-----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, Ob8MwHjD9hNhm3B9zAeukkxis7gZeElNrMWM6W070Roefq15MMf9NeiHPCi8raeu sKYVRn1ScYcmmPiWeM2VmQ== 0000912057-99-002234.txt : 19991027 0000912057-99-002234.hdr.sgml : 19991027 ACCESSION NUMBER: 0000912057-99-002234 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990812 ITEM INFORMATION: FILED AS OF DATE: 19991026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION HOLDINGS INC CENTRAL INDEX KEY: 0001063744 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 061518007 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-14371 FILM NUMBER: 99734055 BUSINESS ADDRESS: STREET 1: 2777 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2034665055 MAIL ADDRESS: STREET 1: 2777 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06905 8-K/A 1 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) - AUGUST 12, 1999 --------------- 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 Master Data Center, Inc. Report of Independent Auditors Balance Sheets as of December 31, 1998 and June 30, 1999 (unaudited) Statements of Operations for the Periods January 1, 1998 through November 27, 1998 and November 27, 1998 through December 31, 1998 and for the Six Months Ended June 30, 1999 (unaudited) Statements of Cash Flows for the Periods January 1, 1998 through November 27, 1998 and November 27, 1998 through December 31, 1998 and for the Six Months Ended June 30, 1999 (unaudited) 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, 1998 and for the Six Months Ended June 30, 1999 Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1999 Notes to Pro Forma Consolidated Financial Statements (c) Exhibit 23.1 Consent of Ernst & Young LLP 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: October 26, 1999 By: /S/ MASON P. SLAINE ---------------------------------------- Name: Mason P. Slaine Title: President Report of Independent Auditors Board of Directors Pearson Plc. We have audited the accompanying balance sheet of Master Data Center, Inc. (the Company) an indirectly wholly-owned subsidiary of Pearson, Plc. (the Successor) as of December 31, 1998 and the related statements of operations and cash flows for the periods of November 28, 1998 through December 31, 1998, and for the period in which the Company was a wholly-owned subsidiary of Viacom Inc. (the Predecessor) of January 1, 1998 through November 27, 1998. 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 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 financial statements referred to above present fairly, in all material respects, the financial position of Master Data Center, Inc., at December 31, 1998 and the results of its operations and its cash flows for the period November 28, 1998 through December 31, 1998 and for the Predecessor for the period January 1, 1998 through November 27, 1998 in conformity with generally accepted accounting principles. /s/Ernst & Young LLP August 5, 1999, except for Note 1 which is dated August 12, 1999 F-1 MASTER DATA CENTER, INC. BALANCE SHEETS (IN THOUSANDS)
ECEMBER 31 JUNE 30 1998 1999 ASSETS (UNAUDITED) CURRENT ASSETS: Accounts receivable $ 5,016 $ 6,182 Prepaid expenses 148 214 ---------- ----------- Total current assets 5,164 6,396 Property and equipment, net (NOTE 3) 5 5 Intangible assets, net (NOTE 1) 15,735 15,345 Goodwill, net (NOTE 1) 33,554 32,714 Other assets 94 116 ---------- ----------- TOTAL $ 54,552 $ 54,576 ---------- ----------- ---------- ----------- LIABILITIES AND PEARSON PLC. EQUITY INVESTMENT CURRENT LIABILITIES: Annuity tax payment services payable $ 10,777 $ 12,309 Other accounts payable 272 230 Accrued expenses and other liabilities (NOTES 4 AND 7) 3,496 3,767 ---------- ----------- Total current liabilities 14,545 16,306 Deferred tax liabilities (NOTE 7) 6,293 6,137 Pearson Plc. equity investment 33,714 32,133 ---------- ----------- TOTAL $ 54,552 $ 54,576 ---------- ----------- ---------- -----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. F-2 MASTER DATA CENTER, INC. STATEMENTS OF OPERATIONS (IN THOUSANDS)
PREDECESSOR SUCCESSOR SIX MONTHS COMPANY COMPANY ENDED JANUARY 1 NOVEMBER 28 JUNE 30 1998 - 1998- 1999 NOVEMBER 27 DECEMBER 31 (UNAUDITED) 1998 1998 Revenues $ 7,114 $ 725 $ 3,998 Cost of sales 3,105 329 2,151 ---------------- ---------------- --------------- Gross profit 4,009 396 1,847 ---------------- ---------------- --------------- Operating expenses: Selling, general and administrative 1,265 188 695 Depreciation and amortization 1,021 213 1,230 ---------------- ---------------- --------------- Total operating expenses 2,286 401 1,925 ---------------- ---------------- --------------- Income (loss) from operations 1,723 (5) (78) Provision for income taxes 949 55 305 ---------------- ---------------- --------------- Net income (loss) $ 774 $ (60) $ (383) ---------------- ---------------- --------------- ---------------- ---------------- ---------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. F-3 MASTER DATA CENTER, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR SUCCESSOR SIX MONTHS COMPANY COMPANY ENDED JANUARY 1 NOVEMBER 28 JUNE 30 1998 - 1998- 1999 NOVEMBER 27 DECEMBER 31 (UNAUDITED) 1998 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 774 $ (60) $ (383) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,021 213 1,230 Deferred income taxes 35 (27) (156) Changes in operating assets and liabilities: Accounts receivable 887 (2,694) (1,166) Prepaid expenses (125) 17 (66) Other assets - (43) (22) Accounts payable (6,646) 8,206 1,490 Accrued expenses and other liabilities 7,139 (6,386) 271 ------------- ---------------- --------------- Net Cash Provided by (Used in) operating activities 3,085 (774) 1,198 ------------- ---------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net distributions (to) from Viacom Inc./ Pearson Plc. (3,404) 746 (1,198) Amounts paid by Viacom Inc./Pearson Plc. 319 28 - ------------- ---------------- --------------- Net Cash (Used in) Provided by financing activities (3,085) 774 (1,198) ------------- ---------------- --------------- Net change in cash - - - Cash at beginning of period - - - ------------- ---------------- --------------- Cash at end of period $ - $ - $ - ------------- ---------------- --------------- ------------- ---------------- ---------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. F-4 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) 1. ORGANIZATION AND BASIS OF PRESENTATION Master Data Center, Inc. ("MDC" or the "Company") is a provider of intellectual property services and software. The Company provides annuity tax payment services for owners of intellectual property in domestic and foreign markets and patent and trademark management software for the management of intellectual property. The Company also provides other related services including training and product maintenance. MDC is an indirect wholly owned subsidiary of Pearson Plc. ("Pearson" or the "Successor") which acquired the Company from Viacom Inc. ("Viacom" or the "Predecessor") on November 27, 1998. The allocated purchase price of $33 million in connection with Pearson's acquisition from the Predecessor on November 27, 1998 was preliminarily allocated to acquired net assets based upon the estimates of their respective fair market value as follows: Accounts receivable and prepaid expenses $ 2,487 Property and equipment and capitalized software 63 Goodwill 33,695 Customer list 15,800 Liabilities assumed (19,045) ------------------- $ 33,000 ------------------- ------------------- The allocation of the purchase price on November 27, 1998 described above was a non-cash transaction as the $33 million purchase price resulted in an increase in the Pearson Plc. Equity investment account. Goodwill and the customer list are being amortized over 20 years. Goodwill and other intangible amortization expense was $140 and $65 for the period from November 28, 1998 through December 31, 1998, respectively. The financial statements for the period from January 1, 1998 through November 27, 1998 are presented on the Company's previous basis of accounting. Viacom allocated the excess cost over fair value of the net tangible assets acquired to goodwill and the customer list, which prior to November 27, 1998 was being amortized over 20 years. Goodwill and other intangible amortization expense for the period January 1, 1998 through November 27, 1998 was $601 and $340, respectively. F-5 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) 1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED) On May 14, 1999, Pearson entered into an agreement to sell the stock of the Company to Information Holdings Inc. ("Information Holdings") for $33 million in cash. The transaction was completed on August 12, 1999. 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS INTERIM FINANCIAL STATEMENTS The balance sheet as of June 30, 1999 and the statements of operations and cash flows for the six months ended June 30, 1999 are unaudited and have been prepared on the same basis as the audited financial statements included herein. In the opinion of management, such unaudited financial statements include all adjustments necessary to present fairly the information set forth therein, which consists solely of normal recurring adjustments. The results of operations for the interim periods are not necessarily indicative of results for the full year. USE OF 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 assets and liabilities at the date of the financial statements and reported amounts of sales and expenses during the reporting period. Actual results could subsequently differ from those estimates. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of individual assets. F-6 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) GOODWILL AND INTANGIBLES The Company periodically assesses the recoverability of intangibles based on its expectations of future profitability and the undiscounted cash flow of operations. These factors, along with management's plans with respect to operations, are considered in assessing the recoverability of goodwill and other intangibles. If the Company determines, based on such measures, that the carrying amount is impaired, the goodwill and intangibles will be written down to its recoverable value with a corresponding charge to earnings. During the periods presented no impairment writedowns were incurred. SOFTWARE DEVELOPMENT COSTS Capitalized software is stated at the lower of cost or net realizable value. Principally all software development activities are performed by independent third parties. The Company capitalizes costs of developing and enhancing its software products after the determination of technological feasibility, which includes the completion of a detail program design in accordance with Statement of Financial Accounting Standards No. 86 ("SFAS 86") "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Development costs incurred prior to the determination of technological feasibility are expensed as incurred as research and development costs. Amortization of capitalized software costs commences once the intended product or release is available for sale and is amortized ratably over a 3 year period. REVENUE RECOGNITION Revenue from annuity tax payment services is recognized in the period when the related annuity tax payments are made to various regulatory agencies. Amounts collected from annuity tax customers include a fee for such services which is recorded as revenue. The amounts passed through to the various regulatory agencies for annuity tax payment services during the periods of November 28, 1998 through December 31, 1998, January 1 through November 27, 1998 and for the six months ended June 30, 1999 approximated $2,327, $55,122, and $34,846, respectively. Software license revenue is recognized upon shipment, provided no significant future obligations exist and collection is probable. Software maintenance and training revenues are recognized ratably over the service period. Deferred revenue primarily represents the unearned portion of revenue related to software maintenance. F-7 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) ADVERTISING EXPENSES The Company expenses advertising costs as they are incurred. Advertising expenses for the periods of November 28, 1998 through December 31, 1998 and January 1, 1998 through Novemer 27, 1998 were $7 and $86, respectively. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued Statement of Financial Accounting Standards No. SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 will be required to be adopted in years beginning after June 15, 2000. SFAS 133 will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not anticipate that the adoption of this SFAS will have a significant effect on its results of operations or financial position. 3. PROPERTY AND EQUIPMENT Property and Equipment consists primarily of office furniture. The cost and accumulated depreciation approximated $5 and $1 at December 31, 1998 Depreciation expense was $3 for the eleven month period ended November 27, 1998 and $1 for the period November 28, 1998 through December 31, 1998. 4. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities are comprised of the following at December 31, 1998: Bank overdrafts $2,107 Accrued compensation 479 Deferred revenue 743 Other accrued expenses 167 ------------- $3,496 ------------- ------------- F-8 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) 5. VIACOM/PEARSON EQUITY INVESTMENT An analysis of the Viacom/Pearson equity investment activity is as follows:
PREDECESSOR SUCCESSOR COMPANY COMPANY JANUARY 1, 1998- NOVEMBER 28, 1998- NOVEMBER 27, 1998 DECEMBER 31, 1998 ---------------------------------------------------- Balances as of the beginning of the period $4,585 $ - Net earnings 774 (60) Net Capital Contribution - 33,000 Net distributions (to)/from Viacom/Pearson (3,404) 746 Allocated charges from Viacom/Pearson 319 28 ---------------------------------------------------- Balances as of the end of the period $2,274 $33,714 ---------------------------------------------------- ----------------------------------------------------
Viacom/Pearson funds the working capital requirements of the Company based upon a centralized cash management system. The equity investment account includes accumulated equity as well as any payables and receivables due to/from Viacom/Pearson resulting from cash transfers and other intercompany activity. No interest was charged to the Company on intercompany balances. 6. RELATED PARTY TRANSACTIONS Viacom/Pearson provided the Company with certain general and administrative services including insurance, legal, financial and other corporate functions. Allocated charges for such services were $58 for the eleven month period ending November 27, 1998 and $7 for the period of November 28, 1998 through December 31, 1998. Viacom/Pearson sponsor a noncontributory defined benefit pension plan covering substantially all of its employees, including employees of the Company. Retirement benefits are based principally on years of service and salary. Viacom/Pearson charged the Company for pension expense of $44 for the eleven month period ended November 27, 1998 and $7 for the period November 28, 1998 through December 31, 1998. F-9 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) 6. RELATED PARTY TRANSACTIONS (CONTINUED) Viacom/Pearson also provide other employee benefits to MDC's employees, including certain post employment benefits, medical and dental insurance costs and contributions to a 401(k) savings plan. Viacom/Pearson charged the Company $217 for the eleven month period ended November 27, 1998 and $14 for the period November 28, 1998 through December 31, 1998 for these benefits. Management believes that the methodologies used to allocate charges for the services described above are reasonable. 7. INCOME TAXES The Company has been included in consolidated federal, state and local income tax returns filed by Viacom/Pearson. However, the tax expense reflected in the statement of operations and tax liabilities reflected in the balance sheet have been prepared on a separate return basis as though the Company had filed stand-alone income tax returns. The current income tax liabilities of $82 for the period presented have been reflected in the accrued expenses and other liabilities in the balance sheet. Components of the provision for income taxes are as follows:
PREDECESSOR SUCCESSOR COMPANY COMPANY JANUARY 1, 1998- NOVEMBER 28, 1998- NOVEMBER 27, 1998 DECEMBER 31, 1998 --------------------------------------------------- Current: Federal $800 $72 State 114 10 --------------------------------------------------- Total current 914 82 Deferred: Federal 31 (24) State 4 (3) --------------------------------------------------- Total deferred 35 (27) --------------------------------------------------- Provision for income taxes $949 $55 --------------------------------------------------- ---------------------------------------------------
F-10 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) 7. INCOME TAXES (CONTINUED) The Company's provision for income taxes differed from the amount computed by applying the statutory tax rate to operating income/(loss) as follows:
PREDECESSOR SUCCESSOR COMPANY COMPANY JANUARY 1, 1998- NOVEMBER 28, 1998- NOVEMBER 27, 1998 DECEMBER 31, 1998 ---------------------------------------------------------- Federal statutory tax rate $603 $(2) Amortization of nondeductible goodwill 210 49 State taxes (net of federal benefit) and other 136 8 ---------------------------------------------------------- ---------------------------------------------------------- $949 $55 ---------------------------------------------------------- ----------------------------------------------------------
Deferred taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1998 are as follows: Current deferred tax assets: Allowance for doubtful accounts and other $ 4 Noncurrent deferred liabilities: Intangible asset bases differences (6,293) ------------------- Net deferred tax liabilities $(6,289) ------------------- ------------------- F-11 MASTER DATA CENTER, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 IS UNAUDITED) (IN THOUSANDS) 8. COMMITMENTS The Company has long-term noncancelable lease commitments for office space and equipment which expire at various dates. At December 31, 1998, minimum rental payments under noncancelable leases are as follows: 1999 $246 2000 143 2001 and thereafter - ------------------- $389 ------------------- ------------------- Rent expense was $218 for the eleven month period ended November 27, 1998 and $20 for the period November 28, 1998 through December 31, 1998. 9. FORWARD CONTRACTS At December 31, 1998, the Company had entered into forward contracts to acquire various international currencies aggregating approximately $7.1 million. Such forward contracts have been designated as hedges for future annual patent payments to related international regulatory agencies. F-12 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, 1998 and for the six months ended June 30, 1999 and the unaudited pro forma condensed consolidated balance sheet as of June 30, 1999 give effect to the acquisition of Master Data Center, Inc. as if it occurred on January 1, 1998. The unaudited condensed consolidated financial statements give effect to the acquisition 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 transaction 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 1998 Annual Report on Form 10-K, Form 10-Q, and the MDC financial statements included herein. F-13 INFORMATION HOLDINGS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DECEMBER 31, 1998 (IN THOUSANDS EXCEPT SHARE DATA)
INFORMATION MASTER PRO FORMA PRO FORMA HOLDINGS DATA CENTER ADJUSTMENTS CONSOLIDATED Revenues $ 46,651 $ 7,839 $54,490 Cost of sales 11,707 3,434 15,141 ----------- ------- ------- Gross profit 34,944 4,405 39,349 ----------- ------- ------- Operating expenses: Selling, general and administrative 24,871 1,453 26,324 Depreciation and amortization 5,313 1,234 $ 1,644(1) 8,191 Severance and special bonuses 1,050 -- -- 1,050 ----------- ------- -------- ------- Total operating expenses 31,234 2,687 1,644 35,565 ----------- ------- -------- ------- Income (loss) from operations 3,710 1,718 (1,644) 3,784 ----------- ------- -------- ------- Other income (expense): Interest income (expense), net 1,117 -- (570)(2) 547 ----------- ------- -------- ------- Income (loss) before income taxes 4,827 1,718 (2,214) 4,331 Provision (benefit) for income taxes 42 1,004 (843)(3) 203 ----------- ------- -------- ------- Net income (loss) $ 4,785 $ 714 $ (1,371) $ 4,128 ----------- ------- -------- ------- ----------- ------- -------- ------- Earnings per share $ 0.28 $ 0.24 (basic and diluted) ----------- ------- ----------- -------
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 STATEMENT OF OPERATIONS JUNE 30, 1999 (IN THOUSANDS EXCEPT SHARE DATA)
INFORMATION MASTER PRO FORMA PRO FORMA HOLDINGS DATA CENTER ADJUSTMENTS CONSOLIDATED Revenues $ 25,032 $ 3,998 $ 29,030 Cost of sales 6,743 2,151 8,894 ---------- ---------- ---------- Gross profit 18,289 1,847 20,136 ---------- ---------- ---------- Operating expenses: Selling, general and administrative 13,682 695 14,377 Depreciation and amortization 2,058 1,230 $ 165 (1) 3,453 ---------- ---------- -------- ---------- Total operating expenses 15,740 1,925 165 17,830 ---------- ---------- -------- ---------- Income (loss) from operations 2,549 (78) (165) 2,306 ---------- ---------- -------- ---------- Other income (expense): Interest income (expense), net 1,107 - (742) (2) 365 Other expense (18) - - (18) ---------- ---------- -------- ---------- Income (loss) before income taxes 3,638 (78) (907) 2,653 Provision (benefit) for income taxes 1,419 305 (527) (3) 1,197 ---------- ---------- -------- ---------- Net income (loss) $ 2,219 $ (383) $ (380) $ 1,456 ---------- ---------- -------- ---------- ---------- ---------- -------- ---------- Earnings per share $ 0.13 $ 0.09 (basic and diluted) ---------- ---------- ---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-15 INFORMATION HOLDINGS INC. UNAUDITED PRO FORMA CONDENSED BALANCE SHEET JUNE 30, 1999 (IN THOUSANDS)
INFORMATION MASTER PRO FORMA PRO FORMA HOLDINGS HOLDINGS DATA CENTER ADJUSTMENTS CONSOLIDATED Cash and equivalents $ 54,730 $(33,000)(4) $ 21,730 Accounts receivable 7,117 $ 6,182 -- 13,299 Other current assets 8,816 214 -- 9,030 -------- ------- -------- -------- Total current assets 70,663 6,396 (33,000) 44,059 Intangible assets, including goodwill, net 23,565 48,059 12,590 (4) 84,214 Other long-term assets 9,152 121 -- 9,273 -------- ------- -------- -------- Total assets $103,380 $54,576 $(20,410) $137,546 -------- ------- -------- -------- -------- ------- -------- -------- Annuity tax payment services payable $12,309 $ 12,309 Other current liabilities $ 12,991 3,997 $ 2,000 (4) 18,988 Long-term liabilities 3,377 6,137 9,723 (4) 19,237 -------- ------- -------- -------- Total liabilities 16,368 22,443 11,723 50,534 Common stock 169 -- -- 169 Paid in capital 84,750 32,133 (32,133)(4) 84,750 Retained earnings 2,093 -- -- 2,093 -------- ------- -------- -------- Total equity 87,012 32,133 (32,133) 87,012 -------- ------- -------- -------- Total liabilities and equity $103,380 $54,576 $(20,410) $137,546 -------- ------- -------- -------- -------- ------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-16 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 Master Data Center, Inc. on Information Holdings Inc.'s ("IHI") Condensed Consolidated Statements of Operations for the year ended December 31, 1998 and for the six months ended June 30, 1999 and the Condensed Consolidated Balance Sheet as of June 30, 1999, the following adjustments have been made (IN THOUSANDS):
Six Months Year Ended Ended As of 12/31/98 06/30/99 06/30/99 (1) - Represents incremental amortization of acquired intangible assets of MDC, amortized over 20 years $1,644 $165 (2) - Represents a reduction in the interest income recorded by Information Holdings Inc. on a cash balance of $33 million, which reflects the acquisition cost of MDC, at an average rate of 4.5%. (Interest for the period ended December 31, 1998 is calculated from the date subsequent to IHI's Initial Public Offering on August 12, 1998) 570 742 (3) - Represents the income tax benefit of the tax deductible components of items (1) and (2) above, at a tax rate of 39%. A portion of incremental amortization above is not tax deductible (843) (527) (4) - Represents adjustment to reflect purchase of MDC based on a preliminary allocation of the purchase price as follows - debit (credit): Cash - acquisition cost (33,000) Intangible assets - adjustment to reflect excess purchase price 12,590 Current liabilities - costs associated with acquisition (2,000) Deferred taxes - purchase accounting adjustment (9,723) Paid in capital - eliminate prior owner's equity 32,133
F-17 INFORMATION HOLDINGS INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 June 30 1998 1999 Basic: Shares outstanding 16,943,189 16,943,189 ---------- ---------- ---------- ---------- Dilutive: Shares outstanding 16,943,189 16,943,189 Common stock equivalents - 180,250 ---------- ---------- 16,943,189 17,123,439 ---------- ---------- ---------- ----------
F-18 EX-23.1 2 EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-63325) pertaining to the Stock Option Plan of Information Holdings Inc. of our report dated August 5, 1999 (except for Note 1 which is dated August 12, 1999) on the financial statements of Master Data Center, Inc. included in Information Holdings Inc.'s Current Report (Form 8-K/A) dated October 26, 1999. Detroit, Michigan ERNST & YOUNG LLP October 26, 1999 -----END PRIVACY-ENHANCED MESSAGE-----