<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
Commission file number: O-26886
-------
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 68-0239619
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
100 BLUE RAVINE ROAD
FOLSOM, CALIFORNIA 95630
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(916) 353-2400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Number of shares of registrants common stock outstanding as of October 31, 1996:
31,977,740
================================================================================
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1996
and June 30, 1996 3
Condensed Consolidated Statements of Income for the three months
ended September 30, 1996 and September 30, 1995 4
Condensed Consolidated Statements of Cash Flows for the three months
ended September 30, 1996 and September 30, 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 6. Exhibits and Reports on Form 8-K 12
Index to Exhibits 12
SIGNATURES 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OBJECTIVE SYSTEMS INTEGRATORS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
------------ --------
(UNAUDITED) (1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 55,337 $ 53,988
Accounts receivable (net of allowances of
$1,355 and $987)................................. 34,284 32,198
Income tax refund receivable....................... 6,562 7,710
Prepaid expenses and other current assets.......... 3,119 2,364
-------- --------
Total current assets............................ 99,302 96,260
Property and equipment, net.......................... 12,479 9,822
Other assets (net of accumulated amortization of
$806 and $748)................................... 462 431
-------- --------
Total assets.................................... $112,243 $106,513
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 2,407 $ 3,462
Accrued liabilities................................ 4,222 2,644
Deferred revenue................................... 4,135 5,349
-------- --------
Total current liabilities....................... 10,764 11,455
-------- --------
Shareholders' equity:
Common stock....................................... 77,182 73,207
Deferred stock compensation........................ (903) (996)
Retained earnings.................................. 25,200 22,847
-------- --------
Total shareholders' equity...................... 101,479 95,058
-------- --------
Total liabilities and shareholders' equity...... $112,243 $106,513
======== ========
</TABLE>
(1) The information in this column was derived from the Company's audited
consolidated balance sheet as of June 30, 1996.
See notes to condensed consolidated financial statements.
3
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
License............................. $13,105 $ 5,456
Service and other................... 4,450 4,503
------- -------
Total revenues................... 17,555 9,959
------- -------
Cost of revenues:
License............................. 361 208
Service and other................... 3,186 2,592
------- -------
Total cost of revenues........... 3,547 2,800
------- -------
Gross profit.......................... 14,008 7,159
------- -------
Operating expenses:
Sales and marketing................. 5,328 2,961
Research and development............ 2,722 1,218
General and administrative.......... 2,774 1,127
------- -------
Total operating expenses......... 10,824 5,306
------- -------
Income from operations................ 3,184 1,853
Other income (expense), net........... 683 (15)
------- -------
Income before taxes................... 3,867 1,838
Provision for income taxes............ 1,514 735
------- -------
Net income............................ $ 2,353 $ 1,103
======= =======
Net income per share.................. $ .07 $ .04
======= =======
Shares used in per share computation.. 34,067 31,407
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 2,353 $ 1,103
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization.................. 885 618
Amortization of deferred stock compensation.... 93 105
Interest received on loans to shareholders..... -- 212
Effect of changes in:
Accounts receivable......................... (2,086) (5,384)
Income tax refund receivable................ 5,080 --
Prepaid expenses and other current assets... (755) (361)
Accounts payable............................ (1,055) (11)
Accrued liabilities......................... 1,576 174
Income taxes payable........................ -- 627
Deferred revenue............................ (1,214) 2,342
------- -------
Net cash provided by (used for)
operating activities.................... 4,877 (575)
------- -------
Cash flows from investing activities:
Purchases of property and equipment............... (3,571) (1,798)
Loans to shareholders collected................... -- 4,200
------- -------
Net cash (used for) provided
by investing activities................. (3,571) 2,402
------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock............ 43 --
Repayments of line-of-credit...................... -- (401)
------- -------
Net cash provided by (used in)
financing activities.................... 43 (401)
------- -------
Net increase in cash and cash
equivalents........................................ 1,349 1,426
Cash and cash equivalents:
Beginning of the period........................... 53,988 763
------- -------
End of the period................................. $55,337 $ 2,189
======= =======
Other cash flow information:
Cash paid during the period for:
Interest....................................... $ 17 $ 24
======= =======
Income taxes................................... $ -- $ 330
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The information furnished in this report reflects all
adjustments which, in the opinion of management, are necessary for a fair
statement of the financial position, results of operations and cash flows as of
and for the interim periods. Such adjustments consist of items of a normal
recurring nature. The condensed consolidated financial statements included
herein should be read in conjunction with the audited financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended June 30, 1996. The results of operations for the interim periods are not
necessarily indicative of the results of operations expected for the full fiscal
year or for any other future period.
2. EARNINGS PER SHARE
Net income per share is based on the weighted average number of common and
common equivalent shares outstanding during the periods. Common equivalent
shares are calculated using the treasury stock method and represent shares
issuable upon exercise of outstanding stock options. All common shares issued
and stock options granted at a price less than the initial public offering price
subsequent to July 1, 1994 (using the treasury stock method for options and an
estimated public offering price) have been included in the computation of common
and common equivalent shares outstanding for all periods presented.
3. RELATED PARTY TRANSACTION
For the three month period ended September 30, 1996, the Company had
revenues of approximately $3.0 million from Cisco Systems, Inc. ("Cisco"). Cisco
currently owns 1,315,789 shares of Common Stock of the Company and a Vice
President of Cisco is a member of the Company's Board of Directors. At September
30, 1996, accounts receivables from Cisco were approximately $3.0 million.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company develops, markets and supports object-oriented, client/server
software systems for network operations support and management. The Company was
founded in June 1989 and began shipments of NetExpert(TM) in August 1990. As of
September 1996, the Company had directly or indirectly licensed its products to
more than 150 customers worldwide. The Company has experienced substantial
revenue growth in each of the last three fiscal years and has been profitable in
each of the last twelve quarters. Revenue from licenses, service and support of
NetExpert has accounted for substantially all of the Company's revenues since
inception. A typical NetExpert sale generally includes a combination of license
fees, fees for professional services and fees for maintenance, customer support
and training. The Company believes that revenue from the licenses, service and
support of NetExpert will continue to account for substantially all of the
Company's total revenue in fiscal 1997 and for the foreseeable future
thereafter. A significant portion of the Company's revenues has been, and will
continue to be, derived from substantial orders placed by large organizations.
The timing of such orders and their fulfillment has caused and will continue to
cause material fluctuations in the Company's operating results, particularly on
a quarterly basis. The Company believes that its quarterly revenues and
operating results are likely to vary significantly in the future and that
period-to-period comparisons of its revenue and results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance.
The Company distributes and sells NetExpert to end users in North America
primarily through a direct sales organization. Outside of North America, the
Company sells its products and services principally through systems integrators
and local distributors and, to a lesser extent, through a direct sales force.
The Company intends to enter into additional international markets and to
continue to expand its operations outside of North America by expanding its
direct sales force, opening additional customer support and sales offices,
adding distributors and pursuing additional strategic relationships.
RESULTS OF OPERATIONS
Revenues
- --------
The Company's revenues are derived from license fees and fees for a full
range of services complementing its products, including professional services,
software maintenance and customer support and training. Software licenses are
generally granted and priced on a per-seat basis, although the Company may grant
site or network wide or enterprise wide licenses for larger installations. The
Company's software licenses generally provide for an up-front fee and are non-
royalty bearing. Revenue from software licenses for which collectibility is
probable and customer acceptance is not dependent on the fulfillment of other
significant vendor obligations is generally recognized after shipment and
customer acceptance. Costs associated with insignificant vendor obligations are
accrued. Revenue from software licenses with other significant vendor
obligations is generally recognized using contract accounting on a percentage of
completion basis, using input or output measurements as appropriate. Although
the Company's license agreements generally do not provide for a right of return,
reserves are maintained for returns and potential credit losses, neither of
which has had a material effect on the Company's results of operations or
financial condition through September 30, 1996. The Company offers 12-month
support contracts to its customers generally at a cost of 20% of the customers
aggregate license price. The support contract entitles the customer to unlimited
telephone support, product updates and product maintenance during the support
period. Maintenance revenues from ongoing customer support and product upgrades
are deferred and recognized ratably over the term of the maintenance agreement,
typically 12 months. Payments for maintenance fees are generally made in advance
and are generally non-refundable. Revenues for training, consulting and
professional services are recognized as the services are performed and
acceptance criteria has been met.
Total revenues increased 76% to $17.6 million in the first quarter of fiscal
1997 from
7
<PAGE>
$10.0 million in the first quarter of fiscal 1996. Total revenues increased due
to increased licenses of NetExpert and an increase in maintenance fees partially
offset by a decrease in professional services. The Company's product and service
list prices did not change significantly between comparison periods. Currently,
the Company believes its products are priced at a premium when compared to its
competitors. However, the Company anticipates that competition will increase,
resulting in downward pricing pressure on the Company's products and services.
International revenues increased to 37% of total revenues in the first
quarter of fiscal 1997 from 33% of total revenues in the first quarter of fiscal
1996. International revenues increased due primarily to increased licenses of
NetExpert to new customers, penetration into new countries and an increase in
professional services and maintenance fees resulting from the increase in
licenses.
License Revenues. License revenues increased 140% to $13.1 million in the
----------------
first quarter of fiscal 1997 from $5.5 million in the first quarter of fiscal
1996. License revenues increased in the first quarter of fiscal 1997 as compared
to the first quarter of fiscal 1996 due to additional licenses to existing
customers of the Company's NetExpert, as well as new customer installations.
License revenues represented 75% and 55% of total revenues in first quarter
of fiscal 1997 and 1996, respectively. The Company anticipates that license
revenue will continue to represent a majority of its total revenues for the
foreseeable future. The Company expects that prior growth rates of the Company's
license revenues are not sustainable and should not be relied upon as an
indication of growth rates for any future period. The Company also believes that
competition in its markets will increase which could result in price reductions,
reduced gross margins or loss of market share, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition.
Service and Other Revenues. Service and other revenues remained comparable at
--------------------------
$4.5 million in the first quarter of fiscal 1997 and in the first quarter of
fiscal 1996. Service and other revenues remained constant in the first quarter
of fiscal 1997 as compared to the first quarter of fiscal 1996 primarily due to
increased maintenance and customer support from a larger installed base of the
Company's products offset by a decrease in professional services revenue.
Professional services revenue decreased in the first quarter of fiscal 1997
compared to the first quarter of fiscal 1996 due primarily to the booking of
significant revenues in the first quarter of fiscal 1996 related to three
professional service contracts with major customers that were substantially
completed in fiscal 1996.
Service and other revenues represented 25% and 45% of total revenues in the
first quarter of 1997 and 1996, respectively. The Company anticipates that
service and other revenues will continue to represent a significant portion of
its total revenues in future periods, primarily as a result of continued demand
for professional services in connection with increased licenses of NetExpert,
renewal of existing maintenance contracts and incremental maintenance revenues
attributable to the increasing installed base of NetExpert. The Company expects
that prior growth rates of the Company's service and other revenues are not
sustainable and should not be relied upon as an indication of growth rates for
any future period.
Cost of Revenues
- ----------------
Cost of License Revenues. Cost of license revenues consists primarily of
------------------------
license fees paid to third-party software vendors and the costs of product media
and duplication, manuals, packaging materials, shipping expenses, amortization
of capitalized software costs and related labor costs. Cost of license revenues
increased 74% to $361,000 in the first quarter of fiscal 1997 from $208,000 in
the first quarter of fiscal 1996. The increase resulted primarily from
additional fees paid to third-party software vendors from increased revenues.
Gross profit on license revenue was 97% and 96% in the first quarter of fiscal
1997 and 1996, respectively.
Cost of Service and Other Revenues. Cost of service and other revenues
----------------------------------
consists primarily of personnel costs for providing professional services,
consulting fees paid to third-party
8
<PAGE>
providers of professional services, personnel costs for telephone support,
maintenance, shipment of product upgrades and customer training. Cost of service
and other revenues increased 23% to $3.2 million in the first quarter of fiscal
1997 from $2.6 million in the first quarter of fiscal 1996. The increase in cost
of service and other revenues is primarily due to increases in personnel and
related costs in professional services, telephone support, maintenance, and
customer training. Gross profit on service and other revenues was 28% and 42% in
the first quarter of fiscal 1997 and 1996, respectively.
Operating Expenses
- ------------------
Sales and Marketing. Sales and marketing expenses consist primarily of
-------------------
salaries, commissions and bonuses for sales and marketing personnel, facilities
costs associated with the Company's sales and customer support offices and
promotional expenses. Sales and marketing expenses increased 80% to $5.3 million
in the first quarter of fiscal 1997 from $3.0 million in the first quarter of
fiscal 1996. Sales and marketing expenses represented 30% of total revenues in
the first quarter of fiscal 1997 and 1996. The increase in sales and marketing
expenses resulted primarily from the expansion of the Company's worldwide sales
and marketing organization, expansion and support of the Company's indirect
sales channels, particularly outside of North America, and increased expenses
for trade shows, advertising and other marketing programs. The Company expects
that sales and marketing expenses in future periods will continue to increase in
absolute dollars and may increase as a percentage of total revenues.
Research and Development. Research and development expenses increased 123%
------------------------
to $2.7 million in the first quarter of fiscal 1997 from $1.2 million in the
first quarter of fiscal 1996. Research and development expenses represented 16%
and 12% of total revenues in the first quarter of fiscal 1997 and 1996,
respectively. The increase in research and development expenses was primarily
attributable to increased staffing costs including salaries, bonuses and
recruiting expenses, and associated equipment, facilities, and support for
software engineers. The Company anticipates that it will continue to commit
significant resources to research and development in future periods to enhance
and extend its core technology and product line, and the Company expects that
research and development expenses in future periods will continue to increase in
absolute dollars and may increase as a percentage of total revenues.
General and Administrative. General and administrative expenses consist
--------------------------
primarily of personnel costs for finance, human resources, network and
information systems and general management, as well as insurance and
professional services expenses. General and administrative expenses increased by
146% to $2.8 million in the first quarter of fiscal 1997 from $1.1 million in
the first quarter of fiscal 1996. General and administrative expenses
represented 16% and 11% of total revenues in the first quarter of fiscal 1997
and 1996, respectively. The increase in general and administrative expenses
resulted primarily from increased staffing, facilities costs and associated
expenses necessary to manage and support the Company's growth. The Company
expects that general and administrative expenses will increase in future periods
in absolute dollars and may increase as a percentage of total revenues.
Provision for Income Taxes
- --------------------------
The provision for income taxes includes federal, state and foreign income
taxes. The effective tax rate for the first quarter of fiscal 1997 and 1996 was
39% and 40%, respectively. The effective tax rates for such periods differ from
the federal statutory rate primarily due to the effect of state income taxes and
foreign taxes. As of September 30, 1996, the Company had no net operating loss
or other tax credit carryforwards. The Company believes that its effective tax
rate for fiscal 1997 will remain at approximately 39%.
SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The discussion in Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those discussed below.
9
<PAGE>
The Company's quarterly operating results have in the past and will in the
future vary significantly depending on the timing of significant orders and
shipments. In fiscal 1994, 1995, 1996 and the first three months of fiscal 1997,
license revenues varied from $2.1 million for the first three months of fiscal
1994 to $7.6 million for the first three months of fiscal 1995 to $5.5 million
for the first three months of fiscal 1996 and to $13.1 million for the first
three months of 1997. The significant fluctuation in quarterly license revenues
is due to the timing of large orders by domestic and international customers
such as AT&T Wireless Services and Sprint. Large orders are typically preceded
by long sales cycles, and accordingly it has been and will continue to be
difficult to predict the timing of such orders. The Company expects that
quarterly license revenues will continue to vary significantly based upon the
timing of large orders. The failure to obtain such orders, for any reason, would
have a material adverse effect on the Company's business, operating results and
financial condition.
The Company's quarterly operating results have also varied significantly
depending on factors such as capital spending patterns of the Company's
customers; the lengthy sales cycles of the Company's products; increased
competition; cancellation of licenses or maintenance agreements; changes in
operating expenses; personnel changes; demand for NetExpert; the number, timing
and significance of new product and product enhancement announcements by the
Company and its competitors; the ability of the Company to develop, introduce
and market new and enhanced versions of NetExpert on a timely basis; the mix of
direct and indirect sales; and general economic factors, among others. A
significant portion of the Company's revenues have been, and will continue to
be, derived from substantial orders placed by large organizations, and the
timing of such orders and their fulfillment has caused and will continue to
cause material fluctuations in the Company's operating results, particularly on
a quarterly basis. Due to the foregoing factors, as well as an evolving
forecasting and budgeting system that has not been tested against historical
results and new senior management who initially will have limited historical
perspective with respect to the Company's operations, quarterly revenue and
operating results have been and will continue to be difficult to forecast.
Revenues are also difficult to forecast because the Company's sales cycle, from
initial evaluation to product shipment, varies substantially from customer to
customer. The purchase of a network operations support and management
application generally involves a significant commitment of capital, with the
attendant time requirements often associated with customers' internal procedures
to approve large capital expenditures and test and accept new technologies that
affect mission-critical operations. For these and other reasons, the sales cycle
associated with the purchase of the Company's products is typically lengthy and
subject to a number of significant risks, including customers' budgetary
constraints and internal acceptance reviews, over which the Company has little
or no control. In addition, the Company typically realizes a significant portion
of license revenues in the last month of a quarter, frequently in the last weeks
or even days of a quarter. The Company's expense levels are based, in part, on
its expectations as to future revenue levels. Therefore, if revenue levels are
below expectations, operating results are likely to be materially adversely
affected. In particular, because only a small portion of the Company's expenses
varies with revenue, net income may be disproportionately affected by a
reduction in revenue. The Company's business has experienced and is expected to
continue to experience significant seasonality, in part due to an increase in
capital expenditures by customers in certain quarters. The Company has
historically had higher sales for its software products during the quarter
ending in December and weaker sales during the quarter ending in March. The
Company believes this pattern will continue. Based upon all of the foregoing,
the Company believes that quarterly revenues and operating results are likely to
vary significantly in the future and that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. Further, it is likely that in some
future quarter the Company's revenues or operating results will be below the
expectations of public market analyst and investors. In such event, the price of
the Company's Common Stock will be materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has funded its operations primarily through cash
generated from operations and, to a lesser extent, capital equipment leases. In
addition, in November
10
<PAGE>
1995, the Company completed its initial public offering raising approximately
$59.5 million, net of underwriting discounts and commissions, and other
expenses. The Company's operating activities provided for $4.9 million for the
three-month period ended September 30, 1996 primarily from the decrease in
income tax refund receivable. The Company currently expects to make capital
expenditures of $8.0 million to $11.0 million in the next 12 months primarily
for the purchase of computer equipment and related software, furniture and
fixtures and leasehold improvements. The $8.0 million to $11.0 million of
capital expenditures includes capital expenditures associated with developing
and expanding international markets.
As of September 30, 1996, the Company had working capital of approximately
$88.5 million, including $55.3 million in cash and cash equivalents. In
addition, the Company has an unsecured revolving line of credit with Wells Fargo
Bank, pursuant to which the Company may borrow up to $5.0 million. Under the
line of credit, which expires in November 1996, borrowings bear interest at
either (i) a fluctuating rate per annum equal to the prime rate in effect from
time to time or (ii) a fixed rate per annum equal to 2% above the London
Interbank Offered Rate. As of September 30, 1996, there were no borrowings
outstanding under the line of credit.
From time to time, accounts receivable of the Company remain outstanding
beyond their payment terms. The Company maintains an allowance for doubtful
accounts that it believes is adequate to cover any potential credit losses. As
of September 30, 1996, accounts receivable of approximately $10.8 million had
been outstanding for more than 120 days, of which approximately $6.6 million
were beyond payment terms. The reason such accounts are beyond payment terms
varies from customer to customer but generally relates to the internal budget
function of the customer, particularly in the case of Regional Bell Operating
Company customers, delays in the launch of the customer's system in which the
Company's product is included, and increased international revenues, which
typically have slower payment cycles. Approximately $5.2 million of the accounts
receivable outstanding greater than 120 days as of September 30, 1996 were due
from six customers of the Company. Each of these organizations continues to
license products and services from the Company. In addition, the Company
believes that each of the six customers is strong financially.
The Company believes that existing cash balances and cash flow from
operations will be sufficient to support the Company's working capital
requirements for at least the next 12 months. Thereafter, if cash generated from
operations is insufficient to satisfy the Company's working capital
requirements, the Company may be required to raise additional funds. No
assurance can be given that additional financing will be available or that, if
available, such financing will be obtainable on terms favorable to the Company
or its shareholders. To the extent the Company raises additional capital by
issuing equity or convertible debt securities, ownership dilution to the
Company's shareholders will result. In the event that adequate funds are not
available, the Company's business may be adversely affected.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the quarter ended September 30, 1996.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OBJECTIVE SYSTEMS INTEGRATORS, INC.
Dated: November 13, 1996 By: /s/ David M. Allen
------------------------------------------
David M. Allen, Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
13
<PAGE>
EXHIBIT 11.1
OBJECTIVE SYSTEMS INTEGRATORS, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
1996 1995
------- -------
<S> <C> <C>
Net income $ 2,353 $ 1,103
======= =======
Weighted average common shares outstanding 31,479 11,266
Equivalent shares from options granted
during twelve month period prior to the
Company's initial public offering -- 773
Weighted average common equivalent
shares from convertible preferred stock,
(if-converted method). -- 15,772
Equivalent shares attributed to
options, (treasury stock method) 2,588 3,596
------- -------
Weighted average common and equivalent shares 34,067 31,407
------- -------
Net income per share $ .07 $ .04
======= =======
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 55,337
<SECURITIES> 0
<RECEIVABLES> 34,284
<ALLOWANCES> 1,355
<INVENTORY> 0
<CURRENT-ASSETS> 99,302
<PP&E> 18,162
<DEPRECIATION> (5,683)
<TOTAL-ASSETS> 112,243
<CURRENT-LIABILITIES> 10,764
<BONDS> 0
0
0
<COMMON> 77,182
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</TABLE>
