-----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, Le+uRY+ofxV+EOJAwsP1lO2KJbwNLwd6s/MFoyb+wY34GV55kxW+i9QiIg27e3q5 Yu9vQkOcp7nw5zWlu5AMoA== 0001047469-99-006104.txt : 19990217 0001047469-99-006104.hdr.sgml : 19990217 ACCESSION NUMBER: 0001047469-99-006104 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMIX SYSTEMS INC CENTRAL INDEX KEY: 0000872443 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 311083175 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19024 FILM NUMBER: 99541410 BUSINESS ADDRESS: STREET 1: 2800 CORPORATE EXCHANGE DR CITY: COLUMBUS STATE: OH ZIP: 43231 BUSINESS PHONE: 6145237000 MAIL ADDRESS: STREET 1: 2800 CORPORATE EXCHANGE DR CITY: COLUMBUS STATE: OH ZIP: 43231 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- -------------------- Commission File Number 0-19024 ------- Symix Systems, Inc. ------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-1083175 ---- ---------- (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 2800 Corporate Exchange Drive Columbus, Ohio 43231 -------------------- (Address of principal executive offices) (Zip Code) (614) 523-7000 -------------- (Registrant's telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report) 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 --- --- The number of common shares, without par value, of the registrant outstanding as of February 8, 1999 was 6,710,869. PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. INDEX Consolidated Balance Sheets December 31, 1998 (unaudited) June 30, 1998 Filed herein Consolidated Statements of Operations (unaudited) Three Months and Six Months Ended December 31, 1998 and 1997 Filed herein Consolidated Statements of Cash Flows (unaudited) Six Months Ended December 31, 1998 and 1997 Filed herein Notes to Consolidated Financial Statements (unaudited) Filed herein
2 SYMIX SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
December 31, June 30, 1998 1998 ------------ ------------ (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,024 $ 6,115 Trade accounts receivable, less allowance for doubtful accounts of $1,193 at December 31, 1998 and $1,063 at June 30, 1998 39,980 32,925 Inventories 672 489 Prepaid expenses 2,205 1,346 Other receivables 641 427 Deferred income taxes 477 573 ------------ ------------ TOTAL CURRENT ASSETS 46,999 41,875 OTHER ASSETS Purchased and developed software, net of accumulated amortization of $9,292 at December 31, 1998 and $8,164 at June 30, 1998 12,104 11,012 Deferred income taxes 361 180 Intangibles, net 6,020 5,091 Deposits and other assets 1,678 1,725 ------------ ------------ 20,163 18,008 EQUIPMENT AND IMPROVEMENTS Furniture and fixtures 3,047 2,880 Computer and other equipment 13,041 11,573 Leasehold improvements 1,433 1,262 ------------ ------------ 17,521 15,715 Less allowance for depreciation and amortization 10,760 9,216 ------------ ------------ 6,761 6,499 ------------ ------------ TOTAL ASSETS $73,923 $66,382 ------------ ------------ ------------ ------------
See notes to consolidated financial statements 3 SYMIX SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) (In thousands)
December 31, June 30, 1998 1998 ------------ ------------ (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $10,711 $13,276 Customer deposits 148 288 Deferred revenue 16,997 13,155 Income taxes payable 1,577 1,304 Current portion of long term obligations 630 277 ------------ ------------ TOTAL CURRENT LIABILITIES 30,063 28,300 LONG-TERM OBLIGATIONS 300 305 BANK CREDIT AGREEMENT 3,851 2,000 DEFERRED INCOME TAXES 2,323 2,476 MINORITY INTEREST 2,020 2,000 SHAREHOLDERS' EQUITY Common stock, authorized 20,000 shares; issued 6,876 shares at December 31, 1998, and 6,778 at June 30, 1998; at stated capital amounts of $.01 per share 68 68 Convertible preferred stock of subsidiary 783 1,031 Capital in excess of stated value 24,840 23,937 Retained earnings 12,684 9,497 Cumulative translation adjustment (1,689) (1,912) ------------ ------------ 36,686 32,621 Less: Cost of common shares in treasury, 304 shares at December 31, 1998 and June 30, 1998, at cost (1,320) (1,320) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 35,366 31,301 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $73,923 $66,382 ------------ ------------ ------------ ------------
See notes to consolidated financial statements 4 SYMIX SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (unaudited)
Three Months Six Months Ended December 31, Ended December 31, --------------------- --------------------- 1998 1997 1998 1997 --------- ---------- --------- ---------- License fees $19,018 $14,485 $33,498 $24,033 Service, maintenance and support 14,083 9,532 26,494 17,549 --------- ---------- --------- ---------- Net revenue 33,101 24,017 59,992 41,582 License fees 4,689 3,679 8,554 6,391 Service, maintenance and support 8,030 4,858 14,362 9,037 --------- ---------- --------- ---------- Cost of revenue 12,719 8,537 22,916 15,428 --------- ---------- --------- ---------- Gross Margin 20,382 15,480 37,076 26,154 --------- ---------- --------- ---------- Selling, general and administrative 14,331 11,133 27,423 18,874 Research and product development 2,249 1,709 4,446 3,744 Acquisition research and development write-off - 6,503 - 6,503 --------- ---------- --------- ---------- Total operating expenses 16,580 19,345 31,869 29,121 --------- ---------- --------- ---------- Operating income (loss) 3,802 (3,865) 5,207 (2,967) Interest and other income (expense), net 80 (16) 92 (65) --------- ---------- --------- ---------- Income (loss) before income taxes 3,882 (3,881) 5,299 (3,032) Provision for income taxes 1,553 1,004 2,112 1,321 --------- ---------- --------- ---------- Net income (loss) $2,329 ($4,885) $3,187 ($4,353) --------- ---------- --------- ---------- --------- ---------- --------- ---------- Basic EPS: Net income (loss) per share $0.35 ($0.79) $0.48 ($0.72) --------- ---------- --------- ---------- --------- ---------- --------- ---------- Diluted EPS: Net income (loss) per share $0.32 ($0.79) $0.44 ($0.72) --------- ---------- --------- ---------- --------- ---------- --------- ---------- Weighted average number of common shares outstanding 6,648 6,185 6,635 6,084 --------- ---------- --------- ---------- --------- ---------- --------- ---------- Weighted average number of common shares outstanding assuming dilution 7,281 6,185 7,270 6,084 --------- ---------- --------- ---------- --------- ---------- --------- ----------
See notes to consolidated financial statements 5 SYMIX SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)
Six Months Ended December 31, ------------------------- 1998 1997 ------------ ----------- Increase (decrease) in cash OPERATING ACTIVITIES Net income (loss) $3,187 ($4,353) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Acquisition research and development write-off - 6,503 Depreciation and amortization 3,752 2,833 Provision for losses on accounts receivable 130 211 Provision for deferred income taxes 542 1,171 Changes in operating assets and liabilities: Trade accounts receivable (6,948) (6,463) Prepaid expenses and other receivables (1,046) 102 Inventory (182) (175) Deposits 71 (480) Accounts payable and accrued expenses (2,947) (648) Customer deposits (140) (137) Deferred revenue 3,816 908 Income taxes payable/refundable (646) (203) ------------ ----------- NET CASH USED BY OPERATING ACTIVITIES (411) (731)
See notes to consolidated financial statements 6 SYMIX SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands) (unaudited)
Six Months Ended December 31, ------------------------- 1998 1997 ------------ ----------- Increase (decrease) in cash INVESTING ACTIVITIES Purchase of equipment and improvements (1,806) (1,160) Additions to purchased and developed software (2,415) (2,390) Purchase of subsidiaries, net of cash acquired (638) (148) ------------ ----------- NET CASH USED BY INVESTING ACTIVITIES (4,859) (3,698) FINANCING ACTIVITIES Proceeds from issuance of common stock and exercise of stock options 395 105 Additions to long-term obligations, net of payments 1,573 3,556 ------------ ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,968 3,661 Effect of exchange rate changes on cash 211 (114) ------------ ----------- Net change in cash (3,091) (882) Cash at beginning of period 6,115 2,332 ------------ ----------- CASH AT END OF PERIOD $3,024 $1,450 ------------ ----------- ------------ -----------
See notes to consolidated financial statements 7 SYMIX SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note A - Accounting Policies and Presentation The accompanying consolidated financial statements are unaudited; however, the information contained therein reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods. All adjustments made were of a normal recurring nature. These interim results of operations are not necessarily indicative of the results to be expected for a full year. The notes to the consolidated financial statements contained in the Symix Systems, Inc. and Subsidiaries' (the "Company") June 30, 1998 Annual Report to Shareholders should be read in conjunction with these financial statements. Certain reclassifications have been made to conform prior quarter amounts to the current quarter presentation. In the first quarter of fiscal 1999, the Company adopted Statement of Position ("SOP") 97-2, "Software Revenue Recognition," as amended by SOP 98-4, which provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. The adoption of the SOPs, in certain circumstances, has resulted and may in the future result in the deferral of software license revenues that would have been recognized upon delivery of the related software under the preceding accounting standard, SOP 91-1. In December 1998, SOP 98-9 was issued which modifies SOP 97-2 with respect to certain transactions. The Company will be required to adopt SOP 98-9 beginning in fiscal 2000. The Company has not yet determined the effect, if any, that SOP 98-9 will have on it's revenue recognition policies. Note B - Acquisitions On November 24, 1997, the Company acquired Pritsker Corporation ("Pritsker"), for $737,000 in cash and 485,000 common shares of the Company. Pursuant to the acquisition agreement, (i) Pritsker was merged with and into a wholly-owned subsidiary of the Company incorporated in Ohio, (ii) each share of Pritsker common stock was converted into the right to receive 0.170108 common shares of the Company and (iii) each share of Pritsker preferred stock was converted into the right to receive $5.23 in cash plus accrued and unpaid dividends. Each unexercised employee stock option and outstanding warrant for Pritsker common stock was assumed by Symix and converted into the right to acquire that number of common shares of the Company to which the holder would have been entitled if such holder exercised the option or warrant immediately prior to the merger. Pritsker markets advanced planning and scheduling and simulation software to mid-market manufacturers. The transaction was accounted for as a purchase and resulted in a one-time, non-recurring charge of approximately $6.5 million relating to the write-off of acquired in-process technology of Pritsker. The following proforma information (in $000's) displays revenue and net income assuming the Company and Pritsker had been combined at the beginning of the period presented. The one time, non-recurring charge of approximately $6.5 million is excluded from proforma net income. 8
Six Months Ended December 31, --------------------- 1998 1997 -------- --------- Revenue $59,992 $42,746 -------- --------- Net Income $3,187 $1,489 -------- ---------
Note C - Earnings per Share The Company adopted the provisions of Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share" during the fiscal quarter ended December 31, 1997. The following table sets forth the computation of basic and diluted earnings per share (in $000's except per share data):
Three Months Six Months Ended December 31, Ended December 31, --------------------- --------------------- 1998 1997 1998 1997 ---------- --------- --------- ---------- NUMERATOR: Net income (loss) for both basic and diluted earnings (loss) per share $2,329 ($4,885) $3,187 ($4,353) ---------- --------- --------- ---------- ---------- --------- --------- ---------- DENOMINATOR: Weighted-average shares outstanding 6,551 6,060 6,524 5,959 Contingently issuable shares 97 125 111 125 ---------- --------- --------- ---------- Denominator for basic earnings (loss) per share 6,648 6,185 6,635 6,084 Effect of dilutive securities: Employee stock options 633 - 635 - ---------- --------- --------- ---------- Denominator for diluted earnings (loss) per share 7,281 6,185 7,270 6,084 ---------- --------- --------- ---------- ---------- --------- --------- ---------- Basic earnings (loss) per share $0.35 ($0.79) $0.48 ($0.72) ---------- --------- --------- ---------- ---------- --------- --------- ---------- Diluted earnings (loss) per share $0.32 ($0.79) $0.44 ($0.72) ---------- --------- --------- ---------- ---------- --------- --------- ----------
During fiscal 1998, if the effect of the non-recurring charge of $6.5 million were excluded from the financial results, the effect of the dilutive securities should be factored into the denominator for the diluted earnings per share calculation. The effect of those dilutive securities for the three month period ended December 31, 1997 would be 604 and for the six month period 594. 9 Note D - Comprehensive Income The Company adopted SFAS No. 130, "Reporting Comprehensive Income" as of July 1, 1998. SFAS No. 130 requires disclosure of total non-stockholder changes in equity in interim periods and additional disclosures of the components of non-stockholder changes in equity on an annual basis. Total non-stockholder changes in equity include all changes in equity during a period except those resulting from investments by and distributions to stockholders. The Company has restated information for the prior period reported below to conform to this standard.
Three Months Six Months Ended December 31, Ended December 31, --------------------- --------------------- 1998 1997 1998 1997 ---------- --------- --------- ---------- Net income (loss) $2,329 ($4,885) $3,187 ($4,353) Foreign currency translation adjustment (188) (614) 223 (943) ---------- --------- --------- ---------- Total comprehensive income (loss) $2,141 ($5,499) $3,410 ($5,296) ---------- --------- --------- ---------- ---------- --------- --------- ----------
10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW Symix is a global provider of open, client/server manufacturing software for mid-range discrete manufacturers. Symix designs, develops, markets and supports a fully integrated manufacturing, planning and financial software system that addresses the ERP requirements of manufacturers. REVENUE The Company's net revenue is derived primarily from (1) licensing Symix software and providing custom programming services; (2) providing installation, implementation, training, consulting and systems integration services; and (3) providing maintenance and support on a subscription basis. Revenue for fiscal 1998 is accounted for in accordance with AICPA Statement of Position 91-1 on Software Revenue Recognition. Revenue for fiscal 1999 is accounted for in accordance with SOP 97-2, as amended by SOP 98-4. Net revenue was $33.1 million for the three months ended December 31, 1998, an increase of 38% from the same quarter of the previous year. Both license fee and service, maintenance and support revenues contributed to the net revenue increase, with 31% and 48% increases respectively. For the six months ended December 31, 1998, net revenue was $60.0 million, an increase of 44% from the same period of the previous year. Consistent with the quarter, both license fee and service, maintenance and support revenues contributed to the six month net revenue increase, with 39% and 51% increases, respectively. The license fee component of net revenue of $19.0 million increased 31% from the same three-month period last year. All three major geographic channels (North America, Europe and Asia Pacific) contributed to the revenue growth. A combination of factors attributed to the increase in license fee revenue. An increased number of sales representatives and overall market acceptance of the Company's product line resulted in more software sales. The Company also targeted selling into its existing customer base. As a result, sales into the existing customer base increased this past quarter to approximately 25% of total license fees compared to 20% in prior quarters. International license fee revenue was in line with expectations and increased slightly to 25% of revenue compared to 21% of license fee revenue for the same period last year. Service, maintenance and support revenue of $14.1 million increased 48% from the quarter-to-quarter comparison and to $26.5 million, a 51% increase for the six month comparison. The significant increases in the service, maintenance and support revenues for both the three and six month periods is attributable to the growth of the Company's service organization to support the increase of new licenses sold during the past few quarters. 11 COST OF REVENUE Total cost of revenue as a percentage of net revenue was 38% for the quarter ended December 31, 1998, compared to 36% for the quarter ended December 31, 1997. The six month comparison was similar to the three month, with cost of revenue as a percentage of net revenue increasing slightly to 38% at December 31, 1998 compared to 37% at December 31, 1997. Cost of license fees includes royalties, amortization of capitalized software development costs and software delivery expenses. Cost of license fees stated as a percentage of license fee revenue was 25% for each three month period ended December 31, 1998 and 1997, respectively. The six month period percentages were fairly consistent as well, 26% for the six month period ended December 31, 1998, and 27% for the six month period ended December 31, 1997. The slight improvement in the six month period percentage is attributable to the increase in the license fee revenue relative to the rate of amortization on capitalized software. Cost of service, maintenance and support includes the personnel and related overhead costs for implementation, training, and customer support services, together with fees paid to third parties for subcontracted services. Cost of service, maintenance and support increased to 57% of service, maintenance and support revenue for the three month period ended December 31, 1998 from 51% for the same period last year. The percentage also increased slightly from 51% for the six month period ended December 31, 1997 to 54% for the six month period ended December 31, 1998. The increase in this cost for both the three and six month periods is primarily attributable to the increase in the amount of third party subcontracted services. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expense consists of personnel and related overhead costs including commissions for the sales, marketing, general and administrative activities of the Company, together with advertising and promotional costs. Selling, general and administrative expense increased 29% for the quarter ended December 31, 1998, and as a percentage of revenue decreased from 46% for the quarter ended December 31, 1997 to 43% for the quarter ended December 31, 1998. Improved productivity in the international distribution channels, particularly in Asia, contributed to the lower expense ratio. For the six month periods ended December 31, 1998 and 1997, respectively, selling, general and administrative expense increased 45% and as a percentage of net revenue increased from 45% in 1997 to 46% in 1998. The slight increase in selling, general and administrative expense ratio for the six month period is related to the increase in staffing, the spending in infrastructure to support growth and emerging technologies, and expanding operations. RESEARCH AND DEVELOPMENT Research and product development expenditures, including amounts capitalized for the three months ended December 31, 1998, were $3.4 million compared to $2.8 million for the same period last year. For the six months ended December 31, 1998, research and development expenses, including capitalized costs, were $6.8 million compared to $6.1 million for the same 12 period last year. Capitalization of software development costs was $1.2 million for the quarter ended December 31, 1998, compared to $1.1 million for the comparable period last year. For the six month period ended December 31, 1998, $2.3 million of research and development expense was capitalized compared to $2.4 million for the same period last year. For the three month period comparison, as a percentage of net revenue net of software capitalized, research and development expense remained constant at 7%. In terms of absolute dollars, research and development expense increased 32%. For the six month comparison, as a percentage of net revenue net of software capitalized, research and development expense decreased from 9% for the period ended December 31, 1997 to 7% for the period ended December 31, 1998. In terms of absolute dollars, research and development expense increased 19%. The increase in research and development expenditures is the result of investments in the expanding product offerings as well as a new release of the Company's core product - SyteLine version 4.0. Additionally, the new Electronics, Computers and Consumer product initiative will be launched in early calendar year 1999. PROVISION FOR INCOME TAXES The effective tax rates for the quarters ended December 31, 1998 and 1997 were 40% and 38% (excluding the non-deductible charge of $6.5 million for acquired research and development) respectively. The increased effective tax rate is primarily due to, (i) the amount of foreign taxable earnings in countries with higher effective tax rates and (ii) the non-deductibility of the amortization of goodwill thereby increasing the Company's overall tax rate. LIQUIDITY AND CAPITAL RESOURCES The Company's operating activities used cash of $0.4 million during the six month period ended December 31, 1998, compared to $0.7 million used in the same period in 1997. In both periods, cash provided by operating activities was due principally to earnings and increases in deferred revenues and non-cash charges. Cash provided by operations was more than offset by the increase in trade accounts receivable and the decrease in trade payables. The accounts receivable average days sales outstanding was 106 days at December 31, 1997 compared to 110 days at December 31, 1998. The increase in average days sales outstanding is primarily attributable to the increase in the international business. For both periods presented, cash provided by financing activities was used to fund software development costs and to purchase computer equipment. As of December 31, 1998, the Company had $16.9 million in working capital, including $3.0 million in cash and cash equivalents. The Company has accessed its $15.0 million unsecured revolving line of credit for $3.9 million as of December 31, 1998. It is expected that the Company's continued expansion of its operations and products will result in additional requirements for cash in the future, which will be met through operations and the line of credit. POSSIBLE ADVERSE IMPACT OF RECENT ACCOUNTING PRONOUNCEMENT In October 1997 the Accounting Standards Executive committee issued SOP 97-2 "Software Revenue Recognition". SOP 97-2 is effective for transactions entered into in fiscal years beginning after December 15, 1997. Accordingly, the Company adopted SOP 97-2 beginning this fiscal year. The Company believes its current revenue recognition policies and practices are materially consistent with SOP 97-2. Implementation guidelines for this standard, 13 however, have not yet been issued and a wide range of potential interpretations is being discussed with the accounting profession. Once available, such implementation guidance could lead to unanticipated changes in the Company's current revenue accounting practices, and such changes could materially adversely affect the Company's future revenue and net income. In addition, such implementation guidance may necessitate substantial changes in the Company's business practices in order for the Company to continue to recognize a substantial portion of its license fee revenue upon delivery of its software products. Such changes may reduce demand, extend sales cycles, increase administrative costs and otherwise adversely affect operations. In addition, the Company could become competitively disadvantaged relative to foreign-based competitors not subject to U.S. generally accepted accounting principles. YEAR 2000 READINESS DISCLOSURE STATEMENT The Company faces "Year 2000 compliance" issues similar to those faced by other companies in the information technology industry. Year 2000 compliance issues typically arise with respect to computer software systems and programs that use only two digits, rather than four digits, to represent a particular year. Consequently, these systems and programs may not process dates beyond the year 1999 and may result in miscalculations or system failures. Year 2000 compliance problems also may arise in embedded systems, such as environmental system controls, elevators and other products that use microprocessors or computer chips. The Company's current product and service offerings, including those products developed and supported by third party software vendors, have been designed to be Year 2000 compliant. New products also are being designed by the Company to be Year 2000 compliant. The Company's existing contracts with active customers (e.g., customers with effective maintenance and support agreements with the Company) cover recent software products that are Year 2000 compliant or for which a Year 2000 ready upgrade is available, or do not expressly obligate the Company to furnish an updated release that is Year 2000 compliant. The Company has communicated with its customers regarding Year 2000 compliance, notifying them of the availability of upgraded or new releases of the Company's products which are Year 2000 compliant for certain older software products released by the Company which may still be in use by them. In certain cases, the Company has warranted that the Company's current software product offerings are Year 2000 ready when specifically requested by the customer. Although the software products currently offered by the Company have been tested for Year 2000 readiness, any failure of the Company's software products to perform, including the failure to process dates beyond the year 2000, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is in the process of assessing the Year 2000 readiness of selected third parties, including key suppliers, subcontractors, business partners and customers. To the extent that the Company uses third party products or technology in its computer software products, the Company has obtained confirmation of Year 2000 compliance from such third party providers. A failure of one or more of such suppliers, subcontractors, business partners or customers to 14 sufficiently address their Year 2000 compliance issues could materially adversely affect the Company's business, financial condition and results of operations. The Company also is in the process of reviewing its internal computer information system and non-computer systems, such as telecommunications equipment, building elevators, etc., which contain embedded computer technology, to determine whether such systems are Year 2000 compliant. Most of the embedded systems on which the Company relies in its daily operations are owned and managed by the lessors of the facilities in which the Company's operations are located, or by agents of such lessors. Although the Company's review of its internal computer information system and non-computer systems is not expected to be completed until March, 1999, the Company presently believes that such systems are Year 2000 compliant. The Company is less certain of the Year 2000 readiness of third parties who provide external services, such as public utilities, which could adversely impact the Company's operations. For example, the failure or interruption of electrical services would disrupt the Company's ability to communicate with its customers, suppliers, business partners and others. The Company does not anticipate any material costs associated with Year 2000 compliance relating to its internal computer information system or non-computer systems. All costs related to Year 2000 issues are being expensed by the Company. The Company does not expect that the total costs of evaluation and compliance with the Company's Year 2000 issues will be material. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS", INCLUDING INFORMATION REGARDING FUTURE ECONOMIC PERFORMANCE AND PLANS AND OBJECTIVES OF MANAGEMENT, WHICH ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. IN SOME CASES, INFORMATION REGARDING CERTAIN IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM A FORWARD-LOOKING STATEMENT APPEAR TOGETHER WITH SUCH STATEMENT. OTHER UNCERTAINTIES AND RISKS INCLUDE, BUT ARE NOT LIMITED TO, DEMAND FOR AND MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS; THE IMPACT OF COMPETITIVE PRODUCTS; THE COMPANY'S ABILITY TO MAINTAIN EFFICIENT MARKETING AND DISTRIBUTION OPERATIONS DOMESTICALLY AND INTERNATIONALLY; FUTURE WORLDWIDE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS; THE COMPANY'S ABILITY TO ATTRACT AND RETAIN HIGHLY SKILLED TECHNICAL, MANAGERIAL, SALES, MARKETING, SERVICE AND SUPPORT STAFF AND TO RETAIN KEY TECHNICAL AND MANAGEMENT PERSONNEL; TIMING OF PRODUCT DEVELOPMENT AND GENERAL RELEASE; THE COMPANY'S ABILITY TO SUCCESSFULLY RESOLVE ANY YEAR 2000 ISSUES; PRODUCT PRICING AND OTHER FACTORS DETAILED IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OTHER FILINGS MADE BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. 15 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company is subject to legal proceedings and claims which arise in the normal course of business. While the outcome of these matters cannot be predicted with certainty, management does not believe the outcome of any of these legal matters will have a material adverse effect on the Company's business, financial condition or results of operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. In connection with the acquisition of Visual Applications Software, Inc. ("VAS") in January, 1997, the Company entered into a Share Exchange Agreement with the former stockholders of VAS. Under the Share Exchange Agreement, the Company agreed to exchange Class A Preference Shares of Symix Systems (Ontario) Inc., a subsidiary of the Company (the "Class A Shares"), held by the former VAS stockholders for common shares of the Company. On October 7, 1998, the Company issued 34,768 common shares to the former VAS stockholders in exchange for 30,000 Class A Shares in reliance upon an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, and based upon representations from each former VAS stockholder that the shares were being acquired for his own account for investment purposes only. The Company did not receive any other consideration in connection with the issuance of the common shares. The common shares were subsequently registered with the Securities and Exchange Commission on Form S-3 (Registration No. 333-64677) at the request of the former VAS stockholders pursuant to the terms of the Share Exchange Agreement. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The Annual Meeting of Shareholders of Registrant was held on November 11, 1998 (the "Meeting"). (b) No response required. (c) The only matters voted on at the Meeting were (i) the uncontested election of Lawrence J. Fox, Stephen A. Sasser, Duke W. Thomas, Larry L. Liebert, John T. Tait and James A. Rutherford as directors of the Company; and (ii) the approval of an amendment to Section 6 of the Symix Systems, Inc. Employee Stock Purchase Plan (the "Plan") in order to eliminate the exclusion of certain "highly compensated employees" (as defined in the Plan) from participation in the Plan. There were 16 6,092,672 common shares of the Company represented in person or by proxy at the Meeting. The manner in which the votes were cast with respect to the election of directors was as follows:
SHARES NOMINEE SHARES VOTED "FOR" WITHHELD ------- -------------------- -------- Lawrence J. Fox 6,015,547 74,125 Stephen A. Sasser 6,019,047 73,625 Duke W. Thomas 6,018,047 74,625 Larry L. Leibert 6,018,547 74,125 John T. Tait 6,016,947 75,725 James A. Rutherford 6,018,864 73,808
The manner in which the votes were cast with respect to the proposed amendment to Section 6 of the Plan was as follows:
SHARES VOTED "FOR" SHARES VOTED "AGAINST" ABSTENTIONS BROKER NONVOTES -------------------- ----------------------- ----------- --------------- 5,803,179 275,472 6,665 7,356
(d) Not applicable. ITEM 5. OTHER INFORMATION. Symix announced, on January 29, 1999, that its Board of Directors had elected Stephen A. Sasser, 49, to the position of president and chief executive officer. Sasser succeeded Larry J. Fox, 42, to the position of chief executive officer. Fox will continue to serve Symix as chairman. Sasser has been president and chief operating officer of Symix since July, 1995. Prior to joining Symix, he served as vice president of international operations for Trilogy Development Group, a provider of client-server sales and marketing software. From 1992 to 1994, he served as group vice president of the Systems Management Division and Pacific Rim Operations for Legent Corporation, a provider of systems management software products and services. Sasser also served as president of the Data Center Management Division of Goal Systems International, Inc., which was acquired by Legent in 1992. He holds a B.B.A. and M.B.A. from Southern Methodist University and currently serves as a director of Viaserv Corporation and Alkon Corporation. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a) See Index to Exhibits filed with this Quarterly Report on Form 10-Q following the Signature Page. b) Reports on Form 8-K: None. 17 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. SYMIX SYSTEMS, INC. Date: February 16, 1999 /s/ Lawrence W. DeLeon ---------------------- Lawrence W. DeLeon, Duly Authorized Officer and Principal Financial Officer 18 INDEX TO EXHIBITS
Exhibit No. Description Page - ----------- ----------- ---- 3(a)(1) Amended Articles of Incorporation of Incorporated herein by reference to Symix Systems, Inc. (as filed with the Exhibit 3(a)(1) to the Annual Report on Ohio Secretary of State on February 8, Form 10-K for the fiscal year ended June 1991) 30, 1997 3(a)(2) Certificate of Amendment to the Amended Incorporated herein by reference to Articles of Incorporation of Symix Exhibit 3(a)(2) to the Annual Report on Systems, Inc. (as filed with the Ohio Form 10-K for the fiscal year ended June Secretary of State on July 16, 1996) 30, 1997 3(a)(3) Amended Articles of Incorporation of Incorporated herein by reference to Symix Systems, Inc. (reflecting Exhibit 3(a)(3) to the Annual Report on amendments through July 16, 1996, for Form 10-K for the fiscal year ended June purposes of SEC reporting compliance 30, 1997 only) 3(b) Amended Regulations of Symix Systems, Incorporated herein by reference to Inc. Exhibit 3(b) to the Registration Statement on Form S-1 of Registrant filed on February 12, 1991 (Registration No. 33-38878) 4(a)(1) Amended Articles of Incorporation of Incorporated herein by reference to Symix Systems, Inc. (as filed with the Exhibit 3(a)(1) to the Annual Report on Ohio Secretary of State on February 8, Form 10-K for the fiscal year ended June 1991) 30, 1997 4(a)(2) Certificate of Amendment to the Amended Incorporated herein by reference to Articles of Incorporation of Symix Exhibit 3(a)(2) to the Annual Report on Systems, Inc. (as filed with the Ohio Form 10-K for the fiscal year ended June Secretary of State on July 16, 1996) 30, 1997 4(a)(3) Amended Articles of Incorporation of Incorporated herein by reference to Symix Systems, Inc. (reflecting Exhibit 3(a)(3) to the Annual Report on amendments through July 16, 1996, for Form 10-K for the fiscal year ended June purposes of SEC reporting compliance 30, 1997 only)
19
Exhibit No. Description Page - ----------- ----------- ---- 4(b) Amended Regulations of Symix Systems, Incorporated herein by reference to Inc. Exhibit 3(b) to the Registration Statement on Form S-1 of Registrant filed February 12, 1991 (Registration No. 33-38878) 10 Fourth Amendment to Loan Agreement Among Filed herein Symix Systems, Inc. and Symix Computer Systems, Inc. and Bank One, NA 27 Financial Data Schedule Filed herein 99 Press Release Announcing Election Filed herein of Stephen A. Sasser as President and Chief Executive Officer
20 EX-10 2 EX-10 EXHIBIT 10 FOURTH AMENDMENT TO LOAN AGREEMENT AMONG SYMIX SYSTEMS, INC. and SYMIX COMPUTER SYSTEMS, INC. AND BANK ONE, NA THIS FOURTH AMENDMENT ("Fourth Amendment") is dated as of December 24, 1998, between SYMIX SYSTEMS, INC., an Ohio corporation ("SSI") and SYMIX COMPUTER SYSTEMS, INC., an Ohio corporation ("SCSI" and, collectively with SSI, the "Companies") and BANK ONE, NA, a national association ("Bank One"). WITNESSETH: WHEREAS, the Companies and Bank One, parties to that certain Loan Agreement dated as of May 20, 1996, amended by First Amendment dated as of August 13, 1997, Second Amendment dated as of March 4, 1998 and further amended by Third Amendment dated as of June 1, 1998 (the "Agreement"), have agreed to amend the Agreement on the terms and conditions hereinafter set forth. Terms not otherwise defined herein are used as defined in the Agreement as amended hereby. NOW, THEREFORE, the Companies and Bank One hereby agree as follows: Section 1. AMENDMENT OF THE AGREEMENT. The Agreement is, effective the date hereof, hereby amended as follows: 1.1. In Section 1.1.5, the words "daily average unused portion" shall be deleted and the words "daily unused portion" shall be inserted in their place. 1.2. In Section 8, the definition of "Debt Service Coverage Ratio" shall amended and restated in its entirety as follows: "Debt Service Coverage Ratio" shall mean the ratio of (a) net income after tax plus depreciation and amortization plus interest expense plus $6,503,000 for the non-recurring charge related to the acquisition and research and development write off appearing in the June 30, 1998 financial statements minus capitalized software minus capital expenditures to (b) current maturities of long term debt plus interest expense, all determined in accordance with generally accepted accounting principles applied on a consistent basis. The current maturities of long term debt under the Revolving Credit Note shall be determined on a pro forma basis assuming that the then-current principal balance of the Revolving Credit Note would be amortized, on a straight line basis, over 60 months. 1.3. Section 4.20 shall be amended and restated in its entirety as follows: 4.20. PLEDGE OF INTERCOMPANY NOTE. The Companies shall cause all the Non-Obligor Subsidiaries (except Symix Computer Systems (Malaysia) Sdn Bhd.) to execute an intercompany promissory note that evidences all borrowings that such Non-Obligor Subsidiaries make from the Companies of funds borrowed under the $13,000,000 Revolving Credit Note, and the Companies shall deliver such intercompany promissory note to Bank One as security for the amounts due hereunder and under the Revolving Credit Notes. 1.4. Section 5.13 shall be amended and restated in its entirety as follows: 5.13. FUNDING. The Companies shall not use the proceeds of the Revolving Credit Notes to find any Non-Obligor Subsidiary acquisitions or non-operational purposes or obligations other than operating cash flow of such Non-Obligor Subsidiary. The Companies shall not (and shall not permit any Subsidiary to) loan or otherwise advance funds to Symix Computer Systems (Malaysia) Sdn Bhd. in an amount to exceed $200,000 in the aggregate outstanding at any time. 1.5. All references to Symix Italia S.p.A. shall be changed to Symix Italia S.r.l. SECTION 2. GOVERNING LAW. This Fourth Amendment shall be governed by and construed in accordance with the laws of the State of Ohio. SECTION 3. COSTS AND EXPENSES. All fees, costs or expenses, including reasonable fees and expenses of outside legal counsel, incurred by Bank One in connection with either the preparation, administration, amendment, modification or enforcement of this Fourth Amendment shall be paid by the Companies on request. SECTION 4. COUNTERPARTS. This Fourth Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 5. CONFESSION OF JUDGMENT. Each Company hereby authorizes any attorney at law to appear for the Company, in an action on this Fourth Amendment, at any time after the same becomes due, as herein provided, in any court of record in or of the State of Ohio, or elsewhere, to waive the issuing and service of process against the Company and to confess judgment in favor of the holder of this Fourth Amendment or the party entitled to the benefits of this Fourth Amendment against the Company for the amount that may be due, with interest at the rate herein mentioned and costs of suit, and to waive and release all errors in said proceedings and judgment, and all petitions in error, and right of appeal from the judgment rendered. No judgment against one Company shall preclude Bank One from taking a confessed judgment against the other Company. SECTION 6. CONDITIONS PRECEDENT. Simultaneously with the execution hereof, Bank One shall receive all of the following, each dated the date hereof, in form and substance satisfactory to Bank One: 6.1. The Assignment of Intercompany Note, dated as of June 1, 1998. 6.2. Such other documents as Bank One may, in its reasonable discretion, so require. SECTION 7. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES; NO DEFAULTS. The Companies hereby expressly acknowledge and confirm that the representations and warranties of the Company set forth in Section 3 of the Agreement are true and accurate on this date with the same effect as if made on and as of this date; that no financial condition or circumstance exists which would inevitably result in the occurrence of an Event of Default under Section 6 of the Agreement; and that no event has occurred or no condition exists which constitutes, or with the running of time or the giving of notice would constitute an Event of Default under Section 6 of the Agreement. SECTION 8. REAFFIRMATION OF DOCUMENTS. Except as herein expressly modified, the parties hereto ratify and confirm all of the terms, conditions, warranties and covenants of the Agreement, and all security agreements, pledge agreements, mortgage deeds, assignments, subordination agreements, or other instruments or documents executed in connection with the Agreement, including provisions for the payment of the Notes pursuant to the terms of the Agreement. This Fourth Amendment does not constitute the extinguishment of any obligation or indebtedness previously incurred, nor does it in any manner affect or impair any security interest granted to Bank One, all of such security interests to be continued in full force and effect until the indebtedness described herein is fully satisfied. The Companies have executed this Fourth Amendment as of the date first above written. SYMIX SYSTEMS, INC. SYMIX COMPUTER SYSTEMS, INC. By:/s/ Lawrence W. DeLeon By:/s/ Lawrence W. DeLeon --------------------------------- --------------------------------- name: Lawrence W. DeLeon Name: Lawrence W. DeLeon Its: Vice President, Chief Financial Its: Vice President, Chief Financial Officer and Secretary Officer and Secretary WARNING - IN SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. BANK ONE, NA By:/s/Kimberley C. Currie --------------------------------- Name: Kimberley C. Currie Its: Vice President EX-27 3 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS IN THE QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998 FOR SYMIX SYSTEMS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1999 JUL-01-1998 DEC-31-1998 3,024 0 41,173 1,193 672 46,999 17,521 10,760 73,923 30,063 0 0 783 68 34,515 73,923 33,498 59,992 8,554 22,916 31,869 130 165 5,299 2,112 3,187 0 0 0 3,187 0.48 0.44
EX-99 4 EX-99 EXHIBIT 99 SYMIX NAMES STEPHEN A. SASSER PRESIDENT AND CEO COLUMBUS, OHIO, January 29, 1999 - Symix Systems, Inc. (Nasdaq: SYMX) today announced that its Board of Directors has elected Stephen A. Sasser, 49, current Symix president and chief operating officer, to the position of president and chief executive officer. Sasser succeeds Larry J. Fox, 42, company founder and chairman. Fox will continue to maintain an active role as chairman, focusing on strategic company initiatives. "I am pleased to announce Steve's promotion to CEO," said Fox. "As president of Symix for the past three and a half years, Steve has led the company to a leadership position in the ERP midmarket. His insight, management talents and absolute relentless pursuit of organizational excellence have led Symix to record growth, strong profitability, and industry prominence. I congratulate Steve and look forward to continuing to work with him as Symix enters its twentieth year." Sasser has been president and chief operating officer of Symix since July 1995. Prior to joining Symix, he served as vice president of International operations for Trilogy Development Group, a provider of client-server sales and marketing software. From 1992 to 1994, he served as group vice president of the Systems Management Division and Pacific Rim Operations for Legent Corporation, a provider of systems management software products and services. Sasser also served as president of the Data Center management Division of Goal Systems International, Inc., which was acquired by Legent in 1992. He holds a B.B.A. and an M.B.A. from Southern Methodist University, and currently serves as a director of Viaserv Corporation and Alkon Corporation. Symix Systems, Inc. develops, markets and supports integrated enterprise management systems that meet the unique needs of midsize manufacturers. Symix is the originator of Customer Synchronized Resource Planning (CSRP), which extends Enterprise Resource Planning (ERP) to incorporate customer needs into manufacturers' central planning processes. CSRP helps manufacturers achieve a competitive advantage by providing value-added, customized products and services to their customers. Every day, over 3,500 customers use Symix software, including its SyteLine enterprise software suite for industrial products markets. Founded in 1979 and headquartered in Columbus, Ohio, Symix markets its products through sales and service offices in Europe, North America and the Pacific Rim, as well as through independent software and support business partners worldwide. Symix company and product information is available at http://www.symix.com. ### SyteLine is a registered trademark of Symix Systems, Inc. -----END PRIVACY-ENHANCED MESSAGE-----