<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): December 28, 1995
THE CONTINUUM COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-10151 74-1609363
(Commission File Number) (IRS Employer Identification No.)
9500 ARBORETUM BOULEVARD, AUSTIN, TEXAS 78759-6399
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: 512/345-5700
N/A
(Former name of former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Report on Form 8-K dated December
28, 1995, as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits
(a) PRO FORMA FINANCIAL INFORMATION
(1) Unaudited Pro Forma Combined Condensed Balance Sheet of the Continuum
Company, Inc. and SOCS Holding as of September 30, 1995.
(2) Unaudited Pro Forma Combined Condensed Statement of Operations of The
Continuum Company, Inc. and SOCS Holding for the six months ended
September 30, 1995.
(3) Unaudited Pro Forma Combined Condensed Statement of Operations of The
Continuum Company, Inc. for the year ended March 31, 1995 and SOCS
Holding for the year ended September 30, 1995.
(4) Notes to Unaudited Pro Forma Combined Condensed Financial Statements of
The Continuum Company, Inc. and SOCS Holding.
(b) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
(1) SOCS Holding Auditors' Report On the Consolidated
Financial Statements at September 30, 1995 ..........................F1
(2) SOCS Holding Consolidated Financial Statements at
September 30, 1995 ..................................................F3
(3) SOCS Holding Notes to the Consolidated Financial
Statements at September 30, 1995 ....................................F6
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 of the
undersigned thereunto duly authorized.
THE CONTINUUM COMPANY, INC.
Date: March 8, 1996 By: JOHN L. WESTERMANN III
Vice President and Chief Financial Officer
2
<PAGE>
CONTINUUM AND SOCS
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements assume
a business combination between The Continuum Company, Inc. ("Continuum") and
SOCS Holding ("SOCS") which is accounted for under the purchase method of
accounting.
The pro forma combined condensed financial statements are based on the
respective historical financial statements of Continuum and SOCS and should be
read in conjunction with such historical financial statements and notes thereto.
The pro forma combined condensed balance sheet combines Continuum's September
30, 1995 unaudited condensed consolidated balance sheet with SOCS' September 30,
1995 audited condensed consolidated balance sheet. The pro forma combined
condensed statements of operations combine Continuum's unaudited condensed
consolidated statement of operations for the six months ended September 30, 1995
with the corresponding SOCS unaudited condensed consolidated statement of
operations for the six months ended September 30, 1995 and Continuum's condensed
consolidated statement of operations for the year ended March 31, 1995 with
SOCS' condensed consolidated statement of operations for the year ended
September 30, 1995. The condensed consolidated statement of operations for the
six months ended September 30, 1995 was not available for SOCS; accordingly, the
statement shown represents 50% (six months) of the audited results for the year
ended September 30, 1995.
The pro forma information is presented for illustrative purposes only and is not
indicative of the operating results or financial position that would have
occurred if the combination had been consummated at the beginning of the periods
presented, nor is it indicative of future operating results or financial
position.
3
<PAGE>
<TABLE>
<CAPTION>
CONTINUUM AND SOCS
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
ADJUSTMENTS
CONTINUUM SOCS COMBINED DR CR PRO FORMA
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................ $ 25,016 $ 499 $ 25,515 $ - $ 25,515 $ -
Receivables, net of allowance
for doubtful accounts .......................... 98,384 6,909 105,293 - - 105,293
Other current assets ............................. 16,663 1,412 18,075 878 30 18,923
---------- --------- ---------- --------- --------- ----------
140,063 8,820 148,883 878 25,545 124,216
Property and equipment, net of depreciation ........ 29,883 1,082 30,965 - - 30,965
Goodwill, net of amortization ...................... 22,636 - 22,636 9,894 - 32,530
Software systems, net of amortization .............. 13,012 - 13,012 2,400 - 15,412
Other assets ....................................... 9,976 1,010 10,986 6,111 - 17,097
---------- --------- ---------- --------- --------- ----------
TOTAL ASSETS ....................................... $ 215,570 $ 10,912 $ 226,482 $ 19,283 $ 25,545 $ 220,220
========== ========= ========== ========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 19,165 $ 3,220 $ 22,385 $ - $ - $ 22,385
Deferred revenue ................................. 12,179 286 12,465 - - 12,465
Accrued liabilities and other .................... 44,943 4,675 49,618 - 299 49,917
Current portion of long-term debt ................ 863 - 863 - 11,769 12,632
---------- --------- ---------- --------- --------- ----------
77,150 8,181 85,331 - 12,068 97,399
---------- --------- ---------- --------- --------- ----------
Long-term debt ..................................... 18,051 3,118 21,169 - - 21,169
Other obligations .................................. 20,689 294 20,983 - 6,989 27,972
---------- --------- ---------- --------- --------- ----------
38,740 3,412 42,152 - 6,989 49,141
---------- --------- ---------- --------- --------- ----------
Stockholders' equity:
Common Stock, $.10 par value ..................... 1,926 5,380 7,306 5,380 - 1,926
Capital in excess of par value ................... 123,640 399 124,039 399 - 123,640
Retained earnings (deficit) ...................... (24,133) (6,460) (30,593) 26,000 6,460 (50,133)
Other ............................................ (1,753) - (1,753) - - (1,753)
---------- --------- ---------- --------- --------- ----------
99,680 (681) 98,999 31,779 6,460 73,680
---------- --------- ---------- --------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 215,570 $ 10,912 $ 226,482 $ 31,779 $ 25,517 $ 220,220
========== ========= ========== ========= ========= ==========
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONTINUUM AND SOCS
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
ADJUSTMENTS
----------------------
CONTINUUM SOCS COMBINED DR CR PRO FORMA
--------- --------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenues ............................... $ 180,159 $ 9,393 $ 189,552 $ - $ - $ 189,552
Software system licensing ...................... 13,829 - 13,829 - - 13,829
Interest income ................................ 543 33 576 - - 576
--------- --------- --------- ---------- -------- ----------
194,531 9,426 203,957 - - 203,957
--------- --------- --------- ---------- -------- ----------
EXPENSES:
Service expenses ............................... 137,744 9,715 147,459 - - 147,459
Marketing and administration ................... 32,055 543 32,598 367 - 32,965
Interest expense ............................... 1,259 95 1,354 500 - 1,854
Purchased research and development ............. - - - 26,000 - 26,000
--------- --------- --------- ---------- -------- ----------
171,058 10,353 181,411 26,867 - 208,278
--------- --------- --------- ---------- -------- ----------
Income before income taxes ....................... 23,473 (927) 22,546 (26,867) - (4,321)
Income tax provision ............................. 7,043 (187) 6,856 - - 6,856
--------- --------- --------- ---------- -------- ----------
Income from continuing operations ................ $ 16,430 $ (740) $ 15,690 $ (26,867) $ - $ (11,177)
========= ========= ========= ========== ======== ==========
Earnings per common share from continuing
operations ..................................... $ 0.83 .......................................................... $ (0.56)
========= ==========
Average common shares outstanding ................ 19,900 .......................................................... 19,900
========= ==========
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CONTINUUM AND SOCS
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
YEAR ENDED YEAR ENDED ADJUSTMENTS
3/31/95 9/30/95 ------------------------
CONTINUUM SOCS COMBINED DR CR PRO FORMA
---------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenues ................................ $ 301,783 $ 8,787 $ 320,570 $ - $ - $ 320,570
Software system licensing ....................... 21,135 - 21,135 - - 21,135
Interest income ................................. 618 65 683 - - 683
--------- --------- --------- ---------- -------- ----------
323,536 18,852 342,388 - - 342,388
--------- --------- --------- ---------- -------- ----------
EXPENSES:
Service expenses ................................ 228,725 19,430 248,155 - - 248,155
Marketing and administration .................... 54,494 1,086 55,580 735 - 56,315
Interest expense ................................ 2,209 190 2,399 2,236 - 3,399
Purchased research and development .............. - - - 26,000 - 26,000
--------- --------- --------- ---------- -------- ----------
285,428 20,706 306,134 28,971 - 333,869
--------- --------- --------- ---------- -------- ----------
Income before income taxes ........................ 38,108 (1,854) 36,254 (28,971) - 8,519
Income tax provision .............................. 11,904 (374) 11,530 - - 11,530
--------- --------- --------- ---------- -------- ----------
Income from continuing operations ................. $ 26,204 $ (1,480) $ 24,724 $ (28,971) $ - $ (3,011)
========= ========= ========= ========== ======== ==========
Earnings per common share from continuing
operations ...................................... $ 1.38 ......................................................... $ (0.16)
========= ==========
Average common shares outstanding ................. 19,038 ......................................................... 19,038
========= ==========
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
</TABLE>
6
<PAGE>
CONTINUUM AND SOCS
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed financial
statements assume a business combination between The Continuum Company, Inc.
("Continuum") and SOCS Holding ("SOCS") which is accounted for under the
purchase method of accounting. The pro forma combined condensed financial
statements are based on the respective historical financial statements of
Continuum and SOCS and should be read in conjunction with such historical
financial statements and notes thereto. The pro forma combined condensed balance
sheet combines Continuum's September 30, 1995 unaudited condensed consolidated
balance sheet with SOCS' September 30, 1995 audited condensed consolidated
balance sheet. The pro forma combined condensed statements of operations combine
Continuum's unaudited condensed consolidated statement of operations for the six
months ended September 30, 1995 with the corresponding SOCS unaudited condensed
consolidated statement of operations for the six months ended September 30, 1995
and Continuum's condensed consolidated statement of operations for the year
ended March 31, 1995 with SOCS' condensed consolidated statement of operations
for the year ended September 30, 1995. The condensed consolidated statement of
operations for the six months ended September 30, 1995 was not available for
SOCS; accordingly, the statement shown represents 50% (six months) of the
audited results for the year ended September 30, 1995.
The acquisition of SOCS by Continuum has been accounted for under the purchase
method of accounting in the accompanying unaudited pro forma combined condensed
financial statements. The total purchase price has been allocated to the assets
and liabilities of SOCS based on their estimated fair values.
Certain reclassifications have been made in the historical financial statements
of Continuum and SOCS in order to conform presentations. The audited financial
statements of SOCS have been prepared in accordance with French statutory
accounting principles. Certain adjustments have been made to conform these
statements to U.S. generally accepted accounting principles.
PRO FORMA PURCHASE ACCOUNTING ADJUSTMENTS AND ELIMINATIONS
The pro forma purchase accounting adjustments and eliminations in the
preceding pro forma financial statements assume that Continuum acquired SOCS in
exchange for $37,613,000 in cash, financed through short-term debt and cash on
hand. The allocation of the purchase price is as follows ($ in thousands):
<TABLE>
<S> <C>
Purchase of outstanding SOCS stock $ 37,613
Book value of net assets acquired at
September 30, 1995 681
---------
Purchase price assigned to intangible
assets and other $ 38,294
=========
7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Allocation to intangible assets and other:
Software Systems $ 2,400
Purchased research and development 26,000
Goodwill 9,894
----------
$ 38,294
==========
</TABLE>
The adjustments to the unaudited pro forma combined condensed statement of
operations are as follows:
(a) To record amortization of software based on the greater of amortization
based on the estimated revenues of the products or the straight-line method
over the estimated lives of the products. To record amortization of
goodwill based upon the straight line method over a 20 year life.
(b) To expense the portion of the purchase price allocated to in-process and
future software development projects at the purchase date in accordance
with Statement of Financial Accounting Standards No. 2, "Accounting for
Research and Development Costs."
(c) To record interest expense in association with the short-term borrowings
made to purchase SOCS.
The adjustments to the unaudited pro forma combined condensed balance sheet are
as follows:
(a) To record the minimum royalty due to the owners of SOCS for royalties equal
to a percentage of eligible license fees collected by Continuum from
licensing the OCEANIC software and its derivatives outside of Continuum's
core business.
(b) To establish initial deferred tax balances for SOCS.
8
<PAGE>
SOCS HOLDING
AUDITORS' REPORT
ON THE CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 1995
(This report is a free translation of the report of the auditors
on the consolidated financial statements of SOCS Holding)
To the Shareholders
SOCS Holding
Axe Liberte
2, Place de la Coupole
94227 Charenton Le Pont Cedex
Dear Sirs,
In accordance with the terms of our appointment, we hereby present our
report on the examination of the consolidated financial statements of SOCS
Holding for the period ended September 30, 1995 as attached to this report.
These consolidated financial statements are the responsibility of Group
management. Our responsibility is to express an opinion on these financial
statements, based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement preparation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of SOCS Holding and its
subsidiaries at September 30, 1995 and the consolidated results of their
operations in accordance with accounting principles described in the notes to
the consolidated financial statements.
These consolidated financial statements have been prepared for a specific
purpose and for this reason a different accounting principle as compared to
statutory financial statements has been adopted for software development costs,
which have been charged to the statement of operations instead of being
capitalized in the balance sheet (note I (e)). The consolidated financial
F1
<PAGE>
statements for the year ended September 30, 1994 have been restated accordingly.
The impact of this change in accounting method, which will not be retained in
the statutory financial statements at December 31, 1995, was a charge against
income of FF 17,737 thousand and FF 10,437 thousand respectively for the years
ended September 30, 1995 and 1994. Simultaneously, deferred tax assets of FF
5,912 thousand and FF 3,479 thousand respectively have been recognized in the
consolidated balance sheets at September 30, 1995 and 1994, based on
management's estimates of SOCS' future results.
Paris, December 26, 1995
Coopers & Lybrand Audit S.A.
L.P. Schneider
Partner
F2
<PAGE>
SOCS HOLDING
CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 1995
F3
<PAGE>
<TABLE>
<CAPTION>
SOCS HOLDING
CONSOLIDATED BALANCE SHEETS
(thousands of French francs)
AT SEPTEMBER 30
ASSETS 1995 1994
<S> <C> <C>
Goodwill, net .......................................................... 17,249 16,990
Intangible assets, net ................................................. 3,444 1,712
Property, plant and equipment, net ..................................... 5,360 4,300
Investments, net ....................................................... 1,302 956
Investments in companies accounted for by the equity method ............ 256 256
TOTAL FIXED ASSETS ..................................................... 27,611 24,214
Trade receivables, net ................................................. 25,972 28,135
Other receivables ...................................................... 8,246 609
Deferred taxes ......................................................... 6,472 4,039
Short-term investments ................................................. 1,251 382
Cash ................................................................... 1,220 3,138
Prepaid expenses ....................................................... 523 1,096
TOTAL ASSETS ........................................................... 71,295 61,613
LIABILITIES AND SHAREHOLDERS' EQUITY
Capital stock .......................................................... 26,648 25,103
Additional paid-in capital ............................................. 1,976 314
Deficit ................................................................ (7,417) (2,890)
Loss for the year ...................................................... (7,329) (4,187)
SHAREHOLDERS'EQUITY .................................................... 13,878 18,340
Minority interests ..................................................... 757 1,225
Provisions for contingencies ........................................... 700 742
Provisions for charges ................................................. - 200
Borrowings ............................................................. 15,442 10,232
Trade payables ......................................................... 6,453 5,240
Accrued taxes and personnel costs ...................................... 20,717 18,730
Other liabilities ...................................................... 2,440 1,185
Insurance companies - accounts payable, net ............................ 9,489 4,044
Deferred income ........................................................ 1,419 1,675
TOTAL LIABILITIES ...................................................... 55,960 41,106
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................. 71,295 61,613
</TABLE>
F4
<PAGE>
<TABLE>
<CAPTION>
SOCS HOLDING
CONSOLIDATED STATEMENT OF OPERATIONS
(thousands of French francs)
1995 1994
<S> <C> <C>
NET SALES ............................................. 93,049 82,978
Other purchases and external charges .................. (27,940) (24,722)
Taxes other than on income ............................ (3,727) (2,153)
Wages and salaries .................................... (43,863) (38,018)
Social security taxes ................................. (17,768) (14,560)
Employee profit sharing ............................... - (845)
Depreciation, amortization and provisions ............. (2,664) (3,873)
Other expenses ........................................ (272) (1,050)
TOTAL OPERATING EXPENSES .............................. (96,234) (85,271)
OPERATING LOSS BEFORE INTEREST ........................ (3,185) (2,293)
Interest income ....................................... 322 287
Interest expense ...................................... (940) (720)
NET INTEREST EXPENSE .................................. (618) (433)
OPERATING LOSS ........................................ (3,803) (2,726)
Non-operating income .................................. 134 156
Non-operating expense ................................. (2,846) (94)
NET NON-OPERATING (EXPENSE)/INCOME .................... (2,712) 62
Current taxes ......................................... (579) (2,549)
Deferred taxes ........................................ 2,433 3,267
TOTAL INCOME TAX ...................................... 1,854 718
Amortization of goodwill .............................. (2,342) (1,974)
Minority interests .................................... (326) (267)
NET LOSS .............................................. (7,329) (4,187)
</TABLE>
F5
<PAGE>
SOCS HOLDING
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT SEPTEMBER 30, 1995
F6
<PAGE>
I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in
accordance with French generally accepted accounting principles.
A) CONSOLIDATION METHODS
Companies over which the group has direct or indirect exclusive
control are fully consolidated.
Companies over which the group exercises significant influence,
but not exclusive control, are accounted for by the equity method.
Some companies which meet these criteria but are not material to
the consolidated financial statements, have not been consolidated. Shares in
these companies and other equity interests are carried at cost under
"Investments, net", after deduction of provisions for impairment of value, where
applicable.
B) FOREIGN CURRENCY TRANSLATION
The financial statements of foreign companies or branches are
translated as follows:
(i) Balance sheet: at the year-end exchange rate;
(ii) Statement of operations: at the average exchange rate for the year.
Differences arising from translation are debited or credited to
shareholders' equity.
C) CHANGE OF YEAR-END
At respective Extraordinary General Meetings of September 29,
1995, the shareholders of SOCS Holding SA, SOCS SA and SOCS Gestion SA decided
to change these companies' year-end to December 31. The financial year
commencing on October 1, 1994 will therefore cover a period of 15 months ending
on December 31, 1995.
Following the decision taken by its sole shareholder, Sofadec EURL
will also now have a December 31 year end. The financial year commencing on
October 1, 1994 will therefore cover a period of 15 months ending on December
31, 1995.
Hyperion already has a December 31 year end.
For consolidation purposes, interim financial statements have been
prepared at September 30, 1995 for all fully consolidated companies.
F7
<PAGE>
D) GOODWILL
Goodwill corresponds to the difference between the cost of shares
in subsidiaries and the Group's equity in the fair value of the underlying net
assets of the companies concerned at the date of acquisition.
Goodwill is amortized over 10 years by the straight line method.
E) OTHER INTANGIBLE ASSETS
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. They
exclude development costs for marketable software which are capitalised under
concessions, patents, licenses, software and similar rights.
CONCESSIONS, PATENTS, LICENSES, SOFTWARE AND SIMILAR RIGHTS
The method normally applied by the Group is as follows:
- Development costs for software designed by or on behalf of the
Group and intended for use by third parties under license are
capitalized when it appears probable that the software will become
commercially successful.
- Capitalized software development costs are amortised over an
estimated maximum useful life of three years.
During the year ended September 30, 1994 the Group set up a
software development cost accounting system in order to give a fairer view of
the consolidated financial statements. As a result, software development costs
for the year then ended were capitalized in accordance with the principle
described above. In prior years, these costs were charged in full to the
statement of operations.
However, to permit comparisons with the financial statements
prepared in accordance with accounting principles applied in the United States
of America, the Group has decided to account for software development costs as
expenses in the financial statements as at September 30, 1995 and 1994.
For the purpose of the present financial statements and in
accordance with the principle of non-capitalization of software development
costs, the financial statements for the periods ended September 30, 1995 and
1994 have been restated as follows (in thousands of French Francs):
F8
<PAGE>
<TABLE>
<CAPTION>
30.09.1995 30.09.1994
---------- ----------
<S> <C> <C>
Capitalized development costs (Cr) ................ (17,737) (10,437)
Deferred taxes (Dr) ............................... 5,912 3,479
Minority interests (Dr) ........................... 458 458
--------- ----------
Net impact (decrease in shareholders' equity) ..... (11,367) (6,500)
========= ==========
</TABLE>
F) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated in the balance sheet at
cost less accumulated depreciation. Depreciation is calculated by the straight
line or reducing balance method, based on the following estimated useful lives:
- fixtures and fittings 10 years/straight line
- office equipment 5 years/reducing balance
- computer equipment 4 years/reducing balance
- furniture 10 years/straight line
G) SHORT-TERM INVESTMENTS
Short-term investments are stated at the lower of cost or market
value at year end.
H) PROVISION FOR RETIREMENT BONUSES
Retirement bonuses payable to employees on retirement are
recorded as expenses in the year they are paid. The liability at the year-end is
not recognized because it is not material due to the age of the group's
employees (on average, 30 and 32 for female and male employees, respectively)
and their low average seniority (4 years for both male and female employees).
I) INCOME TAXES
Deferred taxes are recorded in the balance sheet and statement of
operations in respect of timing differences between the recognition of certain
items of income and expense (software development costs, provision for paid
vacation, employee profit sharing, etc.) for financial reporting and tax
purposes.
Deferred taxes assets are recognized in the balance sheet when
there is a strong probability that the related tax benefit will crystallize.
J) REVENUE RECOGNITION
Income from software licensing and other services such as systems
implementation is recognized according to the invoicing clauses of the contracts
provided that the service has effectively been rendered.
F9
<PAGE>
License agreements generally extend for three to five years and
provide for a quarterly license fee.
2. LIST OF CONSOLIDATED COMPANIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------- ---------------------
% % % VOTING %
VOTING INTEREST RIGHTS INTEREST
RIGHTS
------ -------- -------- --------
<S> <C> <C> <C> <C>
FULLY CONSOLIDATED COMPANIES :
SOCS Holding - Parent company
SOCS SA ........................................ 93 93 87 87
SOCS Conseils et Services ...................... N/A N/A 99.76 99.76
SOCS Gestion ................................... 90 90 90 90
SOFADEC ........................................ 100 90 100 90
Hyperion ....................................... 66 66 66 66
SOCS Objectum .................................. N/A N/A 100 100
SOCS Associes .................................. 100 100 100 100
PARALLAX ....................................... 99 99 - -
COMPANY ACCOUNTED FOR BY THE EQUITY METHOD :
CBDIS .......................................... 34 31.62 34 29.58
</TABLE>
As decided at the Extraordinary General Meeting of September 29,
1995, the two wholly-owned subsidiaries of SOCS SA, SOCS Conseils et Services SA
(previously, Saturne Informatique SA) and SOCS Objectum SA, were merged into
SOCS SA, with retroactive effect from October 1, 1994.
3. OTHER INTANGIBLE ASSETS, NET
Other intangible assets comprise :
<TABLE>
<CAPTION>
AT SEPTEMBER 30
-----------------------------------
1995 1994
-------------------------- -----
In FF'000 COST AMORT. NET NET
- --------- ----- ------ ----- -----
<S> <C> <C> <C> <C>
Purchased goodwill (Sofadec, Parallax) ................... 2,000 - 2,000 1,300
Concessions, patents, licenses, software and
similar rights ........................................... 2,313 (869) 1,444 412
TOTAL .................................................... 4,313 (869) 3,444 1,712
</TABLE>
F10
<PAGE>
4. GOODWILL, NET
Details of goodwill are as follows :
<TABLE>
<CAPTION>
AT SEPTEMBER 30
------------------------------------------------------------------------------
1995 1994
----------------------------------------------------------------- -------
SOCS SOCS
SOCS GESTION CONSEILS SOFADEC CBDIS TOTAL TOTAL
IN FF'000 ET
- --------- SERVICES
------ ------- -------- ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Goodwill - Gross value ......... 18,076 1,384 2,413 1,009 544 23,426 20,825
Accumulated amortization ....... (4,796) (413) (662) (252) (54) (6,177) (3,835)
GOODWILL, NET .................. 13,280 971 1,751 757 490 17,249 16,990
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT, NET
Details of property, plant and equipment are as follows :
<TABLE>
<CAPTION>
AT SEPTEMBER 30
------------------------------------------------
1995 1994
------------------------------------ -----
In FF'000 COST DEPRECIATION NET NET
- --------- ----- ------------ ----- -----
<S> <C> <C> <C> <C>
Fixtures and fittings 1,655 (139) 1,516 1,542
Office and computer equipment, furniture 7,719 (3,875) 3,844 2,758
TOTAL 9,374 (4,014) 5,360 4,300
</TABLE>
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<PAGE>
6. INVESTMENTS CARRIED AT COST, NET
Investments comprise :
<TABLE>
<CAPTION>
AT SEPTEMBER 30
--------------------
In FF'000 1995 1994
- --------- ----- ----
NON-CONSOLIDATED INVESTMENTS
<S> <C> <C>
DATASOCS (49% of capital) ............. 147 147
SOCS NTI (15% of capital) ............. 8 8
OTHER INVESTMENTS
Deposits and guarantees ............... 1,147 801
TOTAL ................................. 1,302 956
</TABLE>
7. CONSOLIDATED SHAREHOLDERS' EQUITY
The change in consolidated shareholders' equity can be analyzed as
follows:
<TABLE>
<CAPTION>
In FF'000
---------
<S> <C>
AT SEPTEMBER 30, 1994 ..................................................... 18,340
October 6, 1994 share capital increase .................................... 2,966
Issuance of stock warrants on October 6, 1994 (warrant n(degree) 5) ....... 241
Dividends paid ............................................................ (340)
Net loss for the year ..................................................... (7,329)
AT SEPTEMBER 30, 1995 ..................................................... 13,878
</TABLE>
SOCS Holding's share capital is composed of 226,475 A shares with
a par value of FF 100 each and 40,001 B shares with a par value of FF 100 each.
A and B shares carry the right to seats on the Board of Directors.
In the case of share transfers, holders of shares in the same category will have
a preferred right to acquire the shares in question.
B shares carry the right to a preferred dividend and a liquidation
preference.
SOCS Holding SA issued four A stock warrants on September 30, 1992
with the following characteristics:
- WARRANT N(DEGREE) 1 expired on April 1, 1994 without being
exercised;
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<PAGE>
- WARRANT N(DEGREE) 2 gives the right to subscribe for A shares up
to a value of FF 10 million at a price equal to a multiple of
consolidated net income for the year ended September 30, 1993.
This warrant can be exercised at any time between April 1, 1994
and March 31, 1996.
- WARRANT N(DEGREE) 3 gives the right to subscribe for A shares up
to a value of FF 6 million at a price equal to a multiple of
consolidated net income for the year ended September 30, 1994.
This warrant can be exercised at any time between April 1, 1995
and September 30, 1996.
- WARRANT N(DEGREE) 4 gives the right to subscribe for A shares up
to a value of FF 16 million (less sums invested in subscribing for
A shares by means of warrants 1, 2 and 3) at a price equal to a
multiple of consolidated net income for the year ended September
30, 1995. This warrant can be exercised at any time between April
1, 1996 and July 31, 1997.
SOCS SA issued 13,035 stock warrants on October 6, 1994 (WARRANTS
N(DEGREE) 5) which give the right to subscribe for A shares at a price of FF
192. These warrants can be exercised up to December 31, 2023. In a letter dated
September 29, 1995, the holder of warrants expressly waived the exercise right
and the value of the warrants was therefore written off.
8. MINORITY INTERESTS
Changes in minority interests are as follows:
<TABLE>
<CAPTION>
IN FF'000
---------
<S> <C>
MINORITY INTERESTS AT SEPTEMBER 30, 1994 ................. 1,225
Minority interests in income of subsidiaries ............. 326
Dividends paid to minority interests ..................... (393)
Other changes (purchase of SOCS shares) .................. (401)
MINORITY INTERESTS AT SEPTEMBER 30, 1995 ................. 757
</TABLE>
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<PAGE>
9. BORROWINGS
Borrowings can be analyzed as follows (in thousands of French
Francs):
<TABLE>
<CAPTION>
AT SEPTEMBER 30
--------------------
1995 1994
------ ------
Bank borrowings
<S> <C> <C>
- - November 24, 1989 (KF 700) ........... - 44
- - April 4, 1992 (KF 400) ............... - 88
- - May 14, 1992 (KF 400) ................ - 100
- - April 20, 1995 (KF 1,730) ............ 1,442 -
ASTORG current account ................. 14,000 10,000
TOTAL .................................. 15,442 10,232
</TABLE>
10. SALES
Details of sales are as follows (in thousands of French Francs):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-----------------------
1995 1994
--------- ----------
SOFTWARE SYSTEMS
<S> <C> <C>
- - Licenses .......................... 32,412 34,602
- - Assistance ........................ 44,552 24,562
- - Other ............................. 1,492 10,946
.................................... 78,456 70,110
THIRD-PARTY ADMINISTRATION
- - Commissions ....................... 14,593 12,868
TOTAL ............................... 93,049 82,978
</TABLE>
11. RETIREMENT BONUSES
The companies of the Group pay bonuses to their employees upon
retirement, in accordance with the provisions of the relevant collective
regulatory agreements.
Due to the low average age and seniority of employees, the related
liability is not material.
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<PAGE>
13. COMMITMENTS AND CONTINGENCIES
The group companies have rented vehicles under long-term,
noncancellable leases. At September 30, 1995 future minimum lease payments
amounted to FF 263,254 for leases with purchase options and FF 1,794,650 for
other long-term leases.
The financial statements of all the Group companies for the last
three years are open to a tax audit.
Opale has claimed an amount of FF 2,247 thousand from SOCS in
respect of subcontracting services. SOCS management considers that this claim is
without merit and believes that the final outcome will not have a material
impact on the consolidated financial position of the SOCS Group.
14. NUMBER OF EMPLOYEES
At September 30, 1995, the consolidated companies employed a total
of 192 persons.
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