ITEM 1.
BUSINESS
General
SCB Computer Technology, Inc. (the “Company”) is a leading provider of information technology (“IT”) management and technical services to the United States of America (U.S.) federal government, state and local government agencies and commercial enterprises. The Company’s services consist of (1) consulting, which mainly entails the evaluation, design and re-engineering of computer systems, management, quality assurance and technical directions for IT projects, network planning and implementation, and functional expertise and training; (2) outsourcing, which usually involves system development and integration, maintenance, data center management, help desk and technical services; and (3) professional staffing, which includes providing skilled IT staff on an as-needed basis.
The Company was founded as a partnership in 1976 and was incorporated under the laws of the State of Tennessee in 1984. The Company’s principal executive offices are located at 3800 Forest Hill-Irene Road, Suite 100, Memphis, Tennessee 38125, and its telephone number at that address is (901) 754-6577. The Company also can be contacted via its website at http://www.scb.com.
Business Development
In fiscal 2003, the Company’s performance reflected the dramatic change in its strategic direction that began in fiscal 2001 and continued in fiscal 2002. In fiscal 2001, management re-evaluated the Company’s strategic direction and concluded that while the acquisition and diversification strategy followed by the Company since fiscal 1997 had grown revenues at a robust rate, the Company’s net income had declined over the same period. Accordingly, management changed the Company’s business development strategy to focus on its historical core competencies of providing IT consulting, outsourcing, and professional staffing services (the “core operations”). A portion of that change in strategic direction included focusing on the Company’s strengths with government customers and adding agencies of the U.S. federal government as customers. As a result of the change in strategic direction, beginning in fiscal 2001 and continuing through fiscal 2002, the Company disposed of several underperforming business units. These non-core business units were engaged in specialized policy consulting, computer hardware and specialty software sales, enterprise resource planning, and computer equipment leasing (the “non-core operations”). Beginning in fiscal 2003, the Company implemented a strategic acquisition plan focused on growing its core operations through acquiring companies with heavy concentrations in the government market, primarily the U.S. Federal government market. The Company completed its first acquisition under its plan with the purchase of Remtech Services, Inc. on February 6, 2003 as described below in Business Acquisitions. Subsequent to fiscal 2003, on May 28, 2003, the Company entered into a definitive agreement to acquire a second company, National Systems Research Co. This acquisition is expected to close by August 31, 2003 as described below in Business Acquisitions.
Business Acquisitions
On February 4, 2003, the Company, Remtech Services, Inc. (“Remtech” or “RSI”), and the shareholders of Remtech (the “Shareholders”), entered into a Stock Purchase Agreement (the “Agreement”), pursuant to which the Company agreed to purchase and the Shareholders agreed to sell 100% of the outstanding common stock of Remtech. On February 6, 2003 (the “Closing Date”), the sale was completed. On the Closing Date, the Company acquired all of the outstanding stock of Remtech from the Shareholders. Subsequent to the Closing Date, the parties amended the agreement to have the acquisition effective as of February 1, 2003. Pursuant to the Agreement, the Company paid cash in the amount of $10,864,000 and issued unsecured, subordinated promissory notes in the aggregate amount of $1,800,000 to the Shareholders in consideration of the sale of all the outstanding shares of common stock of Remtech. The purchase price was determined by arms’ length negotiation between the parties, taking into account the historical operating results and existing customer relationships of Remtech’s business. The Company obtained financing for part of the cash consideration paid pursuant to the Agreement by (a) a term loan of approximately $7,700,000 and (b) borrowing approximately $3,000,000 under the Company’s existing revolving loan. The Company funded the balance of the cash consideration from working capital. The borrowing base under the existing revolving loan was increased by approximately $3.7 million by virtue of adding Remtech’s accounts receivable to the Company’s borrowing base.
Remtech is a provider of IT technology services to a diverse group of defense and civilian agencies of the federal government. Remtech provides full life-cycle IT services to assist in the design, development, operation and maintenance of its clients’ information technology infrastructure. Remtech also provides professional support services in the areas of training, financial management, logistics and facilities management, which are often integrated with Remtech’s IT service offerings.
Subsequent to year end, on May 28, 2003, the Company entered into a definitive stock purchase agreement to acquire National Systems and Research Co. (“NSR”). The acquisition is expected to close by August 31, 2003 based upon the satisfactory completion of several closing conditions, including the resolution of certain legal matters involving NSR and finalization of the financing. NSR is a company that provides information technology support services primarily to the federal and state governments with annual 2002 revenues of approximately $28.3 million.
Services
The Company provides information technology (“IT”) professional services to its customers. These IT professional services are designed based upon the specific needs and requirements of the customer. Accordingly, the Company offers its customers a wide range of (“IT”) professional services that typically are designed to evaluate all phases of customers’ projects, from front-end needs assessment surveys to detailed design and implementation of appropriate systems. Provided below is a partial list of the IT professional services the Company offers its customer.
•
Performing an IT “wellness” test on a customer’s existing IT systems to determine whether the overall management information systems (“MIS”) function is performing to optimal management and technical specifications.
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Assisting customers attain the return on investment they expected from the systems which the customers has implemented.
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Developing an information systems plan (“ISP”) that identifies a customer’s strategic organizational objectives, recommends an IT infrastructure (either firm-wide or by business unit), and establishes a timeline and prioritizes tasks for accomplishing the ISP.
•
Forcasting a customer’s expected returns or cost savings on a particular technology investment.
•
Creating IT project specifications that can be submitted for bids.
•
Implementing specific solutions selected by the customer.
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Designing and developing a specific system for a customer.
•
Reengineering the customers processes to achieve the operational efficiencies designed into the application.
•
Designing and implementing hardware, networks, operating systems, and database infrastructures as well as integrating software applications with these infrastructures.
•
Networking and telecommunications solutions such as network services (LAN/WAN design and engineering), staffing of help desk centers, project management of larger network related projects, remote network monitoring and management, development and implementation of disaster recovery solutions, and training.
•
Managing a specific application or the entire information systems function for the customer.
The Company delivers these IT services through three forms of projects: a) Consulting, b) Outsourcing/Facilities Management, and c) Professional Staffing. Each of these forms of project is discussed below. The most significant differences are 1) whether the Company assumes management and deliverable responsibility and 2) the length of the engagement.
Consulting
The objective of the Company’s consulting services engagements is to use proven techniques to assist customers in evaluating and redesigning IT operations to achieve improvements in IT cost, quality and efficiency. The Company’s consultants frequently employ state-of-the-art information engineering methodologies and processes to assist customers in migrating from centralized mainframe systems to open client/server and other network architectures.
The Company’s consulting services are delivered by professionals who are specialists in providing complete systems development lifecycle consulting and who have extensive experience working with relational database, networking, client/server, and related technologies. The Company’s consultants also have the business acumen necessary to understand customers’ IT systems’ support needs.
The Company’s consulting service contracts are typically for short periods of time (three months to two years) and specify the discrete tasks to be performed and deliverable responsibility of the Company. The Company’s consulting fees are negotiated on a case-by-case basis, depend on the size of the project and the skills required, and range from billing at hourly rates to fixed-price engagements.
Outsourcing
The Company believes that the outsourcing of IT systems management and operations is growing primarily because outsourcing often allows large organizations to add expertise and improve end-user service in their IT operations at a reduced cost. Because of the emerging hardware and software technologies and the demands by end-users for more memory, speed and flexibility, many large organizations have been forced to selectively deploy their IT assets and personnel. Many of the Company’s customers have elected to focus their internal staffs on the emerging technologies and, therefore, have engaged the Company to maintain and enhance their legacy systems in connection with the development and operation of newer systems. The Company believes that these developments will increase the need to outsource IT services.
The Company’s outsourcing services are designed to support a wide range of legacy and client/server systems and include network design and management, systems support and maintenance, programming and application software development, client/server and other network maintenance, data center management, customer staff training, and help desk services. Under the general direction of the customer, the Company assumes full and ongoing management and technical responsibility for the installation or operation of a customer’s systems on a long-term basis, both at the customer’s business site and at the Company’s sites. Outsourcing services sometimes involve substantial up-front expenditures to purchase equipment, hire personnel, and operate the IT systems on behalf of the customers.
Outsourcing contracts tend to be for longer terms (three to nine years) and produce more revenue per contract than consulting or professional staffing contracts. Outsourcing contracts are expressed in terms of fixed prices for defined services or hourly rates. In general, the Company determines its prices based on the salaries and overhead costs of professionals assigned to a project plus a margin designed to cover other expenses and provide a profit. The Company also provides outsourcing services on a fixed-price basis to some customers when the Company has a well defined understanding of the services to be delivered or extensive knowledge of the customer’s business.
Professional Staffing
The Company provides the services of highly skilled professional IT personnel at customers’ facilities on an as-needed basis. These services are provided primarily to customers who desire the flexibility to supplement internal staff with people having particular skill sets or to eliminate the need to recruit, hire and train technical employees whose skills may not be needed between projects. The Company’s objectives in providing professional staffing services include developing an understanding of the customer’s business and IT systems needs and positioning the Company to provide consulting and outsourcing services if the need arises. Professional staffing engagements range from short-term discrete projects to long-term support arrangements.
Professional staffing, outsourcing, and consulting accounted for the following percentages of core revenue for fiscal year 2003, 2002 and 2001:
As a result of the RSI acquisition, the Company’s revenue mix shifted to more outsourcing and consulting during the fourth quarter of fiscal 2003 as professional staffing, outsourcing and consulting comprised 48%, 42% and 10%, respectively.
Markets and Customers
Subsequent to divesting its non-core operations, the Company operates in one industry segment, providing IT services. Comparative segment revenues, profit and related financial information for fiscal years 2003, 2002 and 2001 are presented in the table captioned “Segment Information” in Note 15 to the Company’s consolidated financial statements included in our 2003 Annual Report to Shareholders.
The Company performs IT services for customers in three distinct markets: state and local governments, agencies of the Federal government of the United States of America (“U.S.”) and commercial enterprises. In fiscal 2003, approximately 57% of the Company’s revenue was attributable to state and local governments, compared to 58% and 48% in fiscal 2002 and 2001, respectively, while commercial enterprises accounted for 33% of the Company’s revenue, a decrease from 42% and 52% in fiscal 2002 and 2001, respectively. The remaining 10% of fiscal 2003 revenue was derived from agencies of the Federal government as a result of the RSI acquisition. The Company believes that it is a leading provider of IT services to state and local governments in the U.S. Management believes this strong presence in the state and local government market creates a competitive advantage and market differentiator for the Company.
The Company currently provides IT services for over 120 customers. The Company earns a significant portion of its revenue from relatively few customers. In fiscal 2003 and 2002, the Company’s five largest revenue-generating customers accounted for 52% of its revenue. In fiscal 2003, the following customers accounted for 10% or more of the Company’s revenue: State of Tennessee (16%), State of Kentucky (14%), and IBM (successor to Honeywell International Inc.) (11%). During the fourth quarter of fiscal 2003, the Company’s five largest revenue-generating customers accounted for only 39.7% of its revenue with just the following two customers accounting for 10% or more of the total revenue: State of Tennessee (12%) and State of Kentucky (11%). A material decrease in services provided to any of the largest clients of the Company could have an adverse impact on the Company’s financial condition and results of operations.
Generally, the Company’s contracts with its customers are, in accordance with industry practice, cancelable on short notice and without penalty (except with respect to the Company’s larger outsourcing contracts), provide for monthly payment of fees, and establish other basic terms such as the hourly billing rates for each type of Company professional who performs work pursuant to the contract. Some contracts specifically define the services to be performed pursuant to the contract, while other contracts, particularly professional staffing contracts, merely establish the basic parameters of the work (i.e., the system to be evaluated, designed or maintained) and require that additional work orders be submitted for services to be performed. The Company is the exclusive service provider under certain contracts, while other contracts, particularly professional staffing contracts, specifically allow the customer to engage other vendors for the projects covered by the contract. The Company had orders at April 30, 2003 of approximately $188 million, in comparison to orders of approximately $19 million at April 30, 2002. Because the Company’s clients can cancel or reduce the scope of their engagements on short notice, the Company does not believe that backlog is a reliable indication of future business. The backlog set forth above excludes any contracts and open work orders the Company has for their Professional Staffing business (which represents approximately 48% of revenue).
Marketing and Sales
The Company markets its services through senior management and a sales staff of 19 people. The Company currently has personnel located at sales offices in 23 cities. Relationships with the Company’s larger clients and key government personnel are maintained and fostered by at least one of the Company’s executive officers. The Company believes that its senior management’s hands-on involvement with major clients is a significant competitive advantage.
Account managers are the primary revenue generators by marketing the Company’s services and serve as the primary contacts in maintaining client relationships. Accordingly, account managers learn the basic aspects of a client’s business in order to identify opportunities for providing additional IT services to the client. Account managers are paid a salary plus commissions based on the revenues associated with client relationships under their supervision. In general, account managers are not IT technicians. They are, however, supported by Company technical personnel in their marketing and sales efforts.
Personnel and Recruiting
The Company’s current headcount, including employees and independent subcontractors, is approximately 1,223 persons consisting of 1,131 technicians, 19 salespersons, 15 recruiters, 4 executive officers, and 54 other administrative personnel. Approximately 6% of the Company’s headcount consists of independent subcontractors. The Company competes for personnel with in-house MIS departments and other IT services firms. In general, the Company seeks to hire professionals who have substantial experience either with an in-house MIS department or another IT services firm. The Company recruits worldwide by soliciting resumes generated by advertisements in trade journals and major city newspapers. Employee referrals are another major source of recruiting leads. In addition, the Company’s web site on
the Internet (www.scb.com) is used for recruiting. Most of the Company’s recruiters have technical or IT sales backgrounds and understand the skill sets needed for the project for which they are recruiting.
Competition
The IT services market is highly competitive and is not dominated by a single company or a small number of companies. The Company believes that its principal competitors, categorized according to the services performed, are as follows: (1) consulting - International Business Global Services (“IBM”), CACI International, Inc., Affiliated Computer Services, Inc., Tier Technologies, Inc., Accenture Ltd, Computer Horizons Corporation, CIBER, and Electronic Data Systems Corporation (“EDS”); (2) outsourcing - IBM, EDS, Perot Systems Corporation, Computer Sciences Corporation, Affiliated Computer Services, Inc., American Management Systems, Inc., BAE Systems, Lockheed Martin, Traywick, ManTech, PROSOFT, SAIC and Accenture Ltd; and (3) professional staffing - CIBER, SAIC, Keane, Inc., and Analysts International Corp.
The Company believes that the principal competitive factors in the IT services industry are (1) responsiveness to clients’ needs and speed in delivering IT solutions; (2) effectiveness of delivered solutions as measured through cost reductions and improvements in price/performance ratios; (3) output per employee as reflected in utilization rates; (4) quality of service; (5) price; and (6) technical expertise. The Company believes that it competes favorably with respect to these factors.
The Company also competes for the hiring and retention of management and other professional personnel. See “Business - Personnel and Recruiting” in Part 1, Item 1 of this Form 10-K. In connection with professional staffing engagements, particularly in situations where the Company is one of a number of approved vendors, the Company competes to provide services based on the relative qualifications of its personnel.
Potential Liability to Customers
Many of the Company’s engagements involve projects that are critical to the operations of its customers’ businesses and provide benefits that may be difficult to quantify. Any failure in a customer’s system could result in a claim for substantial damages against the Company, regardless of the Company’s responsibility for such failure. The Company attempts to contractually limit its liability for damages arising from negligent acts, errors, mistakes and omissions in rendering its IT services. The Company also maintains general liability insurance coverage, including coverage for errors or omissions. Although the Company believes that the insurance coverage is adequate in scope and amount, there can be no assurance that such coverage will continue to be available on acceptable terms or sufficient to cover one or more large claims. Furthermore, any litigation, regardless of its outcome, could result in substantial costs to the Company, diversion of management’s attention from operations, and negative publicity, any of which could adversely affect the Company’s results of operations and financial condition.
Executive Officers of The Registrant
The table below sets forth information with respect to the business experience of the Company’s executive officers during at least the past five years.
ITEM 2.
ITEM 2.
PROPERTIES
The Company leases its corporate headquarters building in Memphis, Tennessee, under a lease expiring in June 2009. The Company leases sales offices in Montgomery, Alabama; Phoenix, Arizona; Little Rock, Arkansas; Jacksonville, Florida; Baton Rouge, Louisiana; Frankfort, Kentucky; Indianapolis, Indiana; Jackson, Mississippi; Nashville, Tennessee; Dallas, Texas; Austin, Texas; Cary, North Carolina; Madison, Wisconsin; Columbia, South Carolina; Overland Park, Kansas, Jefferson City, Missouri; Roseville, Minnesota; Newport News, Virginia; Littleton, Colorado; Norfolk, Virginia; Catonsville, Maryland; and Irmo, South Carolina.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
The Company from time to time is subject to various claims and lawsuits arising out of its operations in the ordinary course of business. Management believes that the disposition of such claims and lawsuits will not have a material adverse effect on the Company’s financial condition or results of operations.
ITEM 4.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company’s security holders during the fiscal quarter ended April 30, 2003.
PART II
ITEM 5.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information set forth under the caption “Market for the Company’s Common Stock” in the Company’s 2003 annual report to shareholders (the “Annual Report”) is incorporated herein by reference in response to this item.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
The information set forth under the caption “Financial Highlights” in the Annual Report is incorporated herein by reference in response to this item.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report is incorporated herein by reference in response to this item.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the caption “Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report is incorporated herein by reference in response to this item.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth under the caption “Consolidated Financial Statements” in the Annual Report is incorporated herein by reference in response to this item. The supplementary data is set forth in Schedule II to this report.
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information to be presented under the captions “Proposal 1 - Election of Directors” and “Stock Ownership - Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement for its 2003 annual meeting of shareholders (the “Proxy Statement”) and the information set forth under the caption “Item 1. Business - Executive Officers of the Registrant” in this report are incorporated herein by reference in response to this item.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
The information to be presented under the captions “Proposal 1 - Election of Directors - How are directors compensated?” and “Executive Compensation” in the Proxy Statement is incorporated herein by reference in response to this item.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information to be presented under the caption “Stock Ownership - How much common stock do the Company’s management and its largest shareholders own?” in the Proxy Statement is incorporated herein by reference in response to this item.
Equity Compensation Plan Information
The table below sets forth certain information concerning the Company’s equity compensation plans as of the end of April 30, 2003:
On December 15, 2000, in connection with the modification of its then existing credit facility, the Company granted to the lender a warrant to purchase 250,000 shares of common stock, at an exercise price of $0.31 per share, at any time during the three-year period beginning on January 1, 2001, and ending on January 1, 2004. On July 23, 2001, in connection with obtaining its currently existing credit facility, the Company granted to the lender and a debt placement agent warrants to purchase 80,000 shares and 220,000 shares, respectively, of common stock, at an exercise price of $1.00 per share, at any time during the three-year period beginning on July 23, 2001, and ending on July 23, 2004. In connection with obtaining a term loan to finance part of the purchase price of the Remtech Services, Inc., acquisition, the Company granted to the lender warrants to purchase 80,000 shares of common stock at an exercise price of $0.68 per share with an expiration date of July 23, 2007 and modified the 80,000 warrants previously issued to the lender on July 23, 2001 (referred to above), at origination of the credit facility. The modification decreased the exercise price from $1.00 to $0.68 and extended the expiration date to July 23, 2007.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information to be presented under the caption “Certain Transactions” in the Proxy Statement is incorporated herein by reference in response to this item.
ITEM 14.
ITEM 14.
CONTROLS AND PROCEDURES
Within the 90 days prior to the date of the filing of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Exchange Act Rules 13a-14(c) and 15d-14(c). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in enabling the Company to record, process, summarize and report information required to be disclosed in the Company’s periodic filings with the Securities and Exchange Commission within the required time period. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Company carried out its evaluation.
PART IV
ITEM 15.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
2. Financial Statement Schedules
The financial statement schedule filed as part of this report is as follows:
Schedule II - Valuation and Qualifying Accounts
Report of BDO Seidman, LLP, Independent Certified Public Accountants
3. Exhibits
The exhibits listed in the Exhibit Index following the signature page hereof are filed as part of this report or are incorporated herein by reference.
(b) Reports on Form 8-K
The Company filed the following Current Reports on Form 8-K during the three-month period ending April 30, 2003.
i.
Current Report on Form 8-K filed with the SEC on February 7, 2003, announcing the agreement to purchase 100% of the common stock of Remtech Services, Inc. (“Remtech”) by the Company.
ii.
Current Report on Form 8-K filed with the SEC on February 13, 2003, which attached and incorporated by reference the Company’s press release announcing that the Company had entered into a non-binding letter of intent to acquire another government information technology professional services company.
iii.
Current Report on Form 8-K/A filed with the SEC on February 13, 2003, amended the Form 8-K dated February 7, 2003, and disclosed that the Remtech transaction had closed.
iv.
Current Report on Form 8-K filed with the SEC on February 21, 2003, which attached and incorporated by reference the Company’s press release regarding financial results for its third quarter ending January 31, 2003.
v.
Current Report on Form 8-K/A filed with the SEC on April 3, 2003, which attached and incorporated by reference an amendment to the agreement between the Company and Remtech providing that the purchase and sale of Remtech common stock would be treated as effective on February 1, 2003.
vi.
Current Report on Form 8-K/A filed with the SEC on April 4, 2003, which provided financial statements, pro forma financial information and exhibits relating to the Remtech acquisition.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: July 28, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
CERTIFICATIONS
Certification
pursuant to and in connection with the
Annual Report on Form 10-K
to be filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended
I, T. Scott Cobb, President and Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K of SCB Computer Technology, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: July 28, 2003
/s/ T. Scott Cobb
T. Scott Cobb
President and Chief Executive Officer
Certification
pursuant to and in connection with the
Annual Report on Form 10-K
to be filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended
I, Michael J. Boling, Executive Vice President, Chief Financial Officer, and Treasurer certify that:
1. I have reviewed this annual report on Form 10-K of SCB Computer Technology, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: July 28, 2003
/s/ Michael J. Boling
Michael J. Boling
Executive Vice President,
Chief Financial Officer, and Treasurer
SCB COMPUTER TECHNOLOGY, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
S-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders
SCB Computer Technology, Inc.
The audits referred to in our report dated June 18, 2003, relating to the consolidated financial statements of SCB Computer Technology, Inc., which is incorporated in Item 8 of the Form 10-K by reference to the annual report to shareholders for the year ended April 30, 2003, included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based upon our audits.
In our opinion, the financial statement schedule referred to above presents fairly, in all material respects, the information set forth therein.
/s/ BDO Seidman, LLP
Memphis, Tennessee
June 18, 2003
S-2
EXHIBIT INDEX
EI-1
*
All or part of this exhibit is filed herewith.
+
This is a management contract or compensatory plan or arrangement.
EI-2