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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-19024
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SYMIX SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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OHIO 31-1083175
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
2800 CORPORATE EXCHANGE DRIVE 43231
COLUMBUS, OHIO (Zip Code)
(Address of principal executive offices)
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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
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES NO-PAR VALUE
Title of Class
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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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 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 15, 1999 was $63,956,000.
The number of common shares outstanding at September 15, 1999 was
7,660,050.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) The Registrant's Definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on November 17, 1999 is incorporated by
reference into Part III of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
General
Symix Systems, Inc. ("Symix" or the "Company") designs, develops, markets
and supports integrated manufacturing, supply chain management, financial and
e-commerce software solutions that address the enterprise requirements of
mid-size manufacturing and distribution companies and business units of larger
companies. Historically, manufacturers have implemented enterprise resource
planning ("ERP") systems to achieve improvements in manufacturing operations and
related cost reductions. Today, in order to remain competitive in an
increasingly global environment, manufacturers must look beyond the factory
walls to meet increasing customer service requirements and improve operating
efficiencies of distribution. In response to this complex business environment,
manufacturers have begun to focus on customer interaction, which requires
further integrating customer requirements into the overall fulfillment cycle.
Business software solutions not only must deliver the operational improvements
of traditional ERP, but also must provide capabilities to enhance customer
interaction and improve revenue performance. These solutions must be able to
address the increasing customer service demands brought on by the Internet and
e-commerce business to business requirements.
Mid-market manufacturers generally are constrained by limited financial and
technological resources; nevertheless, they require enterprise application
solutions that offer a high degree of flexibility and functionality and can
integrate customers with business processes. Through its Customer Synchronized
Resource Planning ("CSRP") approach, the Company delivers to mid-market
manufacturers a cost-effective enterprise application solution that facilitates
a shift in focus from manufacturing-centric planning to customer-centric
planning and prepares the manufacturer for the future of the Internet.
CSRP incorporates and extends traditional ERP functionality to integrate
customer requirements into manufacturers' core business processes. The Company's
core ERP products, SyteLine and SyteCentre, improve manufacturers' performance
with respect to customer service, planning and materials management, production
management and enterprise administration. In addition, Symix offers
complementary software capabilities including:
- advanced planning and scheduling, which allows manufacturers to optimize
scheduling of production operations to improve customer satisfaction and
on-time delivery while reducing the manufacturers' and their customers'
inventory carrying costs;
- supply chain management, which enables manufacturers to create and
distribute products to the end consumer through processes that involve
relationships between predicting demand and fulfilling that demand;
- electronic commerce and web enabled communication capabilities, which
facilitate communication between businesses and their customers and
suppliers;
- configuration, which integrates the customer with the order process to
increase the quality of complex product orders;
- field service, which improves the quality and efficient delivery of field
service and support;
- on-line analytical processing, which aids in decision-making by providing
comprehensive analysis of operational data stored by SyteLine and
SyteCentre; and
- enterprise process documentation, which speeds the implementation of ERP
systems and facilitates the execution of ISO 9000 quality initiatives.
The Company's CSRP approach provides highly integrated, client-focused, software
solutions that address the critical business needs of mid-market manufacturers.
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Symix offers a wide range of services, including project management,
implementation, product education, technical consulting, programming services,
system integration and maintenance and support. Symix works with consulting
firms and third party vendors to deliver integrated CSRP solutions.
The Company has more than 3,800 customer sites, which it services and
supports through a worldwide network of 26 offices in 13 countries.
Symix was incorporated under the laws of the State of Ohio in 1984. The
Company's principal executive offices are located at 2800 Corporate Exchange
Drive, Columbus, Ohio 43231, and its telephone number is (614) 523-7000.
INDUSTRY BACKGROUND
Manufacturers are increasingly subject to global competitive pressures. At
the same time, customer requirements are becoming increasingly complex.
Manufacturers must manage larger product portfolios, shorten product development
and delivery cycles, reduce inventory levels, respond to customers'
customization demands and implement complex multinational manufacturing and
distribution strategies. In response, manufacturers have turned to business
process reengineering and to ERP solutions to improve operational efficiency and
to manage resources across the enterprise. According to Advanced Manufacturing
Research, the worldwide ERP software marketplace will grow to approximately
$20.2 billion in 1999 from an estimated $16.6 billion in 1998. Market growth
through the year 2003 is estimated to exceed 30% per year.
Traditional ERP systems enable the collection, management and integration
of data concerning component procurement, inventory management, manufacturing
control, distribution, finance and other functions with the goal of improving
the efficiency of production. Manufacturers require functionality and
flexibility beyond the scope of traditional ERP systems and seek to manage the
collection and integration of all information that flows to and from customers,
suppliers and business partners. Mid-market manufacturers' ability to
synchronize individual customer preferences with their production and planning
systems will be critical to their success.
As manufacturers begin to achieve operational efficiencies within the
factory through the implementation of enterprise systems, the focus on reducing
costs and improving service has expanded to include distribution. The line
between manufacturing and distribution is rapidly fading with manufacturers
under increasing pressure to accelerate delivery at minimal costs. The emerging
supply chain management market encompasses all software and services which
automate and integrate the business processes required for moving product
through the order-to-delivery cycle. The supply chain management market is
projected to reach over $18.6 billion by 2003 according to Advanced
Manufacturing Research. A host of software applications are included under the
supply chain management umbrella including:
- distribution management;
- warehouse management;
- logistics management;
- demand planning; and
- advanced planning and scheduling.
E-commerce applications are becoming integral within the supply
chain -- speeding communications and transactions throughout the chain, even
defining or eliminating links in the chain. As business transactions are
increasingly being conducted via the Internet -- through online trading sites,
industry portals, or customer-direct storefronts -- customers have a convenient
and cost-effective way to quickly compare products, prices and availability. The
Internet holds significant market and competitive potential for manufacturers
and distributors, but for most businesses this will require significant changes
to current business practices.
Mid-market manufacturers and distributors are impacted by the increasingly
dynamic and competitive service-oriented environment and must address their
needs for functionality and flexibility with limited staff and technical and
financial resources. Such companies require an affordable enterprise system that
incorporates broad functionality, is easy to install and maintain and can be
rapidly deployed.
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THE SYMIX SOLUTION
Symix's CSRP approach creates a competitive advantage for manufacturers and
distributors by integrating all aspects of their operations to satisfy
customers' demands. The CSRP approach incorporates the customer-focused elements
of a manufacturing and distribution business, including after-sale service,
customized management, data mining for new opportunities and advanced planning
and scheduling for fast, reliable delivery.
The Company combines its core enterprise systems, SyteLine and SyteCentre,
with complementary products to deliver CSRP solutions. Symix delivers a
combination of technology, functionality and services to enable manufacturers
and distributors to implement rapidly a solution that integrates customer needs
and requirements into business planning and execution systems. The Company
believes its approach results in enhanced customer relationships, increased
productivity, improved operating efficiency and lower total cost of ownership.
The benefits to companies using the Symix solution include the following:
Improved customer relationships. CSRP integrates customer requirements with
manufacturers' sales, marketing, engineering, manufacturing and customer service
information, resulting in more accurate planning and scheduling decisions, rapid
response times, better on-time deliveries, improved order fulfillment and
improved field service delivery, thereby providing greater customer
satisfaction.
Reduced total cost of ownership. The Company's solutions are designed to
minimize the total cost of implementing, operating and maintaining enterprise
systems and to maximize operating efficiency. Symix's software runs on standard
hardware platforms, providing users with the flexibility to leverage existing
technology systems and to optimize system configurations. The modular design of
the Company's software allows manufacturers and distributors to implement
systems quickly and easily and provides the flexibility to add additional
functionality or change business process models as customer needs and business
requirements change.
Reduced time to benefit. The Company believes its ability to implement its
software solution rapidly and to reduce manufacturers' and distributors' time to
benefit is a key competitive advantage. The Company reduces implementation time
in three ways. First, Symix employs a structured implementation methodology that
separates the solution implementation process into distinct and manageable
phases, ensuring coordination throughout the implementation process. Second, the
Company's proprietary business process modeling tool enables customers to map
the appropriate systems and procedures necessary to increase the speed of the
deployment process. Third, Symix maintains strategic relationships with numerous
business partners, which enable the Company to provide a solution that addresses
enterprise system needs in an integrated fashion with minimal customer
disruption.
STRATEGY
The Company's objective is to be a leading provider of CSRP solutions to
mid-market discrete manufacturers. The key components of the Company's strategy
include:
Expand CSRP solutions by integrating electronic commerce capabilities. The
Company will continue to expand its CSRP vision by delivering midmarket-focused
e-commerce solutions composed of:
- packaged service offerings that provide to Symix customers a "roadmap"
for executing an e-commerce strategy;
- e-commerce software applications including Web store fronts and business
to business transaction managers that support the "roadmap"; and
- integration capabilities to e-commerce "marketplaces" and "information
channels" in the Company's target industries. By integrating the
transaction backbones of its CSRP software solutions with the Internet,
Symix customers will be able to "make a promise" through the Internet and
then "keep that promise" through the execution of its supporting systems.
Evolve from manufacturing centric perspective to include supply chain
management focus. With the acquisition of Distribution Architects International,
Inc. ("DAI") in June 1999 and the future integration of DAI's products with
SyteCentre, the Company will pursue a mid-market leadership position in supply
chain
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management by targeting light manufacturers and distributors with heavy
distribution needs. The supply chain management solution will include:
- advanced planning and scheduling;
- forecast and demand planning;
- warehouse management; and
- traffic and transportation management.
Strengthen mid-market leadership position. The Company believes that it is
a leading provider of enterprise system solutions to mid-market manufacturers.
The Company has more than 3,800 customer sites, which it services and supports
through a worldwide network of 26 offices in 13 countries. The Company intends
to leverage its technology and customer base to enhance its leadership position
in its targeted vertical markets and to pursue new vertical markets in which it
has expertise.
Embrace simple and easy to use technology. The Company's CSRP approach
emphasizes the commitment to a simple but powerful technology solution through
Microsoft and Progress software. The use of technology tools from Microsoft and
Progress standardizes and simplifies integration efforts and avoids the costly
maintenance of internally supported proprietary development tools. The Company
will continue to concentrate its development resources on these technology
platforms.
Pursue strategic partnerships. The Company will continue to provide the
tools, techniques, methodologies and other elements required to simplify the
task of implementing and supporting software solutions. Symix intends to pursue
this strategy through alliances with industry leading partners and/or
acquisitions of new technology.
PRODUCTS
Symix products are comprised of the following:
- SyteLine. SyteLine is the Company's heavy manufacturing oriented product
that was re-architected and developed from earlier versions of Symix
enterprise system solutions. SyteLine targets make-to-order, high
configuration manufacturers of industrial products in five key vertical
markets:
- industrial equipment;
- fabricated metals;
- furniture and fixtures;
- containers and packaging; and
- industrial electronics.
- SyteCentre. SyteCentre was released in February, 1999 and targets light
manufacturers of discrete products in three key vertical markets:
- consumer electronics;
- consumer durable and packaged goods; and
- computer and related peripherals.
- Complementary CSRP products. The Company offers complementary products to
both SyteLine and SyteCentre that support the CSRP vision. These
complementary products include:
- advanced planning and scheduling (SyteAPS);
- e-commerce tools, including Web Store Front, Internet
business-to-business transaction manager and EDI communication
solution;
- configuration and pricing;
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- business intelligence;
- business process modeling; and
- field service management.
- SyteDistribution. SyteDistribution was acquired in connection with the
acquisition of DAI in June 1999. SyteDistribution addresses the supply
chain management requirements of distribution operations. Supply chain
management refers to the overall process through which an organization
creates and distributes its products and services to the end consumer.
The Company intends to incorporate the functionality of SyteDistribution
into SyteCentre over the next two years.
SyteCentre and the key complementary CSRP products such as SyteAPS, sales
and order configuration, and field service management are written in C++
programming language, operate in a Microsoft Windows NT operating environment,
and use SQL as a database. SyteDistribution is written in a combination of C++
and Synergy DBL and operates in either a Windows NT or UNIX operating
environment.
SyteLine operates in either a Windows NT or UNIX operating environment and
is written in PROGRESS, a proprietary programming language licensed by Symix
from Progress Software Corporation. Symix depends upon the license of PROGRESS
to its customers and the acceptance of PROGRESS by its customers. Symix markets
and distributes PROGRESS in connection with the sale of its product under a
non-exclusive agreement with Progress. The agreement may be terminated by either
party upon 90 days written notice to the other party. In addition, the agreement
may be terminated immediately by either party if a material breach of the
agreement by the other party continues after 30 days' written notice. Symix's
relationship with Progress involves other risks which could have a material
adverse effect on Symix's business, operating results or financial condition,
including the following:
- the failure of Progress to continue its relationship with Symix;
- the failure of Progress to develop, support or enhance PROGRESS in a
manner which is competitive with enhancements of other programming
languages;
- the loss of market acceptance of PROGRESS and its relational database
management system; and
- the inability of Symix to migrate its software products to other
programming languages on a timely basis if PROGRESS is no longer
available.
Both SyteLine and SyteCentre supports manufacturers' core business
processes including customer service (estimating, configuring and accepting
orders accurately and rapidly), planning and materials management, production
management and enterprise administration (costing, financial management and
reporting). SyteLine handles multi-national and multi-site requirements and is
available currently in nineteen languages. SyteCentre is available currently
only in North America with international and multi-site functionality scheduled
to be deliverable in calendar year 2000.
Descriptions of the complementary CSRP products offered with SyteLine and
SyteCentre are as follows:
SyteAPS. SyteAPS is an advanced planning and scheduling system that
develops realistic and synchronized productions plans and schedules that
simultaneously consider the multiple constraints and limitations of the
production environment. SyteAPS is fully integrated with both SyteLine and
SyteCentre.
E-commerce. E-commerce applications were acquired in connection with the
acquisition of DAI in June 1999 and provide manufacturers and distributors with
a supporting technical infrastructure that integrates customer management
software with the transactional backbone of enterprise software. These
applications include a Web storefront, an Internet order management system and a
business-to-business transaction manager. The combination of e-commerce
applications with supporting transaction backbones enable manufacturers and
distributors to offer online customer ordering and service ("make a promise"),
and then execute by giving accurate pricing, reliable product delivery dates and
post-sale field service ("keep a promise").
Configuration and Pricing. Configuration and Pricing is an interactive
product configuration and sales force automation software application that was
specially designed for and integrated with SyteLine and SyteCentre.
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Configuration and Pricing was developed in conjunction with Trilogy Development
Group, a leading provider of sales and marketing automation solutions.
Configuration and Pricing provides manufacturers with the ability to configure,
estimate, order and price complex products and services. Once the order and
product are configured, the data is sent to production where bills of material
and job routing instructions are automatically generated. The configuration
component was released in September 1997 and the remote pricing and quotation
component was released in January, 1999.
Business Intelligence. Business Intelligence is a data analysis product
utilizing Online Analytical Processing tools from Cognos Corporation, an
industry leader in business intelligence software tools. Business Intelligence
is an interactive, graphical data access and analysis solution that provides
manufacturers a flexible, multi-dimensional view of business and operating data
stored in SyteLine and SyteCentre. Business Intelligence was released in
December 1996.
Business Process Modeling. Business Process Modeling is an internally
developed tool that provides custom enterprise modeling to speed ERP deployment
and to provide a base for business process improvement initiatives such as ISO
9000. Business Process Modeling, which is comprised of a comprehensive set of
implementation focused programs, resources and tools, was released in June 1997.
EDI. EDI is an electronic commerce software application product that
delivers customer and supplier focused business-to-business communication
solutions for SyteLine customers. EDI was developed in conjunction with Sterling
Commerce, Inc., an industry leader in electronic commerce solutions. EDI is
integrated with SyteLine and was released in September 1997.
Field Service Management. Field Service Management is a service management
application software that supports manufacturers' service businesses more
efficiently and profitably through manpower scheduling, contract management,
remote field service communications and inventory and purchasing tracking. Field
Service Management is based on the Company's stand-alone FieldPro product, and
was integrated with SyteLine in December 1998.
FieldPro. FieldPro is a service management application software product
that supports a manufacturer's service business more efficiently and profitably
through manpower scheduling, contract management, remote field service
communications and inventory and purchasing tracking. FieldPro was acquired by
Symix as a result of its acquisition of Visual Applications Software, Inc. in
January 1997. FieldPro is marketed and sold under a separate and stand-alone
business unit within Symix, the CIT Division. The CIT Division focuses on
selling FieldPro to high technology and office equipment service operations. As
of June 30, 1999, there were 30 employees in the CIT Division.
SyteDistribution. SyteDistribution was acquired in connection with the
acquisition of DAI in June 1999 and supports the supply chain management
requirements of distribution operations. SyteDistribution has extensive
functionality across a number of business processes and is designed to improve:
- customer services (including electronic commerce and internet order
entry);
- demand, inventory and distribution planning;
- warehouse management;
- transportation management; and
- financial management.
Since 1976, DAI has sold its supply chain management solution to
approximately 100 customers in various vertical industries, including retail,
food, wholesale and consumer durable goods distribution. DAI historically sold
its software product in flexible modular components, customizing solutions to
address the individual needs of its customer.
In December 1998, DAI launched an initiative to sell a more "packaged
solution" with reduced implementation time. SyteDistribution is the result of
that initiative. Symix intends to continue marketing and
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selling SyteDistribution, and to eventually incorporate its supply chain
management functionality into SyteCentre, combining the manufacturing
capabilities of SyteCentre with the distribution capabilities of
SyteDistribution.
SERVICES AND SUPPORT
The Company offers a full range of services that allow its customers to
maximize the benefits of the Company's software products, including:
- project management;
- implementation;
- product education;
- technical consulting;
- programming services;
- system integration; and
- maintenance and support.
The Company's services are priced separately, and fees for its services
generally are not included in the price for its software products. Fees for
maintenance and support services generally are billed 12 months in advance while
all remaining consulting, education and programming services generally are
billed as incurred.
The Company considers its ability to implement its software solution
rapidly a key competitive factor. The Company's professional services
organization, which employs approximately 180 consultants and managers, uses a
structured implementation methodology, which divides a customer's implementation
into distinct phases:
- planning and installation;
- education and business system simulations;
- development of operating procedures;
- conversion planning;
- end-user training; and
- cut-over and post implementation evaluation.
The Company offers both on-site and classroom training.
In addition to the consultants employed directly by the Company, customers
can receive consulting services from the Company's approximately 40 business
partners. The Company also has actively established relationships with
consulting firms to provide additional support in project management,
implementation and system integration services for customers. The Company views
these relationships as an important source of future leads for prospective
customers.
Although the Company attempts to minimize customization of its software
products, the Company does provide professional programming services to modify
its software products to address specific customer requirements. These
modifications may include designing and programming complete applications or
integrating the Company's software products with legacy systems.
Maintenance and support services are available to all customers using an
active release of the Company's software products. Maintenance and support
services include product enhancements and updates, free upgrades to new
versions, telephone support during extended business hours, full-time emergency
support and access to the Company's customer support module on the Company's
Internet home page. The price for maintenance and support services is based
primarily on a percentage of the list price of the Company's software product at
the time a license is granted. Fees for maintenance and support services are
billed 12 months in advance, and maintenance and service revenue is deferred and
recognized ratably over the term of the maintenance and support agreement.
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SALES AND DISTRIBUTION
The Company currently licenses SyteLine and SyteCentre based on a license
fee for each concurrent session or concurrent execution of its software
products. The Company receives additional license fees whenever a customer
increases the number of concurrent sessions, usually as a result of the growth
of the customer's business or expansion to other sites. Both SyteLine and
SyteCentre use an encrypted key that allows the customer to use only the number
of concurrent sessions for which the customer has received a license.
The Company principally sells its products and services through a direct
sales and marketing force. The Company has made significant expenditures in
recent years to expand its direct sales and marketing force, primarily outside
the United States, and plans to continue such expansion. The Company's future
success will depend in part upon the effectiveness of its direct sales and
marketing force and the ability of the Company to continue to attract,
integrate, train, motivate and retain new sales and marketing personnel.
Competition for sales and marketing personnel in the software industry is
intense. In addition, there can be no assurance that the Company's direct sales
and marketing organization will be able to compete successfully against the
sales and marketing operations of many of the Company's current and future
competitors. If the Company is unable to develop and manage its direct sales and
marketing force effectively, the Company's business, operating results or
financial condition could be materially adversely affected.
Sales leads are generated through a combination of in-house telemarketing,
leads from consulting partners, advertising, trade shows and direct calls by
sales staff. The Company sells its products and services through both a direct
sales force and approximately 40 business partners worldwide. The Company
currently maintains 26 sales and support offices worldwide: thirteen in North
America, eight in Asia Pacific and five in Europe. Symix's business partners in
North America target the lower end of the mid-market manufacturing sector while
its business partners in Asia Pacific and Europe primarily sell independently to
companies within a geographic region or country.
The Company will need to maintain and expand its relationships with its
existing business partners and enter into relationships with additional business
partners in order to expand the distribution of its products. There can be no
assurance that current or future business partners will provide the level of
expertise and quality of service required to license the Company's products
successfully, that the Company will be able to maintain effective, long-term
relationships with such business partners or that selected business partners
will continue to meet the Company's sales needs. Further, there can be no
assurance that these business partners will not market software products in
competition with the Company in the future or will not otherwise reduce or
discontinue their relationships with, or support of, the Company and its
products. If the Company fails to maintain successfully its existing business
partner relationships or to establish new relationships in the future, or if any
such business partner exclusively adopts a product other than the Company's
products, materially reduces its sales efforts relating to the Company's
products or materially increases its support for competitive products, the
Company's business, operating results and financial condition could be
materially and adversely affected.
In addition to business partners and third party consultants, hardware
vendors continue to be an important source of sales leads. The Company has
entered into cooperative marketing programs with International Business Machines
Corporation, Data General Corporation and Hewlett-Packard Company. The Company
is responsible for providing support for its software to its customers, and the
various hardware vendors are responsible for their products, under each
agreement.
In June, 1998, Mitsui & Co., Ltd. ("Mitsui"), the distributor of Symix
products in Japan, acquired 13.3% of the ownership interest in the Company's
Asia distribution operations for $2.0 million through the purchase of shares of
Symix Computer Systems (Singapore) Pte. Ltd. ("Symix Singapore"). In connection
with and prior to such investment, all of the outstanding shares of the Symix
subsidiaries in Australia, New Zealand, Thailand, Hong Kong and Malaysia were
transferred to Symix Singapore. Consequently, Mitsui currently owns 13.3% of the
outstanding shares of Symix Singapore, with Symix owning the remaining 86.7%.
Management believes that Mitsui's investment in Symix's Asia distribution
operations along with Mitsui's increased sales support to Japanese companies
throughout Asia will further legitimize Symix as a leading ERP vendor in the
Asia Pacific region.
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With recently established subsidiaries in Germany and Italy, and with
continued growth in key areas such as China, the Company believes international
sales will account for a significant portion of its total sales over the next
several years. The Company derived approximately 22% of its fiscal 1999, 21% of
its fiscal 1998, and 25% of its fiscal 1997 net revenues from sales outside of
North America.
The amount of net revenue, operating income and identifiable assets
attributable to each of the Company's geographic market areas for fiscal 1999,
fiscal 1998 and fiscal 1997 were as follows:
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NORTH AMERICA ASIA/PACIFIC EUROPE
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1999
Net revenue..................................... $100,950 $ 11,722 $16,400
Operating income (loss)......................... 8,563* 709 (1,383)
Identifiable assets............................. 70,920 8,321 11,359
1998
Net revenue..................................... $ 77,225 $ 8,665 $11,707
Operating income (loss)......................... 8,773* (694) 442
Identifiable assets............................. 47,778 9,392 9,212
1997
Net revenue..................................... $ 49,388 $ 8,259 $ 8,125
Operating income................................ 4,035 410 627
Identifiable assets............................. 32,531 5,766 5,955
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* Exclusive of acquisition research and development write-offs of $835,000 in
fiscal 1999 and $6.5 million in fiscal 1998.
The Company expects to continue to expand its existing international
operations and to enter additional international markets, which will require
significant management attention and financial resources. Historically, the
Company's international operations have been characterized by lower operating
margins during the period in which marketing and distribution channels were
being developed. Costs associated with international expansion include the
establishment of additional foreign offices, the hiring of additional personnel,
the localization and marketing of products for particular foreign markets and
the development of relationships with international service providers. If
international revenue is not adequate to offset the expense of expanding foreign
operations, the Company's business, operating results or financial condition
could be materially adversely affected.
A significant portion of the Company's international revenue is received in
currencies other than U. S. dollars and, in the past, the Company has not
engaged in hedging activities. As a result, the Company is subject to risks
associated with foreign exchange rate fluctuations. Due to the substantial
volatility of foreign exchange rates, there can be no assurance that foreign
exchange rate fluctuations will not have a material adverse effect on the
Company's business, operating results or financial condition.
The Company's international operations are subject to other risks inherent
in international business activities such as:
- the impact of a recessionary environment in economies outside the United
States;
- cultural and language difficulties associated with servicing customers;
- localization and translation of products for foreign countries;
- difficulties in staffing and managing international operations;
- difficulties in collecting accounts receivable and longer collection
periods;
- reduced protection for intellectual property rights in some countries;
- exchange controls;
- restrictions on the repatriation of foreign earnings;
- political instability;
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- trade restrictions;
- tariff changes; and
- the impact of local economic conditions and practices.
The Company's success in expanding its international business will be dependent,
in part, on its ability to anticipate and effectively manage these and other
risks. There can be no assurance that these and other factors will not have a
material adverse effect on the Company's business, operating results or
financial condition.
PRODUCT DEVELOPMENT
Symix devotes a significant percentage of its resources to identifying
manufacturers' needs, developing new features and enhancements to existing
products and designing and developing new products. New products, updates and
enhancements are developed by the Company's internal development staff. The
Company's practice is to release updates and major enhancements on a regular
basis. Symix works closely with manufacturers and business partners to improve
and enhance its products.
The market for the Company's products is characterized by rapid
technological change, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products embodying new
technologies and the emergence of new industry standards can cause customers to
delay their purchasing decisions and render existing products obsolete and
unmarketable. The life cycles of the Company's software products are difficult
to estimate. As a result, the Company's future success will depend, in part,
upon its ability to continue to enhance existing products and to develop and
introduce in a timely manner new products with technological developments that
satisfy customer requirements and achieve market acceptance. There can be no
assurance that the Company will successfully identify new product opportunities
and develop and bring new products to market in a timely and cost-effective
manner or that products, capabilities or technologies developed by others will
not render the Company's products or technologies obsolete or noncompetitive or
shorten the life cycles of the Company's products. See "Item 1.
Business--Competition." If the Company is unable to develop on a timely and
cost-effective basis new software products or enhancements to existing products,
or if such new products or enhancements do not achieve market acceptance, the
Company's business, operating results or financial condition may be materially
adversely affected.
As a result of the complexities inherent in software development, in
particular development for multi-platform environments, and the broad
functionality and performance demanded by customers for enterprise system
products, major new product enhancements and new products can require long
development and testing periods before they are commercially released. The
Company has on occasion experienced delays in the scheduled introduction of new
and enhanced products, and future delays could have a material adverse effect on
the Company's business, operating results or financial condition.
Research and product development expenses, including amounts capitalized
were $14,600,000, $12,200,000 and $8,759,000 for the fiscal years ended June 30,
1999, 1998 and 1997, respectively. Capitalized software expenditures were
$4,400,000, $4,300,000, and $3,100,000 for the same respective periods and were
capitalized in accordance with the Statement of Financial Accounting Standards
No. 86. Amortization of capitalized software costs is included in cost of
revenue. The Company generally retains the right to remarket specific
modifications developed by its programming services group in or with future
product releases.
COMPETITION
The market for ERP software is intensely competitive, rapidly changing and
significantly affected by new product offerings and other market activities. The
Company has a large number of competitors that vary in size, computing
environments and overall product scope. Within its market, the primary
competition comes from independent software vendors in two distinct groups: (i)
large system developers who are moving into the Company's market, including Baan
Company, N.V., J.D. Edwards & Company, Oracle Corporation and SAP
Aktiengellschaft; and (ii) traditional mid-market competitors, including Epicor
Software, QAD, Inc. and Lilly Software.
11
<PAGE> 12
A number of companies offer products which are similar to the Company's
products and are directed at the market for ERP systems for mid-market
manufacturers. Many of the Company's existing competitors, as well as a number
of potential new competitors, have more established and larger marketing and
sales organizations, significantly greater financial, technical and other
resources and a larger installed base of customers than the Company. Other
competitors leverage vertical market expertise, reputation and price as
competitive advantages. There can be no assurance that competitors will not
offer or develop products that are superior to the Company's products or that
achieve greater market acceptance.
Several large companies which develop management information software
applications for large multinational manufacturers are beginning to market to
mid-market manufacturers targeted by the Company or otherwise develop
applications that compete in the Company's markets. As the market for ERP
software solutions expands, other companies may enter the Company's market or
increase their market presence by acquiring or entering into alliances with
competitors of the Company. As a result of all these factors, competition is
likely to increase substantially, which may result in price competition, loss of
market share or delayed purchasing decisions. There can be no assurance that the
Company will be able to compete successfully against its competitors or that the
competitive pressures faced by the Company will not adversely affect its
financial performance.
The Company believes that the most important considerations for potential
customers for its software products are:
- product functionality;
- open systems technology;
- ease of use;
- rapid installations;
- competitive pricing;
- corporate reputation;
- reliability and quality of technical support;
- documentation and education; and
- size of installed user base.
The Company further believes that it competes favorably in these areas.
PROPRIETARY TECHNOLOGY
The Company's ability to compete is dependent in part upon its internally
developed, proprietary intellectual property. The Company regards its products
as proprietary trade secrets and confidential information. The Company relies
largely upon its license agreements with customers, distribution agreements with
distributors, and its own security systems, confidentiality procedures and
employee agreements to maintain the trade secrecy of its products. In certain
cases, the Company may seek to protect its programs, documentation and other
written materials under copyright law. In addition, SYMIX, SyteLine and Pritsker
are registered trademarks and SyteCentre, SyteDistribution, SyteAPS, and
FieldPro are trademarks of the Company. None of the Company's products is
patented.
There can be no assurance that the Company's means of protecting its
proprietary rights in the United States or abroad will be adequate or that
competitors will not independently develop similar technology. In addition, the
laws of some foreign countries do not protect the Company's proprietary rights
as fully as do the laws of the United States. Preventing or detecting
unauthorized use of the Company's products is difficult. The Company also relies
on certain other technology which it licenses from third parties, including
software that is integrated with internally developed software and used in the
Company's products to perform key functions. No assurance can be given that the
steps taken by the Company will prevent misappropriation of its technology or
that its license agreements will be enforceable. In addition, litigation may be
necessary in the future to enforce the Company's intellectual property rights,
to protect the Company's trade secrets, to determine the validity and scope of
the proprietary rights of others or to defend against claims of infringement or
invalidity. Any such
12
<PAGE> 13
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results or financial condition.
Although the Company does not believe that its products infringe the
proprietary rights of third parties, there can be no assurance that infringement
or invalidity claims (or claims for indemnification resulting from infringement
claims) will not be asserted or prosecuted against the Company or that any such
assertions or prosecutions will not materially adversely affect the Company's
business, operating results or financial condition. Regardless of the validity
or the successful assertion of such claims, defending against such claims could
result in significant costs and diversion of resources, which could have a
material adverse effect on the Company's business, operating results or
financial condition. In addition, the assertion of such infringement claims
could result in injunctions preventing the Company from distributing certain
products, which would have a material adverse effect on the Company's business,
operating results and financial condition. If any claims or actions are asserted
against the Company, the Company may seek to obtain a license to such
intellectual property rights. There can be no assurance, however, that such a
license would be available on reasonable terms or at all.
The Company has in the past and may in the future resell certain software
that it licenses from third parties and jointly develop software in which it
will have co-ownership or cross-licensing rights. See "Item 1.
Business--Products."
EMPLOYEES
As of June 30, 1999, the Company employed 835 persons, including 242 in
North America sales and service operations, 280 in development and support, 215
in international operations outside of North America and 98 in marketing and
administration. None of the Company's employees is represented by a labor union.
The Company has never experienced a work stoppage and believes that its employee
relations are good.
The Company's success depends to a significant extent upon senior
management and other key employees. The loss of one or more key employees could
have a material adverse effect on the Company. The Company does not have
employment agreements with its executive officers, except Stephen A. Sasser,
President and Chief Executive Officer, and does not maintain key man life
insurance on its executive officers. In addition, the Company believes that its
future success will depend in part on its ability to attract and retain highly
skilled technical, managerial, sales, marketing, service and support personnel.
Competition for such personnel in the computer software industry is intense.
There can be no assurance that the Company will be successful in attracting and
retaining such personnel, and the failure to do so could have a material adverse
effect on the Company's business, operating results or financial condition.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
Lawrence J. Fox........................... 43 Chairman of the Board
Stephen A. Sasser......................... 50 President, Chief Executive Officer and a
Director
Stephen A. Yount.......................... 44 Vice President America's Field Operations
Lawrence W. DeLeon........................ 44 Vice President, Chief Financial Officer
and Secretary
Otto E. Offereins......................... 53 Vice President and General Manager, e-
Mongoose Division
Daryll Wartluft........................... 58 Vice President and General Manager,
SyteLine Division
Robert D. Williams........................ 44 Vice President, Human Resources
Catherine K. DeRosa....................... 38 Vice President of Marketing
Jorge L. Lopez............................ 44 Vice President of Corporate Development/
Strategic Planning
</TABLE>
13
<PAGE> 14
Lawrence J. Fox founded Symix in 1979 as a sole proprietorship. He has held
his present office since Symix was incorporated in 1984. From 1984 to 1998 he
also served as Chief Executive Officer of he Company.
Stephen A. Sasser has served as Chief Executive Officer of the Company
since January 1999. He joined the Company in July 1995 as President and Chief
Operating Officer. He has served as a director of the Company since July 1995.
From October 1994 to June 1995, Mr. Sasser served as Vice President of
International Operations for Trilogy Development Group, a provider of sales and
marketing software. From August 1992 to October 1994, Mr. Sasser was Group Vice
President of the Systems Management Division and Pacific Rim Operations of
Legent Corporation, a provider of systems management software products and
services ("Legent"). From April 1987 through its acquisition by Legent in 1992,
Mr. Sasser served as President of the Data Center Management Division of Goal
Systems International, Inc. ("Goal Systems"), which designed, developed, and
marketed systems management software products.
Stephen A. Yount joined the Company in May 1996 as Vice President of
America's Sales and Services. In August 1998 he was elected as Vice President
America's Field Operations. From 1995 to May 1996, he was Vice President of
Sales at Tyecin Systems, a provider of client-server manufacturing software for
the semi-contractor market. From 1993 to 1995, Mr. Yount served as Vice
President of Sales and Services at Neuron Data, a client-server application
development software company. From 1987 to 1993, he served in various senior
sales positions at Legent, including Regional Vice President of Sales, Vice
President of Sales and Director of Sales, Western Region.
Lawrence W. DeLeon joined Symix in August 1995 as Vice President, Chief
Financial Officer and Secretary. From 1991 to August 1995, Mr. DeLeon served in
various capacities at Legent, including Treasurer for Goal Systems, Europe, Vice
President-Finance and Administration and Vice President-Central Europe. From
1988 to 1991, Mr. DeLeon was Chief Financial Officer for Thunderbird Products
Corporation, a boat manufacturer.
Otto E. Offereins joined the Company in September 1995 as Vice President of
Development and Support. In August 1999, Mr. Offereins was elected as Vice
President and General Manager, e-Mongoose Division. From April 1998 until August
1999, he served as Vice President and General Manager, APS and ECC Division. He
was Vice President and General Manager of Client Product Server Division of
Legent from July 1994 to August 1995. From July 1992 to July 1994, Mr. Offereins
served as Vice President of Support and Development for the Systems Management
Division of Legent. From March 1991 to July 1992, he served as Vice President of
Development and Support-Research and Development Division of Legent. Prior to
March 1991, he was Executive Vice President of Operations for Syntelligence
Corporation, a software company specializing in financial risk assessment.
Daryll Wartluft joined the Company in May 1998 as Vice President and
General Manager, SyteLine Division. From August 1995 to April 1998, he was
President and Chief Executive Officer and a director of Pivotpoint Inc., an ERP
software and services provider. From April 1994 to August 1995, he served as
Group Vice President of Applications Management Division of Legent. Prior to
that time, he held various management positions with Group Bull Worldwide
Information Systems, a provider of systems management software products and
services, and International Business Machines Corporation, a provider of
advanced information technology and services.
Robert D. Williams joined the Company in September 1995 as Vice
President-Human Resources. Prior to that time, he served as Director, Human
Resources/Associate Relations of Legent from August 1992 to August 1995. From
March 1990 to August 1992 he was Executive Director of Human Resources and
Administrative Services of Goal Systems.
Catherine K. DeRosa joined the Company as Director of Product Marketing in
August 1994. She has served the Company in the position of Vice President of
Marketing since January 1996. Prior to joining Symix and from 1992 to August
1994, Ms. DeRosa served as an independent consultant to several major technology
companies in the Silicon Valley. From 1989 to 1992, Ms. DeRosa served as a
Senior Consultant with Price Waterhouse, a major accounting and consulting firm.
She also has held a variety of positions with Micro Card Technologies, Inc., an
electronic components manufacturer and Texas Instruments Inc., a leader in
semi-conductors and electronics.
14
<PAGE> 15
Ms. DeRosa is a Certified Public Accountant and received a masters in business
administration degree from the Harvard Business School.
Jorge L. Lopez joined the Company in November 1996 as Vice President of
Corporate Development/ Strategic Planning. From 1995 to November 1996, Mr. Lopez
served as Vice President of Marketing for Salesoft Inc., a provider of automated
sales and marketing software. From 1989 to 1995, Mr. Lopez served as Vice
President of Strategic Alliances for Avalon Software, Inc. an enterprise
resource planning software and services company. Prior to that time, Mr. Lopez
held various marketing and technical positions with International Business
Machines Corporation, a provider of advanced information technology and
services.
The executive officers of the Company are appointed by and serve at the
pleasure of the Symix Board of Directors. There are no arrangements or
understandings between any officer and any other person pursuant to which the
officer was so appointed.
ITEM 2. PROPERTIES
The Company's corporate headquarters and principal administrative, product
development, and sales and marketing operations are located in approximately
75,000 square feet of leased office space in Columbus, Ohio. The lease agreement
commenced in July 1991 and will expire on June 30, 2001. The lease agreement
provides for an annual base rent of approximately $1.2 million. Additionally,
the Company has 26 leased sales and support offices throughout the United States
and elsewhere.
ITEM 3. 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 the outcome of any of
these legal matters will have a material adverse effect on the Company's
business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Shares are traded in the over-the-counter market and
are quoted on the Nasdaq National Market under the symbol "SYMX." The following
table sets forth the high and low sale prices for the Common Shares for fiscal
1998 and 1999, as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal year ended June 30, 1999
First Quarter............................................. $26.38 $15.63
Second Quarter............................................ 22.63 15.25
Third Quarter............................................. 24.88 15.13
Fourth Quarter............................................ 15.88 6.50
Fiscal year ended June 30, 1998
First Quarter............................................. $21.00 $10.75
Second Quarter............................................ 19.00 14.00
Third Quarter............................................. 19.38 14.00
Fourth Quarter............................................ 22.88 18.13
</TABLE>
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<PAGE> 16
The closing price on June 30, 1999 was $10.25. As of June 30, 1999, there
were approximately 255 holders of record of the Common Shares, and the Company
believes that there are more than 2,000 beneficial shareholders.
The Company has never paid cash dividends on its Common Shares. The Company
expects that all future earnings will be retained to finance the Company's
operations and for the growth and development of its business. Accordingly, the
Company does not currently anticipate paying cash dividends on its Common Shares
in the foreseeable future. The payment of any future dividends will be subject
to the discretion of the Board of Directors of the Company and will depend on
the Company's results of operations, financial position and capital
requirements, general business conditions, restrictions imposed by financing
arrangements, if any, legal restrictions on the payment of dividends and other
factors the Board of Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes certain consolidated financial data for each
of the five years presented. The selected financial data presented below has
been derived from, and should be read in conjunction with, the Company's audited
financial statements, and the notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999 1998 1997 1996 1995
------------------- -------- ------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net revenue............................ $129,072 $97,597 $65,772 $45,759 $42,828
Cost of revenue........................ 52,025 35,701 23,690 16,496 15,672
-------- ------- ------- ------- -------
Gross margin......................... 77,047 61,896 42,082 29,263 27,156
Operating expenses:
Selling, general, and
administrative.................... 58,941 45,474 31,351 21,593 24,774
Research and product development..... 10,217 7,901 5,659 3,673 3,744
Restructuring and other unusual
charges........................... -- -- -- 506 --
Acquired research and development
write-off......................... 835 6,503 -- -- --
-------- ------- ------- ------- -------
Total operating expenses..... 69,993 59,878 37,010 25,772 28,518
-------- ------- ------- ------- -------
Operating income (loss)................ 7,054 2,018 5,072 3,491 (1,362)
Other income (expense), net............ 151 (178) 107 221 314
-------- ------- ------- ------- -------
Income (loss) before income taxes...... 7,205 1,840 5,179 3,712 (1,048)
Provision (benefit) for income taxes... 3,206 3,196 1,916 1,404 (410)
-------- ------- ------- ------- -------
Net income (loss).................... $ 3,999 $(1,356) $ 3,263 $ 2,308 $ (638)
======== ======= ======= ======= =======
Earnings (loss) per share(1)........... $ 0.55 $ (0.21) $ 0.54 $ 0.41 $ (0.12)
Weighted average common and common
share equivalents outstanding........ 7,264 6,317 6,079 5,582 5,424
BALANCE SHEET DATA:
Working capital........................ $ 21,926 $13,575 $ 7,897 $ 7,538 $ 6,363
Total assets........................... 90,600 66,382 44,252 30,463 26,069
Total long-term debt and lease
obligations.......................... 5,759 2,305 530 -- 138
Total shareholders' equity............. 42,401 31,301 23,361 17,102 14,508
</TABLE>
- ---------------
(1) Where appropriate, all share data and references in this report have been
adjusted for the 2-for-1 share split, effected in the form of a share
distribution of one share for each share outstanding to shareholders of
record on September 10, 1996. In addition, share data has been restated to
conform with the provisions of FASB Statement 128 for all years presented.
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Symix designs, develops, markets and supports integrated manufacturing,
supply chain management, financial and e-commerce software solutions that
address the enterprise requirements of mid-size manufacturing and distribution
companies and business units of larger companies. Following the fiscal 1995
year-end in which the Company incurred its first loss since becoming publicly
traded in 1991, the Company hired a new president, Stephen A. Sasser, who
implemented several changes in order to restore the Company to profitability.
The new president reorganized the executive management staff by hiring several
key executives and promoting certain employees into executive positions.
Recognizing the strong foundation of the Company's core products and large
customer base, the new management team initially refocused the Company's
investments in development, marketing and promotional activities into supporting
its traditional vertical markets within the mid-range discrete manufacturing
market. The Company also restructured its sales channels by hiring new sales
management in North America and Europe, revising sales compensation programs and
reorganizing the services organization to align more directly with the sales
organization.
During the past three years, the Company has expanded its product offerings
through internal development, partnerships with third party software vendors and
acquisitions. These acquisitions were Visual Application Software, Inc. (field
service management product) in fiscal 1997, Pritsker Corporation (advanced
planning and scheduling solution) in fiscal 1998, and DAI (supply chain
management and e-commerce products) in fiscal 1999. The Company today sells two
core enterprise software application products: SyteLine, a manufacturing
enterprise product targeting make-to-order discrete manufacturers which was
released by Symix in fiscal 1996; and SyteCentre, a supply chain management
product targeting light manufacturers with heavy distribution requirements which
was released by Symix in fiscal 1999. Both products use the same complementary
software products to support the Company's vision of CSRP or "Customer
Synchronized Resource Planning". Management believes that the development,
promotion and delivery of the CSRP vision has been a major contributor to the
Company's success over the past three years.
The Company's product development efforts are currently focused on the
continued expansion of the CSRP vision through the introduction of supply chain
management and e-commerce solutions. Product plans include the integration of
the Company's e-commerce front end applications with its manufacturing and
supply chain transaction backbones. Management considers the ability to deliver
a complete e-commerce business system to mid-market manufacturers and
distributors to be a key requirement for the Company's success in the future.
The Company also has focused its efforts on building its international
distribution channels through acquisitions and converting independent
distributors to direct sales and services operations. During the past four years
, the Company has converted distributors in Australia, Germany, New Zealand and
the Netherlands to subsidiary operations, and has acquired a French sales and
distribution operation. The Company also has opened new offices in China and
Italy. Revenue from foreign operations accounted for approximately 22% of total
revenue in fiscal 1999, compared to 21% in fiscal 1998 and 25% in fiscal 1997.
The decline in the percentage of revenue from foreign operations from fiscal
1997 to fiscal 1998 was the result of a general slowdown in the Asian economies
combined with a strong performance in North America.
In fiscal 1999, the Company experienced the negative effects of the general
market slowdown in industry software revenue growth as customers began
postponing new technology spending and focusing on Year 2000 repairs on existing
systems. The Company's license fee revenue grew 40% during the first half of the
fiscal year, but remained flat in the second half. Offsetting the slowdown in
license fee revenue was an accelerating growth in services revenue supporting
software sales in previous quarters. The increased mix in services revenue
adversely impacted gross margins which declined from 63% in fiscal 1998 to 60%
in fiscal 1999. The decline in gross margins caused pretax operating margins,
exclusive of acquired research and development write-offs, to decrease from 9%
in fiscal 1998 to 6% in fiscal 1999.
In fiscal 1999, the Company generated record revenues of $129.1 million and
net income of $4.8 million, exclusive of the nonrecurring charge relating to the
DAI acquisition. This compares to revenues of $97.6 million
17
<PAGE> 18
in fiscal 1998 and $65.8 million in fiscal 1997 and net income exclusive of
nonrecurring charges of $5.1 million in fiscal 1998 and $3.3 million in fiscal
1997.
NET REVENUE
The Company's net 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. Except for fiscal
1999, revenue for all periods presented is accounted for in accordance with
Statement of Position (SOP) 91-1 on Software Revenue Recognition. Revenue for
fiscal 1999 is accounted for in accordance with SOP 97-2.
Net revenue increased 32% to $129.1 million in fiscal 1999, compared to
increases of 48% and 44% for the years ended June 30, 1998 and 1997,
respectively. The growth in fiscal 1999 and 1998 net revenue compared to
previous years was the result of new software product offerings and the growth
of the distribution channels. Both software license fee revenue and service,
maintenance and support revenue contributed significantly to the net revenue
increase in fiscals 1999 and 1998. The revenue mix since 1997 is shown in the
table below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
1999 1998 1997
--------------- -------------- --------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Software license fees...... $ 67,423 52% $58,498 60% $36,477 55%
Service, maintenance and
support.................. 61,649 48% 39,099 40% 29,295 45%
-------- --- ------- --- ------- ---
Total............ $129,072 100% $97,597 100% $65,772 100%
</TABLE>
Software license fee revenue increased 15% in fiscal 1999 compared to a 60%
license fee revenue growth in fiscal 1998. The decline in the rate of increase
of software license fee revenue growth in fiscal 1999 is attributable to the
industry-wide trend of delays in new business system purchases due to the Year
2000 market dynamics, as companies delay major business system purchases.
Despite this trend, an increased number of sales representatives and overall
market acceptance of Symix's product line resulted in a 15% increase in software
license fee revenue during fiscal 1999, more than offsetting the Year 2000
impact. The increase in software revenue in fiscal 1998 was primarily the result
of (i) the expanding number of products that complement the Company's core ERP
software product, SyteLine, and (ii) the acquisition of Pritsker Corporation in
November 1997.
Service, maintenance and support revenue is derived from installation,
implementation, training, consulting, systems integration and software product
maintenance and support services. Service, maintenance and support revenue
increased 58% in fiscal 1999 to $61.6 million from $39.1 million in fiscal 1998
and $29.3 million in fiscal 1997. The continued increase in service, maintenance
and support revenue is attributable to growth in licensed Symix software
installations worldwide and the expanding product line. Service, maintenance and
support revenue made up 48% of total revenue in fiscal 1999, compared to 40% and
45% in fiscal 1998 and fiscal 1997, respectively. Service, maintenance and
support revenue as a percentage of total revenue increased from fiscal 1998 to
fiscal 1999 due to the de-accelerating software license fee revenue growth, the
expansion of the service's organization to support the increase of new licenses
sold during previous quarters and the expanding product line. Generally,
maintenance and support contracts are billed annually and revenue is recognized
ratably over the contract period, which is typically twelve months. Deferred
revenue on the Company's balance sheet relating primarily to maintenance and
support contracts increased from $13.2 million at June 30, 1998 to $17.2 million
at June 30, 1999.
Cost of Revenue
Total cost of net revenue as a percentage of net revenue was 40% for the
year ended June 30, 1999 compared to 37% and 36% for the years ended June 30,
1998 and 1997, respectively.
Cost of software license fees include royalties, amortization of
capitalized software development costs and software delivery expenses. Cost of
software license fees increased to 27% of software license fee revenue in
18
<PAGE> 19
fiscal 1999 from 25% in fiscal 1998 and 27% in fiscal 1997. The percentage
increase is attributable to the increase in the rate of amortization on
capitalized software expenses relative to license fee revenue. Symix began
amortizing capitalized software costs related to the new product initiative,
SyteCentre, during the third fiscal quarter of fiscal year 1999.
Cost of service, maintenance and support includes the personnel and related
overhead costs for implementation, training and customer support services,
together with fees paid to third parties for subcontracted services. Cost of
service, maintenance and support was 55% of service, maintenance and support
revenue in fiscal 1999 compared to 54% in fiscal 1998 and 48% in fiscal 1997.
The increase in cost of service, maintenance and support in fiscal 1999 and
fiscal 1998, respectively, was due to the continued use of subcontractors to
supplement the work performed by Company employees. In general, the use of
subcontractors results in lower margins than the use of employees but provides
the Company increased flexibility in meeting customer demands.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of personnel and
related overhead costs, including commissions for the sales, marketing, general
and administrative activities of the Company, together with advertising and
promotional costs. Selling, general and administrative expenses increased 30% in
fiscal 1999 compared to a percentage increase of 45% in both fiscal 1998 and
1997. Selling, general and administrative expenses as a percent of net revenue
were 46%, 47% and 48% for the years ended June 30, 1999, 1998 and 1997,
respectively. The slight improvement in these percentages is related to the
increase in percentage of service, maintenance and support revenue versus
license fee revenue in the net revenue mix.
Research and Development
Research and development expenses include personnel and related overhead
costs for product development, enhancement, upgrades, quality assurance and
testing. Total research and development expenses, including amounts capitalized,
were $14.6 million or 11% of net revenue for the year ended June 30, 1999,
compared to $12.2 million or 13% of net revenue in fiscal 1998 and $8.8 million
or 13% of net revenue in fiscal 1997. The Company capitalized research and
development costs of $4.4 million, $4.3 million and $3.1 million for the years
ended June 30, 1999, 1998 and 1997, 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.
The Company incurred nonrecurring charges of approximately $6.5 million in
1998 and $835,000 in 1999 relating to the write-off of acquired in-process
technology in conjunction with the Pritsker and DAI acquisitions.
The increase in overall research and development expense is due to staff
expansion relating to the Company's development of future releases of SyteLine
and SyteCentre, 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, 1999, 1998 and 1997
were 44%, 174% and 37%, respectively. The increased effective tax rates in both
fiscal 1999 and 1998 were primarily due to acquisition research and development
write-offs of $835,000 in fiscal 1999 and $6.5 million in fiscal 1998, which
were not deductible for income tax purposes. The rate also has increased as well
due to, (i) the amount of foreign taxable earnings in countries with higher
effective tax rates and (ii) the non-deductibility of the amortization of
goodwill, thereby increasing Symix's overall tax rate.
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, 1999. 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
19
<PAGE> 20
adjustments) necessary to present fairly this information when read in
conjunction with the Company's audited, consolidated financial statements and
the notes thereto.
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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30,
1999 1999 1998 1998 1998 1998 1997 1997
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue....................... $37,755 $31,325 $33,101 $26,891 $31,692 $24,322 $24,017 $17,565
Cost of revenue................... 15,861 13,249 12,719 10,196 11,122 9,151 8,537 6,891
------- ------- ------- ------- ------- ------- ------- -------
Gross margin.................... 21,894 18,076 20,382 16,695 20,570 15,171 15,480 10,674
Operating expenses................
Selling, general, and
administrative................ 17,337 14,180 14,331 13,093 14,395 12,204 11,133 7,741
Research and product
development................... 3,155 2,617 2,249 2,196 2,287 1,870 1,709 2,034
Acquired research and
development write-off......... 835 -- -- -- -- -- 6,503 --
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 21,327 16,797 16,580 15,289 16,682 14,074 19,345 9,775
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)........... 567 1,279 3,802 1,406 3,888 1,097 (3,865) 899
Other income (expenses), net...... 34 26 80 11 (46) (67) (16) (50)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes........................... 601 1,305 3,882 1,417 3,842 1,030 (3,881) 849
Provision for income taxes........ 571 522 1,553 560 1,486 389 1,004 317
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................. $ 30 $ 783 $ 2,329 $ 857 $ 2,356 $ 641 ($4,885) $ 532
======= ======= ======= ======= ======= ======= ======= =======
Basic earnings (loss) per share... $ 0.00 $ 0.12 $ 0.35 $ 0.13 $ 0.36 $ 0.10 ($ 0.79) $ 0.09
======= ======= ======= ======= ======= ======= ======= =======
Diluted earnings (loss) per
share........................... $ 0.00 $ 0.11 $ 0.32 $ 0.12 $ 0.33 $ 0.09 ($ 0.79) $ 0.08
======= ======= ======= ======= ======= ======= ======= =======
Diluted earnings per share
exclusive of acquired R&D
write-off....................... $ 0.12 $ 0.11 $ 0.32 $ 0.12 $ 0.33 $ 0.09 $ 0.24 $ 0.08
======= ======= ======= ======= ======= ======= ======= =======
Weighted average number of common
shares outstanding.............. 6,874 6,700 6,648 6,622 6,586 6,519 6,179 5,982
Weighted average number of common
shares outstanding assuming
dilution........................ 7,207 7,309 7,281 7,260 7,222 7,115 6,179 6,567
Weighted average number of common
shares outstanding assuming
dilution and exclusive of
acquired R&D write-off.......... 7,207 7,309 7,281 7,260 7,222 7,115 6,783 6,567
</TABLE>
- ---------------
Note: Share data has been restated to conform with the provisions of FASB
Statement 128.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations decreased from $8.8 million in fiscal 1998 to
$5.5 million in fiscal 1999. In all periods presented, cash provided by
operating activities was due to earnings plus non-cash items including acquired
research and development write-offs, increases in deferred revenue, accounts
payable and accrued expenses, offset by an increase in trade accounts
receivable. Trade accounts receivable days sales outstanding were 110 days at
June 30, 1999 in comparison to 97 days and 95 days at June 30, 1998 and 1997,
respectively. For all three years presented, cash provided by operations was
used primarily to fund software development costs and to purchase computer
equipment. In fiscal 1998, the Company received $2.0 million cash from Mitsui &
Co., Ltd. in exchange for a 13.3% minority equity interest in the Symix Asia
distribution operation. Cash at June 30,
20
<PAGE> 21
1999 decreased to $5.2 million from $6.1 million at June 30, 1998, and increased
from $2.3 million at June 30, 1997.
Working capital was $21.9 million at June 30, 1999 compared to $13.6
million at June 30, 1998 and $7.9 million at June 30, 1997. The increase in
working capital in fiscal 1999 and 1998 is primarily attributable to the
increase in trade accounts receivable resulting from revenue growth and increase
in days sales outstanding. For both fiscal 1999 and fiscal 1998, 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 a $15.0 million
unsecured revolving bank line of credit that expires in fiscal 2001. As of June
30, 1999, $5.4 million was drawn under the line of credit to fund the Company's
working capital needs. The Company anticipates that cash on hand, cash flow from
operations, and the bank line of credit will be sufficient to satisfy expected
cash needs for the next 12 months.
YEAR 2000 COMPLIANCE
The Company faces "Year 2000 compliance" issues similar to those faced by
other companies in the information technology industry. Year 2000 compliance
issues typically arise with respect to computer software systems and programs
that use only two digits, rather than four digits, to represent a particular
year. Consequently, these systems and programs may not process dates beyond the
year 1999 and may result in miscalculations or system failures. Year 2000
compliance problems also may arise in embedded systems, such as environmental
system controls, elevators and other products that use microprocessors or
computer chips.
The Company's current product and service offerings, including those
products developed and supported by third party software vendors, have been
designed to be Year 2000 compliant. New products also are being designed by the
Company to be Year 2000 compliant. The Company's existing contracts with active
customers (e.g., customers with effective maintenance and support agreements
with the Company) cover recent software products that are Year 2000 compliant or
for which a Year 2000 ready upgrade is available, or do not expressly obligate
the Company to furnish an updated release that is Year 2000 compliant. The
Company has communicated with its customers regarding Year 2000 compliance,
notifying them of the availability of upgraded or new releases of the Company's
products which are Year 2000 compliant for certain older software products
released by the Company which still may be in use by them. In certain cases, the
Company has warranted that the Company's current software product offerings are
Year 2000 ready when specifically requested by the customer. Although the
software products currently offered by the Company have been tested for Year
2000 readiness, any failure of the Company's software products to perform,
including the failure to process dates beyond the year 1999, could have a
material adverse effect on the Company's business, operating results or
financial condition.
The Company has substantially completed its assessment of selected third
parties, including key suppliers, subcontractors, business partners and
customers regarding their year 2000 readiness. To the extent that the Company
uses third party products or technology in its computer software products, the
Company has obtained confirmation of Year 2000 compliance from such third party
providers. A failure of one or more of such suppliers, subcontractors, business
partners, or customers of the Company to sufficiently address their Year 2000
compliance issues could adversely affect the Company's business, operating
results or financial condition.
The Company also has substantially completed its review of its internal
computer information system and non-computer systems, such as telecommunications
equipment, building elevators, etc., which contain embedded computer technology,
to determine whether such systems are Year 2000 compliant. Most of the embedded
systems on which the Company relies in its daily operations are owned and
managed by the lessors of the facilities in which the Company's operations are
located, or by agents of such lessors. The Company presently believes that such
systems are Year 2000 compliant. The Company is less certain of the Year 2000
readiness of third parties who provide external services, such as public
utilities, which could adversely impact the Company's operations. For example,
the failure or interruption of electrical services would disrupt the Company's
ability to communicate with its customers, suppliers, business partners and
others.
All costs related to Year 2000 issues are being expensed by the Company.
The Company does not expect that the total costs of evaluation and compliance
relating to the Company's Year 2000 issues will be material.
21
<PAGE> 22
The Company's statements regarding its year 2000 readiness are
forward-looking statements and, therefore, are subject to change as a result of
known and unknown factors. The Company's estimate of year 2000 related costs and
assessment of its year 2000 readiness are dependent upon the Company's ability
to successfully identify all relevant year 2000 issues, the nature and amount of
remediation required, and the year 2000 success attained by its key third party
providers and customers. Although these and other unforeseen factors could have
a material adverse effect on the Company's business, operating results or
financial condition, management believes that it has implemented an effective
year 2000 compliance program.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
CERTAIN STATEMENTS CONTAINED IN THIS ANNUAL REPORT ON FORM 10-K AND OTHER
WRITTEN AND ORAL STATEMENTS MADE FROM TIME TO TIME BY THE COMPANY ARE
"FORWARD-LOOKING" STATEMENTS, INCLUDING STATEMENTS REGARDING FUTURE ECONOMIC
PERFORMANCE OF THE COMPANY AND THE PLANS, OBJECTIVES AND EXPECTATIONS OF THE
COMPANY'S MANAGEMENT. THE WORDS "EXPECT," "ANTICIPATE," "INTEND," "PLAN,"
"BELIEVE," "ESTIMATE," AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS PROVIDE CURRENT EXPECTATIONS AND FORECASTS OF
FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, KNOWN AND
UNKNOWN, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
REFLECTED IN THE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT
THE PLANS, OBJECTIVES AND EXPECTATIONS REFLECTED IN OR SUGGESTED BY THE
FORWARD-LOOKING STATEMENTS ARE BASED UPON REASONABLE ASSUMPTIONS, NO ASSURANCE
CAN BE GIVEN THAT SUCH PLANS, OBJECTIVES OR EXPECTATIONS WILL BE ACHIEVED. IN
SOME CASES, INFORMATION REGARDING CERTAIN IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM A FORWARD-LOOKING STATEMENT APPEAR
TOGETHER WITH SUCH STATEMENT. OTHER UNCERTAINTIES AND RISKS INCLUDE, BUT ARE NOT
LIMITED TO, THE DEMAND FOR AND MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS AND
SERVICES; THE IMPACT OF COMPETITIVE PRODUCTS; THE COMPANY'S ABILITY TO MAINTAIN
EFFICIENT MARKETING AND DISTRIBUTION OPERATIONS DOMESTICALLY AND
INTERNATIONALLY; FUTURE WORLDWIDE POLITICAL, ECONOMIC, COMPETITIVE AND MARKET
CONDITIONS; THE COMPANY'S ABILITY TO ATTRACT AND RETAIN HIGHLY SKILLED
TECHNICAL, MANAGERIAL, SALES, MARKETING, SERVICE AND SUPPORT STAFF AND TO RETAIN
KEY TECHNICAL AND MANAGEMENT PERSONNEL; TIMING OF PRODUCT DEVELOPMENT AND
GENERAL RELEASE; EXCHANGE RATE FLUCTUATIONS, THE COMPANY'S ABILITY TO PROTECT IS
PROPRIETARY TECHNOLOGY; RISKS GENERALLY ASSOCIATED WITH NEW PRODUCT
INTRODUCTION; THE COMPANY'S ABILITY TO SUCCESSFULLY RESOLVE ANY REMAINING YEAR
2000 ISSUES; PRODUCT PRICING; AND OTHER FACTORS DETAILED IN THIS ANNUAL REPORT
ON FORM 10-K AND IN OTHER FILINGS MADE BY THE COMPANY WITH THE SECURITIES AND
EXCHANGE COMMISSION. IT IS NOT POSSIBLE TO IDENTIFY OR FORESEE ALL SUCH RISKS OR
UNCERTAINTIES. CONSEQUENTLY, THE FOREGOING SHOULD NOT BE CONSIDERED AN
EXHAUSTIVE STATEMENT OF ALL RISKS, UNCERTAINTIES OR POTENTIALLY INACCURATE
ASSUMPTIONS RELATING TO SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY IS NOT
OBLIGATED TO UPDATE OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT NEW
EVENTS OR CIRCUMSTANCES.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
FOREIGN EXCHANGE
Symix's revenue originating outside the United States was 22% and 21% of
total revenues in fiscal 1999 and fiscal 1998, respectively. In fiscal 1999
international revenues from each geographic region were: Europe 13% of total
revenues and Asia Pacific 9% of total revenues. In fiscal 1998 the respective
percentages were 12% and 9%. International sales are made mostly from the
Company's foreign sales subsidiaries in the local countries and are typically
denominated in the local currency of each country. These subsidiaries also incur
most of their expenses in the local currency. Accordingly, all foreign
subsidiaries use the local currency as their functional currency.
The Company's international business is subject to risks typical of an
international business, including, but not limited to:
- differing economic conditions;
- changes in political climate;
- differing tax structures;
22
<PAGE> 23
- other regulations and restrictions; and
- foreign exchange rate volatility.
Accordingly, the Company's future results could be materially adversely impacted
by changes in these or other factors.
The Company's exposure to foreign exchange rate fluctuations arises in part
from intercompany accounts in which cost of software, including certain
development costs, incurred in the United States is charged to the Company's
foreign sales subsidiaries. These intercompany accounts are typically
denominated in the functional currency of the foreign subsidiary in order to
centralize foreign exchange risk with the parent company in the United States.
The Company is also exposed to foreign exchange rate fluctuations as the
financial results of foreign subsidiaries are translated into U.S. dollars in
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and adversely impact overall profitability.
To date the Company has not realized material fluctuations due to foreign
exchange rates. However, due to the growth of the international business,
management is reviewing a foreign exchange hedge program in order to minimize
this particular exposure.
INFLATION AND INTEREST RATES
The Company has not been significantly affected by inflation in recent
years and anticipates that it will not be significantly affected by inflation in
fiscal 2000. A material change in interest rates could have an impact on the
Company's financial results, as the Company is presently paying a variable
interest rate on its outstanding debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Auditors.............................. 26
Consolidated Statements of Operations -- Years ended June
30, 1999, 1998, and 1997.................................. 27
Consolidated Balance Sheets -- June 30, 1999 and 1998....... 28
Consolidated Statements of Cash Flows -- Years ended June
30, 1999, 1998, and 1997.................................. 29
Consolidated Statements of Shareholders' Equity -- Years
ended June 30, 1999, 1998, and 1997....................... 30
Notes to Consolidated Financial Statements -- June 30,
1999...................................................... 31
Financial statement schedule:
Schedule II -- Valuation and Qualifying Accounts............ 40
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
23
<PAGE> 24
PART III
In accordance with general instruction G(3), the information required by
Items 10, 11, 12 and 13 is hereby incorporated herein by reference from the
Company's definitive proxy statement for its annual meeting of shareholders to
be held on November 17, 1999, which is expected to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A of the Securities Exchange
Act of 1934 within 120 days after the end of the Company's fiscal year covered
by this report, except that certain information required by Item 10 with respect
to executive officers of the Company is set forth in Part I hereof under "Item
1. Business--Executive Officers of the Registrant".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents Filed as Part of This Report:
<TABLE>
<S> <C>
1 Financial Statements
See Item 8.--Index to Financial Statements and Financial
Statement Schedules
2 Financial Statement Schedules
See Item 8.--Index to Financial Statements and Financial
Statement Schedules
3 Exhibits:
See Exhibit Index in this Report.
</TABLE>
(b) Reports on Form 8-K:
None.
24
<PAGE> 25
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 20th day of
September, 1999.
SYMIX SYSTEMS, INC.
By /s/ Lawrence W. DeLeon
----------------------------------
Lawrence W. DeLeon
Vice President, Chief Financial
Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 20th day of September, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Lawrence J. Fox* Chairman of the Board and Director
- ------------------------------------------------
Lawrence J. Fox
Stephen A. Sasser* President, Chief Executive Officer and Director
- ------------------------------------------------
Stephen A. Sasser
/s/ Lawrence W. DeLeon Vice President, Chief Financial Officer and
- ------------------------------------------------ Secretary
Lawrence W. DeLeon
John T. Tait* Director
- ------------------------------------------------
John T. Tait
Duke W. Thomas* Director
- ------------------------------------------------
Duke W. Thomas
Director
- ------------------------------------------------
Larry L. Liebert
James A. Rutherford* Director
- ------------------------------------------------
James A. Rutherford
* By Power of Attorney
/s/ Lawrence W. DeLeon
- ------------------------------------------------
Lawrence W. DeLeon (Attorney-in-Fact)
</TABLE>
25
<PAGE> 26
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Symix Systems, Inc.
We have audited the accompanying consolidated balance sheets of Symix
Systems, Inc. and Subsidiaries as of June 30, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended June 30, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 8. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Symix Systems,
Inc. and Subsidiaries at June 30, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1999, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth herein.
/s/ Ernst & Young LLP
Columbus, Ohio
July 26, 1999
26
<PAGE> 27
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenue:
License fees................................................ $67,423 $58,498 $36,477
Service, maintenance and support............................ 61,649 39,099 29,295
------- ------- -------
Net revenue............................................... 129,072 97,597 65,772
Cost of revenue:
License fees................................................ 18,317 14,746 9,721
Service, maintenance and support............................ 33,708 20,955 13,969
------- ------- -------
Cost of revenue........................................... 52,025 35,701 23,690
------- ------- -------
Gross margin.............................................. 77,047 61,896 42,082
Selling, general and administrative......................... 58,941 45,474 31,351
Research and product development............................ 10,217 7,901 5,659
Acquisition research and development write-off.............. 835 6,503 --
------- ------- -------
Total operating expenses.......................... 69,993 59,878 37,010
------- ------- -------
Operating income.......................................... 7,054 2,018 5,072
Other income (expense), net................................. 151 (178) 107
------- ------- -------
Income before income taxes................................ 7,205 1,840 5,179
Provision for income taxes -- Note F........................ 3,206 3,196 1,916
------- ------- -------
Net income (loss)......................................... $ 3,999 ($1,356) $ 3,263
======= ======= =======
Basic EPS:
Net income (loss) per share............................... $ 0.60 ($ 0.21) $ 0.57
======= ======= =======
Diluted EPS:
Net income (loss) per share............................... $ 0.55 ($ 0.21) $ 0.54
======= ======= =======
Weighted average number of common shares outstanding........ 6,711 6,317 5,753
Weighted average number of common shares outstanding
assuming dilution......................................... 7,264 6,317 6,079
</TABLE>
See notes to consolidated financial statements
27
<PAGE> 28
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
-------- --------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,236 $ 6,115
Trade accounts receivable, less allowance for doubtful
accounts of $1,500 at June 30, 1999 and $1,063 at June
30, 1998............................................... 46,251 32,925
Inventories............................................... 767 489
Prepaid expenses.......................................... 2,518 1,346
Other receivables......................................... 1,346 427
Deferred income taxes -- Note F........................... 811 573
------- -------
Total current assets.............................. 56,929 41,875
Other assets:
Capitalized software, net of accumulated amortization of
$10,833 at June 30, 1999 and $8,164 at June 30,
1998................................................... 16,250 11,012
Deferred income taxes -- Note F........................... -- 180
Intangibles, net.......................................... 7,191 5,091
Deposits and other assets................................. 2,033 1,725
------- -------
25,474 18,008
Equipment and improvements:
Furniture and fixtures.................................... 3,101 2,880
Computer and other equipment.............................. 15,767 11,573
Leasehold improvements.................................... 1,472 1,262
------- -------
20,340 15,715
Less allowance for depreciation and amortization.......... 12,143 9,216
------- -------
8,197 6,499
------- -------
Total assets...................................... $90,600 $66,382
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses-Note G.............. $16,052 $13,276
Customer deposits......................................... 148 288
Deferred revenue.......................................... 17,209 13,155
Income taxes payable...................................... 470 1,304
Current portion of long term obligations-Note I........... 1,124 277
------- -------
Total current liabilities......................... 35,003 28,300
Long-term obligations -- Note I............................. 392 305
Bank credit agreement -- Note E............................. 5,367 2,000
Deferred income taxes -- Note F............................. 5,417 2,476
Minority interest -- Note K................................. 2,020 2,000
Shareholders' equity -- Note C
Common stock, authorized 20,000 shares; issued 7,654
shares at June 30, 1999, and 6,778 at June 30, 1998; at
stated capital amounts of $.01 per share............... 76 68
Convertible preferred stock of subsidiary-Note H.......... -- 1,031
Capital in excess of stated value......................... 32,363 23,937
Retained earnings......................................... 13,496 9,497
Accumulated other comprehensive loss...................... (2,214) (1,912)
------- -------
43,721 32,621
Less: Common stock in treasury:
304 shares, at cost....................................... (1,320) (1,320)
------- -------
Total shareholders' equity........................ 42,401 31,301
------- -------
Total liabilities and shareholders' equity........ $90,600 $66,382
======= =======
</TABLE>
See notes to consolidated financial statements
28
<PAGE> 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1999 1998 1997
-------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in cash
Operating activities:
Net income (loss)........................................... $ 3,999 ($ 1,356) $3,263
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Acquisition research and development write-off............ 835 6,503 --
Depreciation and amortization............................. 8,510 6,220 4,593
Provision for losses on accounts receivable............... 437 353 261
Provision for deferred income taxes....................... 362 572 1,417
Changes in operating assets and liabilities:
Trade accounts receivable............................ (11,829) (11,942) (9,151)
Prepaid expenses and other receivables............... (1,344) (181) (474)
Inventory............................................ (277) (133) (45)
Deposits and other assets............................ (343) (1,084) (611)
Accounts payable and accrued expenses................ 1,688 5,285 157
Customer deposits.................................... (153) (14) 57
Deferred revenue..................................... 3,996 2,831 3,216
Income taxes payable/refundable...................... (407) 1,721 (165)
-------- -------- ------
Net cash provided by operating activities............ 5,474 8,775 2,518
-------- -------- ------
Investing activities:
Purchase of equipment and improvements...................... (3,624) (3,273) (2,649)
Additions to purchased and developed software............... (4,871) (4,667) (3,637)
Purchase of subsidiaries, net of cash acquired.............. (1,069) (699) (1,191)
-------- -------- ------
Net cash used by investing activities................ (9,564) (8,639) (7,477)
-------- -------- ------
Financing activities:
Proceeds from issuance of common stock and exercise of
stock options.......................................... 1,004 815 806
Additions to long-term obligations, net of payments......... 2,204 1,152 (151)
Additions to paid in capital................................ -- 2,000 --
-------- -------- ------
Net cash provided by financing activities............ 3,208 3,967 655
-------- -------- ------
Effect of exchange rate changes on cash..................... 3 (320) (138)
Net increase (decrease) in cash............................. (879) 3,783 (4,442)
Cash at beginning of period................................. 6,115 2,332 6,774
-------- -------- ------
Cash at end of period....................................... $ 5,236 $ 6,115 $2,332
-------- -------- ------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................... $ 320 $ 374 $ 8
Income taxes (net of refunds).......................... 2,381 78 639
-------- -------- ------
</TABLE>
See notes to consolidated financial statements
29
<PAGE> 30
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
COMMON STOCK PREFERRED STOCK ACCUMULATED OTHER
--------------- --------------- CAPITAL IN EXCESS OF RETAINED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT STATED VALUE EARNINGS INCOME
------ ------ ------ ------ -------------------- -------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30,
1996..................... 5,826 $58 $10,985 $ 7,590 $ (211)
Issuance of shares on
exercise of stock
options.................. 182 2 662
Tax benefit on stock
options exercised........ 322
Issuance of convertible
preferred shares of
subsidiary............... 250 $2,062
Exercise of convertible
preferred shares......... 125 1 (125) (1,031) 1,030
Issuance of shares for
employee stock purchase
plan..................... 27 1 142
Compensatory portion of
stock options granted.... 150
Net income................. 3,263
Foreign currency
translation
adjustments.............. (345)
Comprehensive income.......
----- --- ---- ------ ------- ------- -------
Balances at June 30,
1997..................... 6,160 62 125 1,031 13,291 10,853 (556)
Issuance of shares on
exercise of stock
options.................. 97 1 617
Tax benefit on stock
options exercised........ 459
Issuance of shares for
employee stock purchase
plan..................... 36 257
Compensatory portion of
stock options granted.... 150
Issuance of shares and
options related to
acquisition.............. 485 5 9,163
Net loss................... (1,356)
Foreign currency
translation
adjustments.............. (1,356)
Comprehensive loss.........
----- --- ---- ------ ------- ------- -------
Balances at June 30,
1998..................... 6,778 68 125 1,031 23,937 9,497 (1,912)
Issuance of shares on
exercise of stock
options.................. 75 1 516
Tax benefit on stock
options exercised........ 330
Exercise of convertible
preferred shares......... 144 1 (125) (1,031) 1,341
Issuance of shares for
employee stock purchase
plan..................... 38 533
Compensatory portion of
stock options granted.... 140
Issuance of shares related
to acquisition........... 619 6 5,566
Net income 3,999
Foreign currency
translation
adjustments.............. (302)
Comprehensive income.......
----- --- ---- ------ ------- ------- -------
Balances at June 30,
1999..................... 7,654 $76 -- -- $32,363 $13,496 ($2,214)
<CAPTION>
TOTAL
TREASURY SHAREHOLDERS'
STOCK EQUITY
-------- -------------
(IN THOUSANDS)
<S> <C> <C>
Balances at June 30,
1996..................... $(1,320) $17,102
Issuance of shares on
exercise of stock
options.................. 664
Tax benefit on stock
options exercised........ 322
Issuance of convertible
preferred shares of
subsidiary............... 2,062
Exercise of convertible
preferred shares......... --
Issuance of shares for
employee stock purchase
plan..................... 143
Compensatory portion of
stock options granted.... 150
Net income................. 3,263
Foreign currency
translation
adjustments.............. (345)
-------
Comprehensive income....... 2,918
------- -------
Balances at June 30,
1997..................... (1,320) 23,361
Issuance of shares on
exercise of stock
options.................. 618
Tax benefit on stock
options exercised........ 459
Issuance of shares for
employee stock purchase
plan..................... 257
Compensatory portion of
stock options granted.... 150
Issuance of shares and
options related to
acquisition.............. 9,168
Net loss................... (1,356)
Foreign currency
translation
adjustments.............. (1,356)
-------
Comprehensive loss......... (2,712)
------- -------
Balances at June 30,
1998..................... (1,320) 31,301
Issuance of shares on
exercise of stock
options.................. 517
Tax benefit on stock
options exercised........ 330
Exercise of convertible
preferred shares......... 311
Issuance of shares for
employee stock purchase
plan..................... 533
Compensatory portion of
stock options granted.... 140
Issuance of shares related
to acquisition........... 5,572
Net income 3,999
Foreign currency
translation
adjustments.............. (302)
-------
Comprehensive income....... 3,697
------- -------
Balances at June 30,
1999..................... ($1,320) $42,401
</TABLE>
30
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying financial statements include
the accounts of Symix Systems, Inc., and its wholly owned subsidiaries after
elimination of intercompany accounts and transactions.
Organization: Symix Systems, Inc. designs, develops, markets and supports
integrated manufacturing, supply claim management, financial and e-commerce
software solutions for mid-market, discrete manufacturers and business units of
larger companies. The Company today sells two core enterprise software
application products: StyeLine, a manufacturing enterprise product targeting
make-to-order discrete manufacturers; and SyteCentre, a supply chain management
product targeting light manufacturers with heavy distribution requirements.
Founded in 1979, Symix is headquartered in Columbus, Ohio, employing more than
835 people, with direct sales and support offices in the Americas, Europe, and
Asia Pacific.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Revenue Recognition: In October 1997, the American Institute of Certified
Public Accountants ("AICPA") issued SOP 97-2, "Software Revenue Recognition,"
which provides guidance on recognizing revenue on software transactions and
supersedes SOP 91-1. Further guidance was published during 1998 in SOP 98-4,
"Software Revenue Recognition" and SOP 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions." The Company adopted
the provisions of SOP 97-2 effective July 1, 1998.
Revenue is derived principally from the sale of internally produced
software products and maintenance and support agreements from software sales.
The Company licenses software generally under non-cancelable license agreements
and provides product support services and periodic updates including training,
installation, consulting and maintenance. License fee revenues are generally
recognized when a non-cancelable license agreement has been signed, the software
product has been shipped, there are no uncertainties surrounding product
acceptance, the fees are fixed and determinable, and collection is considered
probable. For customer license agreements, which meet these recognition
criteria, the portion of the fees related to software licenses will generally be
recognized in the current period, while the portion of the fees related to
services is recognized as the services are performed. Revenue from maintenance
and support agreements is billed periodically, deferred, and recognized ratably
over the life of the agreements. Revenue from consulting, education, and other
services is recognized as the services are provided.
The Company establishes allowances to provide for uncollectible trade
receivables and anticipated adjustments to amounts previously billed.
Capitalized Software: Capitalized software is stated at the lower of cost
or net realizable value. The Company capitalizes the cost of purchased software
and the qualifying internal cost of developing its software products in
accordance with Statement of Financial Accounting Standards No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed."
Capitalized software costs are amortized by the straight-line method using
estimated useful lives of three to five years. Amortization expense was
$3,437,000, $2,115,000, and $1,795,000 for the years ended June 30, 1999, 1998
and 1997, respectively.
Inventories: Inventories consist primarily of software-related products
that are held for resale. The Company values inventory at the lower of cost or
market. Cost is determined using the specific identification method.
Equipment and Improvements: Equipment and improvements are stated on the
basis of cost. Provisions for depreciation and amortization are computed by the
straight-line method over the estimated lives of the related assets.
Depreciation expense was $3,221,000, $2,434,000, and $1,952,000 for the years
ended June 30, 1999, 1998 and 1997, respectively.
Foreign Currency Translation: The Company has determined that the
functional currency of each foreign operation is the local currency. The effects
of translation rate changes related to assets and liabilities located
31
<PAGE> 32
outside the United States are included as a component of other comprehensive
income. Foreign currency transaction gains and losses are included in Other
Income, Net on the Consolidated Statements of Operations.
Income Taxes: The Company accounts for income taxes under the liability
method pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). Under the liability method, deferred
tax assets and liabilities are determined based on differences between the
financial reporting and tax basis of assets and liabilities using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse.
Earnings Per Share: The Company computes earnings per share in accordance
with the requirements of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128). Under SFAS 128, basic earnings per share
computations are based on the weighted-average number of common shares
outstanding during the period presented. Diluted earnings per share calculations
reflect the assumed exercise and conversion of employee stock options.
Comprehensive Income: The Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income" as of July 1,
1998. SFAS 130 requires disclosure of the components of total non-stockholder
changes in equity as comprehensive income. The Company's only items that meet
the definition for adjustment to arrive at comprehensive income are changes in
cumulative translation adjustments.
Stock-based Compensation: The Company accounts for stock compensation
arrangements in accordance with APB Opinion No. 25, "Accounting for Stock Issued
to Employees." The pro forma information regarding net income and earnings per
share as required by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) is disclosed in "Note
C -- Common Stock and Stock Options".
Preferred Stock: The Company's Articles of Incorporation authorize
1,000,000 shares of preferred stock, no par value. The Board of Directors is
authorized to determine the rights and preferences of these shares. Presently,
no preferred shares are issued and outstanding.
Cash and Cash Equivalents: The Company considers all demand deposits and
highly liquid investments with a maturity of three months or less as cash
equivalents.
Intangible Assets: Intangible assets consist principally of goodwill and
other intangible assets resulting from acquisitions accounted for using the
purchase method of accounting. The intangible assets are amortized using the
straight-line method over a period of three to ten years. The accumulated
amortization of intangible assets relating to acquired businesses was
$1,679,000, $1,479,000 and $608,000 at June 30, 1999, 1998 and 1997,
respectively.
Reclassification: Certain reclassifications have been made to prior year
amounts to conform to the 1999 presentation.
NOTE B -- LEASES
The Company has entered into certain operating lease agreements for the
rental of office facilities and computer equipment. The facility leases provide
for annual rentals which are subject to escalation for increased operating
costs.
Amounts expensed under all operating lease agreements were: $4,415,000,
$3,727,000, and $2,702,000 for the years ended June 30, 1999, 1998 and 1997,
respectively.
32
<PAGE> 33
The following is a schedule of future minimum lease payments required under
the capital and operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of June 30, 1999:
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEARS LEASE LEASE
------------ ------- ---------
(IN THOUSANDS)
<S> <C> <C>
2000.............................................. $160 $3,166
2001.............................................. 98 2,629
2002.............................................. 32 859
2003 -- 551
2004 and thereafter -- 552
---- ------
Total minimum payments...................................... $290 $7,757
======
Less amount representing interest........................... 27
----
Present value of future minimum lease payments.............. $263
====
</TABLE>
NOTE C -- COMMON STOCK AND STOCK OPTIONS
On July 8, 1996, shareholder approval was obtained to amend the Company's
Amended Articles of Incorporation to increase its authorized shares from
6,000,000 to 21,000,000 shares, of which 20,000,000 are common shares and
1,000,000 are preferred shares.
The Company has a non-qualified stock option plan ("the Plan") that
provides for the granting of options to officers and other key employees for
common shares at purchase prices of not less than the fair market value on the
date of the grant as determined by the Compensation Committee of the Board of
Directors. The maximum number of common shares which may be optioned under the
Plan was 2,653,070 as of June 30, 1999. Options under the Plan generally vest
over periods of up to four years and must be exercised within ten years of the
date of grant.
The Company also has a non-qualified stock option plan for Key Executives
("Key Executives Plan"). A total of 400,000 common shares are designated for
issuance under the Key Executives Plan. The Compensation Committee of the Board
of Directors is authorized to set the price and terms and conditions of the
options granted under the Key Executives Plan. Options under the Key Executives
Plan must be exercised within ten years of the date of the grant.
The Company also has a Stock Option Plan for Outside Directors ("Outside
Directors Plan"). The Outside Directors Plan provides for the issuance of
options for 20,000 shares of stock to each Outside Director upon his/her
election to the Board of Directors. A total of 200,000 common shares may be
issued under the Outside Directors Plan. Options under the Outside Directors
Plan vest immediately and must be exercised within ten years of the date of
grant.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company has accounted for its employee stock options granted subsequent
to December 31, 1994 under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1999,
1998 and 1997: risk-free interest rate of 6.0%, 6.50%, and 6.50%, respectively;
no dividend yield; volatility factor of the Company's common shares of 0.5, 0.4,
and 0.4, respectively; and a weighted-average expected life of each option of 6
years.
33
<PAGE> 34
If the Company had elected to recognize compensation cost based on the fair
value of options at the grant date (which includes shares issuable under the
Employee Stock Purchase Plan - see Note D) as prescribed by SFAS 123, the
following displays what reported net income (loss) and per share amounts would
have been:
<TABLE>
<CAPTION>
PRO FORMA YEAR ENDED JUNE 30,
------------------------------
1999 1998 1997
------- -------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss)........................................ $2,955 ($2,047) $2,848
Net income (loss) per share.............................. $ 0.41 ($ 0.32) $ 0.47
</TABLE>
The pro forma financial effects of applying SFAS 123 may not be
representative of the pro forma effects on reported results of operations for
future years.
Information with respect to options granted under the three Plans is as
follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER AVERAGE PRICE
OF SHARES PER SHARE
--------- -------------
<S> <C> <C>
Outstanding at June 30, 1996................................ 1,317,902 $4.72
Granted..................................................... 361,750 7.89
Cancelled................................................... (20,000) 5.42
Exercised................................................... (181,902) 3.44
Outstanding at June 30, 1997................................ 1,477,750 5.61
Granted..................................................... 256,630 15.29
Cancelled................................................... (18,638) 8.04
Exercised................................................... (96,207) 6.42
Outstanding at June 30, 1998................................ 1,619,535 7.17
Granted..................................................... 263,050 15.92
Cancelled................................................... (52,425) 11.81
Exercised................................................... (74,888) 6.90
Outstanding at June 30, 1999................................ 1,755,272 $8.26
</TABLE>
The price range of outstanding options is from $3.82 to $24.06. The
weighted-average fair value of options granted during the years ended June 30,
1999, 1998 and 1997 was $5.39, $4.63 and $2.78, respectively. The
weighted-average remaining contractual life of those options is 8 years. At June
30, 1999, options for 1,017,122 shares were exercisable, and 213,629 shares
remained available for grant.
NOTE D -- EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan that covers substantially all employees over
21 years of age. The Company contributes to the plan based upon employee
contributions and may make additional contributions at the discretion of the
Board of Directors. The Company made contributions to this plan of approximately
$608,000, $496,000, and $287,000 for the years ended June 30, 1999, 1998 and
1997, respectively.
The Company has an employee stock purchase plan that is in accordance with
Section 423 of the Internal Revenue Code whereby participants are eligible to
purchase common shares of the Company during the plan year. The purchase price
for a common share is determined by the Compensation Committee of the Board of
Directors prior to the effective date. The purchase price may not be less than
90% of the per share fair market value of the Company's common shares on either
the effective date or the option date for the offering, whichever is the lesser.
Substantially, all employees are eligible to participate.
NOTE E -- LINE OF CREDIT
In June, 1998 the Company negotiated with a bank a $15.0 million unsecured
revolving line of credit that expires in fiscal year 2001, convertible to a five
year term loan at any time on or before March 31, 2001. Borrowings on the line
of credit were $5,367,000 and $2,000,000 at June 30, 1999 and 1998,
respectively.
34
<PAGE> 35
NOTE F -- INCOME TAXES
SFAS 109 requires recognition of deferred tax liabilities and assets for
the expected future consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
For the years ended June 30, 1999, 1998 and 1997, domestic operations
contributed approximately $6.6 million, $2.3 million, and $525,000 to pre-tax
earnings, respectively, while foreign affiliates generated income (losses) of
$633,000, ($424,000), and $4.6 million for the same periods. Income taxes are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
1999 1998 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $1,927 $1,949 $ (336)
State and local........................................ 475 406 (80)
Foreign................................................ 582 356 1,919
------ ------ ------
2,984 2,711 1,503
Deferred:
Federal................................................ 131 412 444
State and local........................................ 43 73 68
Foreign................................................ 48 -- (99)
------ ------ ------
222 485 413
------ ------ ------
$3,206 $3,196 $1,916
------ ------ ------
</TABLE>
During the years ended June 30, 1999, 1998 and 1997, the Company recorded a
tax benefit of approximately $330,000, $459,000, and $322,000, respectively, in
connection with the exercise of stock options. The benefit, which was due to the
difference in the fair market value and the exercise price of the options at the
date of exercise, was recorded as an increase in capital in excess of stated
value.
35
<PAGE> 36
Significant components of the Company's deferred tax assets and liabilities
as of June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1999 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Current deferred tax asset:
Allowance for doubtful accounts........................... $ 666 $ 424
Customer deposits......................................... -- 51
Accrued liabilities....................................... 145 98
------- ------
Total current deferred tax assets................. $ 811 $ 573
Long-term deferred tax assets:
Book over tax depreciation................................ 435 353
Domestic losses........................................... 1,696 700
Foreign losses............................................ 226 180
Tax credits............................................... 311 --
Other..................................................... -- 168
------- ------
Total long-term deferred tax assets............... $ 2,668 $1,401
------- ------
Long-term deferred tax liabilities:
Capitalized software...................................... $ 5,683 $3,697
Intangibles............................................... 917 --
Capitalized leases........................................ 433 --
Accrued liabilities....................................... 1,052 --
------- ------
Total long-term deferred tax liabilities.......... $ 8,085 $3,697
------- ------
Net long-term deferred tax liabilities.................... $ 5,417 $2,296
------- ------
</TABLE>
The long-term deferred tax assets pertaining to foreign losses are net
operating loss carryforwards for certain foreign subsidiaries which the Company
believes will be utilized in future tax periods.
The Company's effective tax rate differs from the statutory U.S. federal
income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal income tax statutory rate........................... 34% 34% 34%
State and local income taxes net of federal tax benefit..... 4 3 --
Foreign operations taxed at rates different from U.S.
federal statutory rate.................................... 6 13 5
Other....................................................... -- -- (2)
Non-deductible acquisition research and development write
off....................................................... 4 134 --
General business credits.................................... (7) (14) --
Non-deductible permanent differences........................ 3 4 --
-- -- --
44% 174% 37%
-- -- --
</TABLE>
The Company has net operating losses for tax purposes of $490,000, $347,000,
$37,000, $752,000 and $2,600,000 which expire in fiscal years 2008, 2010, 2012,
2013 and 2018, respectively.
36
<PAGE> 37
NOTE G -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1999 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable............................................ $ 4,685 $ 3,699
Accrued commissions & bonus................................. 3,087 2,635
Third party royalties....................................... 3,265 3,752
Other....................................................... 5,015 3,190
-------- -------
$ 16,052 $13,276
======== =======
</TABLE>
NOTE H -- ACQUISITIONS
On July 1, 1996 the Company acquired the net assets of Synchrony
Manufacturing Systems, Pty. Limited, its former distributor in Australia, for
approximately $220,000 which was payable in twenty four equal installments over
two years, and was paid in full as of June 30, 1998. The acquisition was
accounted for using purchase accounting with results included since the date of
acquisition. Acquisition costs exceeded the fair value of the net assets
acquired by approximately $451,000, which is being amortized over five years.
On August 8, 1996 the Company acquired all of the outstanding stock of RDD,
the parent company of GSI Industrie ("GSI"), a French manufacturing software
specialist, from its shareholders for approximately $2.3 million, of which
$944,000 was paid in cash at closing. The remaining balance is payable (a) in
three equal annual installments beginning August 1997 and (b) a final payment of
$466,000, equal to a percentage of cumulative software sales, due on October 15,
1999 and recorded on June 30, 1999. The acquisition was accounted for using
purchase accounting with results included since the date of acquisition.
Acquisition costs exceeded the fair value of the net assets acquired by
approximately $2.4 million, which is being amortized over five years.
On January 9, 1997 the Company acquired an Ontario, Canada corporation
called Visual Applications Software, Inc. ("VAS") for $1.0 million (Canadian) in
cash, and 250,000 convertible Class A Preference Shares (the "Class A Shares")
and 500,000 redeemable Class B Preference Shares (the "Class B Shares") of a
subsidiary of the Company. The Class A Shares have been converted to common
shares of the Company and the Class B Shares have been redeemed by the holders
for $1.00 (Canadian) per share. The acquisition was accounted for using purchase
accounting with results included since the date of acquisition. Acquisition
costs exceeded the fair value of the net assets acquired by approximately $3.4
million which is being amortized over five years.
On November 24, 1997, the Company acquired Pritsker Corporation
("Pritsker"), for $737,000 in cash and 485,000 common shares of the Company.
Pritsker markets advanced planning and scheduling and simulation software to
mid-market manufacturers. 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 had exercised the option or
warrant immediately prior to the merger. 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.
On June 10, 1999 the Company acquired Distribution Architects
International, Inc. ("DAI") for 619,000 common shares of the Company and
$813,000 in cash. Pursuant to the acquisition agreement, DAI was merged with and
into a wholly-owned subsidiary of the Company incorporated in Ohio, and each
share of DAI common stock was converted into the right to receive .1313 common
shares of the Company. Each DAI option outstanding immediately prior to the
merger was canceled and terminated. The holder of each option was entitled to
receive
37
<PAGE> 38
that number of Symix shares equal to $2.17 (the per share value of DAI stock as
agreed to by DAI and Symix) less $1.242 (the stock option exercise price),
multiplied by the number of shares of DAI covered by the option, and divided by
$18.50. DAI is a provider of supply chain management applications for
distribution organizations. The transaction was accounted for as a purchase and
resulted in a one-time, non-recurring charge of $835,000 relating to the
write-off of acquired in-process technology of DAI.
The following proforma information shows revenue, net income and earnings
per share assuming the Company, Pritsker and DAI had been combined at the
beginning of the period indicated. The non-recurring charges of $6.5 million and
$835,000 are excluded from proforma net income.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED JUNE 30,
--------------------
1999 1998
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenue..................................................... $139,123 $112,217
Net Income.................................................. $ 3,266 $ 4,458
Earnings per share.......................................... $ 0.42 $ 0.58
</TABLE>
NOTE I -- LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------
1999 1998
------ ----
(IN THOUSANDS)
<S> <C> <C>
GSI acquisition note payable................................ $ 305 $582
ExperTeam GmbH acquisition note payable..................... 600 --
Mortgage loan payable....................................... 348 --
Present value of minimum capital lease payments............. 263 --
------ ----
1,516 582
Less current portion........................................ 1,124 277
------ ----
Long-term obligations....................................... $ 392 $305
====== ====
</TABLE>
The GSI acquisition note is secured by a letter of credit.
NOTE J -- EARNINGS PER SHARE
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS 128) during the fiscal year 1998.
In accordance with the provisions, earnings per share for 1997 have been
restated. The following table sets forth the computation of basic and diluted
earnings (loss) per share:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
1999 1998 1997
------ ------- ------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Net income (loss) for both basic and diluted earnings
(loss) per share....................................... $3,999 $(1,356) $3,263
Denominator:
Weighted-average shares outstanding....................... 6,654 6,192 5,682
Contingently issuable shares (VAS)........................ 57 125 71
Denominator for basic earnings (loss) per share........... 6,711 6,317 5,753
Effect of dilutive securities:
Employee stock options.................................... 553 n/a 326
Denominator for diluted earnings (loss) per share......... 7,264 6,317 6,079
Basic earnings (loss) per share........................... $ 0.60 $ (0.21) $ 0.57
Diluted earnings (loss) per share......................... $ 0.55 $ (0.21) $ 0.54
</TABLE>
38
<PAGE> 39
NOTE K -- MINORITY INTEREST
In June, 1998, a wholly-owned subsidiary of the Company sold previously
unissued shares of common stock (representing a 13.3% interest in that
subsidiary) for $2 million. No gain or loss was recognized on the sale of the
subsidiary stock. The proceeds from the sale are recorded on the accompanying
balance sheet as minority interest.
The Company and the minority interest investor also entered into a put
option agreement which provides that during a six month period commencing
September 1, 2001, the minority interest investor has the right to put its
shares in the subsidiary to the Company at a formula price as provided in the
put agreement. The minority interest in the subsidiary will be adjusted to its
expected redemption value each year as a credit or charge to income until the
put is exercised or the redemption period expires.
NOTE L -- BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). SFAS 131 establishes standards for the way that
companies report information about operating segments, geographic areas, and
major customers.
The Company designs, develops, markets and supports a fully integrated
manufacturing, planning and financial software system. The software was
developed for mid-market, discrete manufacturers. The Company operates
exclusively in this market therefore only reports on one primary segment.
The amount of net revenue, operating income (loss), and identifiable assets
attributable to each of the Company's geographic areas for fiscal 1999, 1998,
and 1997 were as follows:
<TABLE>
<CAPTION>
NORTH AMERICA ASIA/PACIFIC EUROPE
--------------- -------------- --------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1999
Net revenue............................ $100,950 78% $11,722 9% $16,400 13%
Operating income (loss)................ 7,728 110% 709 10% (1,383) (20%)
Identifiable assets.................... 70,920 78% 8,321 9% 11,359 13%
YEAR ENDED JUNE 30, 1998
Net revenue............................ 77,225 79% 8,665 9% 11,707 12%
Operating income (loss)................ 2,270 112% (694) (34%) 442 22%
Identifiable assets.................... 47,778 72% 9,392 14% 9,212 14%
YEAR ENDED JUNE 30, 1997
Net revenue............................ 49,388 75% 8,259 13% 8,125 12%
Operating income....................... 4,035 80% 410 8% 627 12%
Identifiable assets.................... 32,531 74% 5,766 13% 5,955 13%
</TABLE>
39
<PAGE> 40
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Year ended June 30, 1999
Deducted from asset accounts:
Allowance for doubtful accounts.......... $1,063,000 $1,270,000 $833,000 $1,500,000
---------- ---------- -------- ----------
Year ended June 30, 1998
Deducted from asset accounts:
Allowance for doubtful accounts.......... 702,000 918,000 557,000 1,063,000
---------- ---------- -------- ----------
Year ended June 30, 1997
Deducted from asset accounts:
Allowance for doubtful accounts.......... 450,400 560,500 308,900 702,000
---------- ---------- -------- ----------
</TABLE>
40
<PAGE> 41
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
3(a)(1) Amended Articles of Incorporation of Incorporated by reference to Exhibit
Symix Systems, Inc. (as filed on 3(a)(1) to Registrant's Annual Report on
February 8, 1991) Form 10-K for the fiscal year ended June
30, 1997
3(a)(2) Certificate of Amendment to the Incorporated by reference to
Amended Articles of Exhibit 3(a)(2) to Registrant's
Incorporation of Symix Annual Report on Form 10-K for
Systems, Inc. (as filed on July the fiscal year ended 30, 1997
16, 1996)
3(a)(3) Amended Articles of Incorporation of Incorporated herein by reference to
Symix Systems, Inc. (reflecting Exhibit 3(a)(3) to Registrant's Annual
amendments through July 16, 1996, for Report on Form 10-K for the fiscal year
purposes of SEC reporting compliance ended June 30, 1997
only)
3(b) Amended Regulations of Symix Systems, Incorporated herein by reference to
Inc. Exhibit 3(b) to the Registration
Statement on Form S-1 of Registrant,
filed February 12, 1991 (Registration No.
33-38878)
4(a)(1) Amended Articles of Incorporation of Incorporated herein by reference to
Symix Systems, Inc. (as filed on Exhibit 3(a) (1)of this Annual Report on
February 8, 1991) Form 10-K
4(a)(2) Certificate of Amendment to the Incorporated herein by reference to
Amended Articles of Incorporation Exhibit 3(a)(2) of this Annual Report on
of Symix Systems, Inc. (as filed on Form 10-K
July 16, 1996)
4(a)(3) Amended Articles of Incorporation of Incorporated herein by reference to
Symix Systems, Inc. (reflecting Exhibit 3(a)(3) of this Annual Report on
amendments through July 16, 1996, for Form 10-K
purposes of SEC reporting compliance
only)
4(b) Amended Regulations of Symix Systems, Incorporated herein by reference to
Inc. Exhibit 3(b) of this Annual Report
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C> <C>
on Form 10-K
4(c) Share Exchange Agreement Incorporated herein by reference to
dated January 9, 1997 Exhibit 99 to Registrant's Current Report
on Form 8-K dated January 9, 1997
10(a) Lease Agreement dated April 3, 1991 Incorporated herein by reference to
for corporate offices located at 2800 Exhibit 10(c) to Registrant's Annual
Corporate Exchange Drive, Columbus, Report on Form 10-K for the fiscal year
Ohio ended June 30, 1991
10(b) Amendment to corporate offices lease Incorporated herein by reference to
Exhibit 10(b) to Registrant's Annual
Report on Form 10-K for the fiscal year
ended June 30, 1998.
10(c) Second Amendment to corporate offices Incorporated herein by reference to
lease Exhibit 10(c) to Registrants' Annual Report
on Form 10-K for the fiscal year ended
June 30, 1998.
10(d) Third Amendment to corporate offices Incorporated herein by reference to
lease Exhibit 10(c) to Registrant's Annual
Report on Form 10-K for the fiscal year
ended June 30, 1994
10(e) Fourth Amendment to corporate offices Incorporated herein by reference to
lease Exhibit 10(e) to Registrants'
Annual Report on Form 10-K for
the fiscal year ended June 30, 1998.
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C> <C>
10(f) Fifth Amendment to corporate offices Incorporated herein by reference to
lease Exhibit 10(f) to Registrants' Annual
Report on Form 10-K for the fiscal
year ended June 30, 1998.
10(g) Progress Software Application Partner Incorporated herein by reference to
Agreement dated February 8, 1995 Exhibit 10(e) to Registrant's Quarterly
Report on Form 10-Q for fiscal quarter
ended March 31, 1995
10(h) Amendment to Progress Software Incorporated herein by reference to
Application Partner Agreement dated Exhibit 10(h) to Registrants' Annual
July 1, 1997 Report on Form 10-K for the fiscal year
ended June 30, 1998.
10(i) Second Amendment to Progress Software Incorporated herein by reference to
Application Partner Agreement dated Exhibit 10(i) to Registrants' Annual
July 1, 1998 Report on Form 10-K for the fiscal year
ended June 30, 1998.
10(j)* Summary of Bonus Plan Filed herein.
10(k)* Symix Systems, Inc. Stock Option Plan Incorporated herein by reference to
for Outside Directors Exhibit 10(i) of Registrant's Annual
Report on Form 10-K for fiscal year ended
June 30, 1993
10(l)* Symix Systems, Inc. Non-Qualified Incorporated herein by reference to
Stock Option Plan for Key Executives Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q for fiscal quarter
ended March 31, 1996
10(m)* Symix Systems, Inc. Non-Qualified Incorporated herein by reference to
Stock Option Plan for Key Employees, Exhibit 10(a) to Registrant's Annual
as amended Report on Form 10-K for the fiscal year
ended June 30, 1993
10(n)* Symix Systems, Inc. 1999 Non-Qualified Filed herein.
Stock Option Plan for Key Employees
</TABLE>
43
<PAGE> 44
<TABLE>
<S> <C> <C>
10(o)* Sasser Employment Agreement Incorporated herein by reference to
Exhibit 10(b) to Registrant's Quarterly
Report on Form 10-Q for fiscal quarter
ended March 31, 1996
10(p)* Amendment to Sasser Employment Filed herein
Agreement
10(q)* Second Amendment to Sasser Employment Filed herein
Agreement
10(r)* Stock Option Agreement between the Incorporated herein by reference to
Company and Stephen A. Sasser dated Exhibit 10(c) to Registrant's Quarterly
January 17, 1996 Report on Form 10-Q for fiscal quarter
ended March 31, 1996
10(s) Loan Agreement among Symix Systems, Incorporated herein by reference to
Inc., Symix Computer Systems, Inc. and Exhibit 10(a)(1) to Registrant's Form
Bank One, Columbus, N.A. dated May 20, 10-Q for fiscal quarter ended September
1996 30, 1997
10(t) First Amendment to Loan Agreement Incorporated herein by reference to
among Symix Systems, Inc., Symix Exhibit 10(b) to Registrant's Form 10-Q
Computer Systems, Inc. and Bank One, for fiscal quarter ended September 30,
Columbus, N.A. 1997
10(u) Second Amendment to Loan Agreement Incorporated herein by reference to
among Symix Systems, Inc., Symix Exhibit 10(b) to Registrant's Form 10-Q
Computer Systems, Inc. and Bank for fiscal quarter ended March 31, 1998.
One, NA
10(v) Third Amendment to Loan Agreement Incorporated herein by reference to
among Symix Systems, Inc., Symix Exhibit 10(u) to Registrant's Annual
Computer Systems, Inc. and Bank Report on Form 10-K for the fiscal year
One, NA ended June 30, 1998.
10(w) Fourth Amendment to Loan Agreement Filed herein
among Symix Systems, Inc., Symix
Computer Systems, Inc. and Bank
One, N.A.
10(x) Fifth Amendment to Loan Agreement Filed herein
among Symix Systems, Inc., Symix
</TABLE>
44
<PAGE> 45
<TABLE>
<S> <C> <C>
Computer Systems, Inc. and Bank
One, N.A.
21 Subsidiaries of the Registrant Filed herein
23 Consent of Independent Auditors Filed herein
24 Powers of Attorney Filed herein
27 Financial Data Schedule Filed herein
- ------------------
</TABLE>
*Indicates management contracts or compensatory plans or arrangements that are
required to be filed as an exhibit to this Annual Report on Form 10-K for the
fiscal year ended June 30, 1999.
45
<PAGE> 1
EXHIBIT 10(j) TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
---------------------------------------------------
SUMMARY OF BONUS PLAN
The executive officers named in the Symix Systems, Inc. ("Symix" or the
"Company") Annual Report on Form 10-K for its fiscal year ended June 30, 1999
and other management employees of Symix ("Participants") participate in
compensation plans based upon the performance of Symix. Annual target bonuses
are established by the Symix Compensation Committee for executive officers and
by executive officers for all other Participants. Total targeted compensation is
determined based on average compensation (base compensation plus bonus) levels
for the industry. Under the Company's fiscal year 2000 plan (the "Plan"), a
Participant can earn a bonus based upon the performance of Symix as reflected by
Symix's earnings per share and revenue achievements in relation to its targeted
performance. Bonuses for revenue achievement are paid quarterly based upon
year-to-date performance. Quarterly eligible components are pro-rated against
targeted annual objectives. Bonuses are based on formulas which provide larger
bonuses for higher earnings per share and/or revenue achievement. The annual
earnings per share must be at least ninety percent (90%) of target before any
bonuses are earned. Variable components of the compensation plan are
self-correcting to reflect over or under achievement on a quarterly basis. A
maximum of 200% of the targeted bonus based on earnings per share and revenue
objectives is payable under the compensation plans in the event actual
performance of the Company exceeds 150% of targeted performance. In addition,
individual bonus plans may contain other variable components related to
management objectives, operating margins, and market or geographic revenue
targets. The Company's Chief Executive Officer is not a participant in the Plan
and his compensation is covered by his Employment Agreement with the Company.
46
<PAGE> 1
EXHIBIT 10(n) TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
---------------------------------------------------
SYMIX SYSTEMS, INC.
1999
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES
ARTICLE ONE
PURPOSE
The purpose of this Symix Systems, Inc. 1999 Non-Qualified
Stock Option Plan (the "Plan") is to secure the benefits which accrue from a
program of offering to the Key Employees of Symix Systems, Inc. (the "Company")
and any Subsidiary the opportunity to acquire and increase their proprietary
interest in the success of the Company and thereby to attain the objectives of
this Plan which are:
(1) To obtain and retain the services of Participants;
(2) To encourage and reward efficient and profitable operation; and
(3) To promote the development of the business of the Company.
ARTICLE TWO
DEFINITIONS
For purposes of the Plan, the following terms when capitalized
shall have the meaning designated herein unless a different meaning is plainly
required by the context. Where applicable, the masculine pronoun shall mean or
include the feminine, and the singular shall include the plural.
(a) "Board of Directors" shall mean the Board of Directors of
the Company.
(b) "Committee" shall be the Committee of the Board of
Directors, whose membership shall be determined as provided under Article Four,
appointed to administer the Plan.
(c) "Common Shares" shall mean the common shares, no par
value, of the Company.
(d) "Company" shall mean Symix Systems, Inc.
(e) "Director" shall mean a member of the Board of Directors
of the Company.
47
<PAGE> 2
(f) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, or any successor statute.
(g) "Fair Market Value" on a particular day shall mean the
average of the highest and lowest prices of the Common Shares, as reported on
the NASDAQ National Market System on a particular day, or, if Common Shares were
not traded on such date, on the next preceding day on which Common Shares were
traded.
(h) "Key Employees" shall mean employees of the Company or a
Subsidiary who, in the opinion of the Committee, have demonstrated a capacity
for contributing in a substantial measure to the success of the Company.
(i) "Participant" shall mean a Key Employee selected by the
Committee to receive stock options under the Plan.
(j) "Plan" shall mean the Symix Systems, Inc. 1999
Non-Qualified Stock Option Plan as herein set forth.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(l) "Subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of the granting of any options under the Plan, each of the corporations
(other than the last corporation in the unbroken chain) owns stock possessing 50
percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
ARTICLE THREE
SHARES SUBJECT TO THE PLAN
Six Hundred Thousand (600,000) of the Company's authorized but
unissued Common Shares shall be reserved by the Board of Directors for the
purpose of granting options under the Plan to Key Employees, in each case at a
price of not less than one hundred percent of the Fair Market Value of such
Common Shares at the time of the granting of an option and upon such other terms
and conditions as the Committee might impose. In the event that options granted
under the Plan shall terminate, any Common Shares covered thereby and not
purchased thereunder may again be the subject of an option under the Plan.
ARTICLE FOUR
48
<PAGE> 3
ADMINISTRATION
The Plan shall be administered by a Committee appointed by the
Board of Directors. The Committee shall consist of two or more Directors, as the
Board of Directors may determine, provided each member of the Committee shall
qualify to administer the Plan as contemplated by Rule l6b-3 of the Exchange
Act. The Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed.
Subject to the express provisions of the Plan, the Committee may determine the
individuals to whom and the time or times at which options shall be granted, the
number of Common Shares to be subject to each option, the period of each option,
the vested rights of each Participant in his options (including the vesting
schedule and acceleration of exercise of such options) and other terms and
conditions thereof and shall report its determination to the Board of Directors.
The proper officers of the Company shall carry such determination into effect,
but no action of the Committee or of an officer of the Company shall bind or
become binding upon the Company or create any obligation of the Company
whatsoever unless and until the Company shall have entered into a written and
definitive contract with a proposed Participant in respect of an option for the
purchase of Common Shares and no such contract shall obligate the Company to any
person other than the Participant who is a party to such written contract and to
such persons, if any, as shall be expressly named or provided for in such
written contract. The Committee is authorized to construe and interpret the
Plan, to promulgate, amend and rescind rules and regulations relating to the
implementation of the Plan and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee may designate
persons other than members of the Committee to carry out its responsibilities
under such conditions and limitations as it may prescribe, except that the
Committee may not delegate its authority with regard to selection for,
participation of and the granting of options to persons subject to Section 16(a)
and 16(b) of the Exchange Act. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration,
or application of the Plan shall be final, conclusive and binding upon all
Participants and any person validly claiming under or through Participants.
ARTICLE FIVE
ELIGIBILITY
49
<PAGE> 4
Options may be granted only to those Key Employees as may from
time to time be designated by the Committee. Neither the provisions of the Plan
nor its adoption by the Board of Directors shall be deemed to give any person a
contractual or other right to receive an option under the Plan.
ARTICLE SIX
OPTION PRICE
The purchase price pursuant to which Common Shares may be
purchased under each option granted hereunder shall be fixed by the Committee,
but such purchase price shall in no event be less than one hundred percent
(100%) of the Fair Market Value of the Common Shares on the date on which the
option is granted.
ARTICLE SEVEN
TERM OF OPTION
The term of each option shall be fixed by the Committee, but
in no event shall any option permit the purchase of Common Shares thereunder
after the tenth (10th) anniversary of the date on which the option is granted.
ARTICLE EIGHT
EXERCISE OF OPTION
Subject to the provisions of the written option agreement
pursuant to which it is granted, an option may be exercised by giving to the
Company notice in writing (in such form as may from time to time be specified by
the Committee) stating the number of Common Shares subject to the option in
respect of which it is being exercised, accompanied by a check or cash in full
payment of all Common Shares in respect of which the option is being exercised.
Each such notice of exercise of an option shall be delivered to the Chief
Financial Officer of the Company. The Company shall have a reasonable time after
receipt of any such notice in which to make delivery of share certificates for
the Common Shares in respect of which an option is exercised.
ARTICLE NINE
TERMINATION OF SERVICE
50
<PAGE> 5
In case a Participant shall cease to be a Key Employee for any
reason, within ninety (90) days next succeeding such termination, but not later
than ten (10) years from the date of grant of the option, the Participant (or
the executor or administrator of his estate) may exercise such option rights as
he then has under this Plan. Options not exercised within the period set forth
in the preceding sentence shall thereupon expire and shall not be exercisable
thereafter.
ARTICLE TEN
NON-TRANSFERABILITY OF OPTION
No option granted under this Plan shall be transferable
otherwise than by will or the laws of descent and distribution and an option may
not be exercised during the lifetime of a Participant except by him or by his
guardian or legal representative.
ARTICLE ELEVEN
ADJUSTMENTS
In the event of any change in the outstanding Common Shares by
stock dividend, stock split, stock combination, reclassification,
recapitalization, merger, reorganization or other change in the Common Shares,
the Committee, upon the advice of accountants and counsel for the Company, shall
determine appropriate adjustments, if any, to be made in the number of Common
Shares and the prices per share in respect of Common Shares subject to
outstanding options and the number of Common Shares then reserved for options
which may thereafter be granted.
ARTICLE TWELVE
AMENDMENT AND TERMINATION OF THE PLAN
The Company, by action of the Board of Directors, reserves the
right to amend, modify or terminate this Plan at any time, except that the
Company may not, without shareholder approval, increase the total number of
Common Shares subject to options under this Plan (except increases attributable
to the adjustments authorized in Article Eleven hereof), materially increase the
benefits or materially modify the requirements as to eligibility.
ARTICLE THIRTEEN
RESTRICTIONS AND COMPLIANCE
WITH SECURITIES LAWS
51
<PAGE> 6
Anything contained in the Plan or elsewhere to the contrary
notwithstanding:
(l) No option granted under the Plan shall be exercisable for
the purchase of any Common Shares subject thereto except for:
(A) Common Shares subject thereto which at the time
of such exercise and purchase are registered under the Securities Act or which,
upon the completion of such exercise, would be issued in a transaction exempt
from registration under the Securities Act; and
(B) Common Shares subject thereto which at the time
of such exercise and purchase are exempt or are the subject matter of an exempt
transaction, are registered by description, by coordination, or by
qualification, or at such time are the subject matter of a transaction which has
been registered by description, all in accordance with Chapter 1707 of the Ohio
Revised Code, as amended; and
(C) Common Shares subject thereto in respect of
which the laws of any state applicable to such exercise and purchase have been
satisfied.
(2) If Common Shares subject to an option are sold and
transferred upon the exercise thereof to a person who (at the time of such
exercise or thereafter) controls, is controlled by or is under common control
with the Company, or are sold and transferred in reliance upon an exemption
claimed in respect of the securities Act, then upon such sale and transfer:
(A) such Common Shares shall not be transferable by
the holder thereof, and neither the Company nor its transfer agent or registrar,
if any, shall be required to register or otherwise to give effect to any
transfer thereof and may prevent any such transfer, unless the Company shall
have received an opinion from its counsel to the effect that any such transfer
would not violate the Securities Act and the applicable laws of any state; and
(B) the Company shall cause each share certificate
evidencing such Common Shares to bear a legend reflecting applicable
restrictions on the transfer thereof and may use the following or any other
appropriate legend for that purpose:
SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS, ARE
RESTRICTED SECURITIES WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER
THE ACT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE ENCUMBERED OR DISTRIBUTED EXCEPT PURSUANT TO (1) AN EFFECTIVE
REGISTRATION STATEMENT REGISTERING THE SHARES UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES LAWS, IF REQUIRED OR (2) UNTIL THE COMPANY
HAS RECEIVED AN OPINION FROM ITS COUNSEL TO THE EFFECT
52
<PAGE> 7
THAT SUCH TRANSFER DOES NOT VIOLATE THE ACT AND THE APPLICABLE
SECURITIES LAWS OF ANY STATE.
(3) Nothing contained in the Plan or elsewhere shall be
construed to require the Company to take any action whatsoever to make
exercisable any option granted under the Plan or to make transferable any Common
Shares issued upon the exercise of any such option.
ARTICLE FOURTEEN
TAX WITHHOLDING
Any person exercising an option shall be required to pay to
the Company the amount of any taxes the Company is required by law to withhold
with respect to the exercise of such option. Such payment shall be due on the
date the Company is required by law to withhold such taxes. In the event that
such payment is not made when due, the Company shall have the right to deduct,
to the extent permitted by law, from any payment of any kind (but only as
permitted by Rule l6b-3 of the Exchange Act for persons subject to Section 16 of
the Exchange Act) otherwise due to such person from the Company all or part of
the amount required to be withheld.
53
<PAGE> 1
EXHIBIT 10(p) TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
---------------------------------------------------
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made to be effective as of
the 1st day of April 1997, between Symix Systems, Inc., an Ohio corporation (the
"Company") and Stephen A. Sasser ("Employee").
WITNESSETH
WHEREAS, the Company and Employee are parties to an Employment
Agreement dated July 5, 1995 pursuant to which the Company engaged Employee to
serve as President and Chief Operating Officer of the Company (the "Employment
Agreement"); and
WHEREAS, the Company and Employee desire to modify the Employment
Agreement as set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. MODIFICATION OF COMPENSATION ARRANGEMENT. Subparagraphs 3(a) and
3(b) of the Employment Agreement are hereby amended to read in their entirety as
follows:
"(a) BASE SALARY. Employee shall receive an annual base salary
of not less than $242,000 (the "Base Salary") to be paid semi-monthly
in equal installments. The Base Salary shall be reviewed not less
frequently than annually and shall be subject to such upward
adjustments as the Compensation Committee (the "Compensation
Committee") of the Board of Directors of the Company (the "Board") may
deem appropriate in its discretion.
(b) INCENTIVE COMPENSATION. During the Term of this Agreement,
Employee shall be entitled to additional compensation pursuant to a
bonus plan to be approved by the Compensation Committee and to be
consistent with this paragraph 3(b). Employee's annual target bonus
will be as follows:
(i) $174,500, for the Company's fiscal year
ended June 30, 1997, of which 80% ($139,600) will be earned if
and to the extent the Company's earnings per share achieve
targets proposed by Employee and approved by the Compensation
Committee for such fiscal year and 20% ($34,900) will be
earned if and to the extent the Company achieves other
strategic objectives proposed by Employee and approved by the
Compensation Committee for such fiscal year; and
(ii) $158,000 during the remaining term of
this Agreement, of which 80% ($126,400) will be earned if and
to the extent the Company's earnings per share achieve targets
proposed annually by Employee and approved by the Compensation
Committee and 20% ($31,600) will be earned if and to the
extent the Company achieves other strategic objectives
proposed annually by Employee and approved by the Compensation
Committee."
54
<PAGE> 2
The foregoing provisions shall be substituted for and shall be deemed
to replace the language heretofore set forth in Subparagraphs 3(a) and
(b) of the Employment Agreement as if such substituted language had
been included in the originally-executed Employment Agreement, except
that such substituted provisions shall apply prospectively only from
the effective date hereof.
2. NO MODIFICATION OF OTHER PROVISIONS. Except as provided in Paragraph
1 hereinabove, the terms and provisions of the Employment Agreement
shall remain in full force and effect and shall apply to this Amendment
to Employment Agreement as if fully incorporated herein.
IN WITNESS WHEREOF, the parties have executed this Amendment
to Employment Agreement as of the date first hereinabove written.
SYMIX SYSTEMS, INC.
By /s/ Lawrence J. Fox
----------------------------
Lawrence J. Fox
Chairman and Chief Executive Officer
EMPLOYEE
/s/ Stephen A. Sasser
---------------------
Stephen A. Sasser
55
<PAGE> 1
EXHIBIT 10(q) TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
---------------------------------------------------
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
----------------------------------------
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT is made to be effective
as of the 15th day of December, 1998, between Symix Systems, Inc., an Ohio
corporation (the "Company") and Stephen A. Sasser ("Employee").
WITNESSETH
----------
WHEREAS, the Company and Employee are parties to an Employment
Agreement dated July 5, 1995 (the "Employment Agreement"), as amended by the
Amendment to the Employment Agreement dated April 1, 1997 between the Company
and Employee (the "First Amendment"), pursuant to which the Company has engaged
Employee to serve as President and Chief Operating Officer of the Company (the
Employment Agreement and the First Amendment being referred to herein
collectively as the "Agreement"); and
WHEREAS, THE ORIGINAL TERM OF THE AGREEMENT EXPIRES ON JULY 5, 1999
(THE "ORIGINAL TERM") AND
WHEREAS, the Company desires to induce Employee to continue his
employment as a senior officer of the Company, and Employee desires to continue
such employment, subject to the terms and conditions hereof; and
WHEREAS, the Company and Employee desire to further modify the
Employment Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. TERM. Notwithstanding anything else to the contrary contained in the
Agreement, the Term of the Agreement shall be extended for a period of three (3)
years, commencing upon expiration of the Original Term, unless sooner terminated
pursuant to paragraph 10 of the Agreement. Thereafter, unless sooner terminated
pursuant to paragraph 10 of the Agreement, the Term of the Agreement
automatically shall be extended for additional, consecutive one-year Terms
(each, an "Extended Term") unless, in accordance with paragraph 14 of the
Agreement, (i) at least one hundred and fifty (150) days prior to the expiration
of the extended three (3) year term provided for herein or any other Extended
Term, the Company gives notice to Employee that the Company does not wish to
extend the Term of this Agreement, or (ii) at least one hundred and twenty (120)
days prior to the expiration of the extended three (3) year term provided for
herein or any other Extended Term, Employee gives notice to the Company that
Employee does not wish to extend the Term of this Agreement. The Original Term
and the extended three (3) year term provided for herein, together with all
other Extended Terms, are referred to herein and in the Agreement as the "Term".
2. MODIFICATION OF COMPENSATION ARRANGEMENT. Subparagraphs 3(a) and
3(b) of the Employment Agreement are hereby amended to read in their entirety as
follows:
56
<PAGE> 2
"(a) BASE SALARY. Commencing on December 15, , 1998, Employee
shall receive an annual base salary of not less than $272,000 (the
"Base Salary") to be paid semi-monthly in equal installments. The Base
Salary shall be reviewed not less frequently than annually and shall be
subject to such upward adjustments as the Compensation Committee (the
"Compensation Committee") of the Board of Directors of the Company (the
"Board") may deem appropriate in its discretion.
(b) INCENTIVE COMPENSATION. Commencing on December 15, 1998,
Employee shall be entitled to additional compensation pursuant to a
bonus plan to be approved by the Compensation Committee and to be
consistent with this paragraph 3(b). Employee's annual target bonus for
each fiscal year of the Company will be $188,000, of which (i) 75%
($141,000) will be earned by Employee and payable by the Company if and
to the extent the Company's earnings per share achieve targets proposed
by Employee and approved by the Compensation Committee for such fiscal
year and (ii) 25% ($47,900) will be earned if and to the extent the
market price performance per share of the Company's common shares meets
or exceed the average market price performance of the stocks included
in the NASDAQ Computer and Data Processing Stock Market Index or other
strategic objective(s) approved by the Compensation Committee for such
fiscal year."
The foregoing provisions shall be substituted for and shall be deemed to replace
the language heretofore set forth in Subparagraphs 3(a) and (b) of the
Employment Agreement (including any amendment thereto) as if such substituted
language had been included in the originally-executed Employment Agreement,
except that such substituted provisions shall apply prospectively only from the
effective date hereof.
3. DUTIES. Employee is engaged to serve as President and Chief
Executive Officer of the Company and Employee promises to perform and discharge
well, faithfully and to the best of his abilities the duties ordinarily
performed by the president and/or chief executive officer of a company and such
other duties which may be assigned to him from time to time by the Board of
Directors of the Company. Employee shall serve as a director of the Company and
as an officer or director (or both) of any of its subsidiaries and affiliates if
elected as such. The provisions of this paragraph 3 shall be substituted for,
supersede and replace in their entirety the provisions of paragraph 4 of the
Employment Agreement.
4. NO MODIFICATION OF OTHER PROVISIONS. Except as provided in this
Second Amendment to Employment Agreement, the terms and provisions of the
Agreement shall remain in full force and effect and shall apply to this Second
Amendment to Employment Agreement as if fully written or incorporated herein.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment to Employment Agreement as of the date first written hereinabove.
SYMIX SYSTEMS, INC. EMPLOYEE
By /s/ Lawrence J. Fox /s/ Stephen A. Sasser
-------------------------------- -----------------------------------
Lawrence J. Fox Stephen A. Sasser
Chairman and Chief an individual
Executive Officer
57
<PAGE> 1
EXHIBIT 10(w) TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
---------------------------------------------------
FOURTH AMENDMENT TO LOAN AGREEMENT AMONG
SYMIX SYSTEMS, INC. AND SYMIX COMPUTER SYSTEMS, INC.
AND
BANK ONE, NA
THIS FOURTH AMENDMENT ("Fourth Amendment") is dated as of December 24,
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, Second Amendment dated as of March 4, 1998 and further amended
by Third Amendment dated as of June 1, 1998 (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 1.1.5, the words "daily average unused portion"
shall be deleted and the words "daily unused portion" shall be inserted in their
place.
1.2. In Section 8, the definition of "Debt Service Coverage
Ratio" shall be amended and restated in its entirety as follows:
"Debt Service Coverage Ratio" shall mean the ratio of (a)
net income after tax plus depreciation and amortization plus
interest expense plus $6,503,000 for the non-recurring
charge related to the acquisition and research and
development write-off appearing in the June 30, 1998
financial statements minus capitalized software minus
capital expenditures to (b) current maturities of long term
debt plus interest expense, all determined in accordance
with generally accepted accounting principles applied on a
consistent basis. The current maturities of long term debt
under the Revolving Credit Note shall be determined on a pro
forma basis assuming that the then-current principal balance
of the Revolving Credit Note would be amortized, on a
straight line basis, over 60 months.
1.3. Section 4.20 shall be amended and restated in its
entirety as follows:
4.20. PLEDGE OF INTERCOMPANY NOTE. The Companies
shall cause all the Non-Obligor Subsidiaries (except Symix
Computer Systems (Malaysia) Sdn Bhd.) to execute an
intercompany promissory note that evidences all borrowings
that such Non-Obligor Subsidiaries make from the Companies
of funds borrowed under the $13,000,000 Revolving
58
<PAGE> 2
Credit Note, and the Companies shall deliver such
intercompany promissory note to Bank One as security for
the amounts due hereunder and under the Revolving Credit
Notes.
1.4. Section 5.13 shall be amended and restated in its
entirety as follows:
5.13. FUNDING. The Companies shall not use the
proceeds of the Revolving Credit Notes to fund any
Non-Obligor Subsidiary acquisitions or non-operational
purposes or obligations other than operating cash flow of
such Non-Obligor Subsidiary. The Companies shall not (and
shall not permit any Subsidiary to) loan or otherwise
advance funds to Symix Computer Systems (Malaysia) Sdn Bhd.
in an amount to exceed $200,000 in the aggregate
outstanding at any time.
1.5. All references to Symix Italia S.p.A. shall be changed to
Symix Italia S.r.l.
SECTION 2. GOVERNING LAW. This Fourth 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 Fourth Amendment shall be paid by the Companies on
request.
SECTION 4. COUNTERPARTS. This Fourth 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 Fourth
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 Fourth Amendment or the party entitled to the benefits of
this Fourth 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 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. The Assignment of Intercompany Note, dated as of June 1,
1998.
6.2. 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,
59
<PAGE> 3
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 Fourth 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.
60
<PAGE> 4
The Companies have executed this Fifth Amendment as of the date first
above written.
SYMIX SYSTEMS, INC. SYMIX COMPUTER SYSTEMS, INC.
<TABLE>
<S> <C>
/s/ Lawrence W. DeLeon /s/ Lawrence W. DeLeon
- --------------------------------------------- -------------------------------------
Name: Lawrence W. DeLeon Name: Lawrence W. DeLeon
Its: Vice President, Chief Financial Officer Its: Vice President, Chief Financial
and Secretary Officer and Secretary
</TABLE>
- --------------------------------------------------------------------------------
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
/s/ Kimberly C. Currie
- ----------------------------------------
Name: Kimberly C. Currie
Its: Vice President
61
<PAGE> 1
EXHIBIT 10(x) TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
FIFTH AMENDMENT TO LOAN AGREEMENT AMONG
SYMIX SYSTEMS, INC. AND SYMIX COMPUTER SYSTEMS, INC.
AND
BANK ONE, NA
THIS FIFTH AMENDMENT (Fifth Amendment") is dated as of June 10, 1999,
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, Second Amendment dated as of March 4, 1998, Third Amendment
dated as of June 1, 1998 and further amended by Fourth Amendment dated as of
December 24, 1998 (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. Section 4.18 shall be amended and restated in its entirety
as follows:
4.18. ACCOUNTS RECEIVABLE REPORTING. SCSI will furnish to
Bank One as soon as practicable after the end of each
calendar month, and in any event within 20 days thereafter,
a summary Accounts aging report in a format acceptable to
Bank One and a Borrowing Base Certificate for such month.
From time to time, SCSI shall be required to deliver
detailed aging schedules, trial balances, test verifications
of Accounts and other reports reasonably requested by Bank
One.
1.2. Section 5.2 shall be amended and restated in its entirety
as follows:
5.2. FUNDING. Companies and Subsidiaries shall not create,
incur, assume or suffer to exist any Funded Debt or Current
Debt except (1) debt represented by the Notes, (2) other
indebtedness to Bank One, (3) purchase money debt for fixed
assets that shall not exceed an aggregate of Three Million
Dollars ($3,000,000), (4) unsecured indebtedness to trade
creditors arising out of the ordinary course of business and
(5) indebtedness incurred by Symix (U.K.) Ltd. pursuant to
an overdraft facility provided by Barclays Bank PLC in an
amount not to exceed (pound)100,000.
62
<PAGE> 2
1.3. Section 5.3 shall be amended and restated in its entirety
as follows:
5.3. GUARANTY OF OTHERS' DEBTS. Companies and Subsidiaries
shall not assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable upon the obligations of
any Person; PROVIDED, HOWEVER, that Companies may
guarantee, endorse or otherwise become liable upon the
obligations of Subsidiaries (1) to the extent Subsidiaries
have incurred debt permitted by Section 5.2(3) of this
Agreement, (2) to the extent Subsidiaries have entered into
leases of real property with annual payments not to exceed
$100,000 and (3) regarding indebtedness incurred by Symix
(U.K.) Ltd. pursuant to an overdraft facility provided by
Barclays Bank PLC in an amount not to exceed (pound)100,000
principal and (pound)20,000 interest and expenses.
1.4. The definition of "Guarantors" in Section 8 shall be
amended and restated in its entirety as follows:
"Guarantors" shall mean Pritsker Corporation, Distribution
Architects International, Inc. , Symix Computer Systems
(Canada), Inc., Symix (UK) Ltd., Symix Computer Systems
(UK) Ltd., Symix Systems B.V. and Symix Computer Systems
(Mexico) S. De R.L De C.V.
SECTION 2 GOVERNING LAW. This Fifth 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 Fifth Amendment shall be paid by the Companies on
request.
SECTION 4. COUNTERPARTS. This Fifth 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 Fifth 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 Fifth Amendment or the party entitled to the benefits of this
Fifth 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 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 Fifth Amendment 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 Fifth Amendment or the transactions contemplated hereby.
63
<PAGE> 3
6.2. Unconditional Continuing Guaranty of Dissolution
Architects International, Inc. 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.
6.3. 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; PROVIDED.
HOWEVER, THAT the Companies and the Bank agree that the acquisition of
Distribution Architects International, Inc., a Texas corporation that merged
with and into Distribution Architects International, Inc., an Ohio corporation,
on or about June 9, 1999 (the "DAI Acquisition"), exceeds the limits set forth
in Section 5.4 of the Agreement. The Bank consented to the DAI Acquisition and
waived the violation of Section 5.4 related to the DAI Acquisition by letter
dated June 7, 1999.
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 Fifth 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.
64
<PAGE> 4
The Companies have executed this Fifth Amendment as of the date first
above written.
SYMIX SYSTEMS, INC. SYMIX COMPUTER SYSTEMS, INC.
<TABLE>
<S> <C>
/s/ Lawrence W. DeLeon /s/ Lawrence W. DeLeon
- --------------------------------------------- ---------------------------------------------
Name: Lawrence W. DeLeon Name: Lawrence W. DeLeon
Its: Vice President, Chief Financial Officer Its: Vice President, Chief Financial
and Secretary Officer and Secretary
</TABLE>
- --------------------------------------------------------------------------------
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
/s/ Michael R. Zaksheske
- -------------------------------------
Name: Michael R. Zaksheske
Its: Vice President
65
<PAGE> 1
EXHIBIT 21 TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
------------------------------------------------
SUBSIDIARIES OF REGISTRANT
SUBSIDIARIES OF REGISTRANT
--------------------------
<TABLE>
<CAPTION>
NAME JURISDICTION % OWNERSHIP
<S> <C> <C>
Symix Computer Systems, Inc. Ohio 100
Symix Systems, B.V. The Netherlands 100
Symix France, SA France 100
Pritsker Corporation Ohio 100
Symix distribution.com, Inc. Ohio 100
e-Mongoose, Inc. Ohio 100
</TABLE>
SUBSIDIARIES OF SYMIX COMPUTER SYSTEMS, INC.
--------------------------------------------
<TABLE>
<S> <C> <C>
Symix Computer Systems Delaware, Inc. Delaware 100
Symix Systems (Ontario) Inc. Canada 100
Symix Computer Systems (Canada) Inc. Canada 100
Symix Computer Systems (UK) Ltd. The United Kingdom 100
Symix Computer Systems (Singapore) Pte. Ltd. Singapore 86.7
Symix Computer Systems (Mexico) S. De R.L. De C.V. Mexico 100
</TABLE>
SUBSIDIARIES OF SYMIX SYSTEMS, B.V.
-----------------------------------
<TABLE>
<S> <C> <C>
Symix (U.K.) Ltd. The United Kingdom 100
Symix Systems GmbH Germany 100
Symix Italia S.r.l. Italy 95*
- --------
</TABLE>
66
<PAGE> 2
*Remaining 5% owned by Symix Systems,
Inc.
SUBSIDIARIES OF SYMIX SYSTEMS (ONTARIO) INC.
--------------------------------------------
<TABLE>
<S> <C> <C>
Visual Applications Software, Inc. Canada 100
</TABLE>
SUBSIDIARIES OF SYMIX SYSTEMS (SINGAPORE) PTE. LTD.
---------------------------------------------------
<TABLE>
<S> <C> <C>
Symix Asia Company Ltd. Thailand 100
Symix Computer Systems (Hong Kong) Ltd. Hong Kong 100
Symix Computer Systems (Australia) Pty. Ltd. Australia 100
Symix New Zealand Ltd. New Zealand 100
Symix Computer Systems Malaysia 100
(Malaysia) Sdn Bhd.
</TABLE>
67
<PAGE> 1
EXHIBIT 23 TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-40546, No. 33-45416, No. 33-73014, No. 33-73016, No. 333-660,
No. 333-10631, No. 333-10633 and No. 333-43947, Forms S-3 No. 333-64677 and No.
333-71357 and Form S-4 No. 333-76567) of Symix Systems, Inc. of our report dated
July 26, 1999, with respect to the consolidated financial statements and the
financial statement schedule included in this Annual Report (Form 10-K) of Symix
Systems, Inc.
/s/Ernst & Young LLP
Columbus, Ohio
September 20, 1999
68
<PAGE> 1
EXHIBIT 24 TO SYMIX SYSTEMS, INC. 1999 FORM 10-K
------------------------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Symix Systems, Inc., an Ohio corporation which is about to file with
the Securities and Exchange Commission, under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal
year ended June 30, 1999, hereby constitutes and appoints Stephen A. Sasser and
Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead in any and all capacities, to sign such Annual Report on
Form 10-K, and to file the same with all exhibits and financial statements and
schedules thereto, and other documents in connection therewith, including any
amendment thereto, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this
19th day of September, 1999.
/s/ Lawrence J. Fox
------------------------
Lawrence J. Fox
Chairman of the Board and
Director
69
<PAGE> 2
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Symix Systems, Inc., an Ohio corporation which is about to file with
the Securities and Exchange Commission, under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal
year ended June 30, 1999, hereby constitutes and appoints Lawrence J. Fox and
Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead in any and all capacities, to sign such Annual Report on
Form 10-K, and to file the same with all exhibits and financial statements and
schedules thereto, and other documents in connection therewith, including any
amendment thereto, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this
19th day of September, 1999.
/s/ Stephen A. Sasser
-------------------------
Stephen A. Sasser
President, Chief Executive Officer and Director
70
<PAGE> 3
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Symix Systems, Inc., an Ohio corporation which is about to file with
the Securities and Exchange Commission, under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal
year ended June 30, 1999, hereby constitutes and appoints Lawrence J. Fox,
Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead in any and all capacities, to sign such
Annual Report on Form 10-K, and to file the same with all exhibits and financial
statements and schedules thereto, and other documents in connection therewith,
including any amendment thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them or their or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 13
day of September, 1999.
/s/ John T. Tait
------------------
John T. Tait
Director
71
<PAGE> 4
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Symix Systems, Inc., an Ohio corporation which is about to file with
the Securities and Exchange Commission, under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal
year ended June 30, 1999, hereby constitutes and appoints Lawrence J. Fox,
Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead in any and all capacities, to sign such
Annual Report on Form 10-K, and to file the same with all exhibits and financial
statements and schedules thereto, and other documents in connection therewith,
including any amendment thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them or their or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this
17th day of September, 1999.
/s/ Duke W. Thomas
---------------------
Duke W. Thomas
Director
72
<PAGE> 5
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Symix Systems, Inc., an Ohio corporation which is about to file with
the Securities and Exchange Commission, under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal
year ended June 30, 1999, hereby constitutes and appoints Lawrence J. Fox,
Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead in any and all capacities, to sign such
Annual Report on Form 10-K, and to file the same with all exhibits and financial
statements and schedules thereto, and other documents in connection therewith,
including any amendment thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them or their or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this
13th day of September, 1999.
/s/ James A. Rutherford
---------------------------
James A. Rutherford
Director
73
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS IN THE
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1999 FOR SYMIX SYSTEMS,
INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
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0
0
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