<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 0-17195
LANDMARK GRAPHICS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0029459
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15150 MEMORIAL DRIVE 77079-4304
HOUSTON, TEXAS (Zip Code)
(Address of Principal executive office)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 560-1000
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
------- -------
The number of shares outstanding of the Registrant's common stock, $0.05 par
value, as of November 1, 1995 was 17,427,889.
===============================================================================
<PAGE> 2
INDEX
Page
----
PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated Balance Sheets -
As of September 30, 1995 and June 30, 1995 . . . . . . . . . . 1
Consolidated Statements of Operations -
For the Three Months Ended September 30, 1995 and 1994 . . . . 2
Consolidated Statements of Cash Flows -
For the Three Months Ended September 30, 1995 and 1994 . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF . . . . . . . . . . 9
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
LANDMARK GRAPHICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . $ 73,475 $ 64,099
Receivables:
Trade accounts, net. . . . . . . . . . . . . . . . . . . . 41,934 51,984
Current income tax receivable. . . . . . . . . . . . . . . 1,003 1,003
Accrued revenue and other receivables. . . . . . . . . . . 9,032 7,838
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 4,747 4,340
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 4,146 3,004
Deferred income taxes, net of valuation allowance . . . . . . 3,847 3,847
--------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . 138,184 136,115
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 857 857
Property and equipment, net. . . . . . . . . . . . . . . . . . 46,511 47,503
Software development costs, net . . . . . . . . . . . . . . . 8,641 7,932
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . 13,532 11,949
Other assets, net. . . . . . . . . . . . . . . . . . . . . . . 7,035 6,795
--------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 214,760 $ 211,151
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 10,904 $ 9,488
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . 11,506 10,823
Deferred maintenance fees. . . . . . . . . . . . . . . . . . . 13,558 14,597
Income taxes payable . . . . . . . . . . . . . . . . . . . . . 426 2,683
Current maturities of long-term debt . . . . . . . . . . . . . 1,000 1,007
--------- ----------
Total current liabilities . . . . . . . . . . . . . . . . 37,394 38,598
Deferred income taxes, net of current portion . . . . . . . . 2,590 2,590
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 10,756 11,000
Other long-term liabilities. . . . . . . . . . . . . . . . . . 66 65
--------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 50,806 52,253
Stockholders' equity:
Common stock, $0.05 par value; 17,427 and 17,086
shares issued, respectively . . . . . . . . . . . . . . . 871 854
Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . 127,351 122,407
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 35,732 35,637
--------- ----------
Total common stockholders' equity . . . . . . . . . . . . 163,954 158,898
--------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . $ 214,760 $ 211,151
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
LANDMARK GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------
1995 1994
------------ ------------
(Restated)
<S> <C> <C>
Revenue:
Software product sales . . . . . . . . . . . . . . . . $ 16,174 $ 14,819
Hardware product sales . . . . . . . . . . . . . . . . 6,674 5,984
Maintenance and other. . . . . . . . . . . . . . . . . 16,962 10,964
------------ ------------
Total revenue . . . . . . . . . . . . . . . . . . . 39,810 31,767
Cost of revenue:
Cost of software product sales . . . . . . . . . . . . 2,268 1,884
Cost of hardware product sales . . . . . . . . . . . . 5,761 4,988
Cost of maintenance and other. . . . . . . . . . . . . 8,656 6,911
------------ ------------
Total cost of revenue. . . . . . . . . . . . . . . . 16,685 13,783
------------ ------------
Gross profit . . . . . . . . . . . . . . . . . . . 23,125 17,984
------------ ------------
Operating expenses:
Research and development . . . . . . . . . . . . . . . 4,906 4,318
Selling, marketing and administrative . . . . . . . . 15,633 12,464
Merger costs . . . . . . . . . . . . . . . . . . . . . 66 1,153
Restructuring and other non-recurring charges. . . . . 3,106 1,809
------------ ------------
Total operating expenses . . . . . . . . . . . . . . 23,711 19,744
------------ ------------
Loss from operations . . . . . . . . . . . . . . . . . . (586) (1,760)
Other, net . . . . . . . . . . . . . . . . . . . . . . . 1,006 885
------------ ------------
Income (loss) before income taxes . . . . . . . . . . . 420 (875)
Provision for income taxes . . . . . . . . . . . . . . . 126 97
------------ ------------
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 294 $ (972)
============ ============
Income (loss) per common and common
equivalent share . . . . . . . . . . . . . . . . . . . $ 0.02 $ (0.06)
Weighted average number of common and common
equivalent shares outstanding. . . . . . . . . . . . . 17,932 16,947
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
LANDMARK GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1995 1994
-------- ---------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 294 $ (972)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,547 1,956
Amortization of goodwill/other assets . . . . . . . . . . . . . . . . . . . 476 50
Amortization of capitalized software development costs . . . . . . . . . . . 975 716
Restructuring charges/asset write-downs . . . . . . . . . . . . . . . . . . 463 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 569
Changes in assets and liabilities, net of the effects of purchased business:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,526 9,133
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (502) (2,118)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,052) 71
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 618
Accounts payable/accrued liabilities . . . . . . . . . . . . . . . . . . . . 1,764 1,153
Deferred maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . (1,052) (906)
Deferred income taxes/income taxes payable . . . . . . . . . . . . . . . . . (1,243) (1,329)
-------- ---------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 11,785 8,941
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,028) (2,171)
Payment for business acquisitions, net of cash acquired . . . . . . . . . . (945) (12,064)
Capitalized software development costs . . . . . . . . . . . . . . . . . . . (1,334) (808)
Payment of contingent earn-out agreement . . . . . . . . . . . . . . . . . . (1,808) -
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . 21 160
-------- ---------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (6,094) (14,883)
Cash flows from financing activities:
Reductions of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251) (305)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . 3,936 453
Issuance costs related to stock-based financing activities . . . . . . . . . - (90)
-------- ---------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . 3,685 58
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . 9,376 (5,884)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . 64,099 74,695
-------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . $ 73,475 $ 68,811
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of
Landmark Graphics Corporation and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the audited financial statements
and accompanying notes included in the Company's 1995 Annual Report on Form
10-K.
The consolidated financial statements for the three-month period ended
September 30, 1994 have been restated to give effect to acquisitions which have
been accounted for as poolings of interests (see "Acquisitions" below).
The unaudited consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the interim periods. Results for the
interim periods are not necessarily indicative of results for the year. All
significant intercompany balances and transactions have been eliminated.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
ACQUISITIONS
Tech Logic, Inc.
On September 20, 1995, the Company acquired all of the outstanding
common stock of Tech Logic, Inc. ("Tech Logic"), a Woodinville, Washington
based company. Tech Logic has developed an interactive, integrated 3D
geological modeling system known as IREX.
In connection with the acquisition, the Company issued a total of
74,637 shares of its Common Stock in exchange for all of the outstanding common
stock of Tech Logic in a transaction accounted for as a pooling of interests.
Due to the immateriality of this transaction and its effect on the historical
consolidated financial statements for prior periods, those statements have not
been restated to include the amounts of Tech Logic. The total revenue and net
income (does not include the $3.1 restructuring charge) amounts for the 30
days of post merger combined operations approximated $26.5 million and
$5.7 million, respectively.
GeoGraphix, Inc.
On June 5, 1995, the Company acquired all of the outstanding common
stock of GeoGraphix, Inc. ("GeoGraphix"), a Denver, Colorado based company, in
a transaction accounted for as a pooling of interests and, accordingly, the
consolidated financial statements for the three-month period ended September
30, 1994 have been restated to include the accounts of GeoGraphix.
4
<PAGE> 7
DRD Corporation
On February 28, 1995 the Company purchased certain assets and assumed
certain liabilities of DRD Corporation ("DRD") of Tulsa, Oklahoma in exchange
for cash consideration of approximately $5.8 million. The Company also incurred
accounting, legal and investment banking costs of approximately $600,000
related to the acquisition. The assets acquired primarily consisted of
drilling and completion engineering software applications as well as in-process
research and development activities. The acquisition was recorded using the
purchase method of accounting and, accordingly, the acquired operations have
been included in the results of operations since the date of acquisition.
MGI Associates, Inc.
On September 29, 1994, the Company purchased all the issued and
outstanding capital stock of MGI Associates, Inc., ("MGA), a Company based in
Dallas, Texas, which develops personal computer-based economics and reservoir
engineering software products designed to aid asset teams, including production
and drilling engineers, in oil and gas exploration. The Company acquired MGA
for consideration of approximately $13.3 million which consisted of cash of
$10.5 million paid to acquire the stock, $1.2 million paid to retire certain
related party debt and approximately $1.6 million of acquisition related costs.
The acquisition was recorded using the purchase method of accounting and,
accordingly, the acquired operations have been included in the results of
operations since the date of acquisition.
Stratamodel, Inc.
On September 28, 1994, the Company acquired all of the equity interests
of Stratamodel, Inc. ("Stratamodel"), a Houston, Texas based company, in a
transaction accounted for as a pooling of interests and, accordingly, the
financial statements for the three-month period ended September 30, 1994 have
been restated to include the amounts of Stratamodel.
Stratamodel's reservoir characterization and modeling software products
are designed to aid geoscientists in oil and gas exploration and production.
In connection with the acquisition, the Company issued a total of 413,911
shares of its Common Stock, in exchange for all of the equity interests of
Stratamodel, which included common stock, stock options and warrants. In
addition, the Company retired all of Stratamodel's outstanding debt of
approximately $510,000 and paid certain acquisition-related expenses of
Stratamodel of approximately $293,000.
5
<PAGE> 8
The revenues and net income (loss) amounts included in the
accompanying results of operations are disclosed in the following table with
Stratamodel's and GeoGraphix's amounts for the periods prior to the
acquisitions presented separately (in thousands) (unaudited):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
1995 1994
----------- ----------
(Restated)
<S> <C> <C>
Revenues
Company. . . . . . . . . . . . . $ 39,810 $ 28,404
Stratamodel. . . . . . . . . . . - 1,790
GeoGraphix . . . . . . . . . . . - 1,573
----------- ----------
Combined . . . . . . . . . . . $ 39,810 $ 31,767
=========== ==========
Net income (loss)
Company. . . . . . . . . . . . . $ 294 $ (639)
Stratamodel. . . . . . . . . . . - (441)
GeoGraphix . . . . . . . . . . . - 108
----------- ----------
Combined . . . . . . . . . . . $ 294 $ (972)
=========== ==========
</TABLE>
MERGER COSTS
Merger costs for the three months ended September 30, 1995 include the
accounting and legal costs related to the acquisition of Tech Logic. Merger
costs for the three months ended September 30, 1994 consisted primarily of the
accounting, legal and investment banking costs related to the completion of the
Stratamodel acquisition.
RESTRUCTURING CHARGES AND OTHER NON-RECURRING CHARGES
In July 1995, the Company completed a five-year strategic planning
process which concluded with the decision to proactively realign resources. A
restructuring charge of $3.1 million was recorded in the three months ended
September 30, 1995 to reflect severance costs for terminated employees,
facility consolidation and write-down of certain assets of the Company.
In connection with the Stratamodel acquisition in the first quarter of
fiscal 1995, the Company adopted a restructuring plan in the three months ended
three months ended September 30, 1994 designed to eliminate redundancies and
consolidate operations. Under the plan, the Company recorded approximately
$1.2 million in restructuring charges consisting of severance costs for
terminated employees and lease costs associated with duplicate facilities.
Additionally, non-recurring charges of approximately $600,000 were incurred in
connection with the acquisition including relocation and other
acquisition-related costs.
6
<PAGE> 9
INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Income per common and common equivalent share is computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period. Common stock equivalents include the number of
shares issuable upon exercise of stock options, less the number of shares that
could have been repurchased with the exercise proceeds using the treasury stock
method. In the case of a net loss, no shares are assumed to be issued upon
exercise of stock options because such shares would be antidilutive.
For purposes of the income per share computation, the shares issued in
exchange for the equity interests of pooled entities have been treated as if
they had been issued and outstanding for all periods presented.
CASH FLOW INFORMATION
Net cash provided by operating activities reflects cash payments for
interest and income taxes as follows (in thousands) (unaudited):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1995 1994
--------- ---------
(Restated)
<S> <C> <C>
Income taxes . . . . . . . . . . . . . . . . . $ 1,154 $ 1,251
Interest . . . . . . . . . . . . . . . . . . . 271 249
</TABLE>
During the three month periods ended September 30, 1995 and 1994, there
were non-cash financing activities of $1,014,000 and $159,000, respectively,
relating to tax benefits received from the exercise of non-qualified stock
options by employees.
CONTINGENCIES
Under the terms of the original MGA acquisition agreement, the Company
was obligated to make earn-out payments, based upon the financial performance
of MGA, over a period of four years with a net present value (as of July 1,
1994) of up to $6.0 million. On September 29, 1995, the stock purchase
agreement was amended to guarantee a total earn-out of $6.9 million,
conditional upon the results of an independent audit, and, payable over a
three-year period starting September 30, 1995.
Additionally, in connection with the MGA transaction, the Company
acquired an option to purchase the equity interests of a related party in
exchange for a line of credit guarantee. The option is exercisable no later
than October 31, 1997 at an exercise price which is based upon the related
party's financial results. In no event will the net present value of the
option price be less than $8.0 million.
7
<PAGE> 10
SUBSEQUENT EVENTS
On November 6, 1995, Landmark's Board of Directors approved a plan for
the Company to repurchase shares of its Common Stock on the open market. The
repurchase program is intended to minimize the dilutive effects of the
Company's employee stock option program on the Company's earnings per share.
The Company anticipates purchasing approximately 320,000 shares during the next
twelve months. The actual number of shares repurchased will depend upon
several factors, including the number of employee stock options exercised as
well as general market conditions and the Company's overall cash requirements.
On October 19, 1995, Landmark's Board of Directors approved employment
contracts for ten of Landmark's officers that would be invoked upon a change in
control of the Company. It is anticipated that these agreements will be
executed in December 1995.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Management's Discussion and Analysis of Financial Condition and
Results of Operations is the Company's analysis of its financial performance
and of significant trends which may impact future performance. It should be
read in conjunction with the consolidated financial statements of the Company
and the related notes thereto. On September 20, 1995, the Company acquired all
of the outstanding common stock of Tech Logic, Inc. ("Tech Logic") in an
acquisition accounted for as a pooling of interests. On June 5, 1995, the
Company acquired all of the outstanding common stock of GeoGraphix, Inc.
("GeoGraphix"), in an acquisition accounted for as a pooling of interests. On
February 28, 1995, the Company purchased certain assets and assumed related
liabilities of DRD Corporation ("DRD") in an acquisition accounted for as a
purchase. On September 29, 1994, the Company acquired all of the outstanding
common stock of MGI Associates, Inc. ("MGA") in an acquisition accounted for as
a purchase. On September 28, 1994, the Company acquired all of the equity
interests of Stratamodel, Inc. ("Stratamodel") in an acquisition accounted for
as a pooling of interests. Accordingly, the Company's consolidated financial
statements included elsewhere herein give effect to the acquisitions accounted
for as pooling of interests for all periods presented and include the results
of acquired operations accounted for as purchases and Tech Logic since dates
of acquisition. The following discussion should be read in conjunction with
the consolidated financial statements and related notes thereto.
The Company, incorporated in 1982, designs, markets and supports
software and systems which facilitate the exploration and production efforts of
oil and gas companies. The Company derives revenues from licensing software
products, providing related services and reselling hardware. Customers pay the
Company an initial license fee for the software, which is generally recognized
by the Company upon shipment. Customers have the option to pay an annual
maintenance fee, calculated as a percentage of current list price, which
entitles them to routine support and product updates. The Company generally
recognizes revenue related to customer support agreements ratably over the
contract period.
Many of the Company's customers are shifting from functional
organizations to interdisciplinary teams, which is creating the need for
integrated products and service sales. Accordingly, the Company's sales,
marketing and support organizations are currently being reconfigured to better
address the emerging solutions market. These solution sales have the longer
term potential of generating more recurring revenues, however, it can also
lengthen customers' decision-making processes.
The transition of the Company's sales organization will continue
throughout the current fiscal year. This transition may diminish the Company's
growth prospects for the fiscal year 1996 but will position the Company with
the ongoing prospects that the market has to offer over the longer term.
9
<PAGE> 12
RESULTS OF OPERATIONS
Total revenue. Total revenue for the first quarter of fiscal 1996
increased approximately $8.0 million, or 25 percent, as compared with the first
quarter of fiscal 1995. The increase is primarily due to a 55 percent growth
in maintenance and other sales.
Software product sales. Software product sales consist of licensing
fees for the Company's proprietary and third party software. Total software
product sales increased approximately $1.4 million, or 9 percent from the first
quarter of fiscal 1995. Software product revenue as a percentage of total
revenue decreased from the same period in the prior year; however, this revenue
will continue to be a significant portion of total revenue. Future growth in
software product sales is, in part, dependent upon the Company's ability to
bring innovative software products to the market ahead of its competitors.
Although the Company intends to introduce several new products during the
remainder of the fiscal year, there can be no assurance that these new products
will result in significant product revenue growth.
Hardware product sales. Hardware product sales relate to the resale
of third party computer hardware. Hardware product sales increased $690,000
from the first quarter of fiscal 1995. The increase in hardware product sales
was due primarily to a large international order which occurred in the current
quarter.
Maintenance and other. Maintenance and other revenue relate to
maintenance and support of the Company's hardware and software products as well
as revenue from other services, including consulting, offered to customers.
Maintenance and other revenue increased approximately $6.0 million, or 55
percent, in the first quarter of fiscal 1996 from the comparable period in
fiscal 1995. This increase is primarily attributable to increased software
support sales, which continue to increase due to the growth in Landmark's
installed base and the resulting growth in maintenance contracts.
Cost of software product sales. Cost of software product sales as a
percentage of software product sales increased from 13 percent in the first
quarter of fiscal 1995 to 14 percent in the current quarter. As the Company
develops and releases new products, software development costs and the related
amortization has and may continue to increase. This increased amortization has
negatively impacted the software product margin in the current quarter.
Cost of hardware product sales. Cost of hardware product sales as a
percentage of hardware product sales increased to 86 percent in the current
quarter compared to 83 percent in the prior year first quarter. The increase
is due to the Company's offering of sales discounts to customers in response to
competitive pressures, particularly in the United States market. As price
competitiveness in the computer hardware industry persists, discounts and the
resulting impact on hardware product margins may continue. Although hardware
contributes a lower margin, the Company plans to continue to offer hardware to
accommodate sales of software and services to customers who desire
comprehensive solutions.
10
<PAGE> 13
Cost of maintenance and other. Cost of maintenance and other has
decreased as a percentage of the related revenue from 63 percent in the first
quarter of fiscal 1995 to 51 percent in the current quarter. The favorable
impact on the maintenance and other margins was mainly attributable to the
increase in software support sales.
Research and development. Research and development costs increased
$588,000, or 14 percent, in the first quarter of fiscal 1996 compared to the
prior year first quarter. As a percentage of revenue, research and development
costs were 12 percent and 14 percent in the three months ended September 30,
1995 and 1994, respectively.
Selling, marketing and administrative. Selling, marketing and
administrative expenses increased approximately $3.2 million, or 25 percent,
for the first quarter of fiscal 1996 from the comparable period in the prior
year. The increase is primarily a result of increased costs associated from
the acquisitions accounted for as purchases and with expanding the scope of the
sales and distribution function, which included higher salary and other
personnel costs and commissions. Amortization of goodwill increased $426,000
in the first quarter of fiscal 1996 compared to the prior year fiscal quarter.
As a percentage of total revenue, these costs were 39 percent both in the
current quarter and in the comparable quarter in fiscal 1995.
Merger costs. Merger costs for the three months ended September 30,
1995, include the accounting and legal costs related to the acquisition of Tech
Logic. Merger costs for the three months ended September 30, 1994 consisted of
accounting, legal and investment banking costs related to the acquisition of
Stratamodel.
Restructuring and other non-recurring charges. In July 1995, the
Company completed a five-year strategic planning process which concluded with
the decision to proactively realign its resources. A restructuring charge of
$3.1 million was recorded in the three months ended September 30, 1995 to
reflect severance costs for terminated employees, facility consolidation and
write-down of certain assets of the Company.
In connection with the Stratamodel acquisition in the first quarter of
fiscal 1995, the Company adopted a restructuring plan designed to eliminate
redundancies and consolidate operations. Under the plan, the Company accrued
approximately $1.2 million of severance costs for terminated employees and
lease costs for duplicate facilities. Additionally, $600,000 of non-recurring
costs were recorded for relocation costs and other acquisition related charges.
Other, net. Other, net increased approximately $121,000 from the first
quarter of fiscal 1995 to the current quarter. This increase is primarily
attributable to foreign currency translation gains and interest income from
higher interest rates earned on invested cash balances.
Taxes. Provisions for income taxes of $126,000 and $97,000 were
recorded in the three months ended September 30, 1995 and 1994, respectively.
FINANCIAL CONDITION AND LIQUIDITY
Cash and cash equivalents increased approximately $9.4 million from
June 30, 1995. This increase is mainly attributable to net cash provided by
operating activities of $11.8 million for the three months ended September 30,
1995.
11
<PAGE> 14
Trade accounts receivable decreased by $10.1 million due primarily to
the lower revenue recognized in the first quarter of fiscal 1996 as compared
to the fourth quarter of fiscal 1995. Management continues its emphasis on
improving collections, which has impacted the trade accounts receivable
balance and reduced the significant fluctuations experienced in days sales
outstanding. Management intends to focus efforts on maintaining days sales
outstanding within a 95 to 100 day range.
Goodwill increased approximately $1.6 million from the balance at June
30, 1995. This amount primarily relates to an earn-out payment of $1.8 million
for MGA acquisition and represents the cost in excess of fair value of the net
assets acquired. The goodwill recorded will be amortized on a straight-line
basis over a period of seven years.
Accounts payable and accrued liabilities increased approximately
$2.1 million from June 30, 1995 due primarily to the timing of the receipt and
payment of vendor invoices. Based on the nature of these accounts, period to
period fluctuations can be expected to continue.
The Company's primary internal source of liquidity is cash flow
generated from operations. External sources of liquidity include debt and
equity financing. As of September 30, 1995, the Company had $14.0 million
available under a line of credit facility. The Company believes funds
generated from operations will be sufficient to meet liquidity requirements in
the foreseeable future.
Management continues to evaluate opportunities to acquire product
technologies or businesses complementary to the Company's business. These
acquisition opportunities may involve the use of cash or, depending upon the
size and terms of the acquisition, may require debt or equity financing.
Expenses associated with these potential acquisitions may have an adverse
impact on the Company's results of operations in the period the transactions
are consummated.
Subsequent to September 30, 1995, the Company made payments of
approximately $11.8 million to pay off the outstanding amounts of the line of
credit facility and other debt. This was done to improve the Company's net
interest income position and to allow maximum use of the line of credit for
future acquisitions.
12
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C> <C> <C> <C> <C>
Sequen-
tially (If applicable)
Numbered Incorporation by reference from
Exhibit number and description Page Form Date File No. Exhibit
- ------------------------------ ---- ---- ---- ---- --- -------
</TABLE>
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
<TABLE>
<S> <C> <C> <C> <C> <C>
2.1 Stock Purchase Agreement
by and among the Company,
MGI Associates, Inc.,
Munro Engineering, Inc.
and all of the Shareholders
of MGI Associates, Inc. N/A 8-K 09/29/04 0-17195 2.3
2.1(a) Addendum No. 1 to
Stock Purchase Agreement. ____ N/A N/A N/A N/A
2.1(b) Addendum No. 2 to
Stock Purchase Agreement. ____ N/A N/A N/A N/A
</TABLE>
(27) Financial Data Schedule
27.1 Financial data schedule as of and for the three months ended
September 30, 1995.
(99) Additional Exhibits
<TABLE>
<S> <C> <C> <C> <C> <C>
99.1 Rights Agreement, dated
as of September 1, 1995,
between the Registrant and
Chemical Bank. N/A 10-K 09/21/95 0-17195 99.4
</TABLE>
13
<PAGE> 16
(b) Reports on Form 8-K.
Form 8-K/A dated June 5, 1995 (filed on August 8, 1995) which
presented financial statements for the four-month periods ended
April 30, 1995 and 1994 and audited financial statements for the
years ended December 31, 1994 and 1993 for GeoGraphix, Inc. In
addition, Restated and Pro Forma Condensed Financial Statements of
the Company related to the ten-month periods ended April 30, 1995 and
1994 and the years ended June 30, 1994, 1993 and 1992 were included
to reflect the acquisition of GeoGraphix, Inc.
Form 8-K dated August 10, 1995 which presented Restated Selected
Financial Data, Restated Management's Discussion and Analysis of
Financial Condition and Results of Operations and Restated
Consolidated Financial Statements and Schedules of the Company
related to the years ended June 30, 1994, 1993 and 1992 to reflect
the acquisitions of GeoGraphix, Inc. and Stratamodel, Inc.
14
<PAGE> 17
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.
LANDMARK GRAPHICS CORPORATION
Date: November 10, 1995 By: /s/ Robert P. Peebler
------------------------------------------
Robert P. Peebler
President and Chief Executive
Officer
By: /s/ William H. Seippel
------------------------------------------
William H. Seippel
Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<PAGE> 18
LANDMARK GRAPHICS CORPORATION
INDEX TO EXHIBITS
2.1(a) Addendum No. 1 to Stock Purchase Agreement.
2.1(b) Addendum No. 2 to Stock Purchase Agreement.
27.1 Financial data schedule as of and for the three monthe ended
September 30, 1995.
<PAGE> 1
EXHIBIT 2.1(a)
ADDENDUM NO. 1
TO
STOCK PURCHASE AGREEMENT
This addendum (the "Addendum"), dated June 30, 1995, by and among
Landmark Graphics Corporation, a Delaware corporation ("Landmark"), MGI
Associates, Inc., a Texas corporation ("MGA"), and the other persons and
entities whose signatures appear upon this Addendum (the "Former
Shareholders"), relates to and is intended to amend that certain Stock Purchase
Agreement, dated September 29, 1994, by and among Landmark, MGA and the Former
Shareholders (the "Master Agreement"), and evidences that, in consideration of
the mutual obligations and covenants set forth herein, the parties hereto agree
as follows:
ARTICLE I
GENERAL
SECTION 1.1 RELATION TO MASTER AGREEMENT. Capitalized terms used but
not defined herein are used as defined in the Master Agreement. Except as
modified herein, the Master Agreement will remain in full force and effect in
accordance with the terms thereof. In the event of any conflict between the
terms and conditions of the Master Agreement and the terms and conditions of
this Addendum, the terms and conditions of this Addendum will govern and
control.
SECTION 1.2 AMENDMENT OF THE MASTER AGREEMENT. The definition of
"Actual Operating Income" set forth in Section 3.1 of the Master Agreement is
hereby amended by adding the following sub-paragraph:
"(d) If for any Earnout Period (hereinafter referred to in
this sub-paragraph (d) as the "Current Earnout Period"), other than the Earnout
Period ending June 30, 1995, the Actual Operating Income of MGA (calculated
without regard to the provisions of this sub-paragraph (d)) is less than its
Minimum Operating Income and during the immediately preceding Earnout Period
(hereinafter referred to in this sub-paragraph (d) as the "Prior Earnout
Period") the Actual Operating Income of MGA (calculated without regard to the
provisions of this sub-paragraph (d)) was greater than its Targeted Operating
Income for the Prior Earnout Period, the Actual Operating Income of MGA for the
Current Earnout Period (calculated without regard to the provisions of this
sub-paragraph (d)) will be increased by an amount equal to the result of
subtracting the Targeted Operating Income of MGA for the Prior Earnout Period
from the Actual Operating Income of MGA for the Prior Earnout Period
(calculated without regard to the provisions of this sub-paragraph (d))."
<PAGE> 2
ARTICLE II
MISCELLANEOUS
SECTION 2.1 COUNTERPARTS. This Addendum may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Addendum will be considered
fully executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
SECTION 2.2 SEVERABILITY. If any of the provisions of this Addendum
are determined to be invalid or unenforceable, such invalidity or
unenforceability will not invalidate or render unenforceable the remainder of
this Addendum, but rather the entire Addendum will be construed as if not
containing the particular invalid or unenforceable provision or provisions,
and the rights and obligations of the parties will be construed and enforced
accordingly. The parties acknowledge that if any provision of this Addendum
is determined to be invalid or unenforceable, it is their desire and intention
that such provision be reformed and construed in such manner that it will, to
the maximum extent practicable, be deemed to be valid and enforceable.
-2-
<PAGE> 3
IN WITNESS WHEREOF, Landmark, MGA and the Former Shareholders have
executed this Agreement as of the date first written above.
LANDMARK GRAPHICS CORPORATION
By: WILLIAM H. SEIPPEL
__________________________
Its: Vice President, Finance
_______________________
MGI ASSOCIATES. INC.
By: FRANK D. McCORDIE
____________________________
Name: Frank D. McMordie
Title: President
MUNRO ENGINEERING INC.
By: RODERICK G. MUNRO
____________________________
Name: Roderick G. Munro
Title: President
/s/ FRANK D. McMORDIE
____________________________
Frank D. McMordie
Eppler, Guerin & Turner, Inc. as
Custodian for the benefit of
Frank D. McMordie
By: MAX R. McCASKILL
____________________________
Name: Max R. McCaskill
Title: Vice President
-3-
<PAGE> 4
/s/ ELIZABETH McMORIDE-SCHMIDT Eppler, Guerin & Turner, Inc. as
_______________________________ Custodian for the Benefit of
Elizabeth McMordie-Schmidt Stephen H. Jaffe
/s/ JENNIFER L. McMORDIE
_______________________________
Jennifer L. McMordie By: MARK L. McMORDIE
________________________________
Mark L. McMordie
Name: Mark L. McMordie
/s/ CHRISTOPHER L. McMORDIE Title: Vice President
_______________________________
Christopher L. McMordie
/s/ THEODORE S. ROZSA
_____________________________________
Theodore S. Rozsa
/s/ HELEN LINDSLEY
_______________________________
Helen Lindsley
Vendanges Investments, Inc.
/s/ GORDON R. BAYSTROM
_______________________________ By: RODERICK G. MUNRO
Gordon R. Baystrom _________________________________
Name: Roderick G. Munro
Title: President
Eppler, Guerin & Turner, Inc.
As Custodian for the Benefit of
Gordon R. Baystrom Calyx Investments, Ltd.
By: MAX L. McMORDIE By: IAN MILLS
___________________________ _________________________________
Name: Max L. McMordie Name: Ian Mills
Title: Vice President Title: Vice President
/s/ GUY M. HUMPHRIES, JR. /s/ JAMES R. LOVETT
_______________________________ _____________________________________
Guy M. Humphries, Jr. James R. Lovett
Eppler, Guerin & Turner, Inc. /s/ KIRK D. HANES
As Custodian for the Benefit of _____________________________________
Guy M. Humphries, Jr. Kirk D. Hanes
By: MAX R. McCASKILL /s/ DEBORAH CLOSE
___________________________ _____________________________________
Name: Max R. McCaskill Deborah Close
Title: Vice President
/s/ STEPHEN H. JAFFE
_______________________________
Stephen H. Jaffe
-4-
<PAGE> 5
/s/ GRANT GENEREUX /s/ IAN LEITCH
_________________________________ _________________________________
Grant Genereux Ian Leitch
/s/ DOUG SPACKMAN /s/ ROBERT PATTERSON
_________________________________ _________________________________
Doug Spackman Robert Patterson
/s/ DAVE SAVELLE /s/ KEVIN ROBINSON
_________________________________ _________________________________
Dave Savelle Kevin Robinson
/s/ GREG ROY /s/ BRIAN JANZEN
_________________________________ _________________________________
Greg Roy Brian Janzen
/s/ JIM BURGLIN /s/ PRESTON NALDER
_________________________________ _________________________________
Jim Burglin Preston Nalder
/s/ DAN BEWS /s/ RICHARD WARD
_________________________________ _________________________________
Dan Bews Richard Ward
-5-
<PAGE> 1
EXHIBIT 2.1(b)
ADDENDUM NO. 2 TO STOCK PURCHASE AGREEMENT
This Addendum (the "Addendum"), dated effective as of this 29th day of
September 1995, by and between Landmark Graphics Corporation, a Delaware
corporation ("Landmark"), and the former owners (the "Earnout Recipients") of
the Class A Common Shares, no par value per share, of MGI Associates, Inc., a
Texas corporation ("MGA"), evidences that,
WHEREAS, Landmark and the Earnout Recipients are parties to that certain
Stock Purchase Agreement, dated as of September 29,1994, as amended by
Addendum No. 1 to the Stock Purchase Agreement (the "Stock Purchase
Agreement");
WHEREAS, Article 4 of the Stock Purchase Agreement contemplated that
Landmark would, based upon the financial performance of MGA, make payments of
money to the Earnout Recipients;
WHEREAS, Landmark and the Earnout Recipients desire to amend the Stock
Purchase Agreement to eliminate the financial performance of MGA as a factor in
determining when and the extent to which such payments are to be made by
Landmark;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
GENERAL
SECTION 1.1 RELATION TO STOCK PURCHASE AGREEMENT. Capitalized terms
used but not defined herein are used as defined in the Stock Purchase
Agreement. Except as modified herein, the Stock Purchase Agreement will remain
in full force and effect in accordance with the terms thereof. In the event of
any conflict between the terms and conditions of the Stock Purchase Agreement
and the terms and conditions of this Addendum, the terms and conditions of this
Addendum will govern and control.
SECTION 1.2 AMENDMENT OF ARTICLES 3 AND 4. Articles 3 and 4 of the
Stock Purchase Agreement are hereby amended to read in their entirety as set
forth on Exhibit 1.2 attached hereto and incorporated herein by reference.
SECTION 1.3 CONTINUATION OF THE STOCK PURCHASE AGREEMENT. Except as
amended by this Addendum, the Stock Purchase Agreement will remain in full
force and effect, in accordance with its terms.
SECTION 1.4 NO DUPLICATE PAYMENTS. Nothing contained in this Addendum
will be deemed to obligate Landmark to make more than one (1) payment with
respect to the
<PAGE> 2
Earnout Period ending June 30, 1995. Such payment will be made on or before
September 30, 1995 and will be made in an amount equal to $1,808,095.00.
SECTION 1.5 AUDIT OF RESULTS OF OPERATIONS. On or before October 30,
1995, Landmark will cause the revenues of MGA and its subsidiaries for the
fiscal year ending June 30, 1995 to be audited by Arthur Andersen LLP. Such
audit will be performed in accordance with generally accepted auditing
standards, consistently applied. Landmark's obligations pursuant to this
Addendum are conditioned upon the results of that audit being in substantial
agreement with the unaudited revenues previously reported by MGA and its
subsidiaries to Landmark with respect to such period.
ARTICLE 11
MISCELLANEOUS
SECTION 2.1 ENTIRE AGREEMENT. This Addendum and the agreements,
instruments and documents contemplated by this Addendum represent the parties'
entire agreement with respect to the subject matter of this Addendum and such
other agreements, instruments and documents and supersede and replace any prior
agreement or understanding with respect to that subject matter. This Addendum
may not be amended or supplemented except pursuant to a written instrument
signed by the party against whom such amendment or supplement is to be
enforced.
SECTION 2.2 COUNTERPARTS. This Addendum may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Addendum will be considered
fully executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
SECTION 2.3 SEVERABILITY. If any of the provisions of this
Addendum are determined to be invalid or unenforceable, such invalidity or
unenforceability will not invalidate or render unenforceable the remainder of
this Addendum, but rather the entire Addendum will be construed as if not
containing the particular invalid or unenforceable provision or provisions, and
the rights and obligations of the parties will be construed and enforced
accordingly. The parties acknowledge that if any provision of this Addendum is
determined to be invalid or unenforceable, it is their desire and intention
that such provision be reformed and construed in such manner that it will, to
the maximum extent practicable, be deemed to be valid and enforceable.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Addendum
effective as of the date first above written.
LANDMARK GRAPHICS CORPORATION
By: /s/ WILLIAM H. SEIPPEL
___________________________________
Name: William H. Seippel
Title: VP, Finance & CFO
/s/ FRANK D. MCMORDIE
_______________________________________
Frank D. McMordie
Eppler, Guerin & Turner, Inc. as
Custodian for the benefit of
Frank D. McMordie
By: /s/ MARK R. McCASKILL
____________________________________
Name: Mark R. McCaskill
Title: Vice President
-3-
<PAGE> 4
/s/ ELIZABETH McMORDIE-SCHMIDT /s/ STEPHEN H. JAFFE
_______________________________ ____________________________________
Elizabeth McMordie-Schmidt STEPHEN H. JAFFE
Eppler, Guerin & Turner, Inc. as
Custodian for the Benefit of
Stephen H. Jaffe
/s/ JENNIFER L. McMORDIE
_______________________________
Jennifer L. McMordie By: MAX R. McCASKILL
________________________________
Name: Max R. McCaskill
Title: Vice President
/s/ CHRISTOPHER L. McMORDIE
_______________________________
Christopher L. McMordie
/s/ THEODORE S. ROZSA
_____________________________________
Theodore S. Rozsa
/s/ HELEN LINDSLEY
_______________________________
Helen Lindsley
Vendanges Investments, Inc.
/s/ GORDON R. BAYSTROM
_______________________________ By: RODERICK G. MUNRO
Gordon R. Baystrom _________________________________
Name: Roderick G. Munro
Title: President
Eppler, Guerin & Turner, Inc.
As Custodian for the Benefit of
Gordon R. Baystrom Calyx Investments, Ltd.
By: MAX R. McCASKILL By: JAN MILLS
___________________________ _________________________________
Name: Max R. McCaskill Name: Jan Mills
Title: Vice President Title: Vice President
/s/ GUY M. HUMPHRIES, JR. /s/ JAMES R. LOVETT
_______________________________ _____________________________________
Guy M. Humphries, Jr. James R. Lovett
Eppler, Guerin & Turner, Inc.
As Custodian for the Benefit of /s/ KIRK D. HANES
Guy M. Humphries, Jr. _____________________________________
Kirk D. Hanes
By: MAX R. McCASKILL
___________________________
Name: Max R. McCaskill /s/ DEBORAH CLOSE
Title: Vice President _____________________________________
Deborah Close
-4-
<PAGE> 5
/s/ GRANT GENEREUX /s/ IAN LEITCH
_________________________________ _________________________________
Grant Genereux Ian Leitch
/s/ DOUG SPACKMAN /s/ ROBERT PATTERSON
_________________________________ _________________________________
Doug Spackman Robert Patterson
/s/ DAVE SAVELLE /s/ KEVIN ROBINSON
_________________________________ _________________________________
Dave Savelle Kevin Robinson
/s/ GREG ROY /s/ BRIAN JANZEN
_________________________________ _________________________________
Greg Roy Brian Janzen
/s/ JIM BURGLIN /s/ PRESTON NALDER
_________________________________ _________________________________
Jim Burglin Preston Nalder
/s/ DAN BEWS /s/ RICHARD WARD
_________________________________ _________________________________
Dan Bews Richard Ward
-5-
<PAGE> 6
EXHIBIT 1.2
ARTICLE 3
CERTAIN DEFINITIONS
3.1 Certain Definitions. For purposes of this Agreement, each
capitalized term listed below shall have the meaning set opposite such term
below:
"Closing" shall mean the consummation of the purchase and sale of the
MGA Stock and the ME1 Shares contemplated by this Agreement, the payment
of the Class A Shares Cash Consideration, the Class B Shares Purchase
Price and the MEI Shares Purchase Price, and the execution and delivery
of the other agreements and documents, and the completion, effectuation,
and performance of the other acts and actions contemplated by Article 13
hereof.
"Closing Date" shall have the meaning specified in Section 13.1 hereof.
"Earnout Payments" shall mean, with respect to each Earnout Period, the
amount set forth opposite such Earnout Period in the following table:
Earnout Period ending June 30 Earnout Payment
----------------------------- ---------------
1995 $ 1,808,095
1996 $ 2,248,150
1997 $ 2,843,755
It is understood and agreed that notwithstanding the use of the term
"Earnout Payments" the above-referenced payments are not in any manner
dependent upon or to be determined with reference to the financial or
other performance of MGA or any other entity.
"Eamout Period" shall mean each applicable twelve-month period ending
June 30, 1995, 1996 or 1997.
"Eamout Recipient" shall mean each Person which was a holder of Class A
Shares immediately prior to the Closing Date.
"Person" shall mean any individual, or any corporation, partnership,
trust, or other entity.
EXHIBIT 1.2 - ARTICLES 3 AND 4 - Page 1
<PAGE> 7
ARTICLE 4
EARNOUT PAYMENTS
4.1 Payment of Earnout Payments.
(a) Payments. The Earnout Payments for each Earnout Period shall be
paid by Landmark on the September 30 immediately following the end of such
Earnout Period (the "Earnout Payment Date") and shall be accompanied by a
Statement of Claim (as hereinafter defined). Earnout Payments shall be made to
each of the Earnout Recipients in proportion to the number of Class A Shares
each Earnout Recipient owned immediately prior to the Closing Date. Each
Earnout Payment shall be made by check or by wire transfer if requested.
(b) Adjustments. If a claim is made with respect to the
representations and warranties set forth in Article 6 of this Agreement or the
covenants of MGA set forth in this Agreement, the remaining Earnout Payments
(net of all previous adjustments made pursuant to this Section 4.1 (b)) shall
be reduced by the amount of the claim (the "Claim Amount"). If the amount of
the remaining Earnout Payments (net of all previous adjustments made pursuant
to this Section 4.1 (b)) is greater than the Claim Amount, Landmark shall
(after such reduction) have no further rights against the Shareholders with
respect to such claim. If the Claim Amount exceeds the amount of the
remaining Earnout Payments (net of all previous adjustments made pursuant to
this Section 4.1(b)), the Warranting Shareholders shall pay such excess to
Landmark pursuant to their respective Indemnity Agreements (as hereinafter
defined).
4.2 No Assignment of Earnout Payments. The right to receive
Earnout Payments shall not be assignable except by will and the laws of
intestate succession, or otherwise by operation of law.
4.3 Statement of Claim. In the event Landmark asserts a claim
pursuant to Section 4.1, Landmark shall promptly provide each Earnout
Recipient and the Sellers' Representative a statement (a "Statement of Claim")
describing its claim and the method of its calculation. Any such Claim
Statement shall also set forth the effect of such claim upon the remaining
Earnout Payments. If within thirty (30) days after delivery of the Statement
of Claim to the Earnout Recipients (including Sellers' Representative),
Sellers' Representative or one or more of the Warranting Shareholders has not
given written notice to Landmark disputing such Statement of Claim and
indicating the basis of such dispute, such Statement of Claim will be deemed
to be conclusive with respect to such claim and its effects upon the remaining
Earnout Payments. In the event Landmark receives such notice of dispute
within such 30-day period, Sellers' Representative and Landmark will use their
best efforts to settle the dispute within thirty (30) days after the giving of
such notice.
EXHIBIT 1.2 - ARTICLES 3 AND 4 - Page 2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly filing on Form 10-Q for the period ended September 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 73,475
<SECURITIES> 0
<RECEIVABLES> 44,229
<ALLOWANCES> 1,560
<INVENTORY> 4,747
<CURRENT-ASSETS> 138,184
<PP&E> 82,177
<DEPRECIATION> 35,666
<TOTAL-ASSETS> 214,760
<CURRENT-LIABILITIES> 37,394
<BONDS> 10,756
<COMMON> 871
0
0
<OTHER-SE> 163,083
<TOTAL-LIABILITY-AND-EQUITY> 214,760
<SALES> 22,848
<TOTAL-REVENUES> 39,810
<CGS> 8,029
<TOTAL-COSTS> 16,685
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 389
<INTEREST-EXPENSE> 258
<INCOME-PRETAX> 420
<INCOME-TAX> (126)
<INCOME-CONTINUING> 294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 294
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
