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 March 31, 1995
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 23-1701520
(State or other jurisdiction (I.R.S Employer
of incorporation) Identification Number)
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.
12,723,166 Common shares, $.01 par value, as of May 3, 1995
Page 1 of 15 consecutively numbered pages
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SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1995 and September 30, 1994
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994
Condensed Consolidated Statements of Operations -
Six Months Ended March 31, 1995 and 1994
Condensed Consolidated Statements of Cash Flows -
Six Months Ended March 31, 1995 and 1994
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Operations and Financial Condition
PART II, OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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(TABLE)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(CAPTION)
March 31, September 30,
1995 1994
(UNAUDITED) (NOTE)
(S) (C) (C)
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 19,870,000 $ 30,537,000
Receivables, including $38,509,000
and $34,640,000 of earned
revenues in excess of billings,
net of allowance for doubtful
accounts of $1,171,000 and
$1,228,000 59,213,000 52,406,000
Prepaid expenses and other receivables 8,010,000 5,124,000
------------ ------------
TOTAL CURRENT ASSETS 87,093,000 88,067,000
PROPERTY AND EQUIPMENT--net of
accumulated depreciation 22,053,000 20,002,000
CAPITALIZED COMPUTER SOFTWARE COSTS,
net of accumulated amortization
3,787,000 3,003,000
COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED, net of accumulated
amortization 6,581,000 6,812,000
COVENANTS-NOT-TO-COMPETE, net of
accumulated amortization 2,278,000 2,541,000
OTHER ASSETS AND DEFERRED CHARGES 7,625,000 8,384,000
------------ ------------
TOTAL ASSETS $129,417,000 $128,809,000
============ ============
(FN)
(continued on next page . . . .)
(/FN)
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SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(CAPTION)
March 31, September 30,
1995 1994
(UNAUDITED) (NOTE)
(S) (C) (C)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,173,000 $ 3,660,000
Income taxes payable 491,000 985,000
Accrued expenses 8,774,000 10,097,000
Deferred revenue 8,836,000 14,086,000
------------ ------------
TOTAL CURRENT LIABILITIES 22,274,000 28,828,000
LONG-TERM DEBT, less current portion 32,015,000 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
13,853,386 and 13,581,235 shares 139,000 136,000
Capital in excess of par value 44,266,000 40,869,000
Retained earnings 33,730,000 27,510,000
------------ ------------
78,135,000 68,515,000
Less
Held in treasury, 1,150,941 common
shares--at cost (2,959,000) (2,959,000)
Unearned compensation (48,000) (75,000)
------------ ------------
75,128,000 65,481,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $129,417,000 $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)
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(TABLE)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(CAPTION)
For the Three Months Ended
March 31,
1995 1994
(S) (C) (C)
REVENUES:
OnSite services $16,978,000 $16,168,000
Software and hardware sales and services 16,577,000 14,006,000
Maintenance and enhancements 8,606,000 7,193,000
Interest and other revenue 1,030,000 123,000
----------- -----------
43,191,000 37,490,000
EXPENSES:
Cost of OnSite services 13,536,000 12,884,000
Cost of software and hardware sales
and services and maintenance
and enhancements 13,600,000 10,434,000
Selling, general and administrative 10,185,000 9,262,000
Interest expense 682,000 635,000
----------- -----------
38,003,000 33,215,000
Income before income taxes 5,188,000 4,275,000
Provision for federal and state
income taxes 1,939,000 1,453,000
----------- -----------
Net Income $ 3,249,000 $ 2,822,000
=========== ===========
Per common share:
Net income
Primary $ 0.24 $ 0.21
Fully diluted $ 0.23 $ 0.20
Common shares and equivalents outstanding
Primary 13,562,739 13,569,247
Fully diluted 15,762,739 15,869,247
(FN)
See notes to condensed consolidated financial statements.
(/FN)
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SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(CAPTION)
For the Six Months Ended
March 31,
1995 1994
(S) (C) (C)
REVENUES:
OnSite services $32,731,000 $31,353,000
Software and hardware sales and services 31,302,000 23,569,000
Maintenance and enhancements 16,864,000 14,537,000
Interest and other revenue 1,493,000 424,000
----------- -----------
82,390,000 69,883,000
EXPENSES:
Cost of OnSite services 25,510,000 24,646,000
Cost of software and hardware sales
and services and maintenance
and enhancements 25,732,000 19,455,000
Selling, general and administrative 20,048,000 17,261,000
Interest expense 1,306,000 1,265,000
----------- -----------
72,596,000 62,627,000
Income before income taxes 9,794,000 7,256,000
Provision for federal and state
income taxes 3,574,000 2,467,000
----------- -----------
Net Income $ 6,220,000 $ 4,789,000
=========== ===========
Per common share:
Net income
Primary $ 0.46 $ 0.36
Fully diluted $ 0.44 $ 0.35
Common shares and equivalents outstanding
Primary 13,558,922 13,436,993
Fully diluted 15,808,922 15,788,531
(FN)
See notes to condensed consolidated financial statements.
(/FN)
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(TABLE)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CAPTION)
For the Six Months Ended
March 31,
1995 1994
(S) (C) (C)
OPERATING ACTIVITIES
Net income $ 6,220,000 $ 4,789,000
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation and amortization 4,290,000 3,273,000
Changes in operating assets and
liabilities:
(Increase) in receivables (6,940,000) (6,666,000)
(Increase) in prepaid expenses and
other receivables (2,886,000) (1,088,000)
(Decrease) increase in other accrued
expenses and liabilities (1,423,000) 181,000
(Decrease) in deferred revenue (5,250,000) (4,679,000)
Other, net (32,000) 843,000
------------ ------------
NET CASH (USED IN) OPERATING ACTIVITIES (6,021,000) (3,347,000)
INVESTING ACTIVITIES
Purchase of property and equipment (3,409,000) (2,461,000)
Capitalized computer software costs (1,213,000) (391,000)
(Increase) in short-term investments - - (15,643,000)
Proceeds from sale or maturity of
investments held as available for sale 10,075,000 - -
Purchase of investments held as available
for sale (2,228,000) - -
Purchase of subsidiary assets (424,000) - -
------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 2,801,000 (18,495,000)
FINANCING ACTIVITIES
Proceeds from exercise of stock options 400,000 1,361,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 400,000 1,361,000
(DECREASE) IN CASH & CASH EQUIVALENTS (2,820,000) (20,481,000)
CASH & CASH EQUIVALENTS-BEGINNING OF PERIOD 7,685,000 29,522,000
------------ ------------
CASH & CASH EQUIVALENTS-END OF PERIOD $ 4,865,000 $ 9,041,000
============ ============
SUPPLEMENTAL INFORMATION
Noncash investing and financing activities:
Conversion of subordinated debentures 3,000,000 - -
============ ============
(FN)
See notes to condensed consolidated financial statements.
(/FN)
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SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1995
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 and six month periods ended March 31,
1995 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)
Mar. 31, 1995 Sep. 30, 1994
(S) (C) (C)
Cash and cash equivalents $ 4,865,000 $ 7,685,000
Short-term investments, plus
accrued interest of $135,000
and $209,000 15,005,000 22,852,000
----------- -----------
Cash and short-term investments $19,870,000 $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 highly liquid investments available for current operations
and, accordingly, is classified as short-term investments.
Available-for-sale securities are stated at amortized cost which
approximates market.
The contractual maturities of securities held at March 31, 1995, are
shown below.
(TABLE)
(S) (C)
Due in one year or less $ 112,000
Due after one year through three years 14,758,000
-----------
$14,870,000
(/TABLE)
During the six month period ending March 31, 1995, the gross realized
gains on sales of available-for-sale securities totaled $60,000 and
gross realized losses on sales totaled $4,000.
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 March 31, 1995, assuming the conversion of the
6 1/4% convertible subordinated debentures. Net income for the three
and six month periods ending March 31, 1995 used in the calculation of
fully diluted income per share has been adjusted for interest expense
(net of tax) on the convertible subordinated debentures.
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 $4,369,000 and $3,890,000 in the six month
periods ended March 31, 1995 and 1994, 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 from
prior Year
Three Mos. Six Mos.
Ended Ended Three Mos. Six Mos.
March 31, March 31, Ended Ended
1995 1994 1995 1994 March 31 March 31
(S) (C) (C) (C) (C) (C) (C)
REVENUES
OnSite services 39% 43% 40% 45% 5% 4%
Software and hardware
sales and services 39% 38% 38% 33% 18% 33%
Maintenance & enhancements 20% 19% 20% 21% 20% 16%
Interest and other revenue 2% 0% 2% 1% 737% 252%
---- ---- ---- ----
Total 100% 100% 100% 100% 15% 18%
EXPENSES
Cost of services, sales
and maintenance &
enhancements * 63% 62% 62% 63% 16% 16%
Selling, general and
administrative * 24% 25% 24% 25% 10% 16%
Interest expense 1% 2% 2% 2% 7% 3%
Income before income taxes 12% 11% 12% 10% 21% 35%
(/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 Six Months
Ended Ended
March 31, March 31,
1995 1994 1995 1994
(S) (C) (C) (C) (C)
GROSS PROFIT *
OnSite services 20% 20% 22% 21%
Software and hardware sales
and services and maintenance
and enhancements 46% 51% 47% 49%
TOTAL 36% 38% 37% 37%
(/TABLE)
* Reclassified to conform to current year format.
(PAGE)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)
Revenues
The 18% and 33% increases in software and hardware sales and services
revenue in the second quarter and the first six months of fiscal year
1995 are primarily attributable to increases in licenses of BANNER and
related services to both the US and international utilities markets.
The maintenance and enhancements revenue increases of 20% and 16% in
the three and six-month periods ending March 31, 1995 over the prior
year periods are the result of continued high annual renewal rates and a
growing installed base of clients, primarily in the higher education
market.
The increase in interest and other revenue in the three-month and six-
month periods ending March 31, 1995 is primarily attributable to a
$550,000 gain on the sale of an inactive product line.
Gross Profit
The decrease in gross profit as a percentage of total revenue (excluding
interest and other revenue) from 38% to 36% in the three month period
ending March 31, 1995 is primarily attributable to a change in mix.
The percentage of software services revenues to the international
utilities market included in software and hardware sales and services
revenue increased relative to license fees during the period.
Selling, General And Administrative Expenses
Selling, general and administrative expenses increased 10% and 16% in
the second quarter and first six months of fiscal 1995, due to continued
increases in sales and marketing efforts.
Income Taxes
The provisions for income taxes for the three and six month periods
ending March 31, 1995 and 1994 relate primarily to current income taxes
payable. The increases in the provision for income taxes in the
current periods compared with prior year periods are primarily the
result of a higher relative amount of research and development tax
credits used in the fiscal 1994 periods versus current periods.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
The Company's cash and short-term investments balance was $19.9 million
and $30.5 million at March 31, 1995 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 March 31, 1995, 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.
At March 31, 1995, the Company has outstanding $31.5 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. During the quarter ended
March 31, 1995, $3 million of the convertible subordinated debentures
were converted into 200,000 shares of common stock.
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
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.
During the first six months of 1995 the increase in receivables is due
to: (1) increased revenues accrued on OnSite services contracts in
excess of billings and (2) the timing of billings on the Company's
software products. The decrease in deferred revenues is the result of
(1) an OnSite services client, which prepays annually in the fourth
quarter of the fiscal year and (2) a higher than average percentage of
maintenance contracts having a June 30th anniversary.
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.
In February 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 other customary conditions and
approvals. If the transaction is completed, the Company expects to 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.
Additionally, the Company expects that a portion of the purchase price
will be accounted for as purchased research and development. The charge
for such purchased research and development will be based on an
appraisal which is currently in process. Preliminary estimates suggest
that the charge will be between $6 million and $10 million.
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. During the quarter ended March 31,
1995, the Company released an upgraded version of its client /
server-based administrative software, BANNER 2.1. This latest version
of the software runs in graphical user interface and character-based
modes simultaneously and is successfully operating at numerous early
support sites. The costs of such products were expensed as incurred.
In addition, the Company has new products in development for the utility
and local government markets. The costs of such products have been
capitalized.
(PAGE)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
PART II
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on February 24,
1995, Michael D. Chamberlain and Thomas I. Unterberg were reelected as
directors of the Company for a term expiring at the Company's 1998
Annual Meeting of Shareholders. There were 9,385,780 votes cast in
favor of the election of Mr. Chamberlain and 28,411 votes withheld from
his election, and there were 9,365,102 votes cast in favor of the
election of Mr. Unterberg and 49,089 votes withheld from his election.
There were no abstentions and no broker non-votes.
Item 6(b). Reports on Form 8-K
The registrant did not file any current reports on Form 8-K during
the three months ended March 31, 1995.
(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: 05/15/95 /s/
Eric Haskell
Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
March 31, 1995 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 19,870,000
<SECURITIES> 0
<RECEIVABLES> 60,384,000
<ALLOWANCES> 1,171,000
<INVENTORY> 0
<CURRENT-ASSETS> 87,093,000
<PP&E> 36,136,000
<DEPRECIATION> 14,083,000
<TOTAL-ASSETS> 129,417,000
<CURRENT-LIABILITIES> 22,274,000
<BONDS> 32,015,000
<COMMON> 139,000
0
0
<OTHER-SE> 74,989,000
<TOTAL-LIABILITY-AND-EQUITY> 129,417,000
<SALES> 80,897,000
<TOTAL-REVENUES> 82,390,000
<CGS> 51,242,000
<TOTAL-COSTS> 71,290,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,306,000
<INCOME-PRETAX> 9,794,000
<INCOME-TAX> 3,574,000
<INCOME-CONTINUING> 6,220,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,220,000
<EPS-PRIMARY> .46
<EPS-DILUTED> .44
</TABLE>
