FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-12192
BGS Systems, Inc.
Massachusetts 04-2559993
(State of Incorporation) (I.R.S. Employer
Identification No.)
128 Technology Center Waltham, Massachusetts 02254
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 891-0000
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.
Title of each class
Common stock, $.10 par value
Shares outstanding @ April 30, 1995..........................3,214,849
BGS Systems, Inc.
Table of Contents
Part I Financial Information:
Item 1 - Financial Statements:
Balance Sheets
Statements of Income
Statements of Cash Flows
Notes to Financial Statements
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Part II Other Information:
Item 3 - Exhibits and Reports on Form 8-K
Signatures
Part I Financial Information
Item 1. Financial Statements
BGS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, January 31,
1995 1995
--------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $12,456,757 $ 9,084,622
Marketable securities 6,045,000 6,440,000
Accounts receivable, less allowances of
$365,000 at April 30, 1995 and January
31, 1995 for doubtful accounts 8,602,634 12,458,895
Prepaid expenses and other assets 965,699 768,125
Costs and estimated earnings in excess of
billings on uncompleted contracts - 335,640
Deferred income taxes 201,031 201,031
Total current assets 28,271,121 29,288,313
Capitalized software 400,000 275,000
Equipment:
Furniture and fixtures 1,556,267 1,537,295
Computer equipment 5,810,775 5,473,725
7,367,043 7,011,020
Less accumulated depreciation 5,703,413 5,481,522
1,663,629 1,529,498
Total Assets $30,334,750 $31,092,811
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 812,166 $ 1,247,818
Accrued expenses 496,239 1,005,153
Accrued compensation and employee benefits 1,125,268 1,542,835
Deferred revenue 12,628,146 13,129,025
Federal and state income taxes payable 452,015 429,380
Dividends payable 775,491 -
Total current liabilities 16,289,326 17,354,211
Deferred income taxes 16,057 16,057
Stockholders' equity:
Common stock, $.10 par value-authorized
10,000,000 shares; issued and outstanding
3,214,849 shares 321,486 321,486
Capital in excess of par value 14,441,965 14,441,965
Retained earnings 2,431,340 2,109,638
Equity adjustment from foreign currency
translation (526,785) (511,907)
16,668,006 16,361,182
Less cost of 128,885 shares (83,264 shares
in 1994) of common stock in treasury 2,638,639 2,638,639
Total stockholders' equity 14,029,367 13,722,543
Total liabilities and stockholders' equity $30,334,750 $31,092,811
============ ============
See Accompanying Notes to Financial Statements
BGS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
April 30,
1995 1994
---------------------------
REVENUES:
License fees $ 4,108,930 $ 3,527,732
Maintenance fees 4,177,615 3,676,973
Other 634,437 519,787
------------ ------------
8,920,982 7,724,492
------------ ------------
COSTS AND EXPENSES:
Sales and marketing 2,741,956 2,285,613
General and administrative 842,252 743,320
Product development and maintenance 2,788,984 2,295,413
------------ ------------
6,373,192 5,324,346
------------ ------------
OPERATING INCOME 2,547,790 2,400,146
Investment income:
Interest income, net 199,475 125,681
Other income 81,703 90,332
------------ ------------
281,178 216,013
------------ ------------
INCOME BEFORE TAXES 2,828,968 2,616,159
Income taxes 956,285 878,642
NET INCOME $ 1,872,683 $ 1,737,517
============ ============
Net income per share $ .60 $ .55
============ ============
Weighted average number of shares
outstanding 3,101,964 3,144,856
============ ============
Net income per share: The computations of income per share are based on the
weighted average number of shares of Common Stock outstanding during the
periods, including the dilutive effect of stock options.
See Accompanying Notes to Financial Statements
BGS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
April 30,
1995 1994
-----------------------------
OPERATING ACTIVITIES:
Net income $ 1,872,683 $ 1,737,517
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation 208,041 181,025
Changes in operating assets and
liabilities:
Accounts receivable 4,170,404 3,094,455
Other current assets 105,262 (31,152)
Accounts payable and accrued expenses (1,384,027) 228,460
Deferred revenue (635,525) (816,032)
Federal and state income taxes (181,337) 666,756
Foreign currency transaction (55,219) 30,459
------------ ------------
Net cash provided by operating activities 4,100,282 5,091,488
------------ ------------
FINANCING ACTIVITIES:
Purchases of common stock for treasury 0 (99,000)
Proceeds from issuance of common stock 0 0
Dividends paid (775,491) (469,138)
------------ ------------
Net cash used in financing activities (775,491) (568,138)
------------ ------------
INVESTING ACTIVITIES:
Purchases of available-for-sale securities (505,000) -
Proceeds from maturity of available-for-sale
securities 900,000 -
Additions to capitalized software costs (125,000) -
Additions to equipment (335,824) (125,380)
(Increase) decrease in marketable securities - (1,554,643)
Net cash provided by (used in) investing ------------ ------------
activities (65,824) (1,680,023)
------------ ------------
Effect of exchange rate changes on cash and
cash equivalents 113,168 84,407
Net increase (decrease) in cash and cash
equivalents 3,372,135 2,927,734
Cash and cash equivalents at beginning of
year 9,084,622 7,109,425
------------ ------------
Cash and cash equivalents at end of year $12,456,757 $10,037,159
============ ============
See Accompanying Notes to Financial Statements
BGS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
I. Accounting Comments
With respect to the unaudited statements for the interim periods included
in this report, management of the Company believes that all adjustments
necessary for fair presentation of the results for such interim periods have
been included.
Reference is made to the registrant's Form 10-K Annual Report, filed with
the Securities and Exchange Commission on April 17, 1995, which incorporates
the financial statements and notes thereto, including a summary of significant
accounting policies, for the fiscal years ended January 31, 1995 and January
31, 1994.
The results for the interim periods are not necessarily indicative of the
results for the entire year.
7
FORM 10-Q
Part 1-Item 2
BGS SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Results of Operations
Operating revenues for the first quarter of fiscal year 1996 increased 15% to
$8,921,000. Revenue from license fees for the first quarter grew 16% to
$4,109,000 from $3,528,000 last year. Sales of the Company's products for
distributed systems helped the Company's domestic operations increase license
fee revenue for the quarter. License fee revenue from the Company's
international operations fell below last year's levels as our German operation
continued to underperform and several large deals anticipated by other of the
Company's international operations failed to close until after the period
ended. The frequency of large software purchases by the Company's customers
continues to impact the performance of one or more of the Company's operating
units each quarter, and continues to be of concern because of the increased
potential for unevenness in the total revenue of the Company for the
foreseeable future.
Maintenance fees for the first quarter increased $501,000, or 14%, to
$4,178,000. The higher cost of the Datacenter renewals and a slight
improvement in the domestic renewal rate in the periods prior to the current
quarter were the principal factors in the increase. In the current quarter,
the Company's domestic maintenance renewal rate was adversely impacted by the
cancellation of a few large renewals. While the Company believes that it is
too early to tell if this is a trend, it is of concern that continued budget
cuts, the increased size of maintenance invoices, and datacenter closings may
have a negative impact on maintenance fee revenue in future periods.
The Company has been experiencing a change in the mix of revenue from license
and maintenance fees from its more mature products, which has been declining
as a result of the consolidation of customer datacenters, the change to
different computers (sometimes called "downsizing" or "rightsizing"), to the
Company's newer replacement products (such as our Datacenter, Visualizer,
Unix and AS/400 products) which continue to assist our customers with their
capacity planning and performance management needs on their existing and
additional computer systems.
8
FORM 10-Q
Other revenue for the three month period increased 22% or $115,000 to $634,000
from $520,000 earned for the comparable period of fiscal year 1995. This
growth was primarily the result of an increase in consulting revenue from work
performed during the quarter. Usually, consulting revenue is earned at a
comparable level from quarter to quarter as the Company does not seek to
expand this business beyond the immediate requirements of its customers.
Aggregate costs and expenses for the three month period increased 20% to
$6,373,000 from $5,324,000 during the comparable period last year. Sales and
marketing expenses were higher as a result of increased marketing activity
relating to the Company's new products and the higher level of commissionable
revenue. Product development and maintenance expenses increased 22% primarily
as a result of an increased investment in the development of both new products
for distributed systems and the continued porting of the Company's UNIX based
products to additional UNIX platforms.
Interest income grew 59% to $199,000 in the first quarter of fiscal year 1996,
compared to $126,000 earned a year earlier. An increase in both interest
rates and in the amount invested were the primary reasons for this growth.
Net income grew 8% and earnings per share grew 9% over last year's first
quarter. The effective tax rate for both years was 34%.
Material Changes in Financial Condition/Liquidity
Cash increased $3,372,000 primarily as a result of the collections of fiscal
year 1995 fourth quarter sales. The decrease in accounts receivable from
January 31 is primarily due to the collection of outstanding accounts and the
lower sales levels in the first quarter of the year versus the normal
increased sales activity during the fourth quarter.
The Company's cash resources are considered sufficient to finance the
Company's growth in the foreseeable future.
The Company declared two regular quarterly $.25 per share dividends during the
quarter, one of which was paid in the quarter.
9
FORM 10-Q
BGS SYSTEMS, INC.
Part II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits filed as part of this form 10-Q are
listed on the Exhibit Index immediately preceding such
exhibits and are incorporated herein by reference.
(b) Form 8-K. The Registrant did not file any reports on
Form 8-K during the quarter for which this report is filed.
INDEX TO EXHIBITS
Exhibits
11 Statement regarding Computation
of per share earnings
27 Financial Data Schedule
BGS SYSTEMS, INC.
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.
BGS Systems, Inc.
128 Technology Center
Waltham, Massachusetts 02254
Date: May 31, 1995 By: /s/ Harold S. Schwenk, Jr.
------------------------------------
Dr. Harold S. Schwenk, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 31, 1995 By: /s/ Normand Bilodeau
------------------------------------
Normand Bilodeau
Chief Financial Officer
(Principal Financial Officer)