UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 8, 2003
Commission File No. 0-20740
EPICOR SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware |
33-0277592 | |
(State or other jurisdiction of |
(IRS Employer | |
incorporation or organization) |
Identification No.) |
195 Technology Drive
Irvine, California 92618-2402
(Address of principal executive offices, zip code)
Registrants telephone number, including area code: (949) 585-4000
On July 23, 2003, Epicor Software Corporation (Epicor or the Company) filed a Form 8-K to report its acquisition of ROI Systems, Inc. (ROI). Pursuant to Item 7 of Form 8-K, Epicor indicated that it would file certain financial information no later than the date required by Item 7 of Form 8-K. This Amendment No. 1 to Form 8-K is filed to provide the required financial information as set forth in Items 7(a) and 7(b) below and Exhibit 99.2.
Item 7. Financial Statements and Exhibits.
Listed below are the financial statements, pro forma financial information and exhibits filed as part of the report:
(a) | Financial statements of business acquired. |
The following financial statements of ROI are attached hereto as Exhibit 99.2 and incorporated herein by this reference: |
Financial statements of ROI as of and for the year ended December 31, 2002 and as of June 30, 2003 (unaudited) and for the six months ended June 30, 2003 and 2002 (unaudited) and independent auditors report. |
(b) | Pro forma financial information. |
The accompanying unaudited pro forma condensed combined financial statements give effect to the acquisition completed on July 8, 2003 by Epicor of ROI. The unaudited pro forma condensed combined financial information does not reflect any cost savings or other synergies that might result from the transaction. They are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations for future periods or the financial position or results of operations that actually would have been realized had the acquisition occurred during the specified periods.
The accompanying unaudited pro forma condensed combined statements of operations (the Pro Forma Statement of Operations) for the year ended December 31, 2002 and the six months ended June 30, 2003 give effect to the acquisition by Epicor of ROI using the purchase method as if it occurred on January 1, 2002 and 2003, respectively. The Pro Forma Statements of Operations are based on the respective historical financial statements of Epicor and ROI for the year ended December 31, 2002 and the six months ended June 30, 2003. The accompanying unaudited pro forma condensed combined balance sheet at June 30, 2003 (the Pro Forma Balance Sheet) gives effect to the acquisition as if it took place on June 30, 2003. The Pro Forma Statements of Operations and Pro Forma Balance Sheet and accompanying notes (the Pro Forma Financial Information) should be read in conjunction with, and are qualified by reference to, the historical financial statements of the Company and ROI and the related notes thereto.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, the acquisition has been accounted for under the purchase method of accounting. In order to allocate the purchase price in accordance with SFAS No. 141, the Company has obtained an independent appraisal of the fair value of the acquired intangible assets. The fair values of the tangible assets acquired and liabilities assumed represent managements best estimate of current fair values. Assuming the transaction had occurred on June 30, 2003, the preliminary allocation of the purchase price would have been as follows (in thousands):
Cash |
$ | 20,750 | ||
Transaction costs |
683 | |||
Total purchase price |
$ | 21,433 | ||
Fair value of tangible assets acquired |
$ | 6,623 | ||
Assumed liabilities |
(2,425 | ) | ||
Acquired technology |
7,320 | |||
Customer base |
460 | |||
Trademark |
1,550 | |||
Covenant not to compete |
320 | |||
Goodwill |
7,585 | |||
Net assets acquired |
$ | 21,433 | ||
The final allocation will be determined based on final valuation placed on the intangible assets.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2003
(in thousands)
Historical |
Pro Forma Adjustments |
Pro Forma Combined |
|||||||||||||||
Epicor |
ROI |
||||||||||||||||
ASSETS |
|||||||||||||||||
Current assets: |
|||||||||||||||||
Cash and cash equivalents |
$ | 45,152 | $ | 3,348 | $ | (20,750 | ) | (1) | $ | 27,750 | |||||||
Accounts receivable, net |
22,698 | 2,072 | | 24,770 | |||||||||||||
Prepaid expenses and other current assets |
3,629 | 474 | | 4,103 | |||||||||||||
Total current assets |
71,479 | 5,894 | (20,750 | ) | 56,623 | ||||||||||||
Property and equipment, net |
2,236 | 482 | | 2,718 | |||||||||||||
Software development costs, net |
409 | | | 409 | |||||||||||||
Intangible assets, net |
5,871 | | 17,235 | (2) | 23,106 | ||||||||||||
Other assets |
3,275 | 247 | | 3,522 | |||||||||||||
Total assets |
$ | 83,270 | $ | 6,623 | $ | (3,515 | ) | $ | 86,378 | ||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|||||||||||||||||
Current liabilities: |
|||||||||||||||||
Accounts payable |
$ | 3,738 | $ | 163 | $ | | $ | 3,901 | |||||||||
Accrued expenses |
18,551 | 993 | 683 | (3) | 20,227 | ||||||||||||
Current portion of long-term debt |
555 | | | 555 | |||||||||||||
Current portion of accrued restructuring costs |
2,321 | | | 2,321 | |||||||||||||
Deferred revenue |
36,820 | 1,273 | (4 | ) | (4) | 38,089 | |||||||||||
Total current liabilities |
61,985 | 2,429 | 679 | 65,093 | |||||||||||||
Long-term portion of accrued restructuring costs |
2,187 | | | 2,187 | |||||||||||||
Commitments and contingencies |
|||||||||||||||||
Stockholders equity: |
|||||||||||||||||
Preferred stock |
10,423 | | | 10,423 | |||||||||||||
Common stock |
46 | | | 46 | |||||||||||||
Additional paid-in capital |
250,725 | | | 250,725 | |||||||||||||
Less: treasury stock at cost |
(161 | ) | | | (161 | ) | |||||||||||
Less: unamortized stock compensation expense |
(7,282 | ) | | | (7,282 | ) | |||||||||||
Less: notes receivable from officers for issuance of restricted stock |
| | | | |||||||||||||
Accumulated other comprehensive loss |
(1,179 | ) | | | (1,179 | ) | |||||||||||
Accumulated earnings (deficit) |
(233,474 | ) | 4,194 | (4,194 | ) | (5) | (233,474 | ) | |||||||||
Net stockholders equity |
19,098 | 4,194 | (4,194 | ) | 19,098 | ||||||||||||
Total liabilities and stockholders equity |
$ | 83,270 | $ | 6,623 | $ | (3,515 | ) | $ | 86,378 | ||||||||
See notes to unaudited pro forma condensed consolidated combined financial statements
3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(in thousands, except per share amounts)
Historical |
Pro Forma Adjustments |
Pro Forma Combined |
||||||||||||||||
Epicor |
ROI |
|||||||||||||||||
Revenues: |
||||||||||||||||||
License fees |
$ | 34,216 | $ | 6,546 | $ | | $ | 40,762 | ||||||||||
Consulting |
37,359 | 7,293 | | 44,652 | ||||||||||||||
Maintenance |
69,296 | 9,193 | | 78,489 | ||||||||||||||
Other |
2,596 | | | 2,596 | ||||||||||||||
Total revenues |
143,467 | 23,032 | | 166,499 | ||||||||||||||
Cost of revenues |
57,321 | 8,585 | | 65,906 | ||||||||||||||
Amortization of intangible assets and capitalized software development costs |
7,055 | | 1,947 | (6) | 9,002 | |||||||||||||
Total cost of revenues |
64,376 | 8,585 | 1,947 | 74,908 | ||||||||||||||
Gross profit |
79,091 | 14,447 | (1,947 | ) | 91,591 | |||||||||||||
Operating expenses: |
||||||||||||||||||
Sales and marketing |
42,004 | 8,847 | | 50,851 | ||||||||||||||
Research and development |
18,296 | 2,998 | | 21,294 | ||||||||||||||
General and administrative |
18,280 | 1,556 | | 19,836 | ||||||||||||||
Provision for doubtful accounts |
120 | 29 | | 149 | ||||||||||||||
Stock based compensation expense |
835 | | | 835 | ||||||||||||||
Restructuring charges and other |
3,891 | | | 3,891 | ||||||||||||||
Settlement of claim |
4,288 | | | 4,288 | ||||||||||||||
Total operating expenses |
87,714 | 13,430 | | 101,144 | ||||||||||||||
Income (loss) from operations |
(8,623 | ) | 1,017 | (1,947 | ) | (9,553 | ) | |||||||||||
Other income, net |
159 | 39 | | 198 | ||||||||||||||
Income (loss) before income taxes |
(8,464 | ) | 1,056 | (1,947 | ) | (9,355 | ) | |||||||||||
Provision for income taxes |
1,200 | (16 | ) | 126 | (7) | 1,310 | ||||||||||||
Net income (loss) |
$ | (7,264 | ) | $ | 1,040 | $ | (1,821 | ) | $ | (8,045 | ) | |||||||
Net income (loss) per share applicable to common stockholders: |
||||||||||||||||||
Basic and diluted |
$ | (0.17 | ) | $ | (0.18 | ) | ||||||||||||
Weighted average common shares outstanding: |
||||||||||||||||||
Basic and diluted |
43,835 | 43,835 |
See notes to unaudited pro forma condensed consolidated combined financial statements
4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(in thousands, except per share amounts)
Historical |
Pro Forma Adjustments |
Pro Forma Combined |
||||||||||||||||
Epicor |
ROI |
|||||||||||||||||
Revenues: |
||||||||||||||||||
License fees |
$ | 17,322 | $ | 1,378 | $ | | $ | 18,700 | ||||||||||
Consulting |
17,115 | 4,132 | | 21,247 | ||||||||||||||
Maintenance |
35,561 | 4,850 | | 40,411 | ||||||||||||||
Other |
1,025 | | | 1,025 | ||||||||||||||
Total revenues |
71,023 | 10,360 | | 81,383 | ||||||||||||||
Cost of revenues |
26,871 | 4,227 | | 31,098 | ||||||||||||||
Amortization of intangible assets and capitalized |
3,229 | | 973 | (8) | 4,202 | |||||||||||||
Total cost of revenues |
30,100 | 4,227 | 973 | 35,300 | ||||||||||||||
Gross profit |
40,923 | 6,133 | (973 | ) | 46,083 | |||||||||||||
Operating expenses: |
||||||||||||||||||
Sales and marketing |
16,968 | 3,949 | | 20,917 | ||||||||||||||
Research and development |
9,460 | 1,626 | | 11,086 | ||||||||||||||
General and administrative |
9,197 | 814 | | 10,011 | ||||||||||||||
Provision for doubtful accounts |
(889 | ) | 18 | | (871 | ) | ||||||||||||
Stock based compensation expense |
1,091 | | | 1,091 | ||||||||||||||
Restructuring charges |
1,230 | | | 1,230 | ||||||||||||||
Total operating expenses |
37,057 | 6,407 | | 43,464 | ||||||||||||||
Income (loss) from operations |
3,866 | (274 | ) | (973 | ) | 2,619 | ||||||||||||
Other income, net |
133 | 24 | | 157 | ||||||||||||||
Income (loss) before income taxes |
3,999 | (250 | ) | (973 | ) | 2,776 | ||||||||||||
Provision for income taxes |
(90 | ) | (26 | ) | 54 | (7) | (62 | ) | ||||||||||
Net income (loss) |
$ | 3,909 | $ | (276 | ) | $ | (919 | ) | $ | 2,714 | ||||||||
Value of beneficial conversion related to preferred stock |
(241 | ) | | | (241 | ) | ||||||||||||
Net income (loss) applicable to common stockholders |
$ | 3,668 | $ | (276 | ) | $ | (919 | ) | $ | 2,473 | ||||||||
Net income per share applicable to common stockholders: |
||||||||||||||||||
Basic |
$ | 0.09 | $ | 0.06 | ||||||||||||||
Diluted |
$ | 0.08 | $ | 0.05 | ||||||||||||||
Weighted average common shares outstanding: |
||||||||||||||||||
Basic |
42,798 | 42,798 | ||||||||||||||||
Diluted |
46,882 | 46,882 |
See notes to unaudited pro forma condensed consolidated combined financial statements
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following adjustments have been reflected in the unaudited pro forma condensed combined financial statements:
1) | To record cash paid for the ROI acquisition of $20,750,000. |
2) | To record intangible assets including acquired technology of $7,320,000, customer base of $460,000, trademark of $1,550,000, covenant not to compete of $320,000 and goodwill of $7,585,000. |
3) | To accrue estimated transaction costs of $683,000. |
4) | To adjust the value of the deferred revenues acquired. |
5) | To eliminate the equity of ROI. |
6) | To record $1,464,000 of amortization of acquired technology on a straight line basis over five years, $66,000 of amortization of customer base on a straight line basis over seven years, $310,000 of amortization of trademark on a straight line basis over five years, and $107,000 of amortization of covenant not to compete on a straight line basis over three years for the year ended December 31, 2002. |
7) | Tax adjustment assuming the Company filed a consolidated income tax return. |
8) | To record $732,000 of amortization of acquired technology on a straight line basis over five years, $33,000 of amortization of customer base on a straight line basis over seven years, $155,000 of amortization of trademark on a straight line basis over five years, and $53,000 of amortization of covenant not to compete on a straight line basis over three years for the six months ended June 30, 2003. |
(c) Exhibits in accordance with Item 601 of Regulation S-K
2.1 | * | Agreement and Plan of Reorganization dated as of July 8, 2003, by and between Epicor Software Corporation, Winter Acquisition Corporation, ROI Systems, Inc., George M. Carnahan, Christopher U. Holm, Paul C. Merlo and William T. Pisarra. | |
23.1 | Consent of Independent Auditors. | ||
99.1 | * | Press release dated as of July 9, 2003, announcing completion of the acquisition by Epicor Software Corporation. | |
99.2 | Financial statements of ROI as of and for the year ended December 31, 2002 and as of June 30, 2003 (unaudited) and for the six months ended June 30, 2003 and 2002 (unaudited) and independent auditors report. |
* Previously filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EPICOR SOFTWARE CORPORATION (Registrant)
| ||
Date: September 19, 2003 | /s/ Michael A. Piraino | |
Michael A. Piraino Senior Vice President
and Chief Financial Officer |
Exhibit Index
Exhibits: |
Description of Document | ||
2.1 | * | Agreement and Plan of Reorganization dated as of July 8, 2003, by and between Epicor Software Corporation, Winter Acquisition Corporation, ROI Systems, Inc., George M. Carnahan, Christopher U. Holm, Paul C. Merlo and William T. Pisarra. | |
23.1 | Consent of Independent Auditors. | ||
99.1 | * | Press release dated as of July 9, 2003, announcing completion of the acquisition by Epicor Software Corporation. | |
99.2 | Financial statements of ROI as of and for the year ended December 31, 2002 and as of June 30, 2003 (unaudited) and for the six months ended June 30, 2003 and 2002 (unaudited) and independent auditors report. |
* Previously filed.
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