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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 22, 1994
POLICY MANAGEMENT SYSTEMS CORPORATION
(Exact name of registrant as specified in Charter)
South Carolina 0-10175 57-0723125
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One PMS Center (P.O. Box Ten)
Blythewood, S.C. (Columbia, S.C.) 29016 (29202)
(Address of principle executive (Zip Code)
offices)
Registrant's telephone number, including area code (803) 735-4000
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Item 5. Other Events
On February 22, 1994, Policy Management Systems Corporation (the
"Company") issued a press release reporting its results of operations for
the six months ended June 30, 1993. A copy of the press release is attached
hereto and incorporated by reference herein.
Item 7. Exhibits
Exhibit Number Description
99 Press Release dated February 22, 1994
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POLICY MANAGEMENT SYSTEMS CORPORATION
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.
POLICY MANAGEMENT SYSTEMS CORPORATION
(Registrant)
Date: February 22, 1994 By: Timothy V. Williams
Executive Vice President
(Chief Financial Officer)
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POLICY MANAGEMENT SYSTEMS CORPORATION
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Pages
99 Press Release dated 5-12
February 22, 1994
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POLICY MANAGEMENT SYSTEMS CORPORATION
CONTACT: Jim O'Brien
Manning, Selvage & Lee
212-213-7005
PMSC COMPLETES AUDIT OF ITS
JUNE 30, 1993 FINANCIAL STATEMENTS
Columbia, South Carolina, February 22, 1994 -- Policy Management
Systems Corporation (NYSE: PMS) today reported that, as a result of
a special audit of its balance sheet as of December 31, 1992, it was
restating its previously reported retained earnings at that date from
$267.7 million to $272.8 million, an increase of $5.1 million
bringing total Stockholders' Equity to $579.1 million as of December
31, 1992. For the six-month period ended June 30, 1993, PMSC
reported revenues of $235.9 million and a net loss, after giving
effect to the charges described below, of $60.4 million ($2.62 per
share). PMSC generated positive cash flow from operations of $38.3
million for the first half of 1993.
The net loss for the six-month period was impacted by various
large special and other unusual charges. PMSC established special
pre-tax impairment and restructuring charges during the six-month
period of $80.7 million (after taxes, $65.0 million or $2.81 per
share) principally related to its health insurance systems business.
Additionally, as previously reported, the Company recorded charges
related to early project terminations, the deductible under the
Company's Directors' and Officers' liability insurance policy in
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response to shareholder litigation, cost overruns on certain projects
and other charges arising from the Company's previously disclosed
internal investigation of its accounting practices. These additional
pre-tax charges aggregate approximately $18.1 million (after taxes
$11.2 million, or $.48 per share).
PMSC stated that it is reporting these results following
completion of a previously announced special audit of PMSC's
financial statements by Coopers & Lybrand. Based on the results of
the audit, PMSC increased its retained earnings as of December 31,
1992 to reflect the prior period, after-tax adjustments summarized
below:
(In Thousands)
- Elimination of revenue related
to a contingent contract that
was cancelled $( 820)
- Deferral of revenues due to changes
in timing of revenue recognition ( 8,408)
- Reduction of expenses due to
capitalization of certain software
costs 18,863
- Recognition of expenses due to
changes in timing of expense
accrual ( 1,622)
- Reserve for losses on certain
services contracts ( 5,536)
- Reduction of current income tax
liability due to previously
unrecorded tax credits 2,580
TOTAL after-tax adjustments $ 5,057
The current uncertainty surrounding the issue of national health
care reform has caused PMSC's health insurance customers to postpone
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their investment in information systems until the ultimate outcome of
reform is clear. As a result, PMSC recorded a pre-tax charge,
principally non-cash, of $80.1 million to reduce the carrying value
of PMSC's health insurance assets and to reserve for the costs of
restructuring this business. The Company also recorded other pre-tax
restructuring charges of $.6 million.
G. Larry Wilson, Chairman of the Board and Chief Executive
Officer of PMSC, stated, "We are pleased that the exhaustive special
audit process covering December 31, 1992 and the first six months of
1993 is now complete. At February 18, 1994, PMSC had over $160
million in cash and marketable securities and approximately $9
million in debt. With our strong balance sheet and the recently
announced changes in our senior management team, we believe PMSC is
well positioned to meet the challenges and opportunities of the
future."
Commenting on current operations, Mr. Wilson said, "The Property
and Casualty Group is performing well and its customer base continues
to expand. We have continued to invest in the development of Series
III systems to meet the growing needs of our customers for client-
server technology. Our Total Policy Management Outsourcing area has
added several important contracts recently. While the changes and
uncertainty created by health care reform proposals continue to
adversely affect the health insurance systems business, we believe
that the restructuring of this group will better enable it to
redirect its strategic focus to a post-reform environment."
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"The Company is pleased with the rapid integration of the
recently acquired CYBERTEK business into our life group. PMSC has
implemented a strategy designed to accelerate the integration of the
CYBERTEK product line with PMSC's Series III platform and
applications," Mr. Wilson added.
Coopers & Lybrand has been engaged to perform 1992 and 1993
audits, and Ernst & Young has agreed to perform procedures to
determine whether it can reissue its audit reports on the 1990 and
1991 financial statements. Previous audit reports covering 1990 and
1991 issued by Ernst & Young and the audit report covering 1992
issued by Arthur Andersen have been withdrawn. These audits and the
audit for the remainder of 1993 will be completed as soon as
possible. When these audits are complete, PMSC intends to file
amended 10-Q's, as necessary, and bring its remaining SEC filings up-
to-date, which will permit the resumption of period-to-period
comparisons of its results of operations.
Mr. Wilson said, "The Company is grateful for the continued
strong support of our customers and long-term investors and for the
dedication of our employees. We are encouraged about the future."
PMSC, headquartered in Columbia, South Carolina, has more than
4,400 employees worldwide and is a leading provider of application
software, related automation support and information services
designed to meet the needs of the global insurance industry.
Financial statements are attached.
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FINANCIAL INFORMATION
POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1993
(In Thousands,
Except Per Share Data)
Revenues:
Licensing..................................... $ 42,955
Services...................................... 192,968
235,923
Costs and Expenses:
Employee compensation and benefits............ 84,255
Computer and communications expenses.......... 20,921
Information services and
data acquisition costs...................... 62,019
Other operating costs and expenses............ 70,143
Impairment and restructuring charges.......... 80,733
318,071
Operating loss.................................. (82,148)
Investment income, net.......................... 7,941
Loss before income tax benefit.................. (74,207)
Income tax benefit.............................. 13,784
Net loss........................................ $(60,423)
Net loss per share.............................. $( 2.62)
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<TABLE>
POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS
(As Restated)
<CAPTION> June 30, December 31,
1993 1992
(In Thousands,
Assets Except Share Data)
<S> <C> <C>
Current assets:
Cash and equivalents..................................................... $ 65,925 $ 31,959
Marketable securities.................................................... 117,634 206,562
Receivables, net of allowance for uncollectible amounts
of $2,697 ($1,630 at 1992)............................................ 91,651 86,684
Income tax receivable.................................................... 17,982 2,891
Deferred income taxes.................................................... 6,757 8,083
Other.................................................................... 9,679 9,659
Total current assets.................................................. 309,628 345,838
Property and equipment..................................................... 142,313 131,696
Receivables................................................................ 6,135 22,252
Intangibles................................................................ 51,152 100,792
Capitalized software costs................................................. 96,710 99,414
Deferred income taxes...................................................... 18,054 2,580
Other...................................................................... 3,188 6,295
Total assets.................................................... $627,180 $708,867
Liabilities
Current liabilities:
Accounts payable and accrued expenses.................................... $ 39,591 $ 36,151
Accrued restructuring and lease termination costs........................ 10,596 -
Accrued contract termination costs....................................... 6,177 5,030
Current portion of long-term debt........................................ 2,867 3,670
Income taxes payable..................................................... 45 -
Unearned revenues........................................................ 8,747 11,361
Other.................................................................... 1,262 3,646
Total current liabilities............................................. 69,285 59,858
Long-term debt............................................................. 5,981 6,001
Deferred income taxes...................................................... 59,645 56,112
Accrued restructuring and lease termination costs.......................... 19,100 -
Other...................................................................... 1,864 7,820
Total liabilities..................................................... 155,875 129,791
Commitments and contingencies (Note 5)
Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares authorized................. - -
Common stock, $.01 par value, 75,000,000 shares authorized,
22,589,792 shares issued and outstanding (23,524,197 at 1992)........... 226 235
Additional paid-in capital................................................. 260,870 307,906
Retained earnings.......................................................... 212,343 272,766
Foreign currency translation adjustment.................................... (2,134) (1,831)
Total stockholders' equity............................................ 471,305 579,076
Total liabilities and stockholders' equity......................... $627,180 $708,867
</TABLE>
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<TABLE>
POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Addi- Foreign
tional Currency
Common Paid-In Retained Translation
Stock Capital Earnings Adjustment Total
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992, as previously reported......... $235 $307,906 $267,709 $(1,831) $574,019
Effect of restatement attributable to
prior years............................................ - - 5,057 - 5,057
Balance, December 31, 1992, as restated.................... 235 307,906 272,766 (1,831) 579,076
Net loss................................................... - - (60,423) - (60,423)
Stock options exercised (21,127 shares).................... - 1,036 - - 1,036
Repurchase of 970,668 shares of common stock............... (9) (48,651) - - (48,660)
Issuance of stock to employee benefit plan (15,136 shares). - 579 - - 579
Foreign currency translation adjustment.................... - - - (303) (303)
Balance, June 30, 1993..................................... $226 $260,870 $212,343 $(2,134) $471,305
</TABLE>
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<TABLE>
POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30, 1993
(In Thousands)
<S> <C>
Operating Activities
Net loss.......................................... $(60,423)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization................... 33,947
Deferred income taxes........................... (13,776)
Gain on sale of marketable securities........... (3,034)
Provision for uncollectible accounts............ 1,067
Impairment charges.............................. 54,890
Changes in assets and liabilities:
Restructuring charges........................... 25,843
Receivables..................................... 10,048
Income tax receivable........................... (13,426)
Accounts payable and accrued expenses........... 4,881
Other, net........................................ (1,670)
Cash provided by operations.................. 38,347
Investing Activities
Proceeds from sales/maturities of marketable
securities, net.................................. 230,849
Purchases of marketable securities, net........... (142,672)
Acquisition of property and equipment............. (32,923)
Capitalized internal software development costs... (11,544)
Purchased software................................ (3,275)
Proceeds from disposal of property and equipment.. 8,935
Business acquisition.............................. (2,840)
Cash provided by investing activities........ 46,530
Financing Activities
Payments on long-term debt........................ (3,678)
Issuance of common stock under stock
option plans..................................... 674
Issuance of common stock to employee benefit plan. 579
Repurchase of outstanding common stock............ (48,660)
Cash used for financing activities........... (51,085)
Effect of exchange rate changes on cash............. 174
Net increase in cash and equivalents................ 33,966
Cash and equivalents at beginning of period......... 31,959
Cash and equivalents at end of period............... $ 65,925
Noncash Activities
Long-term debt arising from and assumed in
connection with business acquisition............. $ 2,987
Supplemental Information
Interest paid..................................... 381
Income taxes paid................................. 11,688
</TABLE>
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