<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 AND
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
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: 0-21992
------------------------
FOURTH SHIFT CORPORATION
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-1437794
(state or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
------------------------
7900 INTERNATIONAL DRIVE
SUITE 450
MINNEAPOLIS, MN 55425
(612) 851-1500
(Address, including zip code, of Registrant's
principal executive offices and 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
----- -----
The number of shares outstanding of the Registrant's Common Stock on August 1,
1997 was 9,703,554 shares.
<PAGE>
FOURTH SHIFT CORPORATION
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets at 2
June 30, 1997 and December 31, 1996
Consolidated Statements of Operations 3
for the three and six months ended June 30, 1997
and 1996
Consolidated Statements of Cash Flows 4
for the six months ended June 30, 1997
and 1996
Notes to Interim Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FOURTH SHIFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................... $ 4,531 $ 6,435
Accounts receivable, net........................ 12,023 13,007
Inventories..................................... 590 596
Prepaid expenses................................ 1,292 1,156
Current portion of note receivable.............. 849 813
-------- --------
Total current assets....................... 19,285 22,007
FURNITURE, FIXTURES AND EQUIPMENT, net............... 6,064 6,140
NOTE RECEIVABLE...................................... 688 1,121
SOFTWARE DEVELOPMENT COSTS, net...................... 4,071 1,820
GOODWILL, net........................................ 42 84
-------- --------
TOTAL ASSETS $ 30,150 $ 31,172
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligations
and equipment loans........................... $ 1,206 $ 868
Current portion of deferred gain on sale
of subsidiary................................. 644 617
Revolving credit facility....................... 2,000 -
Accounts payable................................ 2,858 4,283
Accrued expenses................................ 5,576 6,032
Deferred revenue................................ 8,770 8,860
-------- --------
Total current liabilities.................. 21,054 20,660
CAPITAL LEASE OBLIGATIONS AND EQUIPMENT LOANS........ 2,262 2,304
DEFERRED GAIN ON SALE OF SUBSIDIARY.................. 687 1,121
-------- --------
SHAREHOLDERS' EQUITY:
Common stock.................................... 97 96
Additional paid-in capital...................... 30,223 29,872
Accumulated deficit............................. (24,173) (22,881)
-------- --------
Total shareholders' equity................. 6,147 7,087
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 30,150 $ 31,172
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
2
<PAGE>
FOURTH SHIFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUE:
Software license.......................... $ 5,581 $ 6,014 $ 9,382 $ 10,402
Service................................... 6,634 5,647 13,050 11,165
Third-party software and other............ 661 762 1,249 1,428
-------- -------- -------- --------
Total revenue....................... 12,876 12,423 23,681 22,995
-------- -------- -------- --------
OPERATING EXPENSES:
Cost of licenses.......................... 693 664 1,218 1,105
Cost of services.......................... 3,205 2,744 6,327 5,387
Cost of third-party software and other.... 477 560 889 1,045
Selling, general and administrative....... 6,577 5,465 12,700 10,346
Product development....................... 1,985 2,339 4,058 4,307
-------- -------- -------- --------
Total operating expenses............ 12,937 11,772 25,192 22,190
-------- -------- -------- --------
Operating profit (loss)........................ (61) 651 (1,511) 805
Other income (expense), net.................... (63) (4) (140) 39
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES............ (124) 647 (1,651) 844
Provision (benefit) for income taxes...... 21 80 (10) 151
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS....... (145) 567 (1,641) 693
NET GAIN ON SALE OF DISCONTINUED OPERATIONS.... 205 188 406 372
-------- -------- -------- --------
NET INCOME (LOSS).............................. $ 60 $ 755 $ (1,235) $ 1,065
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations..................... $ (0.01) $ 0.06 $ (0.17) $ 0.07
Discontinued operations................... 0.02 0.02 0.04 0.04
-------- -------- -------- --------
Net income (loss)......................... $ 0.01 $ 0.08 $ (0.13) $ 0.11
-------- -------- -------- --------
-------- -------- -------- --------
SHARES USED IN PER COMMON SHARE COMPUTATION.... 9,749 9,914 9,712 9,793
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
FOURTH SHIFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
------------------
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (1,235) $ 1,065
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 1,410 839
Gain on sale of discontinued operations (406) (372)
Other (32) (102)
Change in current operating items:
Accounts receivable, net 984 (931)
Inventories 6 45
Prepaid expenses (136) (150)
Accounts payable (1,425) 276
Accrued expenses (207) (1,508)
Deferred revenue (90) 183
-------- --------
Net cash used in operating activities (1,131) (655)
-------- --------
INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment (738) (1,599)
Proceeds from sale of discontinued operations 397 184
Capitalized software development costs (2,335) -
-------- --------
Net cash used in investing activities (2,676) (1,415)
-------- --------
FINANCING ACTIVITIES:
Payments of long-term obligations (395) (245)
Borrowings on equipment facility and capital leases 195 702
Borrowings on line of credit 2,000 350
Repayments of line of credit borrowings - (350)
Proceeds on issuance of common stock, net 103 156
-------- --------
Net cash provided by financing activities 1,903 613
-------- --------
Net change in cash and cash equivalents (1,904) (1,457)
CASH AND CASH EQUIVALENTS:
Beginning of period 6,435 7,058
-------- --------
End of period $ 4,531 $ 5,601
-------- --------
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during each period for-
Income taxes $ 25 $ 23
Interest 236 100
-------- --------
-------- --------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capitalized leases $ 496 $ 435
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
FOURTH SHIFT CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. The accompanying interim consolidated financial statements have been
prepared by Fourth Shift Corporation (the "Company"), without audit, in
accordance with generally accepted accounting principles for interim financial
information and pursuant to the rules and regulations of the Securities and
Exchange Commission.
The unaudited consolidated financial statements as of June 30, 1997 and 1996 and
for the three month and six month periods then ended include, in the opinion of
management, all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation of the financial results for the respective
interim periods. The results of operations for the three and six month periods
ended June 30, 1997 are not necessarily indicative of results of operations to
be expected for the entire fiscal year ending December 31, 1997. The
accompanying interim consolidated financial statements have been prepared under
the presumption that users of the interim consolidated financial information
have either read or have access to the audited consolidated financial statements
for the year ended December 31, 1996. Accordingly, certain footnote disclosures
which would substantially duplicate the disclosures contained in the December
31, 1996 audited consolidated financial statements have been omitted from these
interim consolidated financial statements. It is suggested that these interim
consolidated financial statements be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 1996 and the
notes thereto.
2. In the second quarter ended June 30, 1997, the Company recognized a gain of
$205,000 related to the receipt of a principal payment in July 1997 on the note
receivable from the sale of its former subsidiary, Just In Time Enterprise
Systems, Inc. For the six-month period ended June 30, 1997, the Company
recognized a gain of $406,000 in connection with this sale.
3. In accordance with Statement of Financial Accounting Standards (SFAS) No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," certain software development costs are capitalized upon the
establishment of technological feasibility. Costs incurred prior to the
establishment of technological feasibility and development costs incurred to
improve and enhance existing software are charged to expense as incurred. In
the quarter ended June 30, 1997, the Company capitalized $1,115,000 of
development costs related to the development of its next generation product,
Fourth Shift OBJECTS Enterprise Software -TM- (OBJECTS). For the six-month
period ended June 30, 1997, the Company capitalized $2,335,000 of development
costs. In June 1997, the Company introduced Release 1.0 of OBJECTS for general
distribution. As such, the Company has begun to amortize all previously
capitalized costs related to the development of OBJECTS framework and Release
1.0 application modules. These costs are being amortized straight-line over
three years, or the economic life of the framework and modules, if less than
three years. The second quarter results included amortization expense of
$60,000.
4. During March 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share", which requires the disclosure of basic earnings per share and diluted
earnings per share. The Company expects to adopt SFAS 128 at the end of 1997
and anticipates it will not have a material impact on previously reported
earnings per share.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations has been prepared under the presumption that users of the interim
consolidated financial statements have either read or have access to the
Company's annual report for the year ended December 31, 1996.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The following Management's
Discussion and Analysis contains various "forward looking statements" within the
meaning of federal securities laws which represent management's expectations or
beliefs concerning future events, including statements regarding anticipated
sales, marketing and research and development expenditures, growth in revenue,
capital requirements and the sufficiency of cash to meet operating expenses.
These, and other forward looking statements made by the Company, must be
evaluated in the context of a number of factors that may affect the Company's
financial condition and results of operations, including the following:
-- the ability of the Company to timely complete the anticipated
development milestones for its Manufacturing Software System (MSS) as
well as its new Fourth Shift OBJECTS Enterprise Software product line
and the degree of market acceptance of that product once developed;
-- fluctuations in quarterly operating results caused by changes in the
computer industry, buying patterns and general economic conditions;
-- the dependence of the Company on revenue from sales of its MSS
product;
-- the effects of changes in technology and standards in the computer
industry;
-- the significant competition among developers and marketers of
industrial software;
-- the increasing size of the Company's international operations;
-- the ability of the Company to manage expansion of international
distribution channels;
-- the dependence of the MSS product line on a third-party database
management system; and
-- evolving standards regarding intellectual property protection for
software products in general.
RESULTS OF OPERATIONS
NET INCOME (LOSS). The Company recorded net income of $60,000 or $.01 per
share for the quarter ended June 30, 1997, compared to net income of $755,000 or
$.08 per share for the quarter ended June 30, 1996. For the six month period
ended June 30, 1997, the Company recorded a net loss of $1,235,000 or $.13 per
share compared to net income of $1,065,000 or $.11 per share in the year-ago
period. The decrease in earnings from the prior
6
<PAGE>
year for the quarter and six months is attributable principally to the reduction
in license revenue when compared with 1996 performance.
TOTAL REVENUE increased 4% to $12,876,000 during the three months ended
June 30, 1997 from $12,423,000 during the comparable period in 1996. For the
six months ended June 30, 1997, total revenue increased 3% to $23,681,000 from
$22,995,000 in the comparable period in 1996, as outlined below.
SOFTWARE LICENSE REVENUE is fees paid by customers for the right to use the
Company's software systems. Software license revenue decreased 7% to $5,581,000
during the second quarter of 1997 from $6,014,000 during the same period in 1996
and decreased 10% to $9,382,000 for the six month period ended June 30, 1997
from $10,402,000 during the same period in 1996. For the second quarter, the
decrease was the result of shortfalls in North America, with Asia and Europe
reflecting year-over-year growth. In North America, sales momentum was down in
the first quarter and the early part of the second quarter as a result of
competitive pressure and changes in sales management. As the second quarter
progressed, improved sales strategies and the management changes lead to
improved performance, culminating with strong license revenues in June.
SERVICE REVENUE includes customer support fees, training, consulting,
installation and project management. Service revenue increased 17% to
$6,634,000 during the second quarter of 1997 from $5,647,000 during the same
period in 1996, and increased 17% to $13,050,000 for the six month period ended
June 30, 1997 from $11,165,000 during the same period in 1996. Service revenue
continues to grow despite reductions in license revenue. This is the result of
an installed base that continues to grow, generating demand for customer
support, training and other service products. In addition, service revenue
continues to benefit from the Company's ongoing efforts to expand, standardize
and promote its professional service offerings.
THIRD-PARTY SOFTWARE AND OTHER REVENUE is derived principally from the
resale of third-party software licenses (companion products) along with limited
hardware sales. These companion products have been integrated to function with
the MSS software and extend the functionality of MSS. Third-party software and
other revenue decreased 13% to $661,000 during the second quarter of 1997 from
$762,000 during the same period in 1996 and decreased 13% to $1,249,000 for the
six month period ended June 30, 1997 from $1,428,000 during the same period in
1996. This reduction is directly attributable to the decrease in MSS software
license revenue, as a significant portion of third-party software is licensed in
conjunction with the MSS product.
COST OF LICENSES increased to $693,000 in the second quarter of 1997 from
$664,000 in the same period of 1996. As a percentage of total software license
revenue, cost of licenses was 12% for the second quarter of 1997 and 11% for the
second quarter of 1996. The increase in cost of licenses as a percentage of
license revenue is primarily due to increases in royalty costs paid to third-
party software suppliers whose products are embedded in and distributed with the
MSS product. As a percentage of license revenue, cost of licenses was 13% for
the six month period ended June 30, 1997 and 11% for the same period in 1996.
COST OF SERVICES increased to $3,205,000 in the second quarter of 1997 from
$2,744,000 in the same period of 1996. As a percentage of service revenue, cost
of services was 48% for the second quarter of 1997 and 49% for the second
quarter of 1996. The decrease in cost of services as a percentage of service
revenue primarily relates to the continued growth of customer support revenues,
as the margins on this product are higher than
7
<PAGE>
the other professional service offerings. As a percentage of service revenue,
cost of services was 48% for the six month periods ended June 30, 1997 and 1996.
COST OF THIRD-PARTY SOFTWARE AND OTHER increased to $477,000 or 72% of
third-party software and other revenue in the second quarter of 1997 from
$560,000 or 73% of third-party software and other revenue in the same period of
1996. The cost of third-party software and other as a percentage of third-party
software and other revenue for the six month period ended June 30, 1997 was 71%
compared to 73% for the same period in 1996. The decrease in the cost of third-
party software as a percentage of third-party software revenue is due to changes
in the mix of software products licensed in the quarter.
SELLING, GENERAL AND ADMINISTRATIVE expense increased to $6,577,000 or 51%
of total revenue for the three month period ended June 30, 1997 from $5,465,000
or 44% of total revenue for the three month period ended June 30, 1996.
Selling, general and administrative expense for the six months ended June 30,
1997 was $12,700,000 or 54% of total revenue compared to $10,346,000 or 45% of
total revenue for the same period in 1996. The increase in terms of both
absolute dollars and as a percentage of revenue reflects the increased size of
the Company resulting from 1996 growth and market penetration. Fixed selling,
general and administrative costs did not expand during the first half of 1997
and essentially reflects the same level of spending as the fourth quarter 1996.
Since 1997 software license revenue did not grow at the rate experienced in the
later part of 1996, these fixed costs as a percent of revenue have grown
significantly when compared to the first half of 1996.
PRODUCT DEVELOPMENT expense for the three months ended June 30, 1997
decreased to $1,985,000 from $2,339,000 for the three months ended June 30,
1996. As a percentage of total revenue, product development decreased to 15% of
total revenue compared to 19% in the same period of 1996. Product development
expense for the six month period ended June 30, 1997 was $4,058,000 or 17% of
total revenue compared to $4,307,000 or 19% of total revenue for the same period
in 1996. In the second quarter of 1997, the Company capitalized $1,115,000 of
development costs or 37% of total development spending. For the six months
ended June 30, 1997, the Company capitalized $2,335,000 of development costs or
37% of total development spending. No development costs were capitalized in the
first six months of 1996.
Under Statement of Financial Accounting Standards No. 86 ("SFAS No. 86"),
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," capitalization of computer software development costs is to begin
upon the establishment of technological feasibility, limited to the net
realizable value of the software product, and cease when the software is
available for general release to customers.
The significant increase in total development spending (including capitalized
costs) in the first six months of 1997 when compared with the same period last
year, is a direct result of increased headcount and support resources associated
with the development of the Company's object-oriented, communications-centric
product, Fourth Shift OBJECTS Enterprise Software (OBJECTS). Release 1.0 of
OBJECTS was shipped to beta sites for testing in the third quarter of 1996 with
general release occurring in June of 1997. The Company believes that the
object-oriented framework is highly reusable and that its economic life will be
in excess of five years, and therefore has capitalized the costs associated with
its development. The Company is also capitalizing the development costs
associated with certain "core" OBJECTS application servers that will likely have
an economic life in excess of three years.
With the June 1997 introduction of Release 1.0 of OBJECTS for general
distribution, the Company has begun to amortize all previously capitalized costs
related to the development of OBJECTS framework and Release 1.0 application
servers. These costs are being amortized straight-line over three years, or the
8
<PAGE>
economic life of the framework and application servers, if less than three
years. The second quarter results included amortization expense of $60,000.
The Company intends to capitalize development costs related to Release 2.0
application servers, beginning at the point in time the respective servers reach
technological feasibility through the market release date.
PROVISION FOR INCOME TAXES. The provision for income taxes for the three
and six month periods ended June 30, 1997 and 1996 was comprised of state and
foreign income taxes. The Company does not provide for U.S. federal taxes as a
result of operating losses and a significant net operating loss carryforward.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, the Company's cash and cash
equivalents decreased $1,904,000 to $4,531,000.
Cash used in operating activities was $1,131,000 for the six months ended June
30, 1997. The primary source of cash from operating activities was a decrease
in accounts receivable of $984,000 resulting from the collection of fourth
quarter revenues and the seasonal decrease in receivables. This source was
offset by the net loss of $1,235,000 adjusted for depreciation and amortization
of $1,410,000 and the gain of $406,000 recorded on the sale of discontinued
operations (these items net to a cash use of $231,000). In addition, cash was
used by decreases in accounts payable of $1,425,000 and decreases in accrued
expenses of $207,000 resulting from the payment of amounts accrued at 1996 year-
end associated with fourth quarter growth.
The Company used $2,676,000 of cash in investing activities during the six
months ended June 30, 1997. The primary use of cash for investing activities
was $2,335,000 of capitalized development spending related to the development of
Fourth Shift OBJECTS Enterprise Software. In addition, purchases of furniture,
fixtures and equipment totaled $738,000 through June 30, 1997 compared to
$1,599,000 for the same period in 1996. The decrease from 1996 to 1997 reflects
reduced capital needs due to slower growth in headcount and increased use of
non-cash equipment leases. These cash uses were offset by principal payments of
$397,000 received in connection with the sale of the Company's former
subsidiary, Just In Time Enterprise Systems, Inc.
Cash provided by financing activities totaled $1,903,000 during the six months
ended June 30, 1997. The primary source of cash from financing activities was
$2,000,000 of borrowings under the Company's revolving line of credit.
Additionally, the Company borrowed $195,000 representing the remaining balance
available under the Company's $1,500,000 long-term bank equipment facility. The
Company also received $103,000 in proceeds in connection with the exercise of
stock options. These sources were partially offset by $395,000 of payments on
the bank equipment facility and capital lease obligations.
The Company does not have any material scheduled commitments for capital
expenditures. The Company believes that the $4,531,000 of cash and cash
equivalents on hand at June 30, 1997, together with $3,000,000 of unused
capacity under the Company's $5,000,000 bank line of credit and anticipated cash
flows from operations will be sufficient to fund operating cash needs over the
next twelve months. At June 30, 1997, the Company was in compliance with all
financial performance covenants under the bank line of credit and the bank
equipment facility. If the above sources of cash are not sufficient to fund
future operations, the Company may need to seek additional funds through equity
or debt financing.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The annual meeting of shareholders of Fourth Shift Corporation was held at
3:30 PM on Tuesday May 7, 1997. Shareholders holding 8,826,080 shares, or
approximately 91.14 % of the outstanding shares, were represented at the meeting
by proxy or in person. Matters submitted at the meeting for vote by the
shareholders were as follows:
a. Election of Directors
The following nominees were elected to serve as members of the Board of
Directors until the annual meeting of shareholders in 2000 or until such time as
a successor may be elected:
TABULATION OF VOTES
-------------------
FOR WITHHELD
--- --------
A. J. Christianson 7,865,542 960,069
S. J. Lair 7,867,342 958,269
R. M. Price 7,887,273 938,338
b. Approval of amendments to the Fourth Shift Corporation 1994 Employee
Stock Purchase Plan
Shareholders approved the amendments to the Fourth Shift Corporation 1994
Employee Stock Purchase Plan by a vote of 5,813,082 shares, or 60.0 % of the
outstanding shares in favor, 210,455 shares against, 108,876 shares abstained,
and 2,693,198 shares present or represented by proxy but not voted. The
amendments increased the number of shares of the Company's common stock
available for issuance under the Plan by 500,000 shares and increased to
75,000 shares the aggregate number of shares that may be purchased in any single
purchase period.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11.1 Calculation of net income (loss) per common share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 1997.
10
<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.
Fourth Shift Corporation
August 14, 1997
/s/ DAVID G. LATZKE
------------------------
David G. Latzke
Vice President and Chief Financial Officer
(principal financial officer)
11
<PAGE>
EXHIBIT 11.1
FOURTH SHIFT CORPORATION
CALCULATION OF NET INCOME (LOSS) PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ -----------------
1997 1996 1997 1996
------ ----- -------- ------
<S> <C> <C> <C> <C>
Net Income (loss) $60 $755 ($1,235) $1,065
------ ----- -------- ------
------ ----- -------- ------
Weighted average number of common and common
equivalent shares outstanding:
Weighted average number of common shares outstanding 9,702 9,543 9,688 9,530
Dilutive effect of stock options after application
of the treasury stock method 47 371 24 263
------ ----- -------- ------
9,749 9,914 9,712 9,793
------ ----- -------- ------
------ ----- -------- ------
Net Income (loss) per common share $0.01 $0.08 ($0.13) $0.11
------ ----- -------- ------
------ ----- -------- ------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FOURTH
SHIFT CORPORATION'S CONSOLIDATED BALANCE SHEET FOR THE PERIOD ENDED JUNE
30, 1997 AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX
MONTH PERIODS ENDED JUNE 30, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,531
<SECURITIES> 0
<RECEIVABLES> 12,023<F1>
<ALLOWANCES> 0
<INVENTORY> 590
<CURRENT-ASSETS> 19,285
<PP&E> 6,064<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,150
<CURRENT-LIABILITIES> 21,054
<BONDS> 2,262
0
0
<COMMON> 97
<OTHER-SE> 30,223
<TOTAL-LIABILITY-AND-EQUITY> 30,150
<SALES> 10,631
<TOTAL-REVENUES> 23,681
<CGS> 2,107
<TOTAL-COSTS> 8,434
<OTHER-EXPENSES> 16,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1651)
<INCOME-TAX> (10)
<INCOME-CONTINUING> (1641)
<DISCONTINUED> 406
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,235)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
<FN>
<F1>These asset values represent amounts net of allowance for doubtful
accounts.
<F2>These asset values represent amounts net of accumulated depreciation.
</FN>
</TABLE>
