-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Esa7wb5TEQZyFkbJJ5H9qqyMbkHhEhBb3MYQbIuqtb0J8ZDKirhcTgZB01yD4out fTFXkMDpJAmxdONp6EdM+Q== 0000707606-96-000011.txt : 19960816 0000707606-96-000011.hdr.sgml : 19960816 ACCESSION NUMBER: 0000707606-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEMS & COMPUTER TECHNOLOGY CORP CENTRAL INDEX KEY: 0000707606 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 231701520 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11521 FILM NUMBER: 96611602 BUSINESS ADDRESS: STREET 1: GREAT VALLEY CORPORATE CTR STREET 2: 4 COUNTRY VIEW RD CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6106475930 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1996 or / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______ . 0-11521 (Commission File Number) SYSTEMS & COMPUTER TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 23-1701520 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) Great Valley Corporate Center 4 Country View Road Malvern, Pennsylvania 19355 (Address of principal executive offices) Registrant's telephone number, including area code: (610) 647-5930 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. 14,070,945 Common shares, $.01 par value, as of August 8, 1996 Page 1 of 16 consecutively numbered pages SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES INDEX PART I, UNAUDITED FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1996 and September 30, 1995 Condensed Consolidated Statements of Operations - Three Months Ended June 30, 1996 and 1995 Condensed Consolidated Statements of Operations - Nine Months Ended June 30, 1996 and 1995 Condensed Consolidated Statements of Cash Flows - Nine Months Ended June 30, 1996 and 1995 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Operations and Financial Condition PART II, OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K SIGNATURES SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30, September 30, 1996 1995 (UNAUDITED) (NOTE) ASSETS CURRENT ASSETS Cash and marketable securities $ 1,937,000 $ 15,312,000 Receivables, including $55,984,000 and $46,746,000 of earned revenues in excess of billings, net of allowance for doubtful accounts of $1,249,000 and $1,003,000 85,078,000 70,270,000 Prepaid expenses and other receivables 12,856,000 9,994,000 ------------ ------------ TOTAL CURRENT ASSETS 99,871,000 95,576,000 PROPERTY AND EQUIPMENT--net of accumulated depreciation 33,855,000 30,135,000 CAPITALIZED COMPUTER SOFTWARE COSTS, net of accumulated amortization 10,108,000 5,532,000 COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED, net of accumulated amortization 8,969,000 8,754,000 OTHER ASSETS AND DEFERRED CHARGES 10,025,000 10,986,000 ------------ ------------ TOTAL ASSETS $162,828,000 $150,983,000 ============ ============ SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30, September 30, 1996 1995 (UNAUDITED) (NOTE) LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 5,841,000 $ 5,234,000 Current portion of long-term debt 10,700,000 100,000 Income taxes payable 419,000 167,000 Accrued expenses 15,036,000 12,065,000 Deferred revenue 4,793,000 14,455,000 ------------ ------------ TOTAL CURRENT LIABILITIES 36,789,000 32,021,000 LONG-TERM DEBT, less current portion 31,690,000 31,790,000 DEFERRED TAXES AND OTHER LONG-TERM LIABILITIES 2,447,000 1,607,000 STOCKHOLDERS' EQUITY Preferred stock, par value $.10 per share--authorized 3,000,000 shares, none issued Common stock, par value $.01 per share-- authorized 24,000,000 shares, issued 15,217,386 and 15,159,804 shares 152,000 152,000 Capital in excess of par value 58,810,000 58,414,000 Retained earnings 36,509,000 30,568,000 ------------ ------------ 95,471,000 89,134,000 Less Held in treasury, 1,150,941 common shares--at cost (2,959,000) (2,959,000) Notes receivable from stockholders (610,000) (610,000) ------------ ------------ 91,902,000 85,565,000 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $162,828,000 $150,983,000 ============ ============ Note: The condensed consolidated balance sheet at September 30, 1995 has been derived from the audited financial statements at that date. See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months Ended June 30, 1996 1995 Revenues: OnSite services $22,068,000 $17,115,000 Software sales and services 23,463,000 20,240,000 Maintenance and enhancements 10,545,000 9,067,000 Interest and other revenue 240,000 283,000 ----------- ----------- 56,316,000 46,705,000 Expenses: Cost of OnSite services 17,978,000 13,293,000 Cost of software sales and services and maintenance and enhancements 19,435,000 15,910,000 Selling, general and administrative 13,157,000 10,496,000 Charge for purchased research & development 0 8,700,000 Interest expense 637,000 494,000 ----------- ----------- 51,207,000 48,893,000 Income (loss) before income taxes 5,109,000 (2,188,000) Provision for income taxes 2,197,000 2,475,000 ----------- ----------- Net Income (Loss) $ 2,912,000 $(4,663,000) =========== =========== Per common share: Net income (loss) Primary $ 0.19 $(0.35) Fully diluted $ 0.19 $(0.35) Common shares and equivalents outstanding Primary 15,044,948 13,208,168 Fully diluted 17,129,948 13,208,168 See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Nine Months Ended June 30, 1996 1995 Revenues: OnSite services $ 62,079,000 $ 49,846,000 Software sales and services 63,299,000 51,542,000 Maintenance and enhancements 30,923,000 25,931,000 Interest and other revenue 590,000 1,776,000 ------------ ------------ 156,891,000 129,095,000 Expenses: Cost of OnSite services 49,556,000 38,803,000 Cost of software sales and services and maintenance and enhancements 55,433,000 41,642,000 Selling, general and administrative 39,830,000 30,544,000 Charge for purchased research & development 0 8,700,000 Interest expense 1,724,000 1,800,000 ------------ ------------ 146,543,000 121,489,000 Income before income taxes 10,348,000 7,606,000 Provision for income taxes 4,407,000 6,049,000 ------------ ------------- Net Income $ 5,941,000 $ 1,557,000 ============ ============ Per common share: Net income Primary $ 0.39 $ 0.11 Fully diluted $ 0.39 $ 0.11 Common shares and equivalents outstanding Primary 15,095,911 13,623,718 Fully diluted 15,095,911 13,705,358 See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended June 30, 1996 1995 OPERATING ACTIVITIES Net income $ 5,941,000 $ 1,557,000 Adjustments to reconcile net income to net cash (used in) operating activities: Charge for purchased research & development 0 8,700,000 Depreciation and amortization 7,701,000 6,661,000 Changes in operating assets and liabilities: (Increase) in receivables (15,611,000) (12,668,000) (Increase) in other current assets (2,862,000) (2,548,000) Increase (decrease) in other accrued expenses and liabilities 2,971,000 (286,000) (Decrease) in deferred revenue (9,084,000) (3,491,000) Other, net 422,000 40,000 ------------- ------------- NET CASH (USED IN) OPERATING ACTIVITIES (10,522,000) (2,035,000) INVESTING ACTIVITIES Purchase of property and equipment (7,455,000) (7,583,000) Capitalized computer software costs (5,408,000) (2,101,000) Proceeds from sale or maturity of investments available for sale 13,504,000 14,769,000 Purchase of investments available for sale 0 (2,228,000) Purchase of subsidiary assets, net of cash acquired (657,000) (892,000) ------------- ------------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (16,000) 1,965,000 FINANCING ACTIVITIES Principal payments on short-term debt (1,600,000) (270,000) Proceeds from revolving line of credit 12,100,000 0 Proceeds from exercise of stock options 373,000 1,566,000 ------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 10,873,000 1,296,000 INCREASE IN CASH & CASH EQUIVALENTS 335,000 1,226,000 CASH & CASH EQUIVALENTS-BEGINNING OF PERIOD 1,602,000 7,685,000 ------------- ------------- CASH & CASH EQUIVALENTS-END OF PERIOD $ 1,937,000 $ 8,911,000 ============= ============= SUPPLEMENTAL INFORMATION Noncash investing and financing activities: Conversion of subordinated debentures 3,000,000 Purchase of subsidiaries--non-cash portion 12,352,000 ============= See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1996 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 1O-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals except as described in Management's Discussion and Analysis) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995. Operating results for the three and nine month periods ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending September 30, 1996. NOTE A--RECLASSIFICATION Certain prior year information has been reclassified to conform with current year format. NOTE B--CASH AND SHORT-TERM INVESTMENTS June 30, September 30, 1996 1995 Cash and cash equivalents $1,937,000 $ 1,602,000 Marketable securities, plus accrued interest of $230,000 0 13,710,000 ---------- ----------- Cash and marketable securities $1,937,000 $15,312,000 ========== =========== Cash equivalents--Cash equivalents are defined as short-term highly liquid investments with a maturity of three months or less at the date of purchase. Securities available-for-sale--Marketable equity and debt securities are classified as available-for-sale. The available-for-sale portfolio represents highly liquid investments available for current operations and, accordingly, is classified as current assets. NOTE C--EARNINGS PER COMMON SHARE Primary income per share is computed based on the weighted average number of common shares outstanding, plus, to the extent dilutive, common stock equivalents. Fully diluted income per share is based on an increased number of shares that would be outstanding assuming the exercise of stock options when the Company's stock price at the end of the period is higher than the average stock price within the respective period, plus to the extent dilutive, the increased number of shares that would be outstanding, assuming conversion of the 6 1/4% convertible subordinated debentures. Net income used in the calculation of fully diluted income per share is adjusted for interest expense (net of tax) on the convertible subordinated debentures. The fully diluted income per share calculation for the nine-month period ending June 30, 1996 did not include the anti-dilutive effect of the convertible subordinated debentures. NOTE D--FOREIGN CURRENCY TRANSLATION On October 1, 1995, the Company changed the functional currency of its foreign subsidiary, SCT International Limited, from the U.S. dollar to the local currency of the subsidiary, the Pound Sterling. The move to the Pound Sterling was in recognition of the growth of and changes in the nature of the business of the subsidiary, which was established in fiscal year 1994. The subsidiary has become a self-sufficient unit and has recently established its headquarters in Basingstoke, Hampshire and, additionally established a European Product Support Center in Manchester. All of the subsidiary's contracts are now denominated in the Pound Sterling (previously some were denominated in the U.S. dollar). The financial position and results of operations of the Company's foreign subsidiary are measured using the local currency as the functional currency. Assets and liabilities of this subsidiary are translated at the exchange rate in effect at the end of the period. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments arising from differences in exchange rates from period to period are included in the cumulative foreign currency translation adjustments account (CTA) in stockholders' equity. Also included in the CTA are the effects of exchange rate changes on intercompany transactions of a long-term investment nature. Gains and losses resulting from the effect of exchange rate changes on foreign currency transactions are included in income currently. The effect of this change in functional currency and the resulting translation adjustment are immaterial to the equity of the Company at June 30, 1996 and to the results of operations for the three and nine-month periods then ended. NOTE E--OTHER Product development expenses (which are included in cost of software sales and services and maintenance and enhancements) not capitalized aggregated $9,677,000 and $7,124,000 in the nine-month periods ending June 30, 1996 and 1995, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table sets forth: (a) certain income statement items as a percentage of total revenues and (b) the percentage change for each item from the prior year comparative period. % of Total Revenues % Change from Prior Year Three Mos. Nine Mos. Three Mos. Nine Mos. Ended Ended Ended Ended June 30, June 30, June 30 June 30 1996 1995 1996 1995 Revenues: OnSite services 39% 37% 40% 39% 29% 25% Software sales and services 42% 43% 40% 40% 16% 23% Maintenance and enhancements 19% 19% 20% 20% 16% 19% Interest and other revenue 0% 1% 0% 1% (15)% (67)% ---- ---- ---- ---- Total 100% 100% 100% 100% 21% 22% Expenses: Cost of services, sales and maintenance and enhancements 67% 63% 67% 62% 28% 31% Selling, general and administrative 23% 22% 25% 24% 25% 30% Charge for purchased research & development 0% 19% 0% 7% -- -- Interest expense 1% 1% 1% 1% (29)% (4)% Income before income taxes 9% -- 7% 6% (334)% (36)% The following table sets forth the gross profit for each of the following revenue categories as a percentage of revenue for each such category and the total gross profit as a percentage of total revenue (excluding interest and other revenue). The Company does not separately present the cost of maintenance and enhancements revenue as it is impracticable to separate such cost from the cost of software sales and services. Three Months Nine Months Ended Ended June 30, June 30, 1996 1995 1996 1995 Gross Profit OnSite services 19% 22% 20% 22% Software sales and services and maintenance and enhancements 43% 46% 41% 46% --- --- --- --- Total 33% 37% 33% 37% Revenues The 29% and 25% increases in OnSite services revenues in the third quarter and first nine months of fiscal year 1996 are primarily the result of two new contracts: a five-year agreement with Continental Cablevision, Inc., which commenced in January 1995, and an agreement with the City of Indianapolis/Marion County, which commenced in December 1995. The agreement with the City of Indianapolis could result in annual revenues of up to $11.5 million for up to seven years from the start of the contract. The City has the option to cancel the agreement after three years from the start of the contract, provided the Company is given six months notice and a termination fee. The 16% increase in software sales and services revenues in the third quarter of fiscal year 1996 is attributable to several factors. BANNER services to the higher education market increased during the three month period compared with the prior year period. BANNER licenses in the utility and local government markets also increased compared to the prior year three-month period. The utility market increase is predominately the result of one large BANNER Customer Information System (CIS) license agreement signed in the third quarter. Software sales and services revenue increases are also the result of licenses of ADAGE Enterprise Resource Planning (ERP) software. ADAGE is developed by the manufacturing and distribution business of SCT which was acquired in June 1995. These increases were off-set by decreases, compared to the prior year period, in software licenses in the higher education market. The 23% increase in software sales and services revenues in the first nine months of fiscal year 1996 is the result of licenses of ADAGE ERP software, increases in BANNER services to the higher education market, and the growth of systems integration services provided to the international utilities market. These increases were off-set by decreases, compared to the prior year periods, in software licenses in the higher education and utility markets. The 16% and 19% increase in maintenance and enhancements revenues in the third quarter and first nine months of fiscal year 1996 is the result of continued high annual renewal rates and the growing installed base of clients primarily in the higher education market. The decrease in interest and other revenue in the three and nine-month periods ending June 30, 1996 is primarily attributable to a decreased short-term investment portfolio. Gross Profit Gross profit decreased as a percentage of total revenue (excluding interest and other revenue) from 37% to 33% for the third quarter and first nine months of fiscal year 1996. The decreases were the result of several factors in both the OnSite services and software sales and services businesses. The decreased gross profit in OnSite services is the result of lower margins on new contract signings compared with older contracts. The decreases in the software sales and services businesses were the result of changes in revenue mix and increased expenditures in the utility and manufacturing and distribution businesses. Lower margin software services delivered to the international utilities market increased relative to higher margin license fees during the nine month period ending June 30, 1996 compared to the prior year period. The Company is increasing its focus on software services, including software installation and systems integration services, in each of its markets, which may result in a decreased profit margin compared with a revenue mix with a higher percentage of license fees. The cost of software sales and services also increased as a result of the Company's increased expenditures in the utility business, a $1,250,000 contract loss provision described below, and the costs associated with the manufacturing and distribution business acquired in June 1995. It is anticipated that costs in the manufacturing and distribution business will increase in the fourth quarter of fiscal 1996 compared with the prior year period as the result of growth in the business and the need for increased employees to support current and future software implementations. Contract Loss Provision In the quarter ended March 31, 1996, the Company recorded a contract loss provision of $1,250,000 to reflect the cost of satisfying certain obligations relating to the CIS product for U.S. utilities which is being installed in a number of utilities. The aforementioned charge is principally for one U.S. client to cover the estimated cost of remaining obligations above unrecognized revenue. Income Taxes The provision for income taxes for the first nine months of 1996 reflects the impact of excluding the research and development tax credit which expired June 30, 1995 and has not yet been reenacted. Selling, General and Administrative Expenses Selling, general and administrative expenses increased during the three and nine-month periods ending June 30, 1996 compared with the prior year periods as result of several factors. The largest increase in selling, general and administrative costs over prior year periods is the result of the Company's acquisition of Adage in June 1995 and the subsequent growth of the manufacturing and distribution business. Smaller increases are the result of increased sales and marketing costs in the higher education software and OnSite services businesses. Seasonality Certain factors have resulted in quarterly fluctuations in operating results, including variability of software license fee revenues, seasonal patterns of capital spending by clients, the timing and receipt of orders, competition, pricing, new product introductions by the Company or its competitors, levels of market acceptance for new products, and general economic and political conditions. While the Company has historically generated a greater portion of license fees in total revenue in the last two fiscal quarters, the non-seasonal factors cited above may have a greater effect than seasonality on the Company's results of operations. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION The Company's cash and short-term investments balance was $1.9 million and $15.3 million at June 30, 1996 and September 30, 1995, respectively. The short-term investment portfolio is classified as available-for-sale. Cash used in operating activities was $10.5 million at June 30, 1996 compared to $2.0 million at June 30, 1995. The increase in cash used reflects the decrease in income before the charge for purchased research and development for the nine month period ending June 30, 1996 compared with the prior year nine-month period, as well as decreases in deferred revenue and increases in accounts receivable at June 30, 1996. During the first nine months of 1996 the increase in accounts receivable is due to increases in revenues and the timing of billings on the Company's software services contracts and software licenses. The decrease in deferred revenue at June 30, 1996 compared with September 30, 1995 is the result of annual scheduled billings on software maintenance contracts and an OnSite services contract in the fourth fiscal quarter of the year, which increase deferred revenue in the fourth fiscal quarter. The deferred revenue balance at June 30, 1995 reflects a pre-payment of approximately $5 million that was received in the third quarter of fiscal 1995. Cash used in investing activities was $16,000 during the nine months ended June 30, 1996 compared to cash provided by investing activities of $2.0 million during the nine months ended June 30, 1995. The use of cash during the nine months ended June 30, 1996 increased primarily as a result of increases in new product development. Capital expenditures during the 1996 period included investment in the new manufacturing and distribution business infrastructure and new facility improvement. Cash was primarily provided by the proceeds from sales and maturities of investments of $13.5 million and $14.8 million at June 30, 1996 and 1995, respectively. In June 1996 the Company released ADAGE 2.3 which has been under development since September 1995. ADAGE is a fully graphical ERP solution with a special emphasis on the process manufacturing and distribution industries. The software employs a business process-based approach that focuses on configuring objects and business rules as process flows to support key business processes across the supply chain. Financing activities provided cash of $10.9 million and $1.3 million at June 30, 1996 and 1995, respectively. The increase during fiscal year 1996 reflects use of the Company's senior revolving credit facility. The Company has outstanding $31.3 million of convertible subordinated debentures bearing interest at 6 1/4% and maturing on September 1, 2003. The debentures are convertible into common stock of the Company any time prior to redemption or maturity at a conversion price of $15 per share. The debentures are redeemable at any time after September 10, 1996 at prices decreasing from 104.2 % of the principal amount at September 1, 1996, to par on September 1, 2002. The Company has a $20 million senior revolving credit facility, available for general corporate purposes which expires in June 1998 with optional annual extensions. As long as borrowings are outstanding and as a condition precedent to new borrowings, the Company must comply with certain covenants, and the Company is prohibited from paying any dividends other than stock dividends. At June 30, 1996 $10.6 million was outstanding. The Company expects to repay these amounts over the next three months using cash provided by operations. The Company believes that its cash provided by continuing operations and borrowing arrangements should satisfy its needs for the foreseeable future. Foreign Operations On October 1, 1995, the Company changed the functional currency of its foreign subsidiary, SCT International Limited, from the U.S. dollar to the local currency, the Pound Sterling. The net assets of SCT International Limited are approximately $10.9 at June 30, 1996. The Company does not believe its foreign currency exposure is significant and analyzes the desirability to hedge the exposure on an ongoing basis. Contingencies A purported class action complaint was filed against the Company and certain of its officers and directors on October 4, 1995. The plaintiff filed an amended complaint on November 28, 1995. The amended complaint alleges violations of certain disclosure and related provisions of the Federal Securities Laws. The amended complaint seeks damages in unspecified amounts as well as equitable relief. In April 1996 the Company's motion to dismiss the amended complaint was granted in part and denied in part. Management believes the claims remaining in the amended complaint are without merit and intends to contest the remaining allegations vigorously. While management, based on its investigation to date, believes that resolution of this action will not have a materially adverse effect on the Company's consolidated financial position, the ultimate outcome of this matter cannot presently be determined. Miscellaneous The matters discussed in this Management's Discussion and Analysis that are forward looking statements are based on current management expectations that involve risks and uncertainties which could cause actual results to differ materially from those anticipated. Potential risks and uncertainties that could affect the Company's future operating results include without limitation the effect of publicity on demand for the Company's products and services, general economic conditions, continued market acceptance of the Company's products and services, the timing of the receipt of software licenses, the timing of services contracts and renewals, the timing and complexity of large transactions, continued competitive and pricing pressures in the marketplace, the Company's ability to develop and market new and updated products and enhancements cost effectively and on a timely basis, and the Company's ability to complete fixed price contracts profitably. The Company is investing in the development of new products and in improvements to existing products; however, software development is a complex and creative process that can be difficult to accurately schedule and predict. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES PART II Item 1. Legal Proceedings On October 4, 1995, John J. Wallace filed a purported class action lawsuit in the United States District Court for the Eastern District of Pennsylvania against the Company, Michael J. Emmi, Chairman of the Board, President and Chief Executive Officer of the Company, Michael D. Chamberlain, Senior Vice President and a director of the Company and Eric Haskell, Senior Vice President, Finance and Administration, Treasurer and Chief Financial Officer of the Company. The plaintiff filed an amended complaint on November 28, 1995. The amended complaint alleges that the defendants violated sections 10 (b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making misstatements and omissions regarding the Company's financial performance in the second half of fiscal year 1995. The class period alleged is from June 5, 1995 through October 2, 1995. The amended complaint seeks damages in unspecified amounts as well as equitable relief. In April 1996, the Company's Motion to Dismiss the Amended Complaint was granted in part and denied in part. Management believes the claims remaining in the amended complaint are without merit and intends to contest the remaining allegations vigorously. While management, based on its investigation to date, believes that resolution of this action will not have a materially adverse effect on the Company's consolidated financial position, the ultimate outcome of this matter cannot be presently determined. Item 6(b). Reports on Form 8-K The registrant did not file any current reports on Form 8-K during the three months ended June 30, 1996. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION (Registrant) Date: 08/14/96 /s/ ________________________________ Eric Haskell Senior Vice President, Finance and Administration, Treasurer and Chief Financial Officer EX-11 2 EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
Three months ended Nine months ended Jun. 30, 1996 Jun. 30, 1995 Jun. 30, 1996 Jun. 30, 1995 PRIMARY Average shares outstanding 14,066,445 13,208,168 14,061,623 12,769,239 Net effect of dilutive stock options-- based on the treasury stock method using average market price 978,503 0 1,034,288 855,000 ---------- ---------- ---------- ---------- Total 15,044,948 13,208,168 15,095,911 13,624,239 ========== ========== ========== ========== Net income (loss) $2,912,000 ($4,663,000) $5,941,000 $1,557,000 ========== ========== ========== ========== Net income (loss) per share $0.19 ($0.35) $0.39 $0.11 ===== ===== ===== ===== FULLY DILUTED Average shares outstanding 14,066,445 13,208,168 14,061,623 12,769,239 Net effect of dilutive stock options-- based on the treasury stock method using the end of period market price, if higher than average market price 978,503 0 1,034,288 936,000 Assumed conversion of 6 1/4% convertible subordinated debentures 2,085,000 0 0 0 ---------- ---------- ---------- ---------- Total 17,129,948 13,208,168 15,095,911 13,705,239 ========== ========== ========== ========== Net income (loss) $2,912,000 ($4,663,000) $5,941,000 $1,557,000 Add 6 1/4 % convertible subordinated debenture interest, net of income tax effect 300,000 0 0 0 Net income (loss), as adjusted $3,212,000 ($4,663,000) $5,941,000 $1,557,000 ========== ========== ========== ========== Net income (loss) per share $0.19 ($0.35) $0.39 $0.11 ===== ===== ===== =====
EX-27 3
5 The schedule contains summary financial information extracted from the June 30, 1996 financial statements and is qualified in its entirety by reference to such financial statements. 9-MOS SEP-30-1996 JUN-30-1996 1,937,000 0 86,327,000 1,249,000 0 99,871,000 54,312,000 20,457,000 162,828,000 36,789,000 31,690,000 0 0 152,000 91,750,000 162,828,000 156,301,000 156,891,000 104,989,000 144,819,000 0 0 1,724,000 10,348,000 4,407,000 5,941,000 0 0 0 5,941,000 0.39 0.39
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