SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 0-25346
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0772104
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
224 South 108th Avenue
Omaha, Nebraska 68154
(Address of principal executive offices, including zip code)
(402) 334-5101
(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__
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
27,266,614 shares of Class A Common Stock at May 7, 1998
1,171,252 shares of Class B Common Stock at May 7, 1998
<PAGE>
TRANSACTION SYSTEMS ARCHITECTS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
TABLE OF CONTENTS
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets as of March 31, 1998
and September 30, 1997 3
Condensed Consolidated Statements of Income for the
three and six months ended March 31, 1998 and 1997 4
Condensed Consolidated Statement of Stockholders' Equity
for the six months ended March 31, 1998 5
Condensed Consolidated Statements of Cash Flows for the six
months six months ended March 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 12
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits 15
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
March 31, September 30,
1998 1997
--------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 49,370 $ 46,600
Billed receivables, net 44,675 39,864
Accrued receivables 24,135 25,063
Deferred income taxes 4,312 3,517
Other 2,714 3,043
---------- ------------
Total current assets 125,206 118,087
Property and equipment, net 17,006 16,263
Software, net 6,476 6,105
Intangible assets, net 10,262 9,539
Installment receivables 1,029 2,394
Investments and notes receivable 12,615 7,969
Other 4,706 4,877
---------- ------------
Total assets $ 177,300 $ 165,234
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 829 $ 768
Current portion of capital lease obligations 432 524
Accounts payable 7,300 7,896
Accrued employee compensation 5,135 5,559
Accrued liabilities 10,894 9,048
Income taxes 5,336 6,230
Deferred revenue 22,071 28,792
---------- ------------
Total current liabilities 51,997 58,817
Long-term debt 1,062 1,465
Capital lease obligations 1,277 914
---------- ------------
Total liabilities 54,336 61,196
---------- ------------
Stockholders' equity:
Class A Common Stock 136 134
Class B Common Stock 6 6
Additional paid-in capital 108,227 103,708
Accumulated translation adjustments (949) (260)
Retained earnings 15,556 462
Treasury stock, at cost (12) (12)
---------- ------------
Total stockholders' equity 122,964 104,038
---------- ------------
Total liabilities and stockholders' equity $ 177,300 $ 165,234
========== ============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share amounts)
Three Months Ended March 31, Six Months Ended March 31,
--------------------------- ---------------------------
1998 1997 1998 1997
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Software license fees $ 37,879 $ 31,179 $ 73,653 $ 58,318
Maintenance fees 12,236 10,179 23,585 20,285
Services 13,065 11,309 25,613 23,350
Hardware, net 1,019 784 2,407 1,337
-------- --------- --------- ---------
Total revenues 64,199 53,451 125,258 103,290
-------- --------- --------- ---------
Expenses:
Cost of software license fees:
Software costs 7,315 6,364 14,597 11,919
Amortization of purchased software - - - 801
Cost of maintenance and services 14,343 12,305 27,678 25,017
Research and development 5,578 4,624 11,083 8,703
Selling and marketing 14,443 12,030 28,195 22,599
General and administrative:
General and administrative costs 10,223 8,777 19,897 17,068
Amortization of goodwill and purchased
intangibles 414 237 729 454
-------- --------- --------- ---------
Total expenses 52,316 44,337 102,179 86,561
-------- --------- --------- ---------
Operating income 11,883 9,114 23,079 16,729
-------- --------- --------- ---------
Other income (expense):
Interest income 723 498 1,314 940
Interest expense (78) (24) (98) (81)
Other 26 (227) (54) (544)
-------- --------- --------- ---------
Total other 671 247 1,162 315
-------- --------- --------- ---------
Income before income taxes 12,554 9,361 24,241 17,044
Provision for income taxes (4,700) (3,838) (9,147) (7,253)
-------- --------- --------- ---------
Net income $ 7,854 $ 5,523 $ 15,094 $ 9,791
======== ========= ========= =========
Earnings Per Share Data:
Basic:
Net income $ 0.28 $ 0.20 $ 0.54 $ 0.35
======== ========= ========= =========
Average shares outstanding 28,183 27,806 28,127 27,790
======== ========= ========= =========
Diluted:
Net income $ 0.27 $ 0.19 $ 0.52 $ 0.34
======== ========= ========= =========
Average shares outstanding 29,108 28,592 29,086 28,603
======== ========= ========= =========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the six months ended March 31, 1998
(unaudited and in thousands)
Class A Class B Additional Accumulated
Common Common Paid-in Translation Retained Treasury
Stock Stock Capital Adjustments Earnings Stock Total
-------- -------- --------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 $ 134 $ 6 $ 103,708 $ (260) $ 462 $ (12) $ 104,038
Issuance of Class A Common Stock for
purchase of Coyote Systems, Inc. 1 1,086 1,087
Exercise of stock options 1 1,100 1,101
Tax benefit of stock options exercised 1,908 1,908
Sale of Class A Common Stock pursuant
to Employee Stock Purchase Plan 425 425
Net Income 15,094 15,094
Translation adjustments (689) (689)
-------- -------- --------- ---------- --------- -------- --------
Balance, March 31, 1998 $ 136 $ 6 $ 108,227 $ (949)$ 15,556 $ (12) $ 122,964
======== ======== ========= ========== ========= ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Six Months Ended March 31,
---------------------------------------
1998 1997
------------------ --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,094 $ 10,294
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,048 2,641
Amortization 2,162 2,518
Increase in receivables, net (3,942) (10,954)
Decrease in other current assets 492 2,242
Decrease in installment receivables 1,365 383
Increase in other assets (781) (27)
Decrease in accounts payable (674) (1,070)
Decrease in accrued employee compensation (505) (2,209)
Increase in accrued liabilities 1,515 3,739
Increase (decrease) in income tax liabilities 1,014 (1,148)
Increase (decrease) in deferred revenue (6,837) 6,898
-------------- ----------------
Net cash provided by operating activities 11,951 13,307
-------------- ----------------
Cash flows from investing activities:
Purchases of property and equipment (3,370) (3,598)
Purchases of software and distribution rights (1,667) (1,497)
Acquisiton of businesses, net of cash acquired (253) (2,385)
Additions to investment and notes receivable (4,751) (3,061)
Proceeds from notes receivable repayments 149 3,680
-------------- ----------------
Net cash used in investing activities (9,892) (6,861)
-------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of Class A Common Stock 426 392
Proceeds from sale and exercise of stock options 1,101 2,908
Distribution to RVS owners - (3,306)
Payments of long-term debt (363) -
Payments on capital lease obligations (64) (51)
-------------- ----------------
Net cash provided by (used in) financing activities 1,100 (57)
-------------- ----------------
Effect of exchange rate fluctuations on cash (389) (39)
-------------- ----------------
Increase in cash and cash equivalents 2,770 6,350
Cash and cash equivalents, beginning of period 46,600 32,751
-------------- ----------------
Cash and cash equivalents, end of period $ 49,370 $ 39,101
============== ================
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRANSACTION SYSTEMS ARCHITECTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
Transaction Systems Architects, Inc. (the Company or TSA) develops, markets and
supports a broad line of software products and services primarily focused on
facilitating electronic payments and electronic commerce. In addition to its own
products, the Company distributes software developed by third parties. The
products are used principally by financial institutions, retailers and
third-party processors, both in domestic and international markets.
The condensed consolidated financial statements at March 31, 1998 and for the
three and six months ended March 31, 1998 and 1997 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1997. The results of operations for the three and six months ended
March 31, 1998 are not necessarily indicative of the results for the entire
fiscal year ending September 30, 1998.
The condensed consolidated financial statements include all domestic and foreign
subsidiaries which are more than 50% owned and controlled. Investments in
companies less than 20% owned are carried at cost.
2. Earnings Per Share
Effective October 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings Per Share." Basic earnings per share is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the periods. Diluted earnings per share is computed by
dividing net income by the sum of the weighted average number of shares of
common stock outstanding and the potential dilutive effect of the outstanding
stock options associated with the Company's stock incentive plans.
3. Acquisitions
In October 1996, the Company completed the acquisition of Open Systems
Solutions, Inc. (OSSI). Stockholders of OSSI received 210,000 shares of TSA
Class A Common Stock in exchange for 100% of OSSI's common stock. The stock
exchange was accounted for as a pooling of interests. OSSI's results of
operations prior to the acquisition were not material.
In May 1997, the Company completed the acquisition of Regency Voice Systems,
Inc. and related entities (RVS). Shareholders of RVS received 1,615,383 shares
of TSA Class A Common Stock in exchange for 100% of RVS's shares. The stock
exchange was accounted for as a pooling of interests. The accompanying condensed
consolidated financial statements for the three and six months ended March 31,
1997 have been restated to reflect the results of operations of RVS.
In February 1998, the Company completed the acquisition of Coyote Systems, Inc.
(Coyote). Shareholders of Coyote received 26,400 shares of TSA Class A Common
Stock in exchange for 100% of Coyote's shares. The stock exchange has been
accounted for using the purchase method of accounting and, accordingly, the cost
in excess of the fair value of the net tangible assets acquired totaling
approximately $1.1 million was allocated to goodwill.
4. Investment and Notes Receivable
In January 1996, the Company entered into a transaction with Insession, Inc.
(Insession) whereby the Company acquired a 6% minority interest in Insession for
$1.5 million. In addition, the Company has extended Insession $6.2 million in
promissory notes as of March 31, 1998. The promissory notes bear an interest
rate of prime plus 0.25%, and are payable in January 1999 ($1.0 million),
January 2000 ($1.0 million) and January 2001 ($1.5 million). The remaining $2.7
million of promissory notes are payable upon demand. The promissory notes are
secured by future royalties owed by the Company to Insession.
The Company has extended a $4.5 million line of credit facility to U.S.
Processing, Inc. (USPI), a transaction processing business in which the Company
has a 19.9% ownership interest. As of March 31, 1998, borrowings under the line
of credit totaled $4.5 million.
5. Subsequent Events
In April 1998, the Company announced an agreement to acquire IntraNet, Inc.
(IntraNet). IntraNet is a provider of electronic funds transfer and payment
processing systems for financial institutions. Under the terms of the agreement,
owners of IntraNet will receive approximately 1,225,000 shares of TSA Class A
Common Stock in exchange for 100% of IntraNet's outstanding stock. The exchange
is expected to be accounted for as a pooling of interests. The transaction,
which is subject to certain conditions including IntraNet's shareholder
approval, is scheduled to close on or about May 28, 1998.
In April 1998, the Company entered into a transaction with Nestor, Inc.
(Nestor), whereby the Company acquired 2.5 million shares of Nestor's Common
Stock for $5.0 million. In addition, the Company received warrants to purchase
an additional 2.5 million shares at an exercise price of $3 per share. Nestor is
a provider of neural-network solutions for financial, internet and
transportation industries. The Company distributes Nestor's PRISM intelligent
fraud detection product. The Company will account for the investment in Nestor's
Common Stock and warrants in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain investments in Debt and Equity
Securities" as "available for sale."
In May 1998, the Company completed the acquisition of Edgeware, Inc. (Edgeware).
Edgeware is a provider of customer specific marketing software and services to
the retail industry. Under the terms of the agreement, owners of Edgeware
received 143,436 shares of TSA Class A Common Stock in exchange for 100% of
Edgeware's outstanding stock. The exchange will be accounted for as a pooling of
interests.
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION SYSTEMS ARCHITECTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain financial data and the percentage of total revenues of the Company for the periods indicated:
Three Months Ended March 31, Six Months Ended March 31,
----------------------------------------- ------------------------------------------
1998 1997 1998 1997
----------------------------------------- ------------------------------------------
% of % of % of % of
Amount Revenue Amount Revenue Amount Revenue Amount Revenue
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Software license fees $ 37,879 59.% $ 31,179 58.% $ 73,653 58.% $ 58,318 56.5
Maintenance fees 12,236 19.1 10,179 19.0 23,585 18.8 20,285 19.6
Services 13,065 20.4 11,309 21.2 25,613 20.4 23,350 22.6
Hardware, net 1,019 1.5 784 1.5 2,407 1.9 1,337 1.3
-------- --------- -------- -------- ------- ------- ------- --------
Total revenues 64,199 100.0 53,451 100.0 125,258 100.0 103,290 100.0
-------- --------- -------- -------- ------- ------- ------- --------
Expenses:
Cost of software license fees:
Software costs 7,315 11.4 6,364 11.9 14,597 11.7 11,919 11.5
Amortization of purchased software 0 0.0 0 0.0 0 0.0 801 0.8
Cost of maintenance and services 14,343 22.3 12,305 23.0 27,678 22.1 25,017 24.2
Research and development 5,578 8.7 4,624 8.7 11,083 8.8 8,703 8.4
Selling and marketing 14,443 22.5 12,030 22.5 28,195 22.5 22,599 21.9
General and administrative:
General and administrative costs 10,223 15.9 8,777 16.4 19,897 15.9 17,068 16.5
Amortization of goodwill and
purchased intangibles 414 0.7 237 0.4 729 0.6 454 0.4
-------- -------- -------- -------- ------- ------- ------- --------
Total expenses 52,316 81.5 44,337 82.9 102,179 81.6 86,561 83.8
-------- -------- -------- -------- ------- ------- ------- --------
Operating income 11,883 18.5 9,114 17.1 23,079 18.4 16,729 16.2
-------- -------- -------- -------- ------- ------- ------- --------
Other income (expense):
Interest income 723 1.1 498 0.9 1,314 1.0 940 0.9
Interest expense (78) (0.1) (24) 0.0 (98) (0.1) (81) (0.1)
Other 26 0.0 (227) (0.4) (54) 0.0 (544) (0.5)
-------- -------- -------- -------- ------- ------- ------- --------
Total other 671 1.0 247 0.5 1,162 0.9 315 0.3
-------- -------- -------- -------- ------- ------- ------- --------
Income before income taxes 12,554 19.6 9,361 17.5 24,241 19.4 17,044 16.5
Provision for income taxes (4,700) (7.4) (3,838) (7.2) (9,147) (7.3) (7,253) (7.0)
-------- -------- -------- -------- ------- ------- ------- --------
Net income 7,854 12.0 5,523 10.0 15,094 12.0 9,791 10.0
======== ======== ======== ======== ======= ======= ======= ========
</TABLE>
<PAGE>
Results of Operations (continued)
Revenues
Total revenues for the second quarter of fiscal 1998 increased 20.1% or $10.7
million over the comparable period in fiscal 1997. Of this increase, $6.7
million of the growth resulted from a 21.5% increase in software license fee
revenue, $1.7 million from a 15.5% increase in services revenue and $2.1 million
from a 20.2% increase in maintenance fee revenue.
Total revenues for the first half of fiscal 1998 increased 21.3% or $22.0
million over the comparable period in fiscal 1997. Of this increase, $15.3
million of the growth resulted from a 26.3% increase in software license fee
revenue, $2.3 million from a 9.7% increase in services revenue and $3.3 million
from a 16.3% increase in maintenance fee revenue.
The growth in software license fee revenue is the result of increased demand for
the Company's BASE24 products and continued growth of the installed base of
customers paying monthly license fee (MLF) revenue. Contributing to the strong
demand for the Company's products is the continued world-wide growth of
electronic payment transaction volume and the growing complexity of electronic
payment systems. MLF revenue was $10.9 million in the second quarter of fiscal
1998 compared to $7.9 million in the second quarter of fiscal 1997. MLF revenue
was $20.4 million in the first half of fiscal 1998 compared to $15.1 million in
the first half of fiscal 1997.
The growth in services revenue for the second quarter and first half of fiscal
1998 is the result of increased demand for technical and project management
services which is a direct result of the increased installed base of the
Company's BASE24 products.
The increase in maintenance fee revenue for the second quarter and first half of
fiscal 1998 is a result of the continued growth of the installed base of the
Company's BASE24 products.
Expenses
Total operating expenses for the second quarter of fiscal 1998 increased 18.1%
or $8.0 million over the comparable period in fiscal 1997. Total operating
expenses for the first half of fiscal 1998 increased 18.0% or $15.6 million over
the comparable period in fiscal 1997. The primary reason for the overall
increase in operating expenses is the increase in staff required to support the
increased demand for the Company's products and services. Total staff (including
both employees and independent contractors) increased from 1,452 at March 31,
1997 to 1,700 at March 31, 1998.
The Company's operating margin for the second quarter of fiscal 1998 was 18.5%
as compared to 17.1% for the comparable period in fiscal 1997. Operating margin
for the first half of fiscal 1998 was 18.4% as compared to 16.2% for the first
half of fiscal 1997. These improvements are primarily due to the impact of the
growth in the Company's recurring revenues (MLF's, maintenance and facilities
management fees) and the conclusion in December 1996 of the software
amortization associated with the acquisition of Applied Communications, Inc.
(ACI) and Applied Communications Inc. Limited (ACIL) in December 1993.
The Company's gross margin (total revenues minus cost of software and cost of
maintenance and services) for the second quarter of fiscal 1998 was 66.3% as
compared to 65.1% for the comparable period in fiscal 1997. The gross margin for
the first half of fiscal 1998 was 66.2% as compared to 63.5% for the first half
of fiscal 1997. The improvements are partly due to the conclusion of the
software amortization associated with the acquisitions of ACI and ACIL.
EBITDA
The Company's earnings before interest expense, income taxes, depreciation and
amortization (EBITDA) increased from $11.3 million in the second quarter of
fiscal 1997 to $14.6 million in the second quarter of fiscal 1998. EBITDA
increased from $21.9 million in the first half of fiscal 1997 to $28.3 million
in the first half of fiscal 1998. The increase in EBITDA can be attributed to
the continued growth in both recurring and non-recurring revenues more than
offsetting the growth in operating expenses. EBITDA is not intended to represent
cash flows for the periods.
Income Taxes
The effective tax rates for the second quarter and first half of fiscal 1998
were 37.4% and 37.7%, respectively. This compares to 39.1% for all of fiscal
1997. The decrease in the effective tax rates is principally the result of
deferred tax assets which were recognized in the first half of fiscal 1998 which
reduced the effective tax rates for those periods with no corresponding
recognition of deferred tax assets in the second quarter and first half of
fiscal 1997.
As of March 31, 1998, the Company has deferred tax assets of $15.8 million and
deferred tax liabilities of $0.4 million. Each quarter, the Company evaluates
its historical operating results as well as its projections for the future to
determine the realizability of the deferred tax assets. This analysis indicated
that $4.3 million of the deferred tax assets were more likely than not to be
realized. Accordingly, the Company has recorded a valuation allowance of $11.5
million as of March 31, 1998.
Results of Operations (continued)
The Company intends to analyze the realizability of the net deferred tax assets
at each future reporting period. Such analysis may indicate that the realization
of various deferred tax benefits is more likely than not and, therefore, the
valuation reserve may be reduced.
Backlog
As of March 31, 1998 and 1997, the Company had non-recurring revenue backlog of
$28.6 million and $23.5 million in software license fees, respectively, and
$24.7 million and $15.5 million in services, respectively. The Company includes
in its non-recurring revenue backlog all fees specified in contracts which have
been executed by the Company to the extent that the Company contemplates
recognition of the related revenue within one year. There can be no assurance
that the contracts included in non-recurring revenue backlog will actually
generate the specified revenues or that the actual revenues will be generated
within the one year period.
As of March 31, 1998 and 1997, the Company had recurring revenue backlog of
$103.4 million and $79.0 million, respectively. The Company defines recurring
revenue backlog to be all monthly license fees, maintenance fees and facilities
management fees specified in contracts which have been executed by the Company
and its customers to the extent that the Company contemplates recognition of the
related revenue within one year. There can be no assurance, however, that
contracts included in recurring revenue backlog will actually generate the
specified revenues.
Liquidity and Capital Resources
As of March 31, 1998, the Company had working capital of $73.2 million which
includes cash and cash equivalents of $49.4 million. The Company has a $10
million bank line of credit of which there are no borrowings outstanding. The
bank line of credit expires on June 30, 1998.
During the six months ended March 31, 1998, the Company's cash flow from
operations amounted to $12.0 million and cash used in investing activities
amounted to $9.9 million. Of the $9.9 million of cash used in investing
activities, $1.7 million consisted of advances to Insession under promissory
notes and $2.5 million consisted of advances to USPI under a line of credit.
In the normal course of business, the Company evaluates potential acquisitions
of complementary businesses, products or technologies. In fiscal year 1997, the
Company acquired 100% of RVS and OSSI in exhange for 1,615,383 and 210,000
shares, respectively, of the Company's Class A Common Stock. In February 1998
the Company acquired 100% of Coyote in exchange for 26,400 shares of the
Company's Class A Common Stock.
In April 1998, the Company acquired 2.5 million shares of Nestor Common Stock
for $5.0 million. The Company also received warrants to purchase an additional
2.5 million shares of Nestor Common Stock for an exercise price of $3 per share.
In May 1998 the Company acquired 100% of Edgeware in exchange for 143,436 shares
of the Company's Class A Common Stock. On or about May 28, 1998 the Company is
scheduled to close on the acquisition of 100% of IntraNet in exchange for
approximately 1,225,000 shares of the Company's Class A Common Stock. The
IntraNet transaction is subject to certain conditions including approval from
IntraNet shareholders.
Management believes that the Company's working capital, cash flow generated from
operations and borrowing capacity are sufficient to meet the Company's working
capital requirements for the foreseeable future.
Year 2000
Management has initiated a Company-wide program to prepare the Company's
computer systems and applications as well as the Company's product offerings for
the year 2000. The Company expects to incur internal staff costs as well as
consulting and other expenses related to system enhancements and product
modifications for the year 2000. The majority of the Company's product offerings
are currently year 2000 compliant. The total cost to be incurred by the Company
for all year 2000 related projects is not expected to have a material impact on
the future results of operations. However, there could be a material adverse
effect on the results of operations of the Company if the system enhancements
and product modifications for the year 2000 prove not to be effective.
<PAGE>
TRANSACTION SYSTEMS ARCHITECTS, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Registrant's annual meeting of stockholders was held on February
24, 1998. Each matter voted upon at such meeting and the number of
shares cast for, against or withheld, and abstained are as follows:
1. Election of Directors
For Withheld
William E. Fisher 23,589,060 41,101
David C. Russell 23,581,350 48,811
Promod Haque 23,588,990 41,171
Charles E. Noell, III 23,588,934 41,227
Jim D. Kever 23,588,598 41,563
Larry G. Fendley 23,588,694 41,467
2. Ratification of Appointment of Arthur Andersen LLP as
Independent Auditors for 1997
For:23,535,217 Against:5,476 Abstain:89,468 Broker Non-vote: 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.00 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 13, 1998
TRANSACTION SYSTEMS ARCHITECTS, INC
(Registrant)
/s/ Dwight G. Hanson
-----------------------------
Dwight G. Hanson
Vice President of Finance
(Principal Accounting Officer)
<PAGE>
TRANSACTION SYSTEMS ARCHITECTS, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
27.00 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 49,370
<SECURITIES> 0
<RECEIVABLES> 44,675
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 125,206
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0
0
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<EPS-DILUTED> .54
</TABLE>
