<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 0-19024
Symix Systems, Inc.
--------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1083175
---- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2800 Corporate Exchange Drive
Columbus, Ohio 43231
--------------------
(Address of principal executive offices)
(Zip Code)
(614) 523-7000
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
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 common shares, without par value, of the registrant
outstanding as of May 11, 1998 was 6,463,804.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDEX
Consolidated Balance Sheets
March 31, 1998 (unaudited) and
June 30, 1997
Consolidated Statements of Operations (unaudited)
Three Months and Nine Months Ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements (unaudited)
2
<PAGE>
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ---------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,179 $ 2,332
Trade accounts receivable, less allowance for
doubtful accounts of $1,006 at March 31, 1998
and $702 at June 30, 1997 29,556 21,689
Inventories 525 356
Prepaid expenses 1,228 1,162
Other receivables 356 300
Income tax recoverable 85 -
Deferred income taxes 601 311
----------- ---------
TOTAL CURRENT ASSETS 33,530 26,150
OTHER ASSETS
Purchased and developed software, net of accumulated
amortization of $7,642 at March 31, 1998
and $6,106 at June 30, 1997 10,366 6,551
Deferred income taxes 284 171
Intangibles, net 5,418 4,779
Deposits and other assets 1,406 877
----------- ---------
17,474 12,378
EQUIPMENT AND IMPROVEMENTS
Furniture and fixtures 2,717 2,436
Computer and other equipment 12,170 10,423
Leasehold improvements 1,235 1,288
----------- ---------
16,122 14,147
Less allowance for depreciation and amortization 10,013 8,423
----------- ---------
6,109 5,724
----------- ---------
TOTAL ASSETS $57,113 $44,252
----------- ---------
----------- ---------
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ---------
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 8,422 $ 7,423
Customer deposits 298 307
Deferred revenue 11,374 9,685
Income taxes payable - 63
Current portion of long-term obligations 306 775
----------- ---------
TOTAL CURRENT LIABILITIES 20,400 18,253
LONG-TERM OBLIGATIONS 305 530
BANK CREDIT AGREEMENT 4,644 -
DEFERRED INCOME TAXES 2,958 2,108
SHAREHOLDERS' EQUITY
Common stock, authorized 20,000 shares; issued
6,727 shares at March 31, 1998, and
6,160 at June 30, 1997; at stated capital
amounts of $.01 per share 66 62
Convertible preferred stock of subsidiary 1,031 1,031
Capital in excess of stated value 23,193 13,291
Retained earnings 7,142 10,853
Cumulative translation adjustment (1,306) (556)
----------- ---------
30,126 24,681
Less: Cost of common shares in treasury,
304 shares at March 31, 1998
and June 30, 1997, at cost (1,320) (1,320)
----------- ---------
TOTAL SHAREHOLDERS' EQUITY 28,806 23,361
----------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $57,113 $44,252
----------- ---------
----------- ---------
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
License fees $14,137 $7,852 $38,171 $23,210
Service, maintenance and support 10,185 7,506 27,733 21,375
------- ------- ------- -------
Net revenue 24,322 15,358 65,904 44,585
License fees 3,688 2,145 10,079 6,525
Service, maintenance and support 5,463 3,260 14,500 10,069
------- ------- ------- -------
Cost of revenue 9,151 5,405 24,579 16,594
------- ------- ------- -------
Gross Margin 15,171 9,953 41,325 27,991
------- ------- ------- -------
Selling, general and administrative 12,204 7,994 31,078 21,399
Research and product development 1,870 1,501 5,614 3,954
Acquisition research and development write-off - - 6,503 -
------- ------- ------- -------
Total operating expenses 14,074 9,495 43,195 25,353
------- ------- ------- -------
Operating income (loss) 1,097 458 (1,870) 2,638
Interest and other income (expense), net (67) 18 (132) 123
------- ------- ------- -------
Income (loss) before income taxes 1,030 476 (2,002) 2,761
Provision for income taxes 389 183 1,710 1,050
------- ------- ------- -------
Net income (loss) $641 $293 ($3,712) $1,711
------- ------- ------- -------
------- ------- ------- -------
Basic EPS:
Net income (loss) per share $0.10 $0.05 ($0.60) $0.30
------- ------- ------- -------
------- ------- ------- -------
Diluted EPS:
Net income (loss) per share $0.09 $0.05 ($0.60) $0.29
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of common
shares outstanding 6,519 5,930 6,229 5,679
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of common
shares outstanding assuming dilution 7,115 6,345 6,229 5,994
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------
1998 1997
------------ -------------
Increase (decrease) in cash
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($3,712) $1,711
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Acquisition research and development write-off 6,503 -
Depreciation and amortization 4,250 3,111
Provision for losses on accounts receivable 323 (6)
Provision for deferred income taxes 625 114
Changes in operating assets and liabilities:
Trade accounts receivable (7,973) (4,248)
Prepaid expenses and other receivables (62) 7
Inventory (169) (69)
Deposits (462) (606)
Accounts payable and accrued expenses (223) (1,323)
Customer deposits (340) (73)
Deferred revenue 959 2,495
Income taxes payable/refundable 373 202
------------ -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 92 1,315
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
1998 1997
----------- ------------
Increase (decrease) in cash
<S> <C> <C>
INVESTING ACTIVITIES
Purchase of equipment and improvements (2,144) (1,915)
Additions to purchased and developed software (3,393) (2,481)
Purchase of subsidiaries, net of cash acquired (149) (1,191)
----------- ------------
NET CASH USED BY
INVESTING ACTIVITIES (5,686) (5,587)
FINANCING ACTIVITIES
Proceeds from issuance of common
stock and exercise of stock options 566 718
Additions to long-term obligations, net of payments 3,824 (84)
----------- ------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 4,390 634
Effect of exchange rate changes on cash 51 (64)
----------- ------------
Net change in cash (1,153) (3,702)
Cash at beginning of period 2,332 6,774
----------- ------------
CASH AT END OF PERIOD $1,179 $3,072
----------- ------------
----------- ------------
</TABLE>
See notes to consolidated financial statements
7
<PAGE>
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Accounting Policies and Presentation
The accompanying consolidated financial statements are unaudited; however,
the information contained herein reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the interim periods. All adjustments made were of a normal
recurring nature. These interim results of operations are not necessarily
indicative of the results to be expected for a full year.
The notes to the consolidated financial statements contained in the Symix
Systems, Inc. and Subsidiaries' (the "Company") June 30, 1997 Annual Report to
Shareholders should be read in conjunction with these financial statements.
Certain reclassifications have been made to conform prior quarter amounts to the
current quarter presentation.
Recently, Statement of Position 97-2, "Software Revenue Recognition"
(SOP 97-2) was issued by the Accounting Standards Executive Committee. SOP
97-2 is effective for transactions entered into in fiscal years beginning
after December 15, 1997. Accordingly the Company will adopt SOP 97-2
beginning in fiscal 1999. The Company is studying the provisions of SOP 97-2,
but does not anticipate that it will have a material impact on its operating
results.
Note B - Acquisitions
On November 24, 1997, the Company acquired Pritsker Corporation
("Pritsker"), for $737,000 in cash and 485,000 common shares of the Company.
Pursuant to the acquisition agreement, (i) Pritsker was merged with and into
a wholly-owned subsidiary of the Company incorporated in Ohio, (ii) each
share of Pritsker common stock was converted into the right to receive
0.170108 common shares of the Company and (iii) each share of Pritsker
preferred stock was converted into the right to receive $5.23 in cash plus
accrued and unpaid dividends. Each unexercised employee stock option and
outstanding warrant for Pritsker common stock was assumed by Symix and
converted into the right to acquire that number of common shares of the
Company to which the holder would have been entitled if such holder exercised
the option or warrant immediately prior to the merger. Pritsker markets
advanced planning and scheduling and simulation software to mid-market
manufacturers. The transaction was accounted for as a purchase and resulted
in a one-time, non-recurring charge of approximately $6.5 million relating to
the write-off of acquired in-process technology of Pritsker.
The following proforma information (in $000's) displays revenue and net
income assuming the Company and Pritsker had been combined at the beginning
of the period presented. The one time, non-recurring charge of approximately
$6.5 million is excluded from proforma net income.
8
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
--------- -----------
1998 1997
<S> <C> <C>
Revenue $67,069 $47,517
--------- -----------
--------- -----------
Net Income $ 2,163 $ 1,761
--------- -----------
--------- -----------
</TABLE>
Note C - Earnings per Share
The Company adopted the provisions of Statement No. 128, "Earnings Per
Share" (SFAS 128) during the fiscal quarter ended December 31, 1997. In
accordance with the provisions of SFAS No. 128, earnings per share for 1997
have been restated. The following table sets forth the computation of basic
and diluted earnings per share (in $000's except per share data):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NUMERATOR:
Net income for both basic and diluted
earnings (loss) per share $641 $293 ($3,712) $1,711
-------- -------- -------- --------
-------- -------- -------- --------
DENOMINATOR:
Weighted-average shares outstanding 6,394 5,770 6,104 5,519
Contingently issuable shares (VAS) 125 160 125 160
-------- -------- -------- --------
Denominator for basic earnings (loss)
per share 6,519 5,930 6,229 5,679
Effect of dilutive securities:
Employee stock options 596 415 - 315
-------- -------- -------- --------
Denominator for diluted earnings (loss)
per share 7,115 6,345 6,229 5,994
-------- -------- -------- --------
-------- -------- -------- --------
Basic earnings (loss) per share $0.10 $0.05 ($0.60) $0.30
-------- -------- -------- --------
-------- -------- -------- --------
Diluted earnings (loss) per share $0.09 $0.05 ($0.60) $0.29
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
If the effect of the non-recurring charge of $6.5 million were excluded
from the financial results, the effect of dilutive securities should be
factored into the denominator for the diluted earnings per share calculation.
The effect of those dilutive securities for the nine month period ended
March 31, 1998 would be 595,000 shares.
9
<PAGE>
Note D - Line of Credit
In March, 1998, the Company renegotiated with a bank an $8.0 million
unsecured revolving line of credit that expires in fiscal year 2000, and is
convertible to a five year term loan at any time on or before October 31, 1999.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Revenue
Net revenue for Symix Systems, Inc. (the "Company" or "Symix") 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.
Net revenue was $24.3 million for the third quarter ended March 31, 1998,
an increase of 58% from the same quarter of the previous year. Both license fee
and service, maintenance and support revenues contributed to the net revenue
increase, but most significantly license fee revenue with an 80% increase. For
the nine months ended March 31, 1998, net revenue was $65.9 million, an increase
of 48% from the same period of the previous year. Consistent with the third
quarter, license fee revenue growth for the nine months ended March 31, 1998
accounted for a significant portion of the overall increase in net revenue,
increasing 64% from the same period last year, and service, maintenance and
support revenues increasing by 30%.
Geographically, North America and Europe continued to be the primary
contributors to the growth of software license fee revenue. In comparison to
the same quarter of last year, license fee revenue for the third quarter ended
March 31, 1998 more than doubled in North America and increased by more than 50%
in Europe. In North America, an increased number of sales representatives and
improved productivity, positively impacted results. The Company's acquisition
of Pritsker Corporation in the second quarter ended December 31, 1997 (discussed
in Note B to the financial statements), also contributed to the third quarter
increase in license fee revenue in North America. In Europe, the Company's
operations in the United Kingdom continued to improve during the third quarter.
The Company attributes part of this continued improvement to recent changes in
sales management personnel in the United Kingdom that have resulted in a more
productive sales force. The impact of the Asian economic difficulties,
particularly in Southeast Asia, adversely affected the Company's business during
the third quarter. As a result, license fee revenue in Asia increased by only
6% for the third quarter compared to the same quarter last year. In total,
revenue outside of North America represented approximately 22% of total Company
revenue during the third quarter, down slightly from the 25% realized by the
Company in the prior few quarters.
License fee results for the nine months ended March 31, 1998 were
consistent with performance for the third quarter, increasing by more than 60%,
most significantly in North America and Europe.
Service, maintenance and support revenue increased 36% to $10.2 million
during the third quarter ended March 31, 1998, compared to $7.5 million for the
same quarter last year. For the nine month period ended March 31, 1998,
service, maintenance and support revenue increased
11
<PAGE>
30% to $27.7 million compared to the same period last year. Service,
maintenance and support revenue continued to grow during the third quarter
and the nine months ended March 31, 1998, primarily due to the Company's
increased customer base.
Cost of Revenue
Total cost of revenue as a percentage of net revenue was 38% for the
third quarter ended March 31, 1998, compared to 35% for the same quarter of
the previous year. The slight decline in margin is attributable to lower
service and support margins primarily due to an increase in the rate of
investment in the services organization to support the growth in license fee
revenue. For the nine months ended March 31, 1998, the total cost of revenue
as a percentage of net revenue remained constant at 37%.
Selling, General and Administrative Expense
Selling, general and administrative expense was $12.2 million for the
third quarter ended March 31, 1998 compared to $8.0 million for the same
quarter last year, a 53% increase. As a percentage of revenue, selling,
general and administrative expense was 50% of net revenue compared to 52% for
the same quarter last year. The decrease is primarily attributable to the
improved productivity of the North American sales channel. On a year-to-date
comparison basis the trend is also favorable. Selling, general and
administrative expense increased in total 45% and, as a percentage of
revenue, dropped from 48% last year to 47% this year.
Research and Development
Research and development expenditures, including amounts capitalized for
the third quarter ended March 31, 1998, were $2.9 million compared to $2.5
million for the same quarter last year. For the nine months ended March 31,
1998, research and development expenses were $9.0 million compared to $6.5
million for the same period last year. The Company capitalized research and
development costs of $1.0 million for each of the third quarters ended March
31, 1998 and 1997. For the nine months ended March 31, 1998, the Company
capitalized $3.3 million of research and development expenses compared to
$2.5 million for the same period last year. The increase in research and
development expenditures is expected to continue as the Company devotes a
significant percentage of its resources to developing and enhancing existing
and new products.
Acquisition Research and Development Write-Off Impact on Net Income and EPS
As a result of the acquisition of Pritsker Corporation, which was
completed during the second quarter ended December 31, 1997, the Company
realized a non-recurring charge of $6.5 million relating to the write-off of
acquired in-process technology. Excluding the one time charge for the nine
months ended March 31, 1998, net income increased 63% to $2.8 million with
earnings per share increasing to $0.41 compared to $0.29 a year ago.
12
<PAGE>
Provision for Income Taxes
The effective tax rate was 38% for each of the third quarters ended March
31, 1998 and 1997.
Liquidity and Capital Resources
Cash provided by operations was $92 thousand for the third quarter ended
March 31, 1998, compared to $1.3 million of cash provided by operations
during the same quarter last year. The increase in net income before the
write-off of acquisition research and development costs was offset by the
increase in trade accounts receivable. Trade accounts receivable days sales
outstanding was 103 days at March 31, 1998 compared to 97 days at March 31,
1997. An increase in installment payments on software license fees from new
customers (particularly on large deals) contributed to the increase in days
sales outstanding. For both periods presented, the Company invested in
software development, computer equipment, and acquisitions. During the third
quarter ended March 31, 1998, the Company met its cash needs from cash on
hand and borrowings under its unsecured line of credit. Cash at March 31,
1998 decreased to $1.2 million from $3.1 million at March 31, 1997.
Working capital of $13.1 million increased $5.2 million over the June
30, 1997 year end level of $7.9 million. During the third quarter ended
March 31, 1998, the Company restructured an unsecured line of credit with a
bank increasing the credit facility to $8.0 million, of which the Company has
drawn down $4.6 million as of March 31, 1998. The Company is in the process
of negotiating an increase on the unsecured line of credit to $15.0 million.
It is expected that the Company's continued expansion of its operations and
products will result in additional requirements for cash in the future.
Year 2000 Compliance Issue
The Company has developed a compliance program over approximately the
past three years that is designed to make the Company's internally developed
software, its relational data base management system, and its information
systems hardware, year 2000 compliant. As a result of the compliance program,
the Company believes that such software, hardware and its relational data
base management system are currently year 2000 compliant. The Company has
not assessed fully the impact of the year 2000 compliance issue on the
entities with whom the Company interacts. The Company also has not verified
that its non-information systems equipment is year 2000 compliant.
13
<PAGE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT ON
FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS", INCLUDING INFORMATION
REGARDING FUTURE ECONOMIC PERFORMANCE AND PLANS AND OBJECTIVES OF MANAGEMENT,
WHICH ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING
STATEMENTS. SUCH UNCERTAINTIES AND RISKS INCLUDE, BUT ARE NOT LIMITED TO,
PRODUCT DEMAND AND MARKET ACCEPTANCE; THE IMPACT OF COMPETITIVE PRODUCTS; THE
COMPANY'S ABILITY TO MAINTAIN EFFICIENT MARKETING AND DISTRIBUTION OPERATIONS
WITH RESPECT TO NEW PRODUCTS; THE COMPANY'S ABILITY TO INTEGRATE PRITSKER
INTO ITS CURRENT BUSINESS IN A TIMELY MANNER OR TO PROFITABLY MARKET AND
DISTRIBUTE PRITSKER'S PRODUCT LINES; THE YEAR 2000 COMPLIANCE ISSUE; FUTURE
ECONOMIC, COMPETITIVE AND MARKET CONDITIONS; THE COMPANY'S ABILITY TO RETAIN
KEY TECHNICAL AND MANAGEMENT PERSONNEL; TIMING OF PRODUCT DEVELOPMENT AND
EXPANSION OF OPERATIONS; PRODUCT PRICING AND OTHER FACTORS DETAILED IN THIS
QUARTERLY REPORT ON FORM 10-Q AND IN OTHER FILINGS MADE BY THE COMPANY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The disclosures required under this Part I, Item 3 are omitted pursuant
to the General Instructions to Item 305 of Regulation S-K, because this
Quarterly Report on Form 10-Q, for the quarter ended March 31, 1998, does not
contain financial statements for fiscal years ended after June 15, 1998.
14
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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 that the outcome of any
of these legal matters will have a material adverse effect on the Company's
business, financial condition or results of operation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) See Index to Exhibits.
b) Reports on Form 8-K.
None
15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYMIX SYSTEMS, INC.
Date: May 14, 1998 /s/ Lawrence W. DeLeon
--------------------------------------
Lawrence W. DeLeon,
Duly Authorized Officer and
Principal Financial Officer
16
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <S> <S>
3(a)(1) Amended Articles of Incorporated herein by
Incorporation of Symix reference to Exhibit
Systems, Inc. (as filed 3(a)(1) to the Annual
with the Ohio Secretary of Report on Form 10-K for
State on February 8, 1991) the fiscal year ended June
30, 1997
3(a)(2) Certificate of Amendment to Incorporated herein by
the Amended Articles of reference to Exhibit
Incorporation of Symix 3(a)(2) to the Annual
Systems, Inc. (as filed Report on Form 10-K for
with the Ohio Secretary of the fiscal year ended June
State on July 16, 1996) 30, 1997
3(a)(3) Amended Articles of Incorporated herein by
Incorporation of Symix reference to Exhibit
Systems, Inc. (reflecting 3(a)(3) to the Annual
amendments through July 16, Report on Form 10-K for
1996, for purposes of SEC the fiscal year ended June
reporting compliance only) 30, 1997
3(b) Amended Regulations of Incorporated herein by
Symix Systems, Inc. reference to Exhibit 3(b)
to the Registration
Statement on Form S-1 of
Registrant filed on
February 12, 1991
(Registration No.
33-38878)
4(a)(1) Amended Articles of Incorporated herein by
Incorporation of Symix reference to Exhibit
Systems, Inc. (as filed 3(a)(1) to the Annual
with the Ohio Secretary of Report on Form 10-K for
State on February 8, 1991) the fiscal year ended June
30, 1997
4(a)(2) Certificate of Amendment to Incorporated herein by
the Amended Articles of reference to Exhibit
Incorporation of Symix 3(a)(2) to the Annual
Systems, Inc. (as filed Report on Form 10-K for
with the Ohio Secretary of the fiscal year ended June
State on July 16, 1996) 30, 1997
4(a)(3) Amended Articles of Incorporated herein by
Incorporation of Symix reference to Exhibit
Systems, Inc. (reflecting 3(a)(3) to the Annual
amendments through July 16, Report on Form 10-K for
1996, for purposes of SEC the fiscal year ended June
reporting compliance only) 30, 1997
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <S> <S>
4(b) Amended Regulations of Incorporated herein by
Symix Systems, Inc. reference to Exhibit 3(b)
to the Registration
Statement on Form S-1 of
Registrant filed
February 12, 1991
(Registration No.
33-38878)
10(a) Second Amendment to Loan Page 19
Agreement Among Symix
Systems, Inc. and Symix
Computer Systems, Inc. and
Bank One, NA
27 Financial Data Schedule Page 27
</TABLE>
18
<PAGE>
EXHIBIT 10(a)
SECOND AMENDMENT TO LOAN AGREEMENT
AMONG SYMIX SYSTEMS, INC.
AND SYMIX COMPUTER SYSTEMS, INC. AND BANK ONE, NA
19
<PAGE>
SECOND AMENDMENT TO LOAN AGREEMENT AMONG
SYMIX SYSTEMS, INC. and SYMIX COMPUTER SYSTEMS, INC.
AND
BANK ONE, NA
DATED AS OF MAY 20, 1996
THIS SECOND AMENDMENT ("Second Amendment") is dated as of March 4, 1998,
between SYMIX SYSTEMS, INC., an Ohio corporation ("SSI") and SYMIX COMPUTER
SYSTEMS, INC., an Ohio corporation ("SCSI" and, collectively with SSI, the
"Companies") and BANK ONE, NA, a national association ("Bank One").
WITNESSETH:
WHEREAS, the Companies and Bank One, parties to that certain Loan Agreement
dated as of May 20, 1996, amended by First Amendment dated as of August 13, 1997
(the "Agreement"), have agreed to amend the Agreement on the terms and
conditions hereinafter set forth. Terms not otherwise defined herein are used
as defined in the Agreement as amended hereby.
NOW, THEREFORE, the Companies and Bank One hereby agree as follows:
SECTION 1. AMENDMENT OF THE AGREEMENT. The Agreement is, effective the
date hereof, hereby amended as follows:
1.1. In Section 1.1.1, the words "Six Million Dollars ($6,000,000)"
shall be deleted each time they appear and the words "Eight Million Dollars
($8,000,000)" shall be inserted in their place.
1.2. In Section 1.1.2, the words "Exhibit A-2" shall be deleted and
the words "Exhibit A-3" shall be inserted in their place.
1.3. In Section 1.1.4(a) and (b) and in Section 1.2.4(a) and (b), the
word "quarter" shall be deleted and the word "month" shall be inserted in its
place each time it is used.
1.4. In Section 1.1.5, the fraction "one-eighth percent (1/8%)" shall
be deleted and the fraction "three eighths percent (3/8%)" shall be inserted in
its place.
20
<PAGE>
1.5. In Section 1.2.1, the words "Six Million Dollars ($6,000,000)"
shall be deleted and the words "Eight Million Dollars ($8,000,000)" shall be
inserted in their place.
1.6. In Section 8, the definition of "Guarantors" is amended by adding
"Pritsker Corporation, an Ohio corporation," after the words "shall mean" but
before "Symix Computer Systems (Canada), Inc."
1.7. Exhibits A and A-2 are hereby deleted and are replaced by Exhibit
A-3 attached to this Second Amendment.
1.8. In Section 5.6, the following shall be added to the end: ";
PROVIDED, HOWEVER, that Symix Computer Systems (Malaysia), Inc., Symix Systems
(Ontario), Inc., Visual Applications Software, Inc and Symix Computer Systems
(New Zealand), Inc. and any subsidiary created after January 31, 1998
(collectively, the "Excluded Subsidiaries") shall not be required to sign
guaranties until the tangible net worth of such entity exceeds $250,000;
PROVIDED, FURTHER, HOWEVER, that Symix (France), NA shall not be required to
sign a guaranty."
1.9. In Section 4.2, the following sentence shall be added: "In
addition, the Companies shall furnish to Bank One within forty-five (45) days
after the close of each quarter of each fiscal year a financial statement
showing the tangible net worth and net income of the Excluded Subsidiaries for
such period, and which are certified as true and correct in all material
respects by the Chief Financial Officer of SSI.
SECTION 2. GOVERNING LAW. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of Ohio.
SECTION 3. COSTS AND EXPENSES. All fees, costs or expenses, including
reasonable fees and expenses of outside legal counsel, incurred by Bank One in
connection with either the preparation, administration, amendment, modification
or enforcement of this Second Amendment shall be paid by the Companies on
request, PROVIDED, HOWEVER, that Bank One and its outside legal counsel will
provide the Companies good faith estimates of the cost of legal services in
connection with the amendment or modification of this Second Amendment.
SECTION 4. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same agreement.
SECTION 5. CONFESSION OF JUDGMENT. Each Company hereby authorizes any
attorney at law to appear for the Company, in an action on this Second
Amendment, at any time after the same becomes due, as herein provided, in any
court of record in or of the State of Ohio, or elsewhere, to waive the issuing
and service of process against the Company and to confess judgment in favor of
the holder of this Second Amendment or the party entitled to the benefits of
this Second Amendment against the Company for the amount that may be due, with
interest at the rate herein mentioned and costs of suit, and to waive and
release all errors in said proceedings and
21
<PAGE>
judgment, and all petitions in error, and right of appeal from the judgment
rendered. No judgment against one Company shall preclude Bank One from
taking a confessed judgment against the other Company.
SECTION 6. CONDITIONS PRECEDENT. Simultaneously with the execution
hereof, Bank One shall receive all of the following, each dated the date hereof,
in form and substance satisfactory to Bank One:
6.1. Certified copies of (a) the resolutions of the board of directors
of each Company evidencing authorization of the execution, delivery, and
performance of this Second Amendment, the Revolving Credit Note, the other
documents set forth in this Section 6 and such other instruments and agreements
contemplated thereby; and (b) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Second Amendment
or the transactions contemplated hereby.
6.2. The Revolving Credit Note, dated as of the date hereof, issued by
the Companies.
6.3. Unconditional Continuing Guaranty of Pritsker Corporation
accompanied by (a) certified copies of the resolutions of such corporation's
board of directors evidencing the authorization of the execution, delivery and
performance of such guaranty and (b) an incumbency certificate of such
corporation.
6.4. Such other documents as Bank One may, in its reasonable
discretion, so require.
SECTION 7. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES; NO DEFAULTS.
The Companies hereby expressly acknowledge and confirm that the representations
and warranties of the Company set forth in Section 3 of the Agreement are true
and accurate on this date with the same effect as if made on and as of this
date; that no financial condition or circumstance exists which would inevitably
result in the occurrence of an Event of Default under Section 6 of the
Agreement; and that no event has occurred or no condition exists which
constitutes, or with the running of time or the giving of notice would
constitute an Event of Default under Section 6 of the Agreement.
SECTION 8. REAFFIRMATION OF DOCUMENTS. Except as herein expressly
modified, the parties hereto ratify and confirm all of the terms, conditions,
warranties and covenants of the Agreement, and all security agreements, pledge
agreements, mortgage deeds, assignments, subordination agreements, or other
instruments or documents executed in connection with the Agreement, including
provisions for the payment of the Notes pursuant to the terms of the Agreement.
This Second Amendment does not constitute the extinguishment of any obligation
or indebtedness previously incurred, nor does it in any manner affect or impair
any security interest granted to Bank One, all of such security interests to be
continued in full force and effect until the indebtedness described herein is
fully satisfied.
22
<PAGE>
The Companies have executed this Second Amendment as of the date first
above written.
SYMIX SYSTEMS, INC. SYMIX COMPUTER SYSTEMS, INC.
By: /s/ Larry W. DeLeon By: /s/ Larry W. DeLeon
------------------------- ---------------------------------
Name: Larry W. DeLeon Name: Larry W. DeLeon
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer Financial Officer
and Secretary and Secretary
- --------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
- --------------------------------------------------------------------------------
BANK ONE, NA
By: /s/ Kimberley C. Currie
--------------------------
Name: Kimberley C. Currie
Its: Vice President
23
<PAGE>
Exhibit A-3
AMENDED AND RESTATED REVOLVING CREDIT NOTE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$8,000,000 Columbus, Ohio
March 4, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
On or before October 31, 1999, for value received, the undersigned, SYMIX
SYSTEMS, INC., an Ohio corporation and SYMIX COMPUTER SYSTEMS, INC., an Ohio
corporation (individually, a "Company" and, collectively, the "Companies")
hereby jointly and severally promise to pay to the order of Bank One, NA, a
national association (the "Bank") or its assigns, as further provided herein,
the principal amount of Eight Million Dollars ($8,000,000) or, if such principal
is less, the aggregate unpaid principal amount of all loans made by the Bank to
the Companies pursuant to the Credit Commitment under the Agreement referred to
in Section 1 hereof, together with interest on the unpaid principal balance from
time to time outstanding hereunder until paid in full at the rates determined in
accordance with the provisions of Section 1.1.4 of the Agreement, payable as set
forth in the Agreement. Both principal and interest are payable in federal
funds or other immediately available money of the United States of America at
the Main Office of the Bank, 100 East Broad Street, Columbus, Ohio 43271-0170.
This Amended and Restated Revolving Credit Note amends and restates in its
entirety the Amended and Restated Revolving Credit Note issued to the Bank by
the Companies dated August 13, 1997 and the Revolving Credit Note issued to the
Bank by the Companies dated May 20, 1996.
SECTION 1. LOAN AGREEMENT. This Amended and Restated Revolving Credit
Note is the Note referred to in the Loan Agreement dated as of May 20, 1996 as
amended by First Amendment dated August 13, 1997 and Second Amendment dated as
of the date hereof (the "Agreement") between the Companies and the Bank, as the
same may be amended, modified or supplemented from time to time, which
Agreement, as amended, is incorporated by reference herein. All capitalized
terms used herein shall have the same meanings as are assigned to such terms in
the Agreement. This Amended and Restated Revolving Credit Note is entitled to
the benefits of and is subject to the terms, conditions and provisions of the
Agreement. The Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events,
and also for repayments and reborrowings on account of the principal hereof
prior to maturity upon the terms, conditions and provisions specified.
SECTION 2. WAIVER OF PRESENTMENT. The Companies hereby waive presentment,
demand, notice, protest, notice of protest, notice of dishonor and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note.
SECTION 3. CONFESSION OF JUDGMENT. The Companies hereby authorize any
attorney at law to appear for the Companies, in an action on this Note, at any
time after the same becomes due, as herein provided, in any court of record in
or of the State of Ohio, or elsewhere, to waive the issuing and service of
process against the Companies and to confess judgment in favor of the holder of
this Note against the Companies for the amount that may be due, with interest at
the
24
<PAGE>
rate herein mentioned and costs of suit, and to waive and release all errors
in said proceedings and judgment, and all petitions in error, and right of
appeal from the judgment rendered. No judgment against one Company shall impair
the Bank's right to receive a confession of judgment against the remaining
Company.
SECTION 4. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANIES HEREBY
VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN THE BANK AND THE COMPANIES ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE
COMPANIES AND THE BANK IN CONNECTION WITH ANY LOAN DOCUMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE TRANSACTIONS RELATED
HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
ENTER INTO THE FINANCING TRANSACTIONS WITH COMPANIES. IT SHALL NOT IN ANY
WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANK'S ABILITY TO PURSUE ITS
REMEDIES INCLUDING, BUT NOT LIMITED TO, ANY CONFESSION OF JUDGMENT OR
COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY OTHER DOCUMENT RELATED HERETO.
SECTION 5. NATURE OF OBLIGATIONS. The obligations of the Companies
hereunder (the "Obligations") are joint and several and a separate action or
actions may be brought and prosecuted against either Company regardless of
whether any action is brought against the other Company or whether the other
Company is joined in any such action(s). The Companies may be sued together
or either of them may be sued separately without first, contemporaneously or
subsequently, suing the other. The Bank may compromise with either of the
Companies for less than all of the amounts owing hereunder and under the Loan
Documents and release either of the Companies from all further liability to
the Bank for the amounts owing hereunder and under the Agreement all without
impairing the rights of the Bank to demand and collect the balance of the
amounts owing hereunder and under the Agreement from the other Company not so
sued or released. There shall be no duty or obligation of the Bank to
exhaust any remedy in law or in equity against either Company before bringing
suit or instituting proceedings of any kind against the other Company. The
Companies and all sureties, endorsers and guarantors of this Amended and
Restated Revolving Credit Note (a) waive demand, presentment for payment,
notice of nonpayment, protest, notice of protest and all other notices,
filing of suit and diligence in collecting this Amended and Restated
Revolving Credit Note, (b) agree to any release of any party primarily or
secondarily liable thereon, and (c) consent to any extension or postponement
of time of payment of this Amended and Restated Revolving Credit Note and to
any other indulgence with respect hereto without notice thereof to any of
them.
The Obligations hereunder are irrevocable and may only be discharged by the
full and timely payment of the amounts owing by the Companies hereunder and
thereunder and will not be discharged, released, altered or modified by any
other action or omission of any Person, on any one or more occasions, including,
without limitation (a) the amendment, modification or waiver of the Agreement or
any performance due hereunder or thereunder, (b) the impairment, grant,
25
<PAGE>
exchange, release, surrender or disposal of any collateral, (c) the release
or discharge of a Company's Obligations, (d) the existence or assertion by
either Company of any personal defense to its obligations including, without
limitation, bankruptcy, (e) the exercise, pursuit or waiver of any right or
remedy that the Bank may have at any time, (f) the Bank's failure to give
notice to either Company of the occurrence of any default in the Company's
performance hereunder or under the Agreement, (g) the taking or omission to
take any action hereunder or under the Agreement, (h) the Bank's release or
discharge of any guaranty or accommodation with respect to the Obligations,
(i) the impossibility or illegality of performance by the Companies or (j)
any change in the corporate organization of the Bank.
If either Company at any time shall pay any sums on account of any
Obligation or take any other action in performance of any Obligation, such
Company shall be subrogated to the rights, powers, privileges and remedies of
the Bank in respect of such Obligation; PROVIDED that all such rights of
subrogation and all claims and indebtedness arising therefrom shall be, and the
Company hereby agrees that the same are, and shall be at all times, in all
respects subordinate and junior to the Banks claims for all the Obligations, and
PROVIDED, FURTHER, that the Company hereby agrees that it shall not seek to
exercise any such rights of subrogation, reimbursement, exoneration, or
indemnity whatsoever or any rights of recourse to any security for any of the
Obligations unless or until all the Obligations shall have been indefeasibly
paid in full. The waivers, representations, warranties, covenants and
agreements contained in this paragraph are for the benefit of and may be
enforced by the Bank and such Company and their respective successors and
assigns, including without limitation any trustee in bankruptcy of such Company.
- --------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
- --------------------------------------------------------------------------------
SYMIX COMPUTER SYSTEMS, INC. SYMIX SYSTEMS, INC.
By: By:
--------------------------- ---------------------------
Name: Larry W. DeLeon Name: Larry W. DeLeon
Vice President, Chief Its: Vice President, Chief
Financial Officer Financial Officer
and Secretary and Secretary
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME IN THE FORM 10-Q OF SYMIX
SYSTEMS, INC. FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 1,179
<SECURITIES> 0
<RECEIVABLES> 30,562
<ALLOWANCES> 1,006
<INVENTORY> 525
<CURRENT-ASSETS> 33,530
<PP&E> 16,122
<DEPRECIATION> 10,013
<TOTAL-ASSETS> 57,113
<CURRENT-LIABILITIES> 20,400
<BONDS> 0
0
1,031
<COMMON> 66
<OTHER-SE> 27,709
<TOTAL-LIABILITY-AND-EQUITY> 57,113
<SALES> 38,171
<TOTAL-REVENUES> 65,904
<CGS> 10,079
<TOTAL-COSTS> 24,579
<OTHER-EXPENSES> 43,195
<LOSS-PROVISION> 304
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> (2,002)
<INCOME-TAX> 1,710
<INCOME-CONTINUING> (3,712)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,712)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
