================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2000
-----------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934.
For the transition period from ____________ to _____________
Commission File Number: 0-26330
-------
ASTEA INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2119058
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 Business Center Drive, Horsham, PA 19044
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 682-2500
---------------
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of November 10, 2000, 14,820,675 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.
ASTEA INTERNATIONAL INC.
FORM 10-Q
QUARTERLY REPORT
INDEX
Page No.
--------
Facing Sheet 1
Index 2
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets (Unaudited) 3
Consolidated Statements of Operations (Unaudited) 4
Consolidated Statements of Cash Flows (Unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure About Market Risk 11
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit 27 Financial Data Schedule
2
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
ASTEA INTERNATIONAL INC.
-------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
September 30, December 31,
2000 1999
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 4,213,000 $ 6,158,000
Investments available for sale 5,995,000 37,907,000
Receivables, net of reserves of $1,324,000 and $1,047,000 6,900,000 9,287,000
Prepaid expenses and other 1,799,000 1,632,000
Deferred income taxes 856,000 856,000
-----------------------------------------------
Total current assets 19,763,000 55,840,000
Property and equipment, net 1,040,000 1,022,000
Capitalized software development costs, net 1,722,000 1,772,000
-----------------------------------------------
Total assets $22,525,000 $58,634,000
===============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 165,000 $ 410,000
Accounts payable and accrued expenses 5,047,000 7,707,000
Deferred revenues 2,652,000 3,553,000
-----------------------------------------------
Total current liabilities 7,864,000 11,670,000
Deferred income taxes 298,000 298,000
Long-term debt 39,000 49,000
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued - -
Common stock, $.01 par value, 25,000,000 shares
authorized, 14,821,000 and 14,136,000 issued and
outstanding 148,000 141,000
Additional paid-in capital 22,669,000 52,242,000
Cumulative currency translation adjustment (1,105,000) (839,000)
Accumulated deficit (7,388,000) (4,927,000)
-----------------------------------------------
Total stockholders' equity 14,324,000 46,617,000
-----------------------------------------------
Total liabilities and stockholders' equity $22,525,000 $58,634,000
===============================================
The accompanying notes are an integral part of these statements.
3
ASTEA INTERNATIONAL INC.
------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Revenues:
Software license fees $ 2,183,000 $ 2,618,000 $ 5,774,000 $ 6,938,000
Services and maintenance 2,843,000 5,537,000 10,823,000 16,844,000
---------------------------------------------------------
Total revenues 5,026,000 8,155,000 16,597,000 23,782,000
---------------------------------------------------------
Costs and expenses:
Cost of software license fees 193,000 459,000 949,000 1,687,000
Cost of services and maintenance 2,181,000 4,301,000 8,438,000 13,170,000
Product development 494,000 1,070,000 2,018,000 3,693,000
Sales and marketing 1,399,000 1,865,000 5,312,000 6,187,000
General and administrative 1,216,000 903,000 2,917,000 2,815,000
Restructuring charge (Note 3) - - 1,101,000 -
---------------------------------------------------------
Total costs and expenses 5,483,000 8,598,000 20,735,000 27,552,000
---------------------------------------------------------
Loss from continuing operations before
interest and taxes (457,000) (443,000) (4,138,000) (3,770,000)
Net interest income 170,000 511,000 1,384,000 1,603,000
(Loss) income from continuing operations
before income tax (287,000) 68,000 (2,754,000) (2,167,000)
Income tax benefit - - - 376,000
---------------------------------------------------------
(Loss) income from continuing operations (287,000) 68,000 (2,754,000) (1,791,000)
---------------------------------------------------------
Gain on disposal of discontinued
operations, net 293,000 - 293,000 -
---------------------------------------------------------
Net income (loss) $ 6,000 $ 68,000 $(2,461,000) $(1,791,000)
=========================================================
Basic and diluted net earnings (loss) per
share:
Continuing operations $ - $ - $(0.19) $(0.13)
Gain on sale of discontinued
operations - - .02 -
---------------------------------------------------------
Net earnings (loss) $ 0.00 $ 0.00 $(0.17) $(0.13)
=========================================================
Share outstanding used in computing basic
earnings (loss) per share 14,821,000 13,944,000 14,486,000 13,856,000
=========================================================
The accompanying notes are an integral part of these statements.
4
ASTEA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended September 30,
---------------------------------
2000 1999
---------------- ---------------
Cash flows from operating activities:
Net loss $(2,461,000) $ (1,791,000)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Gain on sale of discontinued operations (293,000) -
Depreciation and amortization 1,163,000 1,889,000
Variable option compensation benefit (224,000) -
Loss on sale of investments 27,000 -
Other 9,000 16,000
Changes in operating assets and liabilities:
Receivables 2,334,000 (1,315,000)
Prepaid expenses and other (204,000) 204,000
Accounts payable and accrued expenses (2,761,000) (2,883,000)
Deferred revenues (950,000) (318,000)
---------------- ---------------
Net cash used in operating activities of continuing operations (3,360,000) (4,198,000)
---------------- ---------------
Cash flows from investing activities:
Sales (purchases) of investments available for sale 31,885,000 (3,006,000)
Purchases of property and equipment (587,000) (437,000)
Proceeds from note receivable - 9,276,000
Capitalized software development costs (550,000) (600,000)
Proceeds from sale of discontinued operations 143,000 -
---------------- ---------------
Net cash provided by investing activities 30,891,000 5,233,000
---------------- ---------------
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock
purchase plan 1,024,000 921,000
Net repayments of long-term debt (255,000) (840,000)
Dividend distribution (30,376,000) -
---------------- ---------------
Net cash (used in)/provided by financing activities (29,607,000) 81,000
---------------- ---------------
Effect of exchange rate changes on cash and cash equivalents 131,000 31,000
---------------- ---------------
Net (decrease)/increase in cash and cash equivalents (1,945,000) 1,147,000
Cash and cash equivalents balance, beginning of period 6,158,000 14,291,000
---------------- ---------------
Cash and cash equivalents balance, end of period $ 4,213,000 $ 15,438,000
================ ===============
The accompanying notes are an integral part of these statements.
5
Item 1. CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ASTEA INTERNATIONAL INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
----------------------
The consolidated financial statements at September 30, 2000 and for the three
and nine month periods ended September 30, 2000 and 1999 of Astea International
Inc. and subsidiaries (the "Company") are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto, together with Management's Discussion and Analysis of Financial
Condition and Results of Operations, contained in the Company's 1999 Annual
Report on Form 10-K/A which are hereby incorporated by reference in this
quarterly report on Form 10-Q.
2. DISCONTINUED OPERATIONS
-----------------------
In September and December 1998, the Company completed the sales of its Bendata,
Inc. and Abalon AB subsidiaries, respectively. Bendata and Abalon had been
accounted for as discontinued operations. A portion of the original sales price
of Bendata and Abalon , has been held in escrow to cover the potential cost of
unforeseen liabilities realized by the purchaser. During the quarter ended
September 30, 2000, all outstanding issues between the Company and the buyers
have been resolved. Accordingly, the company reported a gain of $ 293,000 in its
results for the quarter ending September 30, 2000.
3. RESTRUCTURING CHARGES
---------------------
During the second quarter of 2000, the Company recorded a restructuring charge
of $1,101,000 for actions aimed at reducing costs and consolidating its
development activities primarily in its service automation product line. Since
the restructuring was announced, the Company has aggressively closed and
consolidated excess capacity. As of September 30, 2000 the Company spent
$615,000 towards completing the restructuring.
4. STOCKHOLDERS' EQUITY/COMPREHENSIVE INCOME (LOSS)
------------------------------------------------
The reconciliation of Stockholders' Equity and comprehensive loss from December
31, 1999 to September 30, 2000 is summarized as follows:
Cumulative
Currency
Additional Translation Accumulated Comprehensive
Common Stock Paid-In Capital Adjustment Deficit Loss
------------ --------------- ----------- ----------- -------------
Balance at December 31, 1999 $141,000 $52,242,000 $(839,000) $(4,927,000) -
Exercise of options 7,000 1,027,000 - - -
Compensation benefit in
connection with variable
stock options - (224,000) - - -
Dividends paid - $2.05/share - (30,376,000) - - -
Cumulative currency
translation adjustment - - (266,000) - (266,000)
Net loss - - - (2,461,000) (2,461,000)
-------------- ----------------- --------------- ---------------- ---------------
Balance at September 30, 2000 $148,000 $22,669,000 $(1,105,000) $(7,388,000) $(2,727,000)
============== ================= =============== ================ ===============
6
5. MAJOR CUSTOMERS
---------------
In the third quarter of 2000, the Company had two customers that each accounted
for 12% of total revenues. In the third quarter of 1999, two customers accounted
for 37% and 8% of total revenues, respectively. For the first nine months of
2000, one customer accounted for 10% of total revenues. In the first nine months
of 1999, the Company had two customers that accounted for 21% and 11% of total
revenues, respectively.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Overview
- --------
This document contains various forward-looking statements and information that
are based on management's beliefs, assumptions made by management and
information currently available to management. Such statements are subject to
various risks and uncertainties, which could cause actual results to vary
materially from those contained in such forward-looking statements. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, expected or projected. Certain of these, as well as
other risks and uncertainties, are described in more detail herein and in the
Company's Annual Report on Form 10-K/A for the fiscal year ended December 31,
1999.
The Company develops, markets and supports front-office solutions for the
Customer Relationship Management (CRM) software market. Astea's client/server
and host-based applications are designed specifically for organizations for
which field service and customer support are considered mission critical aspects
of business operations. The Company maintains operations in the United States,
Canada, Australia, New Zealand, the Netherlands, France, the United Kingdom,
Japan and Israel.
Results of Operations
- ---------------------
Comparison of Three Months Ended September 30, 2000 and 1999
- ------------------------------------------------------------
Continuing Operations
- ---------------------
Revenues
- --------
Revenues decreased $3,129,000, or 38%, to $5,026,000 for the three months ended
September 30, 2000 from $8,155,000 for the three months ended September 30,
1999. Software license fee revenues decreased $435,000, or 17%, from the same
period last year. Services and maintenance fees for the three months ended
September 30, 2000 amounted to $2,797,000, a 49% decrease from the same quarter
in 1999. In addition there were miscellaneous revenues of $46,000 in the third
quarter of 2000 included in services and maintenance fees.
The Company's international operations contributed $2,340,000 of revenues in the
third quarter of 2000 compared to $1,863,000 in the third quarter of 1999. This
represents a 26% increase from the same period last year and 47% of total
revenues in the third quarter 2000.
Software license fee revenues decreased 17% to $2,183,000 in the third quarter
of 2000 from $2,618,000 in the third quarter of 1999. The decrease is
attributable to a decline in Dispatch-1 revenues of $1,309,000 and a decline in
PowerHelp sales of $18,000. The license revenue decreases were partially offset
by an increase in ServiceAlliance revenues of $892,000, indicative of the
continued market acceptance of ServiceAlliance. ServiceAlliance license revenues
increased 143%, to $1,517,000 in the third quarter of 2000 from $625,000 in the
third quarter of 1999. DISPATCH-1 license fee revenue decreased $1,309,000 or
66% from $1,975,000 in the third quarter of 1999 to $666,000 in the third
quarter of 2000. DISPATCH-1 accounted for 31% of total software license fee
revenues in the third quarter of 2000 compared to 75% of total license fee
revenues in the third quarter of 1999. In the third quarter of 1999, software
license revenues from royalties received on PowerHelp, which was sold via a
distributor, were $18,000. Power Help was sold at the end of 1999 and is
therefore not sold by the Company in 2000.
Services and maintenance revenues decreased 49% to $2,843,000 in the third
quarter of 2000 from $5,537,000 in the third quarter of 1999. The decrease
primarily relates to service revenues from Dispatch-1, which decreased
$2,748,000 to $422,000 from $3,170,000 in the third quarter of 1999. Most of the
decline is attributable to the
7
completion of two very large service contracts that were completed before the
start of the third quarter of 2000. In addition, certain customers purchased
DISPATCH-1 source code in 1999 and therefore were able to perform all service
work they required using their internal staff instead of Astea. Service and
maintenance revenues from ServiceAlliance increased by $102,000 or 9% to
$1,194,000 in the third quarter of 2000 from $1,092,000 in the third quarter of
1999. In addition, service and maintenance revenue from PowerHelp was $7,000 in
the third quarter of 1999. There were no revenues in 2000 due to the sale of
Power Help at the end of 1999.
In the third quarter of 2000, the Company had two customers that each accounted
for 12% of total revenues. In the third quarter 1999, two customers accounted
for 37% and 8% of total revenues, respectively.
Costs of Revenues
- -----------------
Cost of software license fees decreased 58% to $193,000 in the third quarter of
2000 from $459,000 in the third quarter of 1999. Included in the cost of
software license fees is the fixed cost of capitalized software amortization.
Capitalized software amortization was $200,000 and $368,000 in the third
quarters of 2000 and 1999 respectively. The decrease in the cost of software
license fees represents decreased third party software costs attributable to the
mix of products sold in conjunction with the company's products in the third
quarter of 2000 as well as a decrease in capitalized software amortization. The
software licenses gross margin percentage was 91% in the third quarter of 2000
compared to 82% in the third quarter of 1999. This increase in gross margin was
attributable to decreased cost of license software fees.
Cost of services and maintenance decreased 49% to $2,181,000 in the third
quarter of 2000 from $4,301,000 in the third quarter of 1999. The services and
maintenance gross margin percentage was 23% and 22% in the third quarter of 2000
and 1999, respectively. The increase in gross margin was attributable to other
revenues included in services and maintenance fees in third quarter of 2000.
Product Development
- -------------------
Product development expense decreased 54% to $494,000 in the third quarter of
2000 from $1,070,000 in the third quarter of 1999. Product development as a
percentage of revenues decreased to 10% in the third quarter of 2000 from 13% in
the third quarter of 1999.
Sales and Marketing
- -------------------
Sales and marketing expense decreased 25% to $1,399,000 in the third quarter of
2000 from $1,865,000 in the third quarter of 1999. As a percentage of revenues,
sales and marketing expenses increased to 28% in 2000 compared to 23% in the
third quarter of 1999.
General and Administrative
- --------------------------
General and administrative expenses increased 35% to $1,216,000 in the third
quarter of 2000 from $903,000 in the third quarter of 1999. The increase
primarily relates to exchange losses recognized on the translation of
subsidiaries' financial statements to U.S. dollars.
Restructuring Charge
- --------------------
During the second quarter of 2000, the Company recorded a restructuring charge
of $1,101,000 for actions aimed at reducing costs and consolidating its
development activities. Since the restructuring was announced, the Company
aggressively continued to close and consolidate excess capacity. At September
30, 2000 the Company owes $486,000 to complete its restructuring.
Net Interest Income
- -------------------
Net interest income decreased $341,000 to $170,000 in the third quarter of 2000
from an interest income amount of $511,000 in the third quarter of 1999. The
decrease of interest income is attributable to reduced marketable securities,
which were liquidated at the end of the second quarter 2000, to pay a special
dividend of $2.05 per share to the Company's stockholders of record as of June
15, 2000.
8
International Operations
- ------------------------
Total revenue from the Company's international operations increased by $477,000,
or 26%, to $2,340,000 in third quarter of 2000 from $1,863,000 in the same
quarter in 1999. The increase in revenue from international operations was
primarily attributable to sales of ServiceAlliance licenses in Europe and
Asia/Pacific. International operations resulted in $55,000 net income for the
third quarter ended September 30, 2000 compared to net loss of $382,000 in the
same quarter in 1999.
Comparison of Nine Months Ended September 30, 2000 and 1999
- -----------------------------------------------------------
Continuing Operations
- ---------------------
Revenues
- --------
Revenues decreased $7,185,000, or 30%, to 16,597,000 for the nine months ended
September 30, 2000 from $23,782,000 for the nine months ended September 30,
1999. Software license fee revenues decreased $1,164,000, or 17%, from the same
period last year. Services and maintenance fees for the nine months ended
September 30, 2000 amounted to $10,823,000, a 36% decrease from the same nine
months in 1999.
The Company's international operations contributed $6,998,000 of revenues in the
first nine months of 2000 compared to $6,421,000 in the first nine months of
1999. This represents a 9% increase from the same period last year and 42% of
total revenues in the first nine months of 2000.
Software license fee revenues decreased 17% to $5,774,000 in the first nine
months of 2000 from $6,938,000 in the first nine months of 1999. The decrease is
attributable to a decline in sales of Dispatch-1, partially offset by the
continued market acceptance of ServiceAlliance. ServiceAlliance license revenues
increased $332,000, or 12%, to $3,066,000 in the first nine months of 2000 from
$2,734,000 in the first nine months of 1999. The increase in ServiceAlliance
license revenue was offset by a decrease in DISPATCH-1 license fee revenue,
which decreased $1,380,000 or 34% from $4,087,000 in the first nine months of
1999 to $2,707,000 in the first nine months of 2000 due to decreasing demand for
this product. DISPATCH-1 accounted for 47% of total software license fee
revenues in the first nine months of 2000 compared to 59% of total license fee
revenues in the first nine months of 1999. In addition, software license fee
revenues from royalties received on PowerHelp, which was sold via a distributor,
was $116,000 in the first nine months of 1999. The Company sold its rights to
PowerHelp at the end of 1999. Accordingly, there were no sales in 2000.
Services and maintenance revenues decreased 36% to $10,823,000 in the first nine
months of 2000 from $16,844,000 in the nine months of 1999. The decrease
primarily relates to service and maintenance revenues from DISPATCH-1, which
decreased $7,271,000 to $6,826,000 from $14,097,000 in the first nine months of
1999. Service and maintenance revenues from ServiceAlliance increased 47% to
$3,945,000 in the first nine months of 2000 from $2,689,000 in the first nine
months of 1999. In addition, service and maintenance revenue from PowerHelp was
$58,000 in the first nine months of 1999. Due to the sale of PowerHelp in 1999,
there were no revenues in 2000.
In the first nine months of 2000, the Company had one customer that accounted
for 10% of total revenues. In the first nine months of 1999, the Company had two
customers that accounted for 21% and 11% of total revenues, respectively.
Costs of Revenues
- -----------------
Cost of software license fees decreased 44% to $949,000 in the first nine months
of 2000 from $1,687,000 in the first nine months of 1999. Included in the cost
of software license fees is the fixed cost of capitalized software amortization.
Capitalized software amortization was $600,000 and $1,104,000 in the first nine
months of 2000 and 1999, respectively. The decrease in the cost of software
license fees represents lower third party software costs attributable to the mix
of products sold in conjunction with the company's products in the first nine
months of 2000 and a decrease in capitalized software amortization. The software
licenses gross margin percentage was 84% in the first nine months of 2000
compared to 76% in the first nine months of 1999. This increase in gross margin
was attributable to the mix of software licenses sold.
9
Cost of services and maintenance decreased 36% to $8,438,000 in the first nine
months of 2000 from $13,170,000 in the first nine months of 1999. The services
and maintenance gross margin percentage was 22% in the first nine months of 2000
and 1999. The decrease in services and maintenance costs results from the lower
level of services provided.
Product Development
- -------------------
Product development expense decreased 45% to $2,018,000 in the first nine months
of 2000 from $3,693,000 in the first nine months of 1999. Product development as
a percentage of revenues decreased to 12% in the first nine months of 2000 from
16% in the first nine months of 1999.
Sales and Marketing
- -------------------
Sales and marketing expense decreased 14% to $5,312,000 in the first nine months
of 2000 from $6,187,000 in the first nine months of 1999. This decrease resulted
from the Company's restructuring and its continued effort to focus its marketing
effort on cost effective means to increase market share and expand its presence
through both direct and indirect channels. As a percentage of revenues, sales
and marketing expenses increased to 32% from 26% in the first nine months of
1999.
General and Administrative
- --------------------------
General and administrative expense increased 4% to $2,917,000 in the first nine
months of 2000 from $2,815,000 in the first nine months of 1999. The increase
primarily relates to exchange losses recognized on the translation of
subsidiaries' financial statements to U.S. dollars.
Net Interest Income
- -------------------
Net interest income decreased $219,000 to $1,384,000 in the first nine months of
2000 from $1,603,000 in the first nine months of 1999. The decrease is
attributable to lower marketable securities which were liquidated to pay a
special dividend on June 30, 2000 to stockholders of record on June 15, 2000.
International Operations
- ------------------------
Total revenue from the Company's international operations increased by $577,000,
or 9%, to $6,998,000 in first nine months of 2000 from $6,421,000 in the same
nine months of 1999. The increase in revenue from international operations was
primarily attributable to increased license sales of ServiceAlliance, offset by
reductions in DISPATCH-1 due to decreasing demand. International operations
resulted in a $697,000 loss for the nine months ended September 30, 2000 as
compared to a loss of $1,366,000 for the nine months ended September 30, 1999.
Liquidity and Capital Resources
- -------------------------------
Net cash used in operating activities was $3,217,000 for the nine months ended
September 30, 2000, $981,000 less than the $4,198,000 of cash used for the nine
months ended September 30, 1999. This decrease in cash used was primarily
attributable to improved collections of accounts receivable partially offset by
the payment of accrued expenses and reduction in deferred revenues.
The Company's investing activities provided $30,748,000 of cash in the first
nine months of 2000 compared to $5,233,000 in the first nine months of 1999. The
increase in cash provided was primarily attributable to the sale of marketable
securities used to fund the June 30, 2000 dividend payment.
The Company used $29,607,000 for financing activities during the nine months
ended September 30, 2000 compared to generating $81,000 in the first nine months
of 1999. This decrease is principally due to payment of the June 30, 2000
dividend. This was partially offset by increased proceeds from the exercise of
stock options and employee stock purchase plan.
At September 30, 2000, the Company had a working capital ratio of 2.5:1, with
cash and investments available for sale of $10,208,000. The Company believes
that it has adequate cash resources to make the investments necessary
10
to maintain or improve its current position and to sustain its continuing
operations for the foreseeable future. The Company does not anticipate that its
operations or financial condition will be affected materially by inflation.
Variability of Quarterly Results and Potential Risks Inherent in the Business
- -----------------------------------------------------------------------------
The Company's operations are subject to a number of risks, which are described
in more detail in the Company's prior SEC filings. Risks which are unique to the
Company on a quarterly basis, and which may vary from quarter to quarter,
include but are not limited to the following:
o The Company's quarterly operating results have in the past varied and may
in the future vary significantly depending on factors such as the size,
timing and recognition of revenue from significant orders, the timing of
new product releases and product enhancements, and market acceptance of
these new releases and enhancements, increases in operating expenses, and
seasonality of its business.
o The Company's future success will depend in part on its ability to increase
licenses of ServiceAlliance and other new product offerings, and to develop
new products and product enhancements to complement its existing field
service offerings.
o The Customer Relationship Management (CRM) software market is intensely
competitive.
o International sales for the Company's products and services, and the
Company's expenses related to these sales, continue to be a substantial
component of the Company's operations. International sales are subject to a
variety of risks, including difficulties in establishing and managing
international operations and in translating products into foreign
languages.
o The market price of the common stock could be subject to significant
fluctuations in response to, and may be adversely affected by, variations
in quarterly operating results, developments in the software industry,
adverse earnings or other financial announcements of the Company's
customers and general stock market conditions, as well as other factors.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- --------------------------------------------------------------------
Interest Rate Risk. The Company's exposure to market risk for changes
in interest rates relate primarily to the Company's investment portfolio. The
Company does not have any derivative financial instruments in its portfolio. The
Company places its investments in instruments that meet high credit quality
standards. The Company is adverse to principal loss and ensures the safety and
preservation of its invested funds by limiting default risk, market risk and
reinvestment risk. As of September 30, 2000, the Company's investments consisted
of U.S. government agencies securities, commercial paper and corporate bonds.
The Company does not expect any material loss with respect to its investment
portfolio.
Foreign Currency Risk. The Company does not use foreign currency
forward exchange contracts or purchased currency options to hedge local currency
cash flows or for trading purposes. All sales arrangements with international
customers are denominated in foreign currency. The Company does not expect any
material loss with respect to foreign currency risk.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- -----------------------------------
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not involved in any legal proceedings, which would, in management's opinion,
have a material adverse effect on the Company's business or results of
operations.
Item 2. Changes in Securities and Use of Proceeds
- -----------------------------------------------------------
There have been no changes in securities during the quarter ended September
30,2000.
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Item 3. Defaults Upon Senior Securities
- -------------------------------------------------
There have been no defaults by the Company on any Senior Securities during the
quarter ended September 30, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------------------------
At the Annual Meeting of Stockholders held on August 24, 2000, pursuant to the
Notice of Annual Meeting of Stockholders dated July 24, 2000, the following
actions were taken:
1. The proposal to elect Zack B. Bergreen, Barry M. Goldsmith, Adrian A. Peters
and Isadore Sobkowski as directors, to hold office until the 2001 Annual Meeting
of Stockholders and until their successors are elected and qualified, was
approved (14,131,031 shares in favor, no shares withheld and 90,471 shares
abstaining).
2. The proposal to appoint Arthur Andersen LLP as independent auditors for the
Company for the fiscal year ending December 31, 2000 was approved (13,891,008
shares in favor; 22,085 shares against; and 8,458 shares abstaining).
No other matters were submitted to a vote of the Company's stockholders during
the third quarter of the fiscal year covered by this report through the
solicitation of proxies or otherwise.
Item 5. Other Information
- -----------------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- --------------------------------------------------
(A) Exhibits
(27) Financial Data Schedule
(B) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 13th day of
November 2000.
ASTEA INTERNATIONAL INC.
By: /s/Zack B. Bergreen
----------------------------
Zack Bergreen
Chief Executive Officer
(Principal Executive Officer)
By: /s/Fredric Etskovitz
----------------------------
Fredric Etskovitz
Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
13