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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): December 7, 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, SC (Columbia, SC) 29016 (29202)
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 735-4000
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Item 5. Other Events
On December 7, 1994, Policy Management Systems Corporation
issued the attached press release.
Item 7. Exhibits
Exhibit Number Description
99 Press Release dated December 7, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
POLICY MANAGEMENT SYSTEMS CORPORATION
(Registrant)
Date: December 7, 1994 By: Timothy V. Williams
Executive Vice President
(Chief Financial Officer)
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PMSC ANNOUNCES SETTLEMENT OF CLASS ACTION
AND SPECIAL ADJUSTMENTS
TO FOURTH QUARTER EARNINGS
PMSC announced today that it reached an agreement in
principle, subject to court approval, to settle its securities
class action. The settlement of $31 million will be paid by the
Company's Directors' & Officers' Liability Insurance Carrier, the
Company's former accountants, and the Company. The Company's
portion of the settlement and associated litigation costs will
result in a special one-time charge to fourth quarter earnings of
approximately $33 million ($20.5 million after tax). This
represents the Company's portion of the total settlement, plus the
Company's litigation costs of $17.2 million ($10.8 million after
tax), less the recovery from the insurance company.
In two unrelated matters, the Company also announced
settlement with the Internal Revenue Service over its examination
of the Company's tax returns for the years 1983 through 1990 and
that it will record special non-cash charges principally related to
its information services business. The result of the tax
settlement is a reduction in PMSC's tax liabilities and expense of
$6 million, which will be recorded in the fourth quarter. The
Company has determined that intangible assets related to its
property and casualty information services business acquisitions
and certain software product acquisitions are not recoverable and
should be written off. The after-tax cost of these special non-
cash charges is anticipated to be approximately $25 million and
will also be recorded in the fourth quarter.
- RECAP OF FOURTH QUARTER SPECIAL CHARGES -
(All amounts are after tax)
In millions, except
per share amount
Settlement and associated litigation
costs of $10.8 million, net of
insurance recovery $ 20.5
Write-off of intangible assets and
certain software products 25.0
Settlement of tax audit ( 6.0)
Total special one-time
fourth quarter charges* $ 39.5
Estimated Annual Earnings Per
Share Impact $ (1.89)
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*Represents estimated current and future cash expenditures of
$6.8 million.
Stephen G. Morrison, Executive Vice President and General
Counsel of PMSC, commented regarding the settlement of the
shareholder lawsuit: "We believe that the Company's financial
disclosures were fair, accurate, and complied with all legal
requirements. The Company strongly believes that this class action
was without merit. However, because of potential ongoing costs,
and diversion of management resources associated with this
protracted and already expensive litigation, we believe this
settlement is in the Company's and the shareholders' best
interests. Unfortunately, in today's litigation environment this
type of suit is all too common for high-tech companies whose stock
price can be volatile and settlement generally is the most prudent
course of action."
G. Larry Wilson, Chairman and Chief Executive Officer said,
"It is necessary to write-off intangible assets associated with our
information services businesses; it became clear in this quarter
that the existing investment is simply not recoverable. These
intangible assets arose in connection with acquisitions in the
information services area made in the 1980s. We are also writing
down our investment in certain other acquired software products
that are not recoverable."
"We remain firmly committed to serving the information
services market. We are developing new products and services that
are responsive to the changes in the marketplace. Our new
investments allow us to introduce new products which provide value
to our customers as a result of greater integration of information
with existing customer technology and with PMSC's own technology;
we will build new databases to provide faster and more flexible
services; and, we will continue to respond to customer demand in an
environment with an ever-increasing pace of change," Wilson added.
Wilson continued, "I want to emphasize that this is a non-cash
write-down of intangible assets. No staff reduction is planned and
we are devoting increased management attention to this sector of
our business. The information services business is a strategic
part of our company's plan for the future."
PMSC, headquartered in Columbia, South Carolina, has more than
4,500 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.
