form 8-K, dated May 7, 1996,
announcing the closing of the merger of Practical Business Solutions,
Inc., Boston, MA, into CIBER in a tax-free reorganization accounted
for as a pooling of interests.
The Company filed a Current Report on Form 8-K, dated May 30, 1996,
announcing a 2-for-1 split of CIBER's Common Stock effective May 31,
1996 and payable as of June 14, 1996.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CIBER, INC.
(Registrant)
Date: September 23, 1996 By /s/ BOBBY G. STEVENSON
-----------------------------------
Bobby G. Stevenson
CHIEF EXECUTIVE OFFICER AND SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Bobby G. Stevenson Chairman, Chief Executive Officer September 23, 1996
- ----------------------------- and Secretary
Bobby G. Stevenson
/s/ Mac J. Slingerlend President, Chief Operating Officer, September 23, 1996
- ----------------------------- Treasurer and Director (Principal
Mac J. Slingerlend Financial Officer)
/s/ Christopher L. Loffredo Vice President/Chief Accounting September 23, 1996
- ----------------------------- Officer (Principal Accounting
Christopher L. Loffredo Officer)
/s/ James A. Rutherford Director September 23, 1996
- -----------------------------
James A. Rutherford
/s/ James C. Spira Director September 23, 1996
- -----------------------------
James C. Spira
/s/ Roy L. Burger Director September 23, 1996
- -----------------------------
Roy L. Burger
33