<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For quarter ended Commission File No. 1-10151
December 31, 1995
THE CONTINUUM COMPANY, INC.
9500 Arboretum Boulevard
Austin, Texas 78759-6399
Telephone: (512) 345-5700
A Delaware Corporation I.R.S. Employer Identification
Number: 74-1609363
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 practical date.
As of January 31, 1996, there were 19,333,000 shares of the registrant's $.10
par value Common Stock outstanding.
<PAGE>
THE CONTINUUM COMPANY, INC.
10-Q December 31, 1995
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets - December 31,
1995 and March 31, 1995 3
Consolidated statements of operations - Three and nine
months ended December 31, 1995 and 1994 4
Condensed consolidated statements of cash flows - Three
and nine months ended December 31, 1995 and 1994 5
Notes to condensed consolidated financial statements -
December 31, 1995 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 12
2
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<TABLE>
<CAPTION>
THE CONTINUUM COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31,
1995 1995
--------------- ----------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................. $ 10,402,000 $ 44,525,000
Receivables, net of allowance for doubtful accounts ....... 121,611,000 78,062,000
Other current assets ...................................... 18,859,000 14,721,000
--------------- ----------------
150,872,000 137,308,000
Property and equipment, net of depreciation ................. 31,020,000 26,896,000
Goodwill, net of amortization ............................... 35,894,000 15,995,000
Software systems, net of amortization ....................... 14,688,000 14,178,000
Other assets ................................................ 24,005,000 5,323,000
--------------- ----------------
TOTAL ASSETS ................................................ $ 256,479,000 $ 199,700,000
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................... $ 21,557,000 $ 18,832,000
Deferred revenue .......................................... 18,235,000 15,981,000
Accrued liabilities and other ............................. 56,029,000 40,228,000
Current portion of long-term debt ......................... 27,144,000 822,000
--------------- ----------------
122,965,000 75,863,000
--------------- ----------------
Long-term debt .............................................. 17,828,000 25,379,000
Other obligations ........................................... 32,074,000 16,167,000
--------------- ----------------
49,902,000 41,546,000
--------------- ----------------
Stockholders' equity:
Common Stock, $.10 par value .............................. 1,936,000 1,919,000
Capital in excess of par value ............................ 124,697,000 122,279,000
Retained deficit .......................................... (41,236,000) (39,870,000)
Other ..................................................... (1,785,000) (2,037,000)
---------------- ----------------
83,612,000 82,291,000
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 256,479,000 $ 199,700,000
================ ================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
THE CONTINUUM COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- --------------------------------
1995 1994 1995 1994
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUE:
Service revenues ................................. $ 94,499,000 $ 76,515,000 $ 274,658,000 $ 217,347,000
Software system licensing ........................ 8,616,000 5,838,000 22,445,000 15,084,000
Interest income .................................. 186,000 182,000 729,000 312,000
-------------- ------------- -------------- --------------
103,301,000 82,535,000 297,832,000 232,743,000
-------------- ------------- -------------- --------------
EXPENSES:
Service expenses ................................. 72,161,000 58,528,000 209,905,000 164,132,000
Marketing and administration ..................... 18,105,000 13,592,000 50,160,000 39,580,000
Interest expense ................................. 563,000 655,000 1,822,000 1,576,000
Charge for purchased research and development .... 26,000,000 -- 26,000,000 --
-------------- ------------- -------------- --------------
116,829,000 72,775,000 287,887,000 205,288,000
-------------- ------------- -------------- --------------
Income (loss) before income taxes .................. (13,528,000) 9,760,000 9,945,000 27,455,000
Income tax provision ............................... 3,427,000 2,912,000 10,470,000 8,729,000
-------------- ------------- -------------- --------------
Net income (loss) .................................. $ (16,955,000) $ 6,848,000 $ (525,000) $ 18,726,000
============== ============= ============== ===============
Earnings (loss) per common share ................... $ (0.88) $ 0.36 $ (0.03) $ 0.99
============== ============= ============== ===============
Average number of common shares and
common equivalent shares outstanding ............. 19,260,000 19,042,000 19,191,000 19,011,000
============== ============= ============== ===============
</TABLE>
4
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<TABLE>
<CAPTION>
THE CONTINUUM COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- -------------------------------
1995 1994 1995 1994
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ...................................... $ (16,955,000) $ 6,848,000 $ (525,000) $ 18,726,000
Items included in income which do not affect cash:
Depreciation, amortization and other ................. 3,695,000 2,664,000 10,794,000 8,098,000
Purchased research and development ................... 26,000,000 -- 26,000,000 --
Changes in operating assets and liabilities:
(Increase) decrease in receivables ................... (18,085,000) (3,379,000) (37,246,000) 1,480,000
(Decrease) in accounts payable ....................... (1,183,000) (4,993,000) (615,000) (2,647,000)
Increase (decrease) in deferred revenue .............. 6,006,000 2,427,000 2,193,000 (989,000)
Decrease (increase) in other net assets .............. 192,000 356,000 (4,889,000) (2,331,000)
------------- ------------- ------------- -------------
Net cash (used) provided by operating activities ....... (330,000) 3,923,000 (4,288,000) 22,337,000
------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, equipment and software .......... (1,996,000) (2,212,000) (9,262,000) (4,681,000)
Purchase of business, net of cash received ............. (36,065,000) -- (38,518,000) --
------------- ------------- ------------- -------------
Net cash (used) by investing activities ................ (38,061,000) (2,212,000) (47,780,000) (4,681,000)
------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt borrowings (payments) , net ....................... 22,836,000 (133,000) 15,562,000 871,000
Common Stock transactions .............................. 912,000 333,000 2,337,000 2,937,000
------------- ------------- ------------- -------------
Net cash provided by financing activities .............. 23,748,000 200,000 17,899,000 3,808,000
------------- ------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................. 29,000 (167,000) 46,000 (415,000)
------------- ------------- ------------- -------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ......... (14,614,000) 1,744,000 (34,123,000) 21,049,000
Cash and cash equivalents at beginning of period ......... 25,016,000 29,969,000 44,525,000 10,664,000
------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............... $ 10,402,000 $ 31,713,000 $ 10,402,000 $ 31,713,000
============== ============= ============= =============
</TABLE>
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE (1) SUMMARY OF ACCOUNTING POLICIES
The condensed consolidated financial statements included herein have been
prepared by the Company without independent audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the condensed consolidated financial statements include all
adjustments necessary to present fairly the information required to be set forth
therein and these adjustments were of a normal recurring nature. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full fiscal year. Certain footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the disclosures included herein
are adequate to make the information presented not misleading. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-K annual report for the fiscal year ended March 31, 1995.
NOTE (2) EARNINGS PER SHARE
For the three and nine months ended December 31, 1995, earnings per share are
computed using the weighted average number of shares outstanding. In both
periods, the effect of common equivalent shares was excluded because the special
acquisition charge resulted in a loss for the quarter and nine month period
ended December 31, 1995. These common stock equivalents, mostly unvested
employee stock options, were included in the previous two quarters, ending June
and September 1995, due to the recent appreciation in Continuum's share price.
For the three and nine months ended December 31, 1994, the effect of options was
excluded due to immateriality.
NOTE (3) ACQUISITIONS
RA SYSTEMS
On May 3, 1995, the Company acquired all of the outstanding shares of Ra Systems
for $10,823,000. A cash payment of $5,423,000 was remitted at closing and the
remainder was paid in January 1996. The acquisition was accounted for using the
purchase method and, accordingly, the operating results of Ra Systems have been
included in the consolidated financial statements from the date of acquisition.
Ra Systems' tangible assets, including cash of $2,970,000, were recorded at
their estimated fair value of $7,242,000 and Ra Systems' liabilities were
recorded at their estimated fair value of $3,965,000. The estimated excess of
$7,546,000 was assigned to goodwill. The acquisition did not have a material
impact on operations.
SOCS GROUPE, SA
On December 28, 1995, Continuum acquired all of the shares of SOCS Groupe, SA
("SOCS"), a Paris-based software and services company, for $37,600,000. SOCS is
the leading provider of insurance application software and related services to
the French insurance industry. SOCS employs 200 people and generated
6
<PAGE>
approximately $20,000,000 in revenues for the fiscal year ended September 30,
1995. The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of SOCS will be included in
the financial statements from the date of acquisition. Continuum utilized expert
independent appraisers to determine an estimated valuation of the acquired
assets and to advise on the allocation of the purchase price. SOCS' tangible
assets were recorded at their estimated fair value of $11,100,000 and SOCS'
liabilities were recorded at their estimated fair value of $15,600,000. The
estimated excess of the purchase price over the net assets acquired totaled
$42,100,000, with $2,400,000 assigned to purchased software, $13,700,000
assigned to goodwill, and $26,000,000 assigned to purchased research and
development, which was expensed in connection with the acquisition.
NOTE (4) PROPOSED ACQUISITION
HOGAN SYSTEMS, INC.
On December 10, 1995, Continuum Acquisition Corporation ("Merger Sub"), a
wholly-owned subsidiary of Continuum, and Hogan Systems, Inc. ("Hogan") entered
into an Agreement and Plan of Merger that provides for the merger of Merger Sub
with and into Hogan. On February 7, 1996, the terms of the previously announced
merger agreement were modified. Hogan provides integrated software applications
and related consulting services to financial institutions worldwide. Hogan will
become a wholly-owned subsidiary of Continuum with continuing operations in
Dallas, Texas; Frankfurt, Germany; London, England; and Melbourne, Australia.
The merger, expected to be completed in March 1996, is subject to various
conditions, including the approval of the stockholders of each company.
Under the terms of the Agreement, each outstanding share of Hogan Common Stock
will be converted into the right to receive 0.315 of a share of Continuum Common
Stock. The business combination is intended to be accounted for using the
pooling of interests method of accounting for business combinations.
Approximately 4,800,000 shares of Continuum common stock will be exchanged for
the outstanding shares of Hogan common stock.
NOTE (5) RESEARCH AND DEVELOPMENT VENTURE
During fiscal 1992, a subsidiary of Paxus entered into an agreement with a
financial institution whereby the Company carried out certain research and
development activities funded by the venture and received special tax incentives
from the Australian government. During fiscal 1995, the Company renegotiated the
agreement. As a result of the renegotiation and subsequent reviews of the
anticipated liabilities, the Company recognized a reduction to service expense
of approximately $2,300,000 for the three and nine months ended December 31,
1995, and $1,000,000 and $2,400,000, respectively, for the three and nine months
ended December 31, 1994. These reductions to service expenses were offset by
increased development expenses incurred during the same periods. At December 31,
1995, the balance sheet included approximately $1,200,000 for anticipated future
liabilities under the terms of the agreement.
7
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NOTE (6) INCOME TAXES
The effective tax rate for the three and nine months ended December 31, 1995 on
income after the one-time acquisition charge was higher than the statutory tax
rate because the special acquisition charge for purchased research and
development does not give rise to a tax benefit.
For the three and nine months ended December 31, 1995, the effective tax rate on
income before the one-time acquisition charge of $26,000,000 for purchased
research and development related to the SOCS acquisition discussed below was 28%
and 29%, respectively. The effective tax rate for the three and nine months
ended December 31, 1994 was 30% and 32%, respectively. The tax rates for fiscal
1995 and 1994 were lower than the statutory rate primarily due to utilization of
foreign net operating losses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1994.
For the three months ended December 31, 1995, the Company recorded income of
$9,045,000 or $.47 per share, before a special acquisition charge, compared to
net income of $6,848,000 or $.36 per share for the same period last year,
representing an increase of 32% year to year.
On December 28, 1995, Continuum acquired SOCS Groupe, SA, a Paris based
insurance software and services company, for $37,600,000. Continuum allocated
$26,000,000 of the purchase price to purchased research and development and
expensed such amount in the quarter. This one-time acquisition charge without
tax benefit was $1.35 per share and caused a loss during the quarter of
$16,955,000 or $.88 per share.
Revenue for the three months ended December 31, 1995 increased to $103,301,000
compared to $82,535,000 for the same quarter a year ago, an increase of 25%.
North American customers accounted for 45% of revenue for the three months ended
December 31, 1995, European customers accounted for 23% and Pacific Rim
customers accounted for 32%.
License revenue for the December 1995 quarter was $8,616,000 compared to
$5,838,000 for the same quarter a year ago. Approximately 55% of the December
quarter total came from North American customers and 30% from European
customers. The December 1995 quarter was geographically more broad-based than
recent quarters with Capsil, LIFE/400 and COLOSSUS sales in Europe, Automated
Work Distributor ("AWD") and COLOSSUS sales in North America, and a COLOSSUS and
healthcare sale in the Pacific.
Service revenue for the December 1995 quarter totaled $94,499,000, an increase
of 24% compared to the same quarter a year ago. North American customers
accounted for 44% of service revenue for the three months ended December 31,
8
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1995, European customers accounted for 22% and Pacific Rim customers accounted
for 34%. The following table summarizes the increase in service revenue by
region ($ in millions):
<TABLE>
<CAPTION>
Quarter ended Dec 95 vs Dec 94
--------------------- increase
Dec 31, Dec 31, ------------------
1995 1994 $ %
------- ------- ------- -------
<S> <C> <C> <C> <C>
Outsourcing Revenue
North America $ 20.5 $ 16.9 $ 3.6 21%
Europe 2.3 2.0 .3 15%
Pacific 11.5 9.1 2.4 26%
------- ------- -------
34.3 28.0 6.3 23%
------- ------- -------
Other Service Revenue
North America 20.7 13.9 6.8 49%
Europe 18.7 15.0 3.7 25%
Pacific 20.8 19.5 1.3 7%
------- ------- -------
60.2 48.4 11.8 24%
------- ------- -------
Total Service Revenue
North America 41.2 30.8 10.4 34%
Europe 21.0 17.0 4.0 24%
Pacific 32.3 28.6 3.7 13%
------- ------- -------
$ 94.5 $ 76.4 $ 18.1 24%
======= ======= =======
</TABLE>
Continuum's recurring revenue from outsourcing customers, mostly in North
America and the Pacific Rim, was 36% of service revenue in the December 1995
quarter. In the December 1995 quarter compared to a year ago, outsourcing
revenue grew 23%. The increase is attributed to new outsourcing agreements
signed in North America and Australia during the second half of fiscal 1995.
During the December 1995 quarter, Continuum announced outsourcing contracts with
Fidelity and Guaranty Life Insurance Company (F&G Life), a subsidiary of USF&G
($80,000,000 over eight years) and Penncorp Financial Group, Inc. ($50,000,000
over seven years). The two contracts will produce revenue beginning in the March
1996 quarter. The F&G Life contract is between F&G Life and Alliance One
services, L.P., a 60% owned subsidiary of Continuum.
Other service revenue increased 24% to $60,200,000, including increases in all
regions. The increase in North American service revenue reflects an increased
demand for consulting and implementation services associated with VANTAGE-ONE(R)
and AWD, and utilization and support fees and services for the COLOSSUS product.
The increase in European service revenue of 25% to $18,700,000 is primarily
attributable to the acquisition of Ra Systems on May 3, 1995. Continuum Ra is
9
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the leading provider of systems to insurance brokers in the United Kingdom. The
incremental revenues generated by Ra were partially offset by declines in
mainframe consulting revenues. The increase in the Pacific region is primarily
attributable to an increased demand for programming services in Australia.
Compared to a year earlier, service gross profit increased $4,300,000 or 24%
with service revenue increasing $18,000,000 or 24% and service expenses
increasing $13,700,000 or 23%. Compared to the September 1995 quarter, revenues
grew $2,600,000 or 3% and service gross profit increased $600,000 or 3%.
Marketing and administration expenses for the December 1995 quarter were
$18,105,000 or 18% of total revenue, compared to a year ago when they were
$13,592,000 or 16% of total revenue. The increase in expense is primarily
attributable to increased sales investments in Continuum Strategic Solutions
International, Continuum's global outsourcing marketing organization. Commission
expense for outsourcing contracts announced during the quarter were also
accrued.
The effective tax rate for the three months ended December 31, 1995 on income
after the one-time acquisition charge was higher than the statutory rate because
the special acquisition charge for purchased research and development does not
give rise to a tax benefit. The effective tax rate for the three months ended
December 31, 1995, before the one-time acquisition charge for purchased research
and development, was 28% and the effective tax rate for the three months ended
December 31, 1994 was 30%. These rates were lower than the statutory rate
primarily due to the use of foreign net operating losses.
In summary, net loss for the three months ended December 31, 1995 was
$16,955,000 compared to a net income of $6,848,000 for the same period last
year. Income before the charge for purchased research and development and income
taxes for the quarter was $12,472,000 compared to $9,760,000 for the same period
last year. The improved performance was due to an increase in license revenue,
service revenue and service gross profit, partially offset by an increase in
sales and marketing expense.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO THE NINE MONTHS ENDED
DECEMBER 31, 1994.
For the nine months ended December 31, 1995, the Company recorded income of
$25,475,000 or $1.33 per share, before a special acquisition charge, compared to
a net income of $18,726,000 or $.99 per share for the same period last year. As
discussed above, the impact of the purchased research and development expense in
the December 1995 quarter caused a loss during the nine months ended December
31, 1995 of $525,000 or $.03 per share.
Revenue for the nine months ended December 31, 1995 increased to $297,832,000
compared to $232,743,000 for the same period last year, an increase of 28%.
License revenue was $22,445,000 for the nine months ended December 31, 1995
compared to $15,084,000 for the same period last year. Approximately 75% of the
product sales came from North American customers, while most of the remainder
came from European life insurance customers.
10
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Service revenue for the nine months ended December 31, 1995 totaled
$274,658,000, an increase of 26% compared to a year ago, due to approximately
equivalent growth of $28,000,000 in outsourcing and $28,000,000 in other service
revenue. The following table summarizes the increase in service revenue by
region ($ in millions):
<TABLE>
<CAPTION>
Nine months ended Dec 95 vs Dec 94
--------------------- increase (decrease)
Dec 31, Dec 31, --------------------
1995 1994 $ %
------- ------- ------- -------
<S> <C> <C> <C> <C>
Outsourcing Revenue
North America $ 66.5 $ 43.3 $ 23.2 54 %
Europe 5.2 5.7 (.5) (9)%
Pacific 33.8 27.9 5.9 21 %
------- ------- -------
105.5 76.9 28.6 37 %
------- ------- -------
Other Service Revenue
North America 55.6 41.6 14.0 34 %
Europe 51.0 42.8 8.2 19 %
Pacific 62.6 56.0 6.6 12 %
------- ------- -------
169.2 140.4 28.8 21 %
------- ------- -------
Total Service Revenue
North America 122.1 84.9 37.2 44 %
Europe 56.2 48.5 7.7 16 %
Pacific 96.4 83.9 12.5 15 %
------- ------- --------
$274.7 $217.3 $ 57.4 26 %
======= ======= ========
</TABLE>
Outsourcing revenues increased 37% to $105,500,000 compared to the same period
last year. Other service revenue increased 21% to $169,200,000, including
increases in all regions. The increase in outsourcing and other service revenues
are attributable to the factors discussed above.
Marketing and administration expenses for the nine months ended December 31,
1995 were $50,160,000 or 17% of total revenue compared to a year ago when they
were $39,580,000 or 17% of total revenue.
The effective tax rate for the nine months ended December 31, 1995 on income
after the one-time acquisition charge was higher than the statutory rate because
the special acquisition charge for purchased research and development does not
give rise to a tax benefit. The effective tax rate for the nine months ended
December 31, 1995, before the one-time acquisition charge for purchased research
and development, was 29% and the effective tax rate for the three months ended
December 31, 1994 was 32%. These rates were lower than the statutory rate
primarily due to the use of foreign net operating losses.
11
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In summary, net loss for the nine months ended December 31, 1995 was $525,000
compared to net income of $18,726,000 for the same period last year. Income
before the charge for purchased research and development and income taxes for
the nine month period was $35,945,000 compared to $27,455,000 for the same
period last year. The improvement was due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended December 31, 1995 cash decreased $14,614,000 and
totaled $10,402,000. Approximately $12,200,000 of cash was used to partially
fund the acquisition of SOCS Groupe, SA. Additional cash requirements for the
quarter included investments in outsourcing contracts, including additions to
equipment and software.
In December 1995, Continuum renewed and increased its $20,000,000 revolving bank
line of credit to $60,000,000. Approximately $26,000,000 of the credit line was
used to fund the $38,000,000 acquisition of SOCS Groupe, SA.
The Company had no material commitments for capital expenditures as of December
31, 1995.
Continuum, VANTAGE-ONE and COLOSSUS are trademarks of The Continuum Company,
Inc. AWD is a registered trademark of DST Systems, Inc.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K reporting date - December 11, 1995.
Items reported: Acquisitions of Hogan Systems, Inc. and SOCS Groupe, SA.
Form 8-K reporting date - December 28, 1995.
Items reported: Acquisition of SOCS Groupe, SA.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 14, 1996 THE CONTINUUM COMPANY, INC.
JOHN L. WESTERMANN III
Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 10,402,000
<SECURITIES> 0
<RECEIVABLES> 121,611,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 150,872,000
<PP&E> 82,811,000
<DEPRECIATION> 51,791,000
<TOTAL-ASSETS> 256,479,000
<CURRENT-LIABILITIES> 122,965,000
<BONDS> 0
<COMMON> 1,936,000
0
0
<OTHER-SE> 81,676,000
<TOTAL-LIABILITY-AND-EQUITY> 256,479,000
<SALES> 297,103,000
<TOTAL-REVENUES> 297,832,000
<CGS> 0
<TOTAL-COSTS> 260,065,000
<OTHER-EXPENSES> 26,000,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,822,000
<INCOME-PRETAX> 9,945,000
<INCOME-TAX> 10,470,000
<INCOME-CONTINUING> (525,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (525,000)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
