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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 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: 0-19024
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Symix Systems, Inc.
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(Exact name of registrant as specified in its charter)
OHIO 31-1083175
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2800 Corporate Exchange Drive
Columbus, Ohio 43231
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 523-7000
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Securities registered pursuant to section 12(b) of the Act:
NONE
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Securities registered pursuant to Section 12(g) of the Act:
Common Shares No-Par Value
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant at September 19, 1997 was $66,528,220.
The number of common shares outstanding at September 19, 1997 was 5,857,556.
Documents Incorporated by Reference:
(1) The Registrant's Definitive Proxy Statement for its Annual
Meeting of Shareholders to be held on November 4, 1997 is
incorporated by reference into Part III of this Annual
Report on Form 10-K.
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PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
For the years ended June 30, 1997, 1996 and 1995, the Company's revenue is
derived primarily from (1) licensing Symix software and providing custom
programming services; (2) providing installation, implementation, training,
consulting and systems integration services; and (3) providing maintenance and
support on a subscription basis. Revenue for all periods presented is accounted
for in accordance with AICPA Statement of Position 91-1 on Software Revenue
Recognition.
REVENUE
Net revenue increased 44% to $65.8 million in fiscal 1997, compared to increases
of 7% and 21% for the years ended June 30, 1996 and 1995, respectively. The
strong growth in fiscal 1997 net revenue compared to previous years was the
result of new software product offerings and an expanding international
distribution channel. Both software revenue and service and support revenue
contributed significantly to the net revenue increase in fiscal 1997. The
increase in net revenue in fiscal 1996 and fiscal 1995 was primarily the result
of increased service and support revenue. Service revenue increased $2.9
million and $7.4 million in fiscal 1996 and fiscal 1995, respectively. The
revenue mix since 1995 is shown in the table below:
REVENUE MIX
Year ended June 30,
(IN THOUSANDS, EXCEPT PERCENTAGES)
1997 1996 1995
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Software $36,477 55% $24,682 54% $24,677 58%
Service and support 29,295 45% 21,077 46% 18,151 42%
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Total $65,772 100% $45,759 100% $42,828 100%
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Software license fees and related revenue increased 48% in fiscal 1997 compared
to flat revenue growth in fiscal 1996 and fiscal 1995. The increase in software
revenue in fiscal 1997 was primarily the result of (1) an expanding
international distribution channel and (2) revenue from the Company's new client
server ERP software product, Symix SyteLine-TM-, available for sale for a full
year for the first time in fiscal 1997. During the past 15 months, the Company
converted distributors in Australia, New Zealand and the Netherlands to
subsidiary operations and acquired a French sales and distribution operation.
Revenue from foreign operations accounted for approximately 25% of total revenue
in fiscal 1997, compared to 18% in fiscal 1996 and 11% in fiscal 1995. The
significant increase in revenue from foreign operations resulted primarily from
the conversion of distributor operations and acquisitions completed during
fiscal 1997.
Symix SyteLine-TM- was released in March, 1996 and represents a large majority
of new product sales to customers. In addition to Symix SyteLine-TM-, the
Company released and sold complementary products during the second half of the
most recent fiscal year that provided
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expanded features and functionality and enhanced sales of Symix SyteLine-TM-.
The Company also purchased a Canadian company in January, 1997 that develops and
distributes an application software product, FieldPro-TM-, which provides field
service and warranty tracking capabilities for manufacturers and service
organizations of computer and office equipment distributors. FieldPro-TM- is
being marketed and distributed as a stand alone product under a newly
established business operating unit, Symix CIT Division. FieldPro-TM-
contributed more than $1.0 million in revenue during the second half of fiscal
1997.
Service and support revenue increased 39% in fiscal 1997 to $29.3 million from
$21.1 million in fiscal 1996 and $18.2 million in fiscal 1995. Service and
support revenue is comprised of installation, implementation, training,
consulting, systems integration and software product maintenance and support.
The continued increase in service and support revenue is attributable to growth
in licensed Symix installations worldwide and the Company's expanding service
organization. Services revenue made up 45% of total revenue in fiscal 1997,
compared to 46% and 42% in fiscal 1996 and fiscal 1995, respectively. Deferred
revenue on the Company's balance sheet relating to maintenance and support
contracts, increased from $5.8 million at June 30, 1996 to $9.7 million at June
30, 1997. Revenue on these maintenance and support contracts is recognized
ratably over the contract period, which is typically twelve months.
A key consideration in the customer's purchasing decision is the selection of
the hardware vendor. The Company participates in joint marketing activities
with various hardware manufacturers to promote new system sales. The customer
usually purchases the hardware direct from the manufacturer or a third-party
systems integrator. Consequently, hardware sales by the Company represent an
insignificant portion of total revenue.
COST OF REVENUE
Total cost of revenue as a percentage of new revenue was 34% for the year ended
June 30, 1997 compared to 34% and 35% for the years ended June 30, 1996 and
1995, respectively. License fee cost of revenue decreased to 27% of license fee
revenue in fiscal 1997 from 28% in both fiscal 1996 and fiscal 1995, while
service, maintenance and support cost of revenue was 43% of service, maintenance
and support revenue in fiscal 1997 compared to 42% in fiscal 1996 and 44% in
fiscal 1995.
The decrease in license fee cost of revenue as a percentage of license fee
revenue is the result of the increased volume of license fee sales. Partially
offsetting the improved license fee margins was an increase in third-party
royalties relating to the new complementary products for Symix SyteLine-TM-
released during the year.
The small increase in service cost of revenue as a percentage of related revenue
in fiscal 1997 compared to the prior fiscal year was the result of increased
costs relating to the hiring of experienced service personnel to support new
system installations. In addition, lower margins in the developing
international distribution channels also contributed to the increase in the cost
percentage. Partially offsetting these lower margins was the increase in Symix
installations and
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corresponding service renewals, from which the Company was able to realize
improved margins through growing maintenance and support revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 45% in fiscal 1997,
compared to a decrease of 12% in fiscal 1996 and an increase of 31% in fiscal
1995. Selling, general and administrative expenses as a percent of net revenue
were 50%, 49% and 60% for the same respective periods. The increase in expenses
as a percent of revenue in fiscal 1997 was the result of significant increases
in marketing and promotional activities relating to international sales. These
increases were partially offset by improved productivity of the North American
sales channel.
The decrease in selling, general and administrative expenses in fiscal 1996 was
the result of general expense controls, reorganization of the North American
sales force and improved margins on international operations. In the first
quarter of fiscal 1996, the Company recognized restructuring and other
non-recurring charges of $506,000, which consisted of primarily severance
payments related to personnel changes and costs associated with reorganizing the
European sales channel.
RESEARCH AND DEVELOPMENT
Total research and product development expenses, including amounts capitalized,
were $8.8 million or 13% of net revenue for the year ended June 30, 1997,
compared to $6.0 million or 13% of net revenue in fiscal 1996 and $5.2 million
or 12% of net revenue in fiscal 1995. The Company capitalized research and
development costs of $3.1 million, $2.3 million and $1.4 million for the years
ended June 30, 1997, 1996 and 1995, respectively. Software development costs
capitalized in a given period are dependent upon the nature and state of the
development process and are recorded in accordance with Statement of Financial
Accounting Standards No. 86. Upon general release of a product, related
capitalized costs are amortized over three years and recorded as license fee
cost of revenue. In addition to the $2.3 million of software development costs
capitalized in fiscal 1996, the Company capitalized $1.0 million relating to the
purchase of existing technology.
The increase in overall research and development expense is due to staff
expansion relating to the Company's development of future releases of Symix
SyteLine-TM-, increased development focus on interfacing with third-party
software products and research involving new technologies and products.
PROVISION FOR INCOME TAXES
The effective tax rates for the years ended June 30, 1997, 1996 and 1995 were
37%, 38% and (39%), respectively. The reduced effective tax rate in fiscal 1997
and fiscal 1996 respectively, compared to the previous year was primarily due to
the amount of foreign taxable earnings in countries with considerably lower
effective rates, thereby reducing the Company's overall tax rate.
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations decreased to $2.5 million in fiscal 1997 from $6.9
million in fiscal 1996 and $3.0 million in fiscal 1995. An increase in earnings
in fiscal 1997 was offset by an increase in trade accounts receivable. Trade
accounts receivable days sales outstanding were 95 days at June 30, 1997 in
comparison to 76 days and 97 days at June 30, 1996 and 1995, respectively. For
all three years presented, cash provided by operations was used to purchase
computer equipment and to fund software development costs. In 1997, cash
provided by operations also was used in connection with the Company's
acquisition activities. Cash at June 30, 1997 decreased to $2.3 million from
$6.8 million at June 30, 1996 and $4.5 million at June 30, 1995.
Working capital was $7.9 million at June 30, 1997 compared to $7.5 million and
$6.4 million at June 30, 1996 and 1995, respectively. The increase in working
capital in fiscal 1997 is primarily attributable to the increase in trade
accounts receivable resulting from the 44% revenue growth and increase in days
sales outstanding. The increase in working capital in fiscal 1996 was primarily
due to the positive cash flow for the year. For both fiscal 1997 and fiscal
1996, the increase in current assets was partially offset by the increase in
deferred revenue due to the increased Symix customer base and renewed service
contracts.
In addition to its present working capital, the Company has with a bank a $6.0
million unsecured revolving line of credit that expires in fiscal 1999. As of
June 30, 1997, no amounts were drawn under the line of credit. It is expected
that the Company's continued expansion of its operations and products will
result in additional requirements for cash in the future. The Company may raise
additional capital through the sale of Company securities during the next 12
months to fund certain internal product development projects and/or future
acquisitions. However, the exact details of such fundraising efforts have not
been determined. Subject to the foregoing, the Company anticipates that
existing sources of liquidity, cash flow from operations and the bank line of
credit will be sufficient to satisfy expected cash needs for the next 12 months.
The Company believes that inflation has not had a material effect on its
operations. The Company's sales are primarily denominated in U.S. dollars
and/or major currencies and other foreign currency risk is considered minimal.
QUARTERLY RESULTS
The following table sets forth certain unaudited operating results for each of
the eight quarters in the two year period ended June 30, 1997. This information
has been prepared by the Company on the same basis as its audited, consolidated
financial statements, and includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly this information when read in
conjunction with the Company's audited, consolidated financial statements and
the notes thereto.
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The Company's results of operations have fluctuated on a quarterly basis. The
Company's expenses, with the principal exception of sales commissions and
certain components of cost of revenue, are generally fixed and do not vary with
revenue. As a result, because the Company's plans and commitments of resources
are in advance of its planned revenue level, any shortfall of actual revenue in
a given quarter would adversely affect net earnings for that quarter by a
significant portion of the shortfall.
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QUARTERLY RESULTS
Three months ended
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
1997 1997 1996 1996 1996 1996 1995 1995
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Net revenue $21,187 $15,358 $16,537 $12,690 $13,204 $11,165 $11,571 $ 9,819
Cost of revenue 7,097 5,405 5,395 4,543 4,553 3,758 3,568 3,799
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Gross margin 14,090 9,953 11,142 8,147 8,651 7,407 8,003 6,020
Operating expenses
Selling, general, and
administrative 9,953 7,994 8,099 6,555 6,514 5,410 5,757 4,730
Research and product
development 1,705 1,501 1,353 1,100 1,086 968 762 857
Restructuring and other
unusual charges -- -- -- -- -- -- -- 506
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Total operating expenses 11,658 9,495 9,452 7,655 7,600 6,378 6,519 6,093
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Operating income (loss) 2,432 458 1,690 492 1,051 1,029 1,484 (73)
Other income (loss), net (16) 18 33 72 60 46 62 53
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Income (loss) before
income taxes 2,416 476 1,723 564 1,111 1,075 1,546 (20)
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Provision (benefit) for
income taxes 865 183 651 217 364 430 618 (8)
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Net income (loss) $ 1,551 $ 293 $ 1,072 $ 347 $ 747 $ 645 $ 928 $ (12)
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Earnings per share $ 0.24 $ 0.04 $ 0.18 $ 0.06 $ 0.12 $ 0.11 $ 0.17 $ 0.00
Weighted average common
and common share
equivalents outstanding 6,554 6,600 6,066 5,989 6,008 5,714 5,556 5,450
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SIGNATURES
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 the 6th day of
October, 1997.
SYMIX SYSTEMS, INC.
By: /s/ Lawrence W. DeLeon
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Lawrence W. DeLeon
Vice President, Chief Financial
Officer and Secretary
