<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
(mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
Commission File Number 0-23852
PROJECT SOFTWARE & DEVELOPMENT, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2448516
(State or other jurisdiction (I.R.S employer
incorporation or organization) identification number)
100 CROSBY DRIVE, BEDFORD MASSACHUSETTS 01730
(Address of principal executive offices, including zip code)
(781) 280-2000
(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 outstanding of the Registrant's common stock as of the latest
practicable date: 21,553,983 shares of common stock, $.01 par value per share,
as of January 31, 2000.
<PAGE> 2
PROJECT SOFTWARE & DEVELOPMENT, INC.
10-Q INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
<S> <C>
Consolidated Balance Sheets (unaudited) as 3
of December 31, 1999 and September 30, 1999.
Consolidated Statements of Operations 4
(unaudited) for the three months ended
December 31, 1999 and 1998.
Consolidated Statements of Cash Flows 5
(unaudited) for the three months ended
December 31, 1999 and 1998.
Notes to Consolidated Financial Statements 6
(unaudited).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 11
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 26
ABOUT MARKET RISK
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 27
SIGNATURE 29
</TABLE>
2
<PAGE> 3
PROJECT SOFTWARE & DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS December 31, September 30,
1999 1999
---- ----
(IN THOUSANDS,EXCEPT SHARE DATA)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 63,580 $ 59,903
Marketable securities 26,114 30,920
Accounts receivable, trade, less allowance
for doubtful accounts of $2,838 at December 31, 1999
and $2,867 at September 30, 1999, respectively 40,400 38,736
Prepaid expenses 5,034 3,919
Other current assets 1,315 1,171
Deferred income taxes 2,158 2,017
-------- --------
Total current assets 138,601 136,666
-------- --------
Marketable securities 9,286 7,413
Property and equipment, net 12,221 12,055
Intangible assets, net 2,616 1,509
Other assets 389 406
Deferred income taxes 1,044 984
-------- --------
Total assets $164,157 $159,033
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 15,911 $ 12,172
Accrued compensation 4,352 8,429
Income taxes payable 5,085 4,227
Deferred revenue 15,648 16,580
Deferred income taxes 94 187
--------- ---------
Total current liabilities 41,090 41,595
--------- ---------
Deferred rent 139 146
Deferred revenue 87 92
Commitments and contingencies
Equity in minority interest -- 44
Stockholders' equity
Preferred stock, $.01 par value;1,000,000 authorized,
none issued and outstanding
Common stock, $.01 par value;50,000,000 authorized;
21,552,258 and 21,301,674 issued at December 31, 1999
and September 30, 1999, respectively 216 213
Additional paid-in capital 70,697 67,418
Retained earnings 52,806 50,210
Accumulated other comprehensive income (878) (685)
--------- ---------
Total stockholders' equity 122,841 117,156
--------- ---------
Total liabilities and stockholders' equity $ 164,157 $ 159,033
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
PROJECT SOFTWARE & DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1999 1998
---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenues:
Software $ 15,737 $ 14,406
Support and services 22,249 19,511
-------- --------
Total revenues 37,986 33,917
-------- --------
Cost of revenues:
Software 659 1,144
Support and services 12,528 9,583
-------- --------
Total cost of revenues 13,187 10,727
-------- --------
Gross margin 24,799 23,190
Operating expenses:
Sales and marketing 13,990 10,955
Product development 4,495 3,476
General and administrative 3,095 2,867
-------- --------
Total operating expenses 21,580 17,298
-------- --------
Income from operations 3,219 5,892
Interest income 937 648
Interest expense (1) (17)
Other income (expense), net (194) 72
-------- --------
Income before income taxes 3,961 6,595
Provision for income taxes 1,365 2,309
-------- --------
Net income $ 2,596 $ 4,286
======== ========
Net income per share, basic $ 0.12 $ 0.21
-------- --------
Net income per share, diluted $ 0.11 $ 0.21
-------- --------
Shares used to calculate net income per share
Basic 21,415 20,004
Diluted 22,706 20,405
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
PROJECT SOFTWARE & DEVELOPMENT, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,596 $ 4,286
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,427 1,097
Gain/(loss) on sale and disposal of property
and equipment (15) 12
Amortization of discount on marketable securities 62 51
Deferred rent (6) 25
Deferred income taxes (350) (37)
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable (2,433) (3,635)
Prepaid expenses (1,131) (381)
Other assets (755) (771)
Accounts payable 4,393 1,485
Accrued compensation (4,042) (1,103)
Income taxes payable 930 1,466
Deferred revenue (469) (441)
-------- --------
Net cash provided by operating activities 207 2,054
-------- --------
Cash flows from investing activities:
Acquisitions of business, net of cash 12 141
Acquisitions of property and equipment (1,376) (1,856)
Purchase of marketable securities (17,797) (12,604)
Sale of marketable securities 20,640 12,087
-------- --------
Net cash provided by/(used in) investing activities 1,479 (2,232)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options
including related tax benefit 2,185 690
-------- --------
Net cash provided by financing activities 3,282 690
-------- --------
Effect of exchange rate changes on cash (194) (90)
-------- --------
Net increase in cash and cash equivalents 3,677 422
Cash and cash equivalents, beginning of period 59,903 28,454
-------- --------
Cash and cash equivalents, end of period $ 63,580 $ 28,876
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
PROJECT SOFTWARE & DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Project Software & Development, Inc. (PSDI) and its majority-owned
subsidiaries (collectively, the "Company"), as of December 31, 1999 and have
been prepared by the Company in accordance with generally accepted accounting
principles for interim reporting and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. All intercompany accounts and transactions have
been eliminated. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
those of a normal recurring nature, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows at the dates
and for the periods indicated. The results of operations for the periods
presented herein are not necessarily indicative of the results of operations to
be expected for the entire fiscal year, which ends on September 30, 2000, or for
any other future period.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, for the year ended
September 30, 1999 included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on December 29, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
B. INCOME PER SHARE
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding.
Diluted earnings per share is computed by dividing income available to common
shareholders by the weighted average common shares outstanding plus additional
common shares that would have been outstanding if dilutive potential common
shares had been issued. For purposes of this calculation, stock options are
considered dilutive potential common shares in periods in which they have a
dilutive effect.
6
<PAGE> 7
Basic and diluted earnings per share are calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
BASIC EPS 12/31/99 12/31/98
- --------- -------- --------
<S> <C> <C>
Net income $ 2,596,008 $ 4,286,249
Weighted average common
shares outstanding 21,415,005 20,004,366
Basic income per share $ 0.12 $ 0.21
</TABLE>
<TABLE>
<CAPTION>
DILUTED EPS
- -----------
<S> <C> <C>
Net income $ 2,596,008 $ 4,286,249
Weighted average common
shares outstanding 21,415,005 20,004,366
Dilutive potential
common shares 1,291,353 400,560
----------- -----------
Total diluted shares 22,706,358 20,404,926
Diluted income per share $ 0.11 $ 0.21
</TABLE>
C. ACQUISITIONS
On October 29, 1999, the Company acquired Modern Distribution Management, Inc.,
a leading information source covering strategic management issues affecting
suppliers and distributors of MRO ("Maintenance, Repair and Operating")
supplies. This acquisition was made with the issuance of 45,600 shares of common
stock valued at $24.07 per share. The transaction was accounted for using the
purchase method of accounting. The Company recorded approximately $1.3 million
of goodwill related to this acquisition, which is being amortized on a
straight-line basis over five years. This acquisition was deemed to be
immaterial for presentation of pro forma information.
On December 10, 1998, the Company acquired the shares and assumed net
liabilities of its Italian distributor, Work Management Consulting, s.r.l, for
the sum of $411,000. The transaction was accounted for using the purchase method
of accounting. The resulting goodwill is being amortized on a straight-line
basis over five years. This acquisition was deemed to be immaterial for
presentation of pro forma information.
D. SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest and taxes were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, 1999
------------------
(in thousands) 1999 1998
---- ----
<S> <C> <C>
Interest ........................ $ 1 $ 17
Income taxes .................... 690 721
</TABLE>
7
<PAGE> 8
Acquisitions of businesses were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, 1999
------------------
(in thousands) 1999 1998
---- ----
<S> <C> <C>
Fair value of assets acquired .... $18 $ 592
Fair value of liabilities assumed 93 729
Net cash payments ................ 3 180
</TABLE>
E. COMPREHENSIVE INCOME
The following table reflects the components of comprehensive income:
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 30, DECEMBER 30,
1999 1998
------------ ------------
<S> <C> <C>
Net income $ 2,596 $ 4,286
------- -------
Other comprehensive income, net of tax:
Unrealized (loss)/gain on
Securities arising during (28) 24
Period
Foreign currency translation
Adjustment (165) 36
------- -------
Comprehensive income $ 2,763 $ 4,346
------- -------
</TABLE>
F. SEGMENT INFORMATION, GEOGRAPHIC DATA AND MAJOR CUSTOMERS:
The following is presented in accordance with SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company has identified
two reportable industry segments: the development, marketing and support of
asset maintenance management software (MAXIMO) and internet e-Commerce software
products and network services (MRO.com). Asset information by reportable segment
is not reported, since the Company does not produce such information internally.
The Company also manages these product lines across geographic reportable
segments: United States, Other Americas (Canada and Latin America),
Europe/Middle East and Africa, and Asia Pacific. All segments are managed by the
same board of directors and executive officers.
8
<PAGE> 9
A summary of the Company's operations by product line was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
(in thousands) 1999 1998
---- ----
<S> <C> <C>
Revenues:
Asset maintenance software and
services .............................. $34,890 $31,007
Internet e-Commerce software and
services .............................. 3,096 2,910
------- -------
$37,986 $33,917
Income from operations:
Asset maintenance software and
services ............................ $ 7,372 $ 5,238
Internet e-Commerce software and
services ............................ (4,153) 654
------- -------
$ 3,219 $ 5,892
------- -------
</TABLE>
A summary of the Company's operations by geographical area was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
(in thousands) 1999 1998
---- ----
<S> <C> <C>
Revenues:
United States ......................... $ 21,019 $ 17,233
Other Americas ........................ 2,774 2,452
Intercompany revenues ................. 2,020 4,615
-------- --------
$ 25,813 $ 24,300
Europe/Middle East and Africa ......... $ 11,279 $ 11,254
Asia/Pacific .......................... 2,914 2,978
Consolidating eliminations ............ (2,020) (4,615)
-------- --------
$ 37,986 $ 33,917
-------- --------
</TABLE>
9
<PAGE> 10
The Company has subsidiaries in foreign countries which sell the Company's
products and services in their respective geographic areas. Intercompany
revenues primarily represent shipments of software to international subsidiaries
and are eliminated from consolidated revenues. Income (loss) from operations
excludes interest income, interest expense, provision for income taxes and
transaction gains and losses.
G. SUBSEQUENT EVENT:
On January 11, 2000, the Company signed a definitive agreement to purchase
INTERMAT, Inc., a leading provider of MRO content management tools and
cataloging services. Under terms of the agreement, Project Software &
Development, Inc. will acquire the capital stock of INTERMAT from Strategic
Distribution, Inc. (NASDAQ: STRD) for approximately $55.0 million in cash.
Closing of the transaction is subject to customary conditions, including
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. The closing is expected to occur in the Company's
second fiscal quarter of 2000 and will be accounted for as a purchase.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historical information this Quarterly Report contains
forward-looking statements identified by footnotes in the text. The
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in such
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the section entitled "Factors
Affecting Future Performance". Readers should carefully review the risk factors
described in other documents that the Company files from time to time with the
Securities and Exchange Commission, including the Annual Report on Form 10-K
filed by the Company on December 29, 1999.
OVERVIEW
ABOUT PSDI AND MRO.COM INC.
PSDI develops, markets and supports business-to-business MRO e-Commerce systems
and enterprise asset maintenance software. Through its subsidiary MRO.com,
Inc., the company complements its MAXIMO enterprise asset maintenance software
with an Internet-based B2B marketplace for MRO buyers and suppliers, a suite of
online procurement software products that improve purchasing efficiency, and
Internet-based content management tools and cataloging services.
Businesses, government agencies, and other organizations use the MAXIMO product
suite to assist in the maintenance of high-value capital assets, such as plants,
facilities, and production equipment, to cut MRO inventories and costs, control
maintenance expenses, reduce downtime, and more effectively deploy productive
assets, personnel and other resources. The Company's revenues are derived
primarily from two sources: (i) software licenses and (ii) fees for services,
including support contracts, training and consulting services and commerce fees
for on-line charges to engage in electronic commerce for Maintenance, Repair and
Operations ("MRO").
ACQUISITIONS AND OTHER RELATED MATTERS
11
<PAGE> 12
over five years. This acquisition was deemed to be immaterial for presentation
of pro forma information purposes.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998
REVENUES
<TABLE>
<CAPTION>
Three CHANGE % Three
Months Months
Ended Ended
(in thousands) 12/31/99 12/31/98
- -------------- -------- --------
<S> <C> <C> <C>
Software licenses $15,737 9.2% $14,406
Percentage of total revenues 41.4% 42.5%
Support and services $22,249 14.0% $19,511
Percentage of total revenues 58.6% 57.5%
Total revenues $37,986 12.0% $33,917
</TABLE>
MAXIMO client/server revenues for the three months ended December 31, 1999
increased 14.6% to $34.4 million from $30.0 million for the three months ended
December 31, 1998. The growth in revenues was generated primarily by increases
from the Company's enterprise asset management product, MAXIMO. MRO.com revenues
were $3.1 million, an increase of 6.4% over three months ended December 31,
1998. The three months ended December 31, 1998. A significant portion of the
Company's MAXIMO revenues were derived from operations outside of the United
States. Revenues from sales outside the United States for the three months ended
December 31, 1999 increased 1.8% to $17.0 million or 44.7% of revenues, compared
to $16.7 million or 49.2% of revenues for the three months ended December 31,
1998.
Software licenses for the three months ended December 31, 1999 increased 9.2% to
$15.7 million from $14.4 million. MAXIMO client/server software license revenue
for the three months ended December 31, 1999 increased 14.0% to $13.0 million
from $11.4 million in the corresponding period in 1998. MRO.com software license
revenue for the three months ended December 31, 1999 increased to $2.7 million
from $2.6 million in the corresponding period in 1998. In the three months
ended December 31, 1998, the Company concluded a significant e-commerce
software license of approximately $2.5 million.
Support and services revenues increased 14.0% over the prior quarter. Consulting
services grew 11.1% for the three months ended December 31, 1999 compared to the
three months ended December 31, 1998 and continues to be a large percentage of
total revenues due to additional service demands in connection with large scale
implementations of the Company's MAXIMO product.
12
<PAGE> 13
MRO.com services were not a significant portion of revenues and represented only
2.3% of service revenues for the three months ended December 31, 1999. Support
services grew to 20.0% as a percentage of revenues for the three months ended
December 31, 1999 compared to the three months ended December 31, 1998. The
increase in the percentage of support revenues was related to the increase in
software license revenues and the high renewal rate for MAXIMO maintenance
contracts.
COST OF REVENUES
<TABLE>
<CAPTION>
Three CHANGE % Three
Months Months
Ended Ended
(in thousands) 12/31/99 12/31/98
- -------------- -------- --------
<S> <C> <C> <C>
Software licenses $ 659 (42.4%) $ 1,144
Percentage of software licenses 4.2% 7.9%
Support and services $ 12,528 30.7% $ 9,583
Percentage of support and services 56.3% 49.1%
Total cost of revenues $ 13,187 22.9% $10,727
Percentage of total revenues 34.7% 31.6%
</TABLE>
Cost of software licenses revenues consists of software purchased for resale,
royalties paid to vendors of third party software, the amortization of
capitalized software, the cost of software product packaging and media, and
certain employee costs related to software duplication, packaging and shipping.
The decrease in the cost of software licenses revenues was due primarily to a
decrease in the amount of software purchased for resale. Additionally, there
were no capitalized software costs amortized during the quarter ended December
31, 1999, as capitalized software costs are fully amortized since costs incurred
subsequent to the establishment of technological feasibility were not
significant. The decrease as a percentage of software licenses was due to the
decrease of fixed third party license fee commitments.
Cost of support and services consists primarily of personnel costs for employees
and the related costs of benefits and facilities. The increase in the cost of
support and services was attributable to the hiring of employees and the
extensive use of third-party consultants contracted to perform services for the
Company. The Company utilizes the services of these higher cost third-party
consultants in order to meet demand for its services and backlog. The cost of
support and services as a percentage of support and services revenues increased
to 56.3% from 49.1% for the three months ended December 31, 1999 and 1998,
respectively. The increase as a percentage of revenues is attributable to low
utilization related to year 2000 factors, continued use of third party
contractors, a European services meeting and expenses related to starting up
the MRO.com consulting services organization.
13
<PAGE> 14
OPERATING EXPENSES
<TABLE>
<CAPTION>
Three CHANGE % Three
Months Months
Ended Ended
(in thousands) 12/31/99 12/31/98
- -------------- -------- --------
<S> <C> <C> <C>
Sales and marketing $ 13,990 27.7% $10,955
Percentage of total revenues 36.8% 32.3%
Product development $ 4,495 29.3% $ 3,476
Percentage of total revenues 11.8% 10.2%
General and administrative $ 3,095 8.0% $ 2,867
Percentage of total revenues 8.1% 8.5%
</TABLE>
The increase in sales and marketing expenses for the three months ended December
31, 1999 was due to increases in sales, sales support and marketing personnel
for the MRO.com organization, sales commissions, marketing research and
telemarketing expenses and higher travel costs.
The increase in product development expenses for the three months ended December
31, 1999 was primarily due to the hiring of additional employees to support the
MRO business. No software development costs were capitalized in the three months
ended December 31, 1999 and 1998, respectively since costs incurred subsequent
to the establishment of technological feasibility were not significant.
The Company intends to continue to make investments in electronic commerce
products for MRO supply chain management. (1) The Company will also continue to
invest in client/server MAXIMO and Java applications.
The increase in general and administrative expenses for the three months ended
December 31, 1999 was primarily due to the hiring of additional general and
administrative personnel and related benefits, as well as, other expenses to
support the global expansion of the Company.
NON-OPERATING EXPENSES
<TABLE>
<CAPTION>
(in thousands) Three CHANGE % Three
Months Months
Ended Ended
12/31/99 12/31/98
-------- --------
<S> <C> <C> <C>
Interest income $ 937 44.6% $ 648
Interest expense $ (1) (94.1%) $ (17)
Other income (expense) $(194) (369.4%) $ 72
</TABLE>
Interest income for the period ended December 31, 1999 was attributable to
interest earned on marketable securities and cash
- -----------------------------
14
<PAGE> 15
equivalents from cash flow generated from operations including accounts
receivable collections offset by premiums amortized for purchased marketable
securities.
The increase in other expense was primarily attributable to foreign currency
translation losses for the quarter ended December 31, 1999. To date, the Company
has not engaged in currency hedging transactions.
PROVISION FOR INCOME TAXES
The Company's effective tax rates were 34.5% and 35.0% for the three months
ended December 31, 1999 and 1998, respectively. The Company anticipates that its
fiscal 2000 effective tax rate will not exceed 36%. (1)
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company had cash and cash equivalents and
marketable securities of approximately $98.9 million and working capital of
$97.5 million. The days sales outstanding were 96 days for the quarter ended
December 31, 1999 compared to 92 days for the quarter ended December 31, 1998.
The Company has established a target of 90 to 95 days for its quarterly days
sales outstanding. (1) Cash provided by operations for the three months ended
December 31, 1999 was $207 thousand, primarily attributable to net income and an
increase in accounts payable, offset by an increase in receivables and accrued
compensation for payment of employee bonuses for fiscal 1999 earnings.
On January 11, 2000, the Company signed a definitive agreement to purchase
INTERMAT, Inc., a leading provider of MRO content management tools and
cataloging services. Under terms of the agreement, the Company will acquire the
capital stock of INTERMAT from Strategic Distribution, Inc. (NASDAQ: STRD) for
approximately $55.0 million in cash. Closing of the transaction is subject to
customary conditions, including expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. The closing is expected to
occur in the Company's second fiscal quarter of 2000 and will be accounted for
as a purchase.
Cash provided by investing activities totaled $1.5 million, primarily for the
sales of marketable securities offset by purchases of marketable securities.
Cash provided by financing activities was $2.2 million, from proceeds received
from exercises of employee stock options.
- --------------------
(1) Forward looking statement
15
<PAGE> 16
As of December 31, 1999, the Company's principal commitment consisted primarily
of an office lease for its headquarters. Under the terms of the lease agreement,
upon termination of the lease the Company has the right to extend the lease for
an additional six year term for an agreed upon fixed cost. The Company leases
its facilities and certain equipment under non-cancelable operating lease
agreements that expire at various dates through September 2006.
The Company may use a portion of its cash to acquire additional businesses,
products and technologies complementary to its business. (1) The Company also
plans to make investments over the next year in its new MRO.com web-based
products and to develop content and add suppliers to www.mro.com, MRO.com's
e-Commerce hub.
The Company believes that its current cash balances and marketable securities
combined with cash flow from operations will be sufficient to meet its working
capital and capital expenditure requirements through at least December 31, 2000.
(1)
YEAR 2000
The information contained under this heading constitutes a 'Year 2000 Readiness
Disclosure' under the Year 2000 Information and Readiness Disclosure Act.
The Year 2000 issue was the result of computer programs being written using two
digits rather than four to define the applicable year. Certain computer
programs that had a date sensitive software and used two digits only may have
recognized a date using "00" as the year 1900 rather than the year 2000.
The Company utilizes other third party software products, network equipment and
telecommunications products. To date, there has been no failure of any critical
technology components to operate properly in the Year 2000 causing an adverse
impact on business operations or require the Company to incur unanticipated
expenses to remedy any problems. Costs associated with preparing internal
systems for the Year 2000 were approximately $100,000.
The Company had evaluated its software products and disclosed its findings in
prior quarters on Form 10-Q and its Form 10-K filed on December 29, 1999, as
well as, the Company's year 2000 readiness documentation. Costs associated to
upgrade all of its products to be year 2000 enabled were approximately $500,000.
EURO COMPLIANCE
On January 1, 1999, eleven European Union member states adopted the euro as
their common national currency. Thereafter, until January 1, 2002, ("the
transition period"), either the euro or a participating country's present
currency will be accepted as legal tender. Beginning on January 1, 2002,
euro-denominated bills and coins will be issued, and by July 1, 2002, only the
euro will be used. A significant number of the Company's customers are located,
or transact business with, or have operations in, participating European Union
countries. As a result, the computer systems or software used by these companies
may need to be upgraded to comply with data storage and computational euro
requirements. In the first fiscal quarter of 1999, the Company released a new
English language client/server version of MAXIMO (MAXIMO 4.0.1) that accepts,
stores, calculates, converts and reports euro currency. In the second quarter of
fiscal 1999, the Company released primary language versions of MAXIMO 4.0.1 in
Brazilian Portuguese, Dutch, French, German, Latin American Spanish, and
Swedish. The Company also released a new English language client/server version
of MAXIMO (MAXIMO 4.0.2) for Workflow in the second quarter of fiscal 1999 that
is euro compliant as defined above. In the third quarter of fiscal 1999, the
Company released an English language version of MROBuyer's(TM) Desktop
Requisition that is also euro compliant. The amount of development dollars spent
on the euro releases did not and is not expected to have a material adverse
effect on the Company's results of operations or financial condition. (1)
- -----------------------------
(1) Forward looking statement
16
<PAGE> 17
FACTORS AFFECTING FUTURE PERFORMANCE
The nature of forward-looking information is that such information involves
assumptions, risks and uncertainties. Certain public documents of the Company
and oral statements made by authorized officers, directors, employees, agents
and representatives of the Company, acting on its behalf, may include
forward-looking information which will be influenced by the following and other
assumptions, risks and uncertainties. Forward-looking information requires
management of the Company to make assumptions, estimates, forecasts and
projections regarding the Company's future results as well as the future
effectiveness of the Company's strategic plans and future operational decisions.
Forward-looking statements made by or on behalf of the Company are subject to
the risk that the forecasts, projections, and expectations of management, or
assumptions underlying such forecasts, projections and expectations, may become
inaccurate. Accordingly, actual results and the Company's implementation of its
plans and operations may differ materially from forward-looking statements made
by or on behalf of the Company. The following discussion identifies certain
important factors that could affect the Company's actual results and actions and
could cause such results and actions to differ materially from any
forward-looking statements made by or on behalf of the Company that related to
such results and actions.
Other factors, which are not identified herein, could also have such an effect.
RAPID TECHNOLOGICAL CHANGE
The computer software industry is characterized by rapid technological advances,
changes in customer requirements and frequent product introductions and
enhancements. The Company's success depends upon its ability to continue to
enhance its current products and to develop and introduce new products that keep
pace with technological developments, respond to evolving customer requirements
and achieve market acceptance. In particular, the Company believes that it must
continue to respond quickly to users' needs for broad functionality and to
advances in hardware and operating systems. Any failure by the Company to
anticipate or respond adequately to technological developments and customer
requirements, or any significant delays in product development or introduction,
could result in a loss of competitiveness and revenues. There can be no
assurance that the Company will be successful in developing and marketing new
products or product enhancements, or that the Company will not experience
significant delays in developing such new products or product enhancements. Such
delays could have a material adverse
17
<PAGE> 18
effect on the Company's results of operations. In addition, there can be no
assurance that new products and product enhancements developed by the Company
will achieve market acceptance.
DEPENDENCE ON MAXIMO
The Company's revenues are primarily attributable to the licensing of its MAXIMO
client/server product, introduced in 1991, and to related services and support.
Revenues from licenses of MAXIMO and related services and support accounted for
approximately 94% of the Company's total revenues in 1999. The Company's
financial performance in 2000 depends largely on continued market acceptance of
MAXIMO. The Company believes that continued market acceptance of MAXIMO will
largely depend on its ability to enhance and broaden the capabilities of MAXIMO
by among other things, developing additional application modules for MAXIMO,
versions of MAXIMO and by developing and incorporating into the MAXIMO product
technologies that are emerging in connection with the Internet. Any factor
adversely affecting sales of MAXIMO, such as delays in development, significant
software flaws, incompatibility with significant hardware platforms, operating
systems or databases, increased competition or negative evaluations of MAXIMO,
would have a material adverse effect on the Company's business and financial
results.
NEW PRODUCTS; NEW MARKETS
In the second quarter of fiscal 1999, the Company formed a new wholly-owned
subsidiary, MRO.com, Inc. MRO.com, Inc. links an on-line community of MRO
suppliers and buyers to a group of Internet-based procurement products. There
can be no assurance that the Company's MRO products will be sold successfully in
the business-to-business electronic commerce market or that the Company's MRO
products will achieve market acceptance. There is also no assurance that the
Company can create a large enough community of sellers and buyers.
The Company's future success in the electronic commerce market may depend on its
ability to accurately determine the functionality and features required by its
customers, as well as the ability to enhance its MRO products and deliver them
in a timely manner.
The Internet procurement market is a nascent market that may undergo rapid
technological change. The Company cannot predict the present and future size of
the potential market for its MRO products and services. The Company may incur
substantial costs to enhance and modify its MRO products and services in order
to meet the demands of this growing and changing market. The Company's MRO
product segment is not yet profitable and may not be profitable for sometime, if
ever.
18
<PAGE> 19
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
The Company has experienced, and may in the future experience, significant
period-to-period fluctuations in revenues and operating results. The Company's
revenues and income from operations typically grow at a lower rate or decline in
the first quarter of each fiscal year, compared to the fourth quarter of the
preceding fiscal year. In addition, revenues are typically higher in the fourth
quarter than in other quarters of the year. The Company believes that these
quarterly patterns are partly attributable to the Company's sales commission
policies, which compensate members of the Company's direct sales force for
meeting or exceeding annual quotas. In addition, the Company's quarterly
revenues and operating results have fluctuated historically due to the number
and timing of product introductions and enhancements, the budgeting and
purchasing cycles of customers, the timing of product shipments and the timing
of marketing and product development expenditures. The Company typically
realizes a significant portion of its revenue from sales of software licenses in
the last two weeks of a quarter, frequently even in the last days of a quarter.
Large software license contracts may have a significant impact on revenues for
any quarter and could, therefore, result in significant fluctuations in
quarterly revenues and operating results. Accordingly, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as an indication of future performance.
The Company generally ships its products upon receipt of orders and maintains no
significant product backlog. As a result, revenues from license fees in any
quarter are substantially dependent on orders booked and shipped in that
quarter. A delay in or loss of orders can cause significant variations in
operating results. A significant portion of the Company's operating expenses are
fixed in the short term, and planned expenditures are based primarily on sales
forecasts. Accordingly, if revenues do not meet the Company's expectations in
any given quarter, operating results may be materially adversely affected.
COMPETITION
The market for applications software is intensely competitive and rapidly
changing. While the Company believes that it has competed effectively to date,
competition in its industry is likely to intensify as current competitors expand
their product lines and new companies enter the market. To remain successful in
the future, the Company must respond promptly and effectively to the challenges
of technological change, evolving standards and its competitors' innovations by
continually enhancing its own products, services and support offerings, as well
as its
19
<PAGE> 20
marketing programs. There can be no assurance that the Company will continue to
be able to compete successfully in the future.
The market for asset maintenance software is fragmented by geography, by
hardware platform and by industry orientation, and is characterized by a large
number of competitors including both independent software vendors and certain
enterprise resource planning vendors. Independent software vendors include
Datastream, Inc. and Indus Group. MAXIMO also competes with integrated
enterprise resource planning systems which are provided by several large
vendors, such as SAP and JD Edwards and others, and which include maintenance
modules. Currently, the Company's client/server versions of MAXIMO compete with
products of a number of large vendors some of which have traditionally provided
maintenance software running on mainframes and minicomputers and are now
offering systems for use in the client/server environment. MAXIMO also
encounters competition from vendors of low cost maintenance management systems
designed initially for use by a single user or limited number of users as
vendors of these products upgrade their functionality to enter the client/server
market.
The Company's MRO supply chain management business using the Internet has many
diverse competitors offering a wide range of differing products, services and
technologies. The Company expects competition to intensify as current
competitors expand their product offerings and new competitors enter the market.
In addition, the market for electronic procurement solutions is relatively new
and underdeveloped. While the Company believes that electronic commerce products
and technologies complement the Company's existing products, there can be no
assurance that the Company will be able to compete successfully in this market.
Many of the Company's enterprise asset management competitors are also entering
the MRO e-commerce market. The current potential competitors in the MRO
e-commerce market include Ariba, Clarus, Commerce One, Concur, Connect,
Harbinger, IBM, Intellisys, Microsoft, Netscape, Oracle, PeopleSoft, SAP and
others.
Certain of the Company's competitors have greater financial, marketing, service
and support and technological resources than the Company. To the extent that
such competitors increase their focus on the asset maintenance or planning and
cost systems markets, or on the supply chain management business, the Company
could be at a competitive disadvantage.
INTERNATIONAL OPERATIONS
A significant portion of the Company's total revenues are derived from
operations outside the United States. The Company derived 46.4%, 45.7%, and
43.8% of its total revenue from sales outside the United States in fiscal years
1999, 1998, and 1997, respectively. The Company expects that international
revenues will continue to be a significant percentage of total revenues. The
Company expects international revenues to continue to grow in
20
<PAGE> 21
absolute dollars during 2000, and accordingly, continues to invest in
international infrastructure, global product functionality and translated
versions of financial and other software products. In the event international
expansion and/or product globalization efforts are not successful, the Company's
business operating results and financial condition may be adversely affected.
This international business is subject to various risks common to international
activities, including exposure to currency fluctuations, greater difficulty in
collecting accounts receivable, political and economic instability, the greater
difficulty of administering business abroad and the need to comply with a wide
variety of foreign import and United States export laws and regulatory
requirements.
A significant portion of the Company's total revenue is derived from
international operations that are conducted in foreign currencies. Changes in
the values of these foreign currencies relative to the United States dollar have
in the past adversely affected, and may in the future affect, the Company's
results of operations and financial position. Gains and losses on translation to
United States dollars and settlement of receivables from international
subsidiaries may contribute to fluctuations in the Company's results of
operations. To date, the Company has not engaged in currency hedging
transactions. The Company may in the future undertake currency hedging, although
there can be no assurance that hedging transactions, if entered into, would
materially reduce the effects of fluctuations in foreign currency exchange rates
on the Company's results of operations.
DEPENDENCE ON THIRD PARTIES
The client/server versions of MAXIMO operate with the Oracle, SQLServer, and
SQLBase database management systems. Introduction and increased market
acceptance of database management systems with which the Company's products do
not operate could adversely affect the market for the Company's products.
The Company has entered into nonexclusive license agreements with, among others,
Broadvision Incorporated, Centura Software Corporation, Scribe Technologies,
Incorporated, Cognos Corporation, Netronic Software GmbH, HSB Reliability
Technologies Corporation, Intelligent Labeling Technologies, Incorporated,
Verity Software, and webMethods, Inc. pursuant to which the Company incorporates
into its products software providing certain application development, user
interface, business intelligence, content and graphics capabilities developed by
these companies. If the Company were unable to renew these licenses, or if any
of such vendors were to become unable to support and enhance its products, the
Company could be required to devote additional resources to the enhancement and
support of these products or to acquire or develop software providing equivalent
capabilities, which could cause delays in
21
<PAGE> 22
the development and introduction of products incorporating such capabilities.
The MRO.com business operations are dependent on third party data centers, which
could be destroyed or damaged. MRO operations are dependent upon the ability to
protect computer equipment and the information stored in these third party data
centers against damage that may be caused by natural disasters, fire, power
loss, telecommunication or Internet failures, unauthorized intrusions, computer
viruses and other similar damaging events. The Company cannot assure that any of
these damaging events would not result in a prolonged outage of the Company's
network services or that the Company would not experience a reduction of
revenues, which could have a material adverse effect on our business and
financial results.
PRODUCT DEVELOPMENT: INTERNET
The Company has developed a Java-based component architect software application
to incorporate into the MAXIMO product technologies emerging in conjunction with
the Internet. Internet technologies and applications generally are developing
and gaining acceptance rapidly in the market. MRO supply chain management using
electronic commerce is a nascent market with many standards and technologies
remaining to be developed. Accordingly, developing technologies pose risks to
the Company. The Company believes that electronic commerce products and
technologies complement the Company's enterprise asset management products.
There can be no assurance that the Company will successfully anticipate trends
in this market, that the Company will be successful in Internet technology
development or acquisition efforts or that the Company's Internet applications,
if developed, will achieve market acceptance.
INTERNET
If Internet usage continues to grow rapidly, its infrastructure may not be able
to support customer and user demands and its performance and reliability may
decline. If outages or delays on the Internet occur frequently or increase in
frequency, overall Internet usage including usage of the Company's products and
services could grow more slowly or decline. The Company is dependent upon
improvements being made to the entire Internet as well as to particular
customers' networking infrastructures to alleviate overloading and congestion.
If these improvements are not made, the ability of the Company's customers to
utilize the Company's solution will be hindered, and the Company's business,
operating results and financial condition may suffer.
LIMITED INTELLECTUAL PROPERTY PROTECTION
The Company's success is dependent upon proprietary technology. The Company
currently has no patents and protects its technology primarily through
copyrights, trademarks, trade secrets and
22
<PAGE> 23
employee and third party nondisclosure agreements. The Company's software
products are sometimes licensed to customers under "shrink wrap" licenses
included as part of the product packaging. Although, in larger sales, the
Company's shrink-wrap licenses may be accompanied by specifically negotiated
agreements signed by the licensee, in many cases its shrink-wrap licenses are
not negotiated with or signed by individual licensees. Certain provisions of the
Company's shrink-wrap licenses, including provisions protecting against
unauthorized use, copying, transfer and disclosure of the licensed program, may
be unenforceable under the laws of certain jurisdictions. In addition, the laws
of some foreign 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 steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or development by others
of similar technology. Although the Company believes that its products and
technology do not infringe on any existing proprietary rights of others, there
can be no assurance that third parties will not assert infringement claims in
the future. Litigation may be necessary to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could potentially have a material adverse result on our operating
results and financial condition.
GENERAL ECONOMIC RISK FACTORS
To date, inflation has not had a material impact on the Company's financial
results. There can be no assurance, however, that inflation will not adversely
affect the Company's financial results in the future.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on certain key executive officers and technical
employees, the loss of one or more of whom could have an adverse impact on the
future operations of the Company. The Company does not have employment contracts
with, and does not maintain key person life insurance policies on, any
personnel. The Company continues to hire a significant number of additional
sales, services and technical personnel. Competition for hiring of such
personnel in the software industry is intense, and the Company from time to time
experiences difficulty in locating candidates with the appropriate
qualifications within the desired geographic locations, or with certain industry
specific domain expertise. It is widely believed that the technology industry is
at or beyond a condition of full employment. There can be no assurance that the
Company will be able to retain its existing personnel or attract additional
qualified employees.
23
<PAGE> 24
CERTAIN RISKS ASSOCIATED WITH ACQUISITIONS
As part of its overall strategy, the Company plans to continue to acquire or
invest in complementary companies, products, or technologies and to enter into
joint ventures and strategic alliances with other companies. There can be no
assurance that the Company will be successful in overcoming the risks associated
or problems encountered in connection with such business combinations,
investments, or joint ventures, or that such transactions will not materially
adversely affect the Company's business, financial condition, or operating
results.
POSSIBLE CONTINUED VOLATILITY OF STOCK PRICE
Fiscal 1999 was marked by significant fluctuations in the market price of the
common stock, par value $.01 per share, of the Company (the "Common Stock").
Factors such as announcements of technological innovations or new products by
the Company, its competitors and other third parties, as well as quarterly
variations in the Company's results of operations and market conditions in the
industry, may cause the market price of the Common Stock to continue to
fluctuate significantly. In addition, the stock market in general has recently
experienced substantial price and volume fluctuations, which have particularly
affected the market prices of many software and e-commerce companies and which
have often been unrelated to the operating performance of such companies. These
broad market fluctuations also may adversely affect the market price of the
common stock.
The information contained under this heading constitutes a 'Year 2000 Readiness
Disclosure' under the Year 2000 Information and Readiness Disclosure Act.
The Year 2000 issue was the result of computer programs being written using two
digits rather than four to define the applicable year. Certain computer
programs that had a date sensitive software and used two digits only may have
recognized a date using "00" as the year 1900 rather than the year 2000.
The Company utilizes other third party software products, network equipment and
telecommunications products. To date, there has been no failure of any critical
technology components to operate properly in the Year 2000 causing an adverse
impact on business operations or require the Company to incur unanticipated
expenses to remedy any problems. Costs associated with preparing internal
systems for the Year 2000 were approximately $100,000.
The Company had evaluated its software products and disclosed its findings in
prior quarters on Form 10-Q and its Form 10-K filed on December 29, 1999, as
well as, the Company's year 2000 readiness documentation. Costs associated to
upgrade all of its products to be year 2000 enabled were approximately $500,000.
LITIGATION RISKS
The Company is subject to the normal risks of litigation with respect to its
business operation.
YEAR 2000
EURO COMPLIANCE
On January 1, 1999, eleven European Union member states adopted the euro as
their common national currency. Thereafter, until January 1, 2002, the
transition period, either the euro or a participating country's present currency
will be accepted as legal tender. Beginning on January 1, 2002, euro-denominated
bills and coins will be issued, and by July 1, 2002, only the euro will be used.
A significant number of the Company's customers are located, or transact
business with, or have operations in participating European Union countries. As
a result, the computer systems or software used by these companies may need to
be upgraded to comply with data storage and computational euro requirements. In
the first fiscal quarter of 1999, the Company released a new English language
client/server version of MAXIMO (MAXIMO 4.0.1) that accepts, stores, calculates,
converts and reports euro currency. In the second quarter of fiscal 1999, the
Company released primary language
24
<PAGE> 25
versions of MAXIMO 4.0.1 in Brazilian Portuguese, Dutch, French, German, Latin
American Spanish, and Swedish. The Company also released a new English language
client/server version of MAXIMO (MAXIMO 4.0.2) for Workflow in the second
quarter of fiscal 1999 that is euro compliant as defined above. In the third
quarter of fiscal 1999, the Company released an English language version of
MROBuyer's(TM) Desktop Requisition that is also euro compliant. The amount of
development dollars spent on the euro releases did not and does not expect to
have a material adverse effect on the Company's results of operations or
financial condition.
NO REVISIONS OR UPDATES TO FORWARD-LOOKING STATEMENTS
The Company has no obligation to release publicly any revision or update to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
25
<PAGE> 26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary exposures to market risk are the effect of fluctuations in
interest rates earned on its cash equivalents and marketable securities.
At December 31, 1999, the Company held $98.9 million in cash equivalents and
marketable securities consisting of taxable and tax exempt municipal securities.
Cash equivalents are classified as available for sale and valued at amortized
cost, which approximates fair market value. A hypothetical 10 percent increase
in interest rates would not have a material impact on the fair market value of
these instruments due to their short maturity and the Company's intention that
all the securities will be sold within one year.
26
<PAGE> 27
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held a Special Shareholders meeting on December 15, 1999 to approve
the amendment of the Company's Restated Articles of Organization to increase the
Company's Common Stock from 15,350,000 to 50,000,000 shares.
<TABLE>
<CAPTION>
Number of
Shares Voted
Pre-split
---------
<S> <C>
For Approval 8,109,597
Against 1,031,874
Abstain 3,255
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Organization of the Company
(included as Exhibit 3.3 to the Company's Registration Statement on
Form S-1, Registration No.376420, and incorporated herein by reference)
3.2 Restated By-Laws of the Company, as amended (included as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996, File No. 0-23852 and incorporated herein by
reference)
3.3 Form of Certificate of Designation of Series A Junior Participating
Preferred Stock of Project Software & Development, Inc. (which is
attached as Exhibit A to the Rights Agreement included as Exhibit 4(b)
to the Company's Current Report on Form 8-K dated February 2, 1998,
File No. 0-23852, and incorporated herein by reference)
3.4 Amendment to Articles of Organization adopted on December 15, 1999.
4. Instruments defining the Rights of Security Holders, Including
Indentures
4.1 Specimen certificate for the Common Stock of the Company (included
as Exhibit 4.1 to the Company's Registration Statement on Form S-1,
Registration No. 33-76420, and incorporated herein by reference)
27
<PAGE> 28
4.2 Article 4B of the Amended and Restated Articles of Organization of
the Company (included as Exhibit 4.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-76420, and incorporated
herein by reference)
4.3 Rights Agreement dated as of January 27, 1998, between Project
Software & Development, Inc. and BankBoston, N.A. as Rights Agent
(included as Exhibit 4 (a) to the Company's Current Report on Form 8-K
dated February 2, 1998, File No. 0-23852, and incorporated herein by
reference)
4.4 Form of Certificate of Designation of Series A Junior Participating
Preferred Stock of Project Software & Development, Inc. (included as
Exhibit 4 (b) to the Company's Current Report on Form 8-K dated
February 2, 1998, File No. 0-23852, and incorporated herein by
reference)
4.5 Form of Rights Certificate (included as Exhibit 4 (c) to the
Company's Current Report on Form 8-K dated February 2, 1998, File No.
0-23852, and incorporated herein by reference)
27. Financial Data Schedule
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no current reports filed on Form 8-K for the three months
ended December 31, 1999.
28
<PAGE> 29
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.
PROJECT SOFTWARE & DEVELOPMENT, INC.
Date: February 14, 2000 By: /s/ Paul D. Birch
----------------- -----------------
Paul D. Birch
Authorized Officer
Executive Vice President Finance &
Administration, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
29
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --- ----------- ----
<S> <C> <C>
3.1 Amended and Restated Articles of Organization of the Company (included
as Exhibit 3.3 to the Company's Registration Statement on Form S-1,
Registration No. 33-76420, and incorporated herein by reference)
3.2 Restated By-Laws of the Company, as amended (included as Exhibit 3.2 to
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996 File No. 0-23852 and incorporated herein by
reference)
3.3 Form of Certificate of Designation of Series A Junior Participating
Preferred Stock of Project Software & Development, Inc. (which is
attached as Exhibit A to the Rights Agreement included as Exhibit 4 (b)
to the Company's Current Report on Form 8-K dated February 2, 1998,
File No. 0-23852, and incorporated herein by reference)
3.4 Amendment to Articles of Organization adopted on December 15, 1999
4.1 Specimen certificate for the Common Stock of the Company (included as
Exhibit 4.1 to the Company's Registration Statement on Form S-1,
Registration No. 33-76420, and incorporated herein by reference)
4.2 Article 4B of the Amended and Restated Articles of Organization of the
Company (included as Exhibit 4.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-76420, and incorporated
herein by reference)
4.3 Rights Agreement dated as of January 27, 1998, between Project Software
& Development, Inc. and BankBoston, N.A. as Rights Agent (included as
Exhibit 4 (a) to the Company's Current Report on Form 8-K dated
February 2, 1998, File No.0-23852, and incorporated herein by
reference)
4.4 Form of Certificate of Designation of Series A Junior Participating
Preferred Stock of Project Software & Development, Inc. (included as
Exhibit 4 (b) to the Company's Current Report on Form 8-K dated
February 2, 1998, File No. 0-23852, and incorporated herein by
reference)
4.5 Form of Rights Certificate (included as Exhibit 4 (c) to the Company's
Current Report on Form 8-K dated February 2, 1998, File No. 0-23852,
and incorporated herein by reference)
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 3.4
FEDERAL IDENTIFICATION
No. 04-2448516
------------------
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
We, Norman E. Drapeau, Jr. *President
---------------------------------------------------------------,
and Paul D. Birch *Clerk
-------------------------------------------------------------------,
of Project Software & Development, Inc.
---------------------------------------------------------------------------,
(Exact name of corporation)
located at 100 Crosby Drive, Bedford, MA 01730
-------------------------------------------------------------------,
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article III
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of the Organization were duly adopted at a meeting held on
December 15, 1999, by vote of:
- ----------- --
8,109,597 shares of Common Stock of 10,650,906 shares outstanding,
- --------- -------------------------- ----------
(type, class & series, if any)
shares of of shares outstanding,
- --------- -------------------------- ----------
(type, class & series, if any)
shares of of shares outstanding,
- --------- -------------------------- ----------
(type, class & series, if any)
(1)** being at least a majority of each type, class or series outstanding and
entitled to vote thereon:
* Delete the inapplicable words. ** Delete the inapplicable clause.
(1) For amendments adopted pursuant to Chapter 156B, Section 70.
(2) For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of a separate 8 1/2
x 11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article requiring
each addition is clearly indicated.
<PAGE> 2
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -------------------------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
Common: Common: 15,350,000 $.01
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $.01
- -------------------------------------------------------------------------------------------------------
Series A Junior Participating Preferred
Stock - 16,000; Undesignated - 984,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
Change the total authorized to:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -------------------------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
Common: Common: 50,000,000 $.01
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $.01
- -------------------------------------------------------------------------------------------------------
Series A Junior Participating Preferred
Stock - 16,000; Undesignated - 984,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
Voted: To amend the Company's Restated Articles of Organization to increase the
authorized Common Stock, par value $.01 per share, from 15,350,000 to
50,000,000 shares.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: _____________________________ .
SIGNED UNDER THE PENALTIES OF PERJURY, this 15th day of December 1999
---- ------------- , ---- ,
/s/ Norman E. Drapeau, Jr. *President
- ------------------------------------------------------------------- ,
/s/ Paul D. Birch *Clerk
- -----------------------------------------------------------------------,
* Delete the inapplicable words.
<PAGE> 4
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
================================================================================
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $ _________ having been paid, said articles deemed to have been filed
with me this ______ day of ____________ 19 _____ .
Effective date: _______________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Jeffrey D. Collins, Esq.
------------------------------------------------
Foley, Hoag & Eliot LLP, One Post Office Square
------------------------------------------------
Boston, MA 02109
------------------------------------------------
(617) 832-1265
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 63,580
<SECURITIES> 26,114
<RECEIVABLES> 43,238
<ALLOWANCES> 2,838
<INVENTORY> 0
<CURRENT-ASSETS> 138,601
<PP&E> 25,414
<DEPRECIATION> 13,193
<TOTAL-ASSETS> 164,157
<CURRENT-LIABILITIES> 41,090
<BONDS> 0
0
0
<COMMON> 216
<OTHER-SE> 122,625
<TOTAL-LIABILITY-AND-EQUITY> 164,157
<SALES> 15,737
<TOTAL-REVENUES> 37,986
<CGS> 659
<TOTAL-COSTS> 13,187
<OTHER-EXPENSES> 21,580
<LOSS-PROVISION> 115
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 3,961
<INCOME-TAX> 1,365
<INCOME-CONTINUING> 3,219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,596
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.11
</TABLE>
