<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
- -- Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ____________ to
______________
Commission File No: 0-22657
H.T.E., INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2133858
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1000 BUSINESS CENTER DRIVE
LAKE MARY, FLORIDA 32746
(407) 304-3235
(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class OUTSTANDING AS OF JULY 31, 1998
----- -------------------------------
Common stock
Par value $.01 per share 16,876,254
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,892 $ 18,634
Restricted cash - 1,574
Trade accounts receivable, net 31,257 22,822
Deferred income taxes 755 751
Other current assets 2,662 1,405
------------- -------------
Total current assets 45,566 45,186
------------- -------------
COMPUTER EQUIPMENT, FURNITURE AND
FIXTURES, net 3,876 3,257
------------- -------------
OTHER ASSETS
Computer software development costs, net 5,211 4,297
Other intangible assets 2,658 1,271
Deposits 262 197
------------- -------------
8,131 5,765
------------- -------------
Total assets $ 57,573 $ 54,208
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,469 $ 3,134
Accrued liabilities 4,103 5,235
Deferred revenue 14,588 12,430
------------- -------------
Total current liabilities 22,160 20,799
------------- -------------
LONG-TERM LIABILITIES
Deferred income taxes 2,070 1,731
Due to stockholders - 1,213
Other long-term liabilities 227 173
------------- -------------
Total long-term liabilities 2,297 3,117
------------- -------------
STOCKHOLDERS' EQUITY
Common stock 168 165
Additional paid-in capital 28,309 27,999
Retained earnings 4,672 2,122
Cumulative translation adjustment (33) 6
------------- -------------
Total stockholders' equity 33,116 30,292
------------- -------------
Total liabilities and stockholders' equity $ 57,573 $ 54,208
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
2
<PAGE> 3
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
REVENUES
Software licenses $ 11,242 $ 5,286 $ 19,801 $ 12,049
Professional services 5,141 3,898 9,454 7,498
Hardware 2,864 2,781 5,477 4,640
Maintenance and other 4,268 3,108 8,362 5,997
Resource management 362 - 723 -
---------- ---------- --------- --------
Total revenues 23,877 15,073 43,817 30,184
---------- ---------- --------- --------
EXPENSES
Cost of software licenses 1,707 1,306 3,016 2,207
Cost of professional services 2,980 2,267 5,546 4,159
Cost of hardware 2,432 1,979 4,378 3,570
Cost of maintenance and other 2,399 1,434 4,400 2,877
Cost of resource management 226 - 467 -
Research and development 3,337 2,066 6,226 4,064
Sales and marketing 4,684 2,735 8,322 5,133
General and administrative 3,501 2,534 6,826 5,188
Acquisition related 237 - 237 -
Provision for relocation of offices - 300 - 300
---------- ---------- --------- --------
Total operating expenses 21,503 14,621 39,418 27,498
---------- ---------- --------- --------
OPERATING INCOME 2,374 452 4,399 2,686
OTHER INCOME (EXPENSES)
Interest 111 (57) 255 (126)
---------- ---------- --------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,485 395 4,654 2,560
TAXES
Deferred tax provision related to acquisitions 339 - 339 -
Provision for income taxes 967 170 1,806 803
---------- ---------- --------- --------
NET INCOME 1,179 225 2,509 1,757
ACCRETION AND ACCRUAL OF DIVIDENDS ON
MANDATORILY REDEEMABLE PREFERRED STOCK - 326 - (1,308)
---------- ---------- --------- --------
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS 1,179 551 2,509 449
Foreign currency translation adjustments (17) 10 (39) 21
---------- ---------- --------- --------
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ 1,162 $ 561 $ 2,470 $ 470
========== ========== ========= ========
PRO FORMA INCOME DATA:
INCOME BEFORE PROVISION FOR INCOME TAXES 2,485 395 4,654 2,560
PRO FORMA PROVISION FOR INCOME TAXES 937 128 1,756 1,005
---------- ---------- --------- --------
PRO FORMA NET INCOME $ 1,548 $ 267 $ 2,898 $ 1,555
========== ========== ========= ========
PER SHARE DATA:
NET INCOME PER COMMON SHARE
(PRO FORMA FOR 1997)
Basic $ 0.07 $ 0.02 $ 0.15 $ 0.14
========== ========== ========= ========
Diluted $ 0.07 $ 0.02 $ 0.14 0.14
========== ========== ========= ========
PRO FORMA NET INCOME PER SHARE, AS
ADJUSTED FOR PRO FORMA PROVISION FOR
INCOME TAXES
Basic $ 0.09 $ 0.02 $ 0.17 $ 0.13
========== ========== ========= ========
Diluted $ 0.09 $ 0.02 $ 0.17 $ 0.13
========== ========== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE> 4
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,509 $ 1,757
Adjustments to reconcile net income to net cash (used in)
provided by operating activities--
Depreciation and amortization 2,430 1,592
Accretion of mandatorily redeemable Class C common stock
charged to interest expense - 19
Compensation due to sale of stock - 65
Deferred income taxes 335 (38)
Changes in operating assets and liabilities--
Decrease (increase) in assets--
Trade accounts receivable, net (8,296) (1,036)
Other current assets (1,257) (952)
Deposits (65) (114)
Increase (decrease) in liabilities--
Accounts payable and accrued liabilities (797) (957)
Deferred revenue 1,902 1,763
Other liabilities 54 20
---------- ---------
Net cash (used in) provided by operating activities (3,185) 2,119
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,194) (302)
Decrease in restricted cash 1,574 -
Computer software development cost (2,205) (1,091)
Cash paid for acquisitions (1,792) -
---------- ---------
Net cash used in investing activities (3,617) (1,393)
---------- ---------
</TABLE>
4
<PAGE> 5
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS) (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 312 19,056
Net repayment under line of credit - (2,306)
Payment of dividends on preferred stock - (624)
Repayments under obligations of capital leases - (17)
Change in due to stockholders (1,213) (329)
---------- --------
Net cash (used in) provided by financing activities (901) 15,780
---------- --------
Effect of foreign currency exchange rate changes on cash and
cash equivalents (39) 21
---------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(7,742) 16,527
CASH AND CASH EQUIVALENTS, beginning of period 18,634 1,038
---------- --------
CASH AND CASH EQUIVALENTS, end of period $ 10,892 $ 17,565
========== ========
SUPPLEMENTAL SCHEDULES OF CASH FLOW INFORMATION:
Cash paid for interest $ 5 $ 116
Cash paid for income taxes 2,661 1,129
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
5
<PAGE> 6
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The consolidated financial statements included herein have been prepared by
H.T.E., Inc. (HTE), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
financial statements for the year ended December 31, 1997, and the notes
thereto, included in the Company's Form 10-K (File No. 0-22657) filed with the
Securities and Exchange Commission.
The unaudited consolidated financial statements included herein include
normal recurring adjustments and reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of such financial
statements. The Company's business is seasonal and, accordingly, interim
results are not indicative of results for a full year.
The accompanying consolidated financial statements include the accounts of HTE,
a Florida corporation, and its wholly owned subsidiaries, HTE Public Safety
Illinois, Inc. (PSI), a Florida corporation, HTE-Software Management, Inc.
(SMI), a Florida corporation, HTE-Programmed For Success, Inc. (PFS), a Florida
corporation, Bellamy Software Ltd. (Bellamy), a Canadian corporation, HTE-Kb
Systems, Inc. (Kb Systems), a Florida corporation and HTE-UCS, Inc. (UCS), a
Florida corporation (collectively, the Company). HTE develops, markets,
implements and supports fully-integrated enterprise-wide software applications
designed specifically for public sector and utility organizations, including
state, county and city governments, other municipal agencies, and publicly and
privately owned utilities. The Company is also engaged in remarketing IBM
hardware systems to run in concert with their application software. The effect
of the Company's foreign operations on the accompanying consolidated financial
statements was not material. On June 1, 1998, the Company, through its
wholly-owned subsidiary HTE-UCS, Inc., purchased privately held UCS, Inc., in
exchange for 1,120,000 shares of the Company's common stock valued at
approximately $15 million as of the April 1998 agreement valuation date. UCS,
Inc. is a mobile work force automation provider of field-based reporting
software. The acquisition has been accounted for as a pooling of interests.
Therefore, the accompanying consolidated financial statements include the
results of operations of UCS, Inc. for all periods presented.
1. INITIAL PUBLIC OFFERING AND RECAPITALIZATION
On June 16, 1997, the Company successfully completed its initial public offering
of common stock. Of the 5,000,000 shares of common stock sold, 3,900,000 were
sold by HTE and 1,100,000 were sold by certain selling shareholders. The Company
sold the 3,900,000 shares of common stock for $19,056 net of issuance costs of
$2,394. In July, the underwriters exercised their option to purchase 750,000
additional shares of common stock to cover over-allotments. The Company received
$3,564 from the transaction, net of additional issuance costs of $561.
Concurrent with the effectiveness of the Company's registration statement on
Form S-1, the Company completed a recapitalization pursuant to which all
outstanding shares of mandatorily redeemable preferred stock, mandatorily
redeemable Class C common stock and Class A common stock were split 53-for-one
and exchanged simultaneously on a two-for-one basis for shares of the Company's
newly authorized common stock. As part of the recapitalization, the Company paid
$624 in accrued dividends on the mandatorily redeemable preferred stock. The
mandatorily redeemable preferred stock, mandatorily redeemable Class C common
stock, Class A common stock and Class B common stock were then canceled, retired
and eliminated from the shares the Company is authorized to issue.
6
<PAGE> 7
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONTINUED)
1. INITIAL PUBLIC OFFERING AND RECAPITALIZATION (CONTINUED)
Effective June 18, 1998, the Company effected a two-for-one stock split which
has been applied retroactively in the accompanying consolidated financial
statements. In connection with the stock split, the Company also increased the
number of authorized shares of common stock to 50 million.
2. LITIGATION
The Company is involved in various legal actions arising in the normal course of
business, as both a claimant and a defendant. While it is not possible to
determine with certainty the outcome of these matters, in the opinion of
management, the eventual resolution of these claims and actions outstanding will
not have a material adverse effect on the Company's financial position or
operating results.
3. EARNINGS PER SHARE
Basic and diluted weighted average shares outstanding were as follows (amounts
in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic weighted-average shares outstanding
(pro forma for 1997) 16,816 12,594 16,675 12,211
Common shares applicable to stock options
using the treasury stock method 855 220 748 192
------ ------ ------ ------
Diluted weighted average shares outstanding
(pro forma for 1997) 17,671 12,814 17,423 12,403
====== ====== ====== ======
</TABLE>
The pro forma basic and diluted weighted-average shares outstanding for the
three and six months ended June 30, 1997, assume the conversion of the
mandatorily redeemable preferred stock and the mandatorily redeemable Class C
common stock into Class A common stock as of the date such stock was first
issued. Common share equivalents included in the diluted calculation are
computed using the treasury stock method and consist of common stock which may
be issuable upon the exercise of outstanding common stock options, when
dilutive.
For the three and six months ended June 30, 1997, pro forma net income per
common share is determined by dividing net income, as adjusted for the effects
of the assumed conversion of the mandatorily redeemable Class C common stock as
of the date it was first issued, by the pro forma weighted-average number of
shares outstanding during the period. Pro forma net income per common share, as
adjusted for pro forma provision for income taxes, is determined by dividing pro
forma net income determined above, as further adjusted for the effects of the
pro forma provision for income taxes, by the pro forma weighted-average number
of shares outstanding during the period.
All share and per share information in the consolidated financial statements
have been adjusted to give effect to the 53-for-one stock split and par value
restatement (related to the Company's mandatorily redeemable preferred stock,
mandatorily redeemable Class C common stock and Class A common stock), which was
effective on June 10, 1997. Additionally, the share and per share information in
the consolidated financial statements have been further adjusted to give effect
to the two-for-one common stock split which was effective on June 18, 1998.
7
<PAGE> 8
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONTINUED)
4. BUSINESS COMBINATIONS
PURCHASES
During the year ended December 31, 1997, the Company created HTE-Kb Systems,
Inc. (Kb Systems) as a wholly owned subsidiary. In December 1997, Kb Systems
purchased the net assets of Kb Systems, Inc. for $400 in cash. The assets
purchased consisted principally of purchased software and other intangible
assets. As part of the purchase, HTE also assumed various customer service
liabilities. Additionally, the Company entered into a royalty agreement with Kb
Systems, Inc. for a period of five years. The Company was granted offset rights
against royalty payments due under this agreement. This acquisition was
accounted for as a purchase in the accompanying consolidated financial
statements.
In January 1998, the Company purchased the net assets of JALAN, Inc. for
$1,723. The assets purchased consisted of equipment, furniture and fixtures and
purchased software. As part of the purchase, HTE also assumed various customer
service liabilities. Additionally, the Company entered into a consulting
agreement with the former owners of JALAN, Inc. This acquisition was accounted
for as a purchase in the accompanying consolidated financial statements.
Revenues, net income and earnings per share presented on a pro forma basis, as
if the acquisitions had occurred at the beginning of each period presented, are
as follows (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 23,877 $ 15,919 $ 43,817 $ 32,606
Net income 1,179 78 2,509 2,341
Basic earnings per share $ 0.07 $ 0.01 $ 0.15 $ 0.19
Diluted earnings per share $ 0.07 $ 0.01 $ 0.14 $ 0.19
</TABLE>
POOLING-OF-INTERESTS
On April 1, 1998, the Company purchased privately held Phoenix Systems, LLC
(Phoenix), in exchange for 272,036 shares of the Company's common stock valued
at approximately $3 million on or about the closing date. Phoenix provides a
suite of integrated software products targeted towards school districts
(kindergarten through 12th grade). The acquisition was accounted for as a
pooling-of-interests, although the Company did not restate the results of prior
periods due to the financial immateriality of Phoenix's historical operations.
In connection with the acquisitions of UCS, Inc. (described in Note 1) and
Phoenix, the Company recorded a non-recurring deferred income tax charge of
$339 during the three months ended June 30, 1998. This provision recorded the
deferred tax liability of UCS, Inc. and Phoenix due to changes in tax status on
the acquisition dates for federal income tax reporting purposes.
8
<PAGE> 9
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONTINUED)
5. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires the presentation of certain items previously
shown only in the equity section of the balance sheet as a component of net
income and is effective for fiscal years beginning after December 15, 1997. The
Company adopted SFAS No. 130 in the quarter ended March 31, 1998.
9
<PAGE> 10
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This section of the Report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Discussion containing such forward-looking statements may be found in
Management's Discussion and Analysis of Financial Condition and Results of
Operations under the captions "Comparison of Three Months Ended June 30, 1998
and June 30, 1997," "Comparison of Six Months Ended June 30, 1998 and June 30,
1997," and "Liquidity and Capital Resources." These statements by their nature
involve substantial risks and uncertainties, certain of which are beyond the
Company's control, and actual results for future periods could differ materially
from those discussed in this section depending on a variety of important
factors, among which are the level of acquisition opportunities available to the
Company and the Company's ability to price and negotiate such transactions on a
favorable basis, the ability of the Company to properly manage growth and
successfully integrate acquired companies and operations, the ability of the
Company to respond to technological changes for enhancement of existing products
and development of new products, changes in budgetary and regulatory conditions
in the Company's public sector customers, demand for the Company's products and
changes in the competitive and economic environment generally. A comprehensive
summary of these and other risks and uncertainties can be found in the Company's
filings with the Securities and Exchange Commission from time to time, including
the Company's annual report on Form 10-K for the fiscal year ended December 31,
1997 (File No. 0-22657).
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain revenue, expense and income items:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES
Software licenses 47.1% 35.1% 45.2% 39.9%
Professional services 21.5 25.9 21.6 24.8
Hardware 12.0 18.4 12.5 15.4
Maintenance and other 17.9 20.6 19.1 19.9
Resource management 1.5 0.0 1.6 0.0
--------- --------- --------- --------
Total revenues 100.0 100.0 100.0 100.0
--------- --------- --------- --------
EXPENSES
Cost of software licenses 7.2 8.7 6.9 7.3
Cost of professional services 12.5 15.0 12.7 13.8
Cost of hardware 10.2 13.1 10.0 11.8
Cost of maintenance and other 10.0 9.5 10.0 9.5
Cost of resource management 0.9 0.0 1.1 0.0
Research and development 14.0 13.7 14.2 13.5
Sales and marketing 19.6 18.2 19.0 17.0
General and administrative 14.7 16.8 15.6 17.2
Acquisition related 1.0 0.0 0.5 0.0
Provision for relocation of offices 0.0 2.0 0.0 1.0
--------- --------- --------- --------
Total operating expenses 90.1 97.0 90.0 91.1
--------- --------- --------- --------
INCOME FROM OPERATIONS 9.9 3.0 10.0 8.9
OTHER INCOME (EXPENSES)
Interest 0.5 (0.4) 0.6 (0.4)
--------- --------- --------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES
10.4 2.6 10.6 8.5
TAXES
Deferred tax provision related to acquisitions 1.4 - 0.8 -
Provision for income taxes 4.0 1.1 4.1 2.7
--------- --------- --------- --------
NET INCOME 5.0% 1.5% 5.7% 5.8%
========= ========= ========= ========
</TABLE>
10
<PAGE> 11
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
Comparison of Three Months Ended June 30, 1998 and June 30, 1997 (Amounts in
thousands)
Revenues
The Company's total revenues increased by 58.4% to $23,877 for the three
months ended June 30, 1998, from $15,073 for the three months ended June 30,
1997.
Software License Revenues. Revenues from software licenses increased 112.7%
to $11,242 for the three months ended June 30, 1998, from $5,286 for the three
months ended June 30, 1997. As a percentage of total revenue, software license
revenue increased to 47.1% for the three months ended June 30, 1998, from 35.1%
for the three months ended June 30, 1997. The dollar and percentage increases
resulted primarily from an increased number of applications available for sale
and an increased investment in sales and marketing.
Professional Services Revenues. Revenues from professional services
increased 31.9% to $5,141 for the three months ended June 30, 1998, from $3,898
for the three months ended June 30, 1997. As a percentage of total revenue,
professional services revenue decreased to 21.5% for the three months ended
June 30, 1998, from 25.9% for the three months ended June 30, 1997. The dollar
increase in professional services was directly related to the growth in staff
and related revenue stemming from the increase in license fees and service
offerings. The decrease in professional services revenue as a percentage of
total revenue was primarily due to changes in the mix of products, along with
an increased backlog of services revenue associated with license fee bookings.
The Company expects professional services revenue to increase as a percent of
total revenue as implementation personnel are developed and deployed.
Hardware Revenues. Hardware revenues increased 3.0% to $2,864 for the three
months ended June 30, 1998, from $2,781 for the three months ended June 30,
1997. As a percentage of total revenue, hardware revenue decreased to 12.0% for
the three months ended June 30, 1998, from 18.4% for the three months ended
June 30, 1997. The dollar increase was primarily due to the increased number of
license fee contracts executed. The decrease in hardware revenue as a
percentage of total revenue was primarily due to software licenses growth
exceeding hardware growth.
Maintenance and Other Revenues. Revenues from maintenance and other
increased 37.3% to $4,268 for the three months ended June 30, 1998, from $3,108
for the three months ended June 30, 1997. As a percentage of total revenue,
maintenance and other revenue decreased to 17.9% for the three months ended
June 30, 1998, from 20.6% for the three months ended June 30, 1997. The dollar
increase was primarily due to maintenance contracts associated with new
software licenses, customer system upgrades and price increases in the fees
charged for annual maintenance. The decrease in maintenance and other revenue
as a percentage of total revenue was primarily due to lag time between
installation and sales, which is directly related to the increased backlog of
services revenue associated with license fee bookings.
Resource Management Revenues. Revenues from resource management were $362 or
1.5% of total revenue for the three months ended June 30, 1998. There were no
comparable revenues for the three months ended June 30, 1997 as this division
began operations in the fourth quarter of 1997.
Cost of Revenues
Cost of Software License Revenues. Cost of software licenses includes
third-party royalties and amortization of computer software development costs.
Cost of software licenses increased by 30.7% to $1,707 for the three months
ended June 30, 1998, compared to $1,306 for the three months ended June 30,
1997. As a percentage of software license revenue, cost of software licenses
decreased to 15.2% for the three months ended June 30, 1998, from 24.7% for the
three months ended June 30, 1997. The dollar increase resulted primarily from
an increased number of third party and internal software licenses, specifically
module enhancements such as report writers and imaging products. The decrease
in the cost of software licenses as a percentage of software license revenue
was primarily due to the mix of third party to internal HTE software licensed,
as the growth of internal software licenses exceeded the growth of third party
software licenses.
11
<PAGE> 12
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
Cost of Professional Service Revenues. Cost of professional services
consists primarily of personnel costs and other costs related to the services
business. Cost of professional services increased 31.5% to $2,980 for the three
months ended June 30, 1998, from $2,267 for the three months ended June 30,
1997. As a percentage of professional services revenue, cost of professional
services decreased to 58.0% for the three months ended June 30, 1998, from
58.2% for the three months ended June 30, 1997. The dollar increase was
directly related to increased professional service revenues and expanded
offerings of full service professional services. The percentage remained
relatively unchanged between periods.
Cost of Hardware Revenues. Cost of hardware consists primarily of costs
payable to vendors for hardware. Cost of hardware increased 22.9% to $2,432 for
the three months ended June 30, 1998, from $1,979 for the three months ended
June 30, 1997. As a percentage of hardware revenue, cost of hardware increased
to 84.9% for the three months ended June 30, 1998, from 71.2% for the three
months ended June 30, 1997. The dollar increase was related to the increased
hardware sales and the mix of equipment sold. The increase in the cost of
hardware as a percentage of hardware revenue was primarily due to the higher
volume and smaller size of new contracts signed.
Cost of Maintenance and Other Revenues. Cost of maintenance and other
consists primarily of 7 days a week, 24 hours a day telephone support,
documentation and related administrative and personnel expenses. Cost of
maintenance and other increased 67.3% to 2,399 for the three months ended June
30, 1998, from $1,434 for the three months ended June 30, 1997. As a percentage
of maintenance and other revenue, cost of maintenance and other increased to
56.2% for the three months ended June 30, 1998, from 46.1% for the three months
ended June 30, 1997. The dollar and percentage increases were primarily due to
investment in new customer support processes and increased personnel to enhance
products and support additional clients installed.
Cost of Resource Management Revenues. Cost of resource management was $226
or 62.4% of resource management revenue for the three months ended June 30,
1998. There were no comparable costs for the three months ended June 30, 1997,
as this division began operations in the fourth quarter of 1997.
Research and Development Expenses. Research and development expenses are
comprised primarily of salaries and a portion of the Company's overhead for its
in-house staff and amounts paid to outside consultants to supplement the
product development efforts of its in-house staff. Research and development
expenses increased 61.5% to $3,337 for the three months ended June 30, 1998,
from $2,066 for the three months ended June 30, 1997. As a percentage of total
revenue, research and development increased to 14.0% for the three months ended
June 30, 1998, from 13.7% for the three months ended June 30, 1997. The dollar
and percentage increases were primarily due to increased staffing levels and
expenses for additional software and hardware required for the development of
additional products and platforms.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily
of salaries, commissions, travel related benefits and administrative costs
allocated to the Company's sales and marketing personnel. Sales and marketing
expenses increased 71.3% to $4,684 for the three months ended June 30, 1998,
from $2,735 for the three months ended June 30, 1997. As a percentage of total
revenue, sales and marketing increased to 19.6% for the three months ended June
30, 1998, from 18.2% for the three months ended June 30, 1997. The dollar and
percentage increases were attributable to the Company's continued expansion of
its direct sales force, increased marketing efforts, travel and other expenses
related to increased sales activity.
General and Administrative Expenses. General and administrative expenses
include the costs of corporate operations, finance and accounting, human
resources and other general operations of the Company. General and
administrative expenses increased 38.2% to $3,501 for the three months ended
June 30, 1998, from $2,534 for the three months ended June 30, 1997. As a
percentage of total revenue, general and administrative expenses decreased to
14.7% for the three months ended June 30, 1998, from 16.8% for the three months
ended June 30, 1997. The dollar increase was due to additional staffing,
additional facility related expenses and additional computer equipment and
software required to build the infrastructure to support the Company's growth.
The decrease in general and administrative expenses as a percentage of total
revenue was primarily due to leveraging of existing resources.
12
<PAGE> 13
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
Acquisition Expenses. Acquisition expenses include the non-recurring charges
related to the acquisitions of Phoenix Systems, L.L.C. and UCS, Inc., which
both occurred in the three months ended June 30, 1998. These expenses were $237
or 1.0% of total revenue for the three months ended June 30, 1998. There were
no comparable expenses in the three months ended June 30, 1997.
Provision for Relocation of Offices. Provision for relocation of offices
includes the costs associated with closing two of the Company's Midwest
regional offices and a West Coast regional office and moving its headquarters
20 miles north of its Orlando, Florida location to Lake Mary, Florida, which
occurred in the three months ended June 30, 1997. As a result of the
relocation, the Company incurred non-recurring expenses, including the costs of
reimbursing certain employees for real estate transactions, moving expenses,
severance and moving and dual building costs related to the change in
headquarters location. The expenses were $300 or 2.0% of total revenue for the
three months ended June 30, 1997. There were no comparable expenses in the
three months ended June 30, 1998.
Taxes. The Company's income taxes have been recorded on a quarterly basis
based on the Company's anticipated annual tax rate. However, during the three
months ended June 30, 1998, the Company recorded a non-recurring deferred
income tax charge of $339 in connection with the acquisitions of UCS, Inc. and
Phoenix Systems, L.L.C. This provision recorded the deferred tax liability of
UCS, Inc. and Phoenix due to changes in tax status on the acquisition dates for
federal income tax reporting purposes.
Comparison of Six Months Ended June 30, 1998 and June 30, 1997 (Amounts in
thousands)
Revenues
The Company's total revenues increased by 45.2% to $43,817 for the six months
ended June 30, 1998, from $30,184 for the six months ended June 30, 1997.
Software License Revenues. Revenues from software licenses increased 64.3%
to $19,801 for the six months ended June 30, 1998, from $12,049 for the six
months ended June 30, 1997. As a percentage of total revenue, software license
revenue increased to 45.2% for the six months ended June 30, 1998, from 39.9%
for the six months ended June 30, 1997. The dollar and percentage increases
resulted primarily from an increased number of applications available for sale
and an increased investment in sales and marketing.
Professional Services Revenues. Revenues from professional services
increased 26.1% to $9,454 for the six months ended June 30, 1998, from $7,498
for the six months ended June 30, 1997. As a percentage of total revenue,
professional services revenue decreased to 21.6% for the six months ended June
30, 1998, from 24.8% for the six months ended June 30, 1997. The dollar
increase in professional services was directly related to the growth in staff
and related revenue stemming from the increase in license fees and service
offerings. The decrease in professional services revenue as a percentage of
total revenue was primarily due to changes in the mix of products, along with
an increased backlog of services revenue associated with license fee bookings.
The Company expects professional services revenue to increase as a percent of
total revenue as implementation personnel are developed and deployed.
Hardware Revenues. Hardware revenues increased 18.0% to $5,477 for the six
months ended June 30, 1998, from $4,640 for the six months ended June 30, 1997.
As a percentage of total revenue, hardware revenue decreased to 12.5% for the
six months ended June 30, 1998, from 15.4% for the six months ended June 30,
1997. The dollar increase was primarily due to the increased number of license
fee contracts executed. The decrease in hardware revenue as a percentage of
total revenue was primarily due to software licenses growth exceeding hardware
growth.
13
<PAGE> 14
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
Maintenance and Other Revenues. Revenues from maintenance and other
increased 39.4% to $8,362 for the six months ended June 30, 1998, from $5,997
for the six months ended June 30, 1997. As a percentage of total revenue,
maintenance and other revenue decreased to 19.1% for the six months ended June
30, 1998, from 19.9% for the six months ended June 30, 1997. The dollar
increase was primarily due to maintenance contracts associated with new
software licenses, customer system upgrades and price increases in the fees
charged for annual maintenance. The decrease in maintenance and other revenue
as a percentage of total revenue was primarily due to lag time between
installation and sales, which is directly related to the increased backlog of
services revenue associated with license fee bookings.
Resource Management Revenues. Revenues from resource management were $723 or
1.6% of total revenue for the six months ended June 30, 1998. There were no
comparable revenues for the six months ended June 30, 1997 as this division
began operations in the fourth quarter of 1997.
Cost of Revenues
Cost of Software License Revenues. Cost of software licenses includes
third-party royalties and amortization of computer software development costs.
Cost of software licenses increased by 36.7% to $3,016 for the six months ended
June 30, 1998, compared to $2,207 for the six months ended June 30, 1997. As a
percentage of software license revenue, cost of software licenses decreased to
15.2% for the six months ended June 30, 1998, from 18.3% for the six months
ended June 30, 1997. The dollar increase resulted primarily from an increased
number of third party software licenses, specifically module enhancements such
as report writers and imaging products. The decrease in the cost of software
licenses as a percentage of software license revenue was primarily due to the
mix of third party to internal HTE software licensed, as the growth of internal
software licenses exceeded the growth of third party software licenses.
Cost of Professional Service Revenues. Cost of professional services
consists primarily of personnel costs and other costs related to the services
business. Cost of professional services increased 33.3% to $5,546 for the six
months ended June 30, 1998, from $4,159 for the six months ended June 30, 1997.
As a percentage of professional services revenue, cost of professional services
increased to 58.7% for the six months ended June 30, 1998, from 55.5% for the
six months ended June 30, 1997. The dollar and percentage increases were
directly related to increased professional service revenues and expanded
offerings of full service professional services.
Cost of Hardware Revenues. Cost of hardware consists primarily of costs
payable to vendors for hardware. Cost of hardware increased 22.6% to $4,378 for
the six months ended June 30, 1998, from $3,570 for the six months ended June
30, 1997. As a percentage of hardware revenue, cost of hardware increased to
79.9% for the six months ended June 30, 1998, from 76.9% for the six months
ended June 30, 1997. The dollar increase was related to the increased hardware
sales and the mix of equipment sold. The increase in the cost of hardware as a
percentage of hardware revenue was primarily due to the higher volume and
smaller size of new contracts signed.
Cost of Maintenance and Other Revenues. Cost of maintenance and other
consists primarily of 7 days a week, 24 hours a day telephone support,
documentation and related administrative and personnel expenses. Cost of
maintenance and other increased 52.9% to $4,400 for the six months ended June
30, 1998, from $2,877 for the six months ended June 30, 1997. As a percentage
of maintenance and other revenue, cost of maintenance and other increased to
52.6% for the six months ended June 30, 1998, from 48.0% for the six months
ended June 30, 1997. The dollar and percentage increases were primarily due to
investment in new customer support processes and increased personnel to enhance
products and support additional clients installed.
Cost of Resource Management Revenues. Cost of resource management was $467
or 64.6% of resource management revenue for the six months ended June 30, 1998.
There were no comparable costs for the six months ended June 30, 1997, as this
division began operations in the fourth quarter of 1997.
14
<PAGE> 15
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
Research and Development Expenses. Research and development expenses are
comprised primarily of salaries and a portion of the Company's overhead for its
in-house staff and amounts paid to outside consultants to supplement the
product development efforts of its in-house staff. Research and development
expenses increased 53.2% to $6,226 for the six months ended June 30, 1998, from
$4,064 for the six months ended June 30, 1997. As a percentage of total
revenue, research and development increased to 14.2% for the six months ended
June 30, 1998, from 13.5% for the six months ended June 30, 1997. The dollar
and percentage increases were primarily due to increased staffing levels and
expenses for additional software and hardware required for the development of
additional products and platforms.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily
of salaries, commissions, travel related benefits and administrative costs
allocated to the Company's sales and marketing personnel. Sales and marketing
expenses increased 62.1% to $8,322 for the six months ended June 30, 1998, from
$5,133 for the six months ended June 30, 1997. As a percentage of total
revenue, sales and marketing increased to 19.0% for the six months ended June
30, 1998, from 17.0% for the six months ended June 30, 1997. The dollar and
percentage increases were attributable to the Company's continued expansion of
its direct sales force, increased marketing efforts, travel and other expenses
related to increased sales activity.
General and Administrative Expenses. General and administrative expenses
include the costs of corporate operations, finance and accounting, human
resources and other general operations of the Company. General and
administrative expenses increased 31.6% to $6,826 for the six months ended June
30, 1998, from $5,188 for the six months ended June 30, 1997. As a percentage
of total revenue, general and administrative expenses decreased to 15.6% for
the six months ended June 30, 1998, from 17.2% for the six months ended June
30, 1997. The dollar increase was due to additional staffing, additional
facility related expenses and additional computer equipment and software
required to build the infrastructure to support the Company's growth. The
decrease in general and administrative expenses as a percentage of total
revenue was primarily due to leveraging of existing resources.
Acquisition Expenses. Acquisition expenses include the non-recurring charges
related to the acquisitions of Phoenix Systems, L.L.C. and UCS, Inc., which
both occurred in the six months ended June 30, 1998. These expenses were $237
or 0.5% of total revenue for the six months ended June 30, 1998. There were no
comparable expenses in the six months ended June 30, 1997.
Provision for Relocation of Offices. Provision for relocation of offices
includes the costs associated with closing two of the Company's Midwest
regional offices and a West Coast regional office and moving its headquarters
20 miles north of its Orlando, Florida location to Lake Mary, Florida, which
occurred in the six months ended June 30, 1997. As a result of the relocation,
the Company incurred non-recurring expenses, including the costs of reimbursing
certain employees for real estate transactions, moving expenses, severance and
moving and dual building costs related to the change in headquarters location.
The expenses were $300 or 1.0% of total revenue for the six months ended June
30, 1997. There were no comparable expenses in the six months ended June 30,
1998.
Taxes. The Company's income taxes have been recorded on a quarterly basis
based on the Company's anticipated annual tax rate. However, during the six
months ended June 30, 1998, the Company recorded a non-recurring deferred
income tax charge of $339 in connection with the acquisitions of UCS, Inc. and
Phoenix Systems, L.L.C. This provision recorded the deferred tax liability of
UCS, Inc. and Phoenix due to changes in tax status on the acquisition dates for
federal income tax reporting purposes.
15
<PAGE> 16
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
The Company's revenues and operating results are subject to quarterly and other
fluctuations resulting from a variety of factors, including the effect of
budgeting and purchasing practices of its customers, the length of the customer
evaluation process for the Company's solutions, the timing of customer system
conversions, and the Company's sales practices. Historically, the Company has
achieved its highest income in the fiscal quarter ended March 31 due to the
Company's sales practices. In 1996, the Company implemented a new sales and
marketing program and to conform to industry standards, changed its fiscal year
end to December 31 which the Company believes will moderate such fluctuations.
Because of these changes, the Company believes that historical quarterly
operating data should not be relied upon as an indicator of future performance.
However, the Company has often recognized a substantial portion of its revenues
during the last month of each quarter. Since a significant portion of the
Company's operating expenses is relatively fixed, the Company may not be able
to adjust or reduce spending in response to sales shortfalls or delays. These
factors can cause significant variations in operating results from quarter to
quarter. The Company believes that quarter to quarter comparisons of its
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance.
YEAR 2000 COMPLIANCE
Risks Associated with the Year 2000. Many currently installed computer systems
and software products are coded to accept only two digit entries in the date
code field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates, As a result, in less
than two years, computer systems and software used by many companies will need
to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. There are several aspects to the Year 2000
issues as follows:
Impact on Revenue. The Company believes that the purchasing patterns of
customers and potential customers may be affected by Year 20000 issues in a
variety of ways. Many companies are expending significant resources to correct
or patch their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase software
products such as those offered by the Company. Conversely, Year 2000 issues may
cause other companies to accelerate purchases of software to replace non-year
2000 compliant applications, causing a short-term increase in demand for the
Company's products. There is no assurance that such increase in demand will be
realized. Either of the foregoing could have a material adverse effect upon the
Company's business, operating results and financial condition.
Year 2000 Compliance. The Company believes that the current versions of its
products are Year 2000 compliant. The Company regularly runs regression tests
on its software, including tests of the Year 2000 rollover. Based on the above,
it is not expected that the Company's products will be adversely affected by
date changes in the year 2000. However, there can be no assurance that the
Company's products contain and will contain all features and functionality
considered necessary by customers, distributors, resellers and systems
integrators to be Year 2000 compliant. Notwithstanding the fact that the
Company regularly provides free software upgrades to its customers and the fact
that these newer upgrades are Year 2000 compliant, certain customers of the
Company may still be running earlier, noncompliant versions of the Company's
products. The Company is in the process of informing customers of the need to
migrate to current products that management believes are Year 2000 compliant.
The Company anticipates that generally throughout the software industry
substantial litigation may be brought against software vendors of noncompliant
operating environments. The Company believes that any such claims against the
Company, with or without merit, could have a material adverse effect on the
Company's business, operating results and financial condition.
16
<PAGE> 17
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
Internal Systems. The Company has also reviewed its internal systems for Year
2000 compliance and is in the process of upgrading to Year 2000 compliant
versions from third party software vendors, modifying certain systems, and
planning to replace certain systems with new third party software, which the
Company expects to complete prior to January 1, 2000. In addition to making its
own systems Year 2000 ready, the Company has also begun to contact its key
suppliers and vendors to determine the extent to which the systems of such
suppliers and vendors are Year 2000 compliant and the extent to which the
Company could be affected by the failure of such third parties to be Year 2000
compliant. The Company has appointed its Manager of Quality Assurance to
oversee all activities associated with Year 2000 compliance issues. A standing
committee meets on a monthly basis to review appropriate activities. Management
does not believe that the cost to bring its software products and internal
systems into Year 2000 compliance will have a material adverse effect on the
Company's results of operations or financial condition. However, delays in
upgrading some systems to Year 2000 compliance, or a failure to fully identify
all Year 2000 dependencies in the Company's systems and in the systems of its
suppliers, vendors, and financial institutions could have material adverse
consequences, including delays in the delivery or sale of products.
Expenses Related to Year 2000 Compliance. The Company has not incurred
significant expense in becoming Year 2000 compliant as this has been achieved
as a part of regular upgrades to its internal operating systems. Future costs
related to Year 2000 compliance are not expected to have a material adverse
effect on the Company's results of operations or financial condition.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities totaled $3,185 in the six months ended
June 30, 1998, compared to cash provided of $2,119 in the comparable 1997
period. The decrease in cash provided by operating activities is primarily due
to an increase in accounts receivable partially offset by an increase in
deferred revenue, resulting primarily from growth in both the size and volume
of contracts in 1998. In addition, accounts payable decreased due to the
implementation of faster processing procedures.
Cash used in investing activities (capital expenditures, software development
investments and acquisitions) totaled $3,617 and $1,393 during the six months
ended June 30, 1998 and 1997, respectively. The Company acquired JALAN, Inc. in
January 1998. Additionally, capital expenditures were primarily comprised of
the Company's investments in equipment and related software development costs.
The Company also made significant investments in upgrading internal systems.
Net cash used in financing activities was $901 in the six months ended June 30,
1998, compared to cash provided of $15,780 during the six months ended June 30,
1997. The 1998 period reflects the payment of the due to stockholders on the
books of UCS, Inc., partially offset by the proceeds from the sale of stock in
conjunction with the employee stock purchase plan. The 1997 period reflects the
net proceeds from the initial public offering, offset partially by the
repayment of the line of credit and payment of dividends on the mandatorily
redeemable preferred stock.
The Company believes its cash balances, cash generated from operations and
borrowings available under its line of credit will satisfy the Company's
working capital and capital expenditure requirements for at least the next 12
months. In the longer term, the Company may require additional sources of
liquidity to fund future growth. Such sources of liquidity may include
additional equity offerings or debt financings. In the normal course of
business, the Company evaluates acquisitions of businesses, products and
technologies that complement the Company's business. In December 1997, the
Company purchased the net assets of Kb Systems, Inc. for $400. On January 1,
1998, the Company purchased the net assets of JALAN, Inc. for $1,723. On April
1, 1998, the Company acquired Phoenix Systems, L.L.C. by issuing 272,036 shares
of common stock valued at $3,000 on or about the closing date. On June 1, 1998,
the Company acquired UCS, Inc. by issuing 1,120,000 shares of common stock
valued at $15,000 as of the April 1998 agreement valuation date. Both the
Phoenix Systems, L.L.C. and UCS, Inc. acquisitions were accounted for as
pooling-of-interests.
17
<PAGE> 18
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1998
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the normal course
of business, as both a claimant and a defendant. While it is not possible to
determine with certainty the outcome of these matters, in the opinion of
management, the eventual resolution of these claims and actions outstanding
will not have a material adverse effect on the Company's financial position or
operating results.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) On June 18, 1998 the Company effected a two-for-one stock split. In
connection with the stock split, the Company amended its articles of
incorporation increasing the number of authorized shares of common stock from
25 million to 50 million.
(b) Not applicable.
(c) On April 1, 1998, the Company purchased privately held Phoenix Systems, LLC
(Phoenix) and issued 272,036 shares of the Company's restricted common stock to
Phoenix's two shareholders, valued at approximately $3 million on or about the
closing date. On June 1, 1998, the Company purchased privately held UCS, Inc.
(UCS) and issued 1,120,000 shares of the Company's common stock to UCS
shareholders and optionees valued at approximately $15 million as of the April
1998 agreement valuation date. In each transaction, the shares were issued in
reliance on Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") because the transaction did not involve a public offering,
the sellers were given information about the Company and were afforded an
opportunity to ask questions of the Company's management, the securities were
acquired with investment intent and the certificates bear a legend accordingly.
(d) During the six months ended June 30, 1998, the Company continued to use the
net proceeds of the initial public offering for working capital purposes and
investments which totaled $3,185 and $3,617 respectively.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Number Name
------------ -------------------------------------------------------
3.1 Articles of Amendment to Articles of Incorporation
27.0 Financial Data Schedule (submitted only in electronic
format)
(B) REPORTS ON FORM 8-K
A current report on Form 8-K and amendment thereto were filed by H.T.E.,
Inc. on June 12, 1998 and June 24, 1998, respectively.
18
<PAGE> 19
H.T.E., INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H.T.E., INC.
Date: August 5, 1998
/s/ DENNIS J. HARWARD
-------------------------------------------
Dennis J. Harward
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER)
/s/ SUSAN D. FALOTICO
-------------------------------------------
Susan D. Falotico
VICE PRESIDENT, TREASURER AND
CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL
OFFICER)
19
<PAGE> 20
EXHIBIT INDEX
Number Name
------------ ----------------------------------------------------------
3.1 Articles of Amendment to Articles of Incorporation
27.0 Financial Data Schedule (submitted only in electronic
format)
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF H.T.E., INC.
Pursuant to the provisions of Sections 607.1006 and 607.10025, Florida
Statutes, this corporation adopts the following articles of amendment to its
Articles of Incorporation:
FIRST: The name of this corporation is H.T.E., Inc. (the "Corporation").
SECOND: The Board of Directors adopted resolutions May 13, 1998
approving a division of the Corporation's issued and outstanding common stock,
$.01 par value as set forth in Article Fourth, below.
THIRD: The Board of Directors adopted an amendment to the Corporation's
Articles of Incorporation May 13, 1998, which amendment increases the number of
shares of common stock the Corporation is authorized to issue and which
amendment is set forth under Article Sixth, below (the "Amendment").
FOURTH: The Amendment to the Articles of Incorporation does not adversely
affect the rights or preferences of the holders of outstanding shares of common
stock and does not result in the percentage of authorized shares of common
stock that remain unissued after the stock split exceeding the percentage of
authorized shares of common stock that were unissued before the stock split.
Only shares of the Corporation's Common Stock are issued and outstanding.
FIFTH: Each share of common stock of the par value of $.01 per share
which the Corporation had authority to issue on or before June 8, 1998 (whether
such shares are issued or unissued) shall be changed into and become two shares
of common stock of the par value of $.01 per share. The effective date for the
stock split is June 18, 1998.
SIXTH: Section 2 of Article IV of the Articles of Incorporation is
hereby amended in its entirety as set forth below. Although Section 2 of
Article IV is set forth in its entirety in this Amendment for purposes of
continuity, only the number of authorized shares of common stock, and as a
result, the aggregate number of shares of all classes of stock) are modified
hereby.
"2. Additional Authorized Capital Stock. Upon the
Reclassification as set forth in Article IV Section E, the aggregate
number of shares of all classes of stock which the Corporation shall
have authority to issue is fifty-five million (55,000,000) shares,
consisting solely of:
(i) fifty million (50,000,000) shares of common stock,
par value $0.01 per share (the "New Common Stock");
and
(ii) five million (5,000,000) shares of preferred stock,
par value $0.01 per share (the "New Preferred
Stock").
No shareholder of any stock of the Corporation shall
have preemptive rights. There shall be no cumulative voting by the
shareholders of the Corporation.
<PAGE> 2
(x) Provisions relating to New Preferred Stock.
1. General. The New Preferred Stock may
be issued from time to time in one or more classes or series, the
shares of each class or series to have such designations and powers,
preferences and rights, and qualifications, limitations and
restrictions thereof as are stated and expressed herein and in the
resolution or resolutions providing for the issue of such class or
series adopted by the Board of Directors (the "Board") as hereinafter
prescribed.
2. Preferences. Authority is hereby
expressly granted to and vested in the Board to authorize the
issuance of the New Preferred Stock from time to time in one or more
classes or series, to determine and take necessary proceedings fully
to effect the issuance and redemption of any such New Preferred Stock
and, with respect to each class or series of the New Preferred Stock,
to fix and state, by resolution or resolutions from time to time
adopted providing for the issuance thereof, the following:
(a) whether or not the class or
series is to have voting rights, full or limited, or is to be without
voting rights;
(b) the number of shares to
constitute the class or series and the designations thereof;
(c) the preferences and relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any, with
respect to any class or series;
(d) whether or not the shares of any
class or series shall be redeemable and if redeemable the redemption
price or prices, and the time or times at which and the terms and
conditions upon which, such shares shall be redeemable and the manner
of redemption;
(e) whether or not the shares of a
class or series shall be subject to the operation of retirement or
sinking funds to be applied to the purchase or redemption of such
shares for retirement, and if such retirement or sinking fund or
funds be established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(f) the dividend rate, whether
dividends are payable in cash, stock of the Corporation or other
property, the conditions upon which and the times when such dividends
are payable, the preference to or the relation to the payment of the
dividends payable on any other class or classes or series of stock,
whether or not such dividend shall be cumulative or noncumulative,
and, if cumulative, the date or dates from which such dividends shall
accumulate;
(g) the preferences, if any, and the
amounts thereof that the holders of any class or series thereof shall
be entitled to receive upon the voluntary or involuntary dissolution
of, or upon any distribution of the assets of, the Corporation;
(h) whether or not the shares of any
class or series shall be convertible into, or exchangeable for, the
shares of any other class or classes or of any other series of the
same or any other class or classes of the Corporation and the
conversion price or prices or ratio or ratios or the rate or rates at
which such conversion or exchange may be made, with such adjustments,
if any, as shall be stated and expressed or provided for in such
resolution or resolutions; and
<PAGE> 3
(i) such other special rights and
protective provisions with respect to any class or series as the
Board may deem advisable.
The shares of each class or series of the New Preferred Stock
may vary from the shares of any other class or series thereof in any
or all of the foregoing respects. The Board may increase the number of
shares of New Preferred Stock designated for any existing class or
series by a resolution adding to such class or series authorized and
unissued shares of the New Preferred Stock not designated for any
other class or series. The Board may decrease the number of shares of
the New Preferred Stock designated for any existing class or series by
a resolution, subtracting from such series unissued shares of the New
Preferred Stock designated for such class or series, and the shares so
subtracted shall become authorized, unissued and undesignated shares
of the New Preferred Stock."
SEVENTH: The amendment was adopted by the Corporation's Board of
Directors without shareholder action and shareholder action was not required.
The undersigned officer and member of the Board of Directors of the
Company, by signature below, hereby signifies his approval of these Articles of
Amendment.
SIGNED, this 28th day of May, 1998.
H.T.E., INC.
By: /s/ Jack L. Harward
-------------------------------
Name: Jack L. Harward
Title: Executive Vice President
and a Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF H.T.E., INC. FOR THE SIX MONTHS ENDED JUNE 30, 1998, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,892
<SECURITIES> 0
<RECEIVABLES> 31,257
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,566
<PP&E> 3,876
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,573
<CURRENT-LIABILITIES> 22,160
<BONDS> 0
0
0
<COMMON> 168
<OTHER-SE> 32,948
<TOTAL-LIABILITY-AND-EQUITY> 57,573
<SALES> 0
<TOTAL-REVENUES> 43,817
<CGS> 0
<TOTAL-COSTS> 39,418
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (255)
<INCOME-PRETAX> 4,654
<INCOME-TAX> 2,145
<INCOME-CONTINUING> 2,509
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,509
<EPS-PRIMARY> .15
<EPS-DILUTED> .14
</TABLE>
