<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
COMMISSION FILE NUMBER 0-19092
------------------------
ROSS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-2170198
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
TWO CONCOURSE PARKWAY, SUITE 800, ATLANTA, GEORGIA 30328
(Address of principal executive offices) (Zip code)
</TABLE>
(770) 351-9600
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
OUTSTANDING
CLASS JANUARY 31, 2000
- ------------------------------ -----------------
<S> <C>
Common stock, $0.001 par value 23,415,707
</TABLE>
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This is page 1 of 22 pages
Index to exhibits is on page 22
<PAGE>
ROSS SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................
Condensed Consolidated Statements of Operations--Three and
six months ended December 31, 1999 and 1998............... 3
Condensed Consolidated Balance Sheets--December 31, 1999 and
June 30, 1999............................................. 4
Condensed Consolidated Statements of Cash Flows--Six months
ended
December 31, 1999 and 1998................................ 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 17
PART II OTHER INFORMATION
Item 2. Changes in Securities....................................... 19
Item 6. Exhibits and Reports on Form 8-K............................ 19
SIGNATURES........................................................... 21
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Software product licenses............................ $ 5,077 $ 8,799 $11,047 $19,061
Consulting and other services........................ 9,834 10,335 20,035 18,634
Maintenance.......................................... 6,931 7,020 14,023 13,978
-------- ------- ------- -------
Total revenues................................... 21,842 26,154 45,105 51,673
-------- ------- ------- -------
Operating expenses:
Costs of software product licenses................... 781 834 1,933 2,190
Costs of consulting, maintenance and other
services........................................... 11,025 11,051 21,905 20,913
Sales and marketing.................................. 5,426 8,019 10,640 14,933
Product development.................................. 2,311 2,985 4,765 6,317
General and administrative........................... 1,870 2,124 3,867 4,199
Provision for uncollectible accounts................. 835 244 1,236 527
Amortization of other assets......................... 260 329 520 649
-------- ------- ------- -------
Total operating expenses......................... 22,508 25,586 44,866 49,728
-------- ------- ------- -------
Operating earnings (loss).............................. (666) 568 239 1,945
Other expenses, net.................................. (324) (171) (676) (332)
-------- ------- ------- -------
Earnings (loss) before extraordinary item.............. (990) 397 (437) 1,613
Extraordinary expense, net of tax effect............. 213 213
Income tax expense................................... 83 27 291 432
-------- ------- ------- -------
Net earnings (loss).................................... $ (1,073) $ 157 $ (728) $ 968
======== ======= ======= =======
Net earnings (loss) per common share--basic............ $ (0.05) $ 0.01 $ (0.03) $ 0.04
======== ======= ======= =======
Net earnings (loss) per common share--diluted.......... $ (0.05) $ 0.01 $ (0.03) $ 0.05
======== ======= ======= =======
Shares used in per share computation--basic............ 23,336 22,190 23,155 21,845
======== ======= ======= =======
Shares used in per share computation--diluted.......... 23,336 23,640 23,155 23,824
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE RELATED DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30
1999 1999
------------ --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,139 $ 6,294
Accounts receivable, less allowance for doubtful accounts
and returns............................................. 31,834 37,593
Prepaids and other current assets......................... 1,358 2,591
-------- --------
Total current assets.................................... 35,331 46,478
Property and equipment...................................... 3,957 5,172
Computer software costs..................................... 30,087 27,261
Other assets................................................ 3,627 4,274
-------- --------
Total assets............................................ $ 73,002 $ 83,185
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of debt.............................. $ 9,857 $ 12,536
Accounts payable.......................................... 8,968 10,232
Accrued expenses.......................................... 6,948 8,743
Income taxes payable...................................... 18 145
Deferred revenues......................................... 14,869 18,567
-------- --------
Total current liabilities............................... 40,660 50,223
-------- --------
Long-term debt, less current installments................... 3,027 3,705
-------- --------
Shareholders' equity:
Common stock, $.001 par value; 35,000,000 shares
authorized, 23,415,707 and 22,904,312 shares issued and
outstanding at December 31, 1999 and June 30, 1999,
respectively. Preferred stock, no par value; 5,000,000
shares authorized, 0 outstanding........................ 23 23
Additional paid-in capital................................ 85,262 84,261
Accumulated deficit....................................... (54,100) (53,372)
Accumulated comprehensive income (deficit)................ (1,870) (1,655)
-------- --------
Total shareholders' equity.............................. 29,315 29,257
-------- --------
Total liabilities and shareholders' equity.............. $ 73,002 $ 83,185
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
balance sheets.
4
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ (728) $ 1,181
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Extraordinary loss on early debt extinguishment....... (213)
Depreciation and amortization of property and
equipment........................................... 1,397 1,556
Amortization of computer software costs............... 3,331 4,762
Amortization of other assets.......................... 520 649
Provision for uncollectible accounts.................. 1,236 527
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable................................. 4,448 (7,080)
Prepaids and other current assets................... 1,207 (980)
Income taxes payable / recoverable.................. (129) (89)
Accounts payable.................................... (1,310) 1,557
Accrued expenses.................................... (1,768) (1,847)
Deferred revenues................................... (3,770) (326)
Other, net............................................ (1) 2
------- -------
Net cash provided by operating activities........... 4,434 (301)
------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (233) (1,123)
Computer software costs capitalized....................... (5,965) (5,033)
Other..................................................... (14) (85)
------- -------
Net cash used for investing activities................ (6,212) (6,241)
------- -------
Cash flows from financing activities:
Net line of credit activity............................... (3,672) 8,213
Capital lease payments.................................... 1,137 (40)
Retirement of convertible debt............................ 0 (2,667)
Proceeds from issuance of common stock, net............... 129 193
------- -------
Net cash provided (used) by financing activities...... (2,406) 5,699
------- -------
Effect of exchange rate changes on cash..................... 29 92
------- -------
Net increase (decrease) in cash and cash equivalents........ (4,155) (751)
Cash and cash equivalents at beginning of period............ 6,294 7,248
------- -------
Cash and cash equivalents at end of period.................. $ 2,139 $ 6,497
======= =======
Noncash investing and financing activities:
Business acquisitions for common stock & forgiveness of
debt.................................................... $ 0 $ 2,067
Conversion of convertible debentures...................... $ 848 $ 878
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Ross Systems, Inc. (the "Company") and its e-commerce subsidiary Resynt.com,
develop, market and implement a comprehensive system of enterprise resource
planning (ERP), advanced planning systems (APS) and supply chain management
(SCM) software. The Company has over 5,000 installations with more than 3,400
customers in 45 countries. The Company's growing global customer base is
primarily in three areas: Process manufacturing with unique functionality for
food/beverage and other FDA regulated process industries; Healthcare
organizations; and Public Sector/Not-for-Profit institutions.
Ross Systems' software is marketed under the name
iRenaissance-Registered Trademark-. This integrated, modular system, which
operates in a thin client or browser based internet mode as well as on open
system/ client-server platforms, includes a suite of the following solutions:
financials; process manufacturing; production planning; finite capacity
scheduling; distribution; human resources; payroll; maintenance management;
transportation management; materials management; decision support; and business
process modeling.
Resynt.com's internet product and services include a wide range of
e-commerce business-to-business features and technology to connect traditional
ERM (enterprise resource management) systems over the internet to customers and
suppliers thereby tightly linking trading partner supply chains to achieve
sustainable competitive advantage.
The accompanying unaudited condensed consolidated financial statements of
the Company reflect all adjustments of a normal recurring nature which are, in
the opinion of management, necessary to present a fair statement of its
financial position as of December 31, 1999, and the results of its operations
and cash flows for the interim periods presented. The Company's results of
operations for the three and six months ended December 31, 1999 are not
necessarily indicative of the results to be expected for the full year.
These unaudited condensed financial statements have been prepared in
accordance with the instructions for Form 10-Q and, therefore, certain
information and footnote disclosures normally contained in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in conjunction
with the Consolidated Financial Statements and notes thereto included in the
Company's Annual Report to Stockholders on Form 10-K for the fiscal year ended
June 30, 1999 filed with the Securities and Exchange Commission on
September 28, 1999.
Certain fiscal 1999 amounts have been reclassified to conform to the fiscal
2000 financial statement presentation.
B) PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
C) CAPITALIZED COMPUTER SOFTWARE COSTS AND OTHER ASSETS
It is the Company's policy to follow paragraph 8 of SFAS 86 in the
computation of annual amortization expense of software costs. The straight-line
method has historically yielded the greatest annual expense when compared to the
ratio of current gross revenues to current and anticipated future
6
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C) CAPITALIZED COMPUTER SOFTWARE COSTS AND OTHER ASSETS (CONTINUED)
gross revenues. Accordingly, the straight-line method is generally used to
amortize previously capitalized software costs.
It is the Company's policy to assess all its long-lived assets and
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable.
Impairment losses, if applicable, would be calculated as the difference between
the carrying value of the asset and the sum of anticipated future undiscounted
cash flows. The calculation would be performed on an individual item basis.
D) ACCOUNTS RECEIVABLE
As of the dates shown, accounts receivable consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
------------ --------
<S> <C> <C>
Trade accounts receivable.............................. $33,455 $40,477
Less allowance for doubtful accounts and returns....... (1,621) (2,884)
------- -------
$31,834 $37,593
======= =======
</TABLE>
E) PROPERTY AND EQUIPMENT
As of the dates shown, property and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
------------ --------
<S> <C> <C>
Computer equipment..................................... $14,225 $14,209
Furniture and fixtures................................. 3,044 3,025
Leasehold improvements................................. 1,662 1,819
------- -------
18,931 19,053
Less accumulated depreciation and amortization......... (14,974) (13,881)
------- -------
$ 3,957 $ 5,172
======= =======
</TABLE>
F) BUSINESS ACQUIRED
On August 26, 1998, the Company acquired a 100% ownership interest in
HiPoint Systems Corporation ("HiPoint"), a privately held computer consulting
firm based in Ontario, Canada, in exchange for shares of the Company's Common
Stock valued at approximately $1,900,000. HiPoint had been a consulting partner
on many of the Company's software implementation and consulting projects over
the past several years. The acquisition has been accounted for as a purchase
and, accordingly, the results of operations of the acquired business have been
included in the Company's results of operations from the date of acquisition.
The pro forma effects on total revenues, net earnings, and net earnings per
share of including this subsidiary in the Company's Consolidated Statement of
Operations from the beginning of fiscal 1999 and 1998 are not significant to the
Company as a whole.
7
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
G) CONVERTIBLE DEBT
On February 6, 1998, the Company closed a private placement of up to
$10,000,000 of convertible subordinated debentures to certain institutional
investors (the "Investors") pursuant to Regulation D promulgated under the
Securities Act of 1933, as amended. The investors invested $6,000,000 on
February 6, 1998 and $4,000,000 on June 11, 1998. As of December 31, 1999, the
remaining balance after conversions and redemptions is $2,233,000. The material
agreements between the Company and each Investor have been filed as exhibits to
the Current Report on Form 8-K filed with the Securities and Exchange Commission
by the Company on February 12, 1998. The salient points of the convertible
subordinated debenture agreement are as follows:
INTEREST: The interest rate is four percent per annum for the first six
months after the original issuance date of the convertible debenture and six
percent per annum thereafter, subject to increases (up to the legal maximum
rate) if the Company is in default under the convertible debenture. Accrued
interest is due and payable in shares of the Company's Common Stock
semi-annually on the last day of June and December of each year. The value for
such shares of Common Stock is the average of the two lowest closing bid prices
for the Company's Common Stock as reported by the Bloomberg Service for the
thirty trading days immediately before the interest payment date.
CONVERSION PRICE: The conversion price for the convertible debentures is
(P + I) divided by the Conversion Date Market Price where P equals the
outstanding principal amount of the convertible debenture submitted for
conversion, I equals accrued but unpaid interest as of the conversion date and
Conversion Date Market Price equals the lesser of the maximum conversion price
(as defined below) or 101% of the average of the two lowest closing bid prices
for the Company's Common Stock as reported by the Bloomberg Service for the
thirty trading days immediately before the conversion date. The maximum
conversion price is 115% of the average closing bid price of the Common Stock as
reported by the Bloomberg Service over the 1998 calendar year. A portion of the
convertible debentures issued in June 1998 (the "Second Closing Debentures")
were redeemed by the Company. See paragraph (H) below and "Part I, Item 2 of
this Quarterly Report on Form 10-Q--Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a description of the
Company's redemption of a portion of the Second Closing Debentures.
H) EXTRAORDINARY ITEM
During October 1998, the Company redeemed $2,667,000 aggregate principle
amount of the then outstanding Second Closing Debentures. In accordance with the
redemption option of the convertible subordinated debenture agreement outlined
above, the Company incurred a one time extraordinary charge of approximately
$213,000, or 8% of the aggregate principle amount of the Second Closing
Debentures redeemed.
I) COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income" as of July 1, 1998. SFAS 130 requires
disclosure of total non-stockholder changes in equity in interim periods and
additional disclosures of the components of non-stockholder changes on an annual
basis. Total non-stockholder changes in equity include all changes in equity
during a period except those resulting from investments by and distributions to
stockholders. The
8
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
I) COMPREHENSIVE INCOME (CONTINUED)
Company has restated information for all prior periods reported below to conform
to this standard (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings........................... $(1,073) $ 157 (728) $ 968
Foreign currency translation
adjustments.......................... (152) (266) (215) (118)
------- ----- ----- -----
Total comprehensive income............. $(1,225) $(109) $(943) $(850)
======= ===== ===== =====
</TABLE>
J) NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Basic earnings per common share are computed by dividing net earnings or net
loss by the weighted average number of common shares outstanding during the
period. Diluted earnings per common and common equivalent share is computed by
dividing net earnings by the weighted average number of common and common
equivalent shares outstanding during the period. Common stock equivalents are
not considered in the calculation of net loss per share when their effect would
be antidilutive.
The following is a reconciliation of the numerators of diluted earnings per
share, (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings........................... (1,073) 157 (728) 968
Payment in kind interest on convertible
debentures........................... -- 69 -- 173
------ --- ---- -----
Numerator for diluted calculation...... (1,073) 226 (728) 1,141
------ --- ---- -----
</TABLE>
The only difference between the denominator for basic and diluted earnings
per share for the three month periods ended December 31, 1999 and 1998 is the
effect of common stock equivalents.
K) OTHER MATTERS
On September 1, 1998, the Board of Directors of the Company approved a
Preferred Shares Rights Agreement dated September 4, 1998, as amended, whereby
the Board has declared a dividend distribution of one Preferred Shares Purchase
Right (the "Rights") on each outstanding share of the Company's Common Stock.
Each Right will entitle stockholders to buy 1/1000(th) of a share of the
Company's Series B Participating Preferred Stock at an exercise price of $21.75.
The Rights will become exercisable following the tenth day after a person or
group announces the acquisition of 15% or more of the Company's Common Stock or
announces commencement of a tender offer the consummation of which would result
in ownership by the person or group of 15% or more of the Common Stock. The
Company will be entitled to redeem the Rights at $.01 per Right at any time on
or before the tenth day following acquisition by a person or group of 15% or
more of the Company's Common Stock.
9
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
K) OTHER MATTERS (CONTINUED)
On September 18, 1998, the Board of Directors of the Company approved an
adjustment to the exercise price for certain outstanding stock options held by
all current employees, which have an exercise price of $3.00 and above. In
consideration for this repricing offer, officers of the Company participating in
the option repricing were required to forfeit 10% of the shares subject to each
option being repriced, while non-officer employees participating in the option
repricing are subject to a one year limitation on the exercisability of repriced
options subject to certain exceptions. The one-year limitation on ability to
exercise expired on September 28, 1999. The revised exercise price was
established by reference to the closing price of the Company's Common Stock on
September 28, 1998, which was approximately $2.59. Approximately 90 employees
participated in the repricing with approximately 1,336,000 options being
repriced. Of the stock options repriced, options to purchase approximately
831,000 shares were held by executive officers of the Company.
On January 7, 1999, the Company entered into employment agreements with each
of J. Patrick Tinley, the Company's President and Chief Operating Officer and
member of the Board of Directors, and Dennis V. Vohs, the Company's Chairman of
the Board of Directors and Chief Executive Officer (the "Employment
Agreements"). In addition to a salary and benefits, each Employment Agreement
provides the employee with a continuation of salary and benefits for a
twenty-four month period immediately following the employee's termination of
employment by the Company "without cause" (as that term is defined in the
Employment Agreement). In addition, if within the first nine months following a
"change of control" of the Company the employee terminates his employment with
the surviving corporation for "good reason" or the surviving corporation
terminates the employee's employment for any reason other than "cause" or
"disability" (as each of these terms in quotes is defined in the Employment
Agreements), the employee shall then be entitled to a continuation of then
applicable salary for the twenty-four month period immediately following the
termination date and all unvested stock options and similar rights shall become
vested and exercisable. Mr. Tinley's and Mr. Vohs Employment Agreements have
been filed as Exhibit 10.3 and Exhibit 10.4, respectively, to the Company's
Quarterly Report on Form 10-Q for the third quarter of fiscal 1999, filed
May 17, 1999.
On September 17, 1999, the Company entered into an employment agreement with
Robert B. Webster, the Chief Financial Officer and Secretary of the Company. In
addition to a salary and benefits, the employment agreement provides the
employee with a continuation of salary and benefits for a twelve-month period
immediately following the employee's termination of employment by the Company
"without cause" (as that term is defined in Mr. Webster's employment agreement).
In addition, if within the first nine months following a "change of control" of
the Company the employee terminates his employment of the surviving corporation
for "good reason" or the surviving corporation terminates the employee's
employment for any reason other than "cause" or "disability" (as each of these
terms in quotes is defined in the employment agreements), the employee shall
then be entitled to a continuation of then applicable salary for the twelve
month period immediately following the termination date and all unvested stock
options and similar rights shall become vested and exercisable. Mr. Webster's
employment agreement has been filed as Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the fiscal year 1999, filed September 28, 1999.
L) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "REPORTING COMPREHENSIVE INCOME"
("Statement 130") and Statement of Financial
10
<PAGE>
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L) NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Accounting Standards No. 131 "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION" ("Statement 131"). Statement 130 establishes standards for
the reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. Statement 131 requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. Generally, financial information is required
to be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. Both statements
have been adopted for the Company's 1999 fiscal year. Disclosures pursuant to
Statement 130 are included under the note regarding Comprehensive Income, above.
Disclosures pursuant to Statement 131 are annual in nature and, therefore, not
contained herein.
In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2 "SOFTWARE REVENUE RECOGNITION"
("SOP 97-2"). SOP 97-2 provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions. The
requirements of SOP 97-2 are effective for transactions entered into in the
Company's fiscal year 1999 and the financial statements contained herein have
been prepared in accordance with the requirements of SOP 97-2.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
VARIABILITY OF QUARTERLY RESULTS
The Company's software product license revenues can fluctuate from quarter
to quarter depending upon, among other things, such factors as overall trends in
the United States and international economies, new product introductions by the
Company, hardware vendors and other software vendors, and customer buying
patterns. Because the Company typically ships software products within a short
period after orders are received, and therefore maintains a relatively small
backlog, any weakening in customer demand can have an almost immediate adverse
impact on revenues and operating results. Moreover, a substantial portion of the
revenues for each quarter is attributable to a limited number of sales and tends
to be realized in the latter part of the quarter. Thus, even short delays or
deferrals of sales near the end of a quarter can cause substantial fluctuations
in quarterly revenues and operating results. Finally, certain agreements signed
during a quarter may not meet the Company's revenue recognition criteria
resulting in deferral of such revenue to future periods. Because the Company's
operating expenses are based on anticipated revenue levels and a high percentage
of the Company's expenses are relatively fixed, a small variation in the timing
of the recognition of specific revenues can cause significant variation in
operating results from quarter to quarter.
RESULTS OF OPERATIONS
REVENUES
Total revenues for the quarter ended December 31, 1999 decreased 16% to
$21,842,000 from $26,154,000 in the same quarter of fiscal 1999. Software
product license revenues decreased 42%, consulting and other services revenues
decreased 5%, and maintenance revenues decreased 1% from the same quarter of the
prior year.
For the six-month period ended December 31, 1999, total revenues decreased
13% to $45,105,000, from $51,673,000 in the same period of fiscal 1999. Software
product license revenues decreased 42%, service revenues increased 8%, and
maintenance revenues were basically unchanged from the same period of the prior
year.
Software product license revenues were $5,077,000 during the quarter ended
December 31, 1999, a decrease of $3,722,000, or 42%, from the same quarter in
fiscal 1999. The Company experienced a decrease over the same quarter of fiscal
1999 in the North American market of approximately $2,694,000, or 49%. This
North American decrease relates to a decrease of approximately $1,418,000 in
U.S. revenues and $1,276,000 in Canadian revenues due to a fewer number of
contracts recorded during the quarter than during the same quarter of the prior
year. The Company experienced a net decrease of $1,028,000, or 31%, in the
European, Asian and Pacific Rim ("International") markets over the same quarter
in fiscal 1999. The Asia/Pacific Rim markets experienced a $180,000, or 77%
decrease in revenues from the same quarter in the prior year due largely to a
fewer number of contracts recorded during the quarter than in the same quarter
of the prior year. European revenues decreased $848,000, or 28%, over the same
quarter in the prior year. This decrease was due largely to decreases in France
of $277,000, other European countries of $472,000, Benelux of $198,000, and
Spain of $385,000, partially offset by increases in UK of $484,000. The Company
believes that the decrease in software product licenses is principally a result
of an industry-wide slowdown in customers willingness to purchase new software
because of issues related to the year 2000 date recognition problem (Y2K). The
Y2K issue arises because certain electronic data processing systems use two
digits rather than four to define the applicable year which may preclude proper
date recognition after December 31, 1999. Maintenance contracts sold by third
party distributors are included by the Company in software product
12
<PAGE>
license revenues because the Company has no support obligations to any of the
distributors' customers. For the six-month period ended December 31, 1999,
software product license revenues decreased $8,014,000 or 42%, from the same
period in the prior year. The Company experienced decreases, as compared to the
same period of the prior year, in all markets as follows, North American
$5,835,000 or 54%, European $1,399,000 or 26%, and Asian Pacific Rim $780,000 or
27%.
Consulting and other services revenues for the second quarter of fiscal 2000
decreased 5% to $9,834,000 from $10,335,000 in the same quarter of fiscal 1999.
Revenues from consulting and other services (which are typically recognized as
performed) are generally correlated with software product license revenues
(which are typically recognized upon delivery), so that when software product
license revenues fluctuate, future period services revenues generally show a
corresponding fluctuation. For the quarter ended December 31, 1999, North
American services revenues decreased by $94,000, or 1%, over the same quarter in
the prior year which is attributable largely to a decline of software product
licensing activity during the previous quarters. Additionally, the Company has
increased its service capacity with the acquisition of HiPoint during the first
quarter of fiscal 1999. HiPoint delivers services and consulting and had worked
with several of the Company's customers prior to the acquisitions. During the
second quarter of fiscal 2000, the Company continued to reduce the number of
outside consultants used to perform implementations, consulting, and other
professional services. The outside consultants normally cost more and generate
lower gross margins than services performed by Company employees. International
services revenues decreased $407,000, or 13% over the same quarter in the prior
year. For six-month period ended December 31, 1999, service revenues increased
$1,401,000 or 8% as compared to the same period of the prior fiscal year. For
the six month period ended December 31,1999, North American services revenues
increased $1,251,000 or 9%, while International services revenues increased
$150,000 or 1% as compared to the same period of the prior fiscal year.
Management feels that the decrease in services revenues for the quarter ended
December 31, 1999 is a result of customers focusing their resources toward the
year 2000 issue.
Maintenance revenues for the second quarter decreased by $89,000, or 1% in
fiscal 2000 versus the same quarter in the prior year. As compared to the same
quarter of the previous fiscal year, maintenance revenues decreased $25,000, or
less than 1% in North America. Decreases were also experienced in the Europe and
Asia/Pacific Rim Markets of $29,000, or 2% and $35,000 or 38%, respectively.
Decreases are typically due to customers with older installations not renewing
their contracts. Maintenance contracts sold by third party distributors are
included by the Company in software product license revenues because the Company
has no support obligations to any of the distributors' customers. For the
six-month period ended December 31, 1999, maintenance revenues increased $45,000
or less than 1% to $14,023,000 as compared to the same period of the prior
fiscal year. For the six month period ended December 31,1999, North American
maintenance revenues increased $163,000 or 2%, while International maintenance
revenues decreased $118,000 or 3% as compared to the same period of the prior
fiscal year.
International revenues as a percentage of total revenues for the second
quarter of fiscal 2000 decreased to 32% from 36% for the same quarter in fiscal
1999. International revenues decreased $1,499,000 or 18% over the same quarter
in the prior year. The Company's UK subsidiary accounted for an increase of
$494,000. The remaining countries all experienced net decreases as follows;
Spain $800,000, Asia/Pacific Rim markets $373,000, Benelux $166,000, France
$119,000, and other European countries of $535,000. These fluctuations are
related to the quantity, scope and timing of contracts closed. The aggregate
second quarter (decrease) in international revenues over the same quarter of
fiscal 1999 is (31%) for software licenses, (13%) for consulting services and
(3%) for maintenance revenue. As a percentage of total revenues for the
six-month period ended December 31, 1999, International revenues remained
constant at 34% of total revenues as compared to the same period of the prior
fiscal year.
13
<PAGE>
North American revenues as a percentage of total revenues for the second
quarter of 2000 increased to 68% from 64% in the same quarter of prior fiscal
year. North American revenues decreased 16% over the same quarter of the
previous fiscal year. The aggregate decrease of $2,813,000 is comprised of a 49%
decrease in software licenses, a decrease of 1% for consulting services and a
decrease of less than 1% for maintenance revenues as compared to the same period
of the prior fiscal year. Decreases are due to reduction of the number of
software agreements entered into during the current quarter. For the six month
period ended December 31, 1999, the aggregate decrease of $4,421,000 is
comprised of a 54% decrease in software licenses, offset by increases of 9% and
2% for consulting services and maintenance revenues, respectively, as compared
to the same period of the prior fiscal year. Increases in maintenance revenues
are a function of previously sold software licenses, whereas increases in
consulting services are a result of revenue generated from acquired companies
and an increased focus on consulting services.
OPERATING EXPENSES
Costs of software product licenses include expenses related to royalties
paid to third parties and product documentation and packaging. Third party
royalty expenses will vary from quarter to quarter based on the number of third
party products being sold by the Company in a particular quarter. Major third
party products sold by the Company include Oracle databases and other optional
software including implementation, reporting, and productivity tools. Costs of
software product licenses for the second quarter of fiscal 2000 decreased by 6%
to $781,000 from $834,000 in the second quarter of fiscal 1999. For the six
months ended December 31, 1999, the cost of software product licenses decreased
12% to $1,933,000 from $2,190,000 for the same period in fiscal 1999. As a
percentage of software product license revenue, the costs of software product
licenses increased to 15% in the second quarter of fiscal 2000 compared to 9% in
the same quarter of fiscal 1999. Likewise, for the six month period ended
December 31, 1999 the costs of product licenses as a percent of software license
revenues increased to 17% from 11% as compared to the same period of the prior
fiscal year. The increase in these items for the three and six month periods was
primarily due to the number of agreements entered into in fiscal 2000 which,
when compared to the prior year, contained a greater amount of third party
software resulting in increased third party royalty expenses incurred by the
Company.
Costs of consulting, maintenance and other services include expenses related
to consulting and training personnel, personnel providing customer support
pursuant to maintenance agreements, and other costs of sales. The Company also
uses outside consultants to supplement Company personnel in meeting peak
customer consulting demands. Costs of consulting, maintenance and other services
decreased by less than 1% to $11,025,000 in the second quarter of fiscal 2000,
as compared to $11,051,000 in the second quarter of fiscal 1999. For the six
month period ended December 31, 1999, costs of consulting, maintenance, and
other services increased 5% to $21,905,000 from $20,913,000 in the same period
of fiscal 1999. The increase in these costs for the six-month period relates in
part to the Company's increased services activity, resulting in the Company
hiring more internal consultants. Additionally, during the first quarter of
fiscal 1999, the Company acquired HiPoint. For the six months ended
December 31, 1999, the incremental expenses attributable to HiPoint are
$659,000. The Company's gross profit margin resulting from consulting,
maintenance and other services revenues for the second quarter of fiscal 2000
was 34%, down from 36% in the same quarter of fiscal 1999. The decline in the
gross profit margin for the quarter was primarily a result of a decline in
revenues versus a relatively fixed cost base. For the six-month periods ended
December 31, 1999 and 1998, the gross profit margin remained unchanged at 36%.
Sales and marketing expenses for the quarter ended December 31, 1999
decreased by 32%, to $5,426,000 from $8,019,000 in the same quarter of the prior
year. For the six-month period ended December 31, 1999, sales and marketing
expenses decreased 29% to $10,640,000 from $14,933,000 as compared to the same
period of the prior fiscal year. These decreases were primarily a result of
14
<PAGE>
decreased headcount combined with an increased control of discretionary
spending. For the three and six months ended December 31, 1999, travel related
expenditures decreased by $707,000 and $1,491,000, respectively, over the same
period of the prior year. Additionally, personnel-related expenses, including
salaries and commissions decreased approximately $1,282,000 and $1,877,000,
respectively, for the three and six months period ended December 31, 1999 as
compared to the same period of the prior year. Furthermore, communications costs
related to telemarketing efforts and facilities related expenses decreased
$210,000 and $358,000 for the three-month and six-month periods ended
December 31, 1999 versus the same period of the prior year. Likewise, for the
three and six months ended December 31, 1999, supplies and outside services
related expenses decreased approximately $285,000 and $442,000, respectively,
over the same period of the prior fiscal year. Furthermore, other expense
categories experienced net decreases of $109,000 and $125,000 for the three and
six month periods, respectively, versus the prior same periods of the prior
fiscal year.
Product development (research and development) expenses decreased by 23%, to
$2,311,000 in the second quarter of fiscal 2000 from $2,985,000 in the same
quarter of the prior year. For the six-month period ended December 31, 1999,
these expenses decreased 25% to $4,765,000 from $6,317,000 in the same period of
the prior fiscal year. The following table summarizes product development
expenditures (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross Expenditures for Product Development....... $ 3,642 $ 3,015 $ 7,238 $ 6,588
Less: Expenses capitalized....................... (2,963) (2,411) (5,965) (5,033)
Plus: Amortization of previously capitalized
amounts........................................ 1,632 2,381 3,492 4,762
------- ------- ------- -------
Total Product Development Expenses............... $ 2,311 $ 2,985 $ 4,765 $ 6,317
======= ======= ======= =======
</TABLE>
As a percentage of total revenues, product development expenditures for the
three-month period ended December 31, 1999 remained constant at 11%, as compared
to the same period of the prior fiscal year. For the six month period ended
December 31, 1999, as a percentage of total revenues, product development
expenditures decreased from 12% to 11% as compared to the same period of the
prior fiscal year. Product development expenditures during fiscal 2000 have been
primarily focused on continued enhancements to existing products and developing
new products. During the three and six months ended December 31, 1999, software
development costs capitalized included amounts attributable to the development
of the Company's new e-business architecture known as iRenaissance Internet
Applications (RNA), and the new browser based version of the Company's core
product known as iRenaissance. The Company does not expect to have any
additional expenditures related to the year 2000 compliance upgrade on its
Renaissance Classic products. The Company believes that its Renaissance CS
products have been Year 2000 compliant since their introduction in 1992.
General and administrative expenses for the quarter ended December 31, 1999
decreased by 12%, to $1,870,000 from $2,124,000 in the same quarter of the prior
year. For the six month period ended December 31, 1999, general and
administrative expenses decreased 8% to $3,867,000 from $4,199,000 in the same
period of the prior fiscal year. The major reasons for the decrease in these
expenses from the same period in the prior year was due to renegotiated
telecommunications contracts and the savings that resulted, therefrom.
During the three month period ended December 31, 1999, the Company recorded
a provision for doubtful accounts of $835,000, as compared to $244,000 recorded
in the second quarter of fiscal 1999. For the six-month period ended
December 31, 1999, the company recorded a provision for doubtful accounts of
$1,236,000 as compared to $527,000 for the same period of the prior fiscal year.
The fiscal
15
<PAGE>
2000 and 1999 provisions consisted primarily of specific customer accounts
identified as being potentially uncollectible.
Amortization of other assets decreased to $260,000 in the second quarter of
fiscal 2000 from $329,000 in the same quarter of the prior year. For the
six-month period ended December 31, 1999, amortization of other assets decreased
to $520,000 from $649,000 during the same period of the prior fiscal year. This
amortization relates to the purchase of the Company in 1988 and its subsequent
acquisitions of other products and companies. The decrease is attributable to
previously purchased products and companies becoming fully amortized.
OTHER EXPENSE, NET
Other expense for the quarter ended December 31, 1999 was $324,000, as
compared to $171,000 in the same quarter of fiscal 1999. For the six-month
period ended December 31, 1999, other expense was $676,000, as compared to
$332,000 in the same period of fiscal 1999. These amounts primarily consisted of
interest expense related to the increased borrowing by the Company under its
existing line of credit facility during the three month and six-month periods
ended December 31, 1999 versus the same period of fiscal 1999.
INCOME TAX EXPENSE
During the second quarter of fiscal 2000, the Company recorded income tax
expense of $83,000 compared with an income tax expense of $27,000 recorded
during the same quarter in fiscal 1999. For the six month period ended
December 31, 1999, the company recorded income tax expense of $291,000 compared
with an income tax expense of $432,000 recorded during the same period of fiscal
1999. Income tax expense includes withholding taxes accrued in certain foreign
jurisdictions where the Company had either no available net operating losses or
had to pay treaty-based taxes.
LIQUIDITY AND CAPITAL RESOURCES
In the first six months of fiscal 2000, net cash provided by operating
activities increased $4,735,000 compared to the same period of the prior year.
An aggregate net decrease in the non-cash charges for depreciation, amortization
and provisions for bad debt of $1,010,000 and an aggregate decrease in the
combined cash effect of accounts payable and accrued expenses changes of
$2,788,000 and by decreased Company earnings of $1,909,000 were offset by cash
provided through decreased accounts receivable of $11,528,000. The decrease in
accounts payable and certain other current liabilities is a function of the
timing of the business cycle. The decreased receivables portfolio was a result
of timing of revenues recognized, increased collection efforts, and some
improvement of the receivables turnover. Management feels that the risk of
uncollectibility has been appropriately assessed and reflected in the
accompanying condensed, consolidated financial statements. Early debt
extinguishments, which resulted in a decrease in cash of $213,000 for the six
months ended December 31, 1998, were not repeated in the current fiscal year.
Changes in prepaid expenses, accrued income taxes and other miscellaneous
accounts resulted in a further increase in cash of $2,145,000. However, cash was
decreased by $3,444,000 due to work performed in fulfillment of the company's
deferred revenue obligations.
In the first six months of fiscal 2000, the Company required $6,212,000 for
investing activities versus $6,241,000 over the same period of the prior year, a
decrease of $29,000. Investment in property and equipment decreased by $890,000
over the same period of the prior year as a result of the Company's ongoing
austerity measures. Capitalized computer software costs increased by $932,000
due to increased effort on the Company's iRennaisance suite and related
offerings. Other investment items decreased by $71,000. The Company financed its
continuing operations for the six months ended December 31, 1999 through cash
generated from operations and available credit facilities.
16
<PAGE>
Cash flows from financing activities decreased by $8,105,000 versus the same
six-month period of the prior fiscal year. Repayments of amounts previously
borrowed under the Company's line of credit resulted in a decrease in cash of
$11,885,000. The company entered into two capital lease arrangements related
previously purchased assets. These new arrangements, net of repayments on
existing leases during the period, resulted in increased cash of $1,177,000.
There were no retirements of convertible debt in the current fiscal year,
compared with $2,667,000 of retirements in the prior fiscal year period.
Proceeds from issuance of common stock decreased by $64,000.
At December 31, 1999 the Company had $2,139,000 of cash and cash
equivalents. The Company also has a revolving credit facility with an
asset-based lender with a maximum credit line of $15,000,000, a maturity date of
October 31, 2000, and an interest rate equal to the Prime Rate plus 2%.
Borrowings under the credit facility are collateralized by substantially all
assets of the Company. At December 31, 1999, the Company had $8,151,000
outstanding against the $15,000,000 revolving credit facility, and based on
eligible accounts receivable at December 31, 1999, the Company's cash and
remaining borrowing capacity under the revolving credit facility totaled
approximately $4,324,000.
The Company's ability to meet its cash requirements for operations and
recurring capital expenditures will depend upon funds expected to be generated
from operations and amounts available under its line of credit facility. In the
future, the company may need to seek additional financing which may be in the
form of debt or equity. If required, additional debt financing would increase
the Company's interest expense while additional equity financing would increase
the number of shares outstanding, resulting in dilution for current
stockholders.
THE YEAR 2000 ISSUE
The Year 2000 issue arises because certain electronic data processing
systems use two digits rather than four to define the applicable year which may
preclude proper date recognition after December 31, 1999.
The Company expended approximately $350,000 related to year 2000
preparedness of its internal systems. Management of the Company believes that
the preparations were adequate, and there have been no year 2000 related
problems in the Company's internal systems between December 31, 1999 and the
date of filing of this Report on Form 10-Q. Further, Management believes that
the more recent versions of its product were developed as year 2000 compliant
while older versions of its product were brought into year 2000 compliance
through updates provided in conjunction with customer's ongoing maintenance
contracts. Management believes that its product design was adequate, and
Management has not been made aware of any year 2000 processing problems in the
Company's products between December 31, 1999 and the date of the filing of this
Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE: The Company has a worldwide presence and as such
maintains offices and derives revenues from sources overseas. For the second
quarter of fiscal 2000, international revenues as a percentage of total revenues
were approximately 32%. For the six-month period ended December 31, 1999,
international revenues as a percentage of total revenues were approximately 34%.
The Company's international business is subject to typical risks of an
international business, including, but not limited to: differing economic
conditions, changes in political climates, differing tax structures, 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 effect of foreign exchange rate fluctuations on
the Company in the first six months of fiscal 2000 was not material.
INTEREST RATES: The Company's exposure to interest rates relates primarily
to the Company's cash equivalents and certain debt obligations. The Company
invests in financial instruments with original
17
<PAGE>
maturities of three months or less. Any interest earned on these investments is
recorded as interest income on the Company's statement of operations. Because of
the short maturity of our investments, a near-term change in interest rates
would not materially effect our financial position, results of operations, or
cash flows. Certain of the Company's debt obligations include a variable rate of
interest. A significant, near term change in interest rates could materially
effect the Company's financial position, results of operations or cash flows.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the first six months of fiscal 2000, the Investors converted an
aggregate principal amount of $800,000 plus accrued interest through the date of
conversion into 446,000 shares of the Company's Common Stock through several
transactions which were priced and executed in accordance with the agreements
between the Company and each of the Investors regarding the convertible
subordinated debentures.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on November 17, 1999.
The following table shows voting information for each item voted upon:
<TABLE>
<CAPTION>
NOMINEES FOR
ELECTION AS DIRECTORS FOR AGAINST WITHELD
<S> <C> <C> <C>
Dennis V. Vohs........................................ 18,966,658 1,738,124 3,290,210
Mario M. Rosati....................................... 19,056,798 1,647,984 3,290,210
Bruce J. Ryan......................................... 19,059,838 1,644,944 3,290,210
J. Patrick Tinley..................................... 19,025,958 1,678,824 3,290,210
J. William Goodhew.................................... 19,062,088 1,642,694 3,290,210
RATIFICATION OF
APPOINTMENT OF
INDEPENDENT AUDITORS.................................... 20,345,051 203,139 156,592
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The Exhibits listed on the accompanying Index to Exhibits are filed as part
of, or incorporated by reference into, this Report.
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of the Registrant, as amended
(1)
3.2 Bylaws of the Registrant (1)
4.3 Form of the subordinated debenture agreement due February 6,
2003 issued by the Registrant to each Investor (3)
4.4 Registration rights agreement between the Registrant and
each Investor (3)
10.1 Preferred Shares Rights Agreement, dated as of September 4,
1998 between the Registrant and BankBoston, N.A. (2)
10.2A Extension Agreement and Amendment to Loan Documents dated
March 21, 1997 between Registrant and Coast Business Credit,
a division of Southern Pacific Thrift and Loan Association
(4)
10.2B Extension Agreement and Amendment to Loan Documents dated
August 18, 1995 between Registrant and CoastFed Business
Credit Corporation ("Coast") (4)
10.2C First Amendment to Loan and Security Agreement dated June
30, 1995 between Registrant and Coast (4)
10.2D Loan and Security Agreement dated October 11, 1994 between
Registrant and Coast (4)
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
10.3 Employment Agreement, dated as of January 7, 1999, between
Mr. Patrick Tinley and the Registrant (5)
10.4 Employment Agreement, dated as of January 7, 1999, between
Mr. Dennis Vohs and the Registrant (5)
10.5 Employment Agreement, dated as of September 17, 1999,
between Mr. Robert Webster and the Registrant (6)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
(1) Incorporated by reference to the exhibit filed with the Registrant's Current
Report on Form 8-K filed July 24, 1998.
(2) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form 8-A filed September 4, 1998.
(3) Incorporated by reference to the exhibit filed with the Registrant's Current
Report on form 8-K filed February 12, 1998.
(4) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form 10-K/A filed April 30, 1998.
(5) Incorporated by reference to the exhibit filed with the Registrant's Current
Report on Form 10-Q filed May 17,. 1999.
(6) Incorporated by reference to the exhibit filed with the Registrant's Current
Report on Form 10-K filed September 28, 1999.
(b) Reports on Form 8-K
ITEMS 1 AND 5 HAVE BEEN OMITTED, AS THEY ARE NOT APPLICABLE.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
ROSS SYSTEMS, INC.
Date: February 14, 2000 /s/ ROBERT B. WEBSTER
---------------------------------------------
ROBERT B. WEBSTER
VICE PRESIDENT, FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
AND DULY AUTHORIZED OFFICER)
</TABLE>
21
<PAGE>
ROSS SYSTEMS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
27.1 Financial Data Schedule
</TABLE>
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,139
<SECURITIES> 0
<RECEIVABLES> 33,455
<ALLOWANCES> 1,621
<INVENTORY> 0
<CURRENT-ASSETS> 35,331
<PP&E> 18,931
<DEPRECIATION> 14,974
<TOTAL-ASSETS> 73,002
<CURRENT-LIABILITIES> 40,660
<BONDS> 3,027
0
0
<COMMON> 23
<OTHER-SE> 29,292
<TOTAL-LIABILITY-AND-EQUITY> 73,002
<SALES> 0
<TOTAL-REVENUES> 21,842
<CGS> 0
<TOTAL-COSTS> 22,508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 835
<INTEREST-EXPENSE> 324
<INCOME-PRETAX> (990)
<INCOME-TAX> (83)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,073)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
