SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 quarterly period ended December 31, 1994
or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from / / to / / .
0-11521
(Commission File Number)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
23-1701520
(I.R.S. Employer Identification No.)
Great Valley Corporate Center
4 Country View Road
Malvern, Pennsylvania 19355
(Address of principal executive offices)
Registrant's telephone number, including area code:
(610) 647-5930
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
12,495,246 Common shares, $.01 par value, as of February 8, 1995
Page 1 of 13 consecutively numbered pages
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1994 and September 30, 1994
Condensed Consolidated Statements of Operations -
Three Months Ended December 31, 1994 and 1993
Condensed Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1994 and 1993
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Operations and Financial Condition
PART II, OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<TABLE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
1994 1994
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $26,338,000 $ 30,537,000
Receivables, including $32,440,000
and $34,640,000 of earned
revenues in excess of billings,
net of allowance for doubtful
accounts of $1,346,000 and
$1,228,000 54,262,000 52,406,000
Prepaid expenses and other receivables 6,556,000 5,124,000
------------ ------------
TOTAL CURRENT ASSETS 87,156,000 88,067,000
PROPERTY AND EQUIPMENT--net of
accumulated depreciation 20,474,000 20,002,000
CAPITALIZED COMPUTER SOFTWARE COSTS,
net of accumulated amortization
3,209,000 3,003,000
COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED, net of accumulated
amortization 6,710,000 6,812,000
COVENANTS-NOT-TO-COMPETE, net of
accumulated amortization 2,601,000 2,541,000
OTHER ASSETS AND DEFERRED CHARGES 8,186,000 8,384,000
------------ ------------
TOTAL ASSETS $128,336,000 $128,809,000
============ ============
<FN>
(continued on next page . . . .)
</FN>
</TABLE>
<PAGE>
<TABLE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
1994 1994
(UNAUDITED) (NOTE)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,070,000 $ 3,660,000
Income taxes payable 442,000 985,000
Accrued expenses 8,860,000 10,097,000
Deferred revenue 12,165,000 14,086,000
------------ ------------
TOTAL CURRENT LIABILITIES 24,537,000 28,828,000
LONG-TERM DEBT, less current portion 35,015,000 34,500,000
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per
share--authorized 3,000,000 shares,
none issued
Common stock, par value $.01 per share-
authorized 24,000,000 shares, issued
13,637,804 and 13,581,235 shares 136,000 136,000
Capital in excess of par value 41,183,000 40,869,000
Retained earnings 30,481,000 27,510,000
------------ ------------
71,800,000 68,515,000
Less
Held in treasury, 1,150,941 common
shares--at cost (2,959,000) (2,959,000)
Unearned compensation (57,000) (75,000)
------------ ------------
68,784,000 65,481,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $128,336,000 $128,809,000
============ ============
<FN>
Note: The condensed consolidated balance sheet at September 30, 1994 has
been derived from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Three Months Ended
December 31,
1994 1993
<S> <C> <C>
REVENUES:
OnSite services $15,753,000 $15,185,000
Software and hardware sales and services 14,725,000 9,563,000
Maintenance and enhancements 8,258,000 7,344,000
Interest and other revenue 463,000 301,000
----------- -----------
39,199,000 32,393,000
EXPENSES:
Cost of OnSite services 11,974,000 11,761,000
Cost of software and hardware sales
and services and maintenance
and enhancements 12,132,000 9,022,000
Selling, general and administrative 9,863,000 7,999,000
Interest expense 624,000 630,000
----------- -----------
34,593,000 29,412,000
Income before income taxes 4,606,000 2,981,000
Provision for federal and state
income taxes 1,635,000 1,014,000
----------- -----------
Net Income $ 2,971,000 $ 1,967,000
=========== ===========
Per common share:
Net income
Primary $ 0.22 $ 0.15
Fully diluted $ 0.21 $ 0.15
Common shares and equivalents outstanding
Primary 13,650,439 13,392,845
Fully diluted 15,950,439 13,392,845
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the Three Months Ended
December 31,
1994 1993
<S> <S> <S>
OPERATING ACTIVITIES
Net income $ 2,971,000 $ 1,967,000
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation and amortization 2,026,000 1,621,000
Changes in operating assets and
liabilities:
(Increase) in receivables (2,092,000) (1,437,000)
(Increase) in other current assets (1,432,000) (903,000)
(Decrease) in other accrued expenses
and liabilities (1,337,000) (457,000)
(Decrease) in deferred revenue (1,921,000) (2,561,000)
Other, net (874,000) (741,000)
------------ ------------
NET CASH (USED IN) OPERATING ACTIVITIES (2,659,000) (2,511,000)
INVESTING ACTIVITIES
Purchase of property and equipment (1,038,000) (771,000)
Capitalized computer software costs (432,000) (187,000)
(Increase) in short-term investments - - (13,788,000)
Proceeds from sale or maturity of
investments held as available for sale 5,082,000 - -
Purchase of investments held as available
for sale (2,228,000) - -
Purchase of IntelliSource assets (400,000) - -
------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 984,000 (14,746,000)
FINANCING ACTIVITIES
Proceeds from exercise of stock options 314,000 811,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 314,000 811,000
(DECREASE) IN CASH & CASH EQUIVALENTS (1,361,000) (16,446,000)
CASH & CASH EQUIVALENTS-BEGINNING OF PERIOD 7,685,000 29,522,000
------------ ------------
CASH & CASH EQUIVALENTS-END OF PERIOD $ 6,324,000 $13,076,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 1994
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 1O-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended September 30, 1994.
Operating results for the three month period ended December 31, 1994 are
not necessarily indicative of the results that may be expected for the
year ending September 30, 1995.
NOTE A--RECLASSIFICATION
Certain prior year information has been reclassified to conform with
current year format.
NOTE B--CASH AND SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
Dec. 31, 1994 Sep. 30, 1994
<S> <C> <C>
Cash and cash equivalents $ 6,324,000 $ 7,685,000
Short-term investments, plus
accrued interest of $113,000
and $209,000 20,014,000 22,852,000
----------- -----------
Cash and short-term investments $26,338,000 $30,537,000
</TABLE>
Cash equivalents--Cash equivalents are defined as short-term highly
liquid investments with a maturity of three months or less at the date
of purchase.
Securities available-for-sale--Effective October 1, 1994, the Company
adopted the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," ("FAS 115"). In accordance with the provisions of FAS 115,
the Company has classified marketable equity securities and debt
securities as available-for-sale. The available-for-sale portfolio
represents cash available for current operations and is classified as
short-term investments. Available-for-sale securities are stated at
amortized cost which approximates market. The amortized cost of
securities is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in interest
income. Realized gains and losses and declines in value judged to be
other-than-temporary are included in interest income. Interest on
securities classified as available-for-sale is included in interest
income.
During the three-month period ending December 31, 1994, the gross
realized gains on sales of available-for-sale securities totaled $20,000
and gross realized losses on sales totaled $4,000.
The contractual maturities of securities held at December 31, 1994, are
shown below.
<TABLE>
<S> <C>
Due in one year or less $12,922,000
Due after one year through three years 6,979,000
-----------
$19,901,000
</TABLE>
NOTE C--EARNINGS PER COMMON SHARE
Primary income per share is computed using the weighted average number
of common shares outstanding, plus, to the extent dilutive, common stock
equivalents. If the inclusion of common stock equivalents has an
anti-dilutive effect in the aggregate, they are excluded from the income
per share calculation. Fully diluted income per share is based on an
increased number of shares that would be outstanding assuming the
exercise of stock options when the Company's stock price at the end of
the period is higher than the average stock price within the respective
period, plus the increased number of shares that would be outstanding
for the quarter ending December 31, 1994, assuming the conversion of the
6 1/4% convertible subordinated debentures. Net income at December 31,
1994 used in the calculation of fully diluted income per share has been
adjusted for interest expense (net of tax) on the convertible
subordinated debentures. The effect of the convertible subordinated
debentures is not included in the December 31, 1993 earnings per share
calculation as the effect would be anti-dilutive.
NOTE D--OTHER
Product development expenses (which are included in cost of software and
hardware sales and services and maintenance and enhancements) not
capitalized aggregated $2,283,000 and $1,900,000 in the three month
periods ended December 31, 1994 and 1993, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth: (a) income statement items as a
percentage of total revenues and (b) the percentage change for each item
from the prior year comparative period.
<CAPTION>
% of Total Revenues % Change
Three Months Ended from
December 31, Prior Year
1994 1993
<S> <C> <C> <C>
REVENUES
OnSite services 40% 47% 4%
Software and hardware sales
and services 38% 29% 54%
Maintenance and enhancements 21% 23% 12%
Interest and other revenue 1% 1% 54%
TOTAL 100% 100% 21%
EXPENSES
Cost of services, sales and
maintenance and enhancements * 61% 64% 16%
Selling, general and administrative * 25% 25% 23%
Interest expense 2% 2% (1)%
Income before income taxes 12% 9% 55%
</TABLE>
The following table sets forth the gross profit for each of the
following revenue categories as a percentage of revenue for each such
category and the total gross profit as a percentage of total revenue
(excluding interest and other revenue). The Company does not separately
present the cost of maintenance and enhancements revenue as it is
impracticable to separate such cost from the cost of software and
hardware sales and services.
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1994 1993
<S> <C> <C>
GROSS PROFIT *
OnSite services 24% 22%
Software and hardware sales and
services and maintenance and enhancements 47% 47%
TOTAL 38% 35%
</TABLE>
* Reclassified to current year format.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)
REVENUES
The 54% increase in software and hardware sales and services revenue is
attributable to increases in licenses of BANNER and related services to
both the US and international utilities markets and continued demand for
the BANNER products and related services in the global higher education
market.
The 12% increase in maintenance and enhancements revenue over the prior
year period is a result of continued high annual renewal rates and a
growing installed base of clients, primarily in the higher education
market.
GROSS PROFIT
The increase in gross profit is the result of increases in volume and
the change in mix during the quarter. Revenue increased in the first
quarter of fiscal year 1995 compared to the prior year period at a
greater rate than increases in related costs. The mix improvement is
primarily the result of the increase in the percentage of license fees
and related services revenue included in software and hardware sales and
services revenue during the quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 23 % in the
first quarter of fiscal 1995, due to continued increases in sales and
marketing efforts.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
The Company's cash and short-term investments balance was $26.3 million
and $30.5 million at December 31, 1994 and September 30, 1994
respectively. The Company has a $20 million credit facility available
for general corporate purposes which expires in June 1996 with optional
annual extensions. At December 31, 1994 there were no borrowings
outstanding. As long as borrowings are outstanding and as a condition
precedent to new borrowings, the Company must comply with certain
covenants, and the Company is prohibited from paying any dividends other
than stock dividends.
The Company has outstanding $34.5 million of convertible subordinated
debentures bearing interest at 6 1/4% and maturing on September 1, 2003.
The debentures are convertible into common stock of the Company any time
prior to redemption or maturity at a conversion price of $15 per share,
subject to adjustment in certain events. The debentures are redeemable
at any time after September 10, 1996 at prices decreasing from 104.2% of
the principal amount at September 1, 1996 to par on September 1, 2002.
Effective October 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," ("FAS 115"). FAS
No. 115 requires the Company to classify as available-for-sale and
carry at fair value all debt securities for which the Company does not
have the positive intent and ability to hold to maturity.
The Company believes that its cash and cash equivalents, short-term
investments, and borrowing arrangements, together with net cash provided
by continuing operations, should satisfy its needs for the foreseeable
future.
In December 1994, the Company acquired the IntelliSource Software Group,
a division of the privately-held Management Analysis Company.
IntelliSource Software Group products serve the utility market. The
Company will pay a purchase price of $1.2 million in increments over a
four-year period with additional payments contingent upon performance.
On February 8, 1995, the Company announced the signing of a letter of
intent for the purchase of Adage Systems International, Inc. (Adage
Systems), including all existing ADAGE software, technology and
operations. The acquisition is subject to completion of due diligence,
execution of a definitive agreement and approvals. If the transaction
is completed, the Company would pay a purchase price of one million
shares of SCT common stock, with potential additional consideration
depending upon the performance of Adage Systems and the Company's stock
price over a five-year period.
Numerous factors could affect the Company's future operating results,
including general economic conditions, continued market acceptance of
the Company's products, and competitive pressures. Future revenue
growth and operating results are in part dependent upon accelerated
license fee revenue and related services growth from the Company's
international operations.
The Company's ability to sustain growth depends in part on the timely
development or acquisition of successful new and updated products. The
Company is investing in the development of new products and in
improvements to existing products; however, software development is a
complex and creative process that can be difficult to accurately
schedule and predict. The Company believes it has the resources to
continue to compete effectively.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
PART II
Item 6(b). Reports on Form 8-K
The registrant was not required to file any current reports on Form
8-K during the three months ended December 31, 1994.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
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.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(Registrant)
Date: 02/13/95 /s/
Eric Haskell
Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
December 31, 1994 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000707606
<NAME> SYSTEMS & COMPUTER TECHNOLOGY CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 26,338,000
<SECURITIES> 0
<RECEIVABLES> 55,608,000
<ALLOWANCES> 1,346,000
<INVENTORY> 0
<CURRENT-ASSETS> 87,156,000
<PP&E> 33,792,000
<DEPRECIATION> 13,318,000
<TOTAL-ASSETS> 128,336,000
<CURRENT-LIABILITIES> 24,537,000
<BONDS> 35,015,000
<COMMON> 136,000
0
0
<OTHER-SE> 68,648,000
<TOTAL-LIABILITY-AND-EQUITY> 128,336,000
<SALES> 38,736,000
<TOTAL-REVENUES> 39,199,000
<CGS> 24,106,000
<TOTAL-COSTS> 33,969,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 624,000
<INCOME-PRETAX> 4,606,000
<INCOME-TAX> 1,635,000
<INCOME-CONTINUING> 2,971,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,971,000
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.21
</TABLE>
