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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(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, 1997
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: 000-18674
MAPICS, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2711580
(State of incorporation) (I.R.S. Employer
Identification No.)
5775-D GLENRIDGE DRIVE
ATLANTA, GEORGIA 30328
(Address of principal executive offices)
(404) 705-3000
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
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 the registrant's Common Stock outstanding at
February 2, 1998 was 18,430,890.
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MAPICS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER
- ------ ------
PART I - FINANCIAL INFORMATION
<S> <C> <C>
1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1997 and
September 30, 1997................................................. 3
Consolidated Statements of Operations for the three months
ended December 31, 1997 and 1996................................... 4
Consolidated Statements of Cash Flows for the three months
ended December 31, 1997 and 1996................................... 5
Notes to Consolidated Financial Statements.............................. 6
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 8
PART II - OTHER INFORMATION
2. Changes in Securities and Use of Proceeds............................... 12
4. Submission of Matters to a Vote of Security Holders..................... 12
6. Exhibits and Reports on Form 8-K........................................ 13
Signature............................................................... 14
Exhibit Index........................................................... 15
</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MAPICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(Unaudited)
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ASSETS
Current assets:
Cash and cash equivalents ........................................ $ 8,575 $ 5,562
Accounts receivable, net of allowances of $1,680 at
December 31,1997 and $1,702 at September 30, 1997 ............. 32,044 30,364
Prepaid expenses and other current assets ........................ 3,261 2,583
Deferred income taxes, net ....................................... 1,551 1,341
-------- --------
Total current assets ..................................... 45,431 39,850
Property and equipment, net ...................................... 4,634 3,562
Computer software costs, net ..................................... 16,649 16,615
Other intangible assets, net ..................................... 4,680 4,809
Deferred income taxes, net ....................................... 9,881 12,134
-------- --------
Total assets ............................................. $ 81,275 $ 76,970
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................. $ 7,594 $ 6,955
Accrued expenses and other current liabilities ................... 19,126 20,174
Deferred revenues ................................................ 25,737 25,134
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Total current liabilities ................................ 52,457 52,263
-------- --------
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $1.00 par value; 1,000 shares authorized
Series D convertible preferred stock, 225 shares issued
and outstanding (liquidation preference of $16,955) .......... 225 225
Series E convertible preferred stock, 100 shares issued
and outstanding (liquidation preference of $7,536) ........... 100 100
Common stock, $.01 par value; 50,000 shares authorized;
18,549 shares issued and 18,445 shares outstanding at
December 31, 1997; 18,499 shares issued and
outstanding at September 30, 1997............................. 186 185
Additional paid-in capital ....................................... 57,367 56,887
Accumulated deficit .............................................. (28,053) (32,690)
Treasury stock-at cost, 104 shares at December 31, 1997 .......... (1,007) --
-------- --------
Total stockholders' equity ............................... 28,818 24,707
======== ========
Total liabilities and stockholders'equity ................ $ 81,275 $ 76,970
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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MAPICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1997 1996
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Revenues:
License ........................................... $18,156 $14,277
Services .......................................... 11,438 9,102
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Total revenues ............................ 29,594 23,379
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Operating expenses:
Cost of license revenues .......................... 2,769 2,558
Cost of services revenues ......................... 3,181 2,583
Selling and marketing ............................. 10,463 8,035
Product development ............................... 3,525 2,488
General and administrative ........................ 2,167 1,922
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Total operating expenses .................. 22,105 17,586
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Income from operations .............................. 7,489 5,793
Interest income, net ................................ 51 --
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Income before income tax expense .................... 7,540 5,793
Income tax expense .................................. 2,903 2,230
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Net income .......................................... $ 4,637 $ 3,563
======= =======
Net income per common share (basic) (Note 3) ........ $ 0.25 $ 0.23
======= =======
Weighted average number of common shares
outstanding (basic) (Note 3) ................... 18,513 15,768
======= =======
Net income per common share (diluted) (Note 3) $ 0.21 $ 0.19
======= =======
Weighted average number of common and common
equivalent shares outstanding (diluted) (Note 3) 22,234 19,203
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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MAPICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
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THREE MONTHS ENDED
DECEMBER 31,
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1997 1996
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Cash flows from operating activities:
Net income ................................................. $ 4,637 $ 3,563
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ............................................ 412 259
Amortization ............................................ 1,654 1,794
Provision for bad debts ................................. 52 272
Deferred income taxes ................................... 2,043 (246)
Changes in operating assets and liabilities:
Accounts receivable ................................... (1,732) (6,042)
Prepaid expenses and other current assets ............. (678) (293)
Accounts payable ...................................... 639 (96)
Accrued expenses and other current liabilities ........ (1,048) (513)
Deferred revenues ..................................... 603 1,810
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Net cash provided by operating activities ............. 6,582 508
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Cash flows from investing activities:
Purchases of property and equipment ........................ (1,484) (260)
Additions to computer software costs ....................... (1,559) (917)
------- -------
Net cash used for investing activities ............. (3,043) (1,177)
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Cash flows from financing activities:
Purchases of treasury stock ................................ (1,007) --
Proceeds from common stock option exercises ................ 481 --
Net transfers from Marcam Corporation ...................... -- 1,861
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Net cash (used for) provided by financing activities (526) 1,861
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Net increase in cash and cash equivalents .................... 3,013 1,192
Cash and cash equivalents at beginning of period ............. 5,562 378
------- -------
Cash and cash equivalents at end of period ................... $ 8,575 $ 1,570
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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MAPICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) REPORTING ENTITY
MAPICS, Inc. ("MAPICS" or the "Company"), formerly known as Marcam
Corporation, is a leading provider of enterprise resource planning ("ERP")
software applications for manufacturing enterprises worldwide. MAPICS' products
provide an integrated and function-rich ERP solution with the breadth and depth
of applications to manage an entire manufacturing enterprise. The MAPICS(R) XA
product line currently consists of over 40 integrated application modules in the
areas of Engineering and Cost Management, Market and Demand Management, Plant
Operations and Logistics Management, Production Resource Planning, Financial
Management and Measurements and Cross Applications Solutions. MAPICS also
provides services to customers in the form of product support. MAPICS' primary
geographic markets include North America; the Europe, Middle East and Africa
region ("EMEA"); and the Latin America and Asia Pacific regions.
In April 1997, the Company's Board of Directors authorized management of the
Company to proceed with the separation of Marcam Corporation into two publicly
traded corporations. The separation was designed with the intent to enable each
company to better focus on its core markets, to better serve its existing
customers and to better finance its business.
On July 25, 1997, the Company transferred substantially all of the business,
assets and liabilities relating to its PRISM(R), Protean(TM) and Avantis(TM)
product lines, which address the needs of continuous flow process manufacturers,
and $39.0 million in cash to a newly formed wholly owned subsidiary, Marcam
Solutions, Inc. ("Marcam Solutions"). The Company borrowed $64.0 million from a
bank (the "Debt Financing") to finance the $39.0 million cash transfer to Marcam
Solutions and to repay Marcam Corporation's $25.0 million 9.82% Subordinated
Notes due 2001.
On July 29, 1997, the Company spun off to its stockholders, in a tax-free
distribution (the "Distribution"), all of the shares of common stock of Marcam
Solutions. In connection with the Distribution, Marcam Corporation changed its
name to MAPICS, Inc. and thereafter continues the operations related to the
MAPICS(R) product line, which addresses the needs of discrete and batch-process
manufacturers. Although the common stock of Marcam Solutions was distributed to
the Company's stockholders, the Distribution was recorded for accounting
purposes as a disposition by Marcam Solutions of the MAPICS business, due to the
relative significance of the PRISM(R), Protean(TM) and Avantis(TM) product
lines.
During August 1997, the Company obtained a senior secured term loan and
revolving credit facility to repay a portion of the borrowings from the Debt
Financing and for general corporate purposes. During August 1997, the Company
completed an underwritten public offering of 6.9 million shares of its common
stock (the "Offering") raising net proceeds of approximately $56.0 million,
after deducting offering costs of approximately $6.1 million. The net proceeds
of the Offering along with borrowings of $6.4 million under the term loan credit
facility and working capital of $1.6 million were used to repay the $64.0
million of indebtedness from the Debt Financing.
(2) BASIS OF PRESENTATION
The consolidated financial statements of MAPICS for reporting periods after
the Distribution, including the consolidated balance sheets as of December 31,
1997 and September 30, 1997, and the related consolidated statements of
operations and cash flows for the three months ended December 31, 1997, consist
solely of the separate consolidated financial statements of MAPICS, Inc. and its
wholly owned subsidiaries and do not correspond to the historical consolidated
financial statements of Marcam Corporation. All significant intercompany
accounts and transactions have been eliminated in the consolidation.
The financial statements of MAPICS for the three months ended December 31,
1996 have been prepared using Marcam Corporation's historical basis in the
assets and liabilities and historical results of operations of the business
related to the MAPICS(R) product line. These financial statements generally
reflect the results of operations and cash flows of MAPICS as if it were a
separate entity for the three months ended December 31, 1996. Certain costs and
expenses for the three months ended December 31, 1996 presented in these
financial statements have been allocated based on management's estimates of the
cost of services provided to MAPICS by Marcam Corporation. Management believes
these allocations are reasonable. However, the financial information included
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herein may not necessarily reflect the financial position, results of operations
and cash flows of MAPICS in the future, or what they would have been had MAPICS
been a separate entity during the three months ended December 31, 1996.
Except for the consolidated balance sheet as of September 30, 1997, the
accompanying financial statements are unaudited; however, in the opinion of
management, these financial statements contain all adjustments (consisting of
only normal, recurring adjustments) necessary to present fairly the Company's
financial position, results of operations and cash flows as of the dates and for
the periods indicated. The financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). As permitted by the rules of the Commission
applicable to quarterly reports on Form 10-Q, these notes are condensed and do
not contain all disclosures required by generally accepted accounting
principles. While the Company believes that the disclosures presented are
adequate to make these financial statements not misleading, these financial
statements should be read in conjunction with the Company's audited financial
statements and related notes included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on December 23, 1997.
The Company operates on a fiscal year ending September 30th. The results of
operations for the interim periods presented are not necessarily indicative of
the results to be expected for a full year.
(3) SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION
The Company licenses its software to its customers primarily through a
global network of independent affiliates. Although the affiliates provide the
principal channel through which the Company's products are distributed to its
customers, a sale is not considered to have occurred until an executed license
agreement is obtained from the ultimate customer.
The Company recognizes revenue from software licensing in accordance with
the guidance provided by Statement of Position ("SOP") 91-1, "Software Revenue
Recognition." The Company generally recognizes revenue from the licensing of its
software upon: (i) the signing of a license agreement between the Company and
the ultimate customer; (ii) delivery of the software to the customer or to a
location designated by the customer; (iii) determination that collection of the
related receivable is probable; and (iv) expiration of contractual rights of
acceptance or return. Under the terms of the Company's license agreements, the
customer is responsible for installation and training. At the time the Company
recognizes revenue from the licensing of software, no significant vendor
obligations remain and the costs of insignificant obligations, if any, are
accrued. Revenue from the licensing of software is included in license revenues,
and the related commissions paid to affiliates are included in selling and
marketing expenses.
The Company recognizes services revenues from its periodic license fees
ratably over the terms of the periodic license agreements. The periodic license
fee, which is typically payable annually in advance, entitles the customer to
continue using the software and to receive certain support services.
The Company has no commitment to reimburse the affiliates for any losses
incurred.
(B) NET INCOME PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share," which is effective for periods ending after
December 15, 1997. SFAS No. 128 requires the Company to present "basic" and
"diluted" earnings per share ("EPS") for all periods presented in the statements
of operations. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.
The Company previously followed the provisions of Accounting Principles
Board Opinion No. 15, "Earnings Per Share," under which "primary" and "fully
diluted" EPS were $0.19 and $0.18, respectively, for the three months ended
December 31, 1996. SFAS No. 128 requires restatement of all prior period
earnings per share data presented in the statements of operations. As restated,
"basic" and "diluted" EPS were $0.23 and $0.19, respectively, for the three
months ended December 31, 1996.
Net income per common share for the three month period ended December 31,
1996, was calculated using the capital structure of Marcam Corporation including
the weighted average number of common and common equivalent shares outstanding,
giving effect to
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the Distribution on a pro forma basis. The weighted average number of common
shares outstanding used to calculate basic EPS includes (i) the weighted average
number of common shares outstanding (18,513,000 and 11,435,000 shares for the
three months ended December 31, 1997 and 1996, respectively) plus (ii) the
number of shares of common stock from the Offering, the proceeds from which were
deemed to be used to pay the capital contribution of $39.0 million to Marcam
Solutions, based on the offering price of $9.00 per share (4,333,000 shares for
the three months ended December 31, 1996).
The weighted average number of common and common equivalent shares
outstanding used to calculate diluted EPS includes the weighted average number
of common shares outstanding plus the number of shares of common stock from the
Offering, as presented above, plus the weighted average number of common
equivalent shares from the assumed exercise of dilutive stock options, warrants
and convertible preferred stock (3,721,000 and 3,435,000 equivalent shares for
the three months ended December 31, 1997 and 1996, respectively).
(4) COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
normal course of business. While the outcome of these matters cannot be
predicted with certainly, management does not believe the outcome of any of
these legal matters will have a material adverse effect on the Company's future
financial position or results of operations
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere herein.
This discussion contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. Words such as "may," "would," "could," "will,"
"expect," "estimate," "anticipate," "believe," "intends," "plans," and similar
expressions and variations thereof are intended to identify forward-looking
statements. The Company's actual results could differ materially from those
contemplated by the forward-looking statements contained herein. Factors that
may cause such a difference include but are not limited to those discussed in
the cautionary statements contained herein as well as those discussed in the
section entitled "Factors Affecting Future Performance" contained in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1997 as filed with the Securities and Exchange Commission. The cautionary
statements made in this report should be read as being applicable to all related
forward-looking statements wherever they appear in this report.
OVERVIEW
The Company licenses its software to its customers primarily through a
global network of independent affiliates. Although the affiliates provide the
principal channel through which the Company's products are distributed to its
customers, a sale is not considered to have occurred until an executed license
agreement is obtained from the ultimate customer.
When it first licenses its software, the Company receives both an initial
license fee and a periodic license fee. The periodic license fee, which is
typically paid annually in advance entitles the customer to continue using the
software and to receive certain support services. If a customer does not renew
its periodic license, it is no longer entitled to use the Company's software.
The Company believes this licensing arrangement provides a source of recurring
revenues from its installed base of customers and enables customers to take
advantage of new releases and enhancements of its software. Initial license fees
are recorded as license revenues and typically recognized upon delivery of the
software to the customer. Periodic license fees are recorded as service revenues
and recognized ratably over the term of the periodic license agreement.
The Company's cost structure is designed so that a significant portion of
its costs vary in direct relation to license revenues, particularly its selling
and marketing expenses and cost of license revenues. . The Company's single
largest expense is commissions paid to affiliates, which are based on the
revenues they generate from licensing MAPICS(R) products. The Company currently
expects that as its affiliates generate more license revenues for the Company,
selling and marketing expenses will decrease as a percentage of total revenues
because of the relatively fixed cost of the Company's direct selling and
marketing activities. The affiliates, rather than the Company, provide the
Company's customers with consulting and implementation services relating to the
MAPICS(R) products. As a result, the Company neither generates revenues from
providing consulting and implementation services nor bears the fixed costs
inherent in maintaining a services business.
In December 1997, the Company delivered MAPICS(R) XA Release 4, the latest
version of its ERP software solution and its first major release since becoming
an independent company. Release 4 adds six new modules and enhancements to 22
existing applications
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of MAPICS(R) XA, including enriched multiple language capabilities, expanded
international financial management and improved multi-facility demand and supply
management to help companies streamline their global communications and
information exchange within their own enterprise, across multinational sites and
among external business partners. Release 5, scheduled for delivery in fiscal
1998, is planned to contain Euro-dollar support, a major expansion of
client/server browsers capabilities and other additional modules. In addition,
the Company is developing, in a Java development environment, additional
versions of certain of its applications to run on Microsoft's NT server platform
and on the AS/400. The Company currently anticipates that core product
development expenditures will increase as a percentage of revenues. Because the
costs of establishing technological feasibility of computer software products
are charged to product development expense as they are incurred, the Company's
operating results may be affected adversely by significant increases in the
level of product development investments.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain line items in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER, 31
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1997 1996
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Revenues:
License ........................ 61.4% 61.1%
Services ....................... 38.6 38.9
----- -----
Total revenues ......... 100.0 100.0
----- -----
Operating expenses:
Cost of license revenues ....... 9.4 10.9
Cost of services revenues ...... 10.7 11.0
Selling and marketing .......... 35.4 34.4
Product development ............ 11.9 10.6
General and administrative ..... 7.3 8.3
----- -----
Total operating expenses 74.7 75.2
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Income from operations............ 25.3 24.8
Interest income, net ............. .2 --
----- -----
Income before income tax expense . 25.5 24.8
Income tax expense ............... 9.8 9.5
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Net income ....................... 15.7% 15.3%
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</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1996
Revenues. Total revenues increased 26.6% to $29.6 million for the three
months ended December 31, 1997 from $23.4 million for the three months ended
December 31, 1996. License revenues increased 27.2% to $18.2 million for the
three months ended December 31, 1997 from $14.3 million for the three months
ended December 31, 1996. This increase resulted primarily from a volume increase
in license sales to existing customers for additional modules and upgraded
systems and a volume increase in license sales to new customers. Services
revenues increased 25.7% to $11.4 million for the three months ended December
31, 1997 from $9.1 million for the three months ended December 31, 1996,
principally due to the increase in the Company's installed customer base.
Cost of License Revenues. Cost of license revenues increased 8.2% to $2.8
million for the three months ended December 31, 1997 from $2.6 million for the
three months ended December 31, 1996. These costs decreased as a percentage of
license revenues to 15.3% for the three months ended December 31, 1997 from
17.9% for the three months ended December 31, 1996. This decrease resulted from
proportionally lower total royalty expenses paid to Solution Partners during the
three months ended December 31, 1997 due to the mix of products sold.
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Cost of Services Revenues. Cost of services revenues increased 23.2% to $3.2
million for the three months ended December 31, 1997 from $2.6 million for the
three months ended December 31, 1996, primarily as a result of a volume increase
in fees paid to affiliates and Solution Partners for providing support services
in EMEA and Latin America and Asia Pacific regions. As a percentage of service
revenues, these costs decreased to 27.8% from 28.4% for the three months ended
December 31, 1997 and 1996, respectively.
Selling and Marketing. Selling and marketing expenses increased 30.2% to
$10.5 million for the three months ended December 31, 1997 from $8.0 million for
the three months ended December 31, 1996. This increase was due primarily to
increased commissions earned by affiliates on increased license revenues. As a
percentage of total revenues, selling and marketing expenses increased to 35.4%
for the three months ended December 31, 1997 from 34.4% for the three months
ended December 31, 1996. This increase was primarily due to the hiring of
additional sales and marketing personnel, as well as increased spending on
marketing programs to promote the new MAPICS image in domestic and international
markets.
Product Development. Overall product development expenses increased 41.7% to
$3.5 million for the three months ended December 31, 1997 from $2.5 million for
the three months ended December 31, 1996. As a percentage of total revenues,
product development expenses increased to 11.9% for the three months ended
December 31, 1997 from 10.6% for the three months ended December 31, 1996. This
increase was a result of the new product development effort to re-host the
Company's software applications to Java, while continuing our efforts to expand
our MAPICS(R) XA product line. This effort began during the three month period
ended December 31, 1996, and therefore the results for such period do not
reflect the full cost structure for this new development effort.
Gross core development expenditures increased 31.5% to $4.1 million for the
three months ended December 31, 1997 from $3.1 million for the three months
ended December 31, 1996. This increase was primarily due to increased
development expenditures as a result of the Company's change in product
development strategy. The amounts of core development expenditures capitalized
during the three months ended December 31, 1997 and December 31, 1996 were $562
thousand and $660 thousand, respectively, representing 13.8% and 21.3% of gross
core development expenditures during those periods. The amount of development
expenditures capitalized during the three months ended December 31, 1997
decreased because a higher proportion of these expenditures had not reached the
technological feasibility stage as compared to the three month period ended
December 31, 1996. Gross translation expenditures increased 72.2% to $1.0
million during the three months ended December 31, 1997 from $588 thousand
during the three months ended December 31, 1996. Translation expenditures are
typically project related, and the timing of these expenditures is subject to
change from period to period. The amounts of translation expenditures
capitalized during the three months ended December 31, 1997 and December 31,
1996 were $997 thousand and $536 thousand, respectively, representing 98% and
91%, respectively, of gross translation expenditures during those periods. The
financial statements for the three month period ended December 31, 1996 reflect
the reclassification of $279 thousand of capitalized software costs to other
assets.
General and Administrative. General and administrative expenses increased
12.7% to $2.2 million during the three months ended December 31, 1997 from $1.9
million during the three months ended December 31, 1996, due primarily to
increases in facilities and personnel costs. General and administrative expenses
represented 7.3% and 8.3% of total revenues during the three months ended
December 31, 1997 and 1996, respectively, reflecting the fixed nature of the
general and administrative expenses.
Interest Income, Net. Interest income, net, which was $51 thousand for the
three months ended December 31, 1997 compared to $0 for the three months ended
December 31, 1996, reflects interest earned on cash and cash equivalents net of
costs to maintain the Company's revolving credit facility. Prior to the
Distribution, MAPICS transferred all excess cash to Marcam Corporation.
Income Tax Expense. Income tax expense represented 38.5% of income before
income tax expense for the three months ended December 31, 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
MAPICS has funded its operations and capital expenditures primarily through
cash generated from operations. As of December 31, 1997, the Company had $8.6
million in cash and cash equivalents and working capital of $18.7 million,
excluding $25.7 million of deferred revenues, which are included in current
liabilities. As of September 30, 1997, the Company had $5.6 million in cash and
cash equivalents and working capital of $12.7 million, excluding $25.1 million
of deferred
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revenues. As of December 31, 1996, the Company had cash and cash equivalents of
$1.6 million and working capital of $12.5 million, excluding $20.4 million of
deferred revenues. The increases in cash and working capital from December 31,
1996 reflect the fact that MAPICS, as a result of the restructuring in July
1997, no longer transfers its excess cash to Marcam Corporation.
Net cash provided by operations was $6.6 million for the three months ended
December 31, 1997 compared with $508 thousand for the three months ended
December 31, 1996, reflecting growth in earnings, an increase in accounts
receivable collections and cash savings from the favorable income tax attributes
inherited from Marcam Corporation in connection with the Distribution. Pursuant
to a tax sharing agreement between Marcam Corporation and Marcam Solutions,
MAPICS became entitled to utilize certain favorable income tax attributes
(principally net operating loss carryforwards and tax credits) of Marcam
Corporation immediately following the Distribution. The Company believes that
the utilization of these favorable income tax attributes will result in cash
savings from the reduction of income taxes payable in future periods as these
favorable income tax attributes are utilized.
Net cash used for investing activities was $3.0 million for the three months
ended December 31, 1997 compared with $1.2 million for the three months ended
December 31, 1996. The Company used cash for investing activities related to
computer software development and translation and purchases of computer
equipment.
Net cash used for financing activities for the three months ended December
31, 1997 was $526 thousand, which reflects $1.0 million used to purchase 103,600
shares of the Company's common stock pursuant to a stock repurchase plan
authorized by the Company's Board of Directors on December 15, 1997. This use of
cash was offset by proceeds from common stock options exercised, providing cash
of $481 thousand.
Additional borrowings of up to $15.0 million, subject to certain
limitations, are available to the Company under a revolving credit facility.
Availability of revolving credit loans and the rate of interest thereof vary
depending upon the Company's ability to maintain certain financial ratios. As of
December 31, 1997, the Company met all of those financial ratios, although no
amount was outstanding under the revolving credit facility at any time during
the three months ended December 31, 1997.
As of December 31, 1997, the Company did not have any material commitments
for capital expenditures.
Management believes that cash flows from operations and available borrowings
under the revolving credit facility will be sufficient to meet the Company's
working capital and capital expenditure needs at least until the end of fiscal
1998.
INFLATION
To date, the Company believes inflation has not had a material impact on the
Company's operations.
11
<PAGE> 12
PART II: OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
Pursuant to the Stock Option Agreement dated August 29, 1995 between the
Company and an option holder (the "Optionee"), the Company granted to the
Optionee an option (the "Option") to purchase up to 14,895 shares of the
Company's common stock, $.01 par value per share (the "Shares"). On November
25, 1997, the Optionee sought to exercise the Option to acquire 4,895 of the
Shares and immediately transfer such Shares to one or more transferees. To
ensure that no unregistered distribution of the Shares in violation of the
Securities Act of 1933, as amended, occurred as a result of such transfer by
the Optionee, the exercise by the Optionee of the Option was cancelled and such
Shares were returned to the Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on February 3, 1998, the
following matters were brought before and voted upon by the shareholders with
the number of votes as indicated below:
1. A proposal to approve a change in domicile of the Company from
Massachusetts to Georgia, including approving a related agreement and plan
of merger and new Georgia articles of incorporation.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,787,376 10,587 13,721 2,665,514
</TABLE>
2. A proposal to elect two directors to serve until the 2001 Annual Meeting of
Stockholders.
<TABLE>
<CAPTION>
Withheld
For Authority
---------- ---------
<S> <C> <C>
Roger Heinen, Jr. 18,456,140 21,058
Edward J. Kfoury 18,458,680 18,518
</TABLE>
3. A proposal to approve the amendment and restatement of the Company's 1991
Non-Employee Director Stock Option Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,310,398 626,571 31,467 2,508,762
</TABLE>
4. A proposal to approve the Company's 1998 Non-Employee Directors Stock
Incentive Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,818,889 117,397 32,150 2,508,762
</TABLE>
5. A proposal to approve the Company's 1998 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,250,400 722,482 24,372 2,479,944
</TABLE>
6. A proposal to approve the amendment and restatement of the Company's 1990
Employee Stock Purchase Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,903,362 36,452 28,622 2,508,762
</TABLE>
7. A proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the fiscal year ending September
30, 1998.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
18,457,583 4,966 14,649 -0-
</TABLE>
12
<PAGE> 13
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission dated December 9, 1997, which reported pursuant to Item
9 the issuance of common stock of MAPICS, Inc. in reliance on Regulation S
under the Securities Act of 1933, as amended.
The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission dated December 16, 1997, which reported pursuant to Item
5 the authorization by its Board of Directors of a plan to repurchase up to
1,800,00 shares of the Company's common stock.
The Company filed a Current Report on Form 8-K/A with the Securities and
Exchange Commission dated February 13, 1998, amending the Current Report on
Form 8-K dated December 9, 1997 which was previously filed with the
Securities and Exchange Commission. The issuance of common stock of MAPICS,
Inc. referred to therein was not made in reliance on Regulation S under the
Securities Act of 1933, as amended. Accordingly, the foregoing Current
Report on Form 8-K was not required to be filed.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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, on February 10, 1998.
MAPICS, INC.
By: /s/ WILLIAM J. GILMOUR
--------------------------------------
William J. Gilmour
Vice President of Finance and
Chief Financial and Accounting Officer
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
11 Computation of Per Share Earnings 16
27 Financial Data Schedule --
</TABLE>
15
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF
PER SHARE EARNINGS
Set forth below are computations, on a basic and diluted basis in accordance
with subparagraph (b)(11) of Item 601 of Regulation S-K of the Securities and
Exchange Commission, of earnings per share of the Company's common stock for the
three months ended December 31, 1997 and 1996, respectively (in thousands,
except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Basic:
Net income $ 4,637 $ 3,563
Weighted average common shares outstanding 18,513 15,768
Basic earnings per share $ 0.25 $ 0.23
Diluted:
Net income $ 4,637 $ 3,563
Weighted average common and common
equivalent shares outstanding 22,234 19,203
Diluted earnings per share $ 0.21 $ 0.19
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MAPICS, INC. FOR THE THREE MONTHS ENDED DECEMBER
31, 1997 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> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,575
<SECURITIES> 0
<RECEIVABLES> 33,724
<ALLOWANCES> 1,680
<INVENTORY> 0
<CURRENT-ASSETS> 45,431
<PP&E> 8,667
<DEPRECIATION> 4,033
<TOTAL-ASSETS> 81,275
<CURRENT-LIABILITIES> 52,457
<BONDS> 0
0
325
<COMMON> 186
<OTHER-SE> 28,307
<TOTAL-LIABILITY-AND-EQUITY> 81,275
<SALES> 18,156
<TOTAL-REVENUES> 29,594
<CGS> 2,769
<TOTAL-COSTS> 5,950
<OTHER-EXPENSES> 3,525
<LOSS-PROVISION> 52
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 7,540
<INCOME-TAX> 2,903
<INCOME-CONTINUING> 4,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,637
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.21
</TABLE>
