32
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997 Commission file number 1-0557
------------------ ------
POLICY MANAGEMENT SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0723125
--------------- ----------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
One PMSC Center (PO Box Ten)
Blythewood, SC (Columbia, SC) 29016 (29202)
- -------------------------------- --------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (803) 333-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
-------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
18,331,102 Common shares, $.01 par value, as of November 7, 1997
The information furnished herein reflects all adjustments which are, in
the opinion of management, necessary for the fair presentation of the results
for the periods reported. Such information should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
POLICY MANAGEMENT SYSTEMS CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Income for the Three and Nine Months ended September 30, 1997 and 1996 3
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996. . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1997 and 1996 . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
PART I
FINANCIAL INFORMATION
POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
(Unaudited)
- -------------------------------------------------------------------------------
(In Thousands, Except Per Share Data)
Revenues
Licensing . . . . . . . . . . . . . $ 33,375 $ 24,186 $ 91,900 $ 74,320
Services. . . . . . . . . . . . . . 130,692 122,812 392,223 343,193
--------- --------- --------- ---------
164,067 146,998 484,123 417,513
--------- --------- --------- ---------
Operating expenses
Cost of revenues
Employee compensation & benefits . 60,163 47,192 167,179 131,523
Computer and communications
expenses. . . . . . . . . . . . . 8,737 7,967 26,052 24,038
Information services and
data acquisition costs. . . . . . 22,925 29,981 84,389 87,890
Depreciation and amortization of
property, equipment and
capitalized software costs. . . . 14,882 12,539 43,297 35,512
Other costs & expenses 9,115 13,669 31,952 29,419
Selling, general and administrative
expenses. . . . . . . . . . . . . 24,227 17,738 67,508 52,329
Amortization of goodwill and
other intangibles . . . . . . . . 2,588 2,616 7,918 7,777
Litigation settlement . . . . . . . - - - (9,422)
--------- --------- --------- ---------
142,637 131,702 428,295 359,066
--------- --------- --------- ---------
Operating income . . . . . . . . . . 21,430 15,296 55,828 58,447
Equity in earnings of
unconsolidated affiliate. . . . . 274 - 964 -
Other Income and Expenses
Investment income. . . . . . . . . 372 376 1,143 1,898
Interest expense and other
charges . . . . . . . . . . . . . (1,378) (1,475) (3,951) (3,544)
--------- --------- --------- ---------
(1,006) (1,099) (2,808) (1,646)
--------- --------- --------- ---------
Income before income taxes . . . . . 20,698 14,197 53,984 56,801
Income taxes . . . . . . . . . . . . 7,760 5,190 20,261 20,363
--------- --------- --------- ---------
Net income . . . . . . . . . . . . . $ 12,938 $ 9,007 $ 33,723 $ 36,438
========= ========= ========= =========
Net income per share . . . . . . . . $ .71 $ .50 $ 1.85 $ 1.94
========= ========= ========= =========
Weighted average number of shares. . 18,230 18,179 18,199 18,747
<FN>
See accompanying notes
POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
September 30, December 31,
1997 1996
- -------------------------------------------------------------------------
(In Thousands, Except Share Data)
Assets
Current assets
Cash and equivalents . . . . . . . . . . . . . . $ 18,639 $ 22,121
Marketable securities. . . . . . . . . . . . . . 3,006 2,234
Receivables, net of allowance for uncollectible
amounts of $1,057 ($883 at 1996). . . . . . . . 139,115 116,113
Income tax receivable. . . . . . . . . . . . . . 1,439 1,383
Deferred income taxes. . . . . . . . . . . . . . 15,281 15,343
Other. . . . . . . . . . . . . . . . . . . . . . 16,684 15,840
--------- --------
Total current assets . . . . . . . . . . . . . 194,164 173,034
Property and equipment, at cost less accumulated
depreciation and amortization of $134,375
($122,462 at 1996) . . . . . . . . . . . . . . . 114,357 115,757
Receivables . . . . . . . . . . . . . . . . . . . 3,481 4,866
Income tax receivable . . . . . . . . . . . . . . 4,041 4,041
Goodwill and other intangibles, net . . . . . . . 71,703 83,363
Capitalized software costs, net . . . . . . . . . 197,412 177,875
Deferred income taxes . . . . . . . . . . . . . . 803 1,560
Investments . . . . . . . . . . . . . . . . . . . 6,211 6,483
Other . . . . . . . . . . . . . . . . . . . . . . 2,001 5,239
--------- --------
Total assets . . . . . . . . . . . . . . . . $594,173 $572,218
========= ========
Liabilities
Current liabilities
Accounts payable and accrued expenses. . . . . . $ 49,690 $ 61,435
Accrued restructuring charges. . . . . . . . . . 164 2,478
Accrued contract termination costs . . . . . . . 845 407
Current portion of long-term debt. . . . . . . . 1,941 31,222
Income taxes payable . . . . . . . . . . . . . . 12,477 6,623
Unearned revenues. . . . . . . . . . . . . . . . 8,478 9,840
Other. . . . . . . . . . . . . . . . . . . . . . 396 631
--------- --------
Total current liabilities. . . . . . . . . . . 73,991 112,636
Long-term debt. . . . . . . . . . . . . . . . . . 55,985 34,268
Deferred income taxes . . . . . . . . . . . . . . 64,650 58,370
Accrued restructuring charges . . . . . . . . . . 1,299 1,340
Other . . . . . . . . . . . . . . . . . . . . . . 3,128 2,352
--------- --------
Total liabilities . . . . . . . . . . . . . . 199,053 208,966
--------- --------
Commitments and contingencies (Note 1)
Stockholders' Equity
Special stock, $.01 par value, 5,000,000 shares
authorized . . . . . . . . . . . . . . . . . . . - -
Common stock, $.01 par value, 75,000,000 shares
authorized, 18,269,339 shares issued and
outstanding (18,179,186 at December 31, 1996). . 183 182
Additional paid-in capital. . . . . . . . . . . . 110,036 106,104
Retained earnings . . . . . . . . . . . . . . . . 289,833 256,110
Foreign currency translation adjustment . . . . . (4,932) 856
--------- --------
Total stockholders' equity. . . . . . . . . . 395,120 363,252
--------- --------
Total liabilities and stockholders' equity . $594,173 $572,218
========= ========
<FN>
See accompanying notes
POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended September 30,
1997 1996
- ----------------------------------------------------------------------
(In Thousands)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . $ 33,723 $ 36,438
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization. . . . . . . . 53,694 45,507
Deferred income taxes. . . . . . . . . . . . 7,059 6,342
Provision for uncollectible accounts . . . . 1,763 456
Impairment and restructuring charges . . . . 444 -
Changes in assets and liabilities:
Accrued restructuring and lease
termination costs . . . . . . . . . . . . . ( 2,355) ( 8,080)
Receivables. . . . . . . . . . . . . . . . . ( 23,380) ( 4,742)
Income taxes receivable. . . . . . . . . . . ( 56) 10,181
Accounts payable and accrued expenses. . . . ( 12,077) ( 21,421)
Income taxes payable . . . . . . . . . . . . 5,854 6,561
Other, net . . . . . . . . . . . . . . . . . . ( 943) ( 2,001)
---------- ----------
Cash provided by operations . . . . . . . 63,726 69,241
---------- ----------
Investing Activities
Proceeds from sales/maturities of marketable
securities. . . . . . . . . . . . . . . . . . 250 2,850
Investment in unconsolidated affiliate . . . . - ( 2,315)
Acquisition of property and equipment. . . . . ( 22,430) ( 20,676)
Capitalized internal software development
costs . . . . . . . . . . . . . . . . . . . . ( 46,809) ( 41,953)
Proceeds from sale of business unit. . . . . . 2,900 -
Purchased software . . . . . . . . . . . . . . - ( 1,192)
Business acquisition . . . . . . . . . . . . . - ( 6,777)
Proceeds from disposal of property and
equipment . . . . . . . . . . . . . . . . . . 1,183 747
---------- ----------
Cash used by investing activities . . . . ( 64,906) ( 69,316)
---------- ----------
Financing Activities
Payments on long-term debt . . . . . . . . . . (120,597) (138,693)
Repurchase of common stock . . . . . . . . . . - ( 73,603)
Proceeds from borrowing under credit facility. 113,033 179,550
Issuance of common stock under stock
option plans. . . . . . . . . . . . . . . . . 3,933 6,283
---------- ----------
Cash used by financing activities . . . . ( 3,631) ( 26,463)
---------- ----------
Effect of exchange rate changes on cash . . . . 1,329 ( 526)
Net decrease in cash and
equivalents. . . . . . . . . . . . . . . . . . ( 3,482) (27,064)
Cash and equivalents at beginning of period . . 22,121 35,094
---------- ----------
Cash and equivalents at end of period . . . . . $ 18,639 $ 8,030
========== ==========
Supplemental Information
Interest paid. . . . . . . . . . . . . . . . . $ 3,636 $ 1,116
Income taxes paid (refunded) . . . . . . . . . 5,471 ( 3,425)
<FN>
See accompanying notes
POLICY MANAGEMENT SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1. CONTINGENCIES
In June 1993, the Securities and Exchange Commission ("SEC") commenced a
formal investigation into possible violations of the Federal securities laws
in connection with Policy Management Systems Corporation's ("Company") public
reports and financial statements, as well as trading in the Company's
securities.
On July 22, 1997, the Company announced a settlement with the SEC that
closed the investigation of the Company's 1990 to 1993 financial statements
and reports. The settlement became effective on July 22 simultaneously with
the filing of an SEC civil complaint in the U.S. District Court for the
District of South Carolina. In consenting to the settlement, the Company
neither admitted nor denied the SEC allegations of reporting, books and
records, and internal control violations. The key provisions of the settlement
are an injunction requiring future compliance with the federal securities
laws, payment by the Company of a $1 million civil penalty and payments by
five current and former officers of $20,000 civil penalties.
In March 1994, Security Life of Denver Insurance Company ("SLD") brought
suit against the Company in the United States District Court for the District
of Colorado alleging breach of a life insurance joint development contract,
unfair trade practices, and fraud. SLD sought direct, indirect, consequential,
and punitive damages in excess of $80 million. In February 1997, following a
jury trial, the Court and jury entered judgments in favor of the Company
against SLD on the claims of fraud and unfair trade practices. A verdict and
judgment was returned against the Company for breach of contract and damages
of $3.5 million, together with pre-judgment interest. In addition, the jury
found that SLD was using the Company's trade secrets without permission. As a
result of post trial motions, the judgment was amended to delete the award of
pre-judgment interest and SLD was ordered to return the Company's systems.
Both the Company and SLD have appealed to the United States Court of Appeals.
Changes in the status of this proceeding could result in a change in the
Company's estimate of anticipated liability for the costs associated with
these matters.
The Company is also presently involved in litigation which commenced in
January of 1996 in the Circuit Court in Greenville County, South Carolina,
with Liberty Life Insurance Company and certain of its affiliates ("Liberty")
arising out of the parties' prior contractual relationship related to the
development and licensing of Series III life insurance systems and the
subsequent licensing of the Company's Cybertek life insurance systems.
Liberty's complaint alleges breach of contract, breach of express and implied
warranties, fraudulent inducement, breach of contract accompanied by a
fraudulent act, and recission. Liberty has alleged actual and consequential
damages of approximately $30 million and also seeks treble and punitive
damages. The Company has asserted various affirmative defenses and is pursuing
counterclaims against Liberty for breach of contract, recoupment, breach of
good faith and fair dealing, and breach of contract accompanied by a
fraudulent act. The Company is seeking equitable relief, including injunctive
relief, and currently unspecified actual, compensatory and consequential
damages.
Based upon the allegations raised in a prior lawsuit and the SLD lawsuit,
the Company's insurer, St. Paul Mercury Insurance Company ("St. Paul"),in June
1995 commenced a declaratory judgment action in the United States District
Court for the District of South Carolina against the Company to determine St.
Paul's obligation for defense costs and to indemnify the Company for any
payment related to these claims. The Company filed a counterclaim against St.
Paul seeking to recover the Company's defense costs in both matters, coverage
for damages, if any, awarded in those matters, and consequential and punitive
damages.
In connection with the dismissal of the prior lawsuit, St. Paul and the
Company agreed to dismiss with prejudice all claims against each other with
respect to the matter, and St. Paul agreed to reimburse the Company for the
Company's legal fees. The action continues as to the parties claims related to
insurance coverage for the SLD matter.
In addition to the litigation described above, there are also various
other litigation proceedings and claims arising in the ordinary course of
business. The Company believes it has meritorious defenses and is vigorously
defending these matters.
While the resolution of any of the above matters could have a material
adverse effect on the results of operations in future periods, the Company
does not expect these matters to have a material adverse effect on its
consolidated financial position. The Company, however, is unable to predict
the ultimate outcome or the potential financial impact of these matters.
NOTE 2. PREPARATION OF INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of Policy Management Systems
Corporation have been prepared in accordance with the rules and regulations of
the SEC. These consolidated financial statements include estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities and the amounts of revenues
and expenses. Actual results could differ from those estimated. In the
opinion of management, these statements include all adjustments necessary for
a fair presentation of the results of all interim periods reported herein. All
adjustments are of a normal recurring nature unless otherwise disclosed.
Certain information and footnote disclosures prepared in accordance with
generally accepted accounting principles have been either condensed or omitted
pursuant to SEC rules and regulations. However, management believes that the
disclosures made are adequate for a fair presentation of results of
operations, financial position and cash flows. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and accompanying notes included in the Company's latest annual
report on Form 10-K.
NOTE 3. NEW ACCOUNTING STANDARDS
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"), was issued. FAS 128 is designed to improve
the earnings per share information provided in financial statements by
simplifying the existing computational guidelines, revising the disclosure
requirements, and increasing the comparability of earnings per share data on
an international basis. FAS 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods and
earlier application is not permitted. The Company will adopt FAS 128 on its
effective date. Pro forma earnings per share of the Company computed using
FAS 128 is not different from earnings per share computed using existing
standards and guidelines.
In June 1997, Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" ("FAS 130") was issued. FAS 130 establishes
standards for reporting and display of comprehensive income and its
components. FAS 130 is effective for fiscal years beginning after December
15, 1997. The effect on the Company's financial statements will be immaterial.
The Company will adopt FAS 130 on its effective date.
In June 1997, Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131") was issued. FAS 131 is designed to improve the information provided in
financial statements about the different types of business activities in which
the enterprise engages and economic environments in which the enterprise
operates. FAS 131 is effective for fiscal years beginning after December 15,
1997. Earlier application is encouraged. The Company does not believe the
adoption of FAS 131 will have a material impact on its financial statements.
NOTE 4. RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to current
year presentation.
POLICY MANAGEMENT SYSTEMS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto contained in Part I of this report on Form 10-Q
and with the Company's Annual Report on Form 10-K for the year ended December
31, 1996.
RESULTS OF OPERATIONS
Set forth below are certain operating items expressed as a percentage of
revenues and the percent increase (decrease) for those items between the
periods presented:
1997 vs. 1996
Percent
Percentage of Revenues Increase (Decrease)
------------------------------ ------------------
Three Nine Three Nine
Months Ended Months Ended Months Months
September 30, September 30, Ended Ended
-------------- --------------
1997 1996 1997 1996 September 30
------ ------ ------ ------ ------------------
Revenues
Licensing . . . . . . . . . . . . . 20.3% 16.4% 18.9% 17.8% 38.0% 23.7%
Services. . . . . . . . . . . . . . 79.7 83.6 81.1 82.2 6.4 14.3
------ ------ ------ ------
100.0 100.0 100.0 100.0 11.6 16.0
Operating expenses
Cost of revenues
Employee compensation and benefits 36.7 32.1 34.5 31.5 27.5 27.1
Computer & communication expenses. 5.3 5.4 5.4 5.8 9.7 8.4
Information services & data
acquisition costs . . . . . . . . 14.0 20.4 17.4 21.1 (23.5) (4.0)
Depreciation & amortization
of property, equipment &
capitalized software costs. . . . 9.1 8.5 8.9 8.5 18.7 21.9
Other costs & expenses . . . . . . 5.5 9.3 6.7 7.0 (33.3) 8.6
Selling, general &
administrative expenses . . . . . 14.8 12.1 13.9 12.5 36.6 29.0
Amortization of goodwill and
other intangibles . . . . . . . . 1.5 1.8 1.7 1.9 (1.1) 1.8
Litigation settlement and
expenses, net . . . . . . . . . . - - - (2.3) - -
------ ------ ------ ------
86.9 89.6 88.5 86.0 8.3 19.3
Operating income . . . . . . . . . . 13.1 10.4 11.5 14.0 40.1 (4.5)
Equity in earnings of unconsolidated
affiliate . . . . . . . . . . . . 0.1 - 0.2 - - -
Other income and expenses. . . . . . (0.6) (0.7) (0.6) (0.4) - -
------ ------ ------ ------
Income before income taxes . . . . . 12.6 9.7 11.1 13.6 45.8 (5.0)
Income taxes . . . . . . . . . . . . 4.7 3.5 4.2 4.9 49.5 (0.5)
------ ------ ------ ------
Net income . . . . . . . . . . . . . 7.9% 6.2% 6.9% 8.7% 43.6% (7.5)%
====== ====== ====== ======
THREE MONTHS COMPARISON
Comparisons of revenues, operating income and margins for each business
unit for the periods presented are as follows:
Three Months
Ended September 30,
REVENUES 1997 1996 Change
- --------------------------------------------------------------------
(Dollars in Millions)
Enterprise Software and Services
Property & Casualty $ 63.2 $ 53.6 17.9%
Life . . . . . . . . . . . . . . . . . . 28.5 20.5 39.3
Information Services
Property & Casualty 16.5 24.0 (31.4)
Life . . . . . . . . . . . . . . . . . . 14.0 14.2 ( 1.5)
------- ------- ------
Total U.S. revenues . . . . . . . . . . 122.2 112.3 8.8
International . . . . . . . . . . . . . . 41.9 34.7 20.7
------- ------- ------
Total revenues. . . . . . . . . . . . $164.1 $147.0 11.6%
========================================= ======= ======= ======
OPERATING INCOME
- --------------------------------------------------------------------
Enterprise Software and Services
Property & Casualty. . . . . . . . . . . $ 18.1 $ 13.6 33.0%
Life . . . . . . . . . . . . . . . . . . 5.7 5.6 2.6
Information Services
Property & Casualty. . . . . . . . . . . - 0.2 (89.8)
Life . . . . . . . . . . . . . . . . . . 0.6 0.7 (26.3
Corporate . . . . . . . . . . . . . . . . (7.1) (6.1) 16.2
------- ------- ------
Total U.S. operating income . . . . . . 17.3 14.0 23.5
International . . . . . . . . . . . . . . 4.1 1.3 220.5
------- ------- ------
Total operating income. . . . . . . . $ 21.4 $ 15.3 40.1%
========================================= ======= ======= ======
OPERATING INCOME AS PERCENTAGE OF REVENUE
- -------------------------------------------------------------------
Enterprise Software and Services
Property & Casualty. . . . . . . . . . . 28.6% 25.4%
Life . . . . . . . . . . . . . . . . . . 20.2 27.4
Information Services
Property & Casualty. . . . . . . . . . . 0.1 0.7
Life . . . . . . . . . . . . . . . . . . 4.0 5.3
------- -------
Total U.S . . . . . . . . . . . . . . . 14.2 12.5
International . . . . . . . . . . . . . . 9.9 3.7
------- -------
Total . . . . . . . . . . . . . . . . 13.1% 10.4%
========================================= ======= =======
REVENUES
Three Months
Ended September 30,
Licensing 1997 1996 Change
- ----------------------------------------------------------------
(Dollars in Millions)
Initial charges $ 16.9 $ 10.1 68.1%
Monthly charges 16.5 14.1 16.5
- ----------------------------------------------------------------
$ 33.4 $ 24.2 38.0%
================================================================
Percentage of total revenues 20.3% 16.4%
- ----------------------------------------------------------------
Initial license revenues increased $6.8 million from the third quarter of
1996 to the third quarter of 1997, with the following increases or decreases
by business unit: domestic property and casualty up 464.9% ($4.0 million);
life insurance and financial solutions down 16.0% ($0.9 million); and
international up 98.1% ($3.7 million).
Initial license charges for the third quarter of 1997 include
right-to-use licenses of $3.7 million. The right-to-use licenses represent
acquisitions by certain customers of perpetual rights in conjunction with
renewals of MESA by these customers. This compares to $2.1 million in
right-to-use licenses for the same period of 1996 arising from a customer
acquiring the perpetual rights in conjunction with its initial license of a
product.
Monthly license charges increased $2.4 million from the third quarter of
1996 to the third quarter of 1997 with the following increases by business
unit: domestic property and casualty up 4.6% ($0.4 million); life insurance
and financial solutions up 52.9% ($1.2 million); and international up 25.2%
($0.8 million). These increases are related to the increase in licensing
activity.
Property and casualty licensing revenues in the United States are being
impacted by various market factors. Prospective customers are expressing a
desire for a Windows NT version of Series III in a client server environment.
The Company believes the market priority is for personal lines functionality
in a Windows NT environment. The first release of Series III with Windows NT
functionality is currently scheduled to be available by year end. This
release will support most personal lines functionality with additional
personal lines and commercial lines functionality scheduled for subsequent
releases. The Company's operating results could be negatively impacted if the
Company experiences delays in delivering Windows NT to its customers.
Additionally, many insurance companies are spending significant amounts of
money to solve their year 2000 problems. To date, the Company does not
believe it has experienced a significant impact, positively or negatively,
from year 2000 issues and at this time is unable to predict what the future
impact, if any, will be.
Because a significant portion of initial licensing revenues are recorded at
the time new systems are licensed, there can be significant fluctuations in
revenue from quarter to quarter. Set forth below is a comparison of initial
license revenues for the last eight quarters expressed as a percentage of
total revenues for each of the periods presented:
1997 1996 1995
--------------------- -------------------------- ------
3rd 2nd 1st 4th 3rd 2nd 1st 4th
--------------------- -------------------------- ------
(Dollars in Millions)
Initial license revenues $16.9 $16.6 $11.3 $19.4 $10.1 $12.0 $10.4 $16.1
% of total revenues 10.3% 10.0% 7.3% 11.8% 6.9% 8.8% 7.8% 11.6%
Three Months
Ended September 30,
Services 1997 1996 Change
- -------------------------------------------------------------------
(Dollars In Millions)
Professional and outsourcing $ 97.8 $ 81.6 19.9%
Information 32.0 39.7 (19.3)
Other 0.9 1.5 40.4
- -------------------------------------------------------------------
$130.7 $122.8 6.4%
===================================================================
Percentage of total revenues 79.7% 83.6%
- -------------------------------------------------------------------
Professional and outsourcing services revenues increased $16.2 million
from the third quarter of 1996 to the third quarter of 1997, with the
following increases by business unit: domestic property and casualty up 14.5%
($6.1 million); life insurance and financial solutions up 68.8% ($7.7
million); and international up 8.6% ($2.4 million). The increases are
principally due to increases in implementation services and in the processing
volumes of services provided to new and existing customers. The increases
were partially offset by the elimination of approximately $3.9 million in pass
through revenue related to the Florida outsourcing unit.
Information services revenues decreased $7.7 million from the 1996 third
quarter to the 1997 third quarter. This decrease is due to the sale in August
1997 of the property and casualty information services business. Additionally,
there was a decrease of $0.2 million in life insurance information services,
principally comprised of attending physician statements and application
processing services.
OPERATING EXPENSES
Cost of Revenues
Employee compensation and benefits increased 27.5% for the third quarter
1997 compared with the third quarter of 1996, principally the result of
increased salaries and related costs associated with the growth in staffing in
all business units. Compensation and benefits increased 27.2% ($3.3 million)
internationally, while domestic increased 27.6% ($9.6 million).
Computer and communications expenses increased 9.7% ($0.8 million)
principally as a result of increased communications, data circuit and
maintenance costs associated with the growth of the Company's domestic and
international outsourcing operations.
Information services and data acquisition costs decreased 23.5%, due to
the sale in August 1997 of the property and casualty information services
business.
Depreciation and amortization of property, equipment and capitalized
software costs increased 18.7%. This increase is due principally to higher
amortization expense resulting from the recent release of the latest version
of CyberLife client/server life insurance software and the recent release of
the Company's Series III (Release 8) property and casualty insurance
client/server software systems. In addition, depreciation expense increased
due to the Company's increased investment in its information technology
equipment and expanded facilities costs.
Other operating costs and expenses decreased 33.3% primarily related to
the reduced pass through costs for the outsourcing unit in Florida.
Selling, general and administrative expenses
Selling, general and administrative expenses increased 36.6% for the
third quarter of 1997 compared with the third quarter of 1996, principally
from the Company's investment in its international sales force and
infrastructure.
Amortization of goodwill and other intangibles
Amortization of goodwill and other intangibles remains relatively
unchanged.
OPERATING INCOME
Third quarter 1997 operating income increased 40.1% ($6.1 million)
compared with the 1996 third quarter. Property and casualty insurance
operating income increased 33.0%, domestic life insurance operating income
increased 2.6% and international operating income increased 220.5%. The
increase in operating income is primarily related to increases in licensing
and professional services revenues.
OTHER INCOME AND EXPENSE
Interest expense remained relatively unchanged at $1.4 million. The
average nominal interest rate applicable to borrowings under the Company's
credit facilities during the third quarter of 1997 was 6.0%.
INCOME TAXES
The effective income tax rate (income taxes expressed as a percentage of
pre-tax income) was 37.5% and 36.6% for the three months ended September 30,
1997 and 1996, respectively. The effective rate for the third quarter of 1997
is higher than the federal statutory rate principally due to the effect of
state and local income taxes.
SALE OF BUSINESS UNIT
On August 31, 1997, the Company completed the sale of substantially all
of the assets of its property and casualty information services business for
cash proceeds of $2.9 million. The Company retained the working capital of
this business, approximately $14.3 million. This transaction produced a
non-recurring gain of $1.7 million. Also, during the third quarter of 1997,
the Company abandoned a related business. As a result, the Company recorded a
non-recurring charge of $1.8 million, principally related to capitalized
software.
NINE MONTHS COMPARISON
Comparisons of revenues, operating income and margins for each business
unit for the periods presented are as follows:
Nine Months
Ended September 30,
REVENUES 1997 1996 Change
- ----------------------------------------------------------------------
(Dollars in Millions)
Enterprise Software and Services
Property & Casualty. . . . . . . . . . . $175.4 $ 148.3 18.3 %
Life . . . . . . . . . . . . . . . . . . 78.9 53.7 46.8
Information Services
Property & Casualty. . . . . . . . . . . 64.9 70.8 (8.3)
Life . . . . . . . . . . . . . . . . . . 43.4 43.6 (0.5)
------- -------- --------
Total U.S. revenues . . . . . . . . . . 362.6 316.4 14.6
International . . . . . . . . . . . . . . 121.5 101.1 20.2
------- -------- --------
Total revenues. . . . . . . . . . . . $484.1 $ 417.5 16.0 %
========================================= ======= ======== ========
OPERATING INCOME
- ----------------------------------------------------------------------
Enterprise Software and Services
Property & Casualty. . . . . . . . . . . $ 46.8 $ 42.4 10.4 %
Life . . . . . . . . . . . . . . . . . . 17.1 12.3 38.7
Information Services
Property & Casualty. . . . . . . . . . . 0.4 (0.5) (189.3)
Life . . . . . . . . . . . . . . . . . . 2.2 2.2 ( 2.1)
Corporate . . . . . . . . . . . . . . . . (19.3) (7.6)* 152.9
------- --------
Total U.S. operating income . . . . . . 47.2 48.8 ( 3.2)
International . . . . . . . . . . . . . . 8.6 9.6 ( 10.9)
------- -------- --------
Total operating income. . . . . . . . $ 55.8 $ 58.4 ( 4.5)%
========================================= ======= ======== ========
OPERATING INCOME AS PERCENTAGE OF REVENUE
- ----------------------------------------------------------------------
Enterprise Software and Services
Property & Casualty. . . . . . . . . . . 26.7% 28.6%
Life . . . . . . . . . . . . . . . . . . 21.6 22.9
Information Services
Property & Casualty. . . . . . . . . . . 0.7 (0.8)
Life . . . . . . . . . . . . . . . . . . 5.0 5.1
------- --------
Total U.S . . . . . . . . . . . . . . . 13.0 15.4
International . . . . . . . . . . . . . . 7.1 9.6
------- --------
Total . . . . . . . . . . . . . . . . 11.5% 14.0%
========================================= ======= ========
<FN>
*Corporate operating income includes a special credit of $9.4 million.
REVENUES
Nine Months
Ended September 30,
Licensing 1997 1996 Change
- -------------------------------------------------------------
(Dollars in Millions)
Initial charges $ 44.7 $ 32.5 37.6%
Monthly charges 47.2 41.8 12.8
- -------------------------------------------------------------
$ 91.9 $ 74.3 23.7%
=============================================================
Percentage of total revenues 18.9% 17.8%
- -------------------------------------------------------------
Initial license charges increased $12.2 million from the first nine
months of 1996 to the first nine months of 1997, with the following increases
by business unit: domestic property and casualty up 22.3% ($2.0 million);
domestic life insurance and financial solutions up 37.2% ($4.3 million); and
international up 50.0% ($5.9 million).
Initial license charges for the first nine months of 1997 include
right-to-use licenses of $5.6 million. The right-to-use licenses represent
acquisitions by certain customers of perpetual rights in conjunction with
renewals of MESA by these customers. This compares to $3.6 million in
right-to-use licenses for the same period of 1996 arising from a customer
acquiring the perpetual rights in conjunction with its initial license of a
product.
Monthly license charges increased $5.4 million from the first nine months
of 1996 to the first nine months of 1997 with the following increases by
business unit: domestic life insurance and financial solutions up 48.8% ($3.1
million); and international up 25.9% ($2.1 million). These increases are
related to the increase in licensing activity. Domestic property and casualty
was relatively unchanged.
Property and casualty licensing revenues in the United States are being
impacted by various market factors, as described in the three months
comparison above.
Nine Months
Ended September 30,
Services 1997 1996 Change
- -----------------------------------------------------------------
(Dollars In Millions)
Professional and outsourcing $275.4 $221.7 24.0%
Information 113.1 118.5 (4.5)
Other 3.7 3.0 20.9
- -----------------------------------------------------------------
$392.2 $343.2 14.3%
=================================================================
Percentage of total revenues 81.1% 82.2%
- -----------------------------------------------------------------
Professional and outsourcing services revenues increased $53.7 million
from the first nine months of 1996 to the first nine months of 1997, with the
following increases by business unit: domestic property and casualty up 22.4%
($24.5 million); life insurance and financial solutions up 53.78% ($17.1
million); and international up 15.1% ($12.1 million). The increases are
principally due to increases in implementation services and in the processing
volumes of services provided to new and existing customers. The increases
were partially offset by the elimination of approximately $7.1 million in pass
through revenue related to the Florida outsourcing unit.
Information services revenues decreased $5.4 million. This decrease is
principally due to the sale in August 1997 of the property and casualty
information services business.
OPERATING EXPENSES
Cost of Revenues
Employee compensation and benefits increased 27.1% from the first nine
months of 1996 to the first nine months of 1997, principally the result of
increased salaries and related costs associated with the growth in staffing in
all business units. Compensation and benefits increased 42.2% ($13.7 million)
internationally, while domestic increased 22.2% ($21.9 million).
Computer and communications expenses increased 8.4%, principally as a
result of increased communications, data circuit and maintenance costs
associated with the growth of the Company's domestic and international
outsourcing operations.
Information services and data acquisition costs decreased 4.0%,
principally due to the sale in August 1997 of the property and casualty
information services business.
Depreciation and amortization of property, equipment and capitalized
software costs increased 21.9%. This increase is due principally to higher
amortization expense resulting from the recent release of the latest version
of CyberLife client/server life insurance software and the recent release of
the Company's Series III (Release 8) property and casualty insurance
client/server software systems. In addition, depreciation expense increased
due to Company's increased investment in its information technology equipment.
Other operating costs and expenses increased 8.6%. This increase is
primarily related to increased fees for the use of consultants and independent
contractors to satisfy staffing needs for certain development and services
activities. In addition, third party commissions, rent and other facilities
costs, and training costs in new technologies rose over amounts in the same
period last year. These increases were offset by reduced pass through costs
for the outsourcing unit in Florida and an increase in amounts capitalized
principally related to the continued enhancement and development of the
Company's Series III property and casualty insurance software, CyberLife life
insurance software and Insure Plus international property and casualty
software.
Selling, general and administrative expenses
Selling, general and administrative expenses increased 29.0% for the first
nine months of 1997 compared with the first nine months of 1996, principally
from the Company's investment in its international sales force and
infrastructure.
Litigation settlement and expenses, net
In May 1996, the Company resolved its litigation with the California
State Automobile Association Inter-Insurance Bureau and the California State
Automobile Association ("CSAA"), concluding with the mutual dismissal of all
related claims and counterclaims as well as the Company's recovery of certain
defense costs incurred relative to the CSAA matter, with interest. As a
result, the Company recorded a $9.4 million gain for this recovery during the
second quarter of 1996.
Amortization of goodwill and other intangibles
Amortization of goodwill and other intangibles remained relatively
unchanged.
OPERATING INCOME
Operating income decreased 4.5% ($2.6 million) due primarily to a
litigation settlement credit of $9.4 million in 1996. Domestic life insurance
operating income increased 38.7% and property and casualty insurance business
increased 10.4% offset by a decrease in international operating income of
10.9%. International operating income is lower than the first nine months of
1996 due to the fact that expenses rose faster than revenues, primarily in the
sales, marketing and administrative areas as the Company has built up its
international infrastructure. While comparative results for international are
down versus the first nine months of 1996, operating income has improved
significantly from the fourth quarter of 1996. The property and casualty
results were negatively impacted due to results in its outsourcing unit in
Florida. The impact is due in part to the state of Florida's efforts to
depopulate its state run homeowners' insurance program. This unit also
suffered approximately $1 million in one time operating expenses in the second
quarter of 1997. Finally, contributing to the impact are significant startup
costs the Company is incurring related to new virtual companies in the
business unit
OTHER INCOME AND EXPENSES
As a result of a higher average level of borrowed funds, principally
borrowings under the Company's credit facilities, interest expense increased
$0.4 million. The average nominal interest rate applicable to borrowings under
these facilities during the first nine months of 1997 was 6.0%.
Investment income decreased $0.8 million, principally due to a lower
average level of interest-bearing cash equivalents during the first nine
months of 1997 as compared to the same period of 1996.
INCOME TAXES
The effective income tax rate (income taxes expressed as a percentage of
pre-tax income) was 37.5% and 35.8% for the nine months ended September 30,
1997 and 1996, respectively. The effective rate for the 1997 period is higher
than the federal statutory rate due principally to the effect of state and
local income taxes.
SALE OF BUSINESS UNIT
On August 31, 1997, the Company completed the sale of substantially all
of the assets of its property and casualty information services business for
cash proceeds of $2.9 million. The Company retained the working capital of
this business unit, approximately $14.3 million. This transaction produced a
non-recurring gain of $1.7 million. Also, during the third quarter of 1997,
the Company abandoned a related business. As a result, the Company recorded a
non-recurring charge of $1.8 million, principally related to capitalized
software.
LIQUIDITY AND CAPITAL RESOURCES
September 30, December 31,
1997 1996
- ---------------------------------------------------------
(Dollars in Millions)
Cash and equivalents, marketable
securities, and investments. . $ 27.9 $ 30.8
Current assets . . . . . . . . . 194.2 173.0
Current liabilities. . . . . . . 74.0 112.6
Working capital. . . . . . . . . 120.2 60.4
Long-term debt 56.0 34.3
Nine Months Ended
September 30,
1997 1996
- ------------------------------------------------------
(Dollars in Millions)
Cash provided by operations. . . . $ 63.7 $ 69.2
Cash used for investing activities (64.9) (69.3)
Cash used for financing activities ( 3.6) (26.5)
The Company's current ratio (current assets divided by current
liabilities) stood at 2.6 at September 30, 1997, which management believes is
sufficient when combined with the available credit facilities to provide for
day-to-day operating needs and the flexibility to take advantage of investment
opportunities. On August 8, 1997, the Company entered into a new credit
facility for $200 million for five years. The Company has available (net of
amounts outstanding at September 30, 1997) $145 million under the $200 million
facility. Also, effective August 5, 1997, the Company has available an
additional $15 million uncommitted operating line of credit with which it may
choose to fund temporary operating cash needs. The uncommitted line of credit
available had previously been at $10 million.
During the nine months ended September 30, 1997 the Company capitalized
software development costs of $46.8 million principally related to the
development of its Series III client/server property and casualty software
(including the incorporation of object-oriented technology and support for
Windows NT), CyberLife object-oriented client/server life insurance software,
and Insure Plus international property and casualty solution as well as other
ongoing projects for other domestic as well as international products.
Significant expenditures anticipated for the remainder of 1997, excluding
any possible business acquisitions or common stock repurchases, are as
follows: acquisition of data processing, communications equipment and office
furniture, fixtures and equipment ($8 million); and costs relating to the
internal development of software systems ($19 million).
The Company has historically used the cash generated from operations for
the following: development and acquisition of new products, acquisition of
businesses and repurchase of the Company's stock. The Company anticipates
that it will continue to use its cash for all of these purposes in the future
and that projected cash from operations, cash and investment reserves along
with amounts available under the Company's debt facilities will be sufficient
to meet presently anticipated operating needs and to accomplish specific
objectives in these areas and for other general corporate purposes.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's operating results and financial condition can be impacted
by a number of factors, including, but not limited to, the following, any of
which could cause actual results to vary materially from current and
historical results or the Company's anticipated future results:
- - Currently, the Company's business is focused principally within the global
property and casualty and life insurance industries;
- - There is increasing competition for the Company's products and services;
- - The market for the Company's products and services is characterized by rapid
changes in technology;
- - Contracts with governmental agencies involve a variety of special risks,
including the risk of early contract termination by the governmental agency
and changes associated with newly elected state administrations or newly
appointed regulators;
- - The timing and amount of the Company's revenues are subject to a number of
factors, including, but not limited to, the timing of customers' decisions to
enter into large license agreements with the Company;
- - Unforeseen events or adverse economic or business trends may significantly
increase cash demands beyond those currently anticipated or affect the
Company's ability to generate/raise cash to satisfy financing needs;
- - The Company's operations have not proven to be significantly seasonal,
although quarterly revenues and net income can be expected to vary at times;
- - Although the Company cannot accurately determine the amounts attributable
thereto, the Company has been affected by inflation through increased costs of
employee compensation and other operating expenses.
- - Many of the Company's current and potential customers are or will spend
significant amounts of money to make their existing information systems
capable of handling the year 2000.
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, as well as the reported amounts of revenues and expenses during
the reporting period. Changes in the status of certain matters or facts or
circumstances underlying these estimates could result in material changes in
these estimates, and actual results could differ from these estimates.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results, past financial performance should not be
considered to be a reliable indicator of future performance, and investors
should not use historical trends to anticipate results or trends in future
periods.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: Statements in this report that are not descriptions of historical facts
may be forward-looking statements that are subject to risks and uncertainties,
including economic, competitive and technological factors affecting the
Company's operations, markets, products, services and prices, as well as other
specific factors discussed in the Company's filings with the Securities and
Exchange Commission. These and other factors may cause actual results to
differ materially from those anticipated.
PART II
OTHER INFORMATION
POLICY MANAGEMENT SYSTEMS CORPORATION
ITEM 1. LEGAL PROCEEDINGS
See Note 1, Contingencies, of Notes to Consolidated Financial Statements,
which is incorporated by reference in this Item.
ITEMS 2, 3, 4 AND 5 are not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits
Exhibits required to be filed with this Quarterly Report on Form 10-Q are
listed in the following Exhibit Index.
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 1997.
POLICY MANAGEMENT SYSTEMS CORPORATION
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.
POLICY MANAGEMENT SYSTEMS CORPORATION
-------------------------------------
(Registrant)
Date: November 12, 1997 Timothy V. Williams
Executive Vice President
(Chief Financial Officer)
POLICY MANAGEMENT SYSTEMS CORPORATION
EXHIBIT INDEX
Exhibit
Number
3. ARTICLES OF INCORPORATION AND BY-LAWS
A. Bylaws of the Company, as amended through July 19, 1994 incorporating
all amendments thereto subsequent to December 31, 1993 (filed as an Exhibit to
Form 10-K for the year ended December 31, 1994, and is incorporated herein by
reference)
B. Articles of Incorporation of the Company, as amended through October
13, 1994, incorporating all amendments thereto subsequent to December 31, 1993
(filed as an Exhibit to Form 10-K for the year ended December 31, 1994, and is
incorporated herein by reference)
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
A. Specimen forms of certificates for Common Stock of the Company (filed
as an Exhibit to Registration Statement No. 2-74821, dated December 16, 1981,
and is incorporated herein by reference)
B. Articles of Incorporation of the Company, as amended through October
13, 1994, incorporating all amendments thereto subsequent to December 31, 1993
(filed as an Exhibit to Form 10-K for the year ended December 31, 1994, and is
incorporated herein by reference)
10. MATERIAL CONTRACTS
A. Policy Management Systems Corporation 1986 Stock Option Plan (filed as
an Exhibit to Form 10-K for the year ended December 31, 1986, and is
incorporated herein by reference)
B. Conformed copy of Development and Marketing Agreement between
International Business Machines Corporation and Policy Management Systems
Corporation, dated July 26, 1989 (File No. 0-10175 - filed under cover of Form
SE filed on September 29, 1989, and is incorporated herein by reference)
C. Policy Management Systems Corporation 1989 Stock Option Plan (File No.
0-10175 - filed under cover of Form SE on March 22, 1991, and is incorporated
herein by reference)
D. Deferred Compensation Agreement with G. Larry Wilson (filed as an
Exhibit to Form 10-K for the year ended December 31, 1993, and is incorporated
herein by reference)
E. Executive Compensation Agreement with G. Larry Wilson (filed as an
Exhibit to Form 10-K for the year ended December 31, 1993, and is incorporated
herein by reference)
F. Employment Agreement with Stephen G. Morrison (filed as an Exhibit to
Form 10-Q for the quarter ended March 31, 1994, and is incorporated herein by
reference)
G. Stock Option/Non-Compete Agreement with Stephen G. Morrison (filed as
an Exhibit to Form 10-Q for the quarter ended March 31, 1994, and is
incorporated herein by reference)
H. Shareholders' Agreement, dated April 26, 1994, among Policy Management
Systems Corporation, General Atlantic Partners 14, L.P. and GAP Coinvestment
Partners (filed as an Exhibit to Form 10-Q for the quarter ended September 30,
1994, and is incorporated herein by reference)
I. Registration Rights Agreement, dated April 26, 1994 among Policy
Management Systems Corporation, General Atlantic Partners 14, L.P. and GAP
Coinvestment Partners (filed as an Exhibit to Form 10-Q for the quarter ended
September 30, 1994, and is incorporated herein by reference)
J. Employment Agreement with Timothy V. Williams (filed as an Exhibit to
Form 10-K for the year ended December 31, 1994, and is incorporated herein by
reference)
K. Stock Option/Non-Compete Form Agreement for named executive officers
together with schedule identifying particulars for each named executive
officer (filed as an Exhibit to Form 10-Q for the quarter ended September 30,
1992, and is incorporated herein by reference)
L. Stock Option/Non-Compete Form Agreement for named executive officers
together with schedule identifying particulars for each named executive
officer (filed as an Exhibit to Form 10-Q for the quarter ended September 30,
1994, and is incorporated herein by reference)
M. Stock Option (Non-Compete Form Agreement for named executive officers
together with schedule identifying particulars for each named executive
officer (filed as an Exhibit to Form 10-K for the year ended December 31,
1994, and is incorporated herein by reference)
N. Policy Management Systems Corporation 1993 Long-Term Incentive Plan for
Executives (filed as an Exhibit to Form 10-K for the year ended December 31,
1994, and is incorporated herein by reference)
O. First Amendment to the Policy Management Systems Corporation 1989 Stock
Option Plan (filed as an Exhibit to Form 10-K for the year ended December 31,
1994, and is incorporated herein by reference)
P. Fourth Amendment to the Policy Management Systems Corporation 1989
Stock Option Plan (filed as an Exhibit to Form 10-Q for the quarter ending
March 31, 1995, and is incorporated herein by reference)
Q. Second and Third Amendments to the Policy Management Systems
Corporation 1989 Stock Option Plan (filed as an Exhibits and to Form 10-Q for
the quarter ended June 30, 1995, and is incorporated herein by reference)
R. Stock Option/Non-Compete Form Agreement for named executive officers
together with schedule identifying particulars for each named executive
officer (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 1995,
and is incorporated herein by reference)
S. Stock Option/Non-Compete Form Agreement for named executive officers
together with schedule identifying particulars for each named executive
officer (filed as an Exhibit to Form 10-K for year ended December 31, 1995,
and is incorporated herein by reference)
T. Stock Option/Non-Compete Form Agreement for named executive officers
together with schedule identifying particulars for each named executive
officer (filed as an Exhibit to Form 10-K for year ended December 31, 1995,
and is incorporated herein by reference)
U. Stock Option/Non-Compete Agreement Amendment No. 1 dated November 8,
1995 to Stock Option/Non-Compete Agreement dated July 20, 1995 with Paul R.
Butare (filed as an Exhibit to Form 10-K for year ended December 31, 1995, and
is incorporated herein by reference)
V. Stock Option/Non-Compete Agreement with Timothy V. Williams dated
February 1, 1994 (filed as an Exhibit to Form 10-K for year ended December 31,
1995, and is incorporated herein by reference)
W. Stock Option/Non-Compete Agreement with Timothy V. Williams dated May
10, 1995 (filed as an Exhibit to Form 10-K for year ended December 31, 1995,
and is incorporated herein by reference)
X. Registration Rights Agreement, dated March 8, 1996, between Policy
Management Systems Corporation and Continental Casualty Company (filed as an
Exhibit to Form 10-Q for the quarter ended March 31, 1996, and is incorporated
herein by reference)
Y. Shareholders Agreement dated March 8, 1996 between Policy Management
Systems Corporation and Continental Casualty Company (filed as an Exhibit to
Form 10-Q for the quarter ended March 31, 1996, and is incorporated herein by
reference)
Z. Stock Option/Non-Compete Form Agreement for named executive officers
together with schedule identifying particulars for each named executive
officer (filed as an Exhibit to Form 10-Q for the quarter ended June 30, 1996,
and is incorporated herein by reference)
AA. Employment Agreement Form dated November 7, 1996 for Messrs. Butare,
Morrison and Williams together with a schedule identifying particulars for
each executive officer (filed as an Exhibit to Form 10-K for year ended
December 31, 1996, and is incorporated herein by reference)
BB. Stock Option/Non-Compete Agreement with Stephen G. Morrison dated
October 22, 1996 (filed as an Exhibit to Form 10-K for year ended December 31,
1996, and is incorporated herein by reference)
CC. Stock Option/Non-Compete Form Agreement dated January 8, 1997 for
named executive officers together with schedule identifying particulars for
each executive officer (filed as an Exhibit to Form 10-Q for the quarter ended
March 31, 1997, and is incorporated herein by reference)
DD. Annual Bonus Program for Executive Officers (filed as an Exhibit to
Form 10-Q for the quarter ended March 31. 1997, and is incorporated herein by
reference)
EE. Form of Amendment No. 1 to the Employment Agreements with Messrs.
Butare, Morrison and Williams together with schedule identifying particulars
for each executive officer (filed as an Exhibit to Form 10-Q for the quarter
ended June 30, 1997, and is incorporated herein by reference)
FF. Form of Employment Agreements with Messrs. Bailey, Coggiola and
Wilson together with schedule identifying particulars for each executive
officer (filed herewith)
GG. Credit Agreement dated as of August 8, 1997 among Policy Management
Systems Corporation, the Guarantors Party hereto, Bank of America National
Trust and Savings Association and the Other Financial Institution Party Hereto
(filed herewith)
11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
A. Filed herewith
27. FINANCIAL DATA SCHEDULE
A. Filed herewith (EDGAR version only)