<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
_______________
(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
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)
Georgia 04-2711580
(State or other (I.R.S. Employer
jurisdiction of incorporation) 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)
Series F Junior Participating Preferred Stock Purchase Rights
(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
9, 1999 was 20,370,338.
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MAPICS, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended December 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
Number Number
------ ------
PART I - FINANCIAL INFORMATION
<S> <C> <C>
1. Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1998 3
and September 30, 1998......................................................
Condensed Consolidated Statements of Operations for the Three 4
Months Ended December 31, 1998 and 1997.....................................
Condensed Consolidated Statements of Cash Flows for the Three 5
Months Ended December 31, 1998 and 1997.....................................
Notes to Condensed Consolidated Financial Statements.......................... 6
2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations...................................................
3. Quantitative and Qualitative Disclosures About Market Risk.................... 15
PART II - OTHER INFORMATION
2. Changes in Securities and Use of Proceeds..................................... 16
4. Submission of Matters to a Vote of Security Holders........................... 16
5. Other Events.................................................................. 16
6. Exhibits and Reports on Form 8-K.............................................. 17
Signature..................................................................... 18
Exhibit Index................................................................. 19
</TABLE>
2
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PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements
MAPICS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------------- -------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 30,474 $ 33,442
Accounts receivable, net of allowances of $2,178 at
December 31, 1998 and $1,989 at September 30, 1998.............. 42,606 35,879
Prepaid expenses and other current assets.......................... 4,872 4,600
Deferred income taxes, net......................................... 1,478 1,462
------------------- -------------------
Total current assets....................................... 79,430 75,383
Property and equipment, net........................................ 5,382 5,038
Computer software costs, net....................................... 19,917 19,554
Other intangible assets, net....................................... 4,163 4,292
Deferred income taxes, net......................................... 2,346 5,775
------------------- -------------------
Total assets............................................... $111,238 $110,042
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 6,540 $ 8,499
Accrued expenses and other current liabilities..................... 19,566 23,496
Deferred revenues.................................................. 30,659 31,106
------------------- -------------------
Total current liabilities.................................. 56,765 63,101
------------------- -------------------
Commitments and contingencies (Note 4)
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000 shares authorized
Series D convertible preferred stock, 125 shares issued
and outstanding (liquidation preference of $9,419)
at December 31, 1998; 225 shares issued and
outstanding (liquidation preference of $16,955) at
September 30, 1998............................................. 125 225
Series E convertible preferred stock, 50 shares issued and
outstanding (liquidation preference of $3,768) at
December 31, 1998; 100 shares issued and outstanding
(liquidation preference of $7,536) at September 30, 1998....... 50 100
Common stock, $.01 par value; 50,000 shares authorized;
20,498 shares issued and 20,369 shares outstanding at
December 31, 1998; 18,891 shares issued and 18,762
shares outstanding at September 30, 1998....................... 205 189
Additional paid-in capital......................................... 63,314 61,670
Accumulated deficit................................................ (7,940) (13,962)
Treasury stock-at cost, 129 shares................................. (1,281) (1,281)
------------------- -------------------
Total shareholders' equity................................. 54,473 46,941
------------------- -------------------
Total liabilities and shareholders' equity................. $111,238 $110,042
=================== ===================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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MAPICS, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------------------------
1998 1997
------------------- -------------------
<S> <C> <C>
Revenues:
License................................................... $22,973 $18,156
Services.................................................. 15,488 11,438
------------------- -------------------
Total revenues.................................... 38,461 29,594
------------------- -------------------
Operating expenses:
Cost of license revenues.................................. 3,595 2,819
Cost of services revenues................................. 4,083 3,181
Selling and marketing..................................... 14,445 10,463
Product development....................................... 4,023 3,475
General and administrative................................ 2,916 2,167
------------------- -------------------
Total operating expenses.......................... 29,062 22,105
------------------- -------------------
Income from operations...................................... 9,399 7,489
Other:
Interest income............................................. 408 65
Interest expense............................................ (15) (14)
------------------- -------------------
Income before income tax expense............................ 9,792 7,540
Income tax expense.......................................... 3,770 2,903
------------------- -------------------
Net income.................................................. $ 6,022 $ 4,637
=================== ===================
Net income per common share (basic) (Note 3)................ $0.31 $0.25
=================== ===================
Weighted average number of common shares
outstanding (basic) (Note 3)........................... 19,490 18,513
=================== ===================
Net income per common share (diluted) (Note 3).............. $0.26 $0.21
=================== ===================
Weighted average number of common shares and common
equivalent shares outstanding (diluted) (Note 3)....... 23,527 22,234
=================== ===================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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MAPICS, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------------------------------
1998 1997
-------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 6,022 $ 4,637
Adjustments to reconcile net income to net cash (used for)
provided by operating activities:
Depreciation.............................................. 517 412
Amortization.............................................. 1,814 1,654
Provision for bad debts................................... 207 52
Deferred income taxes..................................... 3,684 2,043
Deferred stock compensation............................... 34 --
Stock issued to directors................................. 15 --
Changes in operating assets and liabilities:
Accounts receivable..................................... (6,934) (1,732)
Prepaid expenses and other current assets............... (272) (678)
Accounts payable........................................ (1,959) 639
Accrued expenses and other current liabilities.......... (3,930) (1,048)
Deferred revenues....................................... (447) 603
-------------------- --------------------
Net cash (used for) provided by operating activities. (1,249) 6,582
-------------------- --------------------
Cash flows from investing activities:
Purchases of property and equipment..................... (861) (1,484)
Additions to computer software costs.................... (1,412) (1,559)
Purchases of computer software.......................... (636) --
-------------------- --------------------
Net cash used for investing activities............... (2,909) (3,043)
-------------------- --------------------
Cash flows from financing activities:
Proceeds from stock options exercised................... 950 481
Proceeds employee stock purchases....................... 240 --
Acquisitions of treasury stock.......................... -- (1,007)
-------------------- --------------------
Net cash provided by (used for) financing activities. 1,190 (526)
-------------------- --------------------
Net (decrease) increase in cash and cash equivalents........... (2,968) 3,013
Cash and cash equivalents at beginning of period............... 33,442 5,562
-------------------- --------------------
Cash and cash equivalents at end of period..................... $30,474 $ 8,575
==================== ====================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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MAPICS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
Except for the balance sheet as of September 30, 1998, the accompanying
condensed consolidated financial statements are unaudited; however, in the
opinion of management, these condensed consolidated financial statements contain
all adjustments (consisting of only normal, recurring adjustments) necessary to
present fairly the Company's consolidated financial position, results of
operations and cash flows as of the dates and for the periods indicated. The
condensed consolidated 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
condensed consolidated financial statements not misleading, these condensed
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and related notes included
in the Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1998 as filed with the Commission.
MAPICS, Inc. (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. The accompanying
condensed financial statements are consolidated and consist of the condensed
financial statements of MAPICS, Inc. and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in the
consolidation.
Certain reclassifications were made to the 1997 statement of operations to
conform with the 1998 presentation.
(2) Significant Accounting Principles
Revenue Recognition
The Company generates revenues primarily from licensing its software, which is
conducted through a global network of independent Affiliates. The Affiliates
provide the principal channel through which the Company's products are
distributed to its customers. However, the ultimate customer typically executes
a license agreement directly with the Company rather than the Affiliate.
On October 1, 1998, the Company adopted Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," as amended by SOP 98-4. SOP 97-2, as amended,
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions and supercedes SOP 91-1. The
adoption of SOP 97-2 did not and is not expected to have a material impact on
the Company's financial position, results of operations or financial statement
disclosures.
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) fees being fixed and determinable;
and (iv) determination that collection of the related receivable is probable.
Under the terms of the Company's license agreements, the customer is responsible
for installation and training. 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, as
available.
The Company has no commitment to reimburse the Affiliates for any losses
incurred.
6
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Segment Information
On October 1, 1998, the Company adopted Statements of Accounting Standards
("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 requires public companies to report certain
information about operating segments in their financial statements and
establishes related disclosures about products and services, geographic areas
and major customers. SFAS No. 131 does not need to be applied to interim
financial statements in the initial year of application; however, comparative
information for interim periods in the initial year of application will be
reported in the financial statements for interim periods after September 30,
1999.
(3) Net Income Per Common Share
Net income per common share (basic) is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Net
income per common share (diluted) is computed by dividing net income by the
weighted average number of common shares and common equivalent shares
outstanding during the period. Common equivalent shares consist of the shares
issuable upon the assumed exercise of dilutive stock options, warrants and
convertible preferred stock. The following table presents the calculations of
basic and diluted net income per common share (in thousands, except per share
data):
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Numerator:
- ----------
Net income.............................................. $ 6,022 $ 4,637
============== ==============
Denominator:
- ------------
Weighted average number of common shares
outstanding (denominator for net income per
common share (basic)).................................. 19,490 18,513
Common share equivalents:
Convertible preferred stock........................... 2,565 3,250
Common stock options.................................. 782 254
Common stock warrants................................. 690 217
-------------- --------------
Weighted average number of common shares
and common equivalent shares outstanding
(denominator for net income per common
share (diluted))....................................... 23,527 22,234
============== ==============
Net income per common share (basic)..................... $ 0.31 $ 0.25
============== ==============
Net income per common share (diluted)................... $ 0.26 $ 0.21
============== ==============
</TABLE>
(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 certainty, 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.
(5) Office Lease
On October 29, 1998, the Company entered into an agreement to lease
approximately 120,000 square feet of new office space (the ''New Lease'') in
Alpharetta, Georgia, a suburb of Atlanta. The new office space is required to
meet the needs of the Company's growing employee population. The New Lease will
become effective on March 1, 1999, at which time the Company will vacate its
current facilities in Atlanta. The Company has reached an agreement to assign
the four leases for its current facilities in Atlanta (the ''Old Leases'') to a
third party which will assume all of the Company's obligations under the Old
Leases effective March 1, 1999.
7
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(6) Recently Issued Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee ("AcSEC") issued
SOP 98-1, ''Accounting for Costs of Computer Software Developed or Obtained for
Internal Use,'' which is effective for fiscal years beginning after December 15,
1998. The Statement distinguishes accounting for the costs of computer software
developed or obtained for internal use from guidance under SFAS No. 86,
''Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed.'' The Company will adopt SOP 98-1 on October 1, 1999. The adoption of
SOP 98-1 is not expected to have a material impact on the Company's software
capitalization policies, financial position, results of operations or financial
statement disclosures.
In December 1998, the AcSEC issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions." SOP 98-9,
which amends SOP 97-2, provides additional guidance on revenue recognition for
software arrangements with multiple elements. The Company will adopt SOP 98-9 on
October 1, 1999. The adoption of SOP 98-9 is not expected to have a material
impact on the Company's financial position, results of operations or financial
statement disclosures.
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
condensed 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 "anticipate," "believe,"
"could," "estimate," "expect," "intends," "may," "plans," "will," "would" 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Factors Affecting Future Performance" contained in
the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1998 as filed with the 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 is a business software company whose primary customers are
discrete and batch process manufacturers. The Company delivers enterprise
resource planning software that allows its customers to automate the
manufacturing process and coordinate multiple functions and departments within
their organizations, as well as extend their interactions with their supply
chain partners. The MAPICS XA product line currently consists of 49 applications
in the areas of Engineering Management, Demand Management, Operations
Management, Resource Planning, Financial Management and Business Management. The
design of the Company's applications allows its customers to rapidly implement
all or a portion of the Company's solution with minimal disruption to their
business. Furthermore, MAPICS solutions enable customers to leverage existing
information technology investments and adopt new technologies gradually, which
lowers costs and increases their return on investment.
The Company generates revenues primarily from licensing its software, which is
conducted principally through a global network of independent Affiliates. The
Affiliates provide the principal channel through which the Company's products
are distributed to its customers. However, the ultimate customer executes a
license agreement directly with the Company rather than the Affiliate. When it
first licenses its software, the Company receives both an initial license fee
and a periodic license fee. Initial license fees are recorded as license
revenues and generally recognized 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) fees being
fixed and determinable; and (iv) determination that collection of the related
receivable is probable. Periodic license fees are recorded as services revenue
and recognized ratably over the term of the periodic license agreement. 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,
as available. 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.
8
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The Affiliates, rather than the Company, provide the Company's customers with
consulting and implementation services relating to the MAPICS products. As a
result, the Company does not generate revenues from providing consulting and
implementation services.
The Company's cost structure is designed so that a significant portion of the
Company's costs vary in direct relation to license revenues, particularly
commissions paid to Affiliates, which are included in selling and marketing
expenses, and product royalties, which are included in 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 the MAPICS products.
In October 1998, the Company announced the world-wide availability of MAPICS
XA Release 5, which includes three new applications and enhancements to 20 of
the existing applications. Release 5 offers a complete solution for the Euro
Conversion and allows companies to maximize the benefits of e-commerce through a
complete Java user interface (eWorkPlace) and an Internet-based customer service
application (COM_Net). Using eWorkPlace, remote or local users can obtain
controlled access to MAPICS applications via an intranet, an extranet or the
Internet. COM Net helps companies service their customers over the Internet,
enabling them to place orders, review inventory availability, obtain current
pricing and promotional information, specify product configurations and inquire
into the status of an order 24 hours a day, seven days a week.
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,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Revenues:
License................................................ 59.7% 61.4%
Services............................................... 40.3 38.6
-------------- --------------
Total revenues.................................... 100.0 100.0
-------------- --------------
Operating expenses:
Cost of license revenues............................... 9.3 9.6
Cost of services revenues.............................. 10.6 10.7
Selling and marketing.................................. 37.5 35.4
Product development.................................... 10.5 11.7
General and administrative............................. 7.6 7.3
-------------- --------------
Total operating expenses.......................... 75.5 74.7
-------------- --------------
Income from operations.................................. 24.5 25.3
Interest income, net.................................... 1.0 0.2
-------------- --------------
Income before income tax expense........................ 25.5 25.5
Income tax expense...................................... 9.8 9.8
-------------- --------------
Net income.............................................. 15.7% 15.7%
============== ==============
</TABLE>
Three Months Ended December 31, 1998 Compared to Three Months Ended December
31, 1997
Revenues. Total revenues increased 30.0% to $38.5 million for the three
months ended December 31, 1998 from $29.6 million for the three months ended
December 31, 1997.
License revenues increased 26.5% to $23.0 million for the three months ended
December 31, 1998 from $18.2 million for the three months ended December 31,
1997, due to a volume increase in license sales to new customers. License sales
to new customers (which include both new named accounts and migrations from the
older MAPICS I and II product lines) increased 86% over the same
9
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period a year ago. The increase in license sales to new customers resulted from
the introduction of MAPICS XA Release 5 in October 1998 and reflects the
effectiveness of the Company's efforts to enhance the Affiliate channel and
thereby broaden its customer base.
Although the Company expects that the availability of new products and
incremental investments made to enhance the Affiliate channel will continue to
have a positive effect on the Company's revenues, future growth in license
revenues could be lower than that which the Company experienced during the past
twelve months due to prevailing concerns among manufacturers about general
economic conditions and the Year 2000 issue which is discussed elsewhere herein.
During the three months ended December 31, 1998, the Company received
indications that these concerns are affecting the purchasing decisions of both
existing customers and potential new customers alike, most notably in the United
States. However, these concerns might also impact the buying decisions of
customers in international markets. The Company is unable to quantify the effect
that these concerns have had or will continue to have on its business, financial
condition and results of operations.
The Company achieved license revenue growth in each of its primary geographic
markets during the three months ended December 31, 1998. Operations in (i)
North America, (ii) the EMEA region and (iii) the combined Latin America/Asia
Pacific regions accounted for 62%, 25% and 13% of total license revenues,
respectively, during the three months ended December 31, 1998, compared to 64%,
25% and 11% respectively, for the three months ended December 31, 1997.
Services revenues increased 35.4% to $15.5 million for the three months ended
December 31, 1998 from $11.4 million for the three months ended December 31,
1997, primarily due to the increase in the number of customers paying periodic
license fees.
Cost of License Revenues. Cost of license revenues increased 27.5% to $3.6
million for the three months ended December 31, 1998 from $2.8 million for the
three months ended December 31, 1997, primarily as a result of an increase in
product royalty expense due to the increased volume in license revenues and an
increase in amortization expense related to computer software costs. Cost of
license revenues increased slightly as a percentage of license revenues to 15.6%
for the three months ended December 31, 1998 from 15.5% for the three months
ended December 31, 1997, primarily as a result of proportionally higher total
product royalty expenses paid to third party software suppliers ("Solution
Partners") due to the mix of products sold during the three months ended
December 31, 1998. The increase in the amortization of computer software costs
as a percentage of license revenues was smaller than such increases in prior
periods because certain of the costs of computer software are now fully
amortized.
Cost of Services Revenues. Cost of services revenues increased 28.4% to $4.1
million for the three months ended December 31, 1998 from $3.2 million for the
three months ended December 31, 1997. This increase resulted from the
additional distribution and support costs associated with the increase in new
customers, a volume increase in fees paid to Affiliates and Solution Partners
for providing support services in EMEA and the Latin America and Asia Pacific
regions and the added personnel costs associated with hiring additional customer
support personnel. Cost of services revenues decreased as a percentage of
services revenues to 26.4% for the three months ended December 31, 1998 from
27.8% for the three months ended December 31, 1997 because the fixed cost
component relating primarily to personnel costs was a proportionally lower
percentage of costs of services revenues during the three months ended December
31, 1998.
Selling and Marketing. Selling and marketing expenses increased 38.1% to
$14.4 million for the three months ended December 31, 1998 from $10.5 million
for the three months ended December 31, 1997. As a percentage of total
revenues, selling and marketing expenses increased to 37.5% for the three months
ended December 31, 1998 from 35.4% for the three months ended December 31, 1997.
These increases were due to increased commissions earned by Affiliates on
increased license revenues, the hiring of additional sales and marketing
personnel and increased spending on selling and marketing programs.
Product Development. Overall product development expenses increased 15.8% to
$4.0 million for the three months ended December 31, 1998 from $3.5 million for
the three months ended December 31, 1997. As a percentage of total revenues,
product development expenses decreased to 10.5% for the three months ended
December 31, 1998 from 11.7% for the three months ended December 31, 1997. The
increase in product development expense resulted from a combination of increased
spending on core product development and a reduction in the amount of software
translation expenditures which were capitalized during the three months ended
December 31, 1998.
Gross core development expenditures increased 16.0% to $4.7 million for the
three months ended December 31, 1998 from $4.1 million for the three months
ended December 31, 1997. This increase was due primarily to the hiring of
additional personnel and incremental spending on product development resources
to support the on-going effort to re-engineer the Company's software server
applications to the Windows NT server platform, while continuing efforts to
expand the MAPICS XA product line. The amounts of
10
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core development expenditures capitalized during the three months ended December
31, 1998 and December 31, 1997 were $778,000 and $562,000 respectively,
representing 16.5% and 13.8% of gross core development expenditures during those
periods. The amount of core development expenditures capitalized as a percentage
of gross core development expenditures during the three months ended December
31, 1998 increased because a higher proportion of these expenditures had reached
the technological feasibility stage as compared to those for the three months
ended December 31, 1997. Gross computer software translation expenditures
decreased 29.7% to $712,000 during the three months ended December 31, 1998 from
$1.0 million during the three months ended December 31, 1997. 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, 1998 and
December 31, 1997 were $634,000 and $997,000, respectively, representing 89.0%
and 98.4%, respectively, of gross translation expenditures during those periods.
In addition to the amounts spent on core product development and computer
software translation, the Company spent approximately $636,000 during the three
months ended December 31, 1998 and $0 during the three months ended December 31,
1997 to acquire certain rights to computer software. The amounts spent to
acquire computer software were capitalized and are included in computer software
costs.
General and Administrative. General and administrative expenses increased
34.6% to $2.9 million during the three months ended December 31, 1998 from $2.2
million during the three months ended December 31, 1997. These expenses
represented 7.6% and 7.3% of total revenues during the three months ended
December 31, 1998 and 1997, respectively.
Interest Income. Interest income increased to $408,000 for the three months
ended December 31, 1998 from $65,000 for the three months ended December 31,
1997 due to the increase in cash and cash equivalents.
Interest Expense. Interest expense, which primarily reflects commitment fees
incurred for unused portions of the Company's revolving credit facility,
increased to $15,000 for the three months ended December 31, 1998 from $14,000
for the three months ended December 31, 1997.
Income Tax Expense. Income tax expense represented 38.5% of income before
income tax expense for the three months ended December 31, 1998 and 1997.
Net Income. Net income increased 29.9% to $6.0 million, or $0.26 per share
(diluted), for the three months ended December 31, 1998 from $4.6 million, or
$0.21 per share (diluted), for the three months ended December 31, 1997.
Liquidity and Capital Resources
The following table sets forth a summary of the Company's cash flow activity
for the periods indicated and should be read in conjunction with the Company's
statements of cash flows (in thousands):
<TABLE>
<CAPTION>
Summary of Cash Flows
-----------------------------------
Three Months Ended
December 31,
-----------------------------------
1998 1997
----------------- --------------
<S> <C> <C>
Net cash (used for) provided by operating activities............... $(1,249) $ 6,582
Net cash used for investing activities............................. (2,909) (3,043)
Net cash provided by (used for) financing activities............... 1,190 (526)
----------------- --------------
Net (decrease) increase in cash and cash equivalents............ $(2,968) $ 3,013
================= ==============
</TABLE>
The Company has funded its operations and capital expenditures primarily with
cash generated from operating activities. As of December 31, 1998, the Company
had cash and cash equivalents of $30.5 million and working capital of $22.7
million. Excluding deferred revenues of $30.6 million, working capital as of
December 31, 1998 was $53.3 million. As of September 30, 1998, the Company had
cash and cash equivalents of $33.4 million and working capital of $12.3 million.
Excluding deferred revenues of $31.1 million, working capital as of September
30, 1998 was $43.4 million. During the three months ended December 31, 1998,
cash and cash equivalents decreased $3.0 million while working capital,
excluding deferred revenues, increased $9.9 million.
11
<PAGE>
Net cash used for operating activities during the three months ended December
31, 1998 was $1.2 million, compared to net cash provided by operating activities
during the three months ended December 31, 1997 of $6.6 million. Growth in
earnings and the utilization of favorable income tax benefits during the three
months ended December 31, 1998 continued to have a positive effect on the
Company's cash flow from operating activities; however, the effect of changes in
working capital caused an overall decrease in cash flow from operating
activities. During the three months ended December 31, 1998, accounts receivable
increased $6.7 million, accrued expenses and other current liabilities decreased
$3.9 million and accounts payable decreased $2.0 million, each of which had the
effect of reducing cash flow from operating activities. The increase in accounts
receivable resulted principally from an increase in amounts billed to existing
customers in December 1998 for annual license fees. The decreases in accounts
payable and accrued expenses and other current liabilities resulted from
payments to vendors and other service providers, payments to Affiliates for
sales commissions and income tax payments for the year ended September 30, 1998.
Furthermore, the Company accelerated payments of sales commissions to its
Affiliates during the three months ended December 31, 1998 to enhance its
Affiliate channel by providing improved cash flow so that they can continue to
grow their operations. The trends affecting accounts receivable and accrued
expenses and other current liabilities were generally the same during the three
months ended December 31, 1997, during which time accounts receivable increased
$1.7 million, accrued expenses and other current liabilities decreased $1.0
million and accounts payable increased $639,000.
Net cash used for investing activities during the three months ended December
31, 1998 and 1997 was $2.9 million and $3.0 million, respectively. During the
three months ended December 31, 1998 and 1997, the Company used cash for
investing activities related to computer software development, computer software
translation and purchases of property and equipment, reflecting the incremental
investments made in its computer software development activities and the
additional computer equipment and office furniture needed for its growing
employee population. The decrease in cash used for investing activities resulted
from a $623,000 reduction in capital expenditures for property and equipment and
a $147,000 reduction in additions to computer software costs offset by a
$636,000 increase in expenditures to acquire certain rights to computer software
to be integrated with the Company's product offerings.
Net cash provided by financing activities during the three months ended
December 31, 1998 was $1.2 million, compared to net cash used for financing
activities during the three months ended December 31, 1997 of $526,000. During
the three months ended December 31, 1998 and December 31, 1997, respectively,
the Company received proceeds from stock options exercised and employee stock
purchases of $1.2 million and $481,000, respectively. During the three months
ended December 31, 1997, the Company repurchased 103,600 shares of its Common
Stock for $1.0 million pursuant to its then existing stock repurchase plan which
was rescinded in December 1998. On February 10, 1999, the Company's board of
directors authorized the repurchase of up to 1.8 million shares of Common Stock
under a new stock repurchase plan.
In addition to the cash provided by operating and financing activities,
additional borrowings of up to $15.0 million, subject to certain limitations,
are available to the Company under a revolving credit facility with a bank.
Availability of revolving credit loans and the rate of interest thereon vary
depending upon the Company's ability to maintain certain financial ratios. As of
December 31, 1998, the Company met all of those financial ratios, although no
revolving credit borrowings have been outstanding under the revolving credit
facility since its inception. The Company pays a quarterly commitment fee for
unused portions of the revolving credit facility. Any outstanding borrowings
under the revolving credit facility will mature on June 30, 2000.
As of December 31, 1998, the Company did not have any material commitments for
capital expenditures.
The Company believes that cash and cash equivalents on hand as of December 31,
1998, together with cash flows from operations and available borrowings under
the Company's revolving credit facility, will be sufficient to maintain its
current level of operations for at least the next 12 months.
12
<PAGE>
Year 2000 Issue
Many existing computer hardware and software systems are designed to use only
two digits to identify a year in date fields (e.g., ''98'' for ''1998''). These
systems may not properly recognize a year that begins with ''20'' instead of
''19.'' If not corrected, these systems could fail or could create erroneous
results when working with dates beyond the year 1999. This is commonly referred
to as the ''Year 2000 issue.'' The Company believes that the Year 2000 issue may
affect the Company in two principal ways: through the Company's products and its
operations.
The Company's Readiness Status
The Company develops and markets software programs which are date sensitive
and may be affected by the Year 2000 issue. The Year 2000 issue may also affect
the demand for the Company's products and the spending patterns of the Company's
customers.
In July 1997, the Company received Information Technology Association of
America 2000 (''ITAA 2000'') certification, validating that the Company's
development processes meet the information technology industry's best software
development practices for addressing the Year 2000 issue. MAPICS XA releases
since 1995 and the last release of MAPICS/DB have been converted and tested to
be Year 2000 compliant. The Company believes that the products it currently
produces adequately address the Year 2000 issue. The Company's Solution Partners
have certified to the Company that their products are also Year 2000 compliant.
However, the Company cannot assure that these products or future products that
the Company or its Solution Partners develop contain or will contain all
necessary date code changes or that errors will not be found in these products
at a later time. The costs to resolve any resulting Year 2000 related errors
could have a material adverse impact on the Company's business, financial
condition and results of operations.
Many hardware, operating system and application products developed by third
parties interact or operate with MAPICS applications. In addition, customers or
others may modify MAPICS products after they have been installed. The Company
cannot assess the Year 2000 readiness of these hardware, operating system and
application products or modified MAPICS products. If these products are not Year
2000 compliant, it could adversely affect the performance and functionality of
the Company's applications that work with these products. While the Company
believes that it would not be responsible for these Year 2000 problems, it is
unable to assess the effect they may have on the Company's business, financial
condition and results of operations.
The Company believes that the Year 2000 issue is effecting the demand for
Year 2000 enabled hardware and software products, including those offered by the
Company. The Company believe that customers (both existing customers and
potential new customers) have deferred and may continue to defer purchase
decisions for the Company's products while they divert their resources to
address other Year 2000 issues within their businesses. In addition, once
companies have replaced their existing systems which are not Year 2000 enabled
their demand for the Company's products may decrease. The Company is unable to
quantify the effect that the demand for Year 2000 enabled products has had on
its current business, financial condition and results of operations and cannot
predict the effect that any increase or decrease in demand will have on the
Company in the future.
The Company principally relies on its MAPICS XA product to support its
internal accounting, payables and invoicing operations. While MAPICS XA has been
converted and tested to be Year 2000 compliant, the Company also relies on third
party systems developed by others for many of its critical internal operations.
If these systems are not Year 2000 compliant, it may have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company's internal operations may also be affected by Year 2000
issues affecting third parties with whom the Company has relationships,
including Affiliates, Solution Partners and other vendors (e.g., utilities,
distributors, banks and other suppliers). A Year 2000 problem affecting one or
more of these third parties may also have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company has assembled a Year 2000 taskforce made up of representatives
from the Company's development, marketing, support, information systems,
facilities, finance and legal departments to assess the Year 2000 readiness of
the Company's internal operations and the readiness of third parties on which it
relies. The taskforce has identified and assessed the Year 2000 readiness of
most of the material information technology (''I/T'') and non-information
technology (''non-I/T'') systems, including fax machines, phone switches and
badge access readers, used internally as part of the Company's operations, but
such work is ongoing. The taskforce has tested or will test these systems where
feasible and practicable. The Company expects testing to be substantially
complete by March 31, 1999. The Company believes that it has the appropriate
plans in place to achieve timely Year 2000
13
<PAGE>
readiness for its internal systems. However, the Company's on-going assessment
program may in the future reveal Year 2000 issues which are not currently
identified or fully understood.
The taskforce has also worked to identify those third parties on which the
Company's operations materially rely. This includes the Company's Affiliates,
Solution Partners and other suppliers. The taskforce has gathered written
materials published by such third parties or otherwise communicated directly
with such third parties in order to determine the Year 2000 readiness of their
business operations or the readiness of the products or services they supply to
the Company. While the taskforce has collected many responses and other
materials from such third parties regarding their Year 2000 readiness, the
process is ongoing. The Company expects to gather materials on all third parties
with whom it relies by June 30, 1999. The Company is not certain that the Year
2000 issue will be properly and timely resolved by all of its suppliers,
Affiliates, or Solution Partners, and if not so resolved, this could have a
material impact on the Company's business, financial condition and results of
operations.
Company Costs to Address the Year 2000 Issue
The Company has incurred approximately $330,000 in costs to make its products
and internal systems Year 2000 compliant. It does not expect to incur material
additional costs to remedy any remaining Year 2000 problems with its products
and internal systems. However, the Company cannot currently assess the costs of
remedying problems resulting from the Year 2000 issues of others. If the costs
of remedying these Year 2000 problems proves to be significant, it may have a
material adverse effect on the Company's business, financial condition and
results of operations.
Risks
The Company's customer operations are heavily dependent on the constant
availability of telecommunications equipment and other utilities. As a result,
the Company currently believes that the most reasonably likely worst case Year
2000 scenario would involve the temporary interruption of electric power,
telephone or other utility supplies to the Company's headquarters or its other
support operations facilities due to a failure of a utility supplier to be Year
2000 compliant. In addition, despite assurances and testing, it is also possible
that the Company's internal systems or those of its Affiliates or its suppliers
may not be Year 2000 ready. Such failure could have a material adverse effect on
the Company's business, financial condition and results of operations.
In addition, "business interruption" litigation may arise out of the Year
2000 issue. The Company is not aware of any possible claim against it arising
from instances of business interruption. However, the Company is uncertain how
it may be affected by any such litigation. In particular, many of the Company's
applications that are currently in use but were sold before the Company's 1995
application releases are not Year 2000 enabled. These applications are no longer
supported by the Company. While the Company has made Year 2000 enabled
replacement software available to most customers using older applications, it
cannot assure that all of these customers are aware of the Year 2000 issue or
that they have adopted these replacements or other remedies. In addition, it
cannot assure that these customers will not bring Year 2000-related claims
against the Company which, with or without merit, could be time consuming and
expensive for the Company to defend or resolve. Any adverse outcome in any such
litigation could subject the Company to significant liability. As a result,
business interruption litigation could have a material adverse effect on the
Company's business, financial condition and results of operations.
Contingency Plans
The Company has not yet established a contingency plan to address the most
reasonably likely worst case scenario described above. Because the Company has
not completed the testing of those internal systems which it can test feasibly
and practically, and since it has not received all responses from those
suppliers on which it relies, it has not fully assessed the potential Year 2000
exposures. Accordingly, the Company has not yet fully developed Year 2000
specific contingency plans. These plans will be developed by September 30, 1999,
if the foregoing assessment identifies a material business function that is
substantially at risk.
Cautionary Statements
The continued assessment, progress and timing of the Company's Year 2000
readiness efforts and potential exposures as described above depend upon the
cooperation and responsiveness of third parties, the accuracy and reliability of
responses provided and testing procedures, and the availability of skilled
resources, both internal and external, to address Year 2000 issues that exist or
may arise.
14
<PAGE>
There can be no assurance that assessments to date will prove to be accurate.
Serious deficiencies which are not currently identified or fully understood may
arise in the future and may have a material adverse impact on the Company's
business, financial condition and results of operations. The Company plans to
continue its taskforce into the Year 2000 to assess Year 2000 issues affecting
the Company, apprise management of the status of its findings and develop
appropriate contingency plans where necessary in an effort to minimize the
potential exposure of the Company to the Year 2000 issue.
Euro Conversion Issue
On January 1, 1999, a new currency called the "euro" was introduced in 11 of
the 15 member countries of the European Union (the "Euro Conversion"). In 2002,
each of these participating countries will adopt the euro as their single
currency. Until that time, however, financial transactions in these
participating countries may be conducted in either the euro or the local
national currency. As a result, companies operating or conducting business in
these participating countries during this transition period must be able to
process financial transactions in either the euro or the local national
currency.
The latest release of the Company's product (MAPICS XA Release 5) includes a
solution designed to address the Euro Conversion. Although this product is
designed to enable companies to process financial transactions in the euro and
the local national currencies, there can be no assurance that it will
satisfactorily address all Euro Conversion issues. The costs to resolve any
resulting Euro Conversion related errors could have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company, like its customers and others who operate or conduct business in
the participating countries, must be able to process financial transactions in
both the euro and the local national currencies of the participating countries.
To date, the Company has had no financial transactions with its customers,
vendors, Affiliates or others that were denominated in the euro. Furthermore,
management does not expect such transactions to be commonplace during the
initial phase of the transition to the euro. A Company taskforce charged with
analyzing the effect of the Euro Conversion on the Company's operations has
determined that the Company can timely process a minimal amount of euro-related
transactions without modification to its existing internal systems. However,
the taskforce believes that over time, as companies adopt the euro as the
preferred currency for certain or all of their business transactions, the
Company will be required to process euro-related transactions in increasing
volume. The Company currently plans to implement its euro-enabled software
product (MAPICS XA Release 5) before this volume becomes significant.
Management expects that the costs of implementing MAPICS XA Release 5 for its
own use will be insignificant and does not expect to experience significant
conversion and/or operational problems associated with the implementation of its
own software product. However, if the Company is required to process a
significant amount of financial transactions in the euro before it is able to
implement MAPICS XA Release 5 for its own use, or if subsequently MAPICS XA
Release 5 does not allow the Company to satisfactorily process financial
transactions in the euro, it may result in unforeseen costs or a disruption to
the Company's business, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Management does not believe that the translation of financial transactions
into euros will have a significant effect on the Company's business, financial
condition or results of operations. The Euro Conversion, however, may have an
impact on economic factors that affect the Company's business, including its
effect on interest rates, exchange rates and contract prices. Currently,
management believes that its exposure to market risk with respect to financial
instruments is immaterial. However, the Euro Conversion may create strategic
challenges as companies across Europe adapt to a single transnational currency.
The participating countries' adoption of the euro will likely result in greater
transparency of pricing, making Europe a more competitive environment. Although
the Company has adapted its European price list to accommodate the introduction
of the euro, it is currently unsure of the potential impact it could have on
competitive conditions in European markets.
Inflation
To date, the Company believes inflation has not had a material impact on the
Company's operations.
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
The Company does not engage in trading market risk sensitive instruments. The
Company also does not purchase, for investment, hedging or for purposes "other
than trading," instruments that are likely to expose it to market risk, whether
interest rate, foreign currency exchange, commodity price or equity price risk,
except as discussed in the following paragraph. The Company has issued no debt
instruments, entered into no forward or futures contracts, purchased no options
and entered into no swaps, except as discussed in the following paragraph.
The Company's foreign operations, primarily those in western Europe, generate
cash which is denominated in foreign currencies. At December 31, 1998 and
September 30, 1998, cash denominated in foreign currencies was $1,710,000 and
$2,055,000, respectively. From time to time, the Company enters into forward
exchange contracts as a hedge against the foreign currency exchange risk on cash
and net receivables denominated in certain foreign currencies. However, the
Company did not enter into any such contracts during the three months ended
December 31, 1998 nor did the Company have any open forward exchange contracts
at December 31, 1998 or September 30, 1998. Moreover, the Company believes that
its exposure to foreign currency exchange rate risk at December 31, 1998 was not
material.
The Company has minimal interest rate risk. A change in either the lender's
Base Rate or LIBOR would affect the rate at which the Company could borrow funds
under its revolving credit facility.
15
<PAGE>
PART II: OTHER INFORMATION
ITEM 2: Changes in Securities and Use of Proceeds
On November 20, 1998, the Company (i) issued 880,920 shares of Common Stock to
General Atlantic Partners 21, L.P. ("GAP 21") upon the conversion by GAP 21 of
88,029 shares of the Company's Series D Convertible Preferred Stock into Common
Stock, (ii) issued 188,120 shares of Common Stock to GAP Coinvestment Partners,
L.P. ("GAP Coinvestment") upon the conversion by GAP Coinvestment of 11,971
shares of Series D Preferred Stock and 6,841 shares of the Company's Series E
Convertible Preferred Stock into Common Stock and (iii) issued 431,600 shares of
Common Stock to General Atlantic Partners 32, L.P. ("GAP 32") upon the
conversion by GAP 32 of 43,160 shares of Series E Preferred Stock into Common
Stock. The Company did not receive any proceeds from the issuance of such shares
of Common Stock. The issuance of such shares of Common Stock was exempt from the
registration requirements of the Securities Act of 1933 pursuant to Section
3(a)(9) thereof. Such shares currently are eligible for sale in the public
market subject to the conditions of Rule 144 of the Securities and Exchange
Commission.
ITEM 4: Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on February 10, 1999, 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 an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock from
50,000,000 to 90,000,000 shares.
<TABLE>
<CAPTION>
For Against Abstain
- --- ------- -------
<S> <C> <C>
15,737,627 2,625,551 18,637
2. A proposal to elect two directors to serve until the 2002 Annual Meeting of Shareholders.
Withheld
For Authority
--- ---------
George A. Chamberlain 3d 18,323,935 57,880
Richard C. Cook 18,322,962 58,853
3. A proposal to approve an amendment to the Company's 1998 Long Term Incentive Plan to increase the
number of shares of Common Stock available for awards thereunder from 1,000,000 to 2,000,000 shares.
For Against Abstain
- --- ------- -------
15,662,219 2,697,003 22,593
4. A proposal to ratify the appointment of PricewaterhouseCoopers LLP as independent accountants of the
Company for the fiscal year ending September 30, 1999.
For Against Abstain
- --- ------- -------
18,367,569 7,721 6,525
</TABLE>
ITEM 5: Other Events
None.
16
<PAGE>
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
--- -----------
10.1 Sixth Amendment dated as of August 14, 1998 to Revolving Credit and
Term Loan Agreement dated as of August 4, 1997, as Amended and Restated
through March 31, 1998, among MAPICS, Inc., BankBoston, N.A. and the
other lending institutions set forth on Schedule I thereto, and
BankBoston, N.A. as agent
21 Subsidiaries of the Registrant
27.1 Financial Data Schedule for the three months ended December 31, 1998
(for SEC use only)
27.2 Restated Financial Data Schedule for the three months ended December
31, 1997 (for SEC use only)
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission dated December 4, 1998, which reported pursuant to Item 5
the rescission of the Company's stock repurchase program.
17
<PAGE>
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 15, 1999.
MAPICS, Inc.
By: /s/ William J. Gilmour
--------------------------------
William J. Gilmour
Vice President of Finance and
Chief Financial and Accounting Officer
18
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- --- -----------
10.1 Sixth Amendment dated as of August 14, 1998 to Revolving Credit and
Term Loan Agreement dated as of August 4, 1997, as Amended and
Restated through March 31, 1998, among MAPICS, Inc., BankBoston, N.A.
and the other lending institutions set forth on Schedule I thereto,
and BankBoston, N.A. as agent
21 Subsidiaries of the Registrant
27.1 Financial Data Schedule for the three months ended December 31, 1998
(for SEC use only)
27-2 Restated Financial Data Schedule for the three months ended December
31, 1997 (for SEC use only)
19
<PAGE>
Exhibit 10.1
SIXTH AMENDMENT
TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
Sixth Amendment dated as of August 14, 1998 to Revolving Credit and Term
Loan Agreement (the "Sixth Amendment"), by and among MAPICS, INC., a Georgia
corporation (the "Borrower"), BANKBOSTON, N.A. and the other lending
institutions listed on Schedule 1 to the Credit Agreement (as hereinafter
----------
defined) (the "Banks") and BANKBOSTON, N.A., as agent for the Banks (in such
capacity, the "Agent"), amending certain provisions of the Revolving Credit and
Term Loan Agreement dated as of August 4, 1997 (as amended and in effect from
time to time, the "Credit Agreement") by and among the Borrower, the Banks and
the Agent. Terms not otherwise defined herein which are defined in the Credit
Agreement shall have the same respective meanings herein as therein.
WHEREAS, the Borrower, the Banks and the Agent have agreed to modify
certain terms and conditions of the Credit Agreement as specifically set forth
in this Sixth Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
(S)1. Amendment to (S)10 of the Credit Agreement. Section 10 of the
--------- -- ----- -- --------------------
Credit Agreement is hereby amended as follows:
(a) Section 10.1 of the Credit Agreement is hereby amended by (i) deleting
the word "and" which appears at the end of (S)10.1(e); (ii) deleting the period
which appears at the end of (S)10.1(f) and substituting in place thereof a
semicolon and the word "and"; and (iii) inserting immediately after the text of
(S)10.1(f) the following:
(g) Indebtedness of the Borrower consisting of a guaranty by the
Borrower of loans to employees of the Borrower, provided that the aggregate
principal amount of such Indebtedness of the Borrower shall not exceed the
aggregate amount of $500,000 at any one time.
(b) Section 10.2 of the Credit Agreement is hereby amended by (i) deleting
the period which appears at the end of (S)10.2(i) and substituting in place
thereof a semicolon and the word "and"; and (ii) inserting immediately after the
text of (S)10.2(i) the following:
(j) liens to secure Indebtedness of the type and amount permitted by
(S)10.1(g).
<PAGE>
-2-
(S)2. Amendment to (S)11 of the Credit Agreement. Section 11.5 of the
--------- -- ----- -- --------------------
Credit Agreement is hereby amended by deleting the amount "$4,500,000" which
appears in (S)11.5 and substituting in place thereof the amount "$5,500,000".
(S)3. Conditions to Effectiveness. This Sixth Amendment shall not become
---------------------------
effective until the Agent receives a counterpart of this Sixth Amendment,
executed by the Borrower, the Majority Banks and the Agent.
(S)4. Representations and Warranties. The Borrower hereby repeats, on and
------------------------------
as of the date hereof, each of the representations and warranties made by it in
(S)8 of the Credit Agreement (except to the extent of changes resulting from
transactions contemplated or permitted by this Sixth Amendment, the Credit
Agreement (including any prior amendments thereto) and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date), provided,
--------
that all references therein to the Credit Agreement shall refer to such Credit
Agreement as amended hereby. In addition, the Borrower hereby represents and
warrants that the execution and delivery by the Borrower of this Sixth Amendment
and the performance by the Borrower of all of its agreements and obligations
under the Credit Agreement as amended hereby are within the corporate authority
of the Borrower and have been duly authorized by all necessary corporate action
on the part of the Borrower.
(S)5. Ratification, Etc. Except as expressly amended hereby, the Credit
------------ ---
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Sixth Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.
(S)6. No Waiver. Nothing contained herein shall constitute a waiver of,
---------
impair or otherwise affect any Obligations, any other obligation of the Borrower
or any rights of the Agent or the Banks consequent thereon.
(S)7. Counterparts. This Sixth Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
(S)8. Governing Law. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment
as a document under seal as of the date first above written.
MAPICS, INC.
By: /s/ William J. Gilmour
----------------------
Title: Chief Financial Officer
BANKBOSTON, N.A.,
individually and as Agent
By: /s/ Jay L. Massimo
------------------
Jay L. Massimo, Director
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction of Incorporation Names Under Which
Name of Subsidiary or Organization Subsidiaries Do Business
- ------------------ ----------------------------- ------------------------
<S> <C> <C>
MAPICS Australia Pty. Ltd. Australia MAPICS Australia Pty. Ltd.
MAPICS do Brasil Ltda. Brazil MAPICS do Brasil Ltda.
3566196 Canada, Inc. Canada 3566196 Canada, Inc.
MAPICS EMEA Support Center B.V. Netherlands MAPICS EMEA Support Center B.V.
Debutanten 1064AB Sweden Debutanten 1064AB
MAPICS Singapore Pte. Ltd. Singapore MAPICS Singapore Pte. Ltd.
MAPICS GmbH Germany MAPICS GmbH
MAPICS KK Japan MAPICS KK
MAPICS UK Ltd. United Kingdom MAPICS UK Ltd.
MAPICS France S.a.r.l. France MAPICS France S.a.r.l.
MAPICS International Corporation Barbados MAPICS International Corporation
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Mapics, Inc. for the three months ended
December 31, 1998 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-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 30,474
<SECURITIES> 0
<RECEIVABLES> 44,784
<ALLOWANCES> 2,178
<INVENTORY> 0
<CURRENT-ASSETS> 79,430
<PP&E> 11,373
<DEPRECIATION> 5,991
<TOTAL-ASSETS> 111,238
<CURRENT-LIABILITIES> 56,765
<BONDS> 0
0
175
<COMMON> 205
<OTHER-SE> 54,093
<TOTAL-LIABILITY-AND-EQUITY> 111,238
<SALES> 22,973
<TOTAL-REVENUES> 38,461
<CGS> 3,595
<TOTAL-COSTS> 7,678
<OTHER-EXPENSES> 4,023
<LOSS-PROVISION> 207
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 9,792
<INCOME-TAX> 3,770
<INCOME-CONTINUING> 6,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,022
<EPS-PRIMARY> 0.31<F1>
<EPS-DILUTED> 0.26<F2>
<FN>
<F1>Represents basic EPS for the three months ended December 31, 1998.
<F2>Represents diluted EPS for the three months ended December 31, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated 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> 2,819
<TOTAL-COSTS> 6,000
<OTHER-EXPENSES> 3,475
<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> 0.25<F1>
<EPS-DILUTED> 0.21<F2>
<FN>
<F1>Represents basic EPS for the three months ended December 31, 1997.
<F2>Represents diluted EPS for the three months ended December 31, 1997.
</FN>
</TABLE>
