<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19872
WALKER INTERACTIVE SYSTEMS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2862954
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
303 Second Street, San Francisco, CA 94107
-------------------------------------------
(Address of principal executive offices including zip code)
(415) 495-8811
--------------
(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 report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
There were 13,176,645 Shares of $.001 Par Value Common Stock outstanding as of
August 7, 1996.
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WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of June 30,
1996 and December 31, 1995 ..................................... 3
Condensed Consolidated Statement of Operations for
the three months and six months ended June 30, 1996
and 1995........................................................ 4
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and 1995..................... 5
Notes to Condensed Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............. 14
Item 6. Exhibits and Reports on Form 8-K................................. 15
Signatures................................................................ 16
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERACTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 31,
ASSETS 1996 1995
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $15,025 $25,412
Short-term investments 18,045 10,976
Accounts receivable, net 11,367 10,412
Prepaid expenses 1,664 1,241
------- -------
Total current assets 46,101 48,041
Long-term investments 6,072 5,930
Property, net 4,171 5,039
Capitalized software, net 10,823 9,635
Deferred tax assets, net 13,181 13,181
Other assets 708 672
------- -------
TOTAL ASSETS $81,056 $82,498
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $12,407 $12,206
Deferred revenue 14,663 14,060
Current portion of long-term debt 27 236
------- -------
Total current liabilities 27,097 26,502
Deferred revenue 2,085 2,709
Accrued rent 1,088 1,282
Other long-term obligations 4,438 3,271
------- -------
Total liabilities 34,708 33,764
------- -------
Stockholders' equity:
Common stock, $.001 par value: 50,000,000 shares
authorized; issued 13,360,170 shares - June 30,
1996; 13,120,105 shares - December 31, 1995 13 13
Additional paid-in capital 69,050 67,532
Currency translation adjustments 130 123
Unrealized gain (loss) on investments (61) 43
Accumulated deficit (20,751) (18,594)
Treasury stock at cost (207,143 shares - June 30,
1996; 55,143 shares - December 31, 1995) (2,033) (383)
------- -------
Total stockholders' equity 46,348 48,734
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $81,056 $82,498
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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WALKER INTERACTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
License fees $2,273 $693 $3,836 $4,198
Maintenance 6,687 7,154 13,440 14,399
Consulting and other services 6,416 5,774 12,432 12,178
-------- -------- -------- --------
Total revenues 15,376 13,621 29,708 30,775
OPERATING EXPENSES:
Costs of revenues:
Costs of maintenance, consulting, and
other services 5,804 6,634 11,408 13,030
Amortization of capitalized software 956 998 1,717 1,976
Sales and marketing 3,224 3,738 6,103 7,049
Product development 2,953 3,391 5,872 6,581
General and administrative 2,396 3,618 4,860 5,584
Write-off of purchased in-process
research and development 2,784 - 2,784 -
-------- -------- -------- --------
Total operating expenses 18,117 18,379 32,744 34,220
Operating loss (2,741) (4,758) (3,036) (3,445)
Interest income, net 499 479 982 896
-------- -------- -------- --------
Loss before income taxes (2,242) (4,279) (2,054) (2,549)
Income tax expense (benefit) 50 (1,412) 103 (841)
-------- -------- -------- --------
NET LOSS ($2,292) ($2,867) ($2,157) ($1,708)
======== ======== ======== ========
NET LOSS PER SHARE ($0.17) ($0.22) ($0.16) ($0.13)
======== ======== ======== ========
Shares used in computing net loss
per share 13,250 12,946 13,246 12,918
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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WALKER INTERACTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,157) ($1,708)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 3,381 4,124
Tax benefit of nonqualified stock options 286 -
Write-off of purchased in-process research and
development 2,784 -
Changes in operating assets and liabilities:
Accounts receivable, net (955) 2,168
Prepaid expenses (446) (367)
Accrued liabilities (182) 1,251
Deferred tax assets - (770)
Deferred revenue (21) (42)
Other (92) 393
-------- --------
Net cash provided by operations 2,598 5,049
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock purchase plan
and stock options exercised 1,232 271
Capital lease and loan payments (213) (255)
Treasury stock acquired (1,650) -
-------- --------
Net cash provided (used) by financing activities (631) 16
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short- and long-term investments (18,297) (23,631)
Acquisition of Hunt Systems Group, Inc. (2,109) -
Maturities of short-term investments 4,900 12,200
Sales of short-term investments 6,044 10,700
Purchases of property (720) (1,315)
Additions to capitalized software (2,220) (2,040)
Other 48 -
-------- --------
Net cash used by investing activities (12,354) (4,086)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,387) 979
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 25,412 14,357
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $15,025 $15,336
======== ========
Supplemental Disclosure:
Short- and long-term obligations incurred related
to business acquired $1,650 -
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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WALKER INTERACTIVE SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial statements and include all adjustments (consisting
only of normal recurring adjustments) which the Company considers necessary
for a fair presentation of the financial position, operating results and
cash flows for those periods. Results for the interim periods are not
necessarily indicative of the results for the entire year. These condensed
consolidated financial statements, and notes thereto, should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1995 included in the Walker Interactive Systems, Inc.
Annual Report on Form 10-K. Reclassifications have been made to prior
years' amounts in order to conform to the 1996 presentation.
2. ACQUISITION OF HUNT SYSTEMS GROUP, INC.
On May 17, 1996, the Company acquired the business and net assets of Hunt
Systems Group, Inc. ("Hunt") for a total cash acquisition price of
$3,759,000 comprised of $2,109,000 payable at closing, $1,550,000 payable
based on achievement of certain performance targets during the four year
period following closing and $100,000 in transaction costs. Additional
amounts will be paid if further performance targets are reached during the
same four year period. Of the purchase price, $190,000 was allocated to
identifiable net tangible assets, $785,000 was allocated to purchased
software and $2,784,000 was allocated to in-process research and
development. The amount of the purchase price allocated to in-process
research and development was charged to the Company's operations in the
second quarter of 1996, because technical feasibility had not been
established and no alternative future uses existed at the acquisition date.
The acquisition was accounted for as a purchase transaction. The
intangible assets are being amortized ratably, starting from the date of
acquisition, over a period not to exceed three years. The results of
operations of Hunt, from the date of acquisition, are included in the
Condensed Consolidated Statement of Operations and were not material to the
results of operations of the Company.
6
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WALKER INTERACTIVE SYSTEMS, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Any forward-looking statements contained in the following discussion or
elsewhere in this document involve risks and uncertainties which may cause
actual results to differ materially from those discussed. A wide range of
factors could contribute to those differences, including those discussed below
and in the Company's 1995 Annual Report on Form 10-K and Annual Report for the
year ended December 31, 1995.
Overview
- --------
The Company derives its revenues primarily from software license fees, software
maintenance fees, and professional consulting service fees. The Company's
software is licensed primarily to Fortune 1000 companies and similarly-sized
business and governmental organizations worldwide. Professional consulting
services are provided in conjunction with software products. The Company's
products and services are marketed through its sales forces located in the
United States, the United Kingdom, and the Pacific Rim.
The Company licenses software products directly to customers and occasionally to
distributors for resale. Software license fees are recognized upon delivery of
the software, following receipt of a noncancellable license agreement. The
portion of revenues from new license agreements which relate to the Company's
obligation to provide customer support are deferred and recognized ratably over
the contract support period, which is generally one year. Software maintenance
contracts are generally renewable on an annual basis, although the Company also
negotiates longer-term maintenance contracts from time to time. Revenues from
maintenance contract renewals are deferred and recognized ratably over the term
of the agreement. Revenues from professional service fees are recognized as the
related services are provided.
The Company's revenues and operating results are subject to quarterly and other
fluctuations resulting from a variety of factors, including the effect of
budgeting and purchasing practices of its customers, the length of the customer
evaluation process for the Company's products, the timing of customer system
conversions, general economic conditions, and other factors. Operating results
will continue to be heavily influenced by the level of license sales. During
1995 and the three months and six months ended June 30, 1996, the Company
experienced license revenue levels significantly below historical levels. The
Company's professional services revenues tend to fluctuate due to completion or
commencement of significant projects (which may continue over multiple
quarters), the number of working days in a quarter, the utilization rate of
consulting services personnel and the activity level of new license
implementations which provide new consulting opportunities.
Quarterly revenues and operating results depend primarily on the volume and
timing of orders received during the quarter, which are difficult to forecast.
The Company has often realized a substantial portion of its license revenues in
the last month of the quarter. Therefore, the Company may not be able to reduce
expense levels in response to revenue shortfalls to prevent operating results in
a particular quarter from falling below expectations. These factors may also
cause significant variations in operating results from quarter to quarter. The
Company believes
7
<PAGE>
that quarter to quarter comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
Acquisition
- -----------
On May 17, 1996, the Company acquired the business and net assets of Hunt
Systems Group, Inc. ("Hunt") for a total cash acquisition price of $3,759,000
comprised of $2,109,000 payable at closing, $1,550,000 payable based on
achievement of certain performance targets during the four year period following
closing and $100,000 in transaction costs. Additional amounts will be paid if
further performance targets are reached during the same four year period. Of
the purchase price, $190,000 was allocated to identifiable net tangible assets,
$785,000 was allocated to purchased software and $2,784,000 was allocated to in-
process research and development. The amount of the purchase price allocated to
in-process research and development was charged to the Company's operations in
the second quarter of 1996, because technical feasibility had not been
established and no alternative future uses existed at the acquisition date.
The acquisition was accounted for as a purchase transaction. The intangible
assets are being amortized ratably, starting from the date of acquisition, over
a period not to exceed three years. The results of operations of Hunt, from the
date of acquisition, are included in the Condensed Consolidated Statement of
Operations and were not material to the results of operations of the Company.
8
<PAGE>
Results of Operations
- ---------------------
The following table shows the percentage of certain items included in the
condensed consolidated statements of operations as they relate to total revenue
for the three and six months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES:
License fees 15% 5% 13% 14%
Maintenance 43% 53% 45% 47%
Consulting and other services 42% 42% 42% 39%
------ ------ ------ ------
Total revenues 100% 100% 100% 100%
OPERATING EXPENSES:
Cost of revenues:
Cost of maintenance,
consulting, and other
services 38% 49% 38% 42%
Amortization of capitalized
software 6% 7% 6% 6%
Sales and marketing 21% 27% 21% 23%
Product development 19% 25% 20% 21%
General and administrative 16% 27% 16% 18%
Write-off of purchased
in-process research and
development 18% - 9% -
------ ------ ------ ------
Total operating expenses 118% 135% 110% 111%
Operating loss (18%) (35%) (10%) (11%)
Interest income, net 3% 4% 3% 3%
------ ------ ------ ------
Loss before income taxes (15%) (31%) (7%) (8%)
Income tax expense (benefit) - (10%) - 3%
------ ------ ------ ------
NET LOSS (15%) (21%) (7%) (6%)
====== ====== ====== ======
</TABLE>
Revenues.
The Company's second quarter revenues of $15,376,000 increased 13 percent over
the second quarter revenues of the prior year. The increase reflects revenue
growth of 13 percent in North American operations and 15 percent in the United
Kingdom, partially offset by a 2 percent reduction in revenues in the Pacific
Rim region. The Company's revenues for the first six months of 1996 declined
3 percent compared to the same period in 1995.
The increase in revenues for the second quarter of 1996 is attributable to an
increase in license fee revenues which were $2,273,000 for the three months
ended June 30, 1996 compared to $693,000
9
<PAGE>
for the same period in 1995. For the first six months of 1996, license fee
revenues decreased 9 percent from the comparable 1995 period. Demand for
software applications remains unpredictable and past performance is not an
indication of current or future license fee revenue trends.
Maintenance revenues of $6,687,000 for the quarter ended June 30, 1996 decreased
7 percent compared to the same period in 1995. The Company's revenues from
maintenance for the first six months of 1996 decreased 7 percent to $13,440,000
from $14,399,000 in 1995.
Revenues for consulting and other services of $6,416,000 for the second quarter
of 1996 increased 11 percent from the second quarter of 1995. For the six
months ended June 30, 1996, consulting and other services revenue increased 2
percent from the comparable period in 1995. The increase in consulting and
other services is primarily attributable to an increase of services provided to
the existing customer base and to the increase in license fee sales during
recent quarters, which provide the Company with consulting opportunities.
Consulting and other services revenue is generally derived from users of the
Company's products.
Expenses.
Operating expense remained relatively flat at $18,117,000 for the three months
ended June 30, 1996, compared to $18,379,000 for the same period in 1995. For
the first six months of 1996, operating expenses of $32,744,000 decreased 4
percent from $34,220,000 in 1995. During the first half 1996, the Company had a
charge of $2.8 million related to the write-off of purchased in-process research
and development and $1,095,000 for bad debt and senior management changes.
During the first half of the prior year, the Company had charges of $2,602,000
which primarily consisted of costs related to an office consolidation in the
United Kingdom, additions to bad debt reserve, costs associated with senior
management changes and other reserves. Excluding these charges, 1996 operating
expenses decreased 9 percent from the six month period in 1995. The decrease in
operating expenses was primarily a result of the Company's efforts to reduce
expenses beginning in the second half of 1995.
The cost of maintenance, consulting and other services for the quarter ended
June 30, 1996 of $5,804,000 decreased by 13 percent from $6,634,000 for the same
period in 1995. For the six months ended June 30, 1996, cost of maintenance,
consulting and other services expenses of $11,408,000 decreased 12 percent from
$13,030,000 from the same period 1995.
The following table shows the percentage of total maintenance, consulting, and
other services costs for the three and six months ended June 30, 1996 and 1995
as they relate to maintenance, consulting and other services revenues:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Maintenance, consulting and
other services costs 44% 51% 44% 49%
</TABLE>
10
<PAGE>
The decrease in cost of maintenance, consulting and other services from the
prior year is primarily due to a decrease in headcount and an increase in
employee utilization.
Amortization of capitalized software costs for the second quarter of 1996 of
$956,000 decreased 4 percent from $998,000 for the same period in 1995.
Expenses related to the amortization of capitalized software costs decreased 13
percent to $1,717,000 in the first six months of 1996 from $1,976,000 in the
comparable 1995 period. The decrease in amortization of capitalized software
costs is due to previously released products becoming fully amortized at the end
of the first quarter of 1996, partially offset by additional amortization for
recent software releases.
Sales and marketing expenses decreased during the second quarter of 1996 by 14
percent to $3,224,000 from $3,738,000 for the comparable period in 1995. For
the six months ended June 30, 1996, expenses for sales and marketing of
$6,103,000 decreased 13 percent from $7,049,000 in the comparable 1995 period.
The decrease in sales and marketing expense is primarily a result of increased
marketing and promotions and costs associated with changes in senior management
during the second quarter and six months ended June 30, 1995. Selling and
marketing costs fluctuate as a result of the timing of product releases,
promotional activities and other factors. Sales and marketing expenses are
expected to increase as the Company continues to promote its products and as
variable selling expenses increase if license revenues continue to grow.
Product development expenses decreased 13 percent to $2,953,000 for the second
quarter of 1996 compared to $3,391,000 for the same period in 1995, representing
19 percent and 25 percent of total revenues in such periods, respectively.
Expenses for product development for the first six months of 1996 of $5,872,000
decreased 11 percent from $6,581,000 for the same period in 1995, representing
20 percent and 21 percent of total revenues in such periods, respectively. The
decrease is primarily a result of lower costs associated with reduced employee
turnover and a shift from temporary to permanent employees. In order to
actively compete in the market of financial applications, the Company will
continue to invest in research and development of new and existing products and
technology.
General and administrative expenses decreased 34 percent during the second
quarter of 1996 to $2,396,000 from $3,618,000 for the second quarter of 1995.
For the six months ended June 30, 1996, general and administrative expenses
decreased 13 percent from the comparable prior year period to $4,860,000 from
$5,584,000. General and administrative expenses for the six months ended June
30, 1996 include $1,095,000 for bad debt reserves and costs associated with
senior management changes. Included in the general and administrative expenses
for the six months ended June 30, 1995, was $2,549,000 of expense accruals for
an office consolidation in the United Kingdom, additions to bad debt reserve,
costs associated with a senior management change and other reserves. Excluding
the first half of 1996 and 1995 expense accruals, 1996 general and
administration expenses have increased by 24 percent from the six month period
ended June 30, 1995. The increase is primarily attributable to an increase in
labor related costs as the Company invests in senior management and develops
infrastructure and business processes.
Income tax expense/benefit is recorded based on the Company's estimated
effective income tax rate for the year. The Company currently estimates that
the 1996 effective income tax rate will be zero percent. This rate reflects the
effect of the charge for purchased in-process research and development. For the
six months ended June 30, 1995, the Company estimated a 33 percent income tax
benefit. The Company's effective income tax rates are significantly influenced
by the
11
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proportion of tax-exempt income to taxable income/loss and the generation of
state research credits.
Liquidity and Capital Resources
- -------------------------------
Cash flows vary from quarter to quarter due to negotiated terms on perpetual
license agreements and the timing of maintenance agreement anniversary dates.
Cash flows from operating activities are also affected by the payment of bonuses
and commissions which are tied to performance objectives and payments received
on perpetual license agreements.
The Company's operating activities provided cash of $2,598,000 for the six
months ended June 30, 1996 compared to $5,049,000 provided in the same period of
1995. The decrease was primarily due to a result of an increase in accounts
receivable and other working capital changes.
Net cash used by financing activities was $631,000 during the six months ended
June 30, 1996 compared to $16,000 provided during the same period of 1995. The
decrease from the prior year is primarily attributable to the purchase of shares
of treasury stock offset by proceeds from the Company's employee stock purchase
plan and exercise of employee stock options
The Company intends to continue to utilize a portion of its cash to repurchase
shares of its common stock. The Board of Directors has authorized the
repurchase of 800,000 shares, not to exceed a total cost of $6,000,000. The
shares are being repurchased for use in connection with the Company's employee
stock purchase plan and one of its employee stock option plans. The volume of
shares repurchased will vary from quarter to quarter. As of June 30, 1996, the
Company has acquired 202,000 shares of its common stock at a cost of $2,032,000
for this purpose.
As of June 30, 1996, the Company had cash and equivalents and short- and long-
term investments totaling $39,142,000 compared to $42,318,000 at December 31,
1995. The decrease is primarily attributable to the Company's acquisition of
Hunt Systems Group, Inc. which reduced cash by $2,109,000 and the use of cash to
repurchase shares of common stock in the amount of $1,650,000. As of June 30,
1996, the Company had $19,004,000 in working capital compared to $21,539,000 at
December 31, 1995. The decrease in working capital from December 31, 1995, is
due to the decrease in cash and equivalents and short- and long-term investments
and by an increase in current liabilities.
The Company has a line of credit with a financial institution in the amount of
$3,000,000, secured by marketable securities. The line of credit expires on
June 30, 1997. No borrowings were outstanding under the line as of June 30,
1996.
As of June 30, 1996, the Company's principal source of liquidity included cash,
cash equivalents and short- and long-term investments aggregating $39,142,000.
The Company believes that such amounts, together with expected funds from
operations, will satisfy the Company's currently anticipated working capital and
capital expenditure requirements for at least the next twelve months.
12
<PAGE>
Factors Affecting Operating Performance and Stock Price
- -------------------------------------------------------
The Company's future net income and stock price could be subject to significant
fluctuations, particularly on a quarterly basis. The Company's revenues and net
income are difficult to predict because of the timing of significant sales of
the Company's products. The Company has experienced a disproportionately large
percentage of sales in the third fiscal month of each quarter. A shortfall in
sales at the end of any particular quarter may cause the results for that
quarter to fall significantly short of anticipated levels.
The Company generates revenue from internally developed software products of
which certain products utilize technology licensed from third parties. If
revenue growth or mix changes increase disproportionately from the sales of
software utilizing third party technology, operating income as a percent of
revenue may be below historical levels due to third party royalty obligations.
The Company expects sales and marketing expenses to increase in the future as
the Company releases and promotes new products, increases promotions of existing
product lines, and continues to build its sales force. However, because of the
lengthy sales cycle associated with software applications, the Company believes
that the impact of these activities, if any, on future license fee revenues will
not be immediate and there can be no assurance that increased sales and
marketing spending will result in increased revenues.
The Company expects product development expenses to grow in future periods to
fund development efforts on new and existing products. Although the Company may
be able to release new products in addition to enhancements to existing
products, there can be no assurance that the Company's new or upgraded products
will be accepted, will not be delayed or canceled, or will not contain errors or
"bugs" that could affect the performance of the product or cause damage to
users' data.
As a result of the foregoing factors and other factors which may arise in the
future, the market price of the Company's common stock may be subject to
significant fluctuations over a short period of time. These fluctuations may be
due to factors specific to the Company, to changes in analysts' earnings
estimates or to other factors affecting the computer industry or the securities
market in general.
13
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PART II. OTHER INFORMATION
- ---------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of Walker Interactive Systems,
Inc. was held on May 9, 1996.
(b) Leonard Y. Liu, David C. Wetmore, and William A. Hasler were elected
to the board of directors to hold office until the 1999 Annual
Meeting of Stockholders.
(c) The matters voted upon at the meeting and the voting of the
stockholders with respect thereto are as follows:
(i) The election of Leonard Y. Liu as a director to hold office
until the 1999 Annual Meeting of Stockholders:
For: 11,939,081 Withheld: 35,733
(ii) The election of David C. Wetmore as a director to hold office
until the 1999 Annual Meeting of Stockholders:
For: 11,584,163 Withheld: 390,651
(iii) The election of William A. Hasler as a director to
hold office until the 1999 Annual Meeting of Stockholders:
For: 11,931,981 Withheld: 42,833
(iv) Approval of the amendment of the Company's 1993 Non-Employee
Directors' Stock Option Plan to increase the size of initial
and annual option grants thereunder to 15,000 and 6,000
shares, respectively, and to increase the aggregate number of
shares of Common Stock authorized for issuance under the Plan
by 100,000 shares:
For: 10,806,148 Against: 1,097,324
Abstain: 71,342 Broker Non-Votes: 0
(v) Ratification of the selection of Deloitte & Touche LLP as
independent public accountants of the Company for its fiscal
year ending December 31, 1996.
For: 11,941,792 Against: 6,900
Abstain: 26,122 Broker Non-Votes: 0
14
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
ended June 30, 1996.
15
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WALKER INTERACTIVE SYSTEMS, INC.
--------------------------------
(Registrant)
Date: August 9, 1996 By: /s/ BARBARA M. HUBBARD
-------------- ----------------------
Barbara M. Hubbard
Vice President and
Corporate Controller
(Chief Accounting Officer)
16
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule (electronic filing only)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WALKER
INTERACTIVE SYSTEMS INC. QUARTERLY REPORT ON FORM 10Q FOR THE PERIOD ENDED JUNE
30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,025
<SECURITIES> 24,117
<RECEIVABLES> 12,855
<ALLOWANCES> 1,488
<INVENTORY> 0
<CURRENT-ASSETS> 46,101
<PP&E> 20,017
<DEPRECIATION> 15,846
<TOTAL-ASSETS> 81,056
<CURRENT-LIABILITIES> 27,097
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 46,335
<TOTAL-LIABILITY-AND-EQUITY> 81,056
<SALES> 29,708
<TOTAL-REVENUES> 29,708
<CGS> 13,125
<TOTAL-COSTS> 32,744
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,054)
<INCOME-TAX> 103
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,157)
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
