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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: November 19, 2002
(Date of earliest event reported)
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TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-25346 47-0772104
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
224 South 108th Avenue,
Omaha, Nebraska 68154
(Address of principal executive offices, including zip code)
(402) 334-5101
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On November 19, 2002, Transaction Systems Architects, Inc. issued a press
release providing an update on the status of the re-audit, announcing that the
Company will change its revenue recognition policy for prior periods. A copy of
the press release is attached as an exhibit to this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release dated November 19, 2002.
SIGNATURE
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 hereunto duly authorized.
TRANSACTION SYSTEMS ARCHITECTS, INC.
Date: November 20, 2002 By: /s/ Dwight G. Hanson
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Dwight G. Hanson
Chief Financial Officer, Treasurer and
Senior Vice President
EXHIBIT INDEX
Exhibit
Number Description
99.1 Press Release dated November 19, 2002
Exhibit 99.1
News Release
TRANSACTION SYSTEMS ARCHITECTS INC
224 SOUTH 108 AVENUE
OMAHA, NEBRASKA 68154
402.334.5101
FAX 402.390.8077
For more information contact:
William J. Hoelting
Vice President, Investor Relations
402.390.8990
FOR IMMEDIATE RELEASE
TRANSACTION SYSTEMS ARCHITECTS ANNOUNCES UPDATE ON RE-AUDIT:
Company will change revenue recognition policy for prior periods
(OMAHA, Neb.-- November 19, 2002)-- Transaction Systems Architects, Inc.
(Nasdaq: TSAIE), a leading global provider of enterprise e-payments and
e-commerce solutions announced today an update with respect to the previously
announced review and re-audit of its financial statements for fiscal 2000 and
fiscal 2001. On August 14, 2002, the Company announced that information had been
brought to the attention of the Company's management that caused management to
review several transactions involving one of the Company's customers in 1999 and
2000. As a result, the Company engaged its recently appointed independent
accountants, KPMG LLP ("KPMG"), to perform a re-audit of its financial
statements for fiscal years 2000 and 2001, which had been previously audited by
Arthur Andersen LLP.
In the course of the Company's review of its financial statements during the
re-audit process, the Company has, in consultation with KPMG, identified certain
accounting adjustments that will result in restatements of the Company's
financial statements for fiscal 1999, 2000 and 2001, as well as restatements of
previously announced 2002 quarterly results. These adjustments will have no
significant impact on the Company's cash balances.
The most significant adjustment relates to the timing and allocation of license
revenue for contracts with extended payment terms. Historically, and with the
concurrence of Arthur Andersen LLP, the Company's prior auditors, the Company
utilized a method of recognizing revenue from certain software arrangements with
extended payment terms whereby the software license fees were recognized
up-front upon delivery of the software products. These
arrangements generally have payment terms extending from twelve to sixty months,
although certain of these arrangements have payment terms extending beyond
sixty months. The software license revenues recognized under these arrangements
are referred to in our previously issued financial statements as "Recognized
Up-Front MLFs." The Recognized-Up-Front MLFs recognized as software license
revenues and disclosed in our prior SEC filings totaled approximately $21.3
million, $30.3 million, and $60.5 million for fiscal 2001, 2000, and 1999,
respectively, and $9.6 million for the nine-month period ended June 30, 2002.
Upon completion of the re-audit, the Company's previously issued financial
statements for fiscal years 1999, 2000 and 2001 and its quarterly financial
results for 2002 will be restated to recognize revenues under software licensing
arrangements with extended payment terms over the term of the underlying license
arrangements as payments become due. Previously reported software license
revenues and net income will decrease substantially in fiscal 1999 and 2000. The
Company is currently evaluating the impact on fiscal 2001. Previously reported
software license fee revenue and net income for fiscal 2002 will increase.
Software license fee revenue for subsequent periods will be positively impacted
as a result of these changes.
The Company is also evaluating the timing and allocation of license and
maintenance revenue for certain contracts as it relates to "vendor specific
objective evidence (VSOE)." The effect of the VSOE adjustments will be to spread
the software license revenue over the term of the contract. In addition, the
Company is evaluating its accounting for previously reported restructuring
charges and business combinations, as well as for certain other bookkeeping
matters that have been identified in connection with the re-audit. The Company
has not quantified the impact of these possible adjustments; however, these
adjustments may be material.
"We are continuing with the re-audit process and working diligently with the
auditors to complete the re-audit as expediently as possible," said Greg
Derkacht, President and CEO. "Given these changes to the Company's previously
reported financial statements, we believe it is appropriate to disclose the
status of the re-audit at this time. I would like to emphasize these adjustments
will have no significant impact on the Company's cash position and relate
primarily to timing of revenue and expense recognition."
As a result of these adjustments, it is doubtful that the Company will be able
to complete the re-audit prior to the November 29, 2002 deadline allowed by
Nasdaq. The Company has requested
an extension from Nasdaq until December 31, 2002 to complete the re-audit
process, which is the deadline for filing its Form 10-K for fiscal 2002.
The Company will provide further details regarding this announcement in a Web
cast conference call, to be held November 20, 2002 at 7:30 am CDT. Interested
persons may access a real-time audio broadcast of the teleconference at:
www.tsainc.com/ir/ir.asp. The Web cast will be archived for 30 days after the
teleconference at the Internet address listed above.
About Transaction Systems Architects, Inc.
Transaction Systems Architects' software facilitates electronic payments by
providing consumers and companies access to their money. Its products are used
to process transactions involving credit cards, debit cards, secure electronic
commerce, mobile commerce, smart cards, secure electronic document delivery and
payment, checks, high-value money transfers, bulk payment clearing and
settlement, and enterprise e-infrastructure. Transaction Systems Architects'
solutions are used on more than 1,650 product systems in 72 countries on six
continents.
Forward-Looking Statements
This news release contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. Generally,
forward-looking statements include words or phrases such as "management
anticipates," "the Company believes," "the Company anticipates," "the Company
expects," "the Company plans," "the Company will," and words and phrases of
similar impact, and include but are not limited to statements regarding future
operations, business strategy and business environment. The forward-looking
statements are made pursuant to safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially. Factors
that could cause actual results to differ include, but are not limited to, the
following:
o The decision to re-audit the Company's consolidated financial
statements for fiscal years 2000 and 2001 will result in the Company
being required to restate the financial results for one or more prior
periods. The re-audit could also result in the Company's independent
accountants proposing changes to other items of income and expense
and the application of accounting principles unrelated to the
transactions currently under consideration. The Company is uncertain
whether the re-audit or restatement of any prior period would have a
material adverse effect on the Company's customers, suppliers or
other business relationships.
o The Company may not meet the November 29, 2002 deadline imposed by
Nasdaq, which in turn could cause the Company's stock to be de-listed.
The Company has asked Nasdaq for an extension of this deadline in the
event that it is unable to complete the re-audit by that time. There
can be no assurance that Nasdaq will grant an extension.
o As a result of the Company's announcement to conduct a re-audit of
its financial statements for fiscal years 2000 and 2001, the Company
may be subject to inquiry or investigation by governmental
authorities, including the Securities and Exchange Commission. In
the event that the Company is subject to such an inquiry or
investigation, the Company will fully cooperate with such inquiry or
investigation. There is risk that such an inquiry or investigation
could result in substantial costs and divert management attention and
resources from our business, which could adversely affect our
business.
o In the past, private securities class action litigation has been
brought against companies after events occurred that caused volatility
in the market prices. Due to the announcement of the re-audit of our
financial statements, there is risk that private securities litigation
may be brought against the Company.
There is risk that such litigation could result in substantial costs
and divert management attention and resources from our business, which
could adversely affect our business.
o New accounting standards, or additional interpretations or guidance
regarding existing standards, could be issued in the future, which
could lead to unanticipated changes in the Company's current financial
accounting policies. These changes could affect the timing of revenue
or expense recognition and cause fluctuations in operating results.
o The Company's stock price may become volatile, in part, due to the
announcement of the re-audit of its consolidated financial statements
for fiscal years 2000 and 2001, and any resulting restatement of any
prior fiscal period. The stock price may fluctuate until the CEO and
CFO make the required certifications pursuant to the Sarbanes-Oxley
Act of 2002. Fluctuations in quarterly operating results may also
result in volatility in the Company's stock price. No assurance can
be given that operating results will not vary. The Company's stock
price may also be volatile, in part, due to external factors such as
announcements by third parties or competitors, inherent volatility in
the high-technology sector and changing market conditions in the
industry.
For a detailed discussion of these and other risk factors, interested parties
should review the Company's filings with the Securities and Exchange Commission.