<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 7, 1997
SYSTEM SOFTWARE ASSOCIATES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-15322 36-3144515
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(Commission File Number) (I.R.S. Employer Identification No.)
500 West Madison
Chicago, Illinois 60661
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(Address of principal executive offices) (Zip Code)
(312) 258-6000
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former name of former address, if changed since last report.)
<PAGE>
ITEM 5. OTHER EVENTS
On January 7, 1997, the Registrant issued (i) a press release announcing a
change in accounting method and its results of operations for the fourth quarter
and year ended October 31, 1996 and (ii) a press release announcing restated
financial results for fiscal years ended October 31, 1994 and 1995.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press Release dated January 7, 1997 Re: Fiscal 1996.
99.2 Press Release dated January 7, 1997 Re: Fiscal 1995 and 1994.
<PAGE>
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 hereunto duly authorized.
SYSTEM SOFTWARE ASSOCIATES, INC.
Date: January 10, 1997 BY: /s/ Joseph J. Skadra
--------------------------------------
Joseph J. Skadra, Chief Financial
Officer
<PAGE>
EXHIBIT 99.1
[Logo of System Software Associates, Inc. Appears Here] NEWS RELEASE
- --------------------------------------------------------------------------------
Corporate Headquarters
500 West Madison - Chicago, Illinois, U.S.A. 60661 - Telephone: (312) 258-6000
Facsimile: (312) 474-7500
SSA Announces Change in Accounting Method, 1996 Results
CHICAGO--Jan. 7, 1997--System Software Associates, Inc.
(NASDAQ:SSAX) announced today a change in accounting method for revenue
recognition and results for 1996 in light of that change.
Joseph J. Skadra, Chief Financial Officer of SSA, said, "After consultation
with the Company's new independent auditors, KPMG Peat Marwick LLP, the Company
decided to change its accounting for reseller agreements so that revenue is
recorded at the time of sale to the end user. Reseller agreements are common in
the software industry, and this change of method makes for a more conservative
accounting practice."
Roger E. Covey, CEO and Chairman, commented that "the net effect of this
change in accounting method was to take approximately $46 million of revenue and
associated income out of 1996 and push it into later accounting periods. This
included a reduction in fourth quarter 1996 revenue of approximately $12
million."
With the change in accounting method, revenue for the fourth fiscal quarter
ended October 31, 1996 was $109.4 million, as compared to $122.7 million in the
same period of the prior year. Earnings per share showed a loss for the quarter
of $.13 per share as compared with a profit of $.35 per share in the prior year.
Fourth quarter expenses were affected by a substantial increase in reserves for
warranty and doubtful accounts as well as accounts receivable write-offs, which
altogether totaled $10.5 million.
Roger E. Covey, SSA CEO and Chairman, said: "We were very pleased with the
strong sequential growth in our software license revenue, despite very
disappointing results in Europe. Software license fee revenue rose to $81.6
million, up 81% from the third quarter, reflecting early success from our
roll-out of BPCS Client/Server version 6.0. We had the best ever quarter in our
North America operations, as well as strong results in the Asia Pacific region.
The success of our North America and Asia Pacific business was the result of
strong marketplace acceptance of BPCS Client/Server version 6.0. This strong
acceptance validates both SSA's product strategy and product delivery."
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Year Ended
October October Percent October October Percent
31, 31, Change 31, 31, Change
1996 1995(1) 1996 1995(1)
---------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $ 109.4 $ 122.7 (10.8) $ 340.8 $ 374.1 (8.9)
License Fees 81.5 91.6 (11.0) 226.7 250.0 (9.3)
Client Services & Other 27.9 31.1 (10.3) 114.1 124.1 (8.1)
Income Before Income Taxes and
Minority Interest (8.9) 23.2 N.A. (51.4) 40.9 N.A.
Net Income (5.7) 15.3 N.A. (32.8) 26.6 N.A.
Earnings per Share $(0.13) $0.35 N.A. $(0.76) $0.63 N.A.
</TABLE>
(1) As restated
In the fourth quarter SSA also had its best ever cash collection quarter.
At quarter end cash balances stood at over $38 million, up form $19 million at
the beginning of the quarter. Accounts Receivable, net of reserves, declined by
$23 million during the quarter. Days sales outstanding declined from 205 to
193.
Finally, Mr. Covey concluded that: "SSA is brilliantly positioned to
compete and grow in the global market for industrial sector enterprise systems.
The recent strong marketplace acceptance of BPCS Client/Server version 6.0
validates both our product and technology strategies. Our worldwide pipeline of
new business opportunities is far and away the largest in the history of the
Company. We enter our new fiscal year with strong momentum and great
confidence."
The change in accounting method also affected the first three quarters of
fiscal 1996 as follows:
<TABLE>
<CAPTION>
January January April April July July
31, 31, 30, 30, 31, 31,
1996 as 1996 as 1996 as 1996 as 1996 as 1996 as
reported adjusted reported adjusted reported adjusted
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $ 87.8 $ 76.6 102.1 $ 82.5 $ 75.3 $ 72.2
License Fees 59.3 48.1 71.5 51.9 48.2 45.1
Client Services & Other 28.5 28.5 30.6 30.6 27.1 27.1
Income Before Income Taxes and
and Minority Interest 4.5 (.7) .4 (10.1) (29.9) (31.6)
Net Income 2.9 (.4) .3 (6.4) (19.1) (20.2)
Earnings per share $ 0.07 $(0.01) $0.01 $(0.15) $(0.44) $(0.47)
</TABLE>
<PAGE>
SYSTEM SOFTWARE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Three Months Ended
October 31, Year Ended
(unaudited) October 31,
-------------------- ------------------
As As
Restated Restated
1996(A) 1995 1996(A) 1995
-------------------- ------------------
Revenues:
License fees $ 81.5 $ 91.6 $ 226.7 $ 250.0
Client services and other 27.9 31.1 114.1 124.1
------- ------- -------- --------
Total revenues 109.4 122.7 340.8 374.1
------- ------- -------- --------
Costs and Expenses:
Cost of license fees 23.5 18.4 66.9 64.9
Cost of client services
and other 24.2 20.5 89.0 76.8
Sales and marketing 32.4 29.7 103.8 87.6
Research and development 16.2 11.2 54.4 40.2
General and administrative 27.8 19.6 85.5 63.5
------- ------- -------- --------
Total costs and expenses 124.1 99.4 399.6 333.0
------- ------- -------- --------
Operating income (loss) (14.7) 23.3 (58.8) 41.1
Gain on sale of available-
for-sale securities 9.5 - 13.1 -
Other non-operating income
(expense), net (3.7) (0.1) (5.7) (0.2)
-------- ------- -------- --------
Income (loss) before income
taxes and minority interest (8.9) 23.2 (51.4) 40.9
Provision (benefit) for
income taxes (3.2) 7.9 (18.6) 14.2
-------- ------- -------- --------
Income (loss) before minority
interest (5.7) 15.3 (32.8) 26.7
Minority interest - - - (0.1)
------- ------- -------- --------
<PAGE>
Net income (loss) $ (5.7) $ 15.3 $(32.8) $ 26.6
======= ======= ======= =======
Earnings (loss) per
share ($0.13) $ 0.35 ($0.76) $ 0.63
======= ======= ======= =======
Dividends per share $ - $ - $ 0.10 $ 0.08
======= ======= ======= =======
Weighted average common
and equivalent shares
outstanding 42.9 42.8 43.0 42.2
======= ======= ======= =======
(A) After giving effect to change in accounting method retroactive to beginning
of year.
<PAGE>
SYSTEM SOFTWARE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(in millions)
As Restated
October 31, October 31,
1996 1995
----------- -----------
CURRENT ASSETS
Cash and equivalents $ 38.1 $ 57.1
Accounts receivable, less
allowance for doubtful accounts
of $16.5 and $12.5 163.6 184.6
Income taxes receivable 4.4 -
Deferred income taxes 10.1 7.0
Prepaid expenses and other
current assets 25.5 21.3
--------- ---------
Total current assets 241.7 270.0
--------- ---------
PROPERTY and EQUIPMENT:
Data processing equipment 37.3 30.9
Furniture and office equipment 18.7 14.1
Leasehold improvements 9.0 7.8
Transportation equipment 2.3 2.8
--------- ---------
67.3 55.6
Less - Accumulated depreciation
and amortization 39.5 31.3
--------- ---------
Total property and equipment 27.8 24.3
--------- ---------
OTHER ASSETS:
Software costs, less accumulated
amortization of $61.1 and $41.1 82.8 59.0
Cost in excess of net assets of
acquired businesses, less
accumulated amortization of
$8.7 and $6.0 22.8 18.2
Deferred income taxes 1.2 -
Investments in associated companies 2.2 16.5
Miscellaneous 5.9 5.2
--------- ---------
Total other assets 114.9 98.9
--------- ---------
TOTAL ASSETS $ 384.4 $ 393.2
========= =========
<PAGE>
SYSTEM SOFTWARE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(in millions, except share data)
As Restated
October 31, October 31,
1996 1995
----------- ------------
CURRENT LIABILITIES:
Short term borrowings and current
maturities of senior notes payable $ 72.4 $ 4.0
Accrued commissions and royalties 26.3 28.7
Accounts payable and other accrued
liabilities 62.5 46.9
Accrued compensation and related
benefits 23.8 23.5
Deferred revenue 58.8 61.7
Income taxes payable - 12.9
--------- --------
Total current liabilities 243.8 177.7
--------- --------
LONG-TERM OBLIGATIONS 2.7 33.9
--------- --------
DEFERRED REVENUE 27.7 27.3
--------- --------
DEFERRED INCOME TAXES - 9.9
--------- --------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES - 1.0
--------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
100,000 shares authorized, none
issued or outstanding - -
Common stock, $.0033 par value,
60,000,000 shares authorized,
42,577,000 and 42,094,500 shares
issued 0.1 0.1
Capital in excess of par value 32.8 26.1
Retained earnings 78.5 115.5
Unrealized gain on available-for-
sale securities - 2.5
Cumulative translation adjustment (1.2) (0.8)
--------- --------
<PAGE>
Total stockholders' equity 110.2 143.4
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 384.4 $ 393.2
======== ========
The industry leader in the continuing evolution of distributed object
software, SSA is the top provider of cost-effective business enterprise
information systems to the industrial sector worldwide. SSA's product line BPCS
Client/Server provides business process re-engineering and integration of all
operations, including multi-mode manufacturing processes, supply chain
management, and global financial solutions. The BPCS client/Server solution
delivers unparalleled agility, interoperability and reconfigurability to meet
changing market demands in its comprehensive product suite. The distributed
object computing architecture of BPCS Client/Server provides the benefits of
next generation technology in conformance with industry standards. SSA and its
business partners provide full implementation support for BPCS Client/Server in
over 70 countries.
CONTACT: System Software Associates, Inc., Chicago
Investor Relations: Joseph J. Skadra, 312/258-6000
Facsimile: 312/474-7500
Corporate: Roger E. Covey, 312/258-6000
Facsimile: 312/474-7500
[email protected]
<PAGE>
EXHIBIT 99.2
[Logo of System Software Associates, Inc. Appears Here] NEWS RELEASE
- ----------------------------------------------------------------------------
Corporate Headquarters
500 West Madison - Chicago, Illinois, U.S.A. 60661 - Telephone: (312)258-6000-
Facsimile: (312) 474-7500
SSA Announces Restated Financial Results for 1994, 1995
CHICAGO--Jan. 7, 1997--System Software Associates, Inc.
(NASDAQ: SSAX) announced today the restatement of its 1994 and 1995 results.
The restatement of fiscal 1994 reflects the reversal of $10.1 million in
revenues from a software contract originally recognized by the Company in the
third quarter of fiscal 1994.
The fiscal 1995 financial statements have been restated to reflect the
reversal of revenues primarily with respect to two items. The first item
involved $5.0 million in revenues originally recognized in the third quarter of
fiscal 1995 from the final two installment payments of a four installment
payment contract. $1.6 million of the revenue from these installments has been
recognized in fiscal 1996. The second item involved $15.0 million in revenue
originally recognized in the third and fourth quarters of fiscal 1995 from two
related Latin America reseller agreements. Revenues reversed in 1995 and not
recorded in 1996 will be booked in subsequent periods.
The Company has restated its fiscal 1994 and 1995 financial statements
after lengthy discussions between the Company and Price Waterhouse LLP ("PW"),
the Company's former independent public accountants. The restatements reflect
the resolution of disagreements between the Company and PW as to the appropriate
accounting with respect to the items in question.
As a result of the restatement of fiscal 1994, the Company reported
revenues of $324.3 million and net income of $10.0 million in fiscal 1994,
compared to revenues of $334.4 million and net income of $15.4 million, as
originally reported. As a result of the restatement of fiscal 1995, the Company
reported revenues of $374.1 million and net of $26.6 million in fiscal 1995,
compared to revenues of $394.4 million and net income of $34.1 million as
originally reported.
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
Original Presentation
(in millions, except per share data)
Three Months Ended Year Ended
1994 January 31 April 30 July 31 October 31 October 31
---------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
License Fees $45.4 $49.2 $63.1 $81.8 $239.5
Client Services
and other 21.0 22.8 23.1 28.0 94.9
---------- -------- ------- ---------- ----------
Total Revenue $66.4 $72.0 $86.2 $109.8 $334.4
========== ======== ======= ========== ==========
Income Before
Income Taxes and
Minority Interest $1.7 $3.8 $8.1 $10.2 $23.8
Net Income $1.2 $2.6 $5.4 $6.2 $15.4
Earnings
Per Share $0.03 $0.07 $0.13 $0.15 $0.38
Stockholders
Equity $98.9 $101.7 $107.3 $114.7 $114.7
Selected Financial Data
Restated Presentation
(in millions, except per share data)
Three Months Ended Year Ended
1994 January 31 April 30 July 31 October 31 October 31
---------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
License Fees $45.4 $49.2 $53.3 $81.8 $229.7
Client Services
and other 21.0 22.8 22.8 28.0 94.6
---------- -------- ------- ---------- ----------
Total Revenue $66.4 $72.0 $76.1 $109.8 $324.3
========== ======== ======= ========== ==========
Income Before
Income Taxes and
Minority Interest $1.7 $3.8 (0.3) $10.2 $15.4
Net Income $1.2 $2.6 $ -0- $6.2 $10.0
Earnings
Per Share $0.03 $0.07 $0.00 $0.15 $0.25
Stockholders
Equity $98.9 $101.7 $101.9 $109.3 $109.3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
Original Presentation
(in millions, except per share data)
Three Months Ended Year Ended
1995 January 31 April 30 July 31 October 31 October 31
---------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
License Fees $49.0 $52.1 $72.3 $96.6 $270.0
Client Services
and other 28.4 32.2 32.7 31.1 124.4
---------- -------- ------- ---------- ----------
Total Revenue $77.4 $84.3 $105.0 $127.7 $394.4
========== ======== ======= ========== ==========
Income Before
Income Taxes and
Minority Interest $2.9 $6.5 $17.3 $25.7 $52.4
Net Income $1.8 $4.2 $11.2 $16.9 $34.1
Earnings
Per Share $0.05 $0.10 $0.27 $0.39 $0.81
Stockholders
Equity $114.1 $120.0 $133.2 $156.3 $156.3
Selected Financial Data
Restated Presentation
(in millions, except per share data)
Three Months Ended Year Ended
1995 January 31 April 30 July 31 October 31 October 31
---------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
License Fees $49.0 $52.1 $57.3 $91.6 $250.0
Client Services
and other 28.4 32.2 32.4 31.1 124.1
---------- -------- ------- ---------- ----------
Total Revenue $77.4 $84.3 $89.7 $122.7 $374.1
========== ======== ======= ========== ==========
Income Before
Income Taxes and
Minority Interest $2.9 $6.5 $8.3 $23.2 $40.9
Net Income $1.8 $4.2 $5.3 $15.3 $26.6
Earnings
Per Share $0.05 $0.10 $0.13 $0.35 $0.63
Stockholders
Equity $108.7 $114.6 $121.9 $143.4 $143.4
</TABLE>
<PAGE>
The industry leader in the continuing evolution of distributed object
software, SSA is the top provider of cost-effective business enterprise
information systems to the industrial sector worldwide. SSA's product line BPCS
Client/Server provides business process re-engineering and integration of all
operations, including multi-mode manufacturing processes, supply chain
management, and global financial solutions. The BPCS Client/Server solution
delivers unparalleled agility, interoperability and reconfigurability to meet
changing market demands in its comprehensive product suite. The distributed
object computing architecture of BPCS Client/Server provides the benefits of
next generation technology in conformance with industry standards. SSA and its
business partners provide full implementation support for BPCS Client/Server in
over 70 countries.
CONTACT: System Software Associates, Inc.
Investor Relations: Joseph J. Skadra, 312/258-6000
Corporate Contact: Roger E. Covey, 312/258-6000
[email protected]
