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 June 30, 1996
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 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.
14,070,945 Common shares, $.01 par value, as of August 8, 1996
Page 1 of 16 consecutively numbered pages
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX
PART I, UNAUDITED FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and September 30, 1995
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1996 and 1995
Condensed Consolidated Statements of Operations -
Nine Months Ended June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Operations and Financial Condition
PART II, OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1996 1995
(UNAUDITED) (NOTE)
ASSETS
CURRENT ASSETS
Cash and marketable securities $ 1,937,000 $ 15,312,000
Receivables, including $55,984,000
and $46,746,000 of earned revenues
in excess of billings, net of
allowance for doubtful accounts
of $1,249,000 and $1,003,000 85,078,000 70,270,000
Prepaid expenses and other receivables 12,856,000 9,994,000
------------ ------------
TOTAL CURRENT ASSETS 99,871,000 95,576,000
PROPERTY AND EQUIPMENT--net of
accumulated depreciation 33,855,000 30,135,000
CAPITALIZED COMPUTER SOFTWARE COSTS,
net of accumulated amortization 10,108,000 5,532,000
COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED, net of accumulated
amortization 8,969,000 8,754,000
OTHER ASSETS AND DEFERRED CHARGES 10,025,000 10,986,000
------------ ------------
TOTAL ASSETS $162,828,000 $150,983,000
============ ============
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1996 1995
(UNAUDITED) (NOTE)
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,841,000 $ 5,234,000
Current portion of long-term debt 10,700,000 100,000
Income taxes payable 419,000 167,000
Accrued expenses 15,036,000 12,065,000
Deferred revenue 4,793,000 14,455,000
------------ ------------
TOTAL CURRENT LIABILITIES 36,789,000 32,021,000
LONG-TERM DEBT, less current portion 31,690,000 31,790,000
DEFERRED TAXES AND OTHER
LONG-TERM LIABILITIES 2,447,000 1,607,000
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
15,217,386 and 15,159,804 shares 152,000 152,000
Capital in excess of par value 58,810,000 58,414,000
Retained earnings 36,509,000 30,568,000
------------ ------------
95,471,000 89,134,000
Less
Held in treasury, 1,150,941 common
shares--at cost (2,959,000) (2,959,000)
Notes receivable from stockholders (610,000) (610,000)
------------ ------------
91,902,000 85,565,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $162,828,000 $150,983,000
============ ============
Note: The condensed consolidated balance sheet at September 30, 1995 has
been derived from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
June 30,
1996 1995
Revenues:
OnSite services $22,068,000 $17,115,000
Software sales and services 23,463,000 20,240,000
Maintenance and enhancements 10,545,000 9,067,000
Interest and other revenue 240,000 283,000
----------- -----------
56,316,000 46,705,000
Expenses:
Cost of OnSite services 17,978,000 13,293,000
Cost of software sales and services
and maintenance and enhancements 19,435,000 15,910,000
Selling, general and administrative 13,157,000 10,496,000
Charge for purchased research & development 0 8,700,000
Interest expense 637,000 494,000
----------- -----------
51,207,000 48,893,000
Income (loss) before income taxes 5,109,000 (2,188,000)
Provision for income taxes 2,197,000 2,475,000
----------- -----------
Net Income (Loss) $ 2,912,000 $(4,663,000)
=========== ===========
Per common share:
Net income (loss)
Primary $ 0.19 $(0.35)
Fully diluted $ 0.19 $(0.35)
Common shares and equivalents outstanding
Primary 15,044,948 13,208,168
Fully diluted 17,129,948 13,208,168
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Nine Months Ended
June 30,
1996 1995
Revenues:
OnSite services $ 62,079,000 $ 49,846,000
Software sales and services 63,299,000 51,542,000
Maintenance and enhancements 30,923,000 25,931,000
Interest and other revenue 590,000 1,776,000
------------ ------------
156,891,000 129,095,000
Expenses:
Cost of OnSite services 49,556,000 38,803,000
Cost of software sales and services
and maintenance and enhancements 55,433,000 41,642,000
Selling, general and administrative 39,830,000 30,544,000
Charge for purchased research & development 0 8,700,000
Interest expense 1,724,000 1,800,000
------------ ------------
146,543,000 121,489,000
Income before income taxes 10,348,000 7,606,000
Provision for income taxes 4,407,000 6,049,000
------------ -------------
Net Income $ 5,941,000 $ 1,557,000
============ ============
Per common share:
Net income
Primary $ 0.39 $ 0.11
Fully diluted $ 0.39 $ 0.11
Common shares and equivalents outstanding
Primary 15,095,911 13,623,718
Fully diluted 15,095,911 13,705,358
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES
Net income $ 5,941,000 $ 1,557,000
Adjustments to reconcile net income to
net cash (used in) operating activities:
Charge for purchased research
& development 0 8,700,000
Depreciation and amortization 7,701,000 6,661,000
Changes in operating assets and
liabilities:
(Increase) in receivables (15,611,000) (12,668,000)
(Increase) in other current assets (2,862,000) (2,548,000)
Increase (decrease) in other accrued
expenses and liabilities 2,971,000 (286,000)
(Decrease) in deferred revenue (9,084,000) (3,491,000)
Other, net 422,000 40,000
------------- -------------
NET CASH (USED IN) OPERATING ACTIVITIES (10,522,000) (2,035,000)
INVESTING ACTIVITIES
Purchase of property and equipment (7,455,000) (7,583,000)
Capitalized computer software costs (5,408,000) (2,101,000)
Proceeds from sale or maturity of
investments available for sale 13,504,000 14,769,000
Purchase of investments available for sale 0 (2,228,000)
Purchase of subsidiary assets, net of
cash acquired (657,000) (892,000)
------------- -------------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (16,000) 1,965,000
FINANCING ACTIVITIES
Principal payments on short-term debt (1,600,000) (270,000)
Proceeds from revolving line of credit 12,100,000 0
Proceeds from exercise of stock options 373,000 1,566,000
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,873,000 1,296,000
INCREASE IN CASH & CASH EQUIVALENTS 335,000 1,226,000
CASH & CASH EQUIVALENTS-BEGINNING OF PERIOD 1,602,000 7,685,000
------------- -------------
CASH & CASH EQUIVALENTS-END OF PERIOD $ 1,937,000 $ 8,911,000
============= =============
SUPPLEMENTAL INFORMATION
Noncash investing and financing activities:
Conversion of subordinated debentures 3,000,000
Purchase of subsidiaries--non-cash portion 12,352,000
=============
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1996
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 except as
described in Management's Discussion and Analysis) 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, 1995.
Operating results for the three and nine month periods ended June 30, 1996
are not necessarily indicative of the results that may be expected for the
year ending September 30, 1996.
NOTE A--RECLASSIFICATION
Certain prior year information has been reclassified to conform with current
year format.
NOTE B--CASH AND SHORT-TERM INVESTMENTS
June 30, September 30,
1996 1995
Cash and cash equivalents $1,937,000 $ 1,602,000
Marketable securities, plus accrued
interest of $230,000 0 13,710,000
---------- -----------
Cash and marketable securities $1,937,000 $15,312,000
========== ===========
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--Marketable equity and debt securities are
classified as available-for-sale. The available-for-sale portfolio
represents highly liquid investments available for current operations and,
accordingly, is classified as current assets.
NOTE C--EARNINGS PER COMMON SHARE
Primary income per share is computed based on the weighted average number of
common shares outstanding, plus, to the extent dilutive, common stock
equivalents. 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 to the extent
dilutive, the increased number of shares that would be outstanding, assuming
conversion of the 6 1/4% convertible subordinated debentures. Net income
used in the calculation of fully diluted income per share is adjusted for
interest expense (net of tax) on the convertible subordinated debentures.
The fully diluted income per share calculation for the nine-month period
ending June 30, 1996 did not include the anti-dilutive effect of the
convertible subordinated debentures.
NOTE D--FOREIGN CURRENCY TRANSLATION
On October 1, 1995, the Company changed the functional currency of its foreign
subsidiary, SCT International Limited, from the U.S. dollar to the local
currency of the subsidiary, the Pound Sterling. The move to the Pound
Sterling was in recognition of the growth of and changes in the nature
of the business of the subsidiary, which was established in fiscal year 1994.
The subsidiary has become a self-sufficient unit and has recently established
its headquarters in Basingstoke, Hampshire and, additionally established a
European Product Support Center in Manchester. All of the subsidiary's
contracts are now denominated in the Pound Sterling (previously some were
denominated in the U.S. dollar).
The financial position and results of operations of the Company's foreign
subsidiary are measured using the local currency as the functional currency.
Assets and liabilities of this subsidiary are translated at the exchange rate
in effect at the end of the period. Income statement accounts are translated
at the average rate of exchange prevailing during the period. Translation
adjustments arising from differences in exchange rates from period to period
are included in the cumulative foreign currency translation adjustments
account (CTA) in stockholders' equity. Also included in the CTA are the
effects of exchange rate changes on intercompany transactions of a long-term
investment nature. Gains and losses resulting from the effect of exchange
rate changes on foreign currency transactions are included in income
currently.
The effect of this change in functional currency and the resulting
translation adjustment are immaterial to the equity of the Company at
June 30, 1996 and to the results of operations for the three and
nine-month periods then ended.
NOTE E--OTHER
Product development expenses (which are included in cost of software
sales and services and maintenance and enhancements) not capitalized
aggregated $9,677,000 and $7,124,000 in the nine-month periods ending June 30,
1996 and 1995, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth: (a) certain income statement items as a
percentage of total revenues and (b) the percentage change for each item from
the prior year comparative period.
% of Total Revenues % Change from
Prior Year
Three Mos. Nine Mos. Three Mos. Nine Mos.
Ended Ended Ended Ended
June 30, June 30, June 30 June 30
1996 1995 1996 1995
Revenues:
OnSite services 39% 37% 40% 39% 29% 25%
Software sales and services 42% 43% 40% 40% 16% 23%
Maintenance and enhancements 19% 19% 20% 20% 16% 19%
Interest and other revenue 0% 1% 0% 1% (15)% (67)%
---- ---- ---- ----
Total 100% 100% 100% 100% 21% 22%
Expenses:
Cost of services, sales and
maintenance and enhancements 67% 63% 67% 62% 28% 31%
Selling, general and
administrative 23% 22% 25% 24% 25% 30%
Charge for purchased research
& development 0% 19% 0% 7% -- --
Interest expense 1% 1% 1% 1% (29)% (4)%
Income before income taxes 9% -- 7% 6% (334)% (36)%
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 sales and services.
Three Months Nine Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
Gross Profit
OnSite services 19% 22% 20% 22%
Software sales and services and
maintenance and enhancements 43% 46% 41% 46%
--- --- --- ---
Total 33% 37% 33% 37%
Revenues
The 29% and 25% increases in OnSite services revenues in the third quarter and
first nine months of fiscal year 1996 are primarily the result of two new
contracts: a five-year agreement with Continental Cablevision, Inc., which
commenced in January 1995, and an agreement with the City of
Indianapolis/Marion County, which commenced in December 1995. The agreement
with the City of Indianapolis could result in annual revenues of up to $11.5
million for up to seven years from the start of the contract. The City has
the option to cancel the agreement after three years from the start of the
contract, provided the Company is given six months notice and a termination
fee.
The 16% increase in software sales and services revenues in the third quarter
of fiscal year 1996 is attributable to several factors. BANNER services to
the higher education market increased during the three month period compared
with the prior year period. BANNER licenses in the utility and local
government markets also increased compared to the prior year three-month
period. The utility market increase is predominately the result of one large
BANNER Customer Information System (CIS) license agreement signed in the third
quarter. Software sales and services revenue increases are also the result of
licenses of ADAGE Enterprise Resource Planning (ERP) software. ADAGE is
developed by the manufacturing and distribution business of SCT which was
acquired in June 1995. These increases were off-set by decreases, compared to
the prior year period, in software licenses in the higher education market.
The 23% increase in software sales and services revenues in the first nine
months of fiscal year 1996 is the result of licenses of ADAGE ERP software,
increases in BANNER services to the higher education market, and the growth of
systems integration services provided to the international utilities market.
These increases were off-set by decreases, compared to the prior year periods,
in software licenses in the higher education and utility markets.
The 16% and 19% increase in maintenance and enhancements revenues in the third
quarter and first nine months of fiscal year 1996 is the result of continued
high annual renewal rates and the growing installed base of clients primarily
in the higher education market.
The decrease in interest and other revenue in the three and nine-month periods
ending June 30, 1996 is primarily attributable to a decreased short-term
investment portfolio.
Gross Profit
Gross profit decreased as a percentage of total revenue (excluding interest
and other revenue) from 37% to 33% for the third quarter and first nine months
of fiscal year 1996. The decreases were the result of several factors in both
the OnSite services and software sales and services businesses. The decreased
gross profit in OnSite services is the result of lower margins on new contract
signings compared with older contracts. The decreases in the software sales
and services businesses were the result of changes in revenue mix and
increased expenditures in the utility and manufacturing and distribution
businesses. Lower margin software services delivered to the international
utilities market increased relative to higher margin license fees during the
nine month period ending June 30, 1996 compared to the prior year period. The
Company is increasing its focus on software services, including software
installation and systems integration services, in each of its markets, which
may result in a decreased profit margin compared with a revenue mix with a
higher percentage of license fees. The cost of software sales and services
also increased as a result of the Company's increased expenditures in the
utility business, a $1,250,000 contract loss provision described below, and
the costs associated with the manufacturing and distribution business acquired
in June 1995. It is anticipated that costs in the manufacturing and
distribution business will increase in the fourth quarter of fiscal 1996
compared with the prior year period as the result of growth in the business
and the need for increased employees to support current and future software
implementations.
Contract Loss Provision
In the quarter ended March 31, 1996, the Company recorded a contract loss
provision of $1,250,000 to reflect the cost of satisfying certain obligations
relating to the CIS product for U.S. utilities which is being installed in a
number of utilities. The aforementioned charge is principally for one U.S.
client to cover the estimated cost of remaining obligations above unrecognized
revenue.
Income Taxes
The provision for income taxes for the first nine months of 1996 reflects the
impact of excluding the research and development tax credit which expired June
30, 1995 and has not yet been reenacted.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased during the three and
nine-month periods ending June 30, 1996 compared with the prior year periods
as result of several factors. The largest increase in selling, general and
administrative costs over prior year periods is the result of the Company's
acquisition of Adage in June 1995 and the subsequent growth of the
manufacturing and distribution business. Smaller increases are the result of
increased sales and marketing costs in the higher education software and
OnSite services businesses.
Seasonality
Certain factors have resulted in quarterly fluctuations in operating results,
including variability of software license fee revenues, seasonal patterns of
capital spending by clients, the timing and receipt of orders, competition,
pricing, new product introductions by the Company or its competitors, levels
of market acceptance for new products, and general economic and political
conditions. While the Company has historically generated a greater portion of
license fees in total revenue in the last two fiscal quarters, the
non-seasonal factors cited above may have a greater effect than seasonality on
the Company's results of operations.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
The Company's cash and short-term investments balance was $1.9 million and
$15.3 million at June 30, 1996 and September 30, 1995, respectively. The
short-term investment portfolio is classified as available-for-sale.
Cash used in operating activities was $10.5 million at June 30, 1996 compared
to $2.0 million at June 30, 1995. The increase in cash used reflects the
decrease in income before the charge for purchased research and development
for the nine month period ending June 30, 1996 compared with the prior year
nine-month period, as well as decreases in deferred revenue and increases in
accounts receivable at June 30, 1996.
During the first nine months of 1996 the increase in accounts receivable is
due to increases in revenues and the timing of billings on the Company's
software services contracts and software licenses. The decrease in deferred
revenue at June 30, 1996 compared with September 30, 1995 is the result of
annual scheduled billings on software maintenance contracts and an OnSite
services contract in the fourth fiscal quarter of the year, which increase
deferred revenue in the fourth fiscal quarter. The deferred revenue balance
at June 30, 1995 reflects a pre-payment of approximately $5 million that was
received in the third quarter of fiscal 1995.
Cash used in investing activities was $16,000 during the nine months ended
June 30, 1996 compared to cash provided by investing activities of $2.0
million during the nine months ended June 30, 1995. The use of cash during
the nine months ended June 30, 1996 increased primarily as a result of
increases in new product development. Capital expenditures during the 1996
period included investment in the new manufacturing and distribution business
infrastructure and new facility improvement. Cash was primarily provided by
the proceeds from sales and maturities of investments of $13.5 million and
$14.8 million at June 30, 1996 and 1995, respectively.
In June 1996 the Company released ADAGE 2.3 which has been under development
since September 1995. ADAGE is a fully graphical ERP solution with a special
emphasis on the process manufacturing and distribution industries. The
software employs a business process-based approach that focuses on configuring
objects and business rules as process flows to support key business processes
across the supply chain.
Financing activities provided cash of $10.9 million and $1.3 million at
June 30, 1996 and 1995, respectively. The increase during fiscal year 1996
reflects use of the Company's senior revolving credit facility.
The Company has outstanding $31.3 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. 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.
The Company has a $20 million senior revolving credit facility, available for
general corporate purposes which expires in June 1998 with optional annual
extensions. 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 June 30, 1996 $10.6 million was outstanding. The Company
expects to repay these amounts over the next three months using cash provided
by operations.
The Company believes that its cash provided by continuing operations and
borrowing arrangements should satisfy its needs for the foreseeable future.
Foreign Operations
On October 1, 1995, the Company changed the functional currency of its foreign
subsidiary, SCT International Limited, from the U.S. dollar to the local
currency, the Pound Sterling. The net assets of SCT International Limited are
approximately $10.9 at June 30, 1996. The Company does not believe its
foreign currency exposure is significant and analyzes the desirability to
hedge the exposure on an ongoing basis.
Contingencies
A purported class action complaint was filed against the Company and certain
of its officers and directors on October 4, 1995. The plaintiff filed an
amended complaint on November 28, 1995. The amended complaint alleges
violations of certain disclosure and related provisions of the Federal
Securities Laws. The amended complaint seeks damages in unspecified amounts
as well as equitable relief. In April 1996 the Company's motion to dismiss
the amended complaint was granted in part and denied in part. Management
believes the claims remaining in the amended complaint are without merit and
intends to contest the remaining allegations vigorously. While management,
based on its investigation to date, believes that resolution of this action
will not have a materially adverse effect on the Company's consolidated
financial position, the ultimate outcome of this matter cannot presently be
determined.
Miscellaneous
The matters discussed in this Management's Discussion and Analysis that are
forward looking statements are based on current management expectations that
involve risks and uncertainties which could cause actual results to differ
materially from those anticipated. Potential risks and uncertainties that
could affect the Company's future operating results include without limitation
the effect of publicity on demand for the Company's products and services,
general economic conditions, continued market acceptance of the Company's
products and services, the timing of the receipt of software licenses, the
timing of services contracts and renewals, the timing and complexity of large
transactions, continued competitive and pricing pressures in the marketplace,
the Company's ability to develop and market new and updated products and
enhancements cost effectively and on a timely basis, and the Company's ability
to complete fixed price contracts profitably. 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.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
PART II
Item 1. Legal Proceedings
On October 4, 1995, John J. Wallace filed a purported class action lawsuit in
the United States District Court for the Eastern District of Pennsylvania
against the Company, Michael J. Emmi, Chairman of the Board, President and
Chief Executive Officer of the Company, Michael D. Chamberlain, Senior Vice
President and a director of the Company and Eric Haskell, Senior Vice
President, Finance and Administration, Treasurer and Chief Financial Officer
of the Company. The plaintiff filed an amended complaint on November 28,
1995. The amended complaint alleges that the defendants violated sections 10
(b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder by making misstatements and omissions regarding the
Company's financial performance in the second half of fiscal year 1995. The
class period alleged is from June 5, 1995 through October 2, 1995. The
amended complaint seeks damages in unspecified amounts as well as equitable
relief.
In April 1996, the Company's Motion to Dismiss the Amended Complaint was
granted in part and denied in part. Management believes the claims
remaining in the amended complaint are without merit and intends to
contest the remaining allegations vigorously. While management, based on its
investigation to date, believes that resolution of this action will not have a
materially adverse effect on the Company's consolidated financial position,
the ultimate outcome of this matter cannot be presently determined.
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 June 30, 1996.
<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: 08/14/96 /s/
________________________________
Eric Haskell
Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer
<PAGE>
<TABLE>
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
<CAPTION>
Three months ended Nine months ended
Jun. 30, 1996 Jun. 30, 1995 Jun. 30, 1996 Jun. 30, 1995
PRIMARY
<S> <C> <C> <C> <C>
Average shares outstanding 14,066,445 13,208,168 14,061,623 12,769,239
Net effect of dilutive stock options--
based on the treasury stock method
using average market price 978,503 0 1,034,288 855,000
---------- ---------- ---------- ----------
Total 15,044,948 13,208,168 15,095,911 13,624,239
========== ========== ========== ==========
Net income (loss) $2,912,000 ($4,663,000) $5,941,000 $1,557,000
========== ========== ========== ==========
Net income (loss) per share $0.19 ($0.35) $0.39 $0.11
===== ===== ===== =====
FULLY DILUTED
Average shares outstanding 14,066,445 13,208,168 14,061,623 12,769,239
Net effect of dilutive stock options--
based on the treasury stock method
using the end of period market price,
if higher than average market price 978,503 0 1,034,288 936,000
Assumed conversion of 6 1/4%
convertible subordinated debentures 2,085,000 0 0 0
---------- ---------- ---------- ----------
Total 17,129,948 13,208,168 15,095,911 13,705,239
========== ========== ========== ==========
Net income (loss) $2,912,000 ($4,663,000) $5,941,000 $1,557,000
Add 6 1/4 % convertible subordinated
debenture interest, net of
income tax effect 300,000 0 0 0
Net income (loss), as adjusted $3,212,000 ($4,663,000) $5,941,000 $1,557,000
========== ========== ========== ==========
Net income (loss) per share $0.19 ($0.35) $0.39 $0.11
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
June 30, 1996 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,937,000
<SECURITIES> 0
<RECEIVABLES> 86,327,000
<ALLOWANCES> 1,249,000
<INVENTORY> 0
<CURRENT-ASSETS> 99,871,000
<PP&E> 54,312,000
<DEPRECIATION> 20,457,000
<TOTAL-ASSETS> 162,828,000
<CURRENT-LIABILITIES> 36,789,000
<BONDS> 31,690,000
0
0
<COMMON> 152,000
<OTHER-SE> 91,750,000
<TOTAL-LIABILITY-AND-EQUITY> 162,828,000
<SALES> 156,301,000
<TOTAL-REVENUES> 156,891,000
<CGS> 104,989,000
<TOTAL-COSTS> 144,819,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,724,000
<INCOME-PRETAX> 10,348,000
<INCOME-TAX> 4,407,000
<INCOME-CONTINUING> 5,941,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,941,000
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
