8-K/A 1 d8ka.htm EPICOR SOFTWARE CORPORATION, FORM 8-K/A Epicor Software Corporation, Form 8-K/A

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

 

CURRENT REPORT

 

PURSUANT TO SECTION 12 OR 15(D) OF THE

SECURITIES AND EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): December 6, 2002

 

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 incorporation or organization)

  

(IRS Employer

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 December 23, 2002, Epicor Software Corporation (“Epicor” or the “Company”) filed a Form 8-K to report its acquisition of certain assets and liabilities of Clarus Corporation (“Clarus”). 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 2. Acquisition or Disposition of Assets

 

Effective December 6, 2002, pursuant to an Asset Purchase Agreement, dated as of October 17, 2002 (the “Asset Purchase Agreement”), by and between Epicor and Clarus, Epicor completed its acquisition (the “Acquisition”) of certain of Clarus’ employees, customers and core intellectual property products, including eProcurement, Sourcing, and Settlement solutions, in an all-cash transaction for a purchase price of $1 million. The purchase price was paid by Epicor out of working capital and reflects a negotiated price between the parties. Epicor, which has been engaged in reselling Clarus’ procurement product for more than two years, will continue to provide service and support to the majority (approximately 50) of Clarus’ installed base of procurement customers. The acquisition will enable Epicor to initially focus on cross-selling opportunities and to further leverage its experience in procurement and sourcing, its integration expertise, as well as its .NET architecture to deliver an expanded suite of supplier relationship management capabilities as part of its enterprise suite offering or as a stand-alone offering.

 

Item 7. Financial Statements and Exhibits.

 

(a)   Financial statements of business acquired.

 

The following financial statements of Clarus are attached hereto as Exhibit 99.2 and incorporated herein by this reference:

 

Audited statements of assets acquired and liabilities assumed of the eProcurement, Sourcing, and Settlement product lines of Clarus Corporation acquired by Epicor Software Corporation as of September 30, 2002 and December 31, 2001 and audited statements of direct revenue and expenses of the eProcurement, Sourcing, and Settlement product lines of Clarus Corporation acquired by Epicor Software Corporation for the nine-months ended September 30, 2002 and the year ended December 31, 2001.

 

(b)   Pro forma financial information.

 

The following unaudited pro forma financial information is included herein:

 

Unaudited pro forma condensed combined balance sheet as of December 31, 2001 and unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2002 and the year ended December 31, 2001.

 

(c)   Exhibits

 

23.1

   

Independent Auditors’ Consent

99.2

   

Financial Statements of the eProcurement, Sourcing, and Settlement Product Lines of Clarus Corporation Acquired by Epicor Software Corporation

 

2

 

Item 7. (b) Pro forma Financial Information

 

The accompanying unaudited pro forma condensed combined financial statements give effect to the acquisition completed on December 6, 2002 by Epicor of certain of Clarus’ employees, customers and core intellectual property products, including eProcurement, Sourcing, and Settlement solutions. 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, 2001 and nine months ended September 30, 2002 give effect to the acquisition by Epicor of certain of Clarus’ employees, customers and core intellectual property products, including eProcurement, Sourcing and Settlement solutions using the purchase method as if it occurred on January 1, 2001. The Pro Forma Statements of Operations are based on the respective historical financial statements of Epicor and Clarus for the year ended December 31, 2001 and the nine months ended September 30, 2002. The accompanying unaudited pro forma condensed combined balance sheet (the “Pro Forma Balance Sheet”) gives effect to the acquisition as if it took place on September 30, 2002. 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 Clarus 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. The fair values of the assets acquired and liabilities assumed represent management’s best estimate of current fair values. The following table summarizes the components of the purchase price (in thousands):

 

Cash

   

$

1,000

 

Transaction costs

   

 

296

 

    

Total purchase price

   

 

1,296

 

    

Fair value of net tangible assets at 12/6/02

   

$

790

 

Assumed liabilities

   

 

(542

)

Acquired technology

   

 

1,048

 

    

Net assets acquired

   

$

1,296

 

    

 

 

3

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

SEPTEMBER 30, 2002

(in thousands)

 

    

Historical

   

Pro Forma

Adjustments

         

Pro Forma

Combined

  
    

Epicor

     

Clarus

          

ASSETS

                                      

Current assets:

                                      

Cash and cash equivalents

   

$

28,885

 

   

$

—  

   

$

(1,000

)

  

a

   

$

27,885

 

Accounts receivable, net

   

 

19,311

 

   

 

—  

                

 

19,311

 

Prepaid expenses and other current assets

   

 

4,091

 

   

 

151

   

 

(20

)

  

d

   

 

4,222

 

    
  
  
      

Total current assets

   

 

52,287

 

   

 

151

   

 

(1,020

)

       

 

51,418

 

Property and equipment, net

   

 

4,038

 

   

 

682

   

 

(156

)

  

e

   

 

4,564

 

Software development costs, net

   

 

1,425

 

   

 

—  

   

 

1,048

 

  

b

   

 

2,473

 

Intangible assets, net

   

 

8,725

 

   

 

—  

   

 

—  

 

       

 

8,725

 

Other assets

   

 

2,885

 

   

 

—  

   

 

—  

 

       

 

2,885

 

    
  
  
      

Total assets

   

$

69,360

 

   

$

833

   

$

(128

)

       

$

70,065

 

    
  
  
      

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                      

Current liabilities:

                                      

Accounts payable

   

$

3,606

 

   

$

—  

   

$

—  

 

       

$

3,606

 

Accrued expenses

   

 

23,168

 

   

 

—  

   

 

296

 

  

c

   

 

23,464

 

Current portion of long-term debt

   

 

3,279

 

   

 

—  

   

 

—  

 

       

 

3,279

 

Accrued restructuring costs

   

 

1,952

 

   

 

—  

   

 

—  

 

       

 

1,952

 

Deferred revenue

   

 

34,233

 

   

 

478

   

 

32

 

  

f

   

 

34,743

 

    
  
  
      

Total current liabilities

   

 

66,238

 

   

 

478

   

 

328

 

       

 

67,044

 

    
  
  
      

Long-term debt, net of current portion

   

 

—  

 

   

 

—  

   

 

—  

 

       

 

—  

 

    
  
  
      

Commitments and contingencies

                                      

Stockholders’ equity:

                                      

Convertible preferred stock

   

 

5,000

 

   

 

—  

   

 

—  

 

       

 

5000

 

Common stock

   

 

45

 

   

 

—  

   

 

—  

 

       

 

45

 

Additional paid-in capital

   

 

247,678

 

   

 

—  

   

 

—  

 

       

 

247,678

 

Less: treasury stock at cost

   

 

(65

)

   

 

—  

   

 

—  

 

       

 

(65

)

Less: unamortized stock compensation expense

   

 

(955

)

   

 

—  

   

 

—  

 

       

 

(955

)

Less: notes receivable from officers for issuance of restricted stock

   

 

(10,719

)

   

 

—  

   

 

—  

 

       

 

(10,719

)

Accumulated other comprehensive loss

   

 

(2,852

)

   

 

—  

   

 

—  

 

       

 

(2,852

)

Accumulated earnings (deficit)

   

 

(235,010

)

   

 

355

   

 

(456

)

       

 

(235,111

)

    
  
  
      

Net stockholders’ equity

   

 

3,122

 

   

 

355

   

 

(456

)

       

 

3,021

 

    
  
  
      

Total liabilities and stockholders’ equity

   

$

69,360

 

   

$

833

   

$

(128

)

       

$

70,065

 

    
  
  
      

 

See notes to unaudited pro forma condensed consolidated combined financial statements

 

 

4

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

(in thousands, except per share amounts)

 

    

Historical

       

Pro Forma

Adjustments

     

Pro Forma

Combined

  
    

Epicor

     

Clarus

          

Revenues:

                                      

License fees

   

$

24,428

 

   

$

804

 

     

$

(108

)  g

   

$

25,124

 

Consulting

   

 

28,638

 

   

 

1,263

 

     

 

—  

 

   

 

29,901

 

Maintenance

   

 

51,624

 

   

 

1,438

 

     

 

—  

   

   

 

53,062

 

Other

   

 

2,055

 

   

 

—  

 

     

 

—  

 

   

 

2,055

 

    
  
    
  

Total revenues

   

 

106,745

 

   

 

3,505

 

     

 

(108

)

   

 

110,142

 

Cost of revenues

   

 

44,007

 

   

 

2,446

 

     

 

(247

)  d,e,g

   

 

46,206

 

Amortization of intangible assets and capitalized software development costs and impairment charge related to intangible assets

   

 

5,342

 

   

 

3,513

 

     

 

157

   h

   

 

9,012

 

    
  
    
  

Total cost of revenues

   

 

49,349

 

   

 

5,959

 

     

 

(90

)

   

 

55,218

 

    
  
    
  

Gross profit

   

 

57,396

 

   

 

(2,454

)

     

 

(18

)

   

 

54,924

 

Operating expenses:

                                      

Sales and marketing

   

 

32,728

 

   

 

3,749

 

     

 

—  

 

   

 

36,477

 

Research and development

   

 

13,889

 

   

 

3,112

 

     

 

(30

)  d

   

 

16,971

 

General and administrative

   

 

15,429

 

   

 

—  

 

     

 

—  

 

   

 

15,429

 

Stock based compensation expense

   

 

638

 

   

 

—  

 

     

 

—  

 

   

 

638

 

    
  
    
  

Total operating expenses

   

 

62,684

 

   

 

6,861

 

     

 

(30

)

   

 

69,515

 

    
  
    
  

Income (loss) from operations

   

 

(5,288

)

   

 

(9,315

)

     

 

12

 

   

 

(14,591

)

Other income, net

   

 

156

 

   

 

—  

 

     

 

—  

 

   

 

156

 

    
  
    
  

Income (loss) before income taxes

   

 

(5,132

)

   

 

(9,315

)

     

 

12

 

   

 

(14,435

)

Provision for income taxes

   

 

—  

 

   

 

—  

 

     

 

—  

 

   

 

—  

 

    
  
    
  

Net income (loss)

   

$

(5,132

)

   

$

(9,315

)

     

$

12

 

   

$

(14,435

)

    
  
    
  

Net loss per share—basic and diluted

   

$

(0.12

)

                       

$

(0.33

)

Weighted average common shares outstanding—basic and diluted

   

 

43,681

 

                       

 

43,681

 

 

See notes to unaudited pro forma condensed consolidated combined financial statements

 

5

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2001

(in thousands, except per share amounts)

 

    

Historical

       

Pro Forma Adjustments

     

Pro Forma

Combined

  
    

Epicor

     

Clarus

          

Revenues:

                                      

License fees

   

$

45,101

 

   

$

4,382

 

     

$

(163

)g

   

$

49,320

 

Consulting

   

 

51,949

 

   

 

2,225

 

     

 

—  

 

   

 

54,174

 

Maintenance

   

 

74,225

 

   

 

2,021

 

     

 

—  

 

   

 

76,246

 

Other

   

 

3,217

 

   

 

—  

 

     

 

—  

 

   

 

3,217

 

    
  
    
  

Total revenues

   

 

174,492

 

   

 

8,628

 

     

 

(163

)

   

 

182,957

 

Cost of revenues

   

 

74,873

 

   

 

6,081

 

     

 

(244

)d,e,g

   

 

80,710

 

Amortization of intangible assets and capitalized software development costs

   

 

8,634

 

   

 

681

 

     

 

210

 h

   

 

9,525

 

    
  
    
  

Total cost of revenues

   

 

83,507

 

   

 

6,762

 

     

 

(34

)

   

 

90,235

 

    
  
    
  

Gross profit

   

 

90,985

 

   

 

1,866

 

     

 

(129

)

   

 

92,722

 

Operating expenses:

                                      

Sales and marketing

   

 

56,335

 

   

 

15,065

 

     

 

—  

 

   

 

71,400

 

Research and development

   

 

25,122

 

   

 

8,640

 

     

 

(20

)d

   

 

33,742

 

General and administrative

   

 

39,416

 

   

 

—  

 

     

 

—  

 

   

 

39,416

 

Stock based compensation expense

   

 

1,257

 

   

 

—  

 

     

 

—  

 

   

 

1,257

 

Restructuring charges and other

   

 

9,658

 

   

 

—  

 

     

 

—  

 

   

 

9,658

 

Gain on sales of product lines

   

 

(11,880

)

   

 

—  

 

     

 

—  

 

   

 

(11,880

)

    
  
    
  

Total operating expenses

   

 

119,908

 

   

 

23,705

 

     

 

(20

)

   

 

143,593

 

    
  
    
  

Loss from operations

   

 

(28,923

)

   

 

(21,839

)

     

 

(109

)

   

 

(50,871

)

Other income, net

   

 

193

 

   

 

—  

 

     

 

—  

 

   

 

193

 

    
  
    
  

Loss before income taxes

   

 

(28,730

)

   

 

(21,839

)

     

 

(109

)

   

 

(50,678

)

Provision for income taxes

   

 

—  

 

   

 

—  

 

     

 

—  

 

   

 

—  

 

    
  
    
  

Net loss

   

$

(28,730

)

   

$

(21,839

)

     

$

(109

)

   

$

(50,678

)

    
  
    
  

Net loss per share—basic and diluted

   

$

(0.69

)

                       

$

(1.21

)

Weighted average common shares outstanding—basic and diluted

   

 

41,929

 

                       

 

41,929

 

 

See notes to unaudited pro forma condensed consolidated combined financial statements

 

6

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following adjustments have been reflected in the unaudited pro forma condensed combined financial statements:

 

  a)   To record cash paid for the Clarus acquisition of $1,000,000.

 

  b)   To record acquired technology of $1,048,000.

 

  c)   To accrue estimated transaction costs of $296,000.

 

  d)   To eliminate certain Clarus prepaid assets which Epicor determined had no future value in the amount of $20,000 and related amortization of $52,000 ($22,000 in cost of revenues and $30,000 in research and development) for the nine months ended September 30, 2002 and $62,000 ($42,000 in cost of revenues and $20,000 in research and development) for the year ended December 31, 2001.

 

  e)   To eliminate certain Clarus fixed assets which Epicor determined had no future value in the amount of $156,000 and related depreciation of $117,000 for the nine months ended September 30, 2002 and $39,000 for the year ended December 31, 2001.

 

  f)   To eliminate deferred revenues related to license and maintenance royalties on acquired products.

 

  g)   To eliminate revenue and expenses recorded by Epicor and Clarus related to license and maintenance royalties on acquired products.

 

  h)   To record amortization expense for acquired technology over five years on a straight-line basis.

 

Certain reclassifications have been made to amounts reported in the Clarus financial statements to conform with Epicor’s financial statement presentation. In accordance with Epicor’s financial statement presentation, Clarus’ depreciation and amortization on property and equipment has been allocated to the appropriate operating functions as follows:

 

      

Nine Months Ended September 30,

2002

   

Year Ended December 31, 2001

Cost of revenues

     

$

200,000

   

$

168,000

Sales and marketing

     

 

21,000

   

 

27,000

Research and development

     

 

296,000

   

 

384,000

      
  

Total depreciation and amortization on property and equipment

     

$

517,000

   

$

579,000

      
  

 

 

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: February 19, 2002        

          

/s/    Lee Kim        

           

Lee Kim

Senior Vice President and Chief Financial

Officer (Principal Financial and Accounting Officer)

 

 

 

 

7

 

Item 7. (c) – Exhibits

 

Exhibit Index

 

Exhibits:

   

Description of Document

23.1

   

Independent Auditors’ Consent

99.2

   

Financial Statements of the eProcurement, Sourcing, and Settlement Product Lines of Clarus Corporation Acquired by Epicor Software Corporation

 

8