8-K/A 1 a2036034z8-ka.txt FORM 8-K/A =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) - November 6, 2000 ---------------- INFORMATION HOLDINGS INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 1-14371 06-1518007 ------------------ -------------------- ------------------ (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 2777 SUMMER STREET, SUITE 209, STAMFORD, CONNECTICUT 06905 ---------------------------------------------------- ------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 961-9106 -------------- =============================================================================== ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION (a) Financial Statements of Business Acquired The following financial statements are included herein: I. Financial Statements of Transcender Corporation Report of Independent Auditors Balance Sheets as of September 30, 2000 and December 31, 1999 Statements of Income and Retained Earnings for the Nine-Month Period ended September 30, 2000 and for the Year Ended December 31, 1999 Statements of Cash Flows for the Nine-Month Period ended September 30, 2000 and for the Year Ended December 31, 1999 Notes to Financial Statements (b) Pro Forma Financial Information The following pro forma financial information is included herein: I. Pro Forma Condensed Consolidated Financial Statements of Information Holdings Inc. Introduction Pro Forma Condensed Consolidated Statements of Operations for the Year Ended December 31, 1999 and for the Nine Months Ended September 30, 2000 Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2000 Notes to Pro Forma Condensed Consolidated Financial Statements (c) Exhibit 23.1 Consent of Ernst & Young LLP 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 hereunto duly authorized. INFORMATION HOLDINGS INC. Dated: January 22, 2001 By: /s/ Mason P. Slaine -------------------------- Name: Mason P. Slaine Title: President 3 Report of Independent Auditors To the Board of Directors of Transcender Corporation We have audited the accompanying balance sheets of Transcender Corporation as of September 30, 2000 and December 31, 1999, and the related statements of income and retained earnings, and cash flows for the nine-month period ended September 30, 2000 and the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the financial position of Transcender Corporation as of September 30, 2000 and December 31, 1999, and the results of its operations and its cash flows for the nine-month period ended September 30, 2000 and the year ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP November 22, 2000 F-1 Transcender Corporation Balance Sheets
SEPTEMBER 30, DECEMBER 31, 2000 1999 ---------------------------- ASSETS Current assets: Cash and cash equivalents $2,641,395 $1,438,129 Investments 824,540 794,245 Accounts receivable, less allowance of $92,566 and $90,652 at September 30, 2000 and December 31, 1999, respectively 1,029,711 706,341 Inventory 262,043 140,663 Other current assets 406,528 146,523 Deferred state tax asset 26,710 25,376 ---------------------------- Total current assets 5,190,927 3,251,277 Property and equipment, net 794,817 911,857 Other assets 13,932 9,929 ---------------------------- Total assets $5,999,676 $4,173,063 ============================
F-2
SEPTEMBER 30, DECEMBER 31, 2000 1999 --------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 744,432 $ 174,744 Accrued taxes and expenses 888,693 574,582 Deferred revenue 1,754,914 81,184 Allowance for sales returns 52,602 32,280 --------------------------- Total current liabilities 3,440,641 862,790 Deferred state tax liability 9,233 6,834 --------------------------- Total liabilities 3,449,874 869,624 Stockholders' equity: Common stock - Class A, no par value - 100,000 shares authorized, 25,000 shares issued and outstanding 20,000 20,000 Common stock - Class B, no par value - 100,000 share authorized, 28,706 shares issued and outstanding 192,252 192,252 Retained earnings 2,337,550 3,091,187 --------------------------- Total stockholders' equity 2,549,802 3,303,439 --------------------------- Total liabilities and stockholders' equity $5,999,676 $4,173,063 ===========================
SEE ACCOMPANYING NOTES. F-3 Transcender Corporation Statements of Income and Retained Earnings
NINE-MONTH PERIOD ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 2000 1999 ----------------------------- Operating revenue: Certification software, net of discounts $11,975,107 $15,226,805 Royalties and licenses 225,167 332,767 ----------------------------- 12,200,274 15,559,572 Cost of sales 948,842 1,047,058 ----------------------------- Gross profit 11,251,432 14,512,514 Operating expenses: Officer compensation 4,520,234 6,137,461 Sales and marketing 3,409,362 3,547,978 Research and development 1,312,777 1,576,732 General and administrative 1,577,958 1,942,432 Depreciation and amortization 283,478 301,975 ----------------------------- Total operating expenses 11,103,809 13,506,578 ----------------------------- Income from operations 147,623 1,005,936 Other income (expense): Interest income 119,241 124,693 Other (3,911) 541 ----------------------------- 115,330 125,234 ----------------------------- Income before income taxes 262,953 1,131,170 Provision for state income taxes 16,590 68,855 ----------------------------- Net income 246,363 1,062,315 Beginning retained earnings 3,091,187 3,028,872 ----------------------------- 3,337,550 4,091,187 Less: Stockholders' distributions 1,000,000 1,000,000 ----------------------------- Ending retained earnings $2,337,550 $3,091,187 =============================
F-4 SEE ACCOMPANYING NOTES. Transcender Corporation Statements of Cash Flows
NINE-MONTH PERIOD ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 2000 1999 ----------------------------- Cash flows from operating activities: Net income $ 246,363 $1,062,315 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 283,478 301,975 Provision for bad debts 121,000 92,000 Loss on disposal of fixed assets 4,783 704 (Increase) in accounts receivable (444,370) (238,266) (Increase) in inventory (121,380) (57,514) Decrease in prepaid taxes - 68,725 (Increase) in deferred tax asset (1,334) (31,222) (Increase) in other current assets (260,005) (113,411) Increase (decrease) in accounts payable 569,688 (156,010) Increase in deferred revenue 1,673,730 64,829 Increase in allowance for sales returns 20,322 17,859 Increase in accrued taxes and expenses 314,111 447,769 Increase in deferred tax liability 2,399 834 ----------------------------- Cash provided by operating activities 2,408,785 1,460,587 Cash flows used by investing activities: Purchase of property and equipment (171,171) (384,981) Purchase of short-term investments (30,295) (32,165) Proceeds from disposal of property and equipment - 7,342 (Increase) decrease in other assets (4,053) 12,329 ----------------------------- Cash used by investing activities (205,519) (397,475) Cash flows used by financing activities: Stockholders' distributions (1,000,000) (1,000,000) ----------------------------- Cash used by financing activities (1,000,000) (1,000,000) ----------------------------- Increase in cash and cash equivalents 1,203,266 63,112 Beginning cash and cash equivalents 1,438,129 1,375,017 ----------------------------- Ending cash and cash equivalents $2,641,395 $1,438,129 ============================= SUPPLEMENTAL CASH FLOWS INFORMATION: Cash paid for state income taxes $ 116,045 $ - =============================
SEE ACCOMPANYING NOTES. F-5 Transcender Corporation Notes to Financial Statements September 30, 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Transcender Corporation (the Company) is involved primarily in developing training products for the computer professional market. The Company was formed in 1992 after Microsoft Corporation introduced its certification program designed to provide an objective credential for computer professionals who work with Microsoft software and operating systems. The Company has developed testing software for certifications which it sells via the Internet, print media, and direct marketing. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. INVESTMENTS The Company has a money-market mutual fund that is invested in government obligations. The cost and the market value of the investment are the same. INVENTORY Inventory consisting of media, training materials, and packaging supplies is stated at the lower of cost or market. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Maintenance and repair expenditures are charged to expense as incurred. Depreciation is calculated using the straight-line method over the following estimated useful lives of the assets: furniture and fixtures - 7 years, office equipment - 5 years, computer equipment - 5 years, software - 3 years, leasehold improvements - lesser of life of assets or term of lease, generally including renewal options. F-6 Transcender Corporation Notes to Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INCOME TAXES The Company was organized as an S Corporation and is not subject to federal income taxes. The Company does provide for state income taxes. Deferred state income taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities. REVENUE RECOGNITION AND DEFERRED REVENUE Revenue from the sale of software products is recognized upon shipment. Deferred revenue consists of prepaid orders and revenue deferred from the sale of software products that have been released in beta version for which a final version was not available at the balance sheet date. Beta version products are sold at full retail price. Customers purchasing beta version products may receive at the customer's request final version products upon their release (generally two to six weeks after receipt of the beta version) at no additional cost. A portion of the revenue from the sale of beta version products is recognized upon shipment. The remainder of the revenue is deferred until shipment of final version products. ALLOWANCE FOR SALES RETURNS The Company maintains a money-back-guarantee and a thirty-day return policy of the customer purchase price, excluding shipping, under certain stipulated circumstances. The Company provides an allowance for these anticipated returns based on historical experience of returns by product line. ADVERTISING Advertising expense is comprised of print media, direct mail and Internet advertising. Advertising expenditures for print media and Internet are charged to income during the period incurred. Direct mail advertising expenses are capitalized as incurred and charged to income over the period during which the future benefits are expected to be received. Advertising expense was $1,836,537 and $1,922,972 for the nine-month period ended September 30, 2000 and the year ended December 31, 1999, respectively. F-7 Transcender Corporation Notes to Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RESEARCH AND DEVELOPMENT Expenditures for software development costs and research are expensed as incurred. Such costs are required to be expensed until the point that technological feasibility is established. The period between achieving technological feasibility and the general availability of such software has been short. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates in the near term. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on net income as previously reported. 2. INVENTORY Inventory consists of the following:
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------------------------ Finished goods $ 44,968 $ 18,058 Raw materials 217,075 122,605 ------------------------------ $ 262,043 $ 140,663 ==============================
Finished goods inventory primarily includes packaged testing software and training products. Raw materials inventory primarily includes compact discs, manuals, and packaging supplies. F-8 Transcender Corporation Notes to Financial Statements (continued) 3. PROPERTY AND EQUIPMENT Property and equipment consisted of the following:
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------------------------ Leasehold improvements $ 94,357 $ 118,954 Office equipment 133,326 124,072 Furniture and fixtures 327,319 315,551 Computer and equipment 717,904 648,623 Software 366,829 316,646 ------------------------------ 1,639,735 1,523,846 Less: accumulated depreciation (844,918) (611,989) ------------------------------ $ 794,817 $ 911,857 ==============================
Depreciation expense was $283,429 and $301,975 for the nine-month period ended September 30, 2000 and the year ended December 31, 1999, respectively. 4. STOCKHOLDERS' EQUITY The Company is authorized to issue 100,000 shares of no par value, voting Class A common stock and 100,000 shares of no par value, non-voting Class B common stock. At September 30, 2000 and December 31, 1999, issued and outstanding shares were 25,000 and 28,706 of Class A and Class B shares, respectively. Except for the difference in voting rights, all classes of common stock have the same relative rights and have the right to receive the net assets of the Company on dissolution. F-9 Transcender Corporation Notes to Financial Statements (continued) 5. COMMITMENTS Rent expense under operating lease agreements was $192,017 and $245,193 for the nine-month period ended September 30, 2000 and the year ended December 31, 1999, respectively. Future minimum payments at September 30, 2000 under noncancelable operating leases with initial terms of one year or more consist of the following: 2000 $ 63,257 2001 206,577 2002 86,699 -------------- $ 356,533 ==============
On November 21, 2000, the Company entered into an operating lease agreement for office space commencing in April 2001 and expiring in March 2008. Future minimum payments under this lease are as follows: 2001 $ 342,459 2002 467,565 2003 582,744 2004 630,873 2005 645,486 Thereafter 1,504,377 ------------- $4,173,504 =============
6. STATE INCOME TAXES The tax provision is comprised of:
SEPTEMBER 30, 2000 1999 -------------------------- State income taxes currently payable $ 15,525 $ 99,243 Deferred state taxes 1,065 (30,388) -------------------------- $ 16,590 $ 68,855 ==========================
Deferred tax assets result from deductible temporary differences between the financial statement and tax basis of allowance for doubtful accounts, allowance for sales returns and other accruals. The deferred tax liability is provided for taxable temporary differences between the financial statement and the tax basis of property and equipment. F-10 Transcender Corporation Notes to Financial Statements (continued) 7. 401(K) RETIREMENT PLAN The Company sponsors a 401(k) retirement plan for all full-time employees. The plan covers all employees with one year of service that have attained the age of twenty-one. Covered employees make elective salary deferrals subject to the limitations set forth by law. The plan provides for a company matching percentage and a discretionary profit sharing component. The Company's retirement plan expense was $131,448 and $140,298 during the nine-month period ended September 30, 2000 and the year ended December 31, 1999, respectively. 8. CONTINGENCIES The Company has been asked by an out-of-state department of revenue to register as a dealer for the purpose of collecting and remitting sales and use tax. The Company contends it does not have to register and currently does not intend to do so. Management has consulted legal counsel regarding this administrative request. Management has accrued an estimate of the probable loss for uncollected sales tax. 9. SUBSEQUENT EVENT On November 6, 2000, Information Holdings Inc. completed an acquisition of substantially all the assets and certain liabilities of the Company, pursuant to an Asset Purchase Agreement, dated as of November 6, 2000, for cash consideration of approximately $60 million. F-11 INFORMATION HOLDINGS INC. Unaudited Pro Forma Condensed Consolidated Financial Statements The following unaudited pro forma condensed consolidated statements of operations of Information Holdings Inc. for the year ended December 31, 1999 and for the nine months ended September 30, 2000 and the unaudited pro forma condensed consolidated balance sheet as of September 30, 2000 give effect to the acquisition of Transcender as if it occurred on January 1, 1999. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 1999 also reflects the results of Faxpat and Master Data Center (MDC), businesses acquired in July 1999 and August 1999, respectively, as if the businesses were acquired on January 1, 1999. The unaudited condensed consolidated financial statements give effect to the acquisitions under the purchase method of accounting and the assumptions in the accompanying notes to the condensed consolidated financial statements. The unaudited pro forma condensed consolidated financial statements have been prepared by the Company's management. The unaudited pro forma condensed consolidated financial statements are not designed to represent and do not represent what the Company's results of operations and financial position would have been had the aforementioned transactions been completed as of the date or at the beginning of the period indicated or to project the Company's results of operations or financial position at any future date or any future period. The pro forma condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in the Company's 1999 Annual Report on Form 10-K, Form 10-Q, and the Transcender financial statements included herein. F-12 INFORMATION HOLDINGS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DECEMBER 31, 1999 (IN THOUSANDS EXCEPT SHARE DATA)
INFORMATION MDC/ PRO FORMA PRO FORMA HOLDINGS FAXPAT TRANSCENDER ADJUSTMENTS CONSOLIDATED Revenues $ 58,778 $ 7,430 $ 15,560 $ 81,768 Cost of sales 15,742 3,222 1,047 20,011 -------- -------- -------- -------- Gross profit 43,036 4,208 14,513 61,757 -------- -------- -------- -------- Operating expenses: Selling, general and administrative 28,142 1,836 13,205 43,183 Depreciation and amortization 5,962 2,208(5) 302 $ 6,091(1) 14,563 -------- -------- -------- -------- -------- Total operating expenses 34,104 4,044 13,507 6,091 57,746 -------- -------- -------- -------- -------- Income (loss) from operations 8,932 164 1,006 (6,091) 4,011 Other income (expense): Other expense (18) -- -- -- (18) Interest income (expense), net 1,330 (1,147)(6) 125 (4,870)(2) (4,562) -------- -------- -------- -------- -------- Income (loss) before income taxes 10,244 (983) 1,131 (10,961) (569) Provision (benefit) for income taxes 4,227 (192)(7) 69 (3,913)(3) 191 -------- -------- -------- -------- -------- Net income (loss) $ 6,017 $ (791) $ 1,062 $(7,048) $ (760) ======== ======== ======== ======== ======== Basic earnings (loss) per common share $ 0.36 $ (0.04) ======== ======== Diluted earnings (loss) per common share $ 0.35 $ (0.04) ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-13 INFORMATION HOLDINGS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS SEPTEMBER 30, 2000 (IN THOUSANDS EXCEPT SHARE DATA)
INFORMATION PRO FORMA PRO FORMA HOLDINGS TRANSCENDER ADJUSTMENTS CONSOLIDATED Revenues $ 50,421 $ 12,200 $ 62,621 Cost of sales 14,224 949 15,173 -------- -------- -------- Gross profit 36,197 11,251 47,448 -------- -------- -------- Operating expenses: Selling, general and administrative 24,792 10,821 35,613 Depreciation and amortization 6,568 283 $ 4,569(1) 11,420 -------- -------- -------- -------- Total operating expenses 31,360 11,104 4,569 47,033 -------- -------- -------- -------- Income (loss) from operations 4,837 147 (4,569) 415 -------- -------- -------- -------- Other income (expense): Interest income (expense), net 5,025 119 (2,990)(2) 2,154 Other income (expense) 3 (4) -- (1) -------- -------- -------- -------- Income (loss) before income taxes 9,865 262 (7,559) 2,568 Provision (benefit) for income taxes 4,173 16 (2,864)(3) 1,325 -------- -------- -------- Net income (loss) $ 5,692 $ 246 $ (4,695) $ 1,243 ======== ======== ======== ======== Basic earnings per common share $ 0.28 $ 0.06 ======== ======== Diluted earnings per common share $ 0.28 $ 0.06 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-14 INFORMATION HOLDINGS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2000 (IN THOUSANDS)
INFORMATION PRO FORMA PRO FORMA HOLDINGS TRANSCENDER ADJUSTMENTS CONSOLIDATED Cash and equivalents $ 155,436 $ 2,641 $ (60,000)(4) $ 98,077 Accounts receivable 19,859 1,030 -- 20,889 Other current assets 18,495 1,520 -- 20,015 --------- --------- --------- --------- Total current assets 193,790 5,191 (60,000) 138,981 Intangible assets, net 77,278 -- 15,300(4) 92,578 Goodwill, net 15,587 -- 44,750(4) 60,337 Other long-term assets 14,654 809 -- 15,463 --------- --------- --------- --------- Total assets $ 301,309 $ 6,000 $ 50 $ 307,359 ========= ========= ========= ========= Accounts payable $ 16,112 $ 745 $ 16,857 Other current liabilities 12,803 2,696 $ 2,600(4) 18,099 Long-term deferred taxes 14,940 9 -- 14,949 Other long-term liabilities 2,865 -- -- 2,865 --------- --------- --------- --------- Total liabilities 46,720 3,450 2,600 52,770 Common stock 216 212 (212)(4) 216 Paid in capital 242,790 -- -- 242,790 Retained earnings 11,583 2,338 (2,338)(4) 11,583 --------- --------- --------- --------- Total equity 254,589 2,550 (2,550) 254,589 --------- --------- --------- --------- Total liabilities and equity $ 301,309 $ 6,000 $ 50 $ 307,359 ========= ========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-15 INFORMATION HOLDINGS INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. PRO FORMA ADJUSTMENTS For purposes of determining the pro forma effect of the acquisition of Transcender on Information Holdings Inc.'s Condensed Consolidated Statements of Operations for the year ended December 31, 1999 and for the nine months ended September 30, 2000 and the Condensed Consolidated Balance Sheet as of September 30, 2000, the following adjustments have been made (IN THOUSANDS):
Nine Months Year Ended Ended As of 12/31/99 09/30/00 09/30/00 (1) - Represents amortization of acquired intangible assets of Transcender, amortized over useful lives of 3-15 years $ 6,091 $ 4,569 (2) - Represents an adjustment to net interest to reflect reduced interest income and increased interest expense associated with the funding of the Transcender acquisition. The acquisition cost of $62.6 million, including closing costs, is assumed to have been funded through cash on hand, plus incremental borrowings. Interest rates are assumed to be 5.5% on invested cash and 8.5% on borrowed funds. 4,870 2,990 (3) - Represents the income tax benefit of items (1) and (2) above, at a tax rate of 39%, plus federal income taxes on the income of Transcender at a rate of 34%. As a sub-chapter S organization Transcender did not record a provision for federal income taxes. (3,913) (2,864) (4) - Represents adjustment to reflect purchase of Transcender as follows - debit (credit): Cash - acquisition cost (60,000) Intangible assets - adjustment to reflect excess purchase price 15,300 Goodwill - adjustment to reflect excess purchase price 44,750 Current liabilities - costs associated with acquisition (2,600) Common stock - eliminate prior owner's equity 212 Retained earnings - eliminate prior owner's equity 2,338
F-16 INFORMATION HOLDINGS INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For purposes of determining the pro forma effect of the acquisitions of Master Data Center and Faxpat on Information Holdings Inc.'s Condensed Consolidated Statements of Operations for the year ended December 31, the following adjustments have been included in the amounts presented herein (IN THOUSANDS):
Year ended 12/31/99 (5) - Represents incremental amortization of acquired intangible assets of MDC and Faxpat, amortized over useful lives of 20 years and 10 years, respectivley $2,133 (6) - Represents a reduction in the interest income recorded by Information Holdings Inc. on a cash balance of $42 million, which reflects the acquisition costs of MDC and Faxpat, at an average rate of 4.5%. 1,147 (7) - Represents the income tax benefit of the tax deductible components of items (5) and (6) above, plus income taxes on the earnings of MDC and Faxpat, at a tax rate of 39%. A portion of incremental amortization above in item (5) is not tax deductible (192)
2. EARNINGS PER SHARE Earnings per share is calculated by dividing the net income by the weighted average outstanding shares during the period. The weighted average outstanding shares during the period are calculated as follows:
December 31, September 30, 1999 2000 Basic: Shares outstanding 16,945,210 20,239,231 ========== ========== Dilutive: Shares outstanding 16,945,210 20,239,231 Common stock equivalents 183,067 259,798 ---------- ---------- 17,128,277 20,499,029 ========== ==========
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