-----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, Sqe/12PDHv90HUDPOYeL/HB/Rwe+GNqwaZt/H9OgZq4yw+kkeC+oqQ0E1ti51M5E p4Hxvl/FEs2PLqmMjxHurg== 0000950135-00-000819.txt : 20000215 0000950135-00-000819.hdr.sgml : 20000215 ACCESSION NUMBER: 0000950135-00-000819 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROJECT SOFTWARE & DEVELOPMENT INC CENTRAL INDEX KEY: 0000920354 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 042448516 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23852 FILM NUMBER: 543846 BUSINESS ADDRESS: STREET 1: 100 CROSBY DR D CITY: BEDFORD STATE: MA ZIP: 01730 BUSINESS PHONE: 7812802000 MAIL ADDRESS: STREET 1: 100 CROSBY DRIVE CITY: CAMBRBEDFORD STATE: MA ZIP: 01730 10-Q 1 PROJECT SOFTWARE & DEVELOPMENT, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999 (mark one) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from _______________ to __________________ Commission File Number 0-23852 PROJECT SOFTWARE & DEVELOPMENT, INC. (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2448516 (State or other jurisdiction (I.R.S employer incorporation or organization) identification number) 100 CROSBY DRIVE, BEDFORD MASSACHUSETTS 01730 (Address of principal executive offices, including zip code) (781) 280-2000 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares outstanding of the Registrant's common stock as of the latest practicable date: 21,553,983 shares of common stock, $.01 par value per share, as of January 31, 2000. 2 PROJECT SOFTWARE & DEVELOPMENT, INC. 10-Q INDEX PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE Consolidated Balance Sheets (unaudited) as 3 of December 31, 1999 and September 30, 1999. Consolidated Statements of Operations 4 (unaudited) for the three months ended December 31, 1999 and 1998. Consolidated Statements of Cash Flows 5 (unaudited) for the three months ended December 31, 1999 and 1998. Notes to Consolidated Financial Statements 6 (unaudited). ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 11 FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 26 ABOUT MARKET RISK PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 27 SIGNATURE 29
2 3 PROJECT SOFTWARE & DEVELOPMENT, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS December 31, September 30, 1999 1999 ---- ---- (IN THOUSANDS,EXCEPT SHARE DATA) Current assets: Cash and cash equivalents $ 63,580 $ 59,903 Marketable securities 26,114 30,920 Accounts receivable, trade, less allowance for doubtful accounts of $2,838 at December 31, 1999 and $2,867 at September 30, 1999, respectively 40,400 38,736 Prepaid expenses 5,034 3,919 Other current assets 1,315 1,171 Deferred income taxes 2,158 2,017 -------- -------- Total current assets 138,601 136,666 -------- -------- Marketable securities 9,286 7,413 Property and equipment, net 12,221 12,055 Intangible assets, net 2,616 1,509 Other assets 389 406 Deferred income taxes 1,044 984 -------- -------- Total assets $164,157 $159,033 ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 15,911 $ 12,172 Accrued compensation 4,352 8,429 Income taxes payable 5,085 4,227 Deferred revenue 15,648 16,580 Deferred income taxes 94 187 --------- --------- Total current liabilities 41,090 41,595 --------- --------- Deferred rent 139 146 Deferred revenue 87 92 Commitments and contingencies Equity in minority interest -- 44 Stockholders' equity Preferred stock, $.01 par value;1,000,000 authorized, none issued and outstanding Common stock, $.01 par value;50,000,000 authorized; 21,552,258 and 21,301,674 issued at December 31, 1999 and September 30, 1999, respectively 216 213 Additional paid-in capital 70,697 67,418 Retained earnings 52,806 50,210 Accumulated other comprehensive income (878) (685) --------- --------- Total stockholders' equity 122,841 117,156 --------- --------- Total liabilities and stockholders' equity $ 164,157 $ 159,033 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 3 4 PROJECT SOFTWARE & DEVELOPMENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, ----------------------- 1999 1998 ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues: Software $ 15,737 $ 14,406 Support and services 22,249 19,511 -------- -------- Total revenues 37,986 33,917 -------- -------- Cost of revenues: Software 659 1,144 Support and services 12,528 9,583 -------- -------- Total cost of revenues 13,187 10,727 -------- -------- Gross margin 24,799 23,190 Operating expenses: Sales and marketing 13,990 10,955 Product development 4,495 3,476 General and administrative 3,095 2,867 -------- -------- Total operating expenses 21,580 17,298 -------- -------- Income from operations 3,219 5,892 Interest income 937 648 Interest expense (1) (17) Other income (expense), net (194) 72 -------- -------- Income before income taxes 3,961 6,595 Provision for income taxes 1,365 2,309 -------- -------- Net income $ 2,596 $ 4,286 ======== ======== Net income per share, basic $ 0.12 $ 0.21 -------- -------- Net income per share, diluted $ 0.11 $ 0.21 -------- -------- Shares used to calculate net income per share Basic 21,415 20,004 Diluted 22,706 20,405
The accompanying notes are an integral part of the consolidated financial statements. 4 5 PROJECT SOFTWARE & DEVELOPMENT, INC CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED THREE MONTHS ENDED DECEMBER 31, DECEMBER 31, 1999 1998 ---- ---- (in thousands) Cash flows from operating activities: Net income $ 2,596 $ 4,286 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,427 1,097 Gain/(loss) on sale and disposal of property and equipment (15) 12 Amortization of discount on marketable securities 62 51 Deferred rent (6) 25 Deferred income taxes (350) (37) Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (2,433) (3,635) Prepaid expenses (1,131) (381) Other assets (755) (771) Accounts payable 4,393 1,485 Accrued compensation (4,042) (1,103) Income taxes payable 930 1,466 Deferred revenue (469) (441) -------- -------- Net cash provided by operating activities 207 2,054 -------- -------- Cash flows from investing activities: Acquisitions of business, net of cash 12 141 Acquisitions of property and equipment (1,376) (1,856) Purchase of marketable securities (17,797) (12,604) Sale of marketable securities 20,640 12,087 -------- -------- Net cash provided by/(used in) investing activities 1,479 (2,232) -------- -------- Cash flows from financing activities: Proceeds from exercise of stock options including related tax benefit 2,185 690 -------- -------- Net cash provided by financing activities 3,282 690 -------- -------- Effect of exchange rate changes on cash (194) (90) -------- -------- Net increase in cash and cash equivalents 3,677 422 Cash and cash equivalents, beginning of period 59,903 28,454 -------- -------- Cash and cash equivalents, end of period $ 63,580 $ 28,876 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 5 6 PROJECT SOFTWARE & DEVELOPMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of Project Software & Development, Inc. (PSDI) and its majority-owned subsidiaries (collectively, the "Company"), as of December 31, 1999 and have been prepared by the Company in accordance with generally accepted accounting principles for interim reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair presentation of the Company's financial position, results of operations and cash flows at the dates and for the periods indicated. The results of operations for the periods presented herein are not necessarily indicative of the results of operations to be expected for the entire fiscal year, which ends on September 30, 2000, or for any other future period. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, for the year ended September 30, 1999 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 29, 1999. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. B. INCOME PER SHARE Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted average common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For purposes of this calculation, stock options are considered dilutive potential common shares in periods in which they have a dilutive effect. 6 7 Basic and diluted earnings per share are calculated as follows:
THREE MONTHS ENDED BASIC EPS 12/31/99 12/31/98 - --------- -------- -------- Net income $ 2,596,008 $ 4,286,249 Weighted average common shares outstanding 21,415,005 20,004,366 Basic income per share $ 0.12 $ 0.21
DILUTED EPS - ----------- Net income $ 2,596,008 $ 4,286,249 Weighted average common shares outstanding 21,415,005 20,004,366 Dilutive potential common shares 1,291,353 400,560 ----------- ----------- Total diluted shares 22,706,358 20,404,926 Diluted income per share $ 0.11 $ 0.21
C. ACQUISITIONS On October 29, 1999, the Company acquired Modern Distribution Management, Inc., a leading information source covering strategic management issues affecting suppliers and distributors of MRO ("Maintenance, Repair and Operating") supplies. This acquisition was made with the issuance of 45,600 shares of common stock valued at $24.07 per share. The transaction was accounted for using the purchase method of accounting. The Company recorded approximately $1.3 million of goodwill related to this acquisition, which is being amortized on a straight-line basis over five years. This acquisition was deemed to be immaterial for presentation of pro forma information. On December 10, 1998, the Company acquired the shares and assumed net liabilities of its Italian distributor, Work Management Consulting, s.r.l, for the sum of $411,000. The transaction was accounted for using the purchase method of accounting. The resulting goodwill is being amortized on a straight-line basis over five years. This acquisition was deemed to be immaterial for presentation of pro forma information. D. SUPPLEMENTAL CASH FLOW DISCLOSURES Cash paid for interest and taxes were as follows:
THREE MONTHS ENDED DECEMBER 31, 1999 ------------------ (in thousands) 1999 1998 ---- ---- Interest ........................ $ 1 $ 17 Income taxes .................... 690 721
7 8 Acquisitions of businesses were as follows:
THREE MONTHS ENDED DECEMBER 31, 1999 ------------------ (in thousands) 1999 1998 ---- ---- Fair value of assets acquired .... $18 $ 592 Fair value of liabilities assumed 93 729 Net cash payments ................ 3 180
E. COMPREHENSIVE INCOME The following table reflects the components of comprehensive income: (in thousands)
THREE MONTHS THREE MONTHS ENDED ENDED DECEMBER 30, DECEMBER 30, 1999 1998 ------------ ------------ Net income $ 2,596 $ 4,286 ------- ------- Other comprehensive income, net of tax: Unrealized (loss)/gain on Securities arising during (28) 24 Period Foreign currency translation Adjustment (165) 36 ------- ------- Comprehensive income $ 2,763 $ 4,346 ------- -------
F. SEGMENT INFORMATION, GEOGRAPHIC DATA AND MAJOR CUSTOMERS: The following is presented in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company has identified two reportable industry segments: the development, marketing and support of asset maintenance management software (MAXIMO) and internet e-Commerce software products and network services (MRO.com). Asset information by reportable segment is not reported, since the Company does not produce such information internally. The Company also manages these product lines across geographic reportable segments: United States, Other Americas (Canada and Latin America), Europe/Middle East and Africa, and Asia Pacific. All segments are managed by the same board of directors and executive officers. 8 9 A summary of the Company's operations by product line was as follows:
THREE MONTHS ENDED DECEMBER 31, (in thousands) 1999 1998 ---- ---- Revenues: Asset maintenance software and services .............................. $34,890 $31,007 Internet e-Commerce software and services .............................. 3,096 2,910 ------- ------- $37,986 $33,917 Income from operations: Asset maintenance software and services ............................ $ 7,372 $ 5,238 Internet e-Commerce software and services ............................ (4,153) 654 ------- ------- $ 3,219 $ 5,892 ------- -------
A summary of the Company's operations by geographical area was as follows:
THREE MONTHS ENDED DECEMBER 31, (in thousands) 1999 1998 ---- ---- Revenues: United States ......................... $ 21,019 $ 17,233 Other Americas ........................ 2,774 2,452 Intercompany revenues ................. 2,020 4,615 -------- -------- $ 25,813 $ 24,300 Europe/Middle East and Africa ......... $ 11,279 $ 11,254 Asia/Pacific .......................... 2,914 2,978 Consolidating eliminations ............ (2,020) (4,615) -------- -------- $ 37,986 $ 33,917 -------- --------
9 10 The Company has subsidiaries in foreign countries which sell the Company's products and services in their respective geographic areas. Intercompany revenues primarily represent shipments of software to international subsidiaries and are eliminated from consolidated revenues. Income (loss) from operations excludes interest income, interest expense, provision for income taxes and transaction gains and losses. G. SUBSEQUENT EVENT: On January 11, 2000, the Company signed a definitive agreement to purchase INTERMAT, Inc., a leading provider of MRO content management tools and cataloging services. Under terms of the agreement, Project Software & Development, Inc. will acquire the capital stock of INTERMAT from Strategic Distribution, Inc. (NASDAQ: STRD) for approximately $55.0 million in cash. Closing of the transaction is subject to customary conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The closing is expected to occur in the Company's second fiscal quarter of 2000 and will be accounted for as a purchase. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS In addition to historical information this Quarterly Report contains forward-looking statements identified by footnotes in the text. The forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the section entitled "Factors Affecting Future Performance". Readers should carefully review the risk factors described in other documents that the Company files from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10-K filed by the Company on December 29, 1999. OVERVIEW ABOUT PSDI AND MRO.COM INC. PSDI develops, markets and supports business-to-business MRO e-Commerce systems and enterprise asset maintenance software. Through its subsidiary MRO.com, Inc., the company complements its MAXIMO enterprise asset maintenance software with an Internet-based B2B marketplace for MRO buyers and suppliers, a suite of online procurement software products that improve purchasing efficiency, and Internet-based content management tools and cataloging services. Businesses, government agencies, and other organizations use the MAXIMO product suite to assist in the maintenance of high-value capital assets, such as plants, facilities, and production equipment, to cut MRO inventories and costs, control maintenance expenses, reduce downtime, and more effectively deploy productive assets, personnel and other resources. The Company's revenues are derived primarily from two sources: (i) software licenses and (ii) fees for services, including support contracts, training and consulting services and commerce fees for on-line charges to engage in electronic commerce for Maintenance, Repair and Operations ("MRO"). ACQUISITIONS AND OTHER RELATED MATTERS 11 12 over five years. This acquisition was deemed to be immaterial for presentation of pro forma information purposes. RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1998 REVENUES
Three CHANGE % Three Months Months Ended Ended (in thousands) 12/31/99 12/31/98 - -------------- -------- -------- Software licenses $15,737 9.2% $14,406 Percentage of total revenues 41.4% 42.5% Support and services $22,249 14.0% $19,511 Percentage of total revenues 58.6% 57.5% Total revenues $37,986 12.0% $33,917
MAXIMO client/server revenues for the three months ended December 31, 1999 increased 14.6% to $34.4 million from $30.0 million for the three months ended December 31, 1998. The growth in revenues was generated primarily by increases from the Company's enterprise asset management product, MAXIMO. MRO.com revenues were $3.1 million, an increase of 6.4% over three months ended December 31, 1998. The three months ended December 31, 1998. A significant portion of the Company's MAXIMO revenues were derived from operations outside of the United States. Revenues from sales outside the United States for the three months ended December 31, 1999 increased 1.8% to $17.0 million or 44.7% of revenues, compared to $16.7 million or 49.2% of revenues for the three months ended December 31, 1998. Software licenses for the three months ended December 31, 1999 increased 9.2% to $15.7 million from $14.4 million. MAXIMO client/server software license revenue for the three months ended December 31, 1999 increased 14.0% to $13.0 million from $11.4 million in the corresponding period in 1998. MRO.com software license revenue for the three months ended December 31, 1999 increased to $2.7 million from $2.6 million in the corresponding period in 1998. In the three months ended December 31, 1998, the Company concluded a significant e-commerce software license of approximately $2.5 million. Support and services revenues increased 14.0% over the prior quarter. Consulting services grew 11.1% for the three months ended December 31, 1999 compared to the three months ended December 31, 1998 and continues to be a large percentage of total revenues due to additional service demands in connection with large scale implementations of the Company's MAXIMO product. 12 13 MRO.com services were not a significant portion of revenues and represented only 2.3% of service revenues for the three months ended December 31, 1999. Support services grew to 20.0% as a percentage of revenues for the three months ended December 31, 1999 compared to the three months ended December 31, 1998. The increase in the percentage of support revenues was related to the increase in software license revenues and the high renewal rate for MAXIMO maintenance contracts. COST OF REVENUES
Three CHANGE % Three Months Months Ended Ended (in thousands) 12/31/99 12/31/98 - -------------- -------- -------- Software licenses $ 659 (42.4%) $ 1,144 Percentage of software licenses 4.2% 7.9% Support and services $ 12,528 30.7% $ 9,583 Percentage of support and services 56.3% 49.1% Total cost of revenues $ 13,187 22.9% $10,727 Percentage of total revenues 34.7% 31.6%
Cost of software licenses revenues consists of software purchased for resale, royalties paid to vendors of third party software, the amortization of capitalized software, the cost of software product packaging and media, and certain employee costs related to software duplication, packaging and shipping. The decrease in the cost of software licenses revenues was due primarily to a decrease in the amount of software purchased for resale. Additionally, there were no capitalized software costs amortized during the quarter ended December 31, 1999, as capitalized software costs are fully amortized since costs incurred subsequent to the establishment of technological feasibility were not significant. The decrease as a percentage of software licenses was due to the decrease of fixed third party license fee commitments. Cost of support and services consists primarily of personnel costs for employees and the related costs of benefits and facilities. The increase in the cost of support and services was attributable to the hiring of employees and the extensive use of third-party consultants contracted to perform services for the Company. The Company utilizes the services of these higher cost third-party consultants in order to meet demand for its services and backlog. The cost of support and services as a percentage of support and services revenues increased to 56.3% from 49.1% for the three months ended December 31, 1999 and 1998, respectively. The increase as a percentage of revenues is attributable to low utilization related to year 2000 factors, continued use of third party contractors, a European services meeting and expenses related to starting up the MRO.com consulting services organization. 13 14 OPERATING EXPENSES
Three CHANGE % Three Months Months Ended Ended (in thousands) 12/31/99 12/31/98 - -------------- -------- -------- Sales and marketing $ 13,990 27.7% $10,955 Percentage of total revenues 36.8% 32.3% Product development $ 4,495 29.3% $ 3,476 Percentage of total revenues 11.8% 10.2% General and administrative $ 3,095 8.0% $ 2,867 Percentage of total revenues 8.1% 8.5%
The increase in sales and marketing expenses for the three months ended December 31, 1999 was due to increases in sales, sales support and marketing personnel for the MRO.com organization, sales commissions, marketing research and telemarketing expenses and higher travel costs. The increase in product development expenses for the three months ended December 31, 1999 was primarily due to the hiring of additional employees to support the MRO business. No software development costs were capitalized in the three months ended December 31, 1999 and 1998, respectively since costs incurred subsequent to the establishment of technological feasibility were not significant. The Company intends to continue to make investments in electronic commerce products for MRO supply chain management. (1) The Company will also continue to invest in client/server MAXIMO and Java applications. The increase in general and administrative expenses for the three months ended December 31, 1999 was primarily due to the hiring of additional general and administrative personnel and related benefits, as well as, other expenses to support the global expansion of the Company. NON-OPERATING EXPENSES
(in thousands) Three CHANGE % Three Months Months Ended Ended 12/31/99 12/31/98 -------- -------- Interest income $ 937 44.6% $ 648 Interest expense $ (1) (94.1%) $ (17) Other income (expense) $(194) (369.4%) $ 72
Interest income for the period ended December 31, 1999 was attributable to interest earned on marketable securities and cash - ----------------------------- 14 15 equivalents from cash flow generated from operations including accounts receivable collections offset by premiums amortized for purchased marketable securities. The increase in other expense was primarily attributable to foreign currency translation losses for the quarter ended December 31, 1999. To date, the Company has not engaged in currency hedging transactions. PROVISION FOR INCOME TAXES The Company's effective tax rates were 34.5% and 35.0% for the three months ended December 31, 1999 and 1998, respectively. The Company anticipates that its fiscal 2000 effective tax rate will not exceed 36%. (1) LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1999, the Company had cash and cash equivalents and marketable securities of approximately $98.9 million and working capital of $97.5 million. The days sales outstanding were 96 days for the quarter ended December 31, 1999 compared to 92 days for the quarter ended December 31, 1998. The Company has established a target of 90 to 95 days for its quarterly days sales outstanding. (1) Cash provided by operations for the three months ended December 31, 1999 was $207 thousand, primarily attributable to net income and an increase in accounts payable, offset by an increase in receivables and accrued compensation for payment of employee bonuses for fiscal 1999 earnings. On January 11, 2000, the Company signed a definitive agreement to purchase INTERMAT, Inc., a leading provider of MRO content management tools and cataloging services. Under terms of the agreement, the Company will acquire the capital stock of INTERMAT from Strategic Distribution, Inc. (NASDAQ: STRD) for approximately $55.0 million in cash. Closing of the transaction is subject to customary conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The closing is expected to occur in the Company's second fiscal quarter of 2000 and will be accounted for as a purchase. Cash provided by investing activities totaled $1.5 million, primarily for the sales of marketable securities offset by purchases of marketable securities. Cash provided by financing activities was $2.2 million, from proceeds received from exercises of employee stock options. - -------------------- (1) Forward looking statement 15 16 As of December 31, 1999, the Company's principal commitment consisted primarily of an office lease for its headquarters. Under the terms of the lease agreement, upon termination of the lease the Company has the right to extend the lease for an additional six year term for an agreed upon fixed cost. The Company leases its facilities and certain equipment under non-cancelable operating lease agreements that expire at various dates through September 2006. The Company may use a portion of its cash to acquire additional businesses, products and technologies complementary to its business. (1) The Company also plans to make investments over the next year in its new MRO.com web-based products and to develop content and add suppliers to www.mro.com, MRO.com's e-Commerce hub. The Company believes that its current cash balances and marketable securities combined with cash flow from operations will be sufficient to meet its working capital and capital expenditure requirements through at least December 31, 2000. (1) YEAR 2000 The information contained under this heading constitutes a 'Year 2000 Readiness Disclosure' under the Year 2000 Information and Readiness Disclosure Act. The Year 2000 issue was the result of computer programs being written using two digits rather than four to define the applicable year. Certain computer programs that had a date sensitive software and used two digits only may have recognized a date using "00" as the year 1900 rather than the year 2000. The Company utilizes other third party software products, network equipment and telecommunications products. To date, there has been no failure of any critical technology components to operate properly in the Year 2000 causing an adverse impact on business operations or require the Company to incur unanticipated expenses to remedy any problems. Costs associated with preparing internal systems for the Year 2000 were approximately $100,000. The Company had evaluated its software products and disclosed its findings in prior quarters on Form 10-Q and its Form 10-K filed on December 29, 1999, as well as, the Company's year 2000 readiness documentation. Costs associated to upgrade all of its products to be year 2000 enabled were approximately $500,000. EURO COMPLIANCE On January 1, 1999, eleven European Union member states adopted the euro as their common national currency. Thereafter, until January 1, 2002, ("the transition period"), either the euro or a participating country's present currency will be accepted as legal tender. Beginning on January 1, 2002, euro-denominated bills and coins will be issued, and by July 1, 2002, only the euro will be used. A significant number of the Company's customers are located, or transact business with, or have operations in, participating European Union countries. As a result, the computer systems or software used by these companies may need to be upgraded to comply with data storage and computational euro requirements. In the first fiscal quarter of 1999, the Company released a new English language client/server version of MAXIMO (MAXIMO 4.0.1) that accepts, stores, calculates, converts and reports euro currency. In the second quarter of fiscal 1999, the Company released primary language versions of MAXIMO 4.0.1 in Brazilian Portuguese, Dutch, French, German, Latin American Spanish, and Swedish. The Company also released a new English language client/server version of MAXIMO (MAXIMO 4.0.2) for Workflow in the second quarter of fiscal 1999 that is euro compliant as defined above. In the third quarter of fiscal 1999, the Company released an English language version of MROBuyer's(TM) Desktop Requisition that is also euro compliant. The amount of development dollars spent on the euro releases did not and is not expected to have a material adverse effect on the Company's results of operations or financial condition. (1) - ----------------------------- (1) Forward looking statement 16 17 FACTORS AFFECTING FUTURE PERFORMANCE The nature of forward-looking information is that such information involves assumptions, risks and uncertainties. Certain public documents of the Company and oral statements made by authorized officers, directors, employees, agents and representatives of the Company, acting on its behalf, may include forward-looking information which will be influenced by the following and other assumptions, risks and uncertainties. Forward-looking information requires management of the Company to make assumptions, estimates, forecasts and projections regarding the Company's future results as well as the future effectiveness of the Company's strategic plans and future operational decisions. Forward-looking statements made by or on behalf of the Company are subject to the risk that the forecasts, projections, and expectations of management, or assumptions underlying such forecasts, projections and expectations, may become inaccurate. Accordingly, actual results and the Company's implementation of its plans and operations may differ materially from forward-looking statements made by or on behalf of the Company. The following discussion identifies certain important factors that could affect the Company's actual results and actions and could cause such results and actions to differ materially from any forward-looking statements made by or on behalf of the Company that related to such results and actions. Other factors, which are not identified herein, could also have such an effect. RAPID TECHNOLOGICAL CHANGE The computer software industry is characterized by rapid technological advances, changes in customer requirements and frequent product introductions and enhancements. The Company's success depends upon its ability to continue to enhance its current products and to develop and introduce new products that keep pace with technological developments, respond to evolving customer requirements and achieve market acceptance. In particular, the Company believes that it must continue to respond quickly to users' needs for broad functionality and to advances in hardware and operating systems. Any failure by the Company to anticipate or respond adequately to technological developments and customer requirements, or any significant delays in product development or introduction, could result in a loss of competitiveness and revenues. There can be no assurance that the Company will be successful in developing and marketing new products or product enhancements, or that the Company will not experience significant delays in developing such new products or product enhancements. Such delays could have a material adverse 17 18 effect on the Company's results of operations. In addition, there can be no assurance that new products and product enhancements developed by the Company will achieve market acceptance. DEPENDENCE ON MAXIMO The Company's revenues are primarily attributable to the licensing of its MAXIMO client/server product, introduced in 1991, and to related services and support. Revenues from licenses of MAXIMO and related services and support accounted for approximately 94% of the Company's total revenues in 1999. The Company's financial performance in 2000 depends largely on continued market acceptance of MAXIMO. The Company believes that continued market acceptance of MAXIMO will largely depend on its ability to enhance and broaden the capabilities of MAXIMO by among other things, developing additional application modules for MAXIMO, versions of MAXIMO and by developing and incorporating into the MAXIMO product technologies that are emerging in connection with the Internet. Any factor adversely affecting sales of MAXIMO, such as delays in development, significant software flaws, incompatibility with significant hardware platforms, operating systems or databases, increased competition or negative evaluations of MAXIMO, would have a material adverse effect on the Company's business and financial results. NEW PRODUCTS; NEW MARKETS In the second quarter of fiscal 1999, the Company formed a new wholly-owned subsidiary, MRO.com, Inc. MRO.com, Inc. links an on-line community of MRO suppliers and buyers to a group of Internet-based procurement products. There can be no assurance that the Company's MRO products will be sold successfully in the business-to-business electronic commerce market or that the Company's MRO products will achieve market acceptance. There is also no assurance that the Company can create a large enough community of sellers and buyers. The Company's future success in the electronic commerce market may depend on its ability to accurately determine the functionality and features required by its customers, as well as the ability to enhance its MRO products and deliver them in a timely manner. The Internet procurement market is a nascent market that may undergo rapid technological change. The Company cannot predict the present and future size of the potential market for its MRO products and services. The Company may incur substantial costs to enhance and modify its MRO products and services in order to meet the demands of this growing and changing market. The Company's MRO product segment is not yet profitable and may not be profitable for sometime, if ever. 18 19 FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY The Company has experienced, and may in the future experience, significant period-to-period fluctuations in revenues and operating results. The Company's revenues and income from operations typically grow at a lower rate or decline in the first quarter of each fiscal year, compared to the fourth quarter of the preceding fiscal year. In addition, revenues are typically higher in the fourth quarter than in other quarters of the year. The Company believes that these quarterly patterns are partly attributable to the Company's sales commission policies, which compensate members of the Company's direct sales force for meeting or exceeding annual quotas. In addition, the Company's quarterly revenues and operating results have fluctuated historically due to the number and timing of product introductions and enhancements, the budgeting and purchasing cycles of customers, the timing of product shipments and the timing of marketing and product development expenditures. The Company typically realizes a significant portion of its revenue from sales of software licenses in the last two weeks of a quarter, frequently even in the last days of a quarter. Large software license contracts may have a significant impact on revenues for any quarter and could, therefore, result in significant fluctuations in quarterly revenues and operating results. Accordingly, the Company believes that period-to-period comparisons of its results of operations are not necessarily meaningful and should not be relied upon as an indication of future performance. The Company generally ships its products upon receipt of orders and maintains no significant product backlog. As a result, revenues from license fees in any quarter are substantially dependent on orders booked and shipped in that quarter. A delay in or loss of orders can cause significant variations in operating results. A significant portion of the Company's operating expenses are fixed in the short term, and planned expenditures are based primarily on sales forecasts. Accordingly, if revenues do not meet the Company's expectations in any given quarter, operating results may be materially adversely affected. COMPETITION The market for applications software is intensely competitive and rapidly changing. While the Company believes that it has competed effectively to date, competition in its industry is likely to intensify as current competitors expand their product lines and new companies enter the market. To remain successful in the future, the Company must respond promptly and effectively to the challenges of technological change, evolving standards and its competitors' innovations by continually enhancing its own products, services and support offerings, as well as its 19 20 marketing programs. There can be no assurance that the Company will continue to be able to compete successfully in the future. The market for asset maintenance software is fragmented by geography, by hardware platform and by industry orientation, and is characterized by a large number of competitors including both independent software vendors and certain enterprise resource planning vendors. Independent software vendors include Datastream, Inc. and Indus Group. MAXIMO also competes with integrated enterprise resource planning systems which are provided by several large vendors, such as SAP and JD Edwards and others, and which include maintenance modules. Currently, the Company's client/server versions of MAXIMO compete with products of a number of large vendors some of which have traditionally provided maintenance software running on mainframes and minicomputers and are now offering systems for use in the client/server environment. MAXIMO also encounters competition from vendors of low cost maintenance management systems designed initially for use by a single user or limited number of users as vendors of these products upgrade their functionality to enter the client/server market. The Company's MRO supply chain management business using the Internet has many diverse competitors offering a wide range of differing products, services and technologies. The Company expects competition to intensify as current competitors expand their product offerings and new competitors enter the market. In addition, the market for electronic procurement solutions is relatively new and underdeveloped. While the Company believes that electronic commerce products and technologies complement the Company's existing products, there can be no assurance that the Company will be able to compete successfully in this market. Many of the Company's enterprise asset management competitors are also entering the MRO e-commerce market. The current potential competitors in the MRO e-commerce market include Ariba, Clarus, Commerce One, Concur, Connect, Harbinger, IBM, Intellisys, Microsoft, Netscape, Oracle, PeopleSoft, SAP and others. Certain of the Company's competitors have greater financial, marketing, service and support and technological resources than the Company. To the extent that such competitors increase their focus on the asset maintenance or planning and cost systems markets, or on the supply chain management business, the Company could be at a competitive disadvantage. INTERNATIONAL OPERATIONS A significant portion of the Company's total revenues are derived from operations outside the United States. The Company derived 46.4%, 45.7%, and 43.8% of its total revenue from sales outside the United States in fiscal years 1999, 1998, and 1997, respectively. The Company expects that international revenues will continue to be a significant percentage of total revenues. The Company expects international revenues to continue to grow in 20 21 absolute dollars during 2000, and accordingly, continues to invest in international infrastructure, global product functionality and translated versions of financial and other software products. In the event international expansion and/or product globalization efforts are not successful, the Company's business operating results and financial condition may be adversely affected. This international business is subject to various risks common to international activities, including exposure to currency fluctuations, greater difficulty in collecting accounts receivable, political and economic instability, the greater difficulty of administering business abroad and the need to comply with a wide variety of foreign import and United States export laws and regulatory requirements. A significant portion of the Company's total revenue is derived from international operations that are conducted in foreign currencies. Changes in the values of these foreign currencies relative to the United States dollar have in the past adversely affected, and may in the future affect, the Company's results of operations and financial position. Gains and losses on translation to United States dollars and settlement of receivables from international subsidiaries may contribute to fluctuations in the Company's results of operations. To date, the Company has not engaged in currency hedging transactions. The Company may in the future undertake currency hedging, although there can be no assurance that hedging transactions, if entered into, would materially reduce the effects of fluctuations in foreign currency exchange rates on the Company's results of operations. DEPENDENCE ON THIRD PARTIES The client/server versions of MAXIMO operate with the Oracle, SQLServer, and SQLBase database management systems. Introduction and increased market acceptance of database management systems with which the Company's products do not operate could adversely affect the market for the Company's products. The Company has entered into nonexclusive license agreements with, among others, Broadvision Incorporated, Centura Software Corporation, Scribe Technologies, Incorporated, Cognos Corporation, Netronic Software GmbH, HSB Reliability Technologies Corporation, Intelligent Labeling Technologies, Incorporated, Verity Software, and webMethods, Inc. pursuant to which the Company incorporates into its products software providing certain application development, user interface, business intelligence, content and graphics capabilities developed by these companies. If the Company were unable to renew these licenses, or if any of such vendors were to become unable to support and enhance its products, the Company could be required to devote additional resources to the enhancement and support of these products or to acquire or develop software providing equivalent capabilities, which could cause delays in 21 22 the development and introduction of products incorporating such capabilities. The MRO.com business operations are dependent on third party data centers, which could be destroyed or damaged. MRO operations are dependent upon the ability to protect computer equipment and the information stored in these third party data centers against damage that may be caused by natural disasters, fire, power loss, telecommunication or Internet failures, unauthorized intrusions, computer viruses and other similar damaging events. The Company cannot assure that any of these damaging events would not result in a prolonged outage of the Company's network services or that the Company would not experience a reduction of revenues, which could have a material adverse effect on our business and financial results. PRODUCT DEVELOPMENT: INTERNET The Company has developed a Java-based component architect software application to incorporate into the MAXIMO product technologies emerging in conjunction with the Internet. Internet technologies and applications generally are developing and gaining acceptance rapidly in the market. MRO supply chain management using electronic commerce is a nascent market with many standards and technologies remaining to be developed. Accordingly, developing technologies pose risks to the Company. The Company believes that electronic commerce products and technologies complement the Company's enterprise asset management products. There can be no assurance that the Company will successfully anticipate trends in this market, that the Company will be successful in Internet technology development or acquisition efforts or that the Company's Internet applications, if developed, will achieve market acceptance. INTERNET If Internet usage continues to grow rapidly, its infrastructure may not be able to support customer and user demands and its performance and reliability may decline. If outages or delays on the Internet occur frequently or increase in frequency, overall Internet usage including usage of the Company's products and services could grow more slowly or decline. The Company is dependent upon improvements being made to the entire Internet as well as to particular customers' networking infrastructures to alleviate overloading and congestion. If these improvements are not made, the ability of the Company's customers to utilize the Company's solution will be hindered, and the Company's business, operating results and financial condition may suffer. LIMITED INTELLECTUAL PROPERTY PROTECTION The Company's success is dependent upon proprietary technology. The Company currently has no patents and protects its technology primarily through copyrights, trademarks, trade secrets and 22 23 employee and third party nondisclosure agreements. The Company's software products are sometimes licensed to customers under "shrink wrap" licenses included as part of the product packaging. Although, in larger sales, the Company's shrink-wrap licenses may be accompanied by specifically negotiated agreements signed by the licensee, in many cases its shrink-wrap licenses are not negotiated with or signed by individual licensees. Certain provisions of the Company's shrink-wrap licenses, including provisions protecting against unauthorized use, copying, transfer and disclosure of the licensed program, may be unenforceable under the laws of certain jurisdictions. In addition, the laws of some foreign countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States. There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to prevent misappropriation of its technology or development by others of similar technology. Although the Company believes that its products and technology do not infringe on any existing proprietary rights of others, there can be no assurance that third parties will not assert infringement claims in the future. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could potentially have a material adverse result on our operating results and financial condition. GENERAL ECONOMIC RISK FACTORS To date, inflation has not had a material impact on the Company's financial results. There can be no assurance, however, that inflation will not adversely affect the Company's financial results in the future. DEPENDENCE ON KEY PERSONNEL The Company is highly dependent on certain key executive officers and technical employees, the loss of one or more of whom could have an adverse impact on the future operations of the Company. The Company does not have employment contracts with, and does not maintain key person life insurance policies on, any personnel. The Company continues to hire a significant number of additional sales, services and technical personnel. Competition for hiring of such personnel in the software industry is intense, and the Company from time to time experiences difficulty in locating candidates with the appropriate qualifications within the desired geographic locations, or with certain industry specific domain expertise. It is widely believed that the technology industry is at or beyond a condition of full employment. There can be no assurance that the Company will be able to retain its existing personnel or attract additional qualified employees. 23 24 CERTAIN RISKS ASSOCIATED WITH ACQUISITIONS As part of its overall strategy, the Company plans to continue to acquire or invest in complementary companies, products, or technologies and to enter into joint ventures and strategic alliances with other companies. There can be no assurance that the Company will be successful in overcoming the risks associated or problems encountered in connection with such business combinations, investments, or joint ventures, or that such transactions will not materially adversely affect the Company's business, financial condition, or operating results. POSSIBLE CONTINUED VOLATILITY OF STOCK PRICE Fiscal 1999 was marked by significant fluctuations in the market price of the common stock, par value $.01 per share, of the Company (the "Common Stock"). Factors such as announcements of technological innovations or new products by the Company, its competitors and other third parties, as well as quarterly variations in the Company's results of operations and market conditions in the industry, may cause the market price of the Common Stock to continue to fluctuate significantly. In addition, the stock market in general has recently experienced substantial price and volume fluctuations, which have particularly affected the market prices of many software and e-commerce companies and which have often been unrelated to the operating performance of such companies. These broad market fluctuations also may adversely affect the market price of the common stock. The information contained under this heading constitutes a 'Year 2000 Readiness Disclosure' under the Year 2000 Information and Readiness Disclosure Act. The Year 2000 issue was the result of computer programs being written using two digits rather than four to define the applicable year. Certain computer programs that had a date sensitive software and used two digits only may have recognized a date using "00" as the year 1900 rather than the year 2000. The Company utilizes other third party software products, network equipment and telecommunications products. To date, there has been no failure of any critical technology components to operate properly in the Year 2000 causing an adverse impact on business operations or require the Company to incur unanticipated expenses to remedy any problems. Costs associated with preparing internal systems for the Year 2000 were approximately $100,000. The Company had evaluated its software products and disclosed its findings in prior quarters on Form 10-Q and its Form 10-K filed on December 29, 1999, as well as, the Company's year 2000 readiness documentation. Costs associated to upgrade all of its products to be year 2000 enabled were approximately $500,000. LITIGATION RISKS The Company is subject to the normal risks of litigation with respect to its business operation. YEAR 2000 EURO COMPLIANCE On January 1, 1999, eleven European Union member states adopted the euro as their common national currency. Thereafter, until January 1, 2002, the transition period, either the euro or a participating country's present currency will be accepted as legal tender. Beginning on January 1, 2002, euro-denominated bills and coins will be issued, and by July 1, 2002, only the euro will be used. A significant number of the Company's customers are located, or transact business with, or have operations in participating European Union countries. As a result, the computer systems or software used by these companies may need to be upgraded to comply with data storage and computational euro requirements. In the first fiscal quarter of 1999, the Company released a new English language client/server version of MAXIMO (MAXIMO 4.0.1) that accepts, stores, calculates, converts and reports euro currency. In the second quarter of fiscal 1999, the Company released primary language 24 25 versions of MAXIMO 4.0.1 in Brazilian Portuguese, Dutch, French, German, Latin American Spanish, and Swedish. The Company also released a new English language client/server version of MAXIMO (MAXIMO 4.0.2) for Workflow in the second quarter of fiscal 1999 that is euro compliant as defined above. In the third quarter of fiscal 1999, the Company released an English language version of MROBuyer's(TM) Desktop Requisition that is also euro compliant. The amount of development dollars spent on the euro releases did not and does not expect to have a material adverse effect on the Company's results of operations or financial condition. NO REVISIONS OR UPDATES TO FORWARD-LOOKING STATEMENTS The Company has no obligation to release publicly any revision or update to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 25 26 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary exposures to market risk are the effect of fluctuations in interest rates earned on its cash equivalents and marketable securities. At December 31, 1999, the Company held $98.9 million in cash equivalents and marketable securities consisting of taxable and tax exempt municipal securities. Cash equivalents are classified as available for sale and valued at amortized cost, which approximates fair market value. A hypothetical 10 percent increase in interest rates would not have a material impact on the fair market value of these instruments due to their short maturity and the Company's intention that all the securities will be sold within one year. 26 27 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company held a Special Shareholders meeting on December 15, 1999 to approve the amendment of the Company's Restated Articles of Organization to increase the Company's Common Stock from 15,350,000 to 50,000,000 shares.
Number of Shares Voted Pre-split --------- For Approval 8,109,597 Against 1,031,874 Abstain 3,255
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Amended and Restated Articles of Organization of the Company (included as Exhibit 3.3 to the Company's Registration Statement on Form S-1, Registration No.376420, and incorporated herein by reference) 3.2 Restated By-Laws of the Company, as amended (included as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996, File No. 0-23852 and incorporated herein by reference) 3.3 Form of Certificate of Designation of Series A Junior Participating Preferred Stock of Project Software & Development, Inc. (which is attached as Exhibit A to the Rights Agreement included as Exhibit 4(b) to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 0-23852, and incorporated herein by reference) 3.4 Amendment to Articles of Organization adopted on December 15, 1999. 4. Instruments defining the Rights of Security Holders, Including Indentures 4.1 Specimen certificate for the Common Stock of the Company (included as Exhibit 4.1 to the Company's Registration Statement on Form S-1, Registration No. 33-76420, and incorporated herein by reference) 27 28 4.2 Article 4B of the Amended and Restated Articles of Organization of the Company (included as Exhibit 4.1 to the Company's Registration Statement on Form S-1, Registration No. 33-76420, and incorporated herein by reference) 4.3 Rights Agreement dated as of January 27, 1998, between Project Software & Development, Inc. and BankBoston, N.A. as Rights Agent (included as Exhibit 4 (a) to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 0-23852, and incorporated herein by reference) 4.4 Form of Certificate of Designation of Series A Junior Participating Preferred Stock of Project Software & Development, Inc. (included as Exhibit 4 (b) to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 0-23852, and incorporated herein by reference) 4.5 Form of Rights Certificate (included as Exhibit 4 (c) to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 0-23852, and incorporated herein by reference) 27. Financial Data Schedule 27.1 Financial Data Schedule (b) Reports on Form 8-K There were no current reports filed on Form 8-K for the three months ended December 31, 1999. 28 29 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. PROJECT SOFTWARE & DEVELOPMENT, INC. Date: February 14, 2000 By: /s/ Paul D. Birch ----------------- ----------------- Paul D. Birch Authorized Officer Executive Vice President Finance & Administration, Chief Financial Officer and Treasurer (Principal Financial Officer) 29 30 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - --- ----------- ---- 3.1 Amended and Restated Articles of Organization of the Company (included as Exhibit 3.3 to the Company's Registration Statement on Form S-1, Registration No. 33-76420, and incorporated herein by reference) 3.2 Restated By-Laws of the Company, as amended (included as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996 File No. 0-23852 and incorporated herein by reference) 3.3 Form of Certificate of Designation of Series A Junior Participating Preferred Stock of Project Software & Development, Inc. (which is attached as Exhibit A to the Rights Agreement included as Exhibit 4 (b) to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 0-23852, and incorporated herein by reference) 3.4 Amendment to Articles of Organization adopted on December 15, 1999 4.1 Specimen certificate for the Common Stock of the Company (included as Exhibit 4.1 to the Company's Registration Statement on Form S-1, Registration No. 33-76420, and incorporated herein by reference) 4.2 Article 4B of the Amended and Restated Articles of Organization of the Company (included as Exhibit 4.1 to the Company's Registration Statement on Form S-1, Registration No. 33-76420, and incorporated herein by reference) 4.3 Rights Agreement dated as of January 27, 1998, between Project Software & Development, Inc. and BankBoston, N.A. as Rights Agent (included as Exhibit 4 (a) to the Company's Current Report on Form 8-K dated February 2, 1998, File No.0-23852, and incorporated herein by reference) 4.4 Form of Certificate of Designation of Series A Junior Participating Preferred Stock of Project Software & Development, Inc. (included as Exhibit 4 (b) to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 0-23852, and incorporated herein by reference) 4.5 Form of Rights Certificate (included as Exhibit 4 (c) to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 0-23852, and incorporated herein by reference) 27.1 Financial Data Schedule
EX-3.4 2 ARTICLES OF AMENDMENTS 1 Exhibit 3.4 FEDERAL IDENTIFICATION No. 04-2448516 ------------------ THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF AMENDMENT (GENERAL LAWS, CHAPTER 156B, SECTION 72) We, Norman E. Drapeau, Jr. *President ---------------------------------------------------------------, and Paul D. Birch *Clerk -------------------------------------------------------------------, of Project Software & Development, Inc. ---------------------------------------------------------------------------, (Exact name of corporation) located at 100 Crosby Drive, Bedford, MA 01730 -------------------------------------------------------------------, (Street address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered: Article III - -------------------------------------------------------------------------------- (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the Articles of the Organization were duly adopted at a meeting held on December 15, 1999, by vote of: - ----------- -- 8,109,597 shares of Common Stock of 10,650,906 shares outstanding, - --------- -------------------------- ---------- (type, class & series, if any) shares of of shares outstanding, - --------- -------------------------- ---------- (type, class & series, if any) shares of of shares outstanding, - --------- -------------------------- ---------- (type, class & series, if any) (1)** being at least a majority of each type, class or series outstanding and entitled to vote thereon: * Delete the inapplicable words. ** Delete the inapplicable clause. (1) For amendments adopted pursuant to Chapter 156B, Section 70. (2) For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on one side only of a separate 8 1/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a single sheet so long as each article requiring each addition is clearly indicated. 2 To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is:
- ------------------------------------------------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------------------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------------------------------------------------------------------------------------------- Common: Common: 15,350,000 $.01 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Preferred: Preferred: 1,000,000 $.01 - ------------------------------------------------------------------------------------------------------- Series A Junior Participating Preferred Stock - 16,000; Undesignated - 984,000 - -------------------------------------------------------------------------------------------------------
Change the total authorized to:
- ------------------------------------------------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------------------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------------------------------------------------------------------------------------------- Common: Common: 50,000,000 $.01 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Preferred: Preferred: 1,000,000 $.01 - ------------------------------------------------------------------------------------------------------- Series A Junior Participating Preferred Stock - 16,000; Undesignated - 984,000 - -------------------------------------------------------------------------------------------------------
3 Voted: To amend the Company's Restated Articles of Organization to increase the authorized Common Stock, par value $.01 per share, from 15,350,000 to 50,000,000 shares. The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date: _____________________________ . SIGNED UNDER THE PENALTIES OF PERJURY, this 15th day of December 1999 ---- ------------- , ---- , /s/ Norman E. Drapeau, Jr. *President - ------------------------------------------------------------------- , /s/ Paul D. Birch *Clerk - -----------------------------------------------------------------------, * Delete the inapplicable words. 4 THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (GENERAL LAWS, CHAPTER 156B, SECTION 72) ================================================================================ I hereby approve the within Articles of Amendment and, the filing fee in the amount of $ _________ having been paid, said articles deemed to have been filed with me this ______ day of ____________ 19 _____ . Effective date: _______________________________ WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION PHOTOCOPY OF DOCUMENT TO BE SENT TO: Jeffrey D. Collins, Esq. ------------------------------------------------ Foley, Hoag & Eliot LLP, One Post Office Square ------------------------------------------------ Boston, MA 02109 ------------------------------------------------ (617) 832-1265 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS SEP-30-2000 OCT-01-1999 DEC-31-1999 1 63,580 26,114 43,238 2,838 0 138,601 25,414 13,193 164,157 41,090 0 0 0 216 122,625 164,157 15,737 37,986 659 13,187 21,580 115 1 3,961 1,365 3,219 0 0 0 2,596 0.12 0.11
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