SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one):
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended June 30, 1997
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 Number 000-22841
MARCAM SOLUTIONS, INC.
----------------------
(Exact name of registrant as specified in its charter)
Deleware 04-3371621
- -------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.
95 Wells Avenue, Newton, Massachusetts 02159
- -------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (617) 965-0220
--------------
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 [ ] NO [X]
The number of shares outstanding of the registrant's Common Stock, $.01 Par
Value, as of August 6, 1997, was 7,423,388 shares.
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements
MARCAM SOLUTIONS, INC.
Consolidated Balance Sheets
(In Thousands, Except Par Value)
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and equivalents $ 9,813 $ 21,817
Accounts receivable, net of allowances of $2,835 at
June 30, 1997 and $2,472 at September 30, 1996 45,825 50,602
Prepaid expenses and other current assets 10,800 6,132
-------- --------
Total current assets 66,438 78,551
-------- --------
Property and equipment, net 10,041 10,954
Computer software costs, net 19,125 31,292
MAPICS intangible costs, net 4,981 5,325
Other assets 2,445 6,080
-------- --------
Total assets $103,030 $132,202
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 10,370 $ 13,496
Accrued expenses and other current liabilities 44,935 41,272
Deferred revenue 42,654 39,235
-------- --------
Total current liabilities 97,959 94,003
-------- --------
Long-term debt 25,438 25,764
Deferred income taxes 830 761
--------- --------
Total liabilities 124,227 120,528
--------- --------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $1.00 par value; 1,000 shares authorized Series D
Convertible Preferred Stock, 225 shares issued and
outstanding (liquidation preference of $22,500) 225 225
Series E Convertible Preferred Stock, 100 shares issued and
outstanding (liquidation preference of $10,000) 100 100
Common stock, $.01 par value; 30,000 shares authorized;
11,493 and 11,431 shares issued and outstanding at
June 30, 1997 and September 30, 1996 115 114
Additional paid-in capital 77,577 76,602
Accumulated deficit (98,188) (62,795)
Unamortized deferred compensation - (585)
Cumulative translation adjustment (1,026) (1,987)
-------- --------
Total stockholders' equity (deficit) (21,197) 11,674
--------- --------
Total liabilities and stockholders' equity (deficit) $103,030 $132,202
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
MARCAM SOLUTIONS, INC.
Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
License $ 17,698 $ 24,085 $ 55,782 $ 65,493
Services 26,344 27,099 77,811 83,121
-------- -------- -------- --------
Total revenues 44,042 51,184 133,593 148,614
-------- -------- -------- --------
Operating expenses:
Cost of license revenues 3,967 3,484 12,643 11,870
Cost of services revenues 14,695 17,142 43,813 53,680
Selling and marketing 18,828 21,337 55,585 62,110
Product development 9,637 7,339 25,316 20,966
General and administrative 3,197 2,361 7,513 7,782
Restructuring and other charges 18,535 8,300 18,535 8,300
-------- -------- -------- --------
Total operating expenses 68,859 59,963 163,405 164,708
-------- -------- -------- --------
Operating loss (24,817) (8,779) (29,812) (16,094)
Litigation settlement - - - (3,250)
Interest and other income 79 260 694 1,195
Interest and other expense (1,238) (953) (3,273) (2,890)
-------- -------- -------- --------
Loss before income tax expense (25,976) (9,472) (32,391) (21,039)
Income tax expense 1,001 1,110 3,002 3,151
-------- -------- -------- --------
Net loss $(26,977) $(10,582) $(35,393) $(24,190)
======== ======== ======== =========
Net loss per share $ (2.35) $ (0.93) $ (3.09) $ (2.13)
========= ======== ======== ========
Weighted average number of shares outstanding 11,498 11,429 11,472 11,382
====== ====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
MARCAM SOLUTIONS, INC.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(35,393) $(24,190)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 13,313 11,643
Write-off of computer software costs 11,125 -
Provision for restructuring charge, non-cash portion 280 3,800
Non-cash compensation 313 -
Provision for bad debts 2,036 1,801
Deferred income taxes 69 (533)
Changes in operating assets and liabilities, net of effects
of divestiture:
Accounts receivable 2,110 (114)
Prepaid expenses and other assets (1,949) (1,134)
Accounts payable (2,873) 804
Accrued expenses and other current liabilities 4,504 (4,188)
Deferred revenue 4,565 7,703
-------- --------
Net cash used for operating activities (1,900) (4,408)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (3,285) (4,445)
Additions to computer software costs (7,138) (9,088)
Purchases of short-term investments - (6,909)
Proceeds from sale of short-term investments - 7,954
Proceeds from sale of subsidiary, net of cash divested - (461)
-------- --------
Net cash used for investing activities (10,423) (12,949)
-------- --------
Cash flows from financing activities:
Principal payments on debt and capital lease obligations (318) (312)
Proceeds from stock option exercises 302 611
Common stock issued under Employee Stock Purchase Plan 427 369
-------- --------
Net cash provided by financing activities 411 668
Effect of exchange rate changes on cash and cash equivalents (92) (245)
-------- --------
Net decrease in cash and cash equivalents (12,004) (16,934)
Cash and cash equivalents at beginning of the period 21,817 27,312
-------- --------
Cash and cash equivalents at end of the period $ 9,813 $ 10,378
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
MARCAM SOLUTIONS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Reporting Entity
On July 29, 1997, Marcam Corporation spun off in a tax-free
distribution the portion of its business relating to its PRISM, Protean and
Avantis product lines. In connection with the distribution, Marcam Corporation
transferred to Marcam Solutions, Inc., a new wholly owned subsidiary of Marcam
Corporation ("Marcam Solutions" or the "Company"), substantially all of the
business, assets and liabilities relating to its PRISM, Protean and Avantis
product lines and an aggregate of $39.0 million in cash in exchange for (i) the
assumption by Marcam Solutions of certain liabilities and obligations relating
to the business to be conducted by Marcam Solutions, (ii) a number of shares of
common stock of Marcam Solutions sufficient for Marcam Corporation to make the
distribution and (iii) warrants to purchase an aggregate of 500,000 shares of
common stock of Marcam Solutions. Marcam Corporation distributed all of its
ownership interest in Marcam Solutions by means of a distribution on July 29,
1997 to its stockholders of record on July 23, 1997 (the "Distribution"). In
connection with the Distribution, Marcam Corporation changed its name from
"Marcam Corporation" to "MAPICS, Inc." ("MAPICS").
Although the common stock of Marcam Solutions was distributed to Marcam
Corporation's shareholders, the Distribution is being recorded for accounting
purposes as a disposal of the business conducted by MAPICS, due to the relative
significance of the business conducted by Marcam Solutions. The financial
statements of Marcam Solutions for reporting periods after the Distribution will
reflect the Distribution as a disposal of the business conducted by MAPICS and
will not be restated to remove the effects of the prior operating results of the
MAPICS business. The financial statements of Marcam Solutions for periods prior
to the Distribution correspond to the historical consolidated financial
statements of Marcam Corporation.
(2) Basis of Presentation
The accompanying unaudited consolidated financial statements of Marcam
Solutions in this Form 10-Q have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission (the
"Commission"). As permitted by the rules of the Commission applicable to
quarterly reports on Form 10-Q, these notes are condensed and do not contain all
disclosures required by generally accepted accounting principles. In the opinion
of management, these financial statements contain all adjustments (consisting of
only normal, recurring adjustments) necessary to present fairly the Company's
financial position, results of operations and cash flows as of the dates and for
the periods indicated. While the Company believes that the disclosures presented
are adequate to make these financial statements not misleading, these financial
statements should be read in conjunction with Marcam Corporation's audited
financial statements and related notes included in the Marcam Corporation Annual
Report on Form 10-K for the fiscal year ended September 30, 1996 and the Marcam
Corporation Proxy Statement dated June 16, 1997 for its special meeting of
stockholders held on July 17, 1997.
The results of operations for the three and nine months ended June 30,
1997 are not necessarily indicative of the results to be expected for the full
year.
Certain amounts have been reclassified to conform with the current
period presentation.
5
<PAGE>
(3) Restructuring and Other Charges
1997 charges
During the third fiscal quarter of 1997, the Company's business and
operating expense structure were reviewed to identify opportunities for cost
reductions, and actions were initiated to reduce operating expenses. As a result
of these actions as well as an assessment of capitalized software costs and the
costs associated with the Distribution, the Company recorded restructuring and
other charges totaling $18,535,000 in the quarter. Of this amount, approximately
$1,710,000 related principally to reductions in staffing (approximately 100
employees) throughout the business, except the Protean and Avantis development
organizations; $1,500,000 related to the closure of certain European facilities,
including associated write-offs of property and equipment and lease cancellation
costs; and $1,000,000 related to other restructuring actions.
An additional $11,125,000 of this third quarter charge related to the
write-off of the capitalized software development costs related to the Protean
and Avantis.Pro product lines. This write-off resulted from lower than expected
revenue from these product lines during fiscal 1997 and the continuing
uncertainty regarding market acceptance of, and significant revenue generation
from, these product lines in the near future.
The charge also included the costs of $3,200,000 associated with the
spin-off of Marcam Solutions, Inc. in connection with the Distribution. See Note
1.
Approximately $7,130,000 of the third quarter charges has resulted or is
expected to result in cash expenditures, and the Company expects that nearly all
of the restructuring and other actions will be completed by the end of fiscal
1998.
1996 charges
During the third fiscal quarter of 1996, the Company recorded a
restructuring charge of $8,300,000 related to the Company's divestiture of the
MXP product line, the conversion of certain direct sales operations in Asia
Pacific and Latin America to affiliate distribution channels, and other staffing
reductions in Europe.
The restructuring charge included $4,000,000 associated with the Company's
decision to divest itself of the MXP product line, represented by its Foresight
Software, Inc. subsidiary. The amount represented the net loss incurred in
connection with the disposition of the stock of Foresight Software, Inc. in a
sale, effective June 30, 1996, which closed on July 16, 1996. In exchange for
the stock, the Company received a promissory note, as revised, in the amount of
$1,847,000. Principal payments were due monthly beginning April 1997 and will
continue through June 2001. In addition, the Company may be entitled to
royalties based on the attainment of certain future revenue levels. The Company
is recognizing proceeds from the note and any future royalties as cash payments
are received, due to the uncertainty of collection.
The charge also included $4,300,000 for the conversion of certain direct
sales operations in Asia Pacific and Latin America to affiliate distribution
channels and other staffing reductions in Europe. Components of the charge
comprised approximately $1,600,000 for the severance costs of 60 employees,
$600,000 related to customer commitments, $300,000 related to the write-off of
associated fixed assets, $1,000,000 related to the write-off of associated
capitalized software
6
<PAGE>
translation costs, and $800,000 related to lease cancellations and other costs.
The Company expects that nearly all of the restructuring actions will be
completed by the end of fiscal 1998.
(4) Commitments and Contingencies
The Company is subject to legal proceedings and claims which arise in
the normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will have a material adverse effect on the Company's future
financial position or results of operations.
Pursuant to the tax sharing agreement between Marcam Solutions and
Marcam Corporation (renamed MAPICS, Inc.), Marcam Solutions is generally
responsible for certain state and local non-income taxes and certain foreign
income taxes for periods ending on or before the date of the Distribution.
MAPICS is responsible for all other taxes for such periods, including any taxes
arising out of the Distribution.
(5) Subsequent Events
On July 25, 1997, Marcam Corporation repaid its outstanding 9.82%
Subordinated Notes due 2001 with an aggregate principal amount of $25.0 million
(the "Subordinated Notes"). The repayment resulted in the payment of a penalty
of approximately $1.8 million and the write-off of deferred financing costs of
approximately $1.3 million. These charges will be reflected in the statement of
operations for Marcam Solutions in the fourth fiscal quarter of 1997.
On July 25, 1997, Marcam Corporation's $20.0 million credit facility
was terminated. As of that date, the Company had no available credit facilities
and no borrowings outstanding, other than capital lease obligations.
Prior to the Distribution, Marcam Corporation (renamed MAPICS, Inc.) and
Marcam Solutions entered into various agreements providing for the separation of
the product lines and governing various ongoing relationships between the two
companies, including a distribution agreement, a general services agreement and
a tax sharing agreement.
(6) Supplementary Cash Flow Information
Capital lease obligations of approximately $930,000 were incurred in
the nine-month period ended June 30, 1996, when the Company entered into leases
for new equipment.
(7) Selected Pro Forma Financial Information
The following unaudited pro forma financial information for the three-
and nine-month periods ended June 30, 1997 and 1996 reflects how the disposition
of the MAPICS business (see Note 1) might have affected the statements of
operations if the disposition had occurred on October 1, 1995. The pro forma
financial information is presented as if Marcam Solutions had been operated as a
separate entity, principally by deducting the operating results of MAPICS from
the historical consolidated operating results of Marcam Corporation. The pro
forma data is for informational purposes only and may not necessarily reflect
future results of operations or what the results of operations would have been
had Marcam Solutions been operating as a separate entity.
7
<PAGE>
Pro Forma Results of Operations
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
License $ 5,521 $ 14,276 $ 18,277 $ 35,183
Services 16,524 18,780 49,154 59,458
-------- -------- -------- --------
Total revenues 22,045 33,056 67,431 94,641
-------- -------- -------- --------
Operating expenses:
Cost of license revenues 1,734 2,055 6,281 7,415
Cost of services revenues 11,119 14,210 33,629 45,706
Selling and marketing 10,617 14,198 30,927 41,217
Product development 7,102 5,857 17,812 16,362
General and administrative 2,616 1,809 5,492 6,212
Restructuring and other charges 18,535 8,300 18,535 8,300
-------- -------- -------- --------
Total operating expenses 51,723 46,429 112,676 125,212
-------- -------- -------- --------
Operating loss (29,678) (13,373) (45,245) (30,571)
Other income (expense), net (1,159) (693) (2,579) (4,945)
Income tax expense (861) (1,022) (2,573) (2,794)
-------- -------- -------- --------
Net loss $(31,698) $(15,088) $(50,397) $(38,310)
========= ========= ======== ========
Pro forma net loss per share $ (4.30) $ (2.21) $ (6.85) $ (5.62)
========= ========= ========= ========
Pro forma weighted average number
of shares outstanding (a) 7,374 6,840 7,361 6,816
===== ===== ===== =====
</TABLE>
(a) The calculation of pro forma weighted average number of shares outstanding
includes the weighted average number of common shares outstanding of Marcam
Corporation for the respective periods, adjusted to give effect to the
distribution of one share of Marcam Solutions Common Stock for each two shares
of Marcam Corporation Common Stock and five shares of Marcam Solutions Common
Stock for each share of Marcam Corporation Series D and Series E Preferred Stock
in connection with the Distribution. The calculation does not include the effect
of common equivalent shares from the assumed exercise of stock options and
warrants of Marcam Corporation because their inclusion would be anti-dilutive.
8
<PAGE>
PART I.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
that involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, fluctuations
in quarterly results, particularly resulting from lengthy sales cycles, the
variable size and timing of the Company's transactions with customers and
relatively fixed expenses in the short term; successful development and
enhancement of the Company's products; demand for and market acceptance of the
Company's products; availability of funds for the continued financing of the
Company's operations and development activities; the proportion of revenues
attributable to license fees versus services fees; and the highly competitive
nature of the Company's markets. Further information on potential factors that
could affect the Company's financial results are included in filings made by the
Company from time to time with the Securities and Exchange Commission, including
in the section entitled "Factors Affecting Future Performance" contained in the
Marcam Corporation Annual Report on Form 10-K for the fiscal year ended
September 30, 1996 (0-18674) and the section entitled "Marcam Solutions Risk
Factors" contained in the Marcam Corporation Proxy Statement dated June 16, 1997
for its special meeting of stockholders held on July 17, 1997.
Overview
On July 29, 1997, Marcam Corporation spun off in a tax-free
distribution the portion of its business relating to its PRISM, Protean and
Avantis product lines. In connection with the distribution, Marcam Corporation
transferred to Marcam Solutions, Inc., a new wholly owned subsidiary of Marcam
Corporation ("Marcam Solutions" or the "Company"), substantially all of the
business, assets and liabilities relating to its PRISM, Protean and Avantis
product lines and an aggregate of $39.0 million in cash in exchange for (i) the
assumption by Marcam Solutions of certain liabilities and obligations relating
to the business to be conducted by Marcam Solutions, (ii) a number of shares of
common stock of Marcam Solutions sufficient for Marcam Corporation to make the
distribution and (iii) warrants to purchase an aggregate of 500,000 shares of
common stock of Marcam Solutions. Marcam Corporation distributed all of its
ownership interest in Marcam Solutions by means of a distribution on July 29,
1997 to its stockholders of record on July 23, 1997 (the "Distribution"). In
connection with the Distribution, Marcam Corporation changed its name from
"Marcam Corporation" to "MAPICS, Inc." ("MAPICS").
Although the common stock of Marcam Solutions was distributed to Marcam
Corporation's shareholders, the Distribution is being recorded for accounting
purposes as a disposal of the business conducted by MAPICS, due to the relative
significance of the business conducted by Marcam Solutions. The financial
statements of Marcam Solutions for reporting periods after the Distribution will
reflect the Distribution as a disposal of the business conducted by MAPICS and
will not be restated to remove the effects of the prior operating results of the
MAPICS business. The financial statements of Marcam Solutions for periods prior
to the Distribution correspond to the historical consolidated financial
statements of Marcam Corporation.
9
<PAGE>
Except for the information provided under the caption "Selected Pro
Forma Results of Operations" which gives effect to the Distribution, the
following discussion and analysis includes data relating to the MAPICS product
line. Only the pro forma information reflects Marcam Solutions as if it had been
operated as a separate entity.
Marcam Solutions is a worldwide provider of enterprise applications and
services for manufacturing companies. The Company's products offer comprehensive
business planning and control solutions to customers' production, logistics,
asset management and financial requirements.
The Company's revenues have historically been derived from licensing
its Protean, PRISM, Avantis and MAPICS products. For the first three quarters of
fiscal 1996, the Company also derived revenues from its subsidiary, Foresight
Software, Inc. ("Foresight") and its MXP product line, which was divested
effective as of June 30, 1996. Each of these product lines support different
customers' technology strategies. The Protean products, which utilize advanced
object technology, tools and databases, are platform independent. PRISM and
MAPICS products provide customer solutions implemented on the IBM AS/400. The
Avantis products provide customer solutions implemented on both the IBM AS/400
and open systems, utilizing object technology.
Marcam Solutions also derives revenues from the sale of product support
and related services. Product support is offered to licensed customers generally
based on agreements that are billed annually, with revenues recognized on a pro
rata basis during the contract period. Services include assisting with customer
implementation of licensed software, providing custom programming and system
integration services, and providing educational material and instruction in the
use of licensed software. Services revenues are generally tied to license
revenues and are recognized as the services are delivered.
For the quarter ended June 30, 1997, the Company recorded a net loss of
$26,977,000. The net loss included an operating loss, excluding restructuring
and other charges, of $6,282,000. The Company's revenues for the quarter ended
June 30, 1997 were less than management expected. The expenditures during the
quarter, particularly the continued investment in the product development of
Protean and underutilized channel costs, had been based on expected revenues.
The revenue shortfall, combined with the relatively fixed nature of the expenses
over the short term, resulted in the loss. While the Company's AS/400 based
businesses were profitable overall, these profits were insufficient to cover
losses in Protean due to development and underutilized channel costs.
Management believes that the achievement of profitability and positive
cash flows from operations as soon as possible is essential. Management
currently believes that a combination of cost reductions and increased revenues
is necessary to achieve this result. During the third fiscal quarter of 1997,
the Company's business and operating expense structure were reviewed to identify
opportunities for cost reductions, and actions were initiated to reduce
operating expenses. As a result of these actions as well as an assessment of
capitalized software costs and the costs associated with the Distribution, the
Company recorded restructuring and other charges totaling $18,535,000 in the
third quarter of 1997.
Of this amount, approximately $1,710,000 related principally to
reductions in staffing (approximately 100 employees) throughout the business,
except the Protean and Avantis development organizations; $1,500,000 related to
the closure of certain European facilities, including associated write-offs of
property and equipment and lease cancellation costs; and
10
<PAGE>
$1,000,000 related to other restructuring actions. An additional $11,125,000 of
this third quarter charge related to the write-off of the capitalized software
development costs relating to the Protean and Avantis.Pro product lines. This
write-off resulted from lower than expected revenue from these product lines
during fiscal 1997 and the continuing uncertainty regarding market acceptance
of, and significant revenue generation from, these product lines in the near
future. The charge also included the costs of $3,200,000 associated with the
spin-off of Marcam Solutions, Inc. in connection with the Distribution.
Approximately $7,130,000 of the third quarter restructuring and other charges
has resulted in or is expected to result in cash expenditures, and the Company
expects that nearly all of the restructuring actions will be completed by the
end of fiscal 1998.
In addition to the cost reduction actions initiated in the third
quarter of 1997, the Company has undertaken a number of actions designed to
increase revenues, including introducing enhanced versions of its Protean and
Avantis.Pro products designed to make them more competitive and refocusing its
sales and marketing efforts on the PRISM product line. Management currently
believes that significant increases in Protean license revenues are required to
offset the costs of maintaining the distribution channel and development
activities relating to the Protean product line. There can be no assurances,
however, that these actions will result in increased revenues or that, when
combined with cost reductions, they will result in Marcam Solutions achieving
profitability or positive cash flows from operations. Failure to achieve
profitability or positive cash flows from operations would materially and
adversely affect Marcam Solutions' financial condition.
Results of Operations
Total revenues decreased 14.0% to $44,042,000 from $51,184,000 and
decreased 10.1% to $133,593,000 from $148,614,000 for the three- and nine-month
periods ended June 30, 1997, respectively, as compared to the same periods in
1996. Excluding revenues from the Foresight product line, which was divested
effective as of June 30, 1996, total revenues for the three- and nine-month
periods ended June 30, 1997 decreased 8.3% from $48,047,000 and decreased 2.8%
from $137,470,000, respectively, as compared to the same periods in 1996.
License revenues decreased 26.5% to $17,698,000 from $24,085,000 and decreased
14.8% to $55,782,000 from $65,493,000 for the three- and nine-month periods
ended June 30, 1997, respectively, as compared to the same periods in 1996.
Excluding revenues from the Foresight product line, license revenues for the
three- and nine-month periods ended June 30, 1997 decreased 20.2% from
$22,177,000 and decreased 5.5% from $59,020,000, respectively, as compared to
the same periods in 1996. The decrease in license fee revenues for the three-
and nine-month periods ended June 30, 1997 as compared to the same periods in
1996, was primarily due to lower license revenue of PRISM, Protean and Avantis
which was only partially offset by stronger MAPICS license revenue, particularly
within North America.
Services revenues decreased 2.8% to $26,344,000 from $27,099,000 and
decreased 6.4% to $77,811,000 from $83,121,000 for the three- and nine-month
periods ended June 30, 1997, respectively, as compared to the same periods in
1996. Excluding revenues from the Foresight product line, services revenues for
the three- and nine-month periods ended June 30, 1997 increased 1.8% from
$25,870,000 and decreased 0.8% from $78,450,000, respectively, as compared to
the same periods in 1996. The increase in services revenues for the three-month
period ended June 30, 1997 was primarily due to increased customer support
revenues which were partially offset by decreased implementation consulting and
customization revenues for the PRISM products. The decrease in services revenues
for the nine-month period ended June 30, 1997, was
11
<PAGE>
primarily due to decreased implementation consulting and customization revenues
for the PRISM products which were partially offset by increased customer support
revenues.
Cost of license revenues represented 22.4% and 22.7% of license
revenues for the three- and nine-month periods ended June 30, 1997,
respectively, as compared to 14.5% and 18.1% for the same periods in 1996,
respectively. The increase in cost of license revenues as a percentage of
license revenues for the three- and nine-month periods ended June 30, 1997 as
compared to the same periods in 1996 was due to increased amortization of
capitalized software translation costs relating to non-U.S. markets and
increased amortization of capitalized software development costs related to the
MAPICS and Protean products. The percentage increase is also attributable to the
decrease in license revenues for the three- and nine-month periods ended June
30, 1997 as compared to the same periods in 1996 as well as increased royalty
costs related to MAPICS product line sales as the volume of Solution Partner
products licensed increased for the 1997 periods as compared to the 1996
periods. As discussed above, during the third fiscal quarter of 1997, the
Company wrote off the capitalized software assets related to the Protean and
Avantis.Pro product lines. As a result, the Company expects that amortization
costs in the fourth quarter of fiscal 1997 and in fiscal year 1998 will be lower
than such costs in comparable periods prior to the write-off. See "Overview."
Cost of services revenues represented 55.8% and 56.3% of services
revenues for the three- and nine-month periods ended June 30, 1997,
respectively, as compared to 63.3% and 64.6% for the same periods in 1996,
respectively. The improvement in cost of services revenues as a percentage of
services revenues for the three- and nine-month periods ended June 30, 1997 as
compared to the same periods in 1996 was primarily due to cost savings from
expense control and the restructuring efforts implemented during the second half
of fiscal year 1996 and due to the service revenues of the Foresight product
line having lower gross margins in 1996 than other product lines. The
improvement in cost of services revenues as a percentage of services revenues in
the nine-month period ended June 30, 1997 is also due to a $2,000,000 special
provision for estimated services contract losses which was recorded within the
three-month period ended March 31, 1996.
Selling and marketing expense decreased $2,509,000, or 11.8%, and
$6,525,000, or 10.5%, for the three- and nine-month periods ended June 30, 1997,
respectively, as compared to the same periods in 1996. These decreases were
primarily related to the costs associated with the Foresight product line, which
was divested effective as of June 30, 1996. The decreases related to the
Foresight product line divestiture more than offset the increased marketing
expenditures in 1997 related to the PRISM, Protean, Avantis and MAPICS product
lines.
Gross research and product development expenditures for the three- and
nine-month periods ended June 30, 1997 were $11,576,000 and $32,454,000,
respectively, as compared to $9,851,000 and $30,054,000 for the same periods in
1996, respectively. The increase in gross research and product development
expenses for the three- and nine-months ended June 30, 1997 as compared to the
same periods in 1996 is primarily due to increased development costs for the
MAPICS and Protean product lines partially offset by lower spending to translate
and localize software products for international sale in the nine-months ended
June 30, 1997, and no development costs in 1997 related to the divested
Foresight product line. Development spending for the PRISM product line during
the three- and nine-month periods ended June 30, 1997 was consistent with the
level of spending during the same periods in 1996.
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Computer software costs capitalized were $1,939,000 and $7,138,000 for
the three- and nine-month periods ended June 30, 1997, respectively,
representing 16.8% and 22.0% of gross research and development expenditures,
respectively. Computer software costs capitalized during the three- and
nine-month periods ended June 30, 1996 were $2,512,000 and $9,088,000,
respectively, representing 25.5% and 30.2% of gross research and development
expenditures. The decreases as a percentage of gross expenditures were due
primarily to lower translation efforts in 1997 and a lower amount of software
development expenditure qualifying for capitalization. Additionally, as
discussed above, capitalization of Protean and Avantis.Pro development and
translation costs ceased during the third fiscal quarter of 1997.
Therefore, product development expenses were $9,637,000 and $25,316,000
for the three- and nine-month periods ended June 30, 1997, respectively,
representing 21.9% and 19.0% of total revenues, respectively. For the three- and
nine-month periods ended June 30, 1996, product development expenses were
$7,339,000 and $20,966,000, respectively, representing 14.3% and 14.1% of total
revenues, respectively. The increases for the three- and nine-month periods
ended June 30, 1997, respectively, as compared to the same periods in 1996 were
primarily related to the continuing investment in all of the Company's products
and lower amounts of costs qualifying for capitalization. The percentage
increase is also attributable to the decrease in total revenues for the three-
and nine-month periods ended June 30, 1997 as compared to the same periods in
1996.
General and administrative expenses, which include the Company's
finance, accounting and corporate administrative functions, increased by
$836,000 for the three-months period ended June 30, 1997 and decreased $269,000
for the nine-month period ended June 30, 1997, as compared to the same periods
in 1996. The increase in the three-month period ended June 30, 1997 primarily
related to provisions for non-income taxes, employee compensation charges
related to the separation from the MAPICS business and consulting fees incurred
to review and recommend efficiencies in business processes. The decrease in the
nine-month period ended June 30, 1997 was primarily due to a $1,000,000 special
provision in 1996 for additional contract claims and legal costs, which was
partially offset by the increased charges explained above.
During the third quarter of fiscal 1997, the Company recorded
restructuring and other charges of $18,535,000. See "Overview." During the third
quarter of fiscal 1996, the Company recorded a restructuring charge of
$8,300,000 related to the divestiture of the MXP product line, the conversion of
certain direct sales operations in Asia Pacific and Latin America to affiliate
distribution channels, and other staffing reductions in Europe (see Note 3 to
the Consolidated Financial Statements, included elsewhere herein).
During the second quarter of fiscal 1996, the Company reached an
agreement in principle to settle the shareholder class action litigation which
was brought against the Company in August 1994. Of the $5,750,000 settlement,
the Company contributed $2,750,000 from its own funds, with the remainder
provided by insurance. The Company recorded a charge in the nine-month period
ended June 30, 1996 of $3,250,000 to cover the settlement and other related
expenses.
Interest and other income decreased $181,000 and $501,000 for the
three-and nine-month periods ended June 30, 1997, respectively, as compared to
the same periods in 1996. These decreases were primarily related to less
interest earned on lower cash balances during the 1997 periods as compared to
the 1996 periods.
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Interest and other expense increased $285,000 and $383,000 for the
three-and nine-month periods ended June 30, 1997, respectively, as compared to
the same periods in 1996. These increases were primarily related to foreign
exchange losses and non-income tax expenses.
The income tax expense for the three- and nine-month periods ended June
30, 1997 was $1,001,000 and $3,002,000, respectively. The income tax expense for
the three- and nine-month periods ended June 30, 1996 was $1,110,000 and
$3,151,000, respectively. The expense in each period was primarily due to
foreign withholding taxes and income taxes on income generated in foreign
jurisdictions, for which U.S. tax credit utilization is currently uncertain.
There was no tax benefit recorded for losses generated in the U.S. during these
periods due to the uncertainty of realizing such benefits.
Liquidity and Capital Resources
The Company has funded its activities primarily from cash generated
from operations, from borrowings and from equity financing.
Current assets decreased $12,113,000 at June 30, 1997 to $66,438,000
from $78,551,000 at September 30, 1996. This decrease was primarily due to lower
cash and accounts receivable balances partially offset by higher prepaid
expenses and other current assets. The decrease in cash is attributable to cash
used to fund operating losses, restructuring-related payments and investments in
software development and fixed assets. The decrease in accounts receivable is
primarily due to decreased revenues for the three-month period ended June 30,
1997 as compared to the three-month period ended September 30, 1996. The
increase in prepaid expenses and other current assets is primarily related to
financing costs incurred related to the MAPICS public offering and a
reclassification of certain long-term other assets to current assets due to
their scheduled realization.
Current liabilities increased $3,956,000 at June 30, 1997 to
$97,959,000 from $94,003,000 at September 30, 1996. The increase was primarily
due to the increase in accrued expenses resulting from third fiscal quarter of
1997 restructuring actions as well as the increase in deferred revenue, which
resulted from the annual billing of the majority of the Company's maintenance
contracts. The maintenance contracts period for the PRISM, Protean and Avantis
products is predominantly from January to December, with the billing occurring
in January of every year. The revenues from these maintenance contracts are
deferred and recognized ratably over the contract period. The increase in
accrued expenses and deferred revenues was partially offset by decreases in
accounts payable. As a result of the decrease in current assets and the increase
in current liabilities, the working capital deficit increased by $16,069,000
from a working capital deficit of $15,452,000 at September 30, 1996 to a working
capital deficit of $31,521,000 at June 30, 1997.
During the nine-month period ended June 30, 1997, operating activities
used approximately $1,900,000 of cash for operating expenses, spin-off related
expenditures, and affiliate fees. These uses of cash more than offset cash
received in advance for support services. During the same period, investing
activities used approximately $10,400,000 of cash primarily for the purchase of
fixed assets and expenditures for software development. Financing activities
during the same period provided $400,000 of cash primarily from proceeds
received from the sale of stock to employees, partially offset by payments made
on capitalized leases.
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At June 30, 1997, the Company had outstanding $25.0 million in
aggregate principal amount of 9.82% unsecured Subordinated Notes due April 30,
2001. The $25.0 million Subordinated Notes were repaid on July 25, 1997. See
"Overview." In connection with the repayment, the Company will record charges
totaling approximately $3,100,000 in the fourth fiscal quarter of 1997
associated with the prepayment penalties and the write-off of deferred financing
costs.
In fiscal years 1995 and 1996, the Company recorded restructuring
charges of $28,756,000 and $10,600,000 respectively. At June 30, 1997, a balance
of $1,450,000 associated with these charges remained in accrued expenses and is
expected to result in cash expenditures. Of the third quarter 1997 restructuring
charge, a balance of $3,918,000 associated with this charge remains in accrued
liabilities at June 30, 1997 and is expected to result in cash expenditures.
It is currently expected that quarterly net losses will continue
through at least the third quarter of fiscal 1998 (which ends on June 30, 1998).
There can be no assurance that the Company will be profitable thereafter or that
profitability, if achieved, will be sustained. In order to support the
anticipated growth of its business, the Company expects to keep investing in its
marketing, sales and product development activities. The Company's expenses for
these and other activities are based in significant portion on its expectations
regarding future revenues and are fixed to a large extent in the short term. The
Company may be unable to adjust its spending in a timely manner to compensate
for any unexpected revenue shortfalls.
The Company has used cash during fiscal years 1997, 1996 and 1995 to
fund strategic investments, in particular substantial expenditures for new
product development. For the first three quarters of fiscal 1997 and for fiscal
years 1996 and 1995, the Company's gross product development expenditures were
$32,454,000, $39,913,000, and $41,140,000, respectively. During the remainder of
fiscal year 1997, the Company currently intends to continue to make investments
in product development and may need to continue funding operating losses. The
Company's objective is to fund these investments and any losses primarily with
the $39.0 million capital contribution received in July 1997 from Marcam
Corporation and with cash from improved operations. The Company's timely ability
to generate cash from operations depends upon, among other things, revenue
growth, completion and market acceptance of new products, success in enhancing
and selling its current AS/400-based families of products, improvements in
operating productivity, and payment terms and collection of accounts receivable.
There can be no assurances that the Company's operations will generate
sufficient cash to finance these activities. Until operations improve to meet
its cash requirements, the Company will need to rely on existing cash resources,
including the $39.0 million capital contribution from Marcam Corporation. The
Company currently anticipates that its available cash will be sufficient to fund
operations and other cash needs for the remainder of 1997 and through fiscal
year 1998. If, however, such sources prove insufficient in 1998, or over the
longer term, the Company will be required to make changes in operations or seek
additional debt or equity financing. There can be no assurance that additional
debt or equity financing will be available or available with terms acceptable to
the Company.
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Selected Pro Forma Results of Operations
The following discussion and analysis relates to Marcam Solutions on a
pro forma basis, giving effect to the Distribution. The unaudited pro forma
financial information for the three- and nine-month periods ended June 30, 1997
and 1996 is presented as if Marcam Solutions had been operated as a separate
entity, principally by deducting the operating results of MAPICS from the
historical consolidated operating results of Marcam Corporation. The pro forma
data is for informational purposes only and may not necessarily reflect future
results of operations or what the results of operations would have been had
Marcam Solutions been operating as a separate entity.
Total revenues decreased 33.0% to $22,045,000 from $33,056,000 and
decreased 28.8% to $67,431,000 from $94,641,000 for the three- and nine-month
periods ended June 30, 1997, respectively, as compared to the same periods in
1996. Excluding revenues from the Foresight product line, which was divested
effective as of June 30, 1996, total revenues for the three- and nine-month
periods ended June 30, 1997 decreased 26.3% from $29,919,000 and decreased 19.2%
from $83,497,000, respectively, as compared to the same periods in 1996. License
revenues decreased 61.3% to $5,521,000 from $14,276,000 and decreased 48.1% to
$18,277,000 from $35,183,000 for the three- and nine-month periods ended June
30, 1997, respectively, as compared to the same periods in 1996. Excluding
revenues from the Foresight product line, for the three- and nine-month periods
ended June 30, 1997 license revenues decreased 55.4% from $12,368,000 and
decreased 36.3% from $28,710,000, respectively, as compared to the same periods
in 1996. The decreases in license revenues for the three- and nine-month periods
ended June 30, 1997 as compared to the same periods in 1996 was primarily due to
lower license revenue from the PRISM and Avantis product lines. Protean license
revenue for the three month period ended June 30, 1997 increased slightly over
the same period in the prior year, but decreased during the nine-months ended
June 30, 1997 as compared to the same period in the prior year.
Services revenues decreased 12.0% to $16,524,000 from $18,780,000 and
decreased 17.3% to $49,154,000 from $59,458,000 for the three- and nine-month
periods ended June 30, 1997, respectively, as compared to the same periods in
1996. Excluding revenues from the Foresight product line, services revenues for
the three- and nine-month periods ended June 30, 1997 decreased 6.2% from
$17,551,000 and decreased 11.5% from $54,787,000, respectively, as compared to
the same periods in 1996. The decrease in services revenues for the three- and
nine-month periods ended June 30, 1997 was primarily due to decreased
implementation consulting and customization revenues for the PRISM products.
Cost of license revenues represented 31.4% and 34.3% of license
revenues for the three- and nine-month periods ended June 30, 1997,
respectively, as compared to 14.4% and 21.1% for the same periods in 1996,
respectively. The increase in cost of license revenues as a percentage of
license revenues for the three- and nine-month periods ended June 30, 1997 as
compared to the same periods in 1996 was due to increased amortization of
capitalized software translation costs relating to non-U.S. markets and
increased amortization of capitalized software development costs related to the
Protean products. The percentage increase is also attributable to the decrease
in license revenues for the three- and nine-month periods ended June 30, 1997 as
compared to the same periods in 1996. As discussed above, during the third
fiscal quarter of 1997, the Company wrote off the capitalized software assets
related to the Protean and Avantis.Pro product lines. See "Overview." As a
result, the Company expects that amortization costs in the fourth quarter of
fiscal 1997 and in fiscal year 1998 will be lower than such costs in comparable
periods prior to the write-off.
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Cost of services revenues represented 67.3% and 68.4% of services
revenues for the three- and nine-month periods ended June 30, 1997,
respectively, as compared to 75.7% and 76.9% for the same periods in 1996,
respectively. The improvement in cost of services revenues as a percentage of
services revenues for the three- and nine-month periods ended June 30, 1997 as
compared to the same periods in 1996 was primarily due to cost savings from
expense control and the restructuring efforts implemented during the second half
of fiscal year 1996 and due to the service revenues of the Foresight product
line having lower gross margins in 1996 than other product lines. The
improvement in cost of services revenues as a percentage of services revenues in
the nine-month period ended June 30, 1996 is also due to a $2,000,000 special
provision for estimated services contract losses which was recorded within the
three-month period ended March 31, 1996.
Selling and marketing expense decreased $3,581,000, or 25.2%, and
$10,290,000, or 25.0%, for the three- and nine-month periods ended June 30,
1997, respectively, as compared to the same periods in 1996. These decreases
were primarily related to the costs associated with the Foresight product line,
which was divested effective as of June 30, 1996. The decreases related to the
Foresight product line divestiture more than offset the increased marketing
expenditures in 1997 related to the PRISM, Protean and Avantis product lines.
Gross research and product development expenditures for the three- and
nine-month periods ended June 30, 1997 were $7,673,000 and $21,193,000,
respectively, as compared to $7,071,000 and $20,530,000 for the same periods in
1996, respectively. The increase in gross research and product development
expenses for the three- and nine-months ended June 30, 1997 as compared to the
same periods in 1996 is primarily due to increased development costs for the
Protean product line partially offset by lower spending to translate and
localize software products for international sale in the nine-months ended June
30, 1997, and no development costs in 1997 related to the divested Foresight
product line. Development spending for the PRISM product line during the three-
and nine-month periods ended June 30, 1997 was consistent with the level of
spending during the same periods in 1996.
Computer software costs capitalized were $571,000 and $3,381,000 for
the three- and nine-month periods ended June 30, 1997, respectively,
representing 7.4% and 16.0% of gross research and development expenditures.
Computer software costs capitalized during the three- and nine-month periods
ended June 30, 1996 were $1,214,000 and $4,168,000, respectively, representing
17.2% and 20.3% of gross research and development expenditures, respectively.
The decrease as a percentage of gross expenditures was due primarily to lower
translation efforts in 1997 and a lower amount of software development
expenditure qualifying for capitalization. Additionally, as discussed above,
capitalization of Protean and Avantis.Pro development and translation costs
ceased during the third fiscal quarter of 1997. See "Overview."
Therefore, product development expenses were $7,102,000 and $17,812,000
for the three- and nine-month periods ended June 30, 1997, respectively,
representing 32.2% and 26.4% of total revenues, respectively. For the three- and
nine-month periods ended June 30, 1996, product development expenses were
$5,857,000 and $16,362,000, respectively, representing 17.7% and 17.3% of total
revenues, respectively. The increases for the three- and nine-month periods
ended June 30, 1997, respectively, as compared to the same periods in 1996 were
primarily related to the continuing investment in all of the Company's products
and lower amounts of costs qualifying for capitalization as well as the
discontinuance of capitalization of Protean and Avantis.Pro development costs
during the third fiscal quarter of 1997. The percentage increase is also
attributable
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to the decrease in total revenues for the three- and nine-month periods ended
June 30, 1997 as compared to the same periods in 1996.
General and administrative expenses, which include the Company's
finance, accounting and corporate administrative functions, increased by
$807,000 for the three-months period ended June 30, 1997 and decreased $721,000
for the nine-month period ended June 30, 1997, as compared to the same periods
in 1996. The increase in the three-month period ended June 30, 1997 primarily
related to provisions for non-income taxes, employee compensation charges
related to the separation from the MAPICS business and consulting fees incurred
to review and recommend efficiencies in business processes. The decrease in the
nine-month period ended June 30, 1997 was primarily due to a $1,000,000 special
provision in 1996 for additional contract claims and legal costs, which was
partially offset by the increased charges explained above.
During the third quarter of fiscal 1997, the Company recorded
restructuring and other charges of $18,535,000. See "Overview." During the third
quarter of fiscal 1996, the Company recorded a restructuring charge of
$8,300,000 related to the divestiture of the MXP product line, the conversion of
certain direct sales operations in Asia Pacific and Latin America to affiliate
distribution channels, and other staffing reductions in Europe (see Note 3 to
the Consolidated Financial Statements, included elsewhere herein).
Other expense (net of other income), increased $466,000 and $2,366,000
for the three-and nine-month periods ended June 30, 1997, respectively, as
compared to the same periods in 1996. These increases were primarily related to
less interest earned on lower cash balances during the 1997 periods as compared
to the 1996 periods and higher foreign exchange losses and non-income tax
expenses during the 1997 periods as compared to the 1996 periods. Additionally,
during the second quarter of fiscal 1996, the Company reached an agreement in
principle to settle the shareholder class action litigation which was brought
against the Company in August 1994. Of the $5,750,000 settlement, the Company
contributed $2,750,000 from its own funds, with the remainder provided by
insurance. The Company recorded a charge in the nine-month period ended June 30,
1996 of $3,250,000 to cover the settlement and other related expenses.
The income tax expense for the three- and nine-month periods ended June
30, 1997 was $861,000 and $2,573,000, respectively. The income tax expense for
the three- and nine-month periods ended June 30, 1996 was $1,022,000 and
$2,794,000, respectively. The expense in each period was primarily due to
foreign withholding taxes and income taxes on income generated in foreign
jurisdictions, for which U.S. tax credit utilization is currently uncertain.
There was no tax benefit recorded for losses generated in the U.S. during these
periods due to the uncertainty of realizing such benefits.
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PART II.
ITEM 1. Legal Proceedings
The Company is subject to legal proceedings and claims which arise in
the normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these other legal matters will have a material adverse effect on the Company's
future financial position or results of operations.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Letter Agreement dated June 10, 1997 by and among Marcam Corporation,
Marcam Solutions, Inc. and Michael J. Quinlan
10.2 Form of Letter Agreement dated June 10, 1997 by and among Marcam
Corporation, Marcam Solutions, Inc. and Mssrs. Ebling and Liptak and
Ms. Clark
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
19
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARCAM SOLUTIONS, INC.
August 22, 1997 /s/ Denis E. Liptak
- -------------------- --------------------
Date Denis E. Liptak
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10.1 Letter Agreement dated June 10, 1997 by and among Marcam
Corporation, Marcam Solutions, Inc. and Michael J. Quinlan
10.2 Form of Letter Agreement dated June 10, 1997 by and among Marcam
Corporation, Marcam Solutions, Inc. and Mssrs. Ebling and Liptak
and Ms. Clark
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
Exhibit 10.1
June 10, 1997
Michael J. Quinlan
755 Boylston Street
Boston, MA 02116
Dear Mike:
The Board of Directors (the "Board") of Marcam Corporation (the "Company")
believes that, given the changes to the Company currently being contemplated by
the Board and the possibility that the Company may receive proposals from third
parties with respect to its future, it is important to the Company that your
management and technical skills continue to be available to the Company and that
you be able to assess and advise the Board whether such proposals would be in
the best interests of the Company and its shareholders and to take such other
actions regarding such proposals as the Board might determine to be appropriate.
The Board has therefore authorized this Agreement as a means of assuring you,
during the timeframe contemplated by this Agreement, there will not be any
change in the terms of your employment at the Company. This Agreement is
designed to assure the Company that it will have your continued management
efforts, dedication and the availability of your advice and counsel,
notwithstanding the potential results of the contemplated changes or proposals
from such third parties. The effective date of this Agreement is as set forth
above. In consideration of the foregoing and for other good and valuable
consideration, the Company and you hereby agree as follows:
1. In the event your employment with the Company or any of its subsidiaries or
affiliates is (a) terminated by the Company for any reason other than (i) your
gross dereliction of duty, or (ii) criminal or civil judgment which, in the
Company's or its successor's good faith judgment, renders you unsuitable for
such employment, or (b) terminated by you for Good Reason (as defined below),
then:
a) the Company will pay you as termination compensation, within fifteen
(15) days after such termination, a lump sum equal to (i) one year's
then current base salary, plus (ii) an amount equal to your salary on a
per diem basis for any outstanding vacation earned but not taken
through the date of your termination, plus (iii) any award previously
made to you under your then current bonus plan and not previously paid
to you;
b) the termination date shall be treated as a "qualifying event" under
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
and should you elect continuation of coverage under the Company's
health plans in accordance with COBRA, the Company agrees to pay COBRA
payments for a period of one (1) year from the termination date;
c) notwithstanding any provisions of the Company's 1987 or 1994 Stock
Plans, or of any other incentive stock option plans or non-qualified
stock option plans which may
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subsequently be adopted (collectively, the "Plans") or any agreements
thereunder, all stock options granted to you under the Plans and not
then vested shall in such event and at such time become immediately
vested and exercisable as of the date of termination and the period of
time in which to exercise such options shall be extended through the
balance of the term of the stock option,
d) the Company shall pay your normal post-termination benefits in
accordance with the Company's retirement, insurance and other benefit
plans and arrangements.
In the event you die, become disabled or voluntarily leave the Company
for other than Good Reason as defined below, then your normal compensation will
be provided to you in accordance with the then-current, applicable Company
policies through the date of such termination.
2. For purposes of this Agreement, "Good Reason" shall mean any of the
following:
a) a reduction in the rate of your salary or in some other form of your
compensation or benefits, including failure to continue any incentive
compensation or employee benefit or stock option or purchase plan,
without providing an appropriate substitute therefor of equal value to
you,
b) a substantial adverse change in (i) the nature or scope of your
duties, responsibilities, powers or authority or (ii) your title,
position or status,
c) the relocation by the Company or its successor of your office to
any place outside the thirty (30) mile radius from your present
principal site of employment with the Company,
d) a material breach by the Company or its successor of any
employment, compensation or similar agreement between you and the
Company, or
e) failure of the Company or its successor to give you, within ten
(10) days after your written request therefor, written assurance of
its intention to honor this Agreement.
3. The terms and conditions of the Marcam Corporation Employee Agreement on
Ideas, Inventions, Confidential Information and Non-Competition (the "Employee
Agreement"), or successor agreement, which you signed upon the commencement of
employment shall survive the termination of your employment.
4. In the event of the termination of your employment under the circumstances
described in the lead in to Section 1, the arrangements provided for by this
Agreement, by any stock option or other agreement between the Company or any of
its subsidiaries and you in effect at the time, and by any other applicable plan
of the Company or any of its subsidiaries will constitute the entire obligation
of the Company to you and performance thereof by the Company will constitute
full settlement of any claim that you might otherwise assert against the Company
or any of its subsidiaries on account of such termination. You shall not be
required to mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of payments provided
for in this Agreement be reduced by any compensation earned by
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you as the result of employment by another employer after the termination of
your employment with the Company or one of its subsidiaries.
5. In the event of your voluntary resignation from the Company, the period of
time in which to exercise options which are vested as of the date of such
resignation shall be extended through the balance of the term of such option
grants.
6. This Agreement shall be binding upon and inure to the benefit of the Company
and any successor of the Company. Neither this Agreement nor any rights arising
hereunder may be assigned or pledged by you during your lifetime. This Agreement
shall inure to the benefit of and be enforceable by your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees. If you should die while any amount would still be payable
to you hereunder if you had continued to live other than amounts the payment of
which is by its terms determined with respect to your death, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to your devisee, legatee or other designee or, if there be no
such designee, to your estate.
7. This Agreement may not be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in a writing signed by you and such
officer as may be specifically designated by the Board. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
8. You hereby acknowledge that (i) the Company currently intends to transfer its
business relating to the PRISM, Protean and Avantis product lines to Marcam
Solutions, Inc., a wholly owned subsidiary of the Company ("Marcam Solutions"),
which the Company currently intends to spin off to its stockholders (the "Spin
Off"), and (ii) in connection with the Spin Off, you will become employed by
Marcam Solutions or one of its subsidiaries. The termination of your employment
with the Company, and commencement of your employment with Marcam Solutions or
one of its subsidiaries, in connection with the Spin Off shall not be a
termination of your employment by the Company and its subsidiaries for purposes
of this Agreement. The Company hereby assigns to Marcam Solutions, and Marcam
Solutions hereby assumes from the Company, all of the Company's rights and
obligations under this Agreement, effective as of the completion of the Spin
Off. You hereby consent to such assignment and assumption and, from and after
the completion of the Spin Off, will look only to Marcam Solutions for
performance of this Agreement. From and after the completion of the Spin Off,
all references to the "Company" in this Agreement shall be deemed to refer only
to "Marcam Solutions" and all references to the "Board" in this Agreement shall
be deemed to refer only to the Board of Directors of Marcam Solutions.
If you are in agreement with the foregoing, please so indicate by signing and
returning to the Company the original of this Agreement, whereupon this shall
constitute a binding agreement between you and the Company. The second copy is
for your files.
Very truly yours,
3
<PAGE>
MARCAM CORPORATION
By: /s/ George A. Chamberlain 3d
-----------------------------------
Name: George A. Chamberlain 3d
Title: Chief Financial Officer
MARCAM SOLUTIONS, INC.
By: /s/ George A. Chamberlain 3d
-----------------------------------
Name: George A. Chamberlain 3d
Title: Chief Financial Officer
Agreed:
/s/ Michael J. Quinlan
- ----------------------------
Michael J. Quinlan
4
Exhibit 10.2
June 10, 1997
[Name]
[Address]
[Address]
Dear [Name]:
The Board of Directors (the "Board") of Marcam Corporation (the "Company")
believes that, given the changes to the Company currently being contemplated by
the Board and the possibility that the Company may receive proposals from third
parties with respect to its future, it is important to the Company that your
management and technical skills continue to be available to the Company and that
you be able to assess and advise the Board whether such proposals would be in
the best interests of the Company and its shareholders and to take such other
actions regarding such proposals as the Board might determine to be appropriate.
The Board has therefore authorized this Agreement as a means of assuring you,
during the timeframe contemplated by this Agreement, there will not be any
change in the terms of your employment at the Company. This Agreement is
designed to assure the Company that it will have your continued management
efforts, dedication and the availability of your advice and counsel,
notwithstanding the potential results of the contemplated changes or proposals
from such third parties. The effective date of this Agreement is as set forth
above. In consideration of the foregoing and for other good and valuable
consideration, the Company and you hereby agree as follows:
1. In the event your employment with the Company or any of its subsidiaries or
affiliates is (a) terminated by the Company for any reason other than (i) your
gross dereliction of duty, or (ii) criminal or civil judgment which, in the
Company's or its successor's good faith judgment, renders you unsuitable for
such employment, or (b) terminated by you for Good Reason (as defined below),
then:
a) the Company will pay you as termination compensation, within
fifteen (15) days after such termination, a lump sum equal to (i) one
year's then current base salary, plus (ii) an amount equal to your
salary on a per diem basis for any outstanding vacation earned but not
taken through the date of your termination, plus (iii) any award
previously made to you under your then current bonus plan and not
previously paid to you;
b) the termination date shall be treated as a "qualifying event" under
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
and should you elect continuation of coverage under the Company's
health plans in accordance with COBRA,
1
<PAGE>
the Company agrees to pay COBRA payments for a period of one (1) year
from the termination date;
c) notwithstanding any provisions of the Company's 1987 or 1994 Stock
Plans, or of any other incentive stock option plans or non-qualified
stock option plans which may subsequently be adopted (collectively,
the "Plans") or any agreements thereunder, all stock options granted
to you under the Plans and not then vested shall in such event and at
such time become immediately vested and exerciseable as of the date of
termination and the period of time in which to exercise such options
shall be extended through the balance of the term of the stock option,
d) the Company shall pay your normal post-termination benefits in
accordance with the Company's retirement, insurance and other benefit
plans and arrangements.
In the event you die, become disabled or voluntarily leave the Company
for other than Good Reason as defined below, then your normal compensation will
be provided to you in accordance with the then-current, applicable Company
policies through the date of such termination.
2. For purposes of this Agreement, "Good Reason" shall mean any of the
following:
a) a reduction in the rate of your salary or in some other form of
your compensation or benefits, including failure to continue any
incentive compensation or employee benefit or stock option or purchase
plan, without providing an appropriate substitute therefor of equal
value to you,
b) a substantial adverse change in (i) the nature or scope of your
duties, responsibilities, powers or authority or (ii) your title,
position or status,
c) the relocation by the Company or its successor of your office to
any place outside the thirty (30) mile radius from your present
principal site of employment with the Company,
d) a material breach by the Company or its successor of any
employment, compensation or similar agreement between you and the
Company, or
e) failure of the Company or its successor to give you, within ten
(10) days after your written request therefor, written assurance of
its intention to honor this Agreement.
3. The terms and conditions of the Marcam Corporation Employee Agreement on
Ideas, Inventions, Confidential Information and Non-Competition (the "Employee
Agreement"), or successor agreement, which you signed upon the commencement of
employment shall survive the termination of your employment.
4. In the event of the termination of your employment under the circumstances
described in the lead in to Section 1, the arrangements provided for by this
Agreement, by any stock option or other agreement between the Company or any of
its subsidiaries and you in effect at the time, and by any other applicable plan
of the Company or any of its subsidiaries will constitute the entire
2
<PAGE>
obligation of the Company to you and performance thereof by the Company will
constitute full settlement of any claim that you might otherwise assert against
the Company or any of its subsidiaries on account of such termination. You shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of
payments provided for in this Agreement be reduced by any compensation earned by
you as the result of employment by another employer after the termination of
your employment with the Company or one of its subsidiaries.
5. This Agreement shall be binding upon and inure to the benefit of the Company
and any successor of the Company. Neither this Agreement nor any rights arising
hereunder may be assigned or pledged by you during your lifetime. This Agreement
shall inure to the benefit of and be enforceable by your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees. If you should die while any amount would still be payable
to you hereunder if you had continued to live other than amounts the payment of
which is by its terms determined with respect to your death, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to your devisee, legatee or other designee or, if there be no
such designee, to your estate.
6. This Agreement may not be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in a writing signed by you and such
officer as may be specifically designated by the Board. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
7. You hereby acknowledge that (i) the Company currently intends to transfer its
business relating to the PRISM, Protean and Avantis product lines to Marcam
Solutions, Inc., a wholly owned subsidiary of the Company ("Marcam Solutions"),
which the Company currently intends to spin off to its stockholders (the "Spin
Off"), and (ii) in connection with the Spin Off, you will become employed by
Marcam Solutions or one of its subsidiaries. The termination of your employment
with the Company, and commencement of your employment with Marcam Solutions or
one of its subsidiaries, in connection with the Spin Off shall not be a
termination of your employment by the Company and its subsidiaries for purposes
of this Agreement. The Company hereby assigns to Marcam Solutions, and Marcam
Solutions hereby assumes from the Company, all of the Company's rights and
obligations under this Agreement, effective as of the completion of the Spin
Off. You hereby consent to such assignment and assumption and, from and after
the completion of the Spin Off, will look only to Marcam Solutions for
performance of this Agreement. From and after the completion of the Spin Off,
all references to the "Company" in this Agreement shall be deemed to refer only
to "Marcam Solutions" and all references to the "Board" in this Agreement shall
be deemed to refer only to the Board of Directors of Marcam Solutions.
3
<PAGE>
If you are in agreement with the foregoing, please so indicate by signing and
returning to the Company the original of this Agreement, whereupon this shall
constitute a binding agreement between you and the Company. The second copy is
for your files.
Very truly yours,
MARCAM CORPORATION
By: /s/ George A. Chamberlain 3d
-----------------------------------
Name: George A. Chamberlain 3d
Title: Chief Financial Officer
MARCAM SOLUTIONS, INC.
By: /s/ George A. Chamberlain 3d
-----------------------------------
Name: George A. Chamberlain 3d
Title: Chief Financial Officer
Agreed:
- -----------------------------
[Name]
4
Exhibit 11
MARCAM SOLUTIONS, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET LOSS $(26,977) $ (10,582) $(35,393) $(24,190)
-------- --------- -------- --------
PRIMARY EARNINGS PER SHARE
Common stock:
Shares outstanding from beginning
of period 11,497 11,411 11,431 11,271
Pro rata shares:
Exercise of stock options 1 18 14 87
Sales of common stock under
Employee Stock Purchase Plan - - 27 24
-------- --------- -------- --------
11,498 11,429 11,472 11,382
-------- --------- -------- --------
Net loss per share $ (2.35) $ (0.93) $ (3.09) $ (2.13)
======== ========= ======== ========
FULLY DILUTED EARNINGS PER SHARE
Common stock:
Shares outstanding from beginning
of period 11,497 11,411 11,431 11,271
Pro rata shares:
Exercise of stock options 1 18 14 87
Sales of common stock under
Employee Stock Purchase Plan - - 27 24
-------- --------- -------- --------
11,498 11,407 11,472 11,382
======== ========= ======== ========
Net loss per share $ (2.35) $ (0.93) $ (3.09) $ (2.13)
======== ========= ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,813
<SECURITIES> 0
<RECEIVABLES> 48,660
<ALLOWANCES> 2,835
<INVENTORY> 0
<CURRENT-ASSETS> 66,438
<PP&E> 31,478
<DEPRECIATION> 21,437
<TOTAL-ASSETS> 103,030
<CURRENT-LIABILITIES> 97,959
<BONDS> 25,438
0
325
<COMMON> 115
<OTHER-SE> (21,637)
<TOTAL-LIABILITY-AND-EQUITY> 103,030
<SALES> 55,782
<TOTAL-REVENUES> 133,593
<CGS> 12,643
<TOTAL-COSTS> 56,456
<OTHER-EXPENSES> 43,851
<LOSS-PROVISION> 2,036
<INTEREST-EXPENSE> 3,273
<INCOME-PRETAX> (32,391)
<INCOME-TAX> 3,002
<INCOME-CONTINUING> (35,393)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,393)
<EPS-PRIMARY> (3.09)
<EPS-DILUTED> (3.09)
</TABLE>
