<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, 1999
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 AUGUST 5, 1999
----- --------------------------------
Common stock
Par value $.01 per share 17,372,374
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,955 $ 7,553
Trade accounts receivable, net 39,343 40,635
Income tax receivable 4,277 3,050
Deferred income taxes 485 485
Other current assets 3,610 4,347
-------- --------
Total current assets 52,670 56,070
-------- --------
COMPUTER EQUIPMENT, FURNITURE AND FIXTURES, net 4,089 4,587
-------- --------
OTHER ASSETS
Computer software development costs, net 6,737 6,393
Other intangible assets 3,108 2,498
Deposits 269 283
-------- --------
Total other assets 10,114 9,174
-------- --------
$ 66,873 $ 69,831
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 8,641 $ 11,829
Deferred revenue 23,509 22,163
-------- --------
Total current liabilities 32,150 33,992
-------- --------
LONG-TERM LIABILITIES
Deferred income taxes 2,515 2,515
Other long-term liabilities 482 385
-------- --------
Total long-term liabilities 2,997 2,900
-------- --------
STOCKHOLDERS' EQUITY
Common stock 172 170
Additional paid-in capital 30,362 29,661
Retained earnings 1,226 3,144
Cumulative translation adjustment (34) (36)
-------- --------
Total stockholders' equity 31,726 32,939
-------- --------
$ 66,873 $ 69,831
======== ========
</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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
REVENUES:
Software licenses $ 6,254 $ 11,242 $ 14,823 $ 19,801
Professional services 6,127 5,141 13,700 9,454
Hardware 5,047 2,864 9,092 5,477
Maintenance and other 6,381 4,268 11,943 8,362
Resource management 402 362 835 723
-------- -------- -------- --------
Total revenues 24,211 23,877 50,393 43,817
-------- -------- -------- --------
EXPENSES:
Cost of software licenses 1,703 1,707 3,551 3,016
Cost of professional services 4,083 2,980 8,371 5,546
Cost of hardware 4,160 2,432 7,436 4,378
Cost of maintenance and other 2,344 2,399 4,657 4,400
Cost of resource management 256 226 515 467
Research and development 4,772 3,337 9,098 6,226
Sales and marketing 5,256 4,684 9,908 8,322
General and administrative 4,290 3,501 8,272 6,826
Acquisition related -- 237 -- 237
Employee termination and other costs -- -- 1,809 --
-------- -------- -------- --------
Total expenses 26,864 21,503 53,617 39,418
-------- -------- -------- --------
OPERATING INCOME (LOSS) (2,653) 2,374 (3,224) 4,399
INTEREST INCOME, net 34 111 79 255
-------- -------- -------- --------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME
TAXES (2,619) 2,485 (3,145) 4,654
PROVISION (BENEFIT) FOR INCOME TAXES (1,021) 1,306 (1,227) 2,145
-------- -------- -------- --------
NET INCOME (LOSS) (1,598) 1,179 (1,918) 2,509
Foreign currency translation adjustments 2 (17) 2 (39)
-------- -------- -------- --------
COMPREHENSIVE INCOME (LOSS) $ (1,596) $ 1,162 $ (1,916) $ 2,470
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE:
Basic $ (0.09) $ 0.07 $ (0.11) $ 0.15
======== ======== ======== ========
Diluted $ (0.09) $ 0.07 $ (0.11) $ 0.14
======== ======== ======== ========
PRO FORMA INCOME DATA:
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME
TAXES (2,619) 2,485 (3,145) 4,654
PRO FORMA PROVISION (BENEFIT) FOR INCOME TAXES (1,021) 937 (1,227) 1,756
-------- -------- -------- --------
PRO FORMA NET INCOME (LOSS) $ (1,598) $ 1,548 $ (1,918) $ 2,898
======== ======== ======== ========
PRO FORMA PER SHARE DATA:
PRO FORMA NET INCOME (LOSS) PER SHARE
Basic $ (0.09) $ 0.09 $ (0.11) $ 0.17
======== ======== ======== ========
Diluted $ (0.09) $ 0.09 $ (0.11) $ 0.17
======== ======== ======== ========
</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,
----------------------
1999 1998
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,918) $ 2,509
Adjustments to reconcile net income (loss) to net cash used in
operating activities--
Depreciation and amortization 2,984 2,430
Deferred income taxes -- 335
Changes in operating assets and liabilities--
Decrease (increase) in assets--
Trade accounts receivable, net 1,292 (8,296)
Income tax receivable (1,227) --
Other current assets 737 (1,257)
Deposits 14 (65)
Increase (decrease) in liabilities--
Accounts payable and accrued liabilities (3,288) (797)
Deferred revenue 1,173 1,902
Other liabilities 97 54
------- --------
Net cash used in operating activities (136) (3,185)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (300) (1,194)
Change in restricted cash -- 1,574
Computer software development costs (1,967) (2,205)
Cash paid for acquisitions (900) (1,792)
------- --------
Net cash used in investing activities (3,167) (3,617)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 703 312
Change in due to stockholders -- (1,213)
------- --------
Net cash provided by (used in) financing activities 703 (901)
------- --------
Effect of foreign currency exchange rate changes on cash and cash
equivalents 2 (39)
------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,598) (7,742)
CASH AND CASH EQUIVALENTS, beginning of period 7,553 18,634
------- --------
CASH AND CASH EQUIVALENTS, end of period $ 4,955 $ 10,892
======= ========
SUPPLEMENTAL SCHEDULES OF CASH FLOW INFORMATION:
Cash paid for interest $ 7 $ 5
Cash paid for income taxes -- 2,661
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
4
<PAGE> 5
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(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 condensed
consolidated financial statements should be read in conjunction with the
financial statements for the year ended December 31, 1998, and the notes
thereto, included in the Company's Form 10-K (File No. 0-22657).
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-Bellamy Ltd.
(Bellamy), a Canadian corporation, HTE-Kb Systems, Inc. (Kb Systems), a Florida
corporation, HTE-Jalan, Inc. (Jalan), a Florida corporation, HTE-Phoenix
Systems, Inc. (Phoenix), a Florida corporation, HTE-UCS, Inc. (UCS), a Florida
corporation, HTE-Vanguard Systems, Inc., a Florida corporation, and HTE-IOD,
Inc., 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 UCS,
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. 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.
On February 3, 1999, a regulated privately owned utility corporation filed a
demand for binding arbitration and claim against the Company with the American
Arbitration Association, alleging that the Company had breached certain
contractual duties and obligations. The claim requests a judgment that the
utility corporation is not obligated to the Company for a majority of the
$1,196 paid pursuant to the Software License and Services Agreement and for
other damages to be determined at the arbitration. The Company denied liability
and filed a counterclaim on March 8, 1999, alleging that the utility
corporation breached its contractual duties and obligations under such
agreement. The Company is seeking damages against the utility corporation in
excess of $1,220 and for other damages to be determined at the arbitration.
Management plans to vigorously defend the claim and pursue its counterclaim. In
the opinion of management, the Company will substantially prevail in this
matter on the merits and the ultimate outcome is not expected to materially
affect the financial position of the Company.
5
<PAGE> 6
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONTINUED)
1. LITIGATION (CONTINUED)
On April 9, 1999, a municipality filed demand for binding arbitration and claim
against the Company with the American Arbitration Association, alleging that
the Company had breached certain contractual duties and obligations. The claim
requests a judgment requiring the Company to pay damages for breach of contract
in an amount to be determined at the arbitration. The municipality has demanded
return of $991 paid to the Company. The Company denied liability and filed
counterclaims on May 3, 1999, alleging that: (i) the municipality breached its
contractual duties and obligations under a Hardware Purchase Agreement and a
Software License and Services Agreement with the Company; and (ii) the
municipality breached its duty of good faith and fair dealing with the Company.
The Company is seeking damages against the municipality in excess of $1,800 and
other damages to be determined at the arbitration. Management plans to
vigorously defend the claim and pursue its counterclaims. In the opinion of
management, the Company will substantially prevail in this matter on the merits
and the ultimate outcome is not expected to materially affect the financial
position of the Company.
The Company is a party to some contracts, which may result in financial
penalties in the event of non-performance. Management anticipates that these
penalties will not have a material adverse effect on the Company's financial
position or operating results.
2. 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,
------------------ ------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic weighted-average shares outstanding 17,190 16,816 17,177 16,675
Common shares applicable to stock options using
the treasury stock method -- 855 -- 748
------ ------ ------ ------
Diluted weighted average shares outstanding 17,190 17,671 17,177 17,423
====== ====== ====== ======
</TABLE>
Options to purchase approximately 1.9 million shares were outstanding as of
June 30, 1999, but were not included in the computation of diluted earnings per
share because they are antidilutive. All 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.
Pro forma net income has been presented to reflect tax expense based on
statutory rates for a subsidiary included in the consolidated results of
operations that had previously been taxed as a Subchapter S corporation.
Pro forma basic net income per share has been calculated by dividing pro forma
net income by the weighted average number of common shares outstanding during
the period. Pro forma diluted net income per share was calculated by dividing
pro forma net income by the sum of the weighted average number of common shares
outstanding plus all additional common shares that would have been outstanding
if potentially dilutive common shares had been issued.
6
<PAGE> 7
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONTINUED)
3. BUSINESS COMBINATIONS
PURCHASES
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.
In August 1998, the Company created HTE-Vanguard Systems, Inc., a wholly-owned
subsidiary, which purchased the net assets of Vanguard Management and
Information Systems, Inc. (Vanguard) for $420 in cash. The assets purchased
consisted of accounts receivable, equipment, furniture and fixtures, purchased
software and other intangible assets. As part of the purchase agreement, the
Company also assumed various customer service liabilities. Additionally, the
Company entered into a royalty agreement with Vanguard for approximately five
years and was granted offset rights for royalties due under this agreement of
$63. This acquisition was accounted for as a purchase in the accompanying
consolidated financial statements.
In June 1999, the Company created HTE-IOD, Inc., a wholly-owned subsidiary,
which purchased the net assets of Information On Demand, Inc. for $900 in cash
and an escrow payable of $100. The Company could pay up to an additional $2,000
for the purchase if HTE-IOD, Inc. meets certain financial targets set forth in
the Agreement for Sale and Purchase of Assets. The assets purchased consisted
of developed technology, which was recorded as other intangible assets in the
accompanying consolidated financial statements. As part of the purchase, HTE
also assumed various customer service liabilities. The Company entered into an
employment agreement with the former owner of Information on Demand, Inc., who
will serve as president of HTE-IOD, Inc. This acquisition was accounted for as
a purchase in the accompanying consolidated financial statements.
Revenues, net income and earnings per share presented for the three months and
six months ended June 30, 1999 and 1998, on a pro forma basis, as if the
acquisitions had occurred at the beginning of the applicable period, are as
follows (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $ 24,289 $ 24,031 $ 50,542 $ 44,125
Net income (1,614) 1,201 (1,970) 2,559
Basic earnings per share $ (0.09) $ 0.07 $ (0.11) $ 0.15
Diluted earnings per share $ (0.09) $ 0.07 $ (0.11) $ 0.15
</TABLE>
4. OPERATING SEGMENTS
The Company adopted Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131) in 1998. SFAS 131 establishes standards for reporting information about
operating segments. As this statement pertains to disclosure and informational
requirements, it has no impact on the Company's operating results or financial
position. Although the Company has five operating segments, separate segment
data has not been presented as they meet the criteria set forth in SFAS 131 for
aggregation.
7
<PAGE> 8
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONTINUED)
5. LINE OF CREDIT
In October 1998, the Company replaced a then existing line of credit with a
revolving line of credit of $15.0 million from SunTrust Bank, Central Florida,
National Association (the "Bank"). This line of credit bears interest at LIBOR
plus 1.7 percent and extends through June 30, 2000, at which time the entire
unpaid principal balance and any accrued interest is payable in full.
Borrowings under the line may be made for financing operations and interim
acquisition financing. The line of credit is collateralized by the Company's
assets, including, but not limited to, accounts receivable, general
intangibles, inventory and equipment, and requires the Company to maintain
certain financial ratios. The Company has never borrowed under this line of
credit and based on the Company's cash flow projections, it does not anticipate
a need to borrow funds under the line. However, if the Company did wish to
borrow under this line of credit, prior to such borrowing, the Company would be
required to seek a waiver of one of the financial ratios or renegotiate the
line of credit with the Bank.
6. EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS
During the three months ended March 31, 1999, the Company recorded employee
termination benefits and other costs of $1,809, which include employee
severance packages and termination of unnecessary lease obligations of the
Company. After reviewing its staffing requirements, the Company terminated 52
employees across all areas of the Company. The employee severance package
benefits related to these terminations were $909. As of June 30, 1999, $244 of
employee termination benefits remain accrued in accounts payable and accrued
liabilities. The Company also incurred $482 for the termination of unnecessary
lease obligations of the Company, of which $243 remain accrued at June 30,
1999.
8
<PAGE> 9
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Discussions 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, 1999 and June 30, 1998," "Comparison
of Six Months Ended June 30, 1999 and June 30, 1998," 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, 1998 (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,
--------------------------- -------------------------
1999 1998 1999 1998
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Software licenses 25.8 % 47.1% 29.4 % 45.2%
Professional services 25.3 21.5 27.2 21.6
Hardware 20.8 12.0 18.0 12.5
Maintenance and other 26.4 17.9 23.7 19.1
Resource management 1.7 1.5 1.7 1.6
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
EXPENSES:
Cost of software licenses 7.0 7.2 7.0 6.9
Cost of professional services 16.9 12.5 16.6 12.7
Cost of hardware 17.2 10.2 14.8 10.0
Cost of maintenance and other 9.7 10.0 9.2 10.0
Cost of resource management 1.1 0.9 1.0 1.1
Research and development 19.7 14.0 18.1 14.2
Sales and marketing 21.7 19.6 19.7 19.0
General and administrative 17.7 14.7 16.4 15.6
Acquisition related - 1.0 - 0.5
Employee termination and other costs - - 3.6 -
----- ----- ----- -----
Total operating expenses 111.0 90.1 106.4 90.0
----- ----- ----- -----
OPERATING INCOME (LOSS) (11.0) 9.9 (6.4) 10.0
INTEREST INCOME, net 0.2 0.5 0.2 0.6
----- ----- ----- -----
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES (10.8) 10.4 (6.2) 10.6
PROVISION (BENEFIT) FOR INCOME TAXES (4.2) 5.4 (2.4) 4.9
----- ----- ----- -----
NET INCOME (LOSS) (6.6)% 5.0% (3.8)% 5.7%
===== ===== ===== =====
</TABLE>
9
<PAGE> 10
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
Comparison of Three Months Ended June 30, 1999 and June 30, 1998 (Amounts in
thousands)
Revenues
The Company's total revenues increased by 1% to $24,211 for the three
months ended June 30, 1999, from $23,877 for the three months ended June 30,
1998.
Software License Revenues. Revenues from software licenses decreased
44% to $6,254 for the three months ended June 30, 1999, compared to $11,242 for
the three months ended June 30, 1998. As a percentage of total revenues,
software license revenues decreased to 25.8% for the three months ended June
30, 1999, from 47.1% for the three months ended June 30, 1998. The dollar and
percentage decreases resulted primarily from a general slowdown across the
software industry as businesses, including governments, adopt a "wait and see"
attitude towards Y2K. In addition, the decrease in the percentage resulted from
increased service revenues resulting from an effort to reduce the services
backlog related to 1998 bookings.
Professional Services Revenues. Revenues from professional services
increased 19% to $6,127 for the three months ended June 30, 1999, from $5,141
for the three months ended June 30, 1998. As a percentage of total revenues,
professional services revenues increased to 25.3% for the three months ended
June 30, 1999, from 21.5% for the three months ended June 30, 1998. The dollar
and percentage increases in professional services were directly related to the
growth in revenue generating (billable) staff and related revenue stemming from
the increase in license fees and service offerings in 1998. In addition, the
increase in the percentage is due to the lower software license revenues.
Hardware Revenues. Hardware revenues increased 76% to $5,047 for the
three months ended June 30, 1999, from $2,864 for the three months ended June
30, 1998. As a percentage of total revenues, hardware revenues increased to
20.8% for the three months ended June 30, 1999, from 12.0% for the three months
ended June 30, 1998. The dollar and percentage increases were primarily due to
a larger number of customers who required additional hardware with software
purchases. In addition, the increase in the percentage is due to the lower
software license revenues.
Maintenance and Other Revenues. Revenues from maintenance and other
increased 50% to $6,381 for the three months ended June 30, 1999, from $4,268
for the three months ended June 30, 1998. As a percentage of total revenues,
maintenance and other revenues increased to 26.4% for the three months ended
June 30, 1999, from 17.9% for the three months ended June 30, 1998. The dollar
and percentage increases were primarily due to maintenance contracts associated
with new software licenses booked in 1998, customer system upgrades and price
increases in the fees charged for annual maintenance. In addition, the increase
in the percentage is due to the lower software license revenues.
Resource Management Revenues. Revenues from resource management
increased 11% to $402 for the three months ended June 30, 1999, from $362 for
the three months ended June 30, 1998. As a percentage of total revenues,
resource management revenues remained relatively constant at 1.7% for the three
months ended June 30, 1999, compared to 1.5% for the three months ended June
30, 1998. The dollar increase was primarily related to the sale of additional
services and an annual price increase.
10
<PAGE> 11
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
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 remained relatively constant at $1,703 for the three
months ended June 30, 1999, compared to $1,707 for the three months ended June
30, 1998. As a percentage of software license revenues, cost of software
licenses increased to 27.2% for the three months ended June 30, 1999, from
15.2% for the three months ended June 30, 1998. The increase in the cost of
software licenses as a percentage of software license revenues was primarily
due to sales of third party products related to public safety applications,
which typically carry a higher cost of sale and relatively fixed computer
software development amortization costs with lower software license revenues.
Cost of Professional Services Revenues. Cost of professional services
consists primarily of personnel costs and other costs related to the services
business. Cost of professional services increased 37% to $4,083 for the three
months ended June 30, 1999, from $2,980 for the three months ended June 30,
1998. As a percentage of professional services revenues, cost of professional
services increased to 66.6% for the three months ended June 30, 1999, from
58.0% for the three months ended June 30, 1998. The dollar increase was
directly related to increased professional services revenues and expanded
offerings of full service professional services. The increase in the cost of
professional services as a percentage of professional services revenues is
primarily due to the use of outside consultants, which results in a higher cost
of professional services.
Cost of Hardware Revenues. Cost of hardware consists primarily of
costs payable to vendors for hardware. Cost of hardware increased 71% to $4,160
for the three months ended June 30, 1999, from $2,432 for the three months
ended June 30, 1998. As a percentage of hardware revenues, cost of hardware
decreased to 82.4% for the three months ended June 30, 1999, from 84.9% for the
three months ended June 30, 1998. The dollar increase was related to the
increased hardware sales. The decrease in the cost of hardware as a percentage
of hardware revenues was primarily due to the mix of equipment sold.
Cost of Maintenance and Other Revenues. Cost of maintenance and other
consists of primarily telephone support, documentation and related
administrative and personnel expenses. Cost of maintenance and other decreased
2% to $2,344 for the three months ended June 30, 1999, from $2,399 for the
three months ended June 30, 1998. As a percentage of maintenance and other
revenues, cost of maintenance and other decreased to 36.7% for the three months
ended June 30, 1999, from 56.2% for the three months ended June 30, 1998. The
dollar and percentage decreases were primarily related to more efficient use of
existing resources and improved processes.
Cost of Resource Management Revenues. Cost of resource management
increased 13% to $256 for the three months ended June 30, 1999, from $226 for
the three months ended June 30, 1998. As a percentage of resource management
revenues, cost of resource management increased to 63.7% for the three months
ended June 30, 1999, from 62.4% for the three months ended June 30, 1998. The
dollar and percentage increases were primarily related to costs associated with
additional services.
Research and Development Expenses. Research and development expenses
are comprised primarily of salaries, 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 43% to $4,772 for the three months ended June 30, 1999, from
$3,337 for the three months ended June 30, 1998. As a percentage of total
revenues, research and development increased to 19.7% for the three months
ended June 30, 1999, from 14.0% for the three months ended June 30, 1998. 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. In addition, the increase in the
percentage is due to the lower software license revenues.
11
<PAGE> 12
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
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 12% to $5,256 for the three months ended June 30,
1999, from $4,684 for the three months ended June 30, 1998. As a percentage of
total revenues, sales and marketing increased to 21.7% for the three months
ended June 30, 1999, from 19.6% for the three months ended June 30, 1998. The
dollar and percentage increases were attributable to the Company's increased
marketing efforts, travel and other expenses related to increased sales effort.
In addition, the increase in the percentage is due to the lower software
license revenues.
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 23% to $4,290 for the three months ended June
30, 1999, from $3,501 for the three months ended June 30, 1998. As a percentage
of total revenues, general and administrative expenses increased to 17.7% for
the three months ended June 30, 1999, from 14.7% for the three months ended
June 30, 1998. The dollar and percentage increases were 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. In addition, the increase in the percentage is due to the
lower software license revenues.
Comparison of Six Months Ended June 30, 1999 and June 30, 1998 (Amounts in
thousands)
Revenues
The Company's total revenues increased by 15% to $50,393 for the six
months ended June 30, 1999, from $43,817 for the six months ended June 30,
1998.
Software License Revenues. Revenues from software licenses decreased
25% to $14,823 for the six months ended June 30, 1999, compared to $19,801 for
the six months ended June 30, 1998. As a percentage of total revenues, software
license revenues decreased to 29.4% for the six months ended June 30, 1999,
from 45.2% for the six months ended June 30, 1998. The dollar and percentage
decreases resulted primarily from a general slowdown across the software
industry as businesses, including governments, adopt a "wait and see" attitude
towards Y2K. In addition, the decrease in the percentage resulted from
increased service revenues resulting from an effort to reduce the services
backlog related to 1998 bookings.
Professional Services Revenues. Revenues from professional services
increased 45% to $13,700 for the six months ended June 30, 1999, from $9,454
for the six months ended June 30, 1998. As a percentage of total revenues,
professional services revenues increased to 27.2% for the six months ended June
30, 1999, from 21.6% for the six months ended June 30, 1998. The dollar and
percentage increases in professional services were directly related to the
growth in revenue generating (billable) staff and related revenue stemming from
the increase in license fees and service offerings in 1998. In addition, the
increase in the percentage is due to the lower software license revenues.
Hardware Revenues. Hardware revenues increased 66% to $9,092 for the
six months ended June 30, 1999, from $5,477 for the six months ended June 30,
1998. As a percentage of total revenues, hardware revenues increased to 18.0%
for the six months ended June 30, 1999, from 12.5% for the six months ended
June 30, 1998. The dollar and percentage increases were primarily due to a
larger number of customers who required additional hardware with software
purchases. In addition, the increase in the percentage is due to the lower
software license revenues.
12
<PAGE> 13
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
Maintenance and Other Revenues. Revenues from maintenance and other
increased 43% to $11,943 for the six months ended June 30, 1999, from $8,362
for the six months ended June 30, 1998. As a percentage of total revenues,
maintenance and other revenues increased to 23.7% for the six months ended June
30, 1999, from 19.1% for the six months ended June 30, 1998. The dollar and
percentage increases were primarily due to maintenance contracts associated
with new software licenses booked in 1998, customer system upgrades and price
increases in the fees charged for annual maintenance. In addition, the increase
in the percentage is due to the lower software license revenues.
Resource Management Revenues. Revenues from resource management
increased 15% to $835 for the six months ended June 30, 1999, from $723 for the
six months ended June 30, 1998. As a percentage of total revenues, resource
management revenues remained relatively constant at 1.7% for the six months
ended June 30, 1999, compared to 1.6% for the six months ended June 30, 1998.
The dollar increase was primarily related to the sale of additional services
and an annual price increase.
Cost of Revenues
Cost of Software License Revenues. Cost of software licenses increased
by 18% to $3,551 for the six months ended June 30, 1999, compared to $3,016 for
the six months ended June 30, 1998. As a percentage of software license
revenues, cost of software licenses increased to 24.0% for the six months ended
June 30, 1999, from 15.2% for the six months ended June 30, 1998. The dollar
and percentage increases resulted primarily from an increased number of
third-party software licenses, specifically module enhancements such as report
writers and imaging products and third-party software related to public safety
applications which typically carry a higher cost of sale than other third-party
products. In addition, the percentage increase is also due to relatively fixed
computer software development amortization costs with lower software license
revenues.
Cost of Professional Services Revenues. Cost of professional services
increased 51% to $8,371 for the six months ended June 30, 1999, from $5,546 for
the six months ended June 30, 1998. As a percentage of professional services
revenues, cost of professional services increased to 61.1% for the six months
ended June 30, 1999, from 58.7% for the six months ended June 30, 1998. The
dollar increase was directly related to increased professional services
revenues and expanded offerings of full service professional services. The
increase in the cost of professional services as a percentage of professional
services revenues is primarily due to the use of outside consultants, which
results in a higher cost of professional services.
Cost of Hardware Revenues. Cost of hardware increased 70% to $7,436
for the six months ended June 30, 1999, from $4,378 for the six months ended
June 30, 1998. As a percentage of hardware revenues, cost of hardware increased
to 81.8% for the six months ended June 30, 1999, from 79.9% for the six months
ended June 30, 1998. 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 revenues was primarily due to the higher volume and
smaller size of new contracts signed, which typically results in smaller
hardware margins.
Cost of Maintenance and Other Revenues. Cost of maintenance and other
increased 6% to $4,657 for the six months ended June 30, 1999, from $4,400 for
the six months ended June 30, 1998. As a percentage of maintenance and other
revenues, cost of maintenance and other decreased to 39.0% for the six months
ended June 30, 1999, from 52.6% for the six months ended June 30, 1998. The
dollar increase was primarily due to investment in a new customer interaction
software system and increased personnel to enhance products and support a
larger client base. The decrease in the cost of maintenance and other as a
percentage of maintenance and other revenue was related to more efficient use
of existing resources and improved processes.
13
<PAGE> 14
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
Cost of Resource Management Revenues. Cost of resource management
increased 10% to $515 for the six months ended June 30, 1999, from $467 for the
six months ended June 30, 1998. As a percentage of resource management
revenues, cost of resource management decreased to 61.7% for the six months
ended June 30, 1999, from 64.6% for the six months ended June 30, 1998. The
dollar increase was primarily related to costs associated with additional
services. The decrease in the cost of resource management as a percentage of
resource management revenues was related to the leveraging of existing
resources.
Research and Development Expenses. Research and development expenses
increased 46% to $9,098 for the six months ended June 30, 1999, from $6,226 for
the six months ended June 30, 1998. As a percentage of total revenues, research
and development increased to 18.1% for the six months ended June 30, 1999, from
14.2% for the six months ended June 30, 1998. 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. In addition, the increase in the percentage is due to
the lower software license revenues.
Sales and Marketing Expenses. Sales and marketing expenses increased
19% to $9,908 for the six months ended June 30, 1999, from $8,322 for the six
months ended June 30, 1998. As a percentage of total revenues, sales and
marketing increased to 19.7% for the six months ended June 30, 1999, from 19.0%
for the six months ended June 30, 1998. The dollar and percentage increases
were attributable to the Company's increased marketing efforts, travel and
other expenses related to increased sales effort. In addition, the increase in
the percentage is due to the lower software license revenues.
General and Administrative Expenses. General and administrative
expenses increased 21% to $8,272 for the six months ended June 30, 1999, from
$6,826 for the six months ended June 30, 1998. As a percentage of total
revenues, general and administrative expenses increased to 16.4% for the six
months ended June 30, 1999, from 15.6% for the six months ended June 30, 1998.
The dollar and percentage increases were 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. In
addition, the increase in the percentage is due to the lower software license
revenues.
Employee Termination Benefits and Other Costs. Employee termination
benefits and other costs were $1,809, or 3.6% of total revenues, for the six
months ended June 30, 1999. These costs consist of $909 for employee severance
packages and $482 for termination of unnecessary lease obligations of the
Company. There were no comparable expenses for the six months ended 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. In 1997, 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.
14
<PAGE> 15
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
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 one year, 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 2000 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 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, non-compliant 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 is implementing a uniform process to assist customers in that
migration. The Company has advised customers that the failure to migrate to
current products may result in Year 2000 failure. In addition, the Company has
historically implemented individual customized solutions for certain customers
that are generally jointly administered with those customers. The Company may
not be able to regression test all of these customized solutions; but, to the
extent that regression tests can be done on those individualized solutions, the
Company believes that they are or will be Year 2000 compliant. The Company
anticipates that, generally throughout the software industry, substantial
litigation may be brought against software vendors of non-compliant 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.
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 is continuing 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. The Company
has no contingency plan as such, however, the Company believes it should be
able to identify alternative vendors if the need arises.
15
<PAGE> 16
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
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 $136 and $3,185 during the six
months ended June 30, 1999 and 1998, respectively. The decrease in cash used in
operating activities is primarily due to the decrease in trade accounts
receivable, partially offset by an increase in the income tax receivable and a
decrease in accounts payable and accrued liabilities.
Cash used in investing activities (capital expenditures, software development
investments and acquisitions) totaled $3,167 and $3,617 during the six months
ended June 30, 1999 and 1998, respectively. Capital expenditures were primarily
comprised of the Company's investments in equipment and related software
development costs and the acquisition of Information On Demand, Inc. in June
1999. In 1998, the Company acquired JALAN, Inc. and Vanguard Management and
Information Services, Inc.
Net cash provided by financing activities was $703 during the six months ended
June 30, 1999, compared to net cash used of $901 in the comparable 1998 period.
The 1999 period reflects the proceeds from the sale of common stock in
conjunction with the Company's employee stock purchase plan and the exercise of
options under the Company's executive incentive plan. The 1998 period reflects
the proceeds from the sale of common stock in conjunction with the Company's
employee stock purchase plan, partially offset by the payment of the amounts
due to stockholders related to the UCS acquisition.
The Company believes its cash balances 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. Although the Company has not
borrowed funds under its line of credit and does not anticipate a need to
borrow funds under the line, if the Company should in the future desire to
borrow under the line of credit, the Company would first be required to obtain
a waiver of one of the financial ratios or renegotiate the line of credit. 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. 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. On August 31,
1998, the Company purchased the net assets of Vanguard Management and
Information Systems, Inc. for $420. The letter of intent, dated February 10,
1999, between World Commerce Online, Inc. and the Company automatically
terminated on March 31, 1999, as a definitive agreement was not reached between
the two parties. On June 18, 1999, the Company purchased the net assets of
Information On Demand, Inc. for $1,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No information has been presented pursuant to Item 3 as the Company does not
have any financial instruments outstanding as of June 30, 1999, requiring
market risk disclosure or material foreign currency exposure requiring market
risk disclosure.
16
<PAGE> 17
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
PART II - OTHER INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
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 outstanding claims and actions
will not have a material adverse effect on the Company's financial position or
operating results.
On February 3, 1999, a regulated privately owned utility corporation filed a
demand for binding arbitration and claim against the Company with the American
Arbitration Association, alleging that the Company had breached certain
contractual duties and obligations. The claim requests a judgment that the
utility corporation is not obligated to the Company for a majority of the
$1,196 paid pursuant to the Software License and Services Agreement and for
other damages to be determined at the arbitration. The Company denied liability
and filed a counterclaim on March 8, 1999, alleging that the utility
corporation breached its contractual duties and obligations under such
agreement. The Company is seeking damages against the utility corporation in
excess of $1,220 and for other damages to be determined at the arbitration.
Management plans to vigorously defend the claim and pursue its counterclaim. In
the opinion of management, the Company will substantially prevail in this
matter on the merits and the ultimate outcome is not expected to materially
affect the financial position of the Company.
On April 9, 1999, a municipality filed demand for binding arbitration and claim
against the Company with the American Arbitration Association, alleging that
the Company had breached certain contractual duties and obligations. The claim
requests a judgment requiring the Company to pay damages for breach of contract
in an amount to be determined at the arbitration. The municipality has demanded
return of $991 paid to the Company. The Company denied liability and filed
counterclaims on May 3, 1999, alleging that: (i) the municipality breached its
contractual duties and obligations under a Hardware Purchase Agreement and a
Software License and Services Agreement with the Company; and (ii) the
municipality breached its duty of good faith and fair dealing with the Company.
The Company is seeking damages against the municipality in excess of $1,800 and
other damages to be determined at the arbitration. Management plans to
vigorously defend the claim and pursue its counterclaims. In the opinion of
management, the Company will substantially prevail in this matter on the merits
and the ultimate outcome is not expected to materially affect the financial
position of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) During the six months ended June 30, 1999, the Company continued to use the
net proceeds of the initial public offering for working capital purposes and
investments, which totaled $136 and $3,167 respectively.
17
<PAGE> 18
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On May 12, 1999, the Company held its annual meeting of shareholders
("Annual Meeting").
(b) At the Annual Meeting, the shareholders elected Mr. Dennis J. Harward and
Mr. Bernard B. Markey as directors to hold office until the 2002 Annual
Meeting or until their successors are duly elected and qualified. The other
directors whose term of office continued after the meeting are Jack L.
Harward, Edward A. Moses and O. F. Ramos.
(c) The matters voted on at the Annual Meeting and the number of votes cast
for, against or withheld, as well as the number of abstentions and broker
non-votes as to each such matter are as follows:
1. Election of Two Members to the Board of Directors:
<TABLE>
<S> <C> <C>
Dennis J. Harward Votes For: 10,854,843
----------
Votes Against: -
----------
Votes Withheld: 124,490
----------
Abstentions: -
----------
Broker Non-Votes: -
----------
Bernard B. Markey Votes For: 10,861,845
----------
Votes Against: -
----------
Votes Withheld: 117,488
----------
Abstentions: -
----------
Broker Non-Votes: -
----------
</TABLE>
2. Ratification of the Amendment to the 1997 Employee Stock Purchase Plan:
The shareholders ratified the Amendment to the Company's 1997 Employee
Stock Purchase Plan, designed to increase the number of shares
authorized for issuance thereunder from 400,000 to 600,000 shares.
<TABLE>
<S> <C>
Votes For: 7,054,607
---------
Votes Against: 175,478
---------
Votes Withheld: -
---------
Abstentions: 17,690
---------
Broker Non-Votes: -
---------
</TABLE>
3. Ratification of the Amendment to the 1997 Executive Incentive
Compensation Plan:
The shareholders ratified the Amendment to the Company's 1997 Executive
Incentive Compensation Plan, designed to increase the number of shares
authorized for issuance thereunder from 1,908,000 to 2,908,000 shares.
<TABLE>
<S> <C>
Votes For: 4,838,762
---------
Votes Against: 2,367,852
---------
Votes Withheld: -
---------
Abstentions: 17,982
---------
Broker Non-Votes: -
---------
</TABLE>
There was no other business brought before the Annual Meeting.
18
<PAGE> 19
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Number Name
------ ----
<S> <C>
27.0 Financial Data Schedule (submitted only in electronic format)
</TABLE>
(b) REPORTS ON FORM 8-K
No current reports on Form 8-K were filed during the quarter ended June 30,
1999.
19
<PAGE> 20
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 13, 1999
/s/ Gary E. Kaiser
-----------------------------------------------
Office of the Chief Executive Officer/President
By: Gary E. Kaiser
/s/ Patrick J. Jannotti
-----------------------------------------------
Patrick J. Jannotti
Acting Chief Financial Officer
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Name
- ------ ----
<S> <C>
27.0 Financial Data Schedule (submitted only in electronic format)
</TABLE>
<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, 1999, 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,955
<SECURITIES> 0
<RECEIVABLES> 39,343
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,670
<PP&E> 4,089
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,873
<CURRENT-LIABILITIES> 32,150
<BONDS> 0
0
0
<COMMON> 172
<OTHER-SE> 31,554
<TOTAL-LIABILITY-AND-EQUITY> 66,873
<SALES> 0
<TOTAL-REVENUES> 50,393
<CGS> 0
<TOTAL-COSTS> 53,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (79)
<INCOME-PRETAX> (3,145)
<INCOME-TAX> (1,227)
<INCOME-CONTINUING> (1,918)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,918)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
