<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, 1999
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 14,013,999 Shares of $.001 Par Value Common Stock outstanding as of
August 10, 1999.
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
INDEX
<TABLE>
PART I. FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998.................................... 3
Consolidated Statements of Operations for the three and six months ended June 30, 1999 and 1998.......... 4
Consolidated Statements of Cash Flows for the three and six months ended June 30, 1999 and 1998.......... 5
Notes to Consolidated Financial Statements............................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................... 18
Item 4. Submission of Matters to a Vote of Security Holders...................................................... 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................................................... 20
Signatures ......................................................................................................... 21
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
JUNE DECEMBER
ASSETS 30, 1999 31, 1998
----------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,000 $ 15,556
Short-term investments 5,956 5,135
Accounts receivable, net 28,870 30,457
Prepaid expenses 3,469 2,347
----------- ------------
Total current assets 50,295 53,495
Long-term investments 5,432 1,906
Property and equipment, net 4,765 4,962
Capitalized software, net 13,154 18,186
Deferred tax assets, net - 12,501
Other assets 549 4,047
----------- ------------
TOTAL ASSETS $ 74,195 $ 95,097
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 19,868 $ 18,496
Deferred revenue 18,094 14,819
----------- ------------
Total current liabilities 37,962 33,315
Deferred revenue 3,280 1,600
Accrued rent 1,004 954
Other long-term obligations 2,562 2,177
----------- ------------
Total liabilities 44,808 38,046
----------- ------------
Commitments and Contingencies - -
Stockholders' equity:
Common stock, $.001 par value: 50,000,000 shares
authorized; issued 14,013,999 shares - June 30, 1999;
14,184,685 shares - December 31, 1998 14 14
Additional paid-in capital 74,116 74,719
Accumulated other comprehensive income 2 232
Accumulated deficit (44,571) (17,662)
Treasury stock at cost (64,166 shares - June 30, 1999;
49,207 shares - December 31, 1998) (174) (252)
----------- ------------
Total stockholders' equity 29,387 57,051
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 74,195 $ 95,097
=========== ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
REVENUES: --------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
License $ 4,778 $ 5,560 $ 8,168 $11,967
Maintenance 8,038 7,602 15,947 15,327
Consulting 12,528 12,278 25,136 21,808
--------- ----------- ---------- ----------
Total revenues 25,344 25,440 49,251 49,102
OPERATING EXPENSES:
Costs of revenues:
Costs of licenses, maintenance and consulting 11,520 10,522 22,964 20,258
Amortization of capitalized software 1,140 1,037 2,629 2,070
Sales and marketing 5,707 5,698 11,643 11,337
Product development 4,112 3,191 7,462 6,392
General and administrative 3,696 3,173 7,297 5,896
Write-down of capitalized research and
development and associated goodwill 9,003 - 9,003 -
Restructuring charges 3,134 - 3,134 -
--------- ----------- ---------- ----------
Total operating expenses 38,312 23,621 64,132 45,953
Operating income (loss) (12,968) 1,819 (14,881) 3,149
Interest income, net 234 276 473 584
--------- ----------- ---------- ----------
Income (loss) before income taxes (12,734) 2,095 (14,408) 3,733
Income tax expense 13,137 755 12,501 1,344
--------- ----------- ---------- ----------
NET INCOME (LOSS) $(25,871) $ 1,340 $(26,909) $ 2,389
========= =========== ========== ==========
BASIC NET INCOME (LOSS) PER SHARE $(1.85) $0.10 $(1.92) $0.17
========= =========== ========== ==========
Shares used in computing
basic net income (loss) per share 13,965 13,978 14,022 13,976
========= =========== ========== ==========
DILUTED NET INCOME (LOSS) PER SHARE $(1.85) $0.09 $(1.92) $0.16
========= =========== ========== ==========
Shares used in computing
diluted net income (loss) per share 13,965 15,196 14,022 15,140
========= =========== ========== ==========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1999 1998
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $(26,909) $ 2,389
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,325 3,267
Tax benefit of nonqualified stock options - 203
Write-down of capitalized research and
development and associated goodwill 9,003 -
Changes in operating assets and liabilities:
Accounts receivable, net 1,587 (3,690)
Prepaids & other assets (1,122) (363)
Accounts payable & accrued liabilities 1,589 (2,376)
Deferred tax asset 12,501 1,344
Deferred revenue 4,955 (1,178)
Other 77 486
-------- -------
Net cash provided by operations 6,006 82
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock purchase plan
issuances and stock options exercised 381 1,201
Treasury stock acquired (906) (1,578)
Capital lease and loan payments (71) (43)
Repayment of borrowings - (1,422)
-------- -------
Net cash used by financing activities (596) (1,842)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short- and long-term investments (8,540) (3,256)
Maturities of short-term investments 2,625 8,150
Sales of short-term investments 1,508 5,221
Purchases of property (1,192) (966)
Additions to capitalized software (3,184) (3,719)
Effective exchange rate changes on cash (169) (19)
Other (14) 7
-------- -------
Net cash provided (used) by investing activities (8,966) 5,418
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,556) 3,658
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 15,556 7,646
-------- -------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 12,000 $11,304
======== =======
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
- -- -------------------------------
BASIS OF PRESENTATION
The accompanying unaudited 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
consolidated financial statements and any notes thereto, should be read in
conjunction with the audited consolidated financial statements included in
the Walker Interactive Systems, Inc. Annual Report on Form 10-K for the
year ended December 31, 1998.
2. EARNINGS PER SHARE
- -- ------------------
The Company calculates basic earnings per share ("EPS") and diluted EPS in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share". Basic EPS is computed by dividing net income
(loss) by the weighted average number of common shares outstanding for that
period. Diluted EPS takes into account the effect of dilutive instruments,
such as stock options, and uses the average share price for the period in
determining the number of incremental shares that are to be added to the
weighted average number of shares outstanding.
The following is a summary of the calculation of the number of shares used
in calculating basic and diluted EPS (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares used to compute basic EPS 13,965 13,978 14,022 13,976
Add: effect of dilutive securities - 1,218 - 1,164
------------ ------------ ------------ ------------
Shares used to compute diluted EPS 13,965 15,196 14,022 15,140
============ ============ ============ ============
</TABLE>
6
<PAGE>
3. COMPREHENSIVE INCOME
- -- --------------------
SFAS No. 130 requires disclosure of total non-stockholder changes in
equity, which include unrealized gains and losses on securities classified
as available-for-sale under SFAS No. 115, foreign currency translation
adjustments accounted for under SFAS No. 52, and minimum pension liability
adjustments made pursuant to SFAS No. 87.
The reconciliation of net income (loss) to comprehensive income (loss) for
the three and six months ended June 30, 1999 and 1998 is as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) $(25,871) $1,340 $(26,909) $2,389
Other comprehensive loss (119) (13) (230) (10)
------------ ------------ ------------ ------------
Total comprehensive income (loss) $(25,990) $1,327 $(27,139) $2,379
============ ============ ============ ============
</TABLE>
4. RESTRUCTURING CHARGES
- -- ---------------------
During the quarter ended June 30, 1999, the Board of Directors approved a
plan to realign Walker's focus on its core financial and analytic
applications. Associated with this change in strategy, the Board of
Directors approved steps to restructure its operations to increase
operating efficiencies. The Company will focus on the Tamaris and Horizon
product lines, specifically investing in Web-enabled functionality. The
Company will continue to support its Aptos and IMMPOWER customers, focusing
sales and marketing on certain geographic regions, but will limit its
investment in these applications. During the quarter ended June 30, 1999,
the Company recorded a pretax charge of $12.1 million in connection with
the change in strategic direction and the related cost restructuring.
The Company re-evaluated capitalized research and development carrying
amounts, and associated goodwill, against related estimated undiscounted
cashflows. The evaluation indicated that the future undiscounted cashflows
were not sufficient to recover the carrying values of some assets. These
assets were adjusted to net realizable value resulting in a charge of $5.3
million associated with IMMPOWER and Aptos capitalized research and
development costs and $3.2 million related to goodwill. The Company
additionally wrote-off $0.5 million in capitalized research and development
costs which had no future value.
Costs associated with office consolidations in Europe and North America
resulted in a pretax charge of $3.1 million which was required to cover
costs of reducing certain areas of the workforce and facilities to levels
more appropriate to current and expected business requirements. A charge of
$2.0 million was recognized to cover costs associated with excess
facilities. The Company intends to continue to search for tenants to
sublet any vacant excess facilities. The Company also recognized a charge
of $1.1 million due to the reduction in workforce; 40 employees were
terminated in the quarter ended June 30, 1999 or will be terminated as a
result of the Company's realignment strategy. Of the total, 14 were in
product development, 13 were in administrative and finance positions, nine
were engaged in sales and marketing, and four were in customer support.
All terminated employees were informed of their terminations by June 30,
1999.
7
<PAGE>
Restructuring charges taken during the second quarter of 1999 and related
charges against respective liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
Expected Expected
Restructuring Charges to Balance at charges to liability balance at
charges liability June 30, 1999 in 1999 Dec 31, 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Termination payments
to employees $ 1,145 $ (280) $ 865 $ (473) $ 392
Facility Closures: 1,989 - 1,989 (530) 1,459
Write-down of capitalized
research and development 5,788 (5,788) - -
Goodwill impairment 3,215 (3,215) - -
--------------------------------------------------------------------------------
$12,137 $(9,283) $2,854 $(1,003) $1,851
================================================================================
</TABLE>
Subsequent to December 31, 1999, the remaining expected charges against
liabilities will be attributable to termination payments to employees and
future lease payments on excess facilities.
8
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The report on this Form 10-Q contains forward-looking statements, including
statements related to prospects associated with certain product lines, working
capital requirements and Year 2000 related issues. Discussions containing such
forward-looking statements may be found in the material set forth in this
section, generally and specifically herein under the captions "Restructuring
Charges", "Liquidity and Capital Resources", "Year 2000 Readiness" and
"Additional Risk Factors." Actual events or results may differ materially from
those discussed herein. The Company disclaims any obligation to update these
forward-looking statements as a result of subsequent events. The risk factors
on pages 14 through 18, among others, should be considered in evaluating the
Company's prospects and future financial performance.
Walker Interactive Systems, Inc.(TM) (hereinafter "Walker" or the "Company") was
incorporated in California in 1973 and reincorporated in Delaware in March 1992.
Walker designs, develops, markets and supports, on an international basis, a
family of network computing and client server based enterprise wide financial,
operational and analytic application software products and related services.
These products and services enable organizations to improve profitability
through the availability of timely and accurate information, reflect new
business processes as a result of organizational change and exploit the latest
technological advances in order to reduce costs.
Walker designs its software products specifically for the network computing and
client/server models and believes that its architecture is among the most
scalable and adaptable available for enterprise-level financial and analytical
applications software. The Company's strategy is to offer enterprise wide
financial, operational and analytical application software solutions, and
related services, to a variety of industries with best-of-breed software
products utilized in a wide variety of cross-industry solutions. The Walker
applications support and enhance enterprise-wide financial, operational and
analytic processes, including planning, budgeting, forecasting, consolidation,
financial management, performance measurement, revenue and procurement
management. The Company's software products utilize the Microsoft Windows
operating systems on the desktop, NT, UNIX and OS/390 operating systems on the
server and industry-leading On Line Analytical Processing ("OLAP"), Relational
Database Management Systems ("RDBMS") including Hyperion Solutions Essbase,
IBM's DB2, Oracle Express and Microsoft SQL/Server.
The Tamaris product line represents the Company's core suite of business and
financial solutions utilizing the power of the enterprise server, while the
Aptos suite of financial applications runs on UNIX and Windows NT servers. The
Company also develops and markets Horizon(TM) best-of-breed analytic
applications which provide financial reporting, budgeting and financial
consolidation solutions. The Horizon analytic applications products integrate
with Tamaris and also work standalone with leading Enterprise Resource Planning
("ERP") applications.
The Company's software products include productivity tools that allow the
Company's applications to be customized to fit the customer's particular
requirements. The Company complements its software products by providing
specialized professional consulting services to assist customers with
customization and implementation of financial, analytical and operational
solutions to fuel business advantage.
The Company derives its revenues primarily from software licenses, software
maintenance and professional consulting services.
RESTRUCTURING CHARGES
- ---------------------
During the quarter ended June 30, 1999, the Board of Directors approved a plan
to realign Walker's focus on its core financial and analytic applications.
Associated with this change in strategy, the Board of Directors approved steps
to restructure its operations to increase operating efficiencies. The Company
will focus on the Tamaris and Horizon product lines, specifically investing in
Web-enabled functionality. The Company will continue to support its Aptos and
IMMPOWER customers, focusing sales and marketing on certain geographic regions,
but will limit its investment in these applications. During the quarter ended
June 30, 1999, the Company recorded a pretax charge of $12.1 million in
connection with the change in strategic direction and the related cost
restructuring.
9
<PAGE>
The Company re-evaluated capitalized research and development carrying amounts,
and associated goodwill, against related estimated undiscounted cashflows. The
evaluation indicated that the future undiscounted cashflows were not sufficient
to recover the carrying values of some assets. These assets were adjusted to
net realizable value resulting in a charge of $5.3 million associated with
IMMPOWER and Aptos capitalized research and development costs and $3.2 million
related to goodwill. The Company additionally wrote-off $0.5 million in
capitalized research and development costs which had no future value.
Costs associated with office consolidations in Europe and North America resulted
in a pretax charge of $3.1 million which was required to cover costs of reducing
certain areas of the workforce and facilities to levels more appropriate to
current and expected business requirements. A charge of $2.0 million was
recognized to cover costs associated with excess facilities. The Company
intends to continue to search for tenants to sublet any vacant excess
facilities. The Company also recognized a charge of $1.1 million due to the
reduction in workforce; 40 employees were terminated in the quarter ended June
30, 1999 or will be terminated as a result of the Company's realignment
strategy. Of the total, 14 were in product development, 13 were in
administrative and finance positions, nine were engaged in sales and marketing,
and four were in customer support. All terminated employees were informed of
their terminations by June 30, 1999.
Restructuring charges taken during the second quarter of 1999 and related
charges against respective liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
Expected Expected
Restructuring Charges to Balance at charges to liability balance at
charges liability June 30, 1999 in 1999 Dec 31, 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Termination payments
to employees $ 1,145 $ (280) $ 865 $ (473) $ 392
Facility Closures: 1,989 - 1,989 (530) 1,459
Write-down of capitalized
research and development 5,788 (5,788) - -
Goodwill impairment 3,215 (3,215) - -
--------------------------------------------------------------------------------
$12,137 $(9,283) $2,854 $(1,003) $1,851
================================================================================
</TABLE>
Subsequent to December 31, 1999, the remaining expected charges against
liabilities will be attributable to termination payments to employees and future
lease payments for excess facilities.
The following paragraph contains forward-looking statements. Walker will
continue to evaluate its reserves in the future which may result in additional
charges associated with the Company's change in strategy or ongoing cost
reduction program. There can be no assurance that Walker will or will not
dispose or sell assets, liabilities and/or intellectual property associated with
the IMMPOWER or Aptos product lines.
RESULTS OF OPERATIONS
- ---------------------
REVENUES. The Company recorded total revenues of $25.3 million and $25.4
million for the three months ended June 30, 1999 and 1998, respectively. For
the first half of 1999, total revenues for the Company were $49.3 million
compared to $49.1 million for the same period last year. Although total
revenues for the first half of 1999 were relatively unchanged from 1998 to 1999,
the Company's revenue mix had increases in consulting revenues offset by a
decrease in license revenues. Maintenance revenues have remained relatively
flat for the first half of 1999 from 1998.
License revenues for the current quarter decreased $0.8 million or 14 percent
from the second quarter of 1998 to $4.8 million in the comparable 1999 period.
Second quarter 1999 license revenues increased in North America and in the Asia
Pacific region, offset by a decrease in license revenue in Europe. For the
first half of 1999, license revenues decreased $3.8 million or 32 percent from
$12.0 million in 1998 to $8.2 million in 1999. For the first half of 1999,
license revenues decreased in all regions except for Asia Pacific, where license
revenues were relatively unchanged. During the second quarter of 1998, license
revenues recognized in Europe reached record levels, which were not attained in
1999. The Company believes the decrease in license revenues in 1999 is primarily
attributable to a general softness in the enterprise financial application
software industry as a whole. The Company believes that potential customers are
utilizing resources to ensure that current software applications are Year 2000
compatible instead of immediately purchasing and implementing new software
applications. The ongoing downturn in the Asia Pacific economy continues to
restrict license revenue growth in that region.
10
<PAGE>
Consulting revenues were relatively flat at $12.5 million and $12.3 million for
the three months ended June 30, 1999 and 1998, respectively. For the first half
of 1999, consulting revenues increased 15 percent to $25.1 million compared to
$21.8 million for the comparable prior year period. Consulting revenues are
generated from new and existing customers for services related to training,
implementation, customization, migration, enhancement, Year 2000 readiness
engagements, best practice consulting engagements and other special projects.
The Company generates a majority of its consulting revenues from implementation-
related projects. The increase in consulting revenues during the first half of
1999 is attributable to revenues generated from Year 2000 readiness engagements,
best practice consulting engagements, and migration-related projects associated
with the Company's Tamaris, Aptos and Horizon product lines.
COSTS OF LICENSES, MAINTENANCE AND CONSULTING. Costs of licenses, maintenance
and consulting represented 45 percent and 41 percent of total revenues for the
three months ended June 30, 1999 and 1998, respectively. For the six months
ended June 30, 1999, costs of licenses, maintenance and consulting represented
47 percent compared to 41 percent in 1998. Contributing to the increase in the
ratio of costs of licenses, maintenance and consulting over total revenues for
1999 were lower profit margins in Europe associated with fixed-fee consulting
engagements, partially offset by relatively higher profit margins recognized on
Year 2000 readiness and best practice consulting engagements. A decrease in
total license revenues, which generally have a higher profit margin compared to
consulting revenue, has negatively impacted cost of licenses, maintenance and
consulting as a percent of total revenues. Further contributing to the increase
in the percent of cost of licenses, maintenance and consulting of total revenues
was an increase in the proportion of license sales which incorporate third party
technology.
AMORTIZATION OF CAPITALIZED SOFTWARE. Amortization of capitalized software
increased $0.1 million or 10 percent in the second quarter of 1999 compared to
the same period in 1998. For the six months ended June 30, 1999, amortization
of capitalized software increased 27 percent to $2.6 million compared to $2.1
million for the same period in 1998. The increase is due to additional
amortization associated with the Company's ongoing practice of evaluating the
lives of capitalized software products and additional amortization resulting
from recent product releases. Offsetting the increase in amortization is the
decrease in amortization associated with products which have been written off as
part of the restructuring in the second quarter of 1999.
SALES AND MARKETING. In absolute dollars, sales and marketing expenses were
flat at $5.7 million for the three months ended June 30, 1999 and 1998. Sales
and marketing expenses increased $0.3 million or three percent to $11.6 million
for the first half of 1999 compared to $11.3 million for the same prior year
period. Due to newly opened sales offices during the first quarter of 1999,
sales expenses in Europe for the first half of 1999 and in the Asia Pacific
region for the first quarter of 1999 increased over the prior year. Offsetting
the increase was a reduction in marketing expenses in North America as the
Company reduced headcount and marketing promotions in 1999 compared to 1998.
PRODUCT DEVELOPMENT. Product development-related expenses, excluding
amortization of capitalized software, are detailed as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Product development costs, including additions
to capitalized software (gross) $ 5,386 $ 4,975 $10,596 $10,111
Less: additions to capitalized software (1,274) (1,784) (3,134) (3,719)
------------- ------------- ------------ ------------
Product development expenses $ 4,112 $ 3,191 $ 7,462 $ 6,392
============= ============= ============ ============
</TABLE>
During the first quarter of 1999, the Company acquired $0.2 million in software
technology which complemented internally developed products and related
technology. Excluding the acquired software, gross product development expenses
increased slightly due to increased costs associated with the Horizon and
Tamaris product lines. The decrease in additions to capitalized software in
absolute dollars and as a percentage of gross product development costs is
attributable to product development resources which were allocated to non-
capitalizable projects. Historical additions to capitalized software, in
absolute dollars and as a percentage of gross product development costs, are not
a reliable indicator of additions to capitalized software that will be incurred
in the future.
11
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $3.7
million and $3.2 million for the three months ended June 30, 1999 and 1998,
respectively. For the first half of the 1999, general and administrative
expenses were $7.3 million and $5.9 million for the same period in 1998. The
increase of $1.4 million or 24 percent for the first half on 1999 is
attributable to increased usage of outside contractors and increased labor
expenses.
INCOME TAX EXPENSE. Due to the change in strategic direction and the timing of
expiration of certain tax credits, the Company recorded a valuation allowance in
the second quarter of $13.1 million to fully reserve its deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's operating activities provided cash of $5.8 million in the first
half of 1999 and $0.1 million during the comparable 1998 period. The change in
deferred revenue was the primary factor contributing to cash provided from
operation. Offsetting the cash proceeds was the Company's net loss of $26.9
million for the six months ended June 30, 1999.
Financing activities used $0.6 million in cash during the first half of 1999 and
$1.8 million during the same period in 1998. There were proceeds of $0.4
million from the employee stock purchase plan issuances during the first half of
1999 compared to $1.2 million from employee stock purchase plan issuances and
stock option exercises in the comparable 1998 period. The Company used $0.9
million in cash in the first half of 1999 and $1.6 million in cash in the
comparable 1998 period for the acquisition of common stock from the open market.
All stock repurchases were made pursuant to resolutions of the Company's Board
of Directors authorizing the repurchase of the Company's outstanding shares of
common stock, which in aggregate is not to exceed a total cost of $17.5 million.
As of June 30, 1999, the Company had acquired 1,007,000 shares of its common
stock at a cost of $10.9 million. As of June 30, 1999, the Company had
reissued 974,000 of the repurchased shares in connection with the Company's
employee stock purchase plan, one of its employee stock option plans and the
December 1997 acquisition of Revere, Inc. ("Revere").
In connection with the acquisition of Revere, the Company assumed a line of
credit with an outstanding balance of $1.5 million. The outstanding balance on
the assumed line of credit was subsequently paid in full in January 1998.
The Company has a line of credit in the amount of $6.0 million, secured by
marketable securities. The line of credit expires on September 1, 1999. The
Company has never borrowed against this line of credit.
Investing activities used cash of $8.8 million in the first half of 1999
compared to providing cash of $5.4 million for the same period in 1998. The
increase in cash used is primarily attributable to an increase of investment
purchases in 1999.
As of June 30, 1999, the Company's principal sources of liquidity included cash,
cash equivalents and short- and long-term investments aggregating $23.4 million.
The following sentence is a forward looking statement. The Company believes
that its principal sources of liquidity, together with funds expected to be
generated from operations, will satisfy the Company's currently anticipated
working capital and capital expenditure requirements for at least the next
twelve months.
YEAR 2000 READINESS
- -------------------
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Company's computer
equipment and software and devices with imbedded technology that are time-
sensitive may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in normal business activities.
The Company has completed an assessment to determine the effect that the Year
2000 issue will have on it. The Company believes that its current commercial
application software products generally offered for license by the Company to
end-user customers are Year 2000 ready. However, certain versions of these
products currently installed
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at customers' sites will require upgrading or other modifications to become Year
2000 ready. The Company has identified those affected customers who are on the
Company's warranty maintenance program, has contacted those customers and is
assisting those customers to assess their readiness. The Company is making
available to those customers a Year 2000 ready release of its software and will
assist such customers to become Year 2000 ready. The following sentence is a
forward-looking statement. The Company believes that the costs associated with
making certain versions of the Company's products Year 2000 ready will not be
material to the Company's business, results of operations or financial
condition.
The Company has completed an assessment of its computer equipment and software,
including information technology systems, such as accounting, data processing
and telephone/PBX systems, and non-information technology systems, such as fax
machines and alarm systems, to determine if they are Year 2000 ready. The
following three sentences are forward-looking statements. The Company believes
that certain of its non-critical computer equipment and software will require
replacement or modification, at a total cost which is not material to the
Company's results of operations or financial condition. The Company believes
that even if such replacements or modifications were not completed, the Year
2000 issue would not have a material adverse effect on the Company's business,
results of operations or financial condition. In addition, even if the
Company's vendors or suppliers fail to become Year 2000 ready in a timely
manner, the Company believes that such failure would not have a material adverse
effect on the Company's business, results of operations or financial condition.
The costs and impact of the Year 2000 issue are based upon management's best
estimates, which were derived using numerous assumptions regarding future
events, including the continued availability of certain resources, the
functioning of its products in accordance with specifications and other factors.
There can be no assurance that these estimates will prove to be accurate and
actual results could differ from those currently anticipated. Specific factors
that could cause such material differences include, but are not limited to, the
availability and cost of personnel trained in Year 2000 issues and the
functioning of the Company's products in accordance with specifications. In
addition, variability of definitions of "Year 2000 ready" and the number of
products that the Company has sold, may lead to claims for which the impact on
the Company is not currently estimable. No assurance can be given that the
aggregate cost of defending and resolving such claims, if any, would not
materially adversely affect the Company's business, results of operations or
financial condition.
OTHER MATTERS
- -------------
On July 14, 1999, the Company announced that they commenced a search for a new
Chief Executive Officer.
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ADDITIONAL RISK FACTORS
- -----------------------
The Company operates in a rapidly changing environment that involves numerous
risks and uncertainties which could have a material adverse effect on the
Company. The following discussion details some, but not all, of these risks and
uncertainties.
LIQUIDITY AND CAPITAL RESOURCES.
There can be no assurance that the Company will not need to raise substantial
additional capital to fund its operations in the future. There can be no
assurance that additional financing will be available on acceptable terms or
will be available at all.
FLUCTUATION IN OPERATING RESULTS.
The Company's operating results fluctuate as a result of a variety of factors
including:
(i) the execution of new license agreements;
(ii) the shipment of software products;
(iii) customer acceptance criteria for services performed;
(iv) completion of milestone or other significant development
requirements pursuant to the Company's license agreements;
(v) the financial terms of consulting agreements and the inclusion of
fixed as opposed to variable pricing;
(vi) third-party royalty payments for licensed software;
(vii) the demand for the Company's products and services;
(viii) changes in the Company's product mix;
(ix) the development and launch of new products, and the life cycles of
the Company's existing products;
(x) research and development expenditures required to update and expand
the Company's product portfolio and related third-party consulting
costs;
(xi) sales and marketing expenses generally related to the entry into new
markets with new or existing products and maintenance of market
share in existing markets;
(xii) acquisitions and the integration and development of acquired
entities or products;
(xiii) competitive conditions in the industry; and
(xiv) general economic conditions.
As a result, the Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful and should not be relied upon
as indications of future performance.
The Company's quarterly operating results are particularly dependent on the
number of license agreement bookings executed in each quarter. The amount of
quarterly bookings has varied substantially from quarter to quarter due to a
variety of reasons including:
(i) a high proportion of license agreements are negotiated during the
latter part of each quarter and may not be completed before the
quarter end;
(ii) the sales cycles for some of the Company's products are relatively
long due to the Company's focus on "enterprise solutions" as opposed
to individual products, which adds complexity to the customer's
selection, negotiation and approval process;
(iii) the amount related to each booking may vary significantly due to the
need for different solutions for different customers;
(iv) procurement procedures may vary from customer to customer, which may
affect the timing of the bookings;
(v) customers may continue to forego or delay software purchases due to
increased attention and spending on Year 2000 related projects;
(vi) the period for a customer to complete product evaluations and to
complete any subsequent purchase approval may be delayed due to
resource limitations; and
(vii) economic, political and industrial conditions can adversely affect
business opportunities without notice.
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In addition, bookings that are executed during a particular quarter may not be
recognized as revenue during such quarter because such bookings may not have met
the Company's revenue recognition criteria. No assurance can be given that the
Company will be able to effect new bookings in accordance with historical
results or management's expectations, and the inability of the Company to do so
could have a material adverse effect on the Company's operating results.
The Company believes that Year 2000 pressures have caused customers to forego or
delay the licensing of new software as they utilize resources to ensure that
their existing software products are Year 2000 ready. Continuation of this
trend will have an adverse impact on Company revenues and results of operations.
There can be no assurance that revenues will return to historical levels or
obtain historical growth rates in the Year 2000 or beyond.
While the Company typically sells its software under a standard license
agreement, license agreements associated with large enterprise solutions often
require the negotiation of terms and conditions that differ substantially from
the Company's standard license agreement terms. The negotiation of these
agreements may extend the sales cycle. The Company may not always obtain terms
and conditions that permit the recognition of revenue upon shipment of the
licensed product or under the percentage of completion method of contract
accounting rules. Accordingly, revenue may not be recognized after shipment of
a product because specified milestones have not been met or because applicable
services have not been completed or cash is secured.
The Company has entered and expects to enter into fixed-price consulting
agreements, particularly in response to increased competition in the industry.
The Company has recognized lower profit margins on certain fixed-price service
agreements when compared to variable agreements. No assurance can be given that
the Company will be able to negotiate fixed-price agreements on terms that will
allow the Company to retain its historical operating margins.
The Company has historically generated a majority of its consulting revenue from
pre- and post-implementation services. Recently, the Company has provided
services which include, but are not limited to, Year 2000 readiness engagements,
best practice solution engagements and other hardware and software solutions.
The Company intends to continue its pursuit of consulting engagements for which
the Company believes it is qualified. There can be no assurance that these
engagements will result in profit margins equal to or greater than those
engagements that are specific to a customer's product implementation. Also,
there can be no assurance that consulting revenue generated from non-
implementation-related projects will continue in the future.
Employee- and facility-related expenditures comprise a significant portion of
the Company's operating costs and expenses, and are therefore relatively fixed
over the short term. In addition, the Company's expense levels are based, in
significant part, on the Company's forecasted revenue. If revenue levels fall
below expectations, net income is likely to be adversely affected. There can be
no assurance that the Company will be profitable on a quarterly or annual basis
in the future. Any of the foregoing factors could cause the Company's future
operating results to fall below the expectations of public securities market
analysts, which could have an adverse effect on the trading price of the
Company's common stock. See "Volatility of Stock Price."
RELIANCE ON THIRD PARTY TECHNOLOGY.
The Company generates revenue from internally developed software products, some
of which utilize technology licensed from third parties. The Company expects to
continue utilizing third party technology and may enter into agreements with
additional business partners. If sales of software utilizing third party
technology increase disproportionately, gross margins may be below historical
levels due to third party royalty obligations. There can be no assurance that
the third parties will renew existing agreements with the Company or will not
require financial conditions which are unfavorable to the Company. In addition,
there can be no assurance that existing third party agreements will not be
terminated.
INDUSTRY.
Certain software companies, including the Company, have experienced significant
economic downturns as a result of technological shifts, competitive pressures
and uncertainties caused by the Year 2000 transition. These downturns are
characterized by decreased product demand, price erosion, work slowdowns and
layoffs. The Company's operations may, in the future, experience substantial
fluctuations from period to period because of such industry patterns and general
economic and political conditions which could affect the timing of orders from
customers.
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There can be no assurance that such factors will not have a materially adverse
effect on the Company's business, operating results or financial condition.
INTERNATIONAL.
The Company plans to increase its presence in international markets by marketing
its Tamaris, Horizon and consulting and services products. The Aptos and
IMMPOWER product lines will be focused in the geographic areas that have
traditionally proven successful. Risks associated with such pursuits include,
but are not limited to, the following:
(i) changing market demands,
(ii) economic and political conditions in foreign markets,
(iii) foreign exchange fluctuations,
(iv) longer collections cycles,
(v) difficulty in managing a geographically dispersed organization and
(vi) changes in international tax laws.
The downturn in the Asia Pacific business climate had and continues to have an
adverse effect on some market opportunities. Operating results are likely to be
adversely affected if the Company's expansion into international markets is not
successful.
COMPETITION.
The business and financial applications software market for complex
organizations is intensely competitive. The Company's principal competitors
with Tamaris solutions are SAP AG, Oracle Corporation and PeopleSoft, Inc. With
the Horizon suite of products, the Company principally competes with Hyperion
Solutions Corporation, and Comshare, Inc. With Aptos solutions, the Company
principally competes with Oracle Corporation, Lawson Software, Inc., Platinum
Software, Inc., and Systems Union Group Ltd. With the IMMPOWER suite of
products, the Company principally competes with Datastream/SQL, Indus
International, Marcam, Mincom, PSDI and SAP AG.
The Company also competes to a lesser extent with other independent software
application vendors. Some of the Company's current and potential competitors
have substantially greater financial, technical, marketing and sales resources
than the Company. Some of these competitors also offer business application
products not offered by the Company, primarily in the areas of human resources
and manufacturing. However, Walker remains one of the few companies committed
to providing and enhancing applications for the mainframe environment. Most of
the competitors listed above compete with Walker by offering UNIX-based
applications.
The Company encounters competition from a broader range of firms in the market
for professional services. Principal competitors include Andersen Consulting,
IBM Global Services and the consulting divisions of the major accounting firms.
These competitors possess greater resources than the Company. Niche consulting
firms which specialize in the Company's products also compete with the Company
primarily on the basis of price.
The principal competitive factors in the market for business and financial
applications software and services include:
(i) product functionality,
(ii) flexibility,
(iii) portability,
(iv) integration,
(v) reliability,
(vi) performance,
(vii) product availability,
(viii) speed of implementation,
(ix) quality of customer support and user documentation,
(x) vendor reputation,
(xi) experience,
(xii) financial stability,
(xiii) cost effectiveness, and
(xiv) price.
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<PAGE>
The Company believes that it competes favorably with respect to these factors.
There can be no assurance, however, that the Company will be able to compete
successfully in the future.
RAPID TECHNOLOGICAL CHANGE.
The software industry is characterized by rapid technological change. The pace
of change has accelerated due to advances in mainframe and client/server
technology and the growth in Internet, Intranet and extranet utilization. The
Company expects to evaluate potential opportunities and may invest in those
which are compatible with the Company's strategic direction. However, there can
be no assurance that any such investments will be profitable. The Company's
products are also designed primarily for use with certain mainframe and
client/server systems. The introduction of products embodying new technologies
and the emergence of new industry standards can render existing products
obsolete. Accordingly, the Company's future success depends in part upon its
ability to continue to enhance its current products and to develop and introduce
new products that respond to evolving customer requirements and keep pace with
technological development and emerging industry standards, such as new operating
systems, hardware platforms, interfaces and third party applications software.
There can be no assurance that:
(i) the Company will be successful in developing and marketing product
enhancements or new products that respond to technological change,
changes in customer requirements or emerging industry standards;
(ii) the Company will not experience difficulties that could delay or
prevent the successful development, introduction and marketing of
such products and enhancements; or
(iii) any new products or enhancements that it may introduce will achieve
market acceptance.
PRODUCT DEVELOPMENT.
The Company's continued success is dependent on its continued ability to
introduce, develop and market new and enhanced versions of its software
products, although there can be no assurance that such ability can be
maintained. The Company plans to continue its investment in product development
in future periods. However, there can be no assurance that revenues will be
sufficient to support the future product development which is required for the
Company to be competitive. 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.
PROPRIETARY RIGHTS.
The Company regards its products as proprietary. Through its license agreements
with customers and its internal security systems, confidentiality procedures and
employee agreements, the Company has taken steps to maintain the trade secrecy
of its products. However, there can be no assurances that misappropriation will
not occur. In addition, the laws of some countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States.
There can be no assurance that the confidentiality of any proprietary
information will provide any meaningful competitive advantage. The Company has
no patents relating to its products. The Company believes that, because of the
rapid pace of technological change in the computer software industry, that
patents and copyrights are less significant than factors such as the knowledge,
ability and experience of the Company's employees, frequent product enhancements
and the timeliness and quality of support services. There can be no assurance
that the Company's current efforts to retain its products as proprietary will be
adequate.
Although the Company believes that its products do not infringe upon the
proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products or that any such assertions will not
require the Company to enter into royalty arrangements or result in costly
litigation.
PRODUCT LIABILITY.
The Company's license agreements with its customers contain provisions designed
to limit the Company's exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in such
license agreements may not be enforced as a result of international, federal,
state and local laws or ordinances or unfavorable judicial decisions. The
license and support of the Company's software for use in mission critical
17
<PAGE>
applications creates the risk of product liability claims against the Company.
Damage liability or injunctive relief resulting from such a claim could cause a
materially adverse impact on the Company's business, operating results and
financial condition.
EMPLOYEES.
The Company believes that its continued success will depend in large part upon
its ability to attract, train and retain highly-skilled technical, sales,
marketing and managerial personnel. Because of a high level of demand,
competition for such personnel is intense and the Company sometimes experiences
difficulty in locating candidates with appropriate qualifications or within
desired geographic locations. Revenue growth is dependent on the Company's
ability to attract, train, retain and productively manage such personnel.
ACQUISITION-RELATED RISKS.
The Company has acquired and may continue to acquire complimentary businesses,
products or technology. The process of integrating an acquired company's
business into the Company's operations may result in unforeseen operating
difficulties and expenditures and may require significant management attention
that would otherwise be available for the ongoing development of the Company's
business. There can be no assurance that any anticipated benefits of an
acquisition will be realized. Future acquisitions by the Company could result
in potentially dilutive issuances of equity securities, the incurrence of debt
and contingent liabilities and amortization related to goodwill and other
intangible assets, which could materially affect the Company's operating results
and financial condition. Acquisitions involve numerous risks, including
difficulties in the assimilation of operations, technologies and products of the
acquired company, risks associated with entering markets in which the Company
has no or limited direct prior experience and the potential loss of key
employees of the acquired company.
VOLATILITY OF STOCK PRICE.
High technology companies, including the Company, frequently experience
volatility in their common stock prices. Factors such as quarterly fluctuations
in results of operations, announcements of technological innovations by the
Company or its competitors or the introduction of new products by the Company or
its competitors and macroeconomic conditions in the computer hardware and
software industries generally may have a significant adverse impact on the
market price of the Company's stock. If revenues or earnings in any quarter
fail to meet the expectations of the investment community, there could be an
immediate impact on the Company's stock price. In addition, the Company has
issued shares and stock options which if sold directly or exercised and sold on
the open market in large concentrations, could cause the Company's stock price
to decline in the short term. Furthermore, the stock market has from time to
time experienced extreme price and volume fluctuations which have particularly
affected the market price for many high technology companies, in some cases
unrelated to the operating performance of those companies. These broad market
fluctuations may materially adversely affect the market price of the stock of
the Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has U.S. dollar interest-bearing investments that are subject to
interest rate risk. The Company analyzed its investments at year-end to
determine the sensitivity to interest rate changes. The fair values of these
instruments were determined by net present values. The Company's sensitivity
analysis used the same change in interest rates for all maturities. All other
factors were held constant. If interest rates increased by 10 percent the
expected effect on net income related to the Company's investments would be
immaterial.
The majority of the Company's revenues are denominated in the U.S. dollar. The
Company does not engage in interest rate swaps or enter into foreign currency
forward contracts.
No material changes have occurred since December 31, 1998.
18
<PAGE>
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 20, 1999.
(b) William A. Hasler, Leonard Y. Liu and David C. Wetmore were elected to the
Board of Directors to hold office until the 2002 Annual Meeting of
Stockholders. The Directors whose term of office as Director continued
after the meeting were: Richard C. Alberding, Tania Amochaev and John M.
Lillie.
(c) The matters voted upon at the meeting and the voting of the stockholders
with respect thereto are as follows:
(i) The election of William A. Hasler as a Director to hold office until
the 2002 Annual Meeting of Stockholders:
For: 10,798,658 Withheld: 1,927,983
(ii) The election of Leonard Y. Liu as a Director to hold office until
the 2002 Annual Meeting of Stockholders:
For: 10,792,613 Withheld: 1,934,028
(iii) The election of David C. Wetmore as a Director to hold office until
the 2002 Annual Meeting of Stockholders:
For: 10,804,158 Withheld: 1,922,483
(iv) To approve the Company's 1992 Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan from 950,000 shares to
1,500,000, an increase of 550,000 shares:
For: 9,840,707 Against: 2,861,099 Abstain:24,835
(v) To approve the Company's 1993 Non-Employee Directors' Stock Option
Plan, as amended, to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan from 250,000
shares to 350,000, an increase of 100,000 shares.
For: 9,618,396 Against: 3,084,055 Abstain: 24,193
(vi) To ratify the selection of Deloitte & Touche LLP as independent
public accountants of the Company for its fiscal year ending
December 31, 1999.
For: 11,354,837 Against: 1,363,616 Abstain: 8,188
19
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PART II. OTHER INFORMATION
- ---------------------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.14 1995 Non-Statutory Stock Option Plan for Non-Officer
Employees, as amended to date
10.19 Agreement between Leonard Y. Liu and the Registrant
27.1 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, 1999.
20
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
SIGNATURES
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.
WALKER INTERACTIVE SYSTEMS, INC.
--------------------------------
(Registrant)
Date: August 16, 1999 By: /s/ Michael B. Shahbazian
--------------- --------------------------
Michael B. Shahbazian
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
21
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
INDEX TO EXHIBITS
10.14 1995 Non-Statutory Stock Option Plan for Non-Officer Employees, as
amended to date
10.19 Agreement between Leonard Y. Liu and the Registrant
27.1 Financial Data Schedule (electronic filing only)
22
<PAGE>
Exhibit 10.14
WALKER INTERACTIVE SYSTEMS, INC.
1995 NONSTATUTORY STOCK OPTION PLAN
FOR NON-OFFICER EMPLOYEES
ADOPTED AUGUST 28, 1995
RATIFIED AND AMENDED SEPTEMBER 20, 1995
AMENDED MAY 9, 1996, OCTOBER 20, 1997, AUGUST 5, 1998,
NOVEMBER 9, 1998, APRIL 12, 1999 AND JUNE 25, 1999
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees of the Company, and its Affiliates, may be given an opportunity
to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services
of persons who are now non-officer Employees of the Company or its
Affiliates, to secure and retain the services of new Employees in such
positions, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall
be only Nonstatutory Stock Options.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined
in Sections 424(e) and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means termination of an Employee's employment with the
Company for any of the following reasons as determined in good faith by the
Company:
(i) an intentional act which materially injures the Company;
(ii) an intentional refusal or failure to follow lawful and
reasonable directions of the Board or the individual to whom the Employee
reports;
(iii) a willful and habitual neglect of duties; or
(iv) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the
Company.
(d) "Change in Control" means:
(i) a dissolution, liquidation or sale of substantially all of
the assets of the Company;
(ii) a merger or consolidation in which the Company is not the
surviving corporation; or
(iii) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(g) "Company" means Walker Interactive Systems, Inc., a Delaware
corporation.
(h) "Continuous Status as an Employee, Director or Consultant" means
the employment relationship, or service as a member of the Board or
Consultant, is not interrupted or terminated. The Board, in its sole
discretion, may determine whether Continuous Status as an Employee,
Director or Consultant shall be considered interrupted in the case of: (i)
any leave of absence approved by the Board, including sick leave, military
leave, or any other personal leave; or (ii) transfers between locations of
the Company or between the Company, Affiliates or their successors.
(i) "Director" means a member of the Board.
(j) "Disinterested Person" means a Director who either (i) was not
during the one year prior to service as an administrator of the Plan
granted or awarded equity securities pursuant to the Plan or
<PAGE>
any other plan of the Company or any Affiliate entitling the participants
therein to acquire equity securities of the Company or any Affiliate except
as permitted by Rule 16b-3(c)(2)(i); or (ii) is otherwise considered to be
a "disinterested person" in accordance with Rule 16b-3(c)(2)(i), or any
other applicable rules, regulations or interpretations of the Securities
and Exchange Commission.
(k) "Employee" means any person employed by the Company or any
Affiliate of the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of the
common stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange
with the greatest volume of trading in common stock) on the last market
trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(2) If the common stock is quoted on the Nasdaq System (but not
on the Nasdaq National Market) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to
the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the
Board.
(m) "Involuntary Termination Without Cause" means an Employee's
dismissal or discharge other than for Cause. The termination of an
Employee's employment as a result of the Employee's death or disability
will not be deemed to be an Involuntary Termination Without Cause.
(n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
(r) "Optionee" means an Employee who holds an outstanding Option.
(s) "Plan" means this Walker Interactive Systems, Inc. 1995
Nonstatutory Stock Option Plan for Non-Officer Employees.
(t) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
3. Administration.
(a) The Plan shall be administered by Compensation Committee of the
Board unless and until the Compensation Committee or the Board delegates
administration to a Committee, as provided in subsection 3(c).
(b) The Compensation Committee shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in
whole or in part; and the number of shares for which an Option shall be
granted to each such person.
(2) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Compensation Committee, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any
Option Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11 of
the Plan.
(4) Generally, to exercise such powers and to perform such acts
as the Compensation Committee deems necessary or expedient to promote the
best interests of the Company.
<PAGE>
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the
members of which Committee shall be Disinterested Persons. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Compensation Committee (and references in this Plan to the
Compensation Committee shall thereafter be to the Committee), subject,
however, to such resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Compensation Committee.
The Compensation Committee may abolish the Committee at any time and revest
in the Compensation Committee the administration of the Plan.
Notwithstanding anything in this Section 3 to the contrary, the Board or
the Compensation Committee may delegate to a committee of one or more
members of the Board the authority to grant Options to persons eligible to
receive Options as provided in Section 5 of the Plan.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Compensation
Committee expressly declares that such requirement shall not apply. Any
Disinterested Person shall otherwise comply with the requirements of Rule
16b-3.
(e) The Board shall at all times have the authority to arrogate to
itself any or all of the powers and responsibilities allocated to the
Compensation Committee or to the Committee under the Plan.
4. Shares Subject To The Plan.
(a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall
not exceed in the aggregate three million (3,000,000) shares of the
Company's common stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in
full, the stock not purchased under such Option shall revert to and again
become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. Eligibility.
Nonstatutory Stock Options may be granted under the Plan only to
Employees who (i) hold positions below the level of Officer, and (ii) are
not then subject to Section 16 of the Exchange Act.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Compensation Committee shall deem appropriate. The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the
Option or otherwise) the substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Price. The exercise price of each Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted.
(c) Consideration. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, in one or more of the following forms: (i) in cash at the time
the Option is exercised, (ii) at the discretion of the Compensation
Committee or the Committee, by delivery to the Company of other common
stock of the Company, or (iii) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which results in
the receipt of cash (or check) by the Company prior to the issuance of the
stock.
(d) Transferability. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the
requirements of Rule 16b-3 and the rules thereunder (a "QDRO"), and shall
be exercisable during the lifetime of the person to whom the Option is
granted only by such person or any transferee pursuant to a QDRO. The
person to whom the Option is granted may, by delivering written notice to
the Company, in a form satisfactory to the Company, designate a third party
who, in the event of the death of the Optionee, shall thereafter be
entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to
time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to
that period, and may be exercised with respect to some or all of the shares
allotted to such period and/or any prior period as to which the Option
became vested but was not fully exercised. The Option may be subject to
such other terms and conditions on the time or times
<PAGE>
when it may be exercised (which may be based on performance or other
criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Securities Law Compliance. The Company may require any Optionee,
or any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience
in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable
and experienced in financial and business matters, and that he or she is
capable of evaluating, alone or together with the purchaser representative,
the merits and risks of exercising the Option; and (2) to give written
assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the
stock. The foregoing requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (i) the issuance of the shares
upon the exercise of the Option has been registered under a then currently
effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need
not be met in the circumstances under the then applicable securities laws.
The Company may, upon advice of counsel to the Company, place legends on
stock certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including,
but not limited to, legends restricting the transfer of the stock.
(g) Termination of Service. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates (other than upon
the Optionee's death or disability), the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it at the
date of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant or such
longer or shorter period specified in the Option Agreement, or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionee does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Disability of Optionee. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer
or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.
If, at the date of termination, the Optionee is not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion
of the Option shall revert to and again become available for issuance under
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become
available for issuance under the Plan.
(i) Death of Optionee. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination
of, the Optionee's Continuous Status as an Employee, Director or
Consultant, the Option may be exercised (to the extent the Optionee was
entitled to exercise the Option at the date of death) by the Optionee's
estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option
upon the Optionee's death pursuant to subsection 6(d), but only within the
period ending on the earlier of (i) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become
available for issuance under the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares
subject to the Option prior to the full vesting of the Option. Any unvested
shares so purchased may be subject to a repurchase right in favor of the
Company or to any other restriction the Board determines to be appropriate.
<PAGE>
(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state, local or foreign
tax withholding obligation relating to the exercise of such Option by any
of the following means or by a combination of such means: (1) tendering a
cash payment; (2) authorizing the Company to withhold shares from the
shares of the common stock otherwise issuable to the participant as a
result of the exercise of the Option; or (3) delivering to the Company
owned and unencumbered shares of the common stock of the Company.
7. Covenants Of The Company.
(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such
Options.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the Options;
provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any Option or any stock
issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell
stock upon exercise of such Options unless and until such authority is
obtained.
8. Use Of Proceeds From Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. Miscellaneous.
(a) The Compensation Committee shall have the power to accelerate the
time at which an Option may first be exercised or the time during which an
Option or any part thereof will vest pursuant to subsection 6(e),
notwithstanding the provisions in the Option stating the time at which it
may first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such person has satisfied all requirements
for exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee any right to continue in
the employ of the Company or any Affiliate, or to continue to serve as a
member of the Board or as a consultant, or shall affect the right of the
Company or any Affiliate to terminate the employment relationship of any
Employee with or without cause, to remove a member of the Board pursuant to
the terms of the Company's Bylaws, or to terminate a consultant in
accordance with the terms of this agreement with the Company or Affiliate.
(d) The Compensation Committee shall have the authority to effect, at
any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of
Options, the cancellation of any outstanding Options and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of Common Stock, but having an exercise price
per share not less than eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the new grant date.
10. Adjustments Upon Changes In Stock.
(a) If any change is made in the stock subject to the Plan, or
subject to any Option (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash,
stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan will be
appropriately adjusted in the class(es) and maximum number of shares
subject to the Plan pursuant to subsection 4(a) and the outstanding Options
will be appropriately adjusted in the class(es) and number of shares and
price per share of stock subject to such outstanding Options.
(b) In the event of a Change in Control, then, to the extent
permitted by applicable law: (i) any surviving corporation shall assume any
Options outstanding under the Plan or shall substitute similar Options for
those outstanding under the Plan; or (ii) such Options shall continue in
full force and effect. In the event any surviving corporation refuses to
assume or continue such options, or to substitute similar options for those
outstanding under the Plan, then, with respect to options held by persons
then performing services as employees, consultants or directors for the
Company, the time during which such Options become vested or may be
exercised shall be accelerated and any outstanding unexercised rights under
any Options terminated if not exercised prior to such event.
<PAGE>
(c) In the event an Employee's employment is terminated due to an
Involuntary Termination Without Cause within twenty-four (24) months after
the effective date of a Change in Control, then all Options issued and
outstanding under the Plan and held by the Employee shall accelerate and
become immediately vested and exercisable. Notwithstanding the foregoing,
if the Change in Control was a transaction that was accounted for as a
pooling of interests for financial reporting purposes, then the unvested
portion of such stock options shall not accelerate unless the Company
receives reasonable assurances from the Company's independent public
accountants (and from the acquiring party's independent public accountants)
that in their good faith judgment such acceleration will not adversely
affect the pooling of interests accounting treatment of such Change in
Control transaction.
11. Amendment Of The Plan and Options.
(a) The Board or the Compensation Committee at any time, and from
time to time, may amend the Plan.
(b) The Compensation Committee may, in its sole discretion, submit
the Plan or any amendment to the Plan for stockholder approval.
(c) It is expressly contemplated that the Board or the Compensation
Committee may amend the Plan in any respect the Board or the Compensation
Committee deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder.
(d) Rights and obligations under any Option granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i)
the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.
(e) The Board or the Compensation Committee at any time, and from
time to time, may amend the terms of any one or more Options; provided,
however, that the rights and obligations under any Option shall not be
impaired by any such amendment unless (i) the Company requests the consent
of the person to whom the Option was granted and (ii) such person consents
in writing.
12. Termination Or Suspension Of The Plan.
(a) The Board or the Compensation Committee may suspend or terminate
the Plan at any time. Unless sooner terminated, the Plan shall terminate on
the date when all the shares of the Company's common stock reserved for
issuance under the Plan have been issued. No Options may be granted under
the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Option was
granted.
13. Effective Date Of Plan.
The Plan shall become effective on August 28, 1995.
Adopted by the Compensation Committee on August 28, 1995 with an aggregate
share reserve of 140,000 shares.
Ratified and amended by the Board of Directors on September 20, 1995 to
increase the aggregate share reserve to 600,000 shares.
Amended by the Board of Directors on May 9, 1996 to increase the aggregate
share reserve to 1,100,000 shares.
Amended by the Board of Directors on October 20, 1997 to increase the
aggregate share reserve to 1,600,000 shares.
Amended by the Board of Directors on August 5, 1998 to remove the
discretion of the Board to determine whether acceleration of vesting shall
occur in the event of a Change in Control if the successor entity does not
assume or continue outstanding options or substitute similar options and to
provide for acceleration of vesting upon an employee's Involuntary
Termination Without Cause within twenty-four months after a Change in
Control.
Amended by the Board of Directors on November 9, 1998 to increase the
aggregate share reserve to 2,000,000 shares.
<PAGE>
Amended by the Board of Directors on April 12, 1999 to increase the
aggregate share reserve to 2,500,000 shares.
Amended by the Board of Directors on June 25, 1999 to increase the
aggregate share reserve to 3,000,000 shares.
<PAGE>
Exhibit 10.19
AGREEMENT
This Agreement (this "Agreement"), is entered into by and between Walker
Interactive Systems, Inc. (the "Company") and Leonard Y. Liu ("Executive"),
effective July 14, 1999.
WITNESSETH
Whereas, the Company and Executive entered into an Executive Employment
Agreement, effective June 25, 1995, and the Amendment No. 1 to Executive
Employment Agreement (Amended and Restated Version), effective August 5, 1998
(collectively the "Employment Agreement");
Whereas, the Company and Executive have mutually agreed that Executive will
terminate his employment with the Company (the "Termination");
Whereas, the Company and Executive now desire to enter into this Agreement
regarding the benefits that Executive will receive upon such Termination;
Now, Therefore, in consideration of the mutual promises and covenants
contained herein, the parties hereby agree as follows:
1. Benefits Upon Termination. Upon the Termination, the Company hereby
agrees that the Executive will receive the benefits set forth in the second
paragraph of Section 7.1(a) of the Employment Agreement; provided, however,
that, subject to Section 2 hereof, Executive shall receive accelerated vesting
of any and all shares pursuant to any and all stock options granted to Executive
such that all shares which otherwise would have vested on or before the end of
the twenty-four (24) months following the date of Termination will be deemed
vested as of the date of Termination and Executive shall have twenty-four (24)
months after the date of Termination to exercise any and all vested shares
subject to any and all stock options granted to Executive (provided that any
such extension shall not extend the maximum term during which any such option
may be exercised beyond ten (10) years). Notwithstanding the foregoing, with
respect to the foregoing provision for accelerated vesting and extended exercise
period for stock options, in the event that Executive continues, after the date
of Termination, to provide services to the Company as a director of or a
consultant to the Company (such that the vesting of Executive's stock options
and exercisability of vested shares thereunder continue until the date that
Executive ceases to provide services in any such capacity (the "Separation
Date"), such accelerated vesting and extended exercise period shall not become
effective until the Separation Date, and all references in such provision to the
"date of Termination" shall be deemed to refer to the Separation Date.
2. Cancellation of Performance Options. Effective upon the date of this
Agreement, the nonstatutory stock option to acquire 300,000 shares of the
Company's common stock under the Company's 1994 Equity Incentive Plan (the "1994
Plan") granted to Executive on August 5, 1998, which option is completely
unvested as of the date hereof, shall be cancelled and shall be of no further
force or effect. The foregoing sentence shall not in any way affect the
effectiveness or the terms and conditions of the nonstatutory stock option to
acquire 100,000 shares of the Company's common stock under the 1994 Plan granted
to Executive on August 5, 1998.
3. Tax Consequences. Executive acknowledges that he has been advised by
the Company to consult with a tax advisor or attorney with respect to the tax
consequences, if any, of this Agreement.
In Witness Whereof, the parties have duly authorized and caused this
Agreement to be executed as of the date reference above.
Leonard Y. Liu Walker Interactive Systems, Inc.
/s/ Leonard Y. Liu By: /s/ Michael B. Shahbazian
- ------------------ ---------------------------
<PAGE>
Date: July 14, 1999 Title: Senior Vice President and Chief Financial Officer
------------- -------------------------------------------------
Date: July 14, 1999
-------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WALKER
INTERACTIVE SYSTEMS, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 12000
<SECURITIES> 11388
<RECEIVABLES> 30407
<ALLOWANCES> 1537
<INVENTORY> 0
<CURRENT-ASSETS> 50295
<PP&E> 29155
<DEPRECIATION> 24390
<TOTAL-ASSETS> 74195
<CURRENT-LIABILITIES> 37962
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 29373
<TOTAL-LIABILITY-AND-EQUITY> 74195
<SALES> 49251
<TOTAL-REVENUES> 49251
<CGS> 25593
<TOTAL-COSTS> 64132
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14408)
<INCOME-TAX> 12501
<INCOME-CONTINUING> 0
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<NET-INCOME> (26909)
<EPS-BASIC> (1.92)
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