<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 1996
OR
[ ] 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 : 0-19058
PLATINUM technology, inc.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3509662
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1815 SOUTH MEYERS ROAD, OAKBROOK TERRACE, ILLINOIS 60181
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (708) 620-5000
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 ___
As of May 13, 1996, there were outstanding 55,190,024 shares of common
stock, par value $.001, of the registrant.
<PAGE>
PLATINUM technology, inc. and subsidiaries
QUARTER ENDED MARCH 31, 1996
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Auditors' Review Report 3
Consolidated Balance Sheets
as of March 31, 1996 (unaudited)
and December 31, 1995 4
Consolidated Statements of Operations
for the three months ended
March 31, 1996 (unaudited)
and 1995 (unaudited) 5
Consolidated Statements of Cash Flows
for the three months ended March 31,
1996 (unaudited) and 1995 (unaudited) 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13
PART II - OTHER INFORMATION
Item 1. Legal proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
<PAGE>
Independent Auditors' Review Report
The Board of Directors
PLATINUM technology, inc.;
We have reviewed the consolidated balance sheet of PLATINUM technology, inc,
and subsidiaries as of March 31, 1996, and the related consolidated
statements of operations and cash flows for the three-month periods ended
March 31, 1996 and 1995. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of the interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above,
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the supplemental consolidated balance sheet of PLATINUM
technology, inc. and subsidiaries as of December 31, 1995, and the related
supplemental consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated March 29, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1995, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
KPMG Peat Marwick LLP
Chicago, Illinois
May 14, 1996
3
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PLATINUM technology, inc. and subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
March 31, December 31,
1996 1995 *
(unaudited)
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 74,588 $ 111,847
Short-term investment securities 14,634 7,802
Trade accounts receivable, net of allowances of $2,479 and $2,695 104,176 115,876
Installment accounts receivable 13,533 6,058
Accrued interest and other current expenses 7,830 10,545
Refundable income taxes 409 355
------------ -------------
Total current assets 215,170 252,483
------------ -------------
Non-current investment securities 4,132 13,126
Property and equipment 56,402 51,004
Purchased and developed software 58,348 52,268
Excess of cost over net assets acquired, net of accumulated
amortization of $6,400 and $5,100 36,149 35,494
Other assets 47,705 33,813
------------ -------------
$ 417,906 $ 438,188
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Acquisition-related payables $ 12,696 $ 12,518
Income taxes payable 511 1,068
Accounts payable 15,059 16,001
Accrued commissions and bonuses 6,356 8,598
Accrued royalties 1,788 1,637
Other accrued liabilities 28,793 27,700
Current maturities of long-term obligations 715 1,313
Deferred revenue 57,812 56,969
------------ -------------
Total current liabilities 123,730 125,804
------------ -------------
Acquisition-related payables 8,026 9,756
Deferred revenue 6,528 3,795
Deferred rent 8,676 8,795
Long-term obligations, net of current maturities 877 1,586
Stockholders' equity:
Class II preferred stock, $.01 par value.
Authorized 10,000, none outstanding. - -
Common stock, $.001 par value. Authorized 120,000, issued and
outstanding 55,068 and 53,194 55 53
Paid-in capital 439,477 433,103
Notes receivable (315) (515)
Accumulated deficit (169,165) (144,662)
Foreign currency translation adjustment 17 473
------------ -------------
Total stockholders' equity 270,069 288,452
------------ -------------
$ 417,906 $ 438,188
------------ -------------
------------ -------------
</TABLE>
* The consolidated balance sheet as of December 31, 1995 has been restated
to give retroactive effect for mergers accounted for using the
pooling-of-interests method.
See accompanying notes to consolidated financial statements.
4
<PAGE>
PLATINUM technology, inc. and subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
Three Months Ended
March 31,
-------------------------
1996 1995*
----------- -----------
<S> <C> <C>
Revenues:
Software products $ 39,355 $ 29,891
Maintenance 22,536 17,360
Professional services 20,580 15,809
----------- -----------
82,471 63,060
----------- -----------
Costs and expenses:
Professional services 18,750 14,367
Product development and support 37,690 17,740
Sales and marketing 37,167 22,557
General and administrative 8,472 6,915
Merger costs 5,714 -
Acquired in-process technology 7,005 18,799
----------- -----------
114,798 80,378
----------- -----------
Operating loss (32,327) (17,318)
Other income 544 1,346
----------- -----------
Loss before income taxes (31,783) (15,972)
Income taxes (7,279) (1,966)
----------- -----------
Net loss $ (24,504) $ (14,006)
----------- -----------
----------- -----------
Net loss per share $ (0.45) $ (0.34)
----------- -----------
----------- -----------
Shares used in computing per share amounts 54,915 40,738
----------- -----------
----------- -----------
</TABLE>
* Results for the three months ended March 31, 1995, are restated for
mergers accounted for using the pooling-of-interests method of accounting.
See accompanying notes to consolidated financial statements.
5
<PAGE>
PLATINUM technology, inc. and subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
----------------------
1996 1995*
-------- ---------
Cash flows from operating activities:
Net loss $(24,504) $ (14,006)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,216 3,183
Acquired in-process technology 7,005 18,799
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (141) 7,582
Deferred income taxes (7,681) 51
Accrued interest and other current assets 2,791 (1,309)
Accounts payable (1,038) 1,788
Accrued liabilities (1,868) (5,664)
Deferred revenue 2,727 (965)
Income taxes payable (611) (1,309)
Other (438) (97)
-------- ---------
Net cash provided by (used in)
operating activities (16,542) 8,053
-------- ---------
Cash flows from investing activities:
Purchases of investment securities (12,009) (17,484)
Sales of investment securities 2,071 8,876
Maturities of investment securities 12,100 1,982
Purchases of property and equipment (8,266) (9,495)
Capitalized software development costs (7,995) (3,294)
Payments for acquisitions (4,834) (24,261)
Other assets (1,206) (122)
-------- ---------
Net cash used in investing activities (20,139) (43,798)
-------- ---------
Cash flows from financing activities:
Proceeds from exercise of stock options 593 115
Short-term borrowings 1,000 72
Payments on borrowings (2,371) (250)
Other 200 -
-------- ---------
Net cash used in financing activities (578) (63)
-------- ---------
Adjustment to conform fiscal years of pooled businesses - (259)
-------- ---------
Net decrease in cash and cash equivalents (37,259) (36,067)
Cash and cash equivalents at beginning of year 111,847 78,458
-------- ---------
Cash and cash equivalents at end of year $ 74,588 $ 42,391
-------- ---------
-------- ---------
*Cash flows for the three months ended March 31, 1995, are restated
for mergers accounted for using the pooling-of-interests method of accounting.
See accompanying notes to consolidated financial statements.
6
<PAGE>
PLATINUM technology, inc. and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods presented. All
such adjustments are of a normal recurring nature. Because the Company's
acquisitions of Prodea Software Corporation (Prodea), Paradigm Systems
Corporation (Paradigm), and Axis Systems International, Inc. (Axis) during
the first quarter of 1996 are being treated as poolings of interests for
accounting purposes, all consolidated financial statements for the periods
prior to the acquisitions have been restated to include the assets,
liabilities and operating results of these companies (See "Business
Combinations" at Note 3). All intercompany accounts and transactions have
been eliminated.
These consolidated financial statements should be read in conjunction
with the Company's audited supplemental consolidated financial statements and
notes thereto for the year ended December 31, 1995, included in the Company's
Registration Statement on Form S-3, as amended, Registration No. 333-00274,
as filed with the Securities and Exchange Commission. The supplemental
consolidated financial statements become the historical financial statements
of the Company upon the filing of this Form 10-Q.
NOTE 2 - EARNINGS PER SHARE
Net loss per share is based on the weighted average number of shares
outstanding and does not include the effect of unexercised stock options.
NOTE 3 - BUSINESS COMBINATIONS
On January 17, 1996, the Company acquired all of the outstanding capital
stock of Advanced Systems Technologies, Inc. (AST), a developer of
performance management tools, in exchange for approximately $6,000,000
(344,640 shares) of the Company's common stock. This acquisition was
accounted for under the purchase method, and a significant portion of the
purchase price was charged to acquired in-process technology in the first
quarter of 1996.
On February 8, 1996, the Company acquired all of the outstanding capital
stock of Prodea Software Corporation (Prodea), a leading provider of data
warehousing and business intelligence tools, in exchange for 2,126,913 shares of
common stock. In addition, the Company assumed stock options which converted
into options to purchase 212,426 shares of common stock.
On March 26, 1996, the Company acquired all of the outstanding capital
stock of Paradigm Systems Corporation (Paradigm), a leading provider of
professional services, in exchange for 762,502 shares of common stock. In
addition, the Company assumed stock options which converted into options to
purchase 55,228 shares of common stock.
On March 29, 1996, the Company acquired all of the outstanding capital
stock of Axis Systems International, Inc. (Axis), a leading provider of
professional services, in exchange for 319,925 shares of common stock. In
addition, the Company assumed stock options which converted into options to
purchase 59,986 shares of common stock.
7
<PAGE>
The Company incurred significant costs and expenses in connection with
these acquisitions, including investment banking and other professional fees,
employees' severance and various other expenses. These costs were expensed
in the first quarter of 1996.
The acquisitions of Prodea, Paradigm, and Axis were accounted for as
poolings of interests. The following unaudited information reconciles total
revenues and net income (loss) of PLATINUM technology, inc. as previously
reported in the Company's annual report on Form 10-K with the amounts
presented in the accompanying unaudited statements of operations for the three
months ended March 31, 1995, as well as the separate results of operations for
the three months ended March 31, 1996 of the acquired companies during the
periods preceeding their acquisition. The 1996 results presented for Prodea
represent the one month ended January 31, 1996. The 1996 results for Paradigm
and Axis are for the three months ended March 31, 1996.
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1996 March 31, 1995
------------------------------ -------------------------------
Revenues Net Income (loss) Revenues Net Income (loss)
-------- ----------------- -------- ------------------
<S> <C> <C> <C> <C>
PLATINUM (1) $55,481 $(14,438)
Prodea $ 40 $(264) 1,463 284
Paradigm 3,837 261 4,261 44
Axis 1,844 112 1,855 104
------- --------
Total $63,060 $(14,006)
------- --------
------- --------
</TABLE>
(1) Represents the historical results of PLATINUM technology, inc. without
considering the effect of the poolings of interests transactions.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth the percentages that selected items in the
Consolidated Statements of Operations bear to total revenues. The Consolidated
Statements of Operations give retroactive effect to the acquisitions of Prodea
Software Corporation, as of February 8, 1996, Paradigm Systems Corporation as of
March 26, 1996, and Axis Systems International as of March 29, 1996, each of
which was accounted for using the pooling-of-interests method, and as a result,
the results of operations are presented as if the combining companies had been
consolidated for all periods presented.
PERCENTAGE OF TOTAL REVENUE
---------------------------
THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1995
-------------- -----------
Statement Of Operations Data:
Revenues:
Software products 48% 47%
Maintenance 27 28
Professional services 25 25
-------------- -----------
Total revenues 100 100
-------------- -----------
Costs and expenses:
Professional services 23 23
Product development and support 46 28
Sales and marketing 45 36
General and administrative 10 11
Merger costs 7 -
Acquired in-process technology 8 29
-------------- -----------
Total costs and expenses 139 127
-------------- -----------
Operating loss (39) (27)
Other income 1 2
-------------- -----------
Loss before income taxes (38) (25)
Income taxes (8) (3)
-------------- -----------
Net loss (30)% (22)%
-------------- -----------
REVENUES
The Company's revenues currently are derived from three sources: 1) license
fees for licensing the Company's proprietary software products, 2) maintenance
fees for maintaining, supporting, and providing current upgrades of the
Company's software products, and 3) revenues from the Company's professional
services business. Total revenues for the first quarter of 1996 were
$82,471,000, an increase of $19,411,000, or 31%, as compared to $63,060,000, for
the same period in 1995.
Revenues from customers in North America, as a percentage of total
revenues, represented 77% and 78%, for the first quarter of 1996 and 1995,
respectively. North America revenue is generated primarily by the Company's
direct sales force and telemarketing organization.
9
<PAGE>
Revenue from international customers, as a percentage of total
revenues, represented 23% and 22%, for the first quarter of 1996 and 1995,
respectively. International revenue is generated primarily by the Company's
subsidiaries and by PLATINUM international affiliates, which are organizations
that contract with the Company to support and promote the Company's software
products and professional services.
SOFTWARE PRODUCTS. Software products revenue for the first quarter of 1996
was $39,355,000 an increase of $9,464,000, or 32%, as compared to $29,891,000
for the first quarter of 1995. The growth in software products revenue is
primarily in the categories of database management, systems management, and
business intelligence, and is primarily attributable to the continued
marketplace acceptance of its products, as well as the Company's aggressive
expansion of its sales and marketing efforts.
MAINTENANCE. Maintenance revenue for the first quarter of 1996 was
$22,536,000, an increase of $5,176,000, or 30%, as compared to $17,360,000 for
the first quarter of 1995. The growth in maintenance revenue is primarily in
the categories of database management, systems management, and data warehousing.
The increase in maintenance revenue is primarily attributable to the expansion
of the installed customer base, which supports recurring fees for maintenance,
and increased revenues associated with first year maintenance fees implicit in
certain license sales. Management believes maintenance revenue should continue
to increase as the installed base of the Company's software products increases
and matures and as software product license revenue increases.
PROFESSIONAL SERVICES. Professional services revenue is revenue
associated with the Company's consulting services business and educational
programs. Professional services revenue for the first quarter of 1996 was
$20,580,000, an increase of $4,771,000, or 30%, as compared to $15,809,000 for
the first quarter of 1995. The growth in revenue is due primarily to the
expansion in professional services personnel, as well as the addition of
established consulting practices through various acquisitions.
COSTS AND EXPENSES
Total expenses for the first quarter of 1996, excluding merger costs and
acquired in-process technology costs, were $102,079,000, an increase of
$40,500,000 or 66%, compared to $61,579,000 for the first quarter of 1995.
During the first quarter of 1996, the Company continued to incur significant
costs in supporting its open enterprise development laboratories and in
building the infrastructure to support the significantly larger Company that
is the result of the recent acquisitions. These costs were associated with
the hiring of product developers, technical writers, and in-house and field
technical support personnel; expanding the inside and outside sales forces;
informing customers of the Company's technical strategy; training all
personnel in open systems issues and new products; accelerated hiring of key
management personnel; and augmenting internal support systems. Management
believes that these investments were required in order to fully exploit the
market opportunity for the products from the acquired companies and to
adequately manage the significantly larger Company.
PROFESSIONAL SERVICES. Costs of professional services for the first
quarter of 1996 were $18,750,000, an increase of $4,383,000, or 31%, as compared
to $14,367,000 for the first quarter of 1995. Professional services expenses as
a percentage of the related revenue were 91% in the first three months of 1996
and 1995. The increase in these expenses is related to salaries and other
direct employment expenses as a result of the Company's rapid hiring to support
this business.
PRODUCT DEVELOPMENT AND SUPPORT. Product development and support expenses
for the first quarter of 1996 were $37,690,000, an increase of $19,950,000, or
112%, as compared to $17,740,000
10
<PAGE>
for the first quarter of 1995. Product development and support expenses as a
percentage of total revenues for the first quarter of 1996 were 46% as
compared to 28% for the same period in 1995. The increase in these expenses
is primarily attributable to the hiring of additional product developers,
in-house as well as field technical support personnel and technical writers;
increased allocated charges for office space and overhead; and increased
hardware and software costs relating to the product development effort. Also
contributing to the increase was higher bonus and royalty expenses associated
with increased software products revenue.
The Company is investing heavily in the development of systems software
products for enterprise-wide information systems that integrate mainframes,
minicomputers, workstations, PC's, and client/server networks. As a result, the
Company expects that significant hiring of development and support personnel
will continue. The Company believes that these actions are required in order to
strengthen its competitive position in the open enterprise marketplace, enhance
existing products, and satisfactorily support the Company's growing customer
base.
For the first quarter of 1996 and 1995, the Company capitalized $5,513,000
and $2,568,000 respectively, of software development costs net of related
amortization expense, in accordance with Statement of Financial Accounting
Standards No. 86.
SALES AND MARKETING. Sales and marketing expenses for the first quarter
of 1996 were $37,167,000, an increase of $14,610,000, or 65%, as compared to
$22,557,000 for the first quarter of 1995. Sales and marketing expenses as a
percentage of total revenue for the first quarter of 1996 were 45% as
compared to 36% for the same period in 1995. The increase in expenses as a
percentage of total revenue for the first quarter of 1996, as compared to the
first quarter in 1995, is primarily attributable to costs associated with the
significant expansion of the outside sales force, and telemarketing
organizations in the U.S. and in international subsidiaries. Also
contributing to the increase were higher commission expense associated with
the 32% increase in software product revenue, increased product marketing
costs associated with an expanded product line, increased costs related to
travel by the expanded outside sales force, higher costs for sponsorship of
seminars and user groups, and increased allocated charges for office space
and overhead. The Company believes the large investment in sales and
marketing was necessary in order to build the sales organization required to
distribute the Company's expanded product line and exploit significant new
market opportunities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
first quarter of 1996 were $8,472,000, an increase of $1,557,000, or 23%, as
compared to $6,915,000 for the first quarter of 1995. General and
administrative expenses as a percentage of total revenues for the first
quarter of 1996 were 10% as compared to 11% for the same period in 1995. The
increase in these expenses is primarily related to salaries and other direct
employment expenses attributable to an expanded administrative staff. Also
contributing to the increase was amortization of costs in excess of net
assets acquired related to the Company's acquisitions accounted for as
purchases and increased professional fees.
MERGER COSTS. Merger costs were $5,714,000 for the three months ended
March 31, 1996. Merger costs relate to acquisitions accounted for as poolings
of interests and include investment banking and other professional fees,
employee severance payments, costs of closing excess office facilities, write
downs of certain assets and various other expenses. The Company expects to
continue to incur such costs and expenses in connection with possible future
mergers.
11
<PAGE>
These costs will be expensed in the period in which the transactions are
consummated.
ACQUIRED IN-PROCESS TECHNOLOGY. Acquired in-process technology costs for
the three months ended March 31, 1996 were $7,005,000. These costs relate to
acquisitions accounted for under the purchase method.
Acquired in-process technology costs incurred in the first quarter of
1996 relate primarily to the acquisition of Advanced Systems Technologies,
Inc. Prior to completing this acquisition, the Company conducted reviews
which included the evaluation of existing products and of research and
development in process (projects that had not reached technological and
economic feasibility and had no alternative future use to the Company). The
Company also conducted reviews of customers and financial and other matters,
in order to determine fair market value. This acquisition was completed
primarily for the research and development in process, and was not completed
for the existing earnings, cash flow or net assets. All of the acquired
in-process research and development represents unique and emerging
technologies, the application of which is limited to the Company's open
enterprise systems software strategy. Accordingly, these acquired
technologies have no alternative future use. The Company believes it has
budgeted adequate research and development resources to complete the
contemplated projects over time periods ranging from six to eighteen months
from the date of acquisition. The Company expects to continue to incur
charges for acquired in-process technology in connection with future
acquisitions, which will reduce operating and net income for the periods in
which the acquisitions are consummated.
OTHER INCOME
Other income for the first quarter of 1996 was $544,000, a decrease of
$802,000, or 60%, as compared to $1,346,000 for the first quarter of 1995. The
decrease in other income is primarily attributable to the costs associated with
accounts receivable sold during the first quarter of 1996.
INCOME TAXES
The effective tax rate for the first quarter of 1996, excluding the tax
effect of charges for acquired in-process technology relating to certain
acquisitions, was 33%. This compares to an effective tax rate of 34% for the
same period in 1995. The Company reported an income tax benefit of $7,279,000,
on a pre-tax loss of $31,783,000, for the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company held approximately $93,354,000 of
cash, cash equivalents, and investments as compared to $132,775,000 as of
December 31, 1995. The decrease from December 31, 1995 to March 31, 1996 is
primarily attributable to approximately $16,542,000 used in operations,
approximately $4,834,000 in payments relating to acquisitions and approximately
$8,266,000 in capital expenditures.
The Company had trade and installment accounts receivable, net of
allowances, of $126,999,000 and $126,539,000 at March 31, 1996 and December
31, 1995, respectively. Total trade and installment receivables include
non-current installment receivables which are classified in other assets in
the consolidated balance sheets. The Company sells software products and
services to customers in diversified industries and geographic regions and,
therefore, has no significant concentration of credit risk. Historically, a
substantial amount of the Company's revenues have been recorded in the third
month of any given quarter, with a concentration of such revenues in the
12
<PAGE>
last week of the third month. This trend results in a high balance of
accounts receivable relative to reported revenues at the end of any quarterly
reporting period. The Company closely monitors its accounts receivable and
has never experienced significant losses relating to collectibility.
The Company had long-term acquisition-related payables of $8,026,000 and
$9,756,000 as of March 31, 1996 and December 31, 1995, respectively. The
Company has secured and unsecured bank lines of credit totaling $27,000,000,
under which borrowings bear interest at rates ranging from approximately the
bank's prime rate to the bank's prime rate plus 1%. As of May 13, 1996, the
Company had approximately $1,000,000 of short-term borrowings under these lines
of credit, bearing interest at the bank's prime rate. These borrowings were
used for general corporate purposes, including short-term working capital
requirements and acquisition-related payments. The Company is in the process of
increasing its lines of credit.
The Company's sources of liquidity have traditionally been cash
generated from operations and funds from capital markets, including bank
facilities. The Company believes the funding available to it from these
sources will be sufficient to satisfy its working capital requirements for
the foreseeable future. The Company's capital requirements are dependent on
management's business plans regarding the levels and timing of investments in
existing and newly-acquired businesses and technologies. These plans and the
related capital requirements may change, based upon various factors, such as
the Company's strategic opportunities, developments in the Company's markets,
the timing of closing and integrating acquisitions, and the conditions of
financial markets.
SAFE HARBOR PROVISION
The statements contained in this MD&A that are not historical facts are
forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. A number of important factors
could cause the Company's actual consolidated results for 1996 and beyond to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company, including without limitation, the maturation
and success of the Company's new open enterprise systems strategy, risks
inherent in conducting international business, general economic and business
conditions, charges and costs related to acquisitions, and the ability of
the Company to: develop and market existing and acquired products for the open
enterprise systems market; successfully integrate its acquired products,
services and businesses; adjust to changes in technology, customer
preferences, enhanced competition and new competitors in the open systems,
systems software and professional services markets; and maintain or enhance
its relationships with relational database vendors.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
TRANSACTION MANAGEMENT TECHNOLOGIES, INC., MAXIMILIAN J. WINTERS, JR. AND THE
MAX J. WINTERS, JR. TRUST V. PLATINUM TECHNOLOGY, INC.
Transaction Management Technologies, Inc., Maximilian J. Winters, Jr.
and the Max J. Winters, Jr. Trust ("Claimants") filed a demand for
arbitration on August 18, 1995 against the Company. Claimants' charges
relate to the parties' agreement relating to Integrator products (the
"Agreement") including: (1) the Company's failure to use best efforts to
market the Integrator products; (2) breach of fiduciary duties; (3) fraud in
the inducement and performance of the Agreement, and (4) other related
wrongs. Claimants sought to rescind the Agreement and related agreements and
sought rescissory and punitive damages of $100,000,000, possible compensatory
damages of at least $20,000,000, attorney's fees and arbitration costs. On
September 11, 1995, the parties selected a single neutral arbitrator in the
case and engaged in discovery. On April 22, 1996, Claimants and the Company
settled the action and dismissed the arbitration. Claimants were granted a
limited, nonexclusive license to use the Integrator products in a
noncompetitive manner and received a prepayment of royalties in an amount
which the Company considers immaterial.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 15 - Acknowledgment of Independent Certified Public
Accountants Regarding Independent Auditors' Review Report
Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated February 16,
1996, (as amended by Form 8-K/A filed April 4, 1996) to report the
Company's acquisition of Prodea Software Corporation. Form 8-K, as
amended, includes (i) the required financial statements of Prodea for
the periods ending December 31, 1995 and 1994 (ii) required pro forma
financial information.
14
<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 thereunto duly authorized.
PLATINUM TECHNOLOGY, INC.
Date: May 15, 1996 By: /s/ Andrew J. Filipowski
-------------------------
Andrew J. Filipowski,
President and Chief Executive Officer
Date: May 15, 1996 By: /s/ Michael P. Cullinane
-------------------------
Michael P. Cullinane,
Chief Financial and Accounting Officer
15
<PAGE>
EXHIBIT 15
ACKNOWLEDGMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
REGARDING INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors
PLATINUM TECHNOLOGY, INC.;
With respect to the registration statements on Form S-8 and Form S-3 of
PLATINUM TECHNOLOGY, INC., we acknowledge our awareness of the use therein of
our report dated May 14, 1996 related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
KPMG Peat Marwick LLP
Chicago, Illinois
May 14, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 74,588
<SECURITIES> 18,766
<RECEIVABLES> 104,176
<ALLOWANCES> 2,479
<INVENTORY> 0
<CURRENT-ASSETS> 215,170
<PP&E> 87,775
<DEPRECIATION> 31,373
<TOTAL-ASSETS> 417,906
<CURRENT-LIABILITIES> 123,730
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 270,014
<TOTAL-LIABILITY-AND-EQUITY> 417,906
<SALES> 0
<TOTAL-REVENUES> 82,471
<CGS> 0
<TOTAL-COSTS> 114,798
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,569
<INCOME-PRETAX> (31,783)
<INCOME-TAX> (7,279)
<INCOME-CONTINUING> (24,504)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,504)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
