- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K (A) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (date of earliest event reported) June 3, 1996 TRANSACTION SYSTEMS ARCHITECTS, INC. (Exact name of registrant as specified in its charter) Delaware 0-25346 47-0772104 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 330 South 108th Avenue Omaha, Nebraska 68154 (address of principal executive offices, including zip code) (402) 390-7600 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- TRANSACTION SYSTEMS ARCHITECTS, INC. FORM 8-K (A) Transaction Systems Architects, Inc. (TSA or the Company) hereby amends Item 7 of its Form 8-K filed to report an event occurring on June 3, 1996 to include the following: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial statements of businesses acquired The following financial statements of TXN Solution Integrators are filed with this report: Page ---- Auditors' Report 4 Balance Sheets as of September 30, 1995 and March 31, 1996 5 Statements of Income for the year ended September 30, 1995 and the six months ended March 31, 1996 6 Statements of Partners' Capital for the year ended September 30, 1995 and the six months ended March 31, 1996 7 Statements of Changes in Financial Position for the year ended September 30, 1995 and the six months ended March 31, 1996 8 Notes to Financial Statements 9-11 (b) Pro forma financial information The following unaudited pro forma combined financial statements are filed with this report: Pro Forma Combined Balance Sheet as of March 31, 1996 12 Pro Forma Combined Statement of Operations: Year ended September 30, 1995 13 Six months ended March 31, 1996 14 Notes to Pro Forma Combined Financial Statements 15 The unaudited pro forma combined statements of operations for the year ended September 30, 1995 and for the six months ended March 31, 1996 give effect to the Company's acquisition of substantially all of the net assets of TXN Solution Integrators ("TXN", and such acquisition, the "TXN acquisition") as if it occurred on October 1, 1994 using the purchase method of accounting. The unaudited pro forma combined balance sheet as of March 31, 1996 gives effect to the TXN acquisition as if it occurred on March 31, 1996. The unaudited pro forma combined financial statements presented herein are shown for illustrative purposes only and are not necessarily indicative of the future financial position or future results of operations of the Company, or of the 2 financial position or results of operations of the Company that would have actually occurred had the transaction been in effect as of the date or for the periods presented. The unaudited pro forma combined financial statements and related notes should be read in conjunction with the historical financial statements and related notes of the Company and TXN. (c) Exhibits The exhibits filed as part of the Form 8-K(A) are: 23.01 Consent of Ernst and Young 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 thereunto duly authorized. Dated: July 15, 1996 TRANSACTION SYSTEMS ARCHITECTS, INC. (Registrant) \s\ Gregory J. Duman ------------------------------------ Gregory J. Duman Chief Financial Officer (Principal Financial Officer) 3 AUDITORS' REPORT To the Partners of TXN Solution Integrators We have audited the balance sheet of TXN Solution Integrators (A Partnership) as at September 30, 1995 and the statements of income, partners' capital and changes in financial position for the year then ended. These financial statements are the responsibility of the Partnership. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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 the Partnership, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Partnership as at September 30, 1995 and the results of its operations and the changes in its financial position for the year then ended in accordance with accounting principles generally accepted in Canada. Ernst & Young Chartered Accountants Thornhill, Canada October 12, 1995 4 TXN Solution Integrators (A Partnership) Balance Sheets (in Canadian Dollars) See accompanying notes 5
March 31, 1996 September 30, 1995 ------------------ ------------------ (unaudited) ASSETS Current assets: Cash $ 2,124,844 $ 1,489,607 Accounts receivable 1,644,386 2,131,870 Prepaid expenses and other 294,547 148,331 Due from partners 1,552,525 2,078,086 ------------------ ------------------ Total current assets 5,616,302 5,847,894 Fixed assets, net 1,917,876 2,148,818 ------------------ ------------------ Total assets $ 7,534,178 $ 7,996,712 ------------------ ------------------ ------------------ ------------------ LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable $ 1,334,676 $ 1,731,792 Accrued liabilities 329,918 797,295 Due to partners 33,442 486,102 Provision for lease termination 398,204 493,204 Deferred revenue 630,174 596,285 ------------------ ------------------ Total current liabilities 2,726,414 4,104,678 Partners' capital 4,807,764 3,892,034 ------------------ ------------------ Total liabilities and partners' capital $ 7,534,178 $ 7,996,712 ------------------ ------------------ ------------------ ------------------ TXN Solution Integrators (A Partnership) Statements of Income (in Canadian Dollars) See accompanying notes 6
Six Months Ended Year Ended March 31, 1996 September 30, 1995 ------------------ ------------------ (unaudited) Revenues: Software license fees $ 1,468,368 $ 3,047,823 Maintenance fees 2,462,466 4,906,502 Services 3,823,475 6,043,485 Hardware, net 38,554 1,435,511 ------------------ ------------------ Total revenues 7,792,863 15,433,321 ------------------ ------------------ Expenses: Salaries, wages and employee benefits 3,768,057 6,553,995 License fees 1,254,151 3,139,842 Contractor costs 417,222 1,132,112 Rent, occupancy and other leasing costs 379,600 750,428 Depreciation and amortization 312,518 591,433 Office and other operating costs 204,171 675,293 Travel and entertainment 158,554 307,477 Education and training 113,781 110,437 Computer maintenance 361,379 116,758 Professional fees 10,616 64,222 ------------------ ------------------ Total expenses 6,980,049 13,441,997 ------------------ ------------------ Operating income 812,814 1,991,324 Foreign exchange gain 22,195 19,469 Interest income 82,908 136,800 Interest expense (2,187) (54,875) ------------------ ------------------ Net income $ 915,730 $ 2,092,718 ------------------ ------------------ ------------------ ------------------ TXN Solution Integrators (A Partnership) Statements of Partners' Capital (in Canadian Dollars) See accompanying notes 7
ACI Canada Tandem Computers SJH MPR EFTS Limited Canada Limited Holdings, Inc. Holdings, Inc. Total -------------- ---------------- ---------------- ---------------- --------------- Partners capital, October 1, 1994 $ 928,314 $ 928,314 $ (28,656) $ (28,656) $ 1,799,316 Reorganization adjustment (57,312) 28,656 28,656 0 Net income for the year 696,875 1,395,843 2,092,718 -------------- ---------------- ---------------- ---------------- --------------- Partners capital, September 30, 1995 1,625,189 2,266,845 0 0 3,892,034 Net income for the period (unaudited) 304,938 610,792 915,730 -------------- ---------------- ---------------- ---------------- --------------- Partners capital, March 31, 1996 (unaudited) $ 1,930,127 $ 2,877,637 $ 0 $ 0 $ 4,807,764 -------------- ---------------- ---------------- ---------------- --------------- -------------- ---------------- ---------------- ---------------- --------------- TXN Solution Integrators (A Partnership) Statements of Changes in Financial Position (in Canadian Dollars) Six months ended Year ended March 31, 1996 September 30, 1995 ----------------- ------------------ (unaudited) Operating activities: Net income for the period $ 915,730 $ 2,092,718 Add items not involving a current outflow of cash Depreciation and amortization 312,518 591,433 Loss on sale of fixed assets 657 ----------------- ------------------ 1,228,248 2,684,808 Net change in non-cash working capital balances related to operations (438,534) 954,384 ----------------- ------------------ Cash provided by operating activities 789,714 3,639,192 ----------------- ------------------ Investing activities: Purchases of fixed assets, net (81,576) (752,272) Proceeds from long-term receivable 933,817 ----------------- ------------------ Cash provided by (used in) investing activities (81,576) 181,545 ----------------- ------------------ Financing activities: Advances to partners (72,901) (2,691,914) ----------------- ------------------ Cash used in financing activities (72,901) (2,691,914) ----------------- ------------------ Net increase in cash during the period 635,237 1,128,823 Cash, beginning of period 1,489,607 360,784 ----------------- ------------------ Cash, end of period $ 2,124,844 $ 1,489,607 ----------------- ------------------ ----------------- ------------------ See accompanying notes 8 TXN SOLUTION INTEGRATORS (A PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION The Partnership is registered under the laws of the Province of Ontario as ACI Canada EFTS and operates as TXN Solution Integrators. The Partnership distributes and supports computer software, acts as a solution integrator and provides facility management services. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements present the accounts of the Partnership only and consequently do not include all the assets, liabilities, revenues and expenses of the individual partners. All amounts presented are in Canadian dollars. There are no significant differences between Canadian generally accepted accounting principles and U.S. generally accepted accounting principles as they relate to the Partnership. FIXED ASSETS Fixed assets are recorded at cost. The Partnership provides for depreciation and amortization at rates which are expected to amortize the cost of the fixed assets over their estimated useful lives as follows: Computer equipment 30% declining balance Furniture and equipment 20% declining balance Software 30% declining balance Leasehold improvements Straight-line over remaining term of lease INCOME TAXES No provision for income taxes is recorded in the accompanying financial statements as the results of operations of the Partnership are included in the partners' income for income tax purposes. REVENUE RECOGNITION Revenue is recognized only on the following basis: Facilities management on a monthly basis as earned Maintenance on a monthly basis as earned Product license fees when production version of software is shipped or installed Professional service fees on a percentage-of-completion basis 9 3. FIXED ASSETS At September 30, 1995, fixed assets consist of the following: Accumulated depreciation/ Net Cost amortization book value ---- ------------ ---------- Computer equipment $2,888,596 $1,597,029 $1,291,567 Furniture and equipment 632,047 340,377 291,670 Software 268,306 136,449 131,857 Leasehold improvements 675,872 242,148 433,724 ---------- ---------- ---------- $4,464,821 $2,316,003 $2,148,818 ---------- ---------- ---------- ---------- ---------- ---------- 4. PARTNERSHIP INTERESTS Each of the partners shares in the profits and losses of the Partnership on the following basis: Tandem Computers Canada Limited 66.7% ACI Canada EFTS Limited 33.3% Tandem Computers Canada Limited (Tandem) is ultimately owned 100% by Tandem Computers Incorporated. ACI Canada EFTS Limited is 100% owned by Tandem Computers Incorporated. In April 1995, Tandem purchased SJH Holdings Inc. and MPR Holdings Inc. The partners' interest is as shown in the statement of partners' capital. 5. RELATED PARTY TRANSACTIONS Due from partners as of September 30, 1995: Advance to Tandem, bearing interest at the prevailing market rates and due on demand $1,431,690 Trade receivable due from Tandem 646,396 ---------- $2,078,086 ---------- ---------- Due to partners as of September 30, 1995: Trade payable due to Tandem $ 135,285 Operating loan from Tandem Computers Incorporated, bearing interest at 10% per annum, repayable in United States dollars and due on demand 350,817 ---------- $ 486,102 ---------- ---------- 10 During the year, the Partnership entered into transactions with its partners as follows: Revenue from Tandem $2,127,741 Purchases from Tandem $ 947,131 Interest paid to Tandem Computers Incorporated $ 52,206 Interest paid to Tandem $ 2,010 Interest received from Tandem $ 43,982 Effective December 31, 1993, Tandem Computers Incorporated sold its interest in Applied Communications, Inc. (ACI) to Transaction Systems Architects, Inc. with the exception of ACI Canada EFTS Limited which is still owned by Tandem Computers Incorporated. The distribution agreement between the Partnership and ACI was extended until December 31, 1997. 6. LEASE COMMITMENTS The Partnership leases office space and equipment under operating leases. Future minimum payments, by year and in the aggregate, consist of the following as of September 30, 1995: 1996 $ 475,640 1997 457,660 1998 382,840 1999 321,955 2000 321,955 Thereafter 456,120 ---------- $2,416,170 ---------- ---------- 7. CONTINGENCIES In the ordinary course of business activities, the Partnership may be contingently liable for litigation and claims with customers, suppliers and former employees. Management believes that adequate provisions have been recorded in accounts where required. Although it is not possible to estimate the extent of potential costs and losses, if any, management believes that the ultimate resolution of such contingencies will not have a material adverse effect on the financial position of the Partnership. 11 TRANSACTION SYSTEMS ARCHITECTS, INC. PRO FORMA COMBINED BALANCE SHEET MARCH 31, 1996 (UNAUDITED, IN THOUSANDS AND U.S. DOLLARS) See notes to pro forma combined financial statements 12
TSA TXN Pro Forma Pro Forma Historical Historical Adjustments Combined -------------- --------------- --------------- --------------- ASSETS Current assets: Cash and cash equivalents $ 28,874 $ 1,563 $ (1,563)(a) $ 25,358 (3,516)(c) Receivables, net 41,096 2,352 (1,143)(a) 42,063 (243)(b) Other 3,766 217 3,983 -------------- --------------- --------------- --------------- Total current assets 73,736 4,132 (6,464) 71,404 Property and equipment, net 10,879 1,330 (296)(a) 11,913 Software, net 5,345 81 368 (c) 5,794 Intangible assets, net 5,029 1,988 (c) 7,017 Installment receivables 657 657 Investment and notes receivable 7,500 7,500 Other 2,524 2,524 -------------- --------------- --------------- --------------- Total assets $ 105,670 $ 5,543 $ (4,404) $ 106,809 -------------- --------------- --------------- --------------- -------------- --------------- --------------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 730 $ $ $ 730 Current portion of capital lease obligations 392 392 Accounts payable 6,000 159 (25)(a) 6,038 (96)(b) Accrued employee compensation 3,515 285 3,800 Accrued liabilities 6,488 1,099 (599)(a) 6,841 (147)(b) Income taxes 2,501 2,501 Deferred revenue 18,387 463 18,850 -------------- --------------- --------------- --------------- Total current liabilities 38,013 2,006 (867) 39,152 Long-term debt 1,419 1,419 Capital lease obligations 146 146 -------------- --------------- --------------- --------------- Total liabilities 39,578 2,006 (867) 40,717 -------------- --------------- --------------- --------------- Stockholders' equity: Class A Common Stock 112 112 Class B Common Stock 15 15 Additional paid-in capital 93,089 93,089 Partners' capital 3,537 (3,537)(c) 0 Accumulated translation adjustments (350) (350) Accumulated deficit (26,762) (26,762) Treasury stock, at cost (12) (12) -------------- --------------- --------------- --------------- Total stockholders' equity 66,092 3,537 (3,537) 66,092 -------------- --------------- --------------- --------------- Total liabilities and stockholders' equity $ 105,670 $ 5,543 $ (4,404) $ 106,809 -------------- --------------- --------------- --------------- -------------- --------------- --------------- --------------- TRANSACTION SYSTEMS ARCHITECTS, INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1995 (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, AND IN U.S. DOLLARS) See notes to pro forma combined financial statements 13
TSA TXN Pro Forma Pro Forma Historical Historical Adjustments Combined -------------- --------------- --------------- --------------- Revenues: Software license fees $ 57,758 $ 2,219 $ (1,446)(d) $ 58,531 Maintenance fees 29,109 3,573 (741)(d) 31,941 Services 23,467 4,401 (178)(d) 27,690 Hardware, net 4,554 1,046 (11)(d) 5,589 -------------- --------------- --------------- -------------- Total revenues 114,888 11,239 (2,376) 123,751 -------------- --------------- --------------- -------------- Expenses: Cost of software license fees: Software costs 12,827 1,472 (1,457)(d) 12,842 Amortization of purchased software 3,165 123 (e) 3,288 Purchased contracts in progress 2,956 2,956 Cost of maintenance and services 26,863 6,386 (66)(f) 32,264 (919)(d) Research and development 12,323 12,323 Selling and marketing 29,089 1,148 (3)(f) 30,234 General and administrative: General and administrative costs 17,898 783 (4)(f) 18,677 Amortization of goodwill and purchased intangibles 344 228 (g) 572 -------------- --------------- --------------- --------------- Total expenses 105,465 9,789 (2,098) 113,156 -------------- --------------- --------------- --------------- Operating income (loss) 9,423 1,450 (278) 10,595 -------------- --------------- --------------- --------------- Other income (expense): Interest income 1,075 100 (190)(h) 985 Interest expense (1,707) (40) (1,747) Other 12 15 27 -------------- --------------- --------------- --------------- Total other (620) 75 (190) (735) -------------- --------------- --------------- --------------- Income (loss) before income taxes 8,803 1,525 (468) 9,860 Provision for income taxes (2,253) (423)(i) (2,676) -------------- --------------- --------------- --------------- Income (loss) before extraordinary loss 6,550 1,525 (891) 7,184 Extraordinary loss (2,750) (2,750) -------------- --------------- --------------- --------------- Net income (loss) $ 3,800 $ 1,525 $ (891) $ 4,434 -------------- --------------- --------------- --------------- -------------- --------------- --------------- --------------- Net income (loss) per common and equivalent share: Before extraordinary loss $ 0.29 $ 0.31 Extraordinary loss (0.12) (0.12) -------------- --------------- Net income $ 0.17 $ 0.19 -------------- --------------- -------------- --------------- Weighted average shares outstanding 22,871 22,871 -------------- --------------- -------------- --------------- TRANSACTION SYSTEMS ARCHITECTS, INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, AND IN U.S. DOLLARS) See notes to combined pro forma financial statements 14
TSA TXN Pro Forma Pro Forma Historical Historical Adjustments Combined -------------- --------------- --------------- --------------- Revenues: Software license fees $ 35,761 $ 1,080 $ (708)(d) $ 36,133 Maintenance fees 16,764 1,812 (392)(d) 18,184 Services 15,735 2,813 (99)(d) 18,449 Hardware, net 2,302 28 (4)(d) 2,326 -------------- --------------- --------------- --------------- Total revenues 70,562 5,733 (1,203) 75,092 -------------- --------------- --------------- --------------- Expenses: Cost of software license fees: Software costs 8,431 708 (712)(d) 8,427 Amortization of purchased software 1,573 61 (e) 1,634 Cost of maintenance and services 17,087 3,516 (46)(f) 20,066 (491)(d) Research and development 7,377 7,377 Selling and marketing 15,659 483 (2)(f) 16,140 General and administrative: General and administrative costs 11,374 428 (3)(f) 11,799 Amortization of goodwill and purchased intangibles 295 114 (g) 409 -------------- --------------- --------------- --------------- Total expenses 61,796 5,135 (1,079) 65,852 -------------- --------------- --------------- --------------- Operating income (loss) 8,766 598 (124) 9,240 -------------- --------------- --------------- --------------- Other income (expense): Interest income 1,136 61 (95)(h) 1,102 Interest expense (106) (2) (108) Other (81) 17 (64) -------------- --------------- --------------- --------------- Total other 949 76 (95) 930 -------------- --------------- --------------- --------------- Income (loss) before income taxes 9,715 674 (219) 10,170 Provision for income taxes (3,836) (182)(i) (4,018) -------------- --------------- --------------- --------------- Net income (loss) $ 5,879 $ 674 $ (401) $ 6,152 -------------- --------------- --------------- --------------- -------------- --------------- --------------- --------------- Net income per common and equivalent share $ 0.22 $ 0.23 -------------- --------------- -------------- --------------- Weighted average shares outstanding 26,586 26,586 -------------- --------------- -------------- --------------- Transaction Systems Architects, Inc. Notes to Pro Forma Combined Financial Statements Note 1. On June 7, 1996, the Company's Board of Directors authorized a two- for-one stock split effected in the form of a 100% stock dividend to be distributed on July 1, 1996 to shareholders of record on June 17, 1996. Stockholders' equity has been restated to give retroactive recognition to the stock split by reclassifying from additional paid-in capital to common stock the par value of the additional shares arising from the split. In addition, all references in the financial statements to number of shares and per share amounts have been restated. Note 2. The unaudited pro forma combined balance sheet reflects the following adjustments: (a) Adjustment to eliminate the TXN assets and liabilities retained by Tandem Computers Incorporated. (b) Adjustment to eliminate the accounts receivable and accounts payable existing between TSA and TXN. (c) Adjustment to record the payment of the purchase price and the excess purchase price over net assets acquired. Note 3. The unaudited pro forma combined statements of operations reflect the following adjustments: (d) Adjustment to eliminate royalties paid by TXN to TSA. (e) Adjustment to reflect additional amortization of purchased software. (f) Adjustment to reflect reduction in depreciation expense related to assets not acquired by TSA. (g) Adjustment to reflect amortization of goodwill. (h) Adjustment to eliminate interest earned on cash used to pay purchase price. (i) Adjustment to increase provision for income taxes arising from inclusion of the results of TXN's operations. 15 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE - ----------- ----------- ---- 23.01 Consent of Ernst & Young 17 16
Exhibit 23.01 CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-2592) pertaining to the 1996 Stock Option Plan of Transaction Systems Architects, Inc., the Registration Statement (Form S-8 No. 333-2594) pertaining to the 1996 Employee Stock Purchase Plan of Transaction Systems Architects, Inc. and the Registration Statement (Form S-8 No 33-93900) pertaining to the 1994 Stock Option Plan of Transaction Systems Architects, Inc. with respect to the financial statements of TXN Solution Integrators (A Partnership) for the year ended September 30, 1995 included in this Form 8-K(A) of Transaction Systems Architects, Inc. Ernst & Young Chartered Accountants Thornhill, Canada July 12, 1996 17