1
THIS DOCUMENT IS A COPY OF THE FORM 10-Q FILED ON FEBRUARY 18, 1997 PURSUANT TO
A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
(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)
20 UNIVERSITY ROAD, CAMBRIDGE, MASSACHUSETTS 02138
Address of principal executive offices, including zip code)
(617) 661-1444
(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: 9,728,896 shares of common stock, $.01 par value per share, as
of January 31, 1997.
1
2
PROJECT SOFTWARE & DEVELOPMENT, INC.
10-Q INDEX
PAGE
- - ----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as of December 31, 1997 3
(unaudited) and September 30, 1996.
Consolidated Statements of Operations (unaudited) for the three 4
months ended December 31, 1996 and 1995.
Consolidated Statements of Cash Flows (unaudited) for the three 5
months ended December 31, 1996 and 1995.
Notes to Consolidated Financial Statements. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 9
RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURE 18
2
3
PROJECT SOFTWARE & DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS DECEMBER 31, SEPTEMBER 30,
----------- ------------
1996 1996
---- ----
(IN THOUSANDS,EXCEPT SHARE DATA) (UNAUDITED)
Current assets:
Cash and cash equivalents $10,083 $ 9,097
Marketable securities 36,634 36,798
Accounts receivable, trade, less allowance
for doubtful accounts of $2,584 at December 31,
1996 and $1,954 at September 30, 1996 27,203 27,030
Prepaid expenses 1,289 1,410
Other assets 582 748
Deferred income taxes 1,157 892
------- -------
Total current assets 76,948 75,975
------- -------
Property and equipment, net 5,094 4,174
Computer software costs, net 639 787
Goodwill, net 1,743 1,832
Deferred income taxes 713 675
Other assets 46 33
------- -------
Total assets $85,183 $83,476
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,323 $ 8,384
Accrued compensation 2,709 5,007
Income taxes payable 2,577 248
Deferred income taxes 6 5
Deferred revenue 8,052 9,042
------- -------
Total current liabilities 20,667 22,686
------- -------
Deferred income taxes 110 168
Deferred rent 69 85
Deferred revenue 262 375
Commitments and contingencies
Preferred stock, $.01 par value;1,000,000 authorized,
none issued and outstanding ---- ----
Common stock, $.01 par value;15,350,000 authorized;
and outstanding 9,720,243 and 9,702,549 for December 31,
1996 and September 30, 1996, respectively 97 97
Additional paid-in capital 45,555 45,324
Retained earnings 18,175 14,538
Cumulative translation adjustment 67 49
Net unrealized gain on marketable securities 181 154
------- -------
Total stockholders' equity 64,075 60,162
------- -------
Total liabilities and stockholders' equity $85,183 $83,476
======= =======
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,
---------------------------------
1996 1995
---- ----
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Revenues:
Software $ 13,673 $ 9,763
Support and services 9,706 6,424
----------- -----------
Total revenues 23,379 16,187
----------- -----------
Cost of revenues:
Software 633 1,148
Support and services 5,288 3,271
----------- -----------
Total cost of revenues 5,921 4,419
----------- -----------
Gross margin 17,458 11,768
Operating expenses:
Sales and marketing 7,339 4,935
Product development 2,492 1,871
General and administrative 2,521 1,749
----------- -----------
Total operating expenses 12,352 8,555
----------- -----------
Income from operations 5,106 3,213
Interest income 461 440
Interest (expense) (2) (15)
Other income (expense), net 58 (4)
----------- -----------
Income before income taxes 5,623 3,634
Provision for income taxes 2,094 1,507
----------- -----------
Net income $ 3,529 $ 2,127
=========== ===========
Net income per share $ 0.35 $ 0.21
----------- -----------
Weighted number of common
and common equivalent shares 10,127,886 10,048,901
----------- -----------
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,
1996 1995
-------- --------
(in thousands)
Cash flows from operating activities:
Net income $ 3,529 $ 2,127
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 761 1,022
Loss on sale and disposal of property
and equipment 19 --
Amortization of discount on marketable securities 379 172
Deferred rent (17) (22)
Deferred taxes (357) (270)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable 675 (1,030)
Prepaid expenses 130 133
Other assets (337) (4)
Accounts payable (1,147) (320)
Accrued compensation (2,369) (1,814)
Income taxes payable 2,315 1,592
Deferred revenue (1,163) 648
-------- --------
Net cash provided by operating activities 2,418 2,234
-------- --------
Cash flows from investing activities:
Acquisitions of businesses, net of cash -- (787)
Acquisitions of property and equipment (1,406) (355)
Additions to computer software costs (37) (312)
Purchase of marketable securities (18,739) (20,728)
Sale of marketable securities 18,551 20,966
-------- --------
Net cash used in investing activities (1,631) (1,216)
-------- --------
Cash flows from financing activities:
Payments on leased equipment 2 (11)
Borrrowings on line of credit -- 110
Payments of long-term debt -- (16)
Proceeds from exercise of stock options
including related tax benefit 231 27
-------- --------
Net cash provided by financing activities 233 110
-------- --------
Effect of exchange rate changes on cash (34) (34)
-------- --------
Net increase in cash and cash equivalents 986 1,094
Cash and cash equivalents, beginning of period 9,097 9,346
-------- --------
Cash and cash equivalents, end of period $ 10,083 $ 10,440
======== ========
Supplemental cash flow disclosures:
Interest $ 1 $ 15
Income taxes 64 2,018
======== ========
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, 1996 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, 1997, 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, 1996 included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on December 30, 1996.
The consolidated financial statements of the Company for all periods prior
to March 31, 1996 included in this report include the results and balances of an
acquisition accounted for as pooling-of-interests.
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
Income per share is computed for each period based upon the weighted
average number of common shares outstanding and dilutive common stock
equivalents (using the treasury stock method). For purposes of this calculation,
stock options are considered common stock equivalents in the periods in which
they have a dilutive
6
7
effect. Fully diluted and primary income per share data are the same for each
period presented.
C. ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" is effective for fiscal years beginning after
December 15, 1995. SFAS No. 123 prescribes accounting and reporting standards
for all stock-based compensation plans, including employee stock options,
restricted stock, and stock appreciation rights. SFAS No. 123 does not require
companies to change their existing accounting for employee stock options under
Accounting Priciples Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees" (the intrinsic value method) but requires pro forma disclosures of
what net income and earnings per share would have been had the new fair value
method been used. The Company has elected to continue following present
accounting rules under APB Opinion No. 25 and will disclose all the required pro
forma information in its Annual Report on Form 10-K for the fiscal year ended
September 30, 1997.
D. COMPUTER SOFTWARE COSTS
Internally developed software costs capitalized were $0 and $254,000 for
the three months ended December 31, 1996 and 1995, respectively. Amortization
expense was $ 127,000 and $673,000 for the three months ended December 31, 1996
and 1995 respectively. For the three months ended December 31, 1995, the Company
changed the estimated useful life of its internally developed software related
to the client/server version of MAXIMO from three years to fifteen months. This
change in estimate resulted in additional amortization expense of $565,000 in
the three months ended December 31, 1995.
E. ACQUISITIONS
On December 27, 1995, the Company acquired the shares of its Swedish
distributor, Planneringssystem och Datorer i Norden AB for the sum of $517,000.
In addition, the Company is obligated to pay the seller an earnout based on
revenue target achievement for the fiscal year ended September 30, 1996. The
total earnout was $257,000. The transaction was accounted for using the purchase
method of accounting. The resulting goodwill is being amortized on a
straight-line basis over 5 years. This acquisition was deemed to be immaterial
for presentation of pro forma information purposes.
On March 1, 1996, the Company acquired certain assets and assumed specific
liabilities of the IHS department of debis Systemhaus Standard - Software -
Produkte GmbH for the sum of $646,000. In addition, the Company will pay an
earnout based on revenue target achievement for the twelve months ended December
7
8
31, 1996. The earnout is estimated to be $260,000 at December 31, 1996. The
transaction was accounted for using the purchase method of accounting. The
resulting goodwill is being amortized on a straight-line basis over 5 years.
This acquisition was deemed to be immaterial for presentation of pro forma
information purposes.
On March 1, 1996, the Company acquired the outstanding common stock of
Maintenance Automation Corporation ("MAC"), a developer of PC-based maintenance
management software, in exchange for the issuance of 368,946 shares of common
stock. The transaction has been accounted for as a pooling-of-interests. Costs
of the acquisition were $965,000. The Company's consolidated financial
statements for all years prior to the acquisition have been restated to include
MAC. MAC's fiscal year for financial reporting purposes was changed from
December 31 to September 30 for the period ended September 30, 1995.
The following information shows revenue and net income of the separate
companies during the periods preceding the combination that are included in this
report. Adjustments recorded to conform the accounting policies of the companies
were not material to the consolidated financial statements.
(in thousands)
REVENUE: Three months
- - -------- ended
-----
12/31/95
--------
PSDI $14,215
MAC $ 1,972
-------
Combined $16,187
-------
NET INCOME:
- - -----------
PSDI $ 2,402
MAC $ (275)
-------
Combined $ 2,127
-------
8
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General.
The Company develops, markets and supports applications software used by
business, government and other organizations to improve the productivity of
facilities, plants and production equipment. The Company's revenues are derived
primarily from two sources: software licenses and fees for services, including
support contracts and training and consulting services. The Company has
experienced a significant shift in the sources of its revenues as a result of
its decision to concentrate its resources on the development and marketing of
enterprise-wide asset maintenance management systems operating in a
client/server environment. Prior to 1991, the Company's revenues were derived
primarily from licenses of its project management software (consisting of
character-based software designed to run on mainframe, minicomputers and
personal computers), and, to a lesser extent, from sales of computer hardware.
The Company acquired Maintenance Automation Corporation ("MAC") on March 1,
1996. MAC is a developer of maintenance management software for the single-user,
PC LAN segment.
The Company released MAXIMO, its first client/server product, in 1991, and
released P/X, its second client/server product, in 1992. In fiscal year ended
September 30, 1996, revenues from client/server software accounted for 89% of
software revenues, of which 93% was attributable to the client/server versions
of MAXIMO.
In fiscal 1996, the Company introduced a new suite of MAXIMO products:
MAXIMO Enterprise, MAXIMO Workgroup and MAXIMO ADvantage. MAXIMO Enterprise, a
new version of which was released in March 1996, is a client/server product,
which runs on Oracle7 and SYBASE platforms and is intended for the high
function, high usage segment of the maintenance management market. MAXIMO
Workgroup, released in July 1996, is also a client/server product and runs on
SQLBase and Oracle Workgroup and is intended for the mid-range segment of the
maintenance management market.
The product acquired as a result of the acquisition of MAC on March 1,
1996, MAXIMO ADvantage, is intended for the lower-end maintenance market. MAXIMO
ADvantage supports Microsoft Access for the single user, PC LAN segment. The
Company has incurred significant additional and unexpected costs in completing
development of MAXIMO ADvantage due to a delay in excess of six months in
completing the release of this product. The delay was necessary to meet the
quality expectations demanded by the Company. The Company has also restructured
the tele-sales operation employed by MAC to improve the fluidity of the sales
distribution channel. Further affecting MAXIMO ADvantage sales was the delay in
availability of a CD-Rom based multi-media
9
10
evaluation kit. This evaluation kit generally became available in December 1996.
The sources of the Company's revenues from support and services have also
shifted since the introduction of the Company's new generation of client/server
products. Revenues from support and services relating to the Company's MAXIMO
products have increased, while those relating to the Company's P/X and mainframe
and other software have declined.
Revenues from licenses of P/X have declined sharply, dropping to 2% of
total license revenues in the fiscal year ended 1996. The Company no longer
actively markets its P/X product as a stand alone solution.
Revenues from licenses of mainframe and other software have also declined
sharply, dropping to 1% of total license revenues in the fiscal year ended 1996.
The Company no longer actively markets its mainframe and other software
products, although it provides technical support and other services to their
installed customer base.
The Company's revenues attributable to its operations outside the United
States are a significant portion of revenues. The Company expects that
international revenues will continue to be a significant percentage of total
revenues. As the percentage of the Company's total revenues which are derived
from international operations and are conducted in foreign currencies grows,
changes in the values of these foreign currencies relative to the United States
dollar will affect the Company's results of operations, and may contribute to
fluctuations in the Company's results of operations. The functional currencies
of the Company's international subsidiaries include the pound sterling, the
French franc, the German deutschemark, the Dutch guilder, the Swedish krona, and
the Australian and Canadian dollars, each of which has fluctuated significantly
in relation to the United States dollar. In addition, the Company is exposed to
potential losses as a result of transactions giving rise to accounts receivable
in currencies other than the United States dollar or the functional currencies
of its international subsidiaries. When the value of a foreign currency in which
the accounts receivable of the Company are denominated changes between the date
the account receivable is accrued and the date on which it is settled, the
resulting gain or loss is recorded as a foreign currency transaction adjustment.
The Company recorded a foreign currency transaction gain of $57,000 and a loss
of $18,000 for the three months ended December 31, 1996 and 1995, respectively.
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.
10
11
To date, inflation has not had a material impact on the Company's financial
results. There can be no assurance, however, that inflation may not adversely
affect the Company's financial results in the future.
Business Combinations.
On December 27, 1995, the Company acquired the shares of its Swedish
distributor, Planneringssystem och Datorer i Norden AB for the sum of $517,000.
In addition, the Company is obligated to pay the seller an earnout based on
revenue target achievement for the fiscal year ended September 30, 1996. The
total earnout at December 31, 1996 was $257,000.
On March 1, 1996, the Company acquired certain assets and assumed specific
liabilities of the IHS department of debis Systemhaus Standard - Software -
Produkte GmbH for the sum of $646,000. In addition, the Company will pay an
earnout based on revenue target achievement for the twelve months ended December
31, 1996. The earnout is estimated to be $260,000 at December 31, 1996.
On March 1, 1996, the Company acquired MAC in exchange for the issuance of
368,946 shares of the Company's common stock. MAC provides the Company an
existing, although immature, tele-sales channel which has been restructured and
can target entities and industries supplemental to those targeted by the
Company's existing direct sales channel, such as real estate management, hotels
and small education and medical facilities. MAC's product, CHIEF ADvantage has
been renamed MAXIMO ADvantage and has been enhanced since the acquisition.
RESULTS OF OPERATIONS
Revenues.
Total revenues increased 44% to $23,379,000 from $16,187,000 for the three
months ended December 31, 1996 and 1995, respectively. The growth in revenues is
attributable to the Company's MAXIMO client/server software and related support
and services. A significant portion of the Company's total revenues are derived
from operations outside the United States. Revenues generated outside the United
States increased 65% to $10,282,000 or 44% of total revenues for the three
months ended December 31, 1996 from $6,236,000 or 39% of total revenues for the
three months ended December 31, 1995.
The Company's software revenues increased 40% to $13,673,000 from
$9,763,000 for the three months ended December 31, 1996 and 1995, respectively.
The Company's MAXIMO software revenues increased 46% to $13,458,000 from
$9,248,000 for the three months ended December 31, 1996 and 1995, respectively.
The increase in total software revenues for the three months ended December 31,
11
12
1996 can be attributed to increases in the number of MAXIMO client/server
licenses sold and increases in the number of users per license of MAXIMO
client/server software combined with the release of the client server versions
of MAXIMO on SYBASE and Oracle. Software revenues as a percentage of total
revenues decreased to 58% from 60% for the three months ended December 31, 1996
and 1995, respectively. The decrease as a percentage of revenues for the three
months ended December 31, 1996, is attributable to an increase in consulting
services performed in connection with the number of MAXIMO client/server
software licenses sold in the previous quarter. Revenues from licenses of MAXIMO
and from related support and services increased 41% to $22,276,000 from
$14,306,000 or 95% and 88% of total revenues for the three months ended December
31, 1996 and 1995, respectively. Revenues from the Company's P/X product and
related support and services decreased 42% to $811,000 from $1,405,000 for the
three months ended December 31, 1996 and 1995, respectively. The Company no
longer actively markets this software product as a stand alone solution.
Revenues from the Company's mainframe and other software and related
support and services decreased 39% to $292,000 from $476,000 for the three
months ended December 31, 1996 and 1995, respectively. The Company no longer
actively markets these software products.
Revenues from support and services increased 51% to $9,706,000 from
$6,424,000 for the three months ended December 31, 1996 and 1995, respectively.
The increases are due primarily to increased sales of support contracts and use
of the Company's training and consulting services in connection with licenses of
the Company's MAXIMO client/server software, partially offset by declines in
sales of support contracts and services relating to the Company's P/X, mainframe
and other software.
Cost of Revenues.
The total cost of revenues increased 34% to $5,921,000 from $4,419,000 for
the three months ended December 31, 1996 and 1995, respectively. The total cost
of revenues as a percentage of total revenues was 25% and 27% for the three
months ended December 31, 1996 and 1995, respectively.
Cost of software revenues decreased 45% to $633,000 from $1,148,000 for
the three months ended December 31, 1996 and 1995, respectively. Costs of
software revenues consist of the amortization of capitalized software, royalties
paid to vendors of third party software, the cost of software product packaging
and media, and certain employee costs related to software duplication, packaging
and shipping. The cost of software revenues decreased as a percentage of
software revenues to 5% from 12% for the three months ended December 31, 1996
and 1995, respectively. The decrease as a percentage of revenues is
12
13
primarily attributable to a decrease in amortization expense of internally
developed software and an increase in the revenue base. In the three months
ended December 31, 1995, the Company changed the estimated useful life of its
MAXIMO Enterprise product from three years to fifteen months to accurately
reflect the lifecycles for new releases of this product. This change resulted in
additional amortization expense of $565,000 in the three months ended December
31, 1995.
Cost of support and services consists primarily of personnel costs for
employees and the related costs of benefits and facilities. Cost of support and
services revenues increased by 62% to $5,288,000 from $3,271,000 for the three
months ended December 31, 1996 and 1995, respectively. Cost of support and
services increased as a percentage of support and services revenues to 54% from
51% for the three months ended December 31, 1996 and 1995, respectively. The
increases as a percentage of revenues for the three months ended December 31,
1996, are attributable to additional employees hired, costs associated with
third-party consultants contracted with to support the growth in revenues and
the timing of hiring permanent employees.
Sales and Marketing Expenses.
Sales and marketing expenses increased 49% to $7,339,000 from $4,935,000
for the three months ended December 31, 1996 and 1995, respectively. The
increase is primarily due to increases in the number of sales personnel, sales
commissions, travel and lodging expenses, and advertising costs. Sales and
marketing expenses as a percentage of total revenues were 31% for both the three
months ended December 31, 1996 and 1995.
Product Development Expenses.
Product development expenses increased 33% to $2,492,000 from $1,871,000
for the three months ended December 31, 1996 and 1995, respectively. The
increase is primarily due to the engagement of additional employees and third
party consultants to work on enhancements to the MAXIMO products. There were no
software costs capitalized in the three months ended December 31, 1996. Product
development expenses as a percentage of revenues were 11% for both the three
months ended December 31, 1996 and 1995. The Company spends virtually all of its
development dollars on the MAXIMO product line.
General and Administrative Expenses.
General and administrative expenses include the cost of the Company's
finance, human resources, information services and administrative operations.
General and administrative expenses increased 44% to $2,521,000 from $1,749,000
for the three months ended December 31, 1996 and 1995, respectively. The
increase is primarily due to an increase in the provision for bad debt
13
14
expenses in proportion to the increase in receivables. General and
administrative expenses as a percentage of total revenues were 11% for both the
three months ended December 31, 1996 and 1995.
Other Income/Expense.
Interest income for the three months ended December 31, 1996 and 1995 was
$461,000 and $440,000, respectively. The increases are due to interest earned on
certain cash equivalents and marketable securities.
Provision for Income Taxes.
The Company's effective tax rate was 37% and 41% for the three months ended
December 31, 1996 and 1995, respectively. The decrease in the effective tax rate
for the three months ended December 31, 1996 can be attributed to utilization of
a Foreign Sales Corporation and utilization of certain foreign net operating
losses.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had cash and cash equivalents of
approximately $10,083,000 and working capital of $56,281,000. Cash provided by
operations for the three months ended December 31, 1996 was $2,418,000 generated
by income earned for the period and an increase in receivables, offset by the
payout of fiscal 1996 employee bonuses. Cash used in investing activities
totaled $1,631,000, and was primarily used for the purchase of computer
equipment. Cash provided by financing activities was $233,000 and is
attributable to exercises of employee stock options.
The Company's principal commitments as of December 31, 1996 consisted
primarily of an office lease for its headquarters. The Company leases its
facilities under non-cancelable operating lease agreements which expire at
various dates through March 1999. The Company's office lease for its
headquarters expires on December 31, 1997. The Company anticipates expenditures
for the purchase of office furniture and equipment, leasehold improvements and
moving expenses to relocate its headquarters to a new location, but has no
estimate of this expenditure at the current time.
In March 1996, the Company extended its $5,000,000 unsecured line of credit
with Chase Manhattan Bank, N.A. This line of credit will expire on March 31,
1997. The Company believes that its current liquidity, together with its
existing credit facility and the cash flows expected to be generated by
operations will be sufficient to meet its cash needs for working capital,
capital
14
15
expenditures and marketing expansion through at least September 30, 1997.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS;SEASONALITY
The Company generally ships its products upon receipt of orders and
maintains no significant 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
quarterly operating results. In addition, the Company's 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
and the timing of large orders, the timing of product shipments and the timing
of marketing and product development expenditures. Large software license
contracts, if any, may have a significant impact on revenues for any quarter and
could therefore result in significant fluctuations in quarterly 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. In
addition, revenues are typically higher in the fourth quarter than in other
quarters of the year reflecting the Company's fiscal year end and a sales
commission policy that bases rewards on achievement of annual quotas. As a
result of these factors, the Company has experienced, and may in the future
experience, significant period-to-period fluctuations in revenues and operating
results.
FACTORS AFFECTING FUTURE PERFORMANCE
Further information on factors that could affect the Company's business and
financial results are included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on December 30, 1996.
Forward-looking statements of the Company are subject to the risk that
assumptions made by management of the Company concerning future general economic
conditions such as recession, inflation, interest rates, tax rates, consumer
spending and credit and other future conditions having an impact on software
markets and the Company's business may prove to be incorrect. Adverse changes in
such future economic conditions could have an adverse effect on the Company's
business.
15
16
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3. Instruments Defining the Rights of
Security-Holders
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 year ended September 30, 1996, File No. 0-23852, and
incorporated herein by reference)
10. Material Contracts
10.1 1997 Executive Bonus Plan
10.2 Project Software & Development, Inc. 1994 Incentive and
Nonqualified Stock Option Plan, as amended
10.3 Project Software & Development, Inc. 1994 Employee Stock
Purchase Plan, as approved by the stockholders of the
Company by written consent dated April 15, 1994 (included as
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1996, File No. 0-23852, and
incorporated herein by reference)
11.1 Statement re computation of per share earnings
27. Financial Data Schedule
16
17
(b) The Company filed no reports on Form 8-K during the three months ended
December 31, 1996.
17
18
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 13, 1997 By: /s/ Paul D. Birch
------------------ -------------------------------
Authorized Officer
Executive Vice President
Finance & Administration, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
18
19
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
year ended September 30, 1996, File No. 0-23852, and incorporated
herein by reference)
10.1 1997 Executive Bonus Plan
10.2 Project Software & Development, Inc. 1994 Incentive and
Nonqualified Stock Option Plan, as amended
10.3 Project Software & Development, Inc. 1994 Employee Stock Purchase
Plan (included as Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended September 30, 1996, File No.
0-23852, and incorporated herein by reference)
11.1 Statement re computation of per share earnings
27.1 Financial Data Schedule