Amendment No. 1 to Form 8-K dated July 8, 2003 - Epicor Software Corporation

 

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)

 

Registrant’s 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 management’s 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

 

 

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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

 

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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
software development costs

      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

 

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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
(Principal Financial and Accounting 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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