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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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                                FORM 8-K/A NO. 2

                                 CURRENT REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


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                           DATE OF REPORT: MAY 9, 1996

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                              CHECKFREE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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    Delaware                        0-26802                    31-1013521
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(STATE OR OTHER               (COMMISSION FILE NO.)           (IRS EMPLOYER
JURISDICTION OF                                           IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)

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                             8275 North High Street
                              Columbus, Ohio 43235
                                 (614) 825-3000
               (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
                       INCLUDING AREA CODE OF REGISTRANT'S
                          PRINCIPAL EXECUTIVE OFFICES)


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                                 Not Applicable
          (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)


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ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS.

         On March 21, 1996, Checkfree Corporation, a Delaware corporation
("Checkfree"), ISC Acquisition Corporation, an Ohio corporation and a wholly
owned subsidiary of Checkfree ("ISC Acquisition"), and Security APL, Inc., an
Illinois corporation ("Security"), entered into an Agreement and Plan of Merger,
dated as of March 21, 1996, as amended (the "Merger Agreement"), whereby ISC
Acquisition would be merged with and into Security with Security being the
surviving entity as a wholly owned subsidiary of Checkfree (the "Acquisition").
Under the terms of the Merger Agreement, Checkfree agreed to acquire the stock
of Security in exchange for common stock, $.01 par value, of Checkfree (the
"Common Stock"). The Acquisition was completed on May 9, 1996. The total
consideration paid by Checkfree was $53,307,815. Pursuant to the terms of the
Merger Agreement, 2,822,325 shares of the Common Stock were issued, based upon
an average stock price of $18.50 per share. Security is a full service provider
of fully integrated, customized portfolio management software services,
including performance measurement, trading and reporting for over 180
Institutional Money managers, along with brokers, financial planners and banks.
Security handles nearly 300,000 professional portfolios and hundreds of
thousands of trades per day.

         Checkfree's Board of Directors approved the issuance of the additional
2,822,325 shares on March 21, 1996. The shares of Common Stock received by the
stockholders of Security are not registered under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon Section 4(2) of the Securities
Act and Rule 506 of Regulation D thereunder.

           The transaction was accomplished through arms-length negotiations
between Checkfree's management and Security's management. Security's
stockholders approved the Acquisition on May 6, 1996. There was no material
relationship between the stockholders of Security and Checkfree or any of
Checkfree's affiliates, any of Checkfree's directors or officers, or any
associate of any such Checkfree director or officer, prior to this transaction.

         Checkfree's press release issued May 9, 1996 regarding the consummation
of the Acquisition is attached as an exhibit to this report and is incorporated
herein by reference.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS.

         (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.

         The financial statements of Security APL, Inc. as audited by its
independent auditors, were previously filed on the original Current Report on
Form 8-K dated May 9, 1996, filed with the Securities and Exchange Commission on
May 20, 1996, and are deemed to be a part of this Amendment No. 2 thereto.





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         (b) PRO FORMA FINANCIAL INFORMATION.

         On July 22, 1996, Checkfree filed the Form 8-K/A. No.1 which provided
the pro forma financials of Checkfree and Security under the pooling of
interests accounting method. Due to the sale of assets by two subsidiaries of
Checkfree to SunGard SSI Inc., Checkfree is required to treat the acquisition of
Security under the purchase method of accounting rather than the pooling of
interest method. Therefore, the following are the pro forma financial statements
of Checkfree and Security, under the purchase method of accounting for the
periods provided therein:


UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION

         Checkfree's acquisition of Security has been treated as a purchase for
accounting purposes. Checkfree acquired Servantis Holdings, Inc. ("Servantis")
in February 1996 (the "Servantis Acquisition"). The Servantis Acquisition was
also treated as a purchase for accounting purposes. Under the purchase method of
accounting, the assets and liabilities of the acquired company are recorded at
their independently appraised fair values at the date of the acquisition, and
the results of the operations are included in the consolidated financial
statements from the effective date of the Acquisition.

         The unaudited pro forma condensed combining statement of operations
combines Checkfree's and Security's results of operations for the fiscal year
ended December 31, 1995, with Servantis' results of operations for the twelve
months ended December 31, 1995, giving effect to the Acquisition and the
Servantis Acquisition as if they had occurred as of January 1, 1995. The
unaudited pro forma condensed combining balance sheet combines Checkfree's and
Security's balance sheets with Servantis' balance sheet as of December 31, 1995,
giving effect to the Acquisition and the Servantis Acquisition as if they had
occurred on that date. The pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred had the Acquisition or
the Servantis Acquisition been consummated at the beginning of the period
presented, nor is it necessarily indicative of future operating results or
financial position.

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                                      Unaudited Pro Forma Condensed Combining Balance Sheet
                                                      As of December 31,1995
                                                          (In thousands)
Historical Amounts Historical -------------------- Pro Forma Amounts Pro Forma Checkfree Servantis Adjustments Pro Forma Security Adjustments Total ------------------------------------------------------------------------------------------ Assets Current assets Cash and short term investments $ 84,852 $ 2,511 $ (42,500)(1) $ 44,863 $ 3,050 $ -- $ 47,913 Receivables - trade and other 3,533 20,921 -- 24,454 1,518 -- 25,972 Prepaid expenses and other 1,916 380 -- 2,296 -- -- 2,296 Deferred income taxes 166 785 972 (2)(6) 1,923 -- -- 1,923 ------------------------------------------------------------------------------------------ Total Current Assets 90,467 24,597 (41,528) 73,536 4,568 -- 78,104 ------------------------------------------------------------------------------------------ Property and equipment - net 13,559 10,775 4,528 (2) 28,862 3,211 -- 32,073 ------------------------------------------------------------------------------------------ Other assets Investments 7,499 -- -- 7,499 1,198 -- 8,697 Capitalized software, net 286 11,004 20,396 (2) 31,686 409 6,391(8) 38,486 Intangible assets, net -- 12,424 13,864 (2) 26,288 -- 13,069(8) 39,357 Deferred income taxes -- 8,949 (254)(2)(6) 8,695 -- -- 8,695 Other noncurrent assets 3,831 299 -- 4,130 266 -- 4,396 ------------------------------------------------------------------------------------------ Total other assets 11,616 32,676 34,006 78,298 1,873 19,460 99,631 ------------------------------------------------------------------------------------------ Total $ 115,642 $ 68,048 $ (2,994) $ 180,696 $ 9,652 $ 19,460 $ 209,808 ========================================================================================== Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued and other liabilities 6,532 5,982 -- 12,514 467 -- 12,981 Current portion of long-term obligations 1,161 -- -- 1,161 -- -- 1,161 Deferred revenues 982 19,167 (20,701)(2)(7) (552) -- -- (552) Deferred income taxes -- 4 8,284 (2)(6) 8,288 -- 8,288 ------------------------------------------------------------------------------------------ Total Current Liabilities 8,675 25,153 (12,417) 21,411 467 -- 21,878 Stockholders' and bank notes payable 125 41,914 (41,914)(1) 125 -- -- 125 Accrued rent and other 7,157 -- -- 7,157 -- -- 7,157 Deferred lease obligation 51 2,285 (2,285 (2) 51 -- -- 51 Deferred income taxes 309 2,898 12,242 (2)(6) 15,449 -- 4,036(8)(11) 19,485 ------------------------------------------------------------------------------------------ Total liabilities 16,317 72,250 (44,374) 44,193 467 4,036 48,696 Stockholders' equity Preferred stock -- 13,052 (13,052)(3) -- -- -- -- Stockholders' equity 99,325 (17,254) 54,432(1)(2)(3) 136,503 9,185 15,424(8)(9) 161,112 ------------------------------------------------------------------------------------------ Total Liabilities and Stockholders' Equity $ 115,642 $ 68,048 $ (2,994) $ 180,696 $ 9,652 $ 19,460 $ 209,808 ========================================================================================== See Notes to Unaudited Pro Forma Condensed Combining Financial Information
-4- 5 Unaudited Pro Forma Condensed Combining Statement of Operations For the Twelve Months Ended December 31, 1995 (In thousands)
Historical Amounts Historical ---------------------- Pro Forma Amounts Pro Forma Checkfree Servantis Adjustments Pro Forma Security Adjustments Total ------------------------------------------------------------------------------------------ OPERATING REVENUES: ------------------------------------------------------------------------------------------- Total operating revenues, net $ 49,330 66,675 $ (20,701) (7) $ 95,304 $ 15,670 $ - $110,974 ------------------------------------------------------------------------------------------- OPERATING EXPENSES: Cost of processing, servicing, and support 30,293 24,610 - 54,903 7,041 - 61,944 Research and development 6,892 13,483 - 20,375 1,756 - 22,131 Sales and marketing 7,261 6,879 - 14,140 1,553 - 15,693 General and administrative 4,064 11,537 - 15,601 1,967 - 17,568 Depreciation and amortization 2,485 11,097 3,223 (4) 16,805 1,454 2,574 (10) 20,833 ------------------------------------------------------------------------------------------- Total operating expenses 50,995 67,606 3,223 121,824 13,771 2,574 138,169 ------------------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS (1,665) (931) (23,924) (26,520) 1,899 (2,574) (27,195) ------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE): INVESTMENT INCOME 2,135 471 - 2,606 201 - 2,807 INTEREST EXPENSE (645) (3,490) 3,490 (5) (645) - (645) ------------------------------------------------------------------------------------------- 1,490 (3,019) 3,490 1,961 201 - 2,162 ------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES (175) (3,950) (20,434) (24,559) 2,100 (2,574) INCOME TAX EXPENSE (BENEFIT) 40 (1,236) (7,720)(6) (8,916) 96 120 (11) (8,700) ------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (215) $ (2,714) $(12,714) $(15,643) $ 2,004 $ (2,694) $(16,333) PREFERRED STOCK DIVIDENDS - (797) 797 (5) - - $ - $ - ------------------------------------------------------------------------------------------- NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (215) $ (3,511) $(11,917) $(15,643) $ 2,004 $ (2,694) $(16,333) =========================================================================================== NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ (0.46) $ (0.44) ========== ========= ======== wtd avg. shares outstanding 28,219 5,672 33,891 2,822 36,713 ========== ========= ========= ======== ========
See Notes to Unaudited Pro Forma Condensed Combining Financial Information -5- 6 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION 1. Adjustment to reflect payment of $42,500,000 cash portion pursuant to the Servantis Merger Agreement. 2. Adjustments to reflect the change in net assets for the Servantis Acquisition based upon the fair market values at February 21, 1996 as follows:
(In thousands) Total purchase price $165,137 Allocation of purchase price ======== Tangible net assets acquired at fair market value $16,849 Adjustments to reflect fair value of assets acquired In-process R&D 90,600 Capitalized software (3 to 10-year lives) 31,400 Other intangibles (10 to 30-year lives) 26,288 --------- 148,288 --------- Total $165,137 ========
3. Adjustment to reflect the issuance of 5,671,726 shares of Checkfree Common Stock at $20.00 per share in exchange for all shares of Servantis' common and preferred stock and the elimination of Servantis' stockholders' equity. 4. Adjustment to eliminate Servantis' historical intangible asset amortization expense and to reflect the amortization from the capitalized software and other intangibles. 5. Adjustment to eliminate Servantis' interest expense to reflect the pay-off of long-term debt, and elimination of Servantis' preferred stock dividends. 6. Adjustment to reflect income tax effects of pre-tax pro forma adjustments at the statutory rate. 7. Adjusted to reflect the reduction in operating and deferred revenues for purchased profits. -6- 7 8. Adjustments to reflect the change in net assets for the Acquisition based upon preliminary estimates of fair market value at December 31, 1995 as follows:
(In thousands) Total purchase price $53,016 Allocation of purchase price ======= Tangible net assets acquired at fair market value $ 4,347 Adjustments to reflect fair value of assets acquired In-process R&D 28,800 Capitalized Software (6 year life) 6,800 Other intangibles (6 to 8-year lives) 13,069 ------- 48,669 ------- Total $53,016 =======
9. Adjustment to reflect the issuance of 2,822,325 shares of Checkfree Common Stock at $18.50 per share in exchange for all shares of Security's common stock and the elimination of Security 's stockholders' equity. 10. Adjustment to eliminate Security's historical intangible asset amortization expense and to reflect the amortization from the capitalized software and other intangibles. 11. Adjustment to reflect income tax effects of pre-tax pro forma adjustments at the statutory rate and the impact of Federal taxes on Security's historical amounts. Prior to the Acquisition Security was an S corporation. Notes to Unaudited Pro Forma Condensed Combining Financial Statements Note A: The unaudited pro forma condensed combining balance sheet of Checkfree, Security, and Servantis has been prepared as if the Acquisition and the Servantis Acquisition were completed as of December 31, 1995 and both were accounted for as purchases. The total purchase price of $165.1 million was allocated to Servantis' December 31, 1995 balance sheet; and the total purchase price of $53.0 million was allocated to Security's December 31, 1995 balance sheet. Actual balance sheets of Checkfree, Security, and Servantis will be combined as of the effective dates of the Acquisition and the Servantis Acquisition. The allocation of the Servantis and Security purchase prices among the identifiable tangible and intangible assets included herein is based on an independent appraisal of the fair market value of those assets. Purchased research and development was identified and valued through interviews and analysis of data concerning each Servantis and Security developmental project. Expected future cash flows of each developmental project were discounted to present value taking into account risks -7- 8 associated with the inherent difficulties and uncertainties in completing the project, and thereby achieving technological feasibility, and risks related to the viability of and potential changes in future target markets. The above analysis and valuation resulted in a value of $90.6 million for purchased research and development for Servantis and $28.8 million purchased research and development for Security, which have not yet reached technological feasibility and do not have alternative future uses. Therefore, in accordance with generally accepted accounting principles, these amounts were written off in the quarter ended March 31, 1996 for Servantis and the quarter ended June 30, 1996 for Security. Using the same methodology, purchased software was identified and valued. Expected future cash flows associated with purchased software product were discounted to present value taking into account risks related to the characteristics and applications of each associated product, existing and future markets, and assessments of the life cycle stage of each product. This analysis resulted in an additional $31.4 million of purchased software for Servantis and $6.8 million of purchased software for Security, which had reached technological feasibility and therefore was capitalized. The amount of purchase price allocated to purchased software was smaller than that allocated to purchased research and development due to the shorter life and lower cash flows remaining for the purchased software as compared to the projects currently under development. Note B: In the pro forma condensed combining statement of operations, the Checkfree and Security statements of operations for the fiscal year ended December 31, 1995 have been combined with the Servantis statement of operations for the twelve months ended December 31, 1995. Note C: The unaudited pro forma combined net loss per share is based on the weighted average number of shares of Checkfree Common Stock outstanding during the period, adjusted to give effect to shares assumed to be issued had the Acquisition and the Servantis Acquisition taken place as of January 1, 1995. Note D: The unaudited pro forma condensed combining statement of operations does not include the value of the $28.8 million and $90.6 million write-offs (no income tax effect) of purchased research and development arising from the Acquisition and the Servantis Acquisition, respectively, as they are material nonrecurring charges. Likewise, an extraordinary loss of $365,000 (net of income tax benefit of $205,000) arising from the extinguishment of certain Servantis debt as part of the Servantis Acquisition has not been reflected in the unaudited pro forma condensed combining statement of operations. -8- 9 (c) EXHIBITS. Exhibit No. Description 2(a) Agreement and Plan of Merger, dated as of March 21, 1996, among Checkfree Corporation, ISC Acquisition Corporation, and Security APL, Inc. (Reference is made to Exhibit 2 to the Current Report on Form 8- K, dated March 21, 1996, filed with the Securities and Exchange Commission on March 29, 1996, and incorporated herein by reference.) 2(b) Amendment to Agreement and Plan of merger, dated as of April 30, 1996, among Checkfree Corporation, ISC Acquisition Corporation, and Security APL, Inc. (Reference is made to Exhibit 2(c) to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, and incorporated herein by reference.) 23 Consent of Ernst & Young, LLP (Reference is made to Exhibit 23 to the Current Report on Form 8-K, dated May 9, 1996, filed with the Securities and Exchange Commission on May 20, 1996, and incorporated herein by reference.) 99 Press Release (Reference is made to Exhibit 99 to the Current Report on Form 8-K, dated May 9, 1996, and filed with the Securities and Exchange Commission on May 20, 1996, and incorporated herein by reference.) -9- 10 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. CHECKFREE CORPORATION Date: October 10, 1996 By: /s/ John M. Stanton ------------------------------- John M. Stanton, Vice President and Treasurer -10- 11 EXHIBIT INDEX Exhibit No. Description Page 2(a) Agreement and Plan of Merger, dated as of March 21, 1996, among Checkfree Corporation, ISC Acquisition Corporation, and Security APL, Inc. (Reference is made to Exhibit 2 to the Current Report on Form 8-K, dated March 21, 1996, filed with the Securities and Exchange Commission on March 29, 1996, and incorporated herein by reference.) 2(b) Amendment to Agreement and Plan of Merger, dated as of April 30, 1996, among Checkfree Corporation, ISC Acquisition Corporation, and Security APL, Inc. (Reference is made to Exhibit 2(c) to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, and incorporated herein by reference.) 23 Consent of Ernst & Young, LLP (Reference is made to Exhibit 23 to the Current Report on Form 8-K, dated May 9, 1996, filed with the Securities and Exchange Commission on May 20, 1996, and incorporated herein by reference.). 99 Press Release (Reference is made to Exhibit 99 to the Current Report on Form 8-K, dated May 9, 1996, and filed with the Securities and Exchange Commission on May 20, 1996, and incorporated herein by reference.) -11-