SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number
0-16439
FAIR, ISAAC AND COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-1499887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 North Redwood Drive, San Rafael, California 94903
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 472-2211
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 of Common Stock, $0.01 par value per share,
outstanding on February 9, 1999, was 14,219,644.
<PAGE>
AMENDMENT NO. 1
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Fair, Isaac and Company, Incorporated amends its report on Form 10-Q filed with
the Securities and Exchange Commission on February 16, 1999, by substituting the
following Consolidated Statements Of Income And Comprehensive Income financial
statement for the one that appears in the original filing. The purpose of this
Amendment No. 1 is to correct a typographical error in the Research and
development amount for the three months ended December 31, 1998 in the
Consolidated Statements Of Income And Comprehensive Income.
Unless otherwise stated, information in the originally filed 10-Q is presented
as of the original filing date, and has not been updated in this amended filing.
<PAGE>
<TABLE>
FAIR, ISAAC AND COMPANY, INCORPORATED
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and September 30, 1998
(dollars in thousands)
<CAPTION>
December 31 September 30
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,687 $ 14,242
Marketable securities 22,305 18,283
Accounts receivable, net 35,028 39,028
Unbilled work in progress 22,765 22,004
Prepaid expenses and other current assets 4,359 4,040
Deferred income taxes 4,917 5,016
--------- ---------
Total current assets 107,061 102,613
Marketable securities 23,846 24,368
Property and equipment, net 37,858 36,893
Intangibles, net 10,037 10,458
Deferred income taxes 6,398 6,398
Other assets 8,891 8,884
--------- ---------
$ 194,091 $ 189,614
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 17,656 $ 17,418
Accrued compensation and employee benefits 16,406 22,065
Billings in excess of earned revenues 8,628 7,862
Capital lease obligations 420 416
--------- ---------
Total current liabilities 43,110 47,761
Other liabilities 7,415 7,613
Capital lease obligations 685 789
--------- ---------
Total liabilities 51,210 56,163
--------- ---------
Stockholders' equity:
Preferred stock -- --
Common stock 141 140
Paid in capital in excess of par value 35,014 32,454
Retained earnings 107,445 100,678
Less treasury stock (10,621 shares at cost at 12/31/98;
9,787 at 9/30/98) (385) (351)
Accumulated other comprehensive income 666 530
--------- ---------
Total stockholders' equity 142,881 133,451
--------- ---------
$ 194,091 $ 189,614
========= =========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
FAIR, ISAAC AND COMPANY, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended December 31, 1998 and 1997
(dollars in thousands, except per share data)
Three Months Ended
December 31
--------------------------
1998 1997
----------- -----------
Revenues $ 67,977 $ 53,511
Costs and expenses:
Cost of revenues 25,071 19,865
Sales and marketing 10,279 8,747
Research and development 7,744 6,598
General and administrative 12,997 11,398
Amortization of intangibles 421 321
----------- -----------
Total costs and expenses 56,512 46,929
----------- -----------
Income from operations 11,465 6,582
Other income, net 686 29
----------- -----------
Income before income taxes 12,151 6,611
Provision for income taxes 5,103 2,644
----------- -----------
Net income $ 7,048 $ 3,967
=========== ===========
Net Income $ 7,048 $ 3,967
Other comprehensive income, net of tax:
Unrealized gains on investments 115 15
Foreign currency translation adjustments 21 44
----------- -----------
Comprehensive income $ 7,184 $ 4,026
=========== ===========
Earnings per share:
Diluted $ .49 $ .28
=========== ===========
Basic $ .50 $ .29
=========== ===========
Shares used in computing earnings per share:
Diluted 14,354,000 14,346,000
=========== ===========
Basic 14,014,000 13,489,000
=========== ===========
See accompanying notes to the consolidated financial statements.
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<PAGE>
<TABLE>
FAIR, ISAAC AND COMPANY, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 1998 and 1997
(dollars in thousands)
<CAPTION>
Three Months Ended
December 31
----------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,048 $ 3,967
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 4,150 3,474
Equity loss in investment 100 170
Deferred income taxes 99 26
Deferred compensation 61 240
Changes in operating assets and liabilities:
Decrease in accounts receivable 4,021 364
(Increase) in unbilled work in progress (761) (1,078)
(Increase) in prepaid expenses and other assets (319) (200)
(Increase) in other assets (7) (45)
Increase in accounts payable and other accrued liabilities 626 3,083
(Decrease) in accrued compensation
and employee benefits (4,204) (6,885)
Increase in billings in excess of earned revenues 766 751
(Decrease) in other liabilities (1,839) (1,119)
-------- --------
Net cash provided by operating activities 9,741 2,748
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (3,053) (6,008)
Payment for acquisition of subsidiary -- (91)
Purchases of marketable securities (18,002) (351)
Proceeds from maturities of marketable securities 14,015 2,019
Proceeds from the sale of marketable securities 502 --
-------- --------
Net cash used in investing activities (6,538) (4,431)
-------- --------
Cash flows from financing activities:
Principal payments of capital lease obligations (100) (94)
Proceeds from the exercise of stock options
and issuance of stock 666 335
Dividends paid (281) (270)
Repurchase of company stock (43) --
-------- --------
Net cash provided by (used in) financing activities 242 (29)
Increase (decrease) in cash and cash equivalents 3,445 (1,712)
Cash and cash equivalents, beginning of period 14,242 13,209
-------- --------
Cash and cash equivalents, end of period $ 17,687 $ 11,497
======== ========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
FAIR, ISAAC AND COMPANY, INCORPORATED
Notes to Consolidated Financial Statements
Note 1 General
In management's opinion, the accompanying unaudited consolidated financial
statements for Fair, Isaac & Company, Incorporated (the "Company") for the three
months ended December 31, 1998 and 1997 have been prepared in accordance with
generally accepted accounting principles for interim financial statements and
include all adjustments (consisting only of normal recurring accruals) that the
Company considers necessary for a fair presentation of its financial position,
results of operations, and cash flows for such periods. However, the
accompanying financial statements do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. All such financial statements presented herein are
unaudited, however, the September 30 balance sheet has been derived from audited
financial statements. This Report and the accompanying financial statements
should be read in connection with the Company's audited financial statements and
notes thereto presented in its Annual Report on Form 10-K for the fiscal year
ended September 30, 1998. Footnotes that would substantially duplicate the
disclosures in the Company's audited financial statements for the fiscal year
ended September 30, 1998, contained in the 1998 Form 10-K have been omitted. The
interim financial information contained in this Report is not necessarily
indicative of the results to be expected for any other interim period or for the
full fiscal year ending September 30, 1999.
Note 2 Earnings Per Share
The following reconciles the numerators and denominators of diluted and
basic earnings per share (EPS):
Three months ended December 31,
(in thousands, except per share data) 1998 1997
- -------------------------------------------------------------------------------
Numerator - Net income $ 7,048 $ 3,967
======== ========
Denominator - Shares:
Diluted weighted-average shares and assumed 14,354 14,346
conversions of stock options
Effect of dilutive securities - employee
stock options (340) (857)
-------- --------
Basic weighted-average shares 14,014 13,489
======== ========
Earnings per share:
Diluted $ .49 $ .28
======== ========
Basic $ .50 $ .29
======== ========
Total options outstanding included 170,000 and 132,000 options to purchase
shares of common stock at prices ranging from $39.88 to $45.63 and $41.88 to
$45.63 at December 31, 1998 and 1997, respectively. These options were not
included in the computation of diluted EPS because the exercise price for such
options was greater than the average market price of the common shares for the
three months ended December 31, 1998 and 1997.
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<PAGE>
Note 3 Cash Flow Statement
Supplemental disclosure of cash flow information:
Three months ended December 31,
(dollars in thousands) 1998 1997
- --------------------------------------------------------------------------------
Income tax payments $4,752 $1,058
Interest paid $ 28 $ 31
Non-cash investing and financing activities:
Issuance of common stock to ESOP $1,455 $ --
Tax benefit of stock options $ 388 $ 384
Purchase of CRMA with common stock $ -- $ 111
Capital lease obligations $ -- $ 40
Note 4 Reclassifications
Certain prior period balances have been reclassified to conform to the
current period presentation.
Note 5 Accounting Pronouncements
During the first quarter of fiscal year 1999, the Company adopted Statement
of Position No. 97-2 ("SOP 97-2"), "Software Revenue Recognition," as amended by
Statement of Position No. 98-4 "Deferral of the Effective Date of a Provision of
SOP 97-2, Software Revenue Recognition". SOP 97-2 provides guidance for software
revenue recognition. The adoption of SOP 97-2 did not have a significant impact
on the Company's financial position or results of operations.
During the first quarter of fiscal year 1999, the Company adopted Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("FAS
130"). FAS 130 requires the Company to report in the financial statements, in
addition to net income, comprehensive income and its components including
foreign currency translation adjustments and unrealized gains and losses on
certain investments in debt and equity securities. Comprehensive income is
defined as "the change in equity (net assets) of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners."
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement establishes standards for
publicly held entities to follow in reporting information about operating
segments in annual financial statements and requires that those entities report
selected information about operating segments in interim financial statements.
This statement also establishes standards for related disclosures about products
and services, geographic areas and major customers. This statement is effective
for annual financial statements issued for fiscal years beginning after December
15, 1997. Beginning with fiscal year 1999, management intends to conform its
annual consolidated financial statements to this pronouncement.
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<PAGE>
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits." The statement standardizes
the disclosure requirements for pension and other postretirement benefits. This
statement is effective for financial statements issued for fiscal years
beginning after December 15, 1997. The Company is currently evaluating the
impact of the disclosure. Beginning with fiscal year 1999, management intends to
conform its annual consolidated financial statements to this pronouncement.
In March 1998, the AICPA issued SOP No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The SOP requires that
certain costs related to the development or purchase of internal-use software be
capitalized and amortized over the estimated useful life of the software. The
SOP also requires that costs related to the preliminary project stage and the
post-implementation/operations stage of an internal-use computer software
development project be expensed as incurred. This statement is effective for
financial statements issued for fiscal years beginning after December 15, 1998.
The Company's management believes that the adoption of SOP 98-1 will not have a
material impact on the Company's results of operations. Beginning with fiscal
year 2000, management intends to conform its consolidated financial statements
to this pronouncement.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to its 10-Q report to be signed on its
behalf by the undersigned thereunto duly authorized.
FAIR, ISAAC AND COMPANY, INCORPORATED
DATE: March 1, 1999
By PETER L. McCORKELL
-----------------------------------
Peter L. McCorkell
Senior Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints PETER L. McCORKELL his attorney-in-fact, with
full power of substitution, for him in any and all capacities, to sign this
Report on Form 10-Q/A and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacities and on the date indicated.
DATE: March 1, 1999
By LENNOX L. VERNON
-----------------------------------
Lennox L. Vernon
Controller and Acting
Chief Financial Officer
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