UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

 

 

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 8, 2008

 

 

BLACKBAUD, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of incorporation)

 

000-50600		11-2617163
(Commission File Number)		(IRS Employer ID Number)

2000 Daniel Island Drive, Charleston, South Carolina 29492

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (843) 216-6200

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Explanatory Note

On July 14, 2008, we filed a Current Report on Form 8-K pursuant to Item 2.01 of Form 8-K to report the completion of our acquisition of Kintera, Inc. (“Kintera”). Under parts (a) and (b) of Item 9.01 therein, we stated that we would file the required financial information by amendment, as permitted by Item 9.01(a)(4) and 9.01(b)(2) to Form 8-K. This Current Report on Form 8-K/A amends our Current Report on Form 8-K filed on July 14, 2008 in order to provide the required financial information.

 

Item 9.01

Financial Statements and Exhibits.

 

(a)	Financial statements of business acquired.

The audited Consolidated Balance Sheets of Kintera, Inc. as of December 31, 2007 and 2006 and the related consolidated Statements of Operations, Changes in Stockholders’ Equity and Cash Flows for each of the two years in the period ended December 31, 2007 and the notes thereto are incorporated by reference from Kintera Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “Commission”) on March 18, 2008.

The unaudited consolidated Balance Sheet as of March 31, 2008 and the related consolidated Statement of Operations and Changes in Stockholders Equity and Cash Flows of Kintera for the three months ended March 31, 2008 are incorporated by reference from Kintera’s Quarterly Report on Form 10-Q filed with the Commission on May 12, 2008.

 

(b)	Pro forma financial information.

The unaudited pro forma condensed combined Balance Sheet as of March 31, 2008 and Statements of Operations for the year ended December 31, 2007 and for the three months ended March 31, 2008 for Blackbaud, Inc. and the notes thereto are included as Exhibit 99.4 and are incorporated herein by reference.

 

(c)

Exhibits

The following exhibits are filed or furnished as part of this report:

 

Exhibit Number		Description of Document
23.1		Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm of Kintera, Inc.
99.1*		Press release dated July 9, 2008.
99.2		Audited Consolidated Balance Sheets of Kintera, Inc. as of December 31, 2007 and 2006 and the related consolidated Statements of Operations, Changes in Stockholders Equity and Cash Flows for each of the two years in the period ended December 31, 2007, and the notes thereto (incorporated by reference to Kintera, Inc.’s Annual Report on Form 10-K filed on March 18, 2008).
99.3		Unaudited Consolidated Balance Sheet as of March 31, 2008 and the related Consolidated Statement of Operations and Changes in Stockholders Equity and Cash Flows of Kintera for the three months ended March 31, 2008 (incorporated by reference to Kintera, Inc.’s Quarterly Report on Form 10-Q filed on May 12, 2008).
99.4		Unaudited pro forma condensed combined Balance Sheet as of March 31, 2008 and Statements of Operations for the year ended December 31, 2007 and for the three months ended March 31, 2008 for Blackbaud, Inc.

 

*	Previously filed

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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 hereunto duly authorized.

 

				BLACKBAUD, INC.
Date: September 19, 2008				/s/ Timothy V. Williams
				Timothy V. Williams,
				Senior Vice President and Chief Financial Officer

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-120690, No. 333-138448 and No. 333-152749) of Blackbaud, Inc. of our report dated March 14, 2008, with respect to the consolidated financial statements and schedule of Kintera, Inc., included in Kintera, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007 and incorporated by reference in this Amendment No. 1 to the Current Report on Form 8-K/A of Blackbaud, Inc.

 

San Diego, California

September 18, 2008

Exhibit 99.4

Blackbaud, Inc.

Kintera, Inc.

Unaudited Pro Forma Condensed

Combined Financial Statements

On July 8, 2008, Blackbaud, Inc. (“Blackbaud”) acquired Kintera, Inc., (“Kintera”) based in San Diego, California as a wholly owned subsidiary. Blackbaud financed the acquisition through a combination of cash and borrowings under the Company’s credit facility for a total purchase price of approximately $50.0 million including approximately $2.4 million in change of control payments to management and approximately $1.9 million in direct acquisition-related costs.

The unaudited pro forma condensed combined balance sheet was prepared as if the acquisition of Kintera had occurred on March 31, 2008. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2007 and the three months ended March 31, 2008 were prepared as if the acquisition had occurred on January 1, 2007.

The unaudited pro forma adjustments are based upon available information and assumptions that Blackbaud believes are reasonable. The unaudited pro forma condensed combined balance sheet and statement of operations and related notes thereto should be read in conjunction with Blackbaud’s historical consolidated financial statements as previously filed in Blackbaud’s Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission (the “Commission”) on February 29, 2008 and Blackbaud’s historical consolidated financial statements as previously filed in Blackbaud’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, filed with the Commission on May 9, 2008. In addition, this unaudited condensed combined pro forma information should be read in conjunction with Kintera’s historical consolidated financial statements as previously filed in Kintera’s Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Commission on March 18, 2008 and as amended on Form 10-K/A filed with the Commission on March 26, 2008 and Kintera’s historical consolidated financial statements for the quarter ended March 31, 2008 filed with the Commission on May 12, 2008. These financial statements are incorporated by reference in Blackbaud’s Current Report on Form 8-K/A filed on September 19, 2008.

These unaudited pro forma condensed combined financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of Kintera been consummated as of January 1, 2007. The pro forma financial statements do not give effect to any cost savings or incremental costs that may result from the integration of Blackbaud and Kintera.

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Blackbaud, Inc.

Unaudited pro forma condensed combined balance sheet

As of March 31, 2008

(in thousands, except share amounts)

 

		Historical								Pro Forma
		Blackbaud				Kintera				Adjustments				Combined
ASSETS
Current assets
Cash and cash equivalents		$	12,142			$	4,080			$	(50,012	) (a)		$	11,870
											45,660	(a)
Marketable securities			—				1,580								1,580
Restricted cash			—				7,718								7,718
Accounts receivable			42,324				4,608								46,932
Prepaid expense			12,184				922								13,106
Deferred costs			—				1,362				(1,362	) (b)			—
Deferred tax asset			3,176				—				4,818	(i)			7,994
Total current assets			69,826				20,270				(896	)			89,200
Property and equipment, net			17,677				3,991								21,668
Deferred tax asset, noncurrent			49,202				—				21,260	(i)			70,462
Developed software, net			—				1,863				(1,863	) (b)			—
Goodwill			60,643				12,017				(12,017	) (d)			67,736
											7,093	(c)
Intangibles, net			36,208				3,392				(3,392	) (d)			53,258
											17,050	(f)
Other assets			446				47								493
Total assets		$	234,002			$	41,580			$	27,235			$	302,817
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	5,822			$	1,395							$	7,217
Accrued expenses			19,813				2,440			$	672	(g)			22,838
											(87	) (e)
Donations payable			—				7,718								7,718
Capital lease obligations			513				17								530
Short-term notes payable			11,500				1,200				113	(o)			12,813
Deferred revenue			94,879				15,721				(8,138	) (h)			102,462
Deferred tax liabilities, current			—				—								—
Total current liabilities			132,527				28,491				(7,440	)			153,578
Notes payable			—				1,974				45,660	(a)			47,634
Capital lease obligations			449				14								463
Deferred rent and other			—				817				(701	) (e)			116
Deferred revenue			4,061				—								4,061
Other liabilities			1,080				—								1,080
Deferred tax liabilities, noncurrent			—				478				(478	) (p)			—
Total long-term liabilities			5,590				3,283				44,481				53,354
Total liabilities			138,117				31,774				37,041				206,932
Capital
Common stock			50				40				(40	) (j)			50
Additional paid in capital			108,551				157,932				(157,932	) (j)			108,551
Treasury stock			(108,130	)			—								(108,130	)
Accumulated other comprehensive income			145				6				(6	) (j)			145
Retained earnings			95,269				(148,172	)			148,172	(j)			95,269
Total equity			95,885				9,806				(9,806	)			95,885
Total liabilities & stockholders’ equity		$	234,002			$	41,580			$	27,235			$	302,817

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.

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Blackbaud, Inc.

Unaudited pro forma condensed combined statement of operations

for the year ended December 31, 2007

(in thousands, except per share amounts)

 

		Historical								Pro Forma
		Blackbaud				Kintera				Adjustments			Combined
Revenue
License fees		$	37,569			$	1,196						$	38,765
Services			91,376				11,079							102,455
Maintenance			94,602				7,379							101,981
Subscriptions			25,389				25,281							50,670
Other revenue			8,102				—							8,102
Total revenue			257,038				44,935			—				301,973
Cost of revenue
Cost of license fees			2,870				694			152	(m)			3,716
Cost of services			54,908				5,101							60,009
Cost of maintenance			17,119				856			1,007	(m)			18,982
Cost of subscriptions			10,306				9,200			1,932	(m)			21,438
Cost of other revenue			7,274				—							7,274
Total cost of revenue			92,477				15,851			3,091				111,419
Gross profit			164,561				29,084			(3,091	)			190,554
Operating expenses
Sales and marketing			56,994				17,967							74,961
Research and development			28,525				6,338							34,863
General and administrative			26,144				16,296							42,440
Amortization			491				2,451			(2,451	) (l)			584
										93	(m)
Restructuring							2,274							2,274
Total operating expenses			112,154				45,326			(2,358	)			155,122
Income from operations			52,407				(16,242	)		(733	)			35,432
Interest income			813				911			(215	) (q)			1,509
Interest expense			(1,164	)			(59	)		(1,584	) (k)			(2,807	)
Other (expense) income, net			(503	)			64							(439	)
Income before provision for income taxes			51,553				(15,326	)		(2,532	)			33,695
Income tax provision			19,829				459			(7,328	) (n)			12,960
Net income		$	31,724				(15,785	)		4,796			$	20,735
Earnings per share
Basic		$	0.73										$	0.48
Diluted		$	0.71										$	0.46
Common shares and equivalents outstanding
Basic weighted average shares			43,619,158											43,619,158
Diluted weighted average shares			44,595,483											44,595,483

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.

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Blackbaud, Inc.

Unaudited pro forma condensed combined statement of operations

for the three months ended March 31, 2008

(in thousands, except per share amounts)

 

		Historical								Pro Forma
		Blackbaud				Kintera				Adjustments				Combined
Revenue
License fees		$	9,635			$	98							$	9,733
Services			23,576				1,811								25,387
Maintenance			25,430				1,652								27,082
Subscriptions			8,785				5,350								14,135
Other revenue			2,010												2,010
Total revenue			69,436				8,911				—				78,347
Cost of revenue
Cost of license fees			842				45				38	(m)			925
Cost of services			15,693				1,490								17,183
Cost of maintenance			4,704				204				271	(m)			5,179
Cost of subscriptions			3,656				2,253				529	(m)			6,438
Cost of other revenue			1,848				—								1,848
Total cost of revenue			26,743				3,993				838				31,574
Gross Profit			42,693				4,918				(838	)			46,773
Operating expenses
Sales and marketing			15,239				3,564								18,803
Research and development			8,767				1,621								10,388
General and administrative			7,266				3,460								10,726
Amortization			167				522				(522	) (l)			190
											23	(m)
Restructuring			—												—
Total operating expenses			31,439				9,167				(499	)			40,107
Income from operations			11,254				(4,249	)			(339	)			6,666
Interest income			165				121				(54	) (q)			232
Interest expense			(70	)			(93	)			(396	) (k)			(559	)
Other (expense) income, net			(89	)			(22	)							(111	)
Income before provision for income taxes			11,260				(4,243	)			(789	)			6,228
Income tax provision			4,217				52				(1,937	) (n)			2,332
Net income		$	7,043			$	(4,295	)		$	1,148			$	3,896
Earnings per share
Basic		$	0.16											$	0.09
Diluted		$	0.16											$	0.09
Common shares and equivalents outstanding
Basic weighted average shares			43,897,369												43,897,369
Diluted weighted average shares			44,662,620												44,662,620

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.

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Note 1 – Basis of presentation

On July 8, 2008, Blackbaud, Inc. (“Blackbaud” or the “Company”) acquired Kintera, Inc. (“Kintera”) based in San Diego, California as more fully described in Note 2.

The unaudited pro forma condensed combined balance sheet was prepared as if the acquisition of Kintera had occurred on March 31, 2008. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2007 and the three months ended March 31, 2008 were prepared as if the acquisition had occurred on January 1, 2007.

The unaudited pro forma condensed combined financial information has been prepared on the same basis as Blackbaud’s audited consolidated financial statements. The acquisition was accounted for using the purchase method of accounting and, accordingly, the respective assets acquired and liabilities assumed have been recorded at their fair value and consolidated into the net assets of Blackbaud.

Note 2 – Purchase price

The purchase price for Kintera was approximately $50.0 million and was funded by cash on hand and borrowings under the Company’s credit facility. The purchase price consisted of $45.7 million of cash from proceeds of debt, $2.4 million in payments to management under change of control provisions and $1.9 million of direct acquisition-related costs. The acquisition was accounted for as a purchase and the total purchase price consisted of (in thousands):

 

Cash from proceeds of debt paid for outstanding shares		$	45,660
Cash on hand used to pay management change of control payments			2,417
Direct acquisition-related costs			1,935
Total purchase price		$	50,012

The purchase price has been based on a preliminary valuation because the final valuation has not been completed. The final valuation is expected to be completed by the end of 2008. Differences between the preliminary valuation and the final valuation are not expected to be significant. Identifiable intangible assets acquired are amortized on a straight-line and accelerated basis as noted in the table below. Based upon the purchase price of the acquisition and based upon the preliminary valuation of the acquired net assets, the preliminary purchase price allocation is as follows (in thousands):

 

Historical net book value of Kintera's assets and liabilities		$	9,806
Adjustments to step-up (down) net assets and liabilities to fair value:
Deferred revenue			8,138
Fair value adjustment to write-off of Kintera's goodwill and intangibles			(15,409	)
Other fair value adjustments			(2,744	)
Fair value of acquired tangible assets and liabilities before adding intangibles and deferred tax impact							(209	)
Identifiable intangible assets
Marketing assets (8 years, straight-line amortization)			740
Customer relationships (4-13 years, accelerated amortization)			12,200
Software (4-8 years, straight-line amortization)			4,110
Total identifiable intangible assets							17,050
Current deferred tax assets							4,818
Non-current deferred tax assets							21,260
Goodwill							7,093
Net assets acquired						$	50,012

Note 3 – Pro forma adjustments

Adjustments have been made to this unaudited pro forma condensed combined financial information to reflect the following:

 

(a)

To reflect the cash paid and the debt financing associated with the acquisition as noted in Note 2;

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(b)

To write off the book value of deferred implementation costs and capitalized software development costs;

 

(c)

To record the fair value of goodwill resulting from the acquisition;

 

(d)

To write off the book value of Kintera’s goodwill and intangible assets;

 

(e)

To write off lease incentive and deferred rent liabilities;

 

(f)

To establish the fair value of identifiable intangible assets resulting from the acquisition, principally the value of customers and software acquired;

 

(g)

To establish liabilities generated upon acquisition;

 

(h)

To establish the fair value of deferred revenues;

 

(i)

To record deferred tax assets and liabilities related to assets acquired and liabilities assumed, principally the acquired net operating loss carryforwards available to offset future taxable income, net of applicable limitations of their use;

 

(j)

To eliminate the historical stockholders’ equity of Kintera;

 

(k)

To record interest expense associated with the $45.7 million in debt incurred to finance the acquisition which is assumed to be outstanding during 2007 and is based on the weighted average interest rate for the period. A change in the interest rate of 1/8th of a percent would result in a change of $58,000 in interest expense for the year ended December 31, 2007 and $14,000 for the three months ended March 31, 2008;

 

(l)

To eliminate amortization recorded on Kintera’s intangible assets;

 

(m)

To record amortization expense on the identified intangible assets resulting from the acquisition;

 

(n)

To record the tax impact of pro forma adjustments by adjusting the combined pro forma presentation to the Blackbaud effective tax rate;

 

(o)

To record an increase in principal to adjust a short term note payable to fair value;

 

(p)

To write off the book value of Kintera’s deferred tax balances; and

 

(q)

To reflect the decrease in interest income based on the weighted average rate of return for the period.

Note 4 – Reclassifications

Certain reclassifications have been made to conform Kintera’s Statement of Operations to Blackbaud’s Statement of Operations. Specifically, certain costs associated with Kintera’s sales contract administration and billing functions that were classified as sales and marketing costs in Kintera’s statements of operations have been reclassified to general and administrative costs consistent with Blackbaud’s treatment of these operating expenses. These costs were $454,000 and $1,386,000 for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively.