-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MutWcIMzbUa0TwIhIgLNliptjZJlWQfvHrm+COIqVX3Rm8FhLlsZ6hfAl26dlKVt q+0U596LJyQry9gskPDPiQ== 0000927356-97-001456.txt : 19971208 0000927356-97-001456.hdr.sgml : 19971208 ACCESSION NUMBER: 0000927356-97-001456 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970919 ITEM INFORMATION: FILED AS OF DATE: 19971205 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSG SYSTEMS INTERNATIONAL INC CENTRAL INDEX KEY: 0001005757 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 470783182 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-27512 FILM NUMBER: 97733377 BUSINESS ADDRESS: STREET 1: 7887 EAST BELLEVIEW AVE STREET 2: SUITE 1000 CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3037962850 MAIL ADDRESS: STREET 1: 5251 DTC PARKWAY SUITE 625 CITY: ENGLEWOOD STATE: CO ZIP: 80111 8-K/A 1 FORM 8-K/A#1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K (A) CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) December 5, 1997 (September 19, 1997) CSG SYSTEMS INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 0-27512 47-0783182 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number Identification No.) 7887 East Belleview, Suite 1000, Englewood, Colorado 80111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 796-2850 CSG SYSTEMS INTERNATIONAL, INC. FORM 8-K (A) CSG Systems International, Inc. (the Company) hereby amends Item 7 of its Form 8-K filed on October 6, 1997, to report an event occurring on September 19, 1997, to include the following: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial statements of businesses acquired None. (b) Pro forma financial information The following unaudited pro forma condensed consolidated financial statements are filed with this report: Page ---- Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997......................................... 4 Pro Forma Condensed Consolidated Statements of Operations: Year ended December 31, 1996............................... 5 Nine months ended September 30, 1997....................... 6 Notes to Pro Forma Condensed Consolidated Financial Statements.. 7 On August 10, 1997, the Company signed a 15-year exclusive contract with a Tele-Communications, Inc. (TCI) affiliate to consolidate 13 million TCI subscribers onto the Company's customer care and billing systems (the 15-Year Contract). TCI also purchased certain software products of the Company under the 15-Year Contract. On August 10, 1997, the Company also entered into an agreement with TCI affiliates to acquire certain SUMMITrak assets, a client/server, open systems, in- house customer care and billing system being developed by TCI. The SUMMITrak assets purchased consisted primarily of software, hardware, people and intellectual property. Both the SUMMITrak asset purchase agreement and the 15-Year Contract closed and became effective September 19, 1997. The accompanying pro forma financial statements give effect to the transactions discussed above, as if such transactions had occurred, in the case of the pro forma balance sheet, on September 30, 1997; and, in the case of the pro forma statements of operations for the year ended December 31, 1996, and the nine-month period ended September 30, 1997, on January 1, 1996. The unaudited pro forma financial statements presented herein are shown for illustrative purposes only and are not necessarily indicative of the future financial position or future results of operations of the Company, or of the financial position or results of operations of the Company that would have actually occurred had the transactions been in effect as of the date or for the periods presented. The unaudited pro forma financial statements and related notes should be read in conjunction with the historical financial statements of the Company. (c) Exhibits None. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: December 5, 1997 CSG SYSTEMS INTERNATIONAL, INC. By: /s/ Randy Wiese ------------------------------ Randy Wiese Controller (Principal Accounting Officer) 3 CSG SYSTEMS INTERNATIONAL, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - UNAUDITED SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Pro Forma Pro Forma Historical Adjustments Combined ------------- -------------- ------------ ASSETS ------ Current Assets: Cash and cash equivalents................................................. $ 25,948 $ - $ 25,948 Accounts receivable- Trade- Billed, net of allowance of $893..................................... 41,807 - 41,807 Unbilled............................................................. 3,307 - 3,307 Other.................................................................... 1,900 - 1,900 Deferred income taxes..................................................... 225 - (e) 225 Other current assets...................................................... 3,003 - 3,003 ----------- ---------- ----------- Total current assets..................................................... 76,190 - 76,190 ----------- ---------- ----------- Property and equipment, net of depreciation of $13,420.................... 15,856 2,699 (a) 18,555 Investment in SUMMITrak assets............................................ 106,226 (106,226)(a) - Software, net of amortization of $32,004.................................. 14,345 4,641 (a) 18,986 Noncompete agreements and goodwill, net of amortization of $17,742........ 20,304 - 20,304 Client contracts and related intangibles, net of amortization of $11,598.. 6,682 41,723 (a) 48,405 Deferred income taxes..................................................... 4,993 - (e) 4,993 Other assets.............................................................. 4,801 - 4,801 ----------- ---------- ----------- Total assets............................................................ $ 249,397 $ (57,163) $ 192,234 =========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt...................................... $ 5,000 $ - $ 5,000 Customer deposits......................................................... 6,878 - 6,878 Trade accounts payable.................................................... 7,905 - 7,905 Accrued liabilities....................................................... 11,045 174 (a) 11,219 Deferred revenue.......................................................... 4,300 - 4,300 Accrued income taxes...................................................... 2,058 - 2,058 Other current liabilities................................................. 469 - 469 ----------- ---------- ----------- Total current liabilities................................................ 37,655 174 37,829 ----------- ---------- ----------- Long-term debt, net of current maturities................................. 145,000 - 145,000 Deferred revenue.......................................................... 11,157 - 11,157 Stockholders' Equity: Preferred stock, par value $.01 per share; 10,000,000 shares authorized; zero shares issued and outstanding....................................... - - - Common stock, par value $.01 per share; 100,000,000 shares authorized; 25,520,248 shares issued and outstanding................................. 255 - 255 Common stock warrants..................................................... - 33,780 (a) 33,780 Additional paid-in capital................................................ 111,942 - 111,942 Deferred employee compensation............................................ (810) - (810) Notes receivable from employee stockholders............................... (861) - (861) Accumulated translation adjustments....................................... (131) - (131) Accumulated deficit....................................................... (54,810) (91,117)(a)(e) (145,927) ----------- ---------- ----------- Total stockholders' equity............................................... 55,585 (57,337) (1,752) ----------- ---------- ----------- Total liabilities and stockholders' equity............................... $ 249,397 $ (57,163) $ 192,234 =========== ========== ===========
See notes to pro forma condensed consolidated financial statements 4 CSG SYSTEMS INTERNATIONAL, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Pro Forma Pro Forma Historical Adjustments Combined ---------- ----------- ------------ (d) Total revenues............................................................. $ 132,297 $ - $ 132,297 Expenses: Cost of revenues: Direct costs............................................................. 59,150 - 59,150 Amortization of acquired software........................................ 11,003 774 (b) 11,777 Amortization of client contracts and related intangibles................. 4,092 960 (b) 5,052 ---------- ---------- ------------ Total cost of revenues.................................................. 74,245 1,734 75,979 ---------- ---------- ------------ Gross margin.............................................................. 58,052 (1,734) 56,318 ---------- ---------- ------------ Operating expenses: Research and development................................................. 20,206 - (a) 20,206 Selling and marketing.................................................... 8,213 - 8,213 General and administrative: General and administrative.............................................. 13,702 - 13,702 Amortization of noncompete agreements and goodwill...................... 6,392 - 6,392 Stock-based employee compensation....................................... 3,570 - 3,570 Depreciation............................................................. 5,121 675 (b) 5,796 ---------- ---------- ------------ Total operating expenses................................................ 57,204 675 57,879 ---------- ---------- ------------ Operating income (loss).................................................... 848 (2,409) (1,561) ---------- ---------- ------------ Other income (expense): Interest expense......................................................... (4,168) (8,196)(c) (12,364) Interest income.......................................................... 844 - (c) 844 ---------- ---------- ------------ Total other............................................................. (3,324) (8,196) (11,520) ---------- ---------- ------------ Loss from continuing operations before income taxes........................ (2,476) (10,605) (13,081) Income tax (provision) benefit............................................ - - (e) - ---------- ---------- ------------ Loss from continuing operations............................................ $ (2,476) $ (10,605) $ (13,081) ========== ========== ============ Pro forma loss from continuing operations per common and equivalent share: Primary.................................................................. $ (0.10) $ (0.52) ========== ============ Fully diluted............................................................ $ (0.10) $ (0.52) ========== ============ Shares used in pro forma per share computation: Primary.................................................................. 24,988,244 - (f) 24,988,244 =========== ========== ============ Fully diluted............................................................. 24,988,244 - (f) 24,988,244 =========== ========== ============
See notes to pro forma condensed consolidated financial statements 5 CSG SYSTEMS INTERNATIONAL, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Pro Forma Pro Forma Historical Adjustments Combined ---------- ----------- ------------ (d) Total revenues............................................................. $ 122,890 $ - $ 122,890 Expenses: Cost of revenues: Direct costs............................................................. 54,962 - 54,962 Amortization of acquired software........................................ 8,668 580 (b) 9,248 Amortization of client contracts and related intangibles................. 3,069 1,521 (b) 4,590 ---------- ---------- ------------ Total cost of revenues.................................................. 66,699 2,101 68,800 ---------- ---------- ------------ Gross margin.............................................................. 56,191 (2,101) 54,090 ---------- ---------- ------------ Operating expenses: Research and development................................................. 16,331 - (a) 16,331 Selling and marketing.................................................... 7,877 - 7,877 General and administrative: General and administrative.............................................. 14,181 - 14,181 Amortization of noncompete agreements and goodwill...................... 5,194 - 5,194 Stock-based employee compensation....................................... 373 - 373 Depreciation............................................................. 5,051 506 (b) 5,557 ---------- ---------- ------------ Total operating expenses................................................ 49,007 506 49,513 ---------- ---------- ------------ Operating income........................................................... 7,184 (2,607) 4,577 ---------- ---------- ------------ Other income (expense): Interest expense......................................................... (2,195) (6,638)(c) (8,833) Interest income.......................................................... 667 - (c) 667 Other.................................................................... 352 - 352 ---------- ---------- ------------ Total other............................................................. (1,176) (6,638) (7,814) ---------- ---------- ------------ Income (loss) from continuing operations before income taxes............... 6,008 (9,245) (3,237) Income tax (provision) benefit............................................ - - (e) - ---------- ---------- ------------ Income (loss) from continuing operations................................... $ 6,008 $ (9,245) $ (3,237) ========== ========== ============ Pro forma income (loss) from continuing operations per common and equivalent share: Primary.................................................................. $ 0.23 $ (0.13) ========== =========== Fully diluted............................................................. $ 0.23 $ (0.13) ========== =========== Shares used in pro forma per share computation: Primary.................................................................. 25,755,833 - (f) 25,755,833 =========== ========== =========== Fully diluted............................................................. 25,842,253 - (f) 25,842,253 =========== ========== ===========
See notes to pro forma condensed consolidated financial statements 6 CSG SYSTEMS INTERNATIONAL, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL The accompanying pro forma financial statements give effect to the transactions discussed in Note 2, as if such transactions had occurred, in the case of the pro forma balance sheet, on September 30, 1997; and, in the case of the pro forma statements of operations for the year ended December 31, 1996, and the nine-month period ended September 30, 1997, on January 1, 1996. 2. SUMMITRAK ASSET PURCHASE On August 10, 1997, the Company signed a 15-year exclusive contract with a Tele- Communications, Inc. (TCI) affiliate to consolidate 13 million TCI subscribers onto the Company's customer care and billing systems (the 15-Year Contract). TCI also purchased certain software products of the Company under the 15-Year Contract. On August 10, 1997, the Company also entered into an agreement with TCI affiliates to acquire certain SUMMITrak assets, a client/server, open systems, in-house customer care and billing system being developed by TCI. The SUMMITrak assets purchased consisted primarily of software, hardware, people and intellectual property. Both the SUMMITrak asset purchase agreement and the 15- Year Contract closed and became effective September 19, 1997. The purchase price for the SUMMITrak assets was $106.0 million in cash at closing, up to $26.0 million in various contingent payments, and warrants to purchase up to 1.5 million shares of the Company's common stock, with the contingent payments and the right to exercise the warrants based upon the achievement of certain milestones by TCI specified in the SUMMITrak asset purchase agreement. The milestones are based principally upon the timing of conversions and the number of TCI subscribers processed on the Company's customer care and billing systems. 3. PRELIMINARY PURCHASE PRICE The purchase price as reflected in the Company's historical financial statements at September 30, 1997, included only the $106.0 million cash payment and related transaction costs on a preliminary basis as the total purchase price and allocation of the purchase price had not yet been finalized. The Company is currently evaluating the components and the amounts to be included in the total purchase price. In conjunction with this evaluation, the Company has engaged an independent party to assist in the allocation of the purchase price to the assets acquired. The Company's internal analysis and the independent valuation are expected to be completed in the fourth quarter of 1997, at which time the total purchase price and the appropriate allocation of the purchase price will be reflected in the Company's financial statements. The adjustments to reflect the total purchase price (the Preliminary Purchase Price) and allocation of the purchase price in the accompanying pro forma financial statements are preliminary, and are based upon the Company's best estimates at this time. The final purchase price and the allocation of the purchase price may vary from these estimates. The Company has estimated the Preliminary Purchase Price to be approximately $140.2 million, which includes the following: i) $106.0 million cash payment made as of the closing, ii) $0.4 million of related transaction costs, and iii) $33.8 million for the estimated fair value of the warrants granted to TCI as of the closing. 7 As discussed above, the rights to exercise the warrants and the payment of $26.0 million contingent payments are dependent principally upon the timing of conversions and the number of TCI subscribers processed on the Company's customer care and billing systems. The Company has included the 1.5 million warrants in the Preliminary Purchase Price as this represents the Company's best available estimate of the number of warrants that are expected to be issued, based principally on the current status and schedule of expected conversions to the Company's CCS(TM) customer care and billing system. The fair value of the 1.5 million warrants was estimated as of the date of grant at $22.52 per warrant using the Black-Scholes pricing model. The Preliminary Purchase Price excludes the $26.0 million contingent payments as the Company is not assured beyond a reasonable doubt as to the total amounts expected to be paid to TCI at this time. The amounts are expected to be capitalized as the future payments are made to TCI and will be amortized ratably over the remaining term of the 15-Year Contract. As a result, the pro forma statements of operations do not include any amortization for the contingent payments. 4. ALLOCATION OF PRELIMINARY PURCHASE PRICE The allocation of the Preliminary Purchase Price included in the pro forma financial statements is estimated as follows (in millions): Asset Life Amount (in years) ------ ---------- In-process research and development............... $ 91.1 - Client contract................................... 41.8 15 Fixed assets...................................... 2.7 4 Acquired software and other intangible assets..... 4.6 6 ------ Total............................................. $140.2 ====== In-process research and development (R&D) represents research and development of software technologies which had not reached technological feasibility and have no alternative future use as of the acquisition date. In-process R&D will be charged to operations in the fourth quarter of 1997. The value assigned to the client contract will be amortized proportionately to the committed revenue under the 15-Year Contract. The fixed assets and acquired software and other intangible assets will be amortized on a straight-line basis. The total purchase price and the allocation of the purchase price are preliminary, and are based upon the Company's best estimates at this time. The final purchase price and the allocation of the purchase price may vary from these estimates. 5. DEBT The SUMMITrak asset acquisition was funded with a $190.0 million debt facility with a bank, which consists of a $150.0 million term facility and a $40.0 million revolving facility. The proceeds from the term facility were used to pay the $106.0 million purchase price at closing, retire the Company's existing debt of $27.5 million, and pay transaction costs of $3.4 million. The remaining proceeds will be used for general corporate purposes. No amounts were drawn on the revolving facility for the period ended September 30, 1997. 8 Transaction costs include $3.2 million of financing costs, which will be amortized over the life of the loan using a method which approximates the effective interest rate method. Interest payments under the new agreement are based on the LIBOR rate or the prime rate, plus an additional percentage spread, with the spread dependent upon the Company's leverage ratio, as defined in the loan agreement. The scheduled maturities of the new loan agreement for each of the years ending December 31 are as follows (in thousands): 1997 .................................. $ - 1998 ................................... 7,500 1999 ................................... 21,250 2000 ................................... 32,500 2001 ................................... 38,750 2002 ................................... 50,000 -------- $150,000 ======== The Company has the right to make optional principal payments on the debt. 6. PRO FORMA ADJUSTMENTS The unaudited pro forma financial statements reflect the following adjustments. The adjustments are based upon currently available information and certain assumptions, and therefore the actual adjustments will likely differ from the pro forma adjustments. As discussed above, the purchase price and allocation of the purchase price are preliminary. However, the Company's management believes that the preliminary purchase price allocation and other assumptions provide a reasonable basis for presenting the effects of the SUMMITrak asset purchase as contemplated. (a) Adjustment to reflect the allocation of the Preliminary Purchase Price as discussed in Notes 3 and 4. The portion allocated to in-process R&D has not been included in the pro forma statements of operations as the amount is considered a material, nonrecurring charge which will be included in the Company's results of operations within 12 months following the closing of the transactions discussed above. Accordingly, the adjustment to accumulated deficit represents the estimated amount of in-process R&D to be expensed by the Company in the fourth quarter of 1997. See additional discussion in Note 4. (b) Adjustment to reflect the depreciation of property and equipment and the amortization of intangible assets acquired. The depreciation and amortization periods and methods are discussed in Note 4. (c) Adjustment to reflect interest expense under the new debt agreement, as discussed in Note 5. The base interest rate on the debt is variable, dependent upon LIBOR or the prime interest rate, plus the additional spread which is dependent on the Company's leverage ratio. The interest rate (including the percentage spread) used for calculating interest expense for the periods presented is assumed to be consistent with the fourth quarter 1997 interest rate. A 1/8 percent variance in the base interest rate in the accompanying pro forma financial statements equates to a variance in interest expense of $0.2 million and $0.1 million for the year and nine months ended December 31, 1996, and September 30, 1997, respectively. It is assumed the principal amount of the debt is reduced by the scheduled principal payments, as reflected in Note 5. The accompanying pro forma financial statements do not assume any optional prepayments of principal. No interest income is assumed from any excess proceeds from the debt. It is assumed no amounts are drawn on the revolving credit facility for the periods presented. 9 (d) The accompanying pro forma financial statements do not reflect any additional revenues which are expected to be generated or costs which are expected to be incurred as a result of the 15-Year Contract or SUMMITrak asset acquisition. TCI has certain financial commitments under the 15-Year Contract which are not reflected in the accompanying pro forma financial statements. TCI's minimum financial commitments under the 15-Year Contract are subject to certain performance criteria by the Company. (e) As of September 30, 1997, the Company had net deferred tax assets of approximately $24.2 million, with a valuation allowance of $19.0 million recorded against this amount, resulting in a net deferred tax asset of $5.2 million recorded in the historical financial statements. The in-process R&D to be expensed for book purposes in the fourth quarter of 1997 will be deductible for tax purposes over a 15-year period, resulting in a deferred tax asset of approximately $34.6 million as of the acquisition date. The additional expense reflected in the pro forma statements of operations will create additional deferred tax assets for the Company. As a result of the significant increase in the deferred tax assets from these items, considered with the historical deferred tax assets, it is assumed in the accompanying pro forma financial statements that any additional deferred tax assets from these transactions would not likely be realized. As a result, no deferred tax benefit for the pro forma adjustments is recorded. This treatment is consistent with the Company's accounting for income taxes as of September 30, 1997. The Company evaluates the liklihood of realization of its net deferred tax assets on a quarterly basis. Such analysis for the quarter ended December 31, 1997 may indicate it is appropriate to realize all or a portion of the deferred tax assets resulting from the transactions discussed above, as well as the historical deferred tax assets. (f) The 1.5 million common stock warrants discussed in Note 2 above are excluded from common equivalent shares as the events necessary to allow the exercise of the warrants had not been satisfied as of September 30, 1997. 10 -----END PRIVACY-ENHANCED MESSAGE-----