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: January 13, 2003
(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 January 13, 2003, Transaction Systems Architects, Inc. issued a press
release announcing the completion of its re-audit and the filing of its Form
10-K, including fourth quarter results and restated financial statements for
prior periods.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release dated January 13, 2003.
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: January 14, 2003 By: /s/ Dwight G. Hanson
----------------------------------------
Dwight G. Hanson
Chief Financial Officer, Treasurer and
Senior Vice President
EXHIBIT INDEX
Exhibit
Number Description
99.1 Press Release dated January 13, 2003
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 Files Form 10-K
And Announces Fourth Quarter Results
Highlights:
o Re-audit completed and form 10-K filed
o Revenue of $70.4 million and EPS of $.03 for fourth quarter 2002 o Operating
cash flow of $35.3 million for fourth quarter 2002 o Seven new ACI Worldwide
customers in five countries added, solutions licensed range from BASE24 to ACI
Smart Chip Manager o Revenue of $282.8 million and EPS of $.43 for fiscal year
2002
o Operating cash flow of $79.0 million for fiscal 2002; cash balance increased
to $87.9 million
(OMAHA, Neb.--January 13, 2003)--Transaction Systems Architects, Inc. (Nasdaq:
TSAIE), a leading global provider of enterprise e-payment and e-commerce
solutions, today announced the completion of its re-audit and the filing of its
form 10-K, which includes fourth quarter results and restated financial
statements for fiscal 2000, 2001 and the first three quarters of fiscal 2002.
The Company has restated its historical results for prior fiscal periods to
recognize various accounting changes. Some of the significant items include:
restatement of revenues under software licensing arrangements with extended
payment terms, the timing and allocation of license and maintenance revenue for
certain contracts as it relates to vendor specific objective evidence (VSOE),
and the timing of a goodwill impairment charge for MDL. The restatements for
extended payment term contracts result in recognition of revenue under software
licensing arrangements with extended payment terms over the term of the
underlying license arrangement, which are generally three to five years, as
payments become due. Also, the Company has determined that in certain
arrangements where it does not have VSOE of the postcontract customer support
(PCS) or maintenance, software license fees will be recognized over the PCS or
maintenance term. In addition as part of the restatement there were other
adjustments made to the Company's financial statements.
For a comparison of restated and previously reported results for fiscal 2000,
2001 and 2002 see the Company's form 10-K, which has been filed with the SEC. In
addition, the Company's form 10-K can be viewed on the Company's Web site at
www.tsainc.com/ir/ir.asp
"The re-audit was a very detailed and time-consuming process to which we
dedicated an enormous amount of our worldwide staff and resources," said Gregory
Derkacht, President and CEO.
With the completion of the re-audit the Company has revised its revenue
recognition policies and will be strengthening its internal policies, procedures
and financial controls.
With the filing of the form 10-K the Company believes it is now in compliance
with Nasdaq Marketplace Rule 4310(c)(14) and will request approval from Nasdaq
to resume trading under the symbol TSAI. The financials have been certified in
accordance with Sarbanes-Oxley Act of 2002.
For the fourth quarter of fiscal 2002, revenue was $70.4 million with software
license fees of $39.3 million, maintenance fees of $18.6 million and services
fees of $12.5 million. The Company's recurring revenue was $39.8 million or 56
percent of revenue. Recurring revenue consists of monthly license fees of $20.0
million, maintenance fees of $18.6 million and facilities management services of
$1.2 million. Operating income was $7.6 million with an operating margin of 10.8
percent. Operating cash flow was $35.3 million and the cash balance as of
September 30, 2002 increased to $87.9 million. With the revised treatment for
certain previously sold software license arrangements interest expense was $1.2
million for the quarter. The revised treatment for these arrangements has
resulted in the recording of periodic interest expense for the difference
between the proceeds received under the previous factoring arrangements and the
license fee revenues recognized under the arrangements. Net income for the
quarter was $1.1 million, or $.03 per diluted share. The results for the quarter
include $3.6 million for impairment of marketable securities and $1.5 million
for the impairment of goodwill. In addition the Company incurred professional
fees related to the re-audit of $2.5 million during the fourth quarter.
During the quarter, ACI Worldwide Inc, the Company's largest business unit,
added nine new customers in five countries. Solutions licensed included
BASE24(R), ACI Proactive Risk Manager(TM), ACI Commerce Gateway(TM), ACI
Payments Manager(TM) and ACI Smart Chip Manager(TM). One new country was added
to the Company's geo portfolio bringing the total to 71 countries. ACI
introduced BASE24-es, the next stage in the evolution of BASE24, its leading
e-payments software solution.
BASE24-es represents a multi-platform strategy for the Company's core e-payments
software. The e-payment processing application is now available on three
industry-leading platforms, HP NonStop, IBM zSeries and Sun Solaris.
Also during the quarter, Insession Technologies signed seven new customers as
the market for infrastructure solutions and tools remained challenging. The
Company's IntraNet business added one new customer, two capacity upgrades for
its Money Transfer Systems(TM) product, and signed ten agreements for
enhancement work.
For fiscal year 2002, revenue was $282.8 million with software license fees of
$158.4 million, maintenance fees of $74.2 million and services fees of $50.2
million. For the year, the Company's recurring revenue was $163.5 million or 58
percent of revenue. Recurring revenue for fiscal year 2002 consisted of monthly
license fees of $84.2 million, maintenance fees of $74.2 million and facilities
management services of $5.1 million. Operating income was $41.7 million; an
operating margin of 14.7 percent and operating cash flow was $79.0 million. Net
income was $15.3 million or $.43 per diluted share. The results for the fiscal
year include $8.4 million for impairment of marketable securities, $1.5 million
for impairment of goodwill, and a gain on the sale of Regency Systems of $8.7
million.
Overall, the Company's liquidity position improved for fiscal year 2002, and it
had a strong cash position. Early results from the first quarter of fiscal year
2003 indicate the Company is positioned to meet the demands of the marketplace.
During the first quarter of fiscal year 2003, ACI signed seven new customers and
twelve capacity upgrades from existing customers, Insession added twelve new
customers and IntraNet added two.
The Company plans to respond to questions regarding its financial performance
for fourth quarter fiscal 2002 and re-audit results in a subsequent
teleconference. Details of the teleconference will be provided in a press
release in the near term.
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 71 countries on six
continents.
Forward-Looking Statements
This report 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 Company is currently in the process of evaluating the claims made
in class action lawsuits filed against the Company. The Company
intends to defend the foregoing lawsuits vigorously, but cannot
predict the outcome and is not currently able to evaluate the
likelihood of its success or the range of potential loss, if any.
However, if the Company were to lose these lawsuits or if they were
not settled on favorable terms, the judgment or settlement may have a
material adverse effect on its consolidated financial position,
results of operations and cash flows.
o The Company has insurance that provides an aggregate coverage of
$20.0 million for the period during which the lawsuits were filed,
but cannot evaluate at this time whether such coverage will be
available or adequate to cover losses, if any, arising out of these
lawsuits. If these policies do not adequately cover expenses and
certain liabilities relating to these lawsuits, our consolidated
financial condition, results of operations and cash flows could be
materially harmed. The Company's certificate of incorporation
provides that it will indemnify and advance expenses to its directors
and officers to the maximum extent permitted by Delaware law. The
indemnification covers any expenses and liabilities reasonably
incurred by a person, by reason of the fact that such person is or
was or has agreed to be a director or officer, in connection with the
investigation, defense and settlement of any threatened, pending or
completed action, suit, proceeding or claim.
o The shareholder lawsuits will likely increase the premiums the
Company must pay for directors and officers liability insurance in
the future, and may make this insurance coverage prohibitively
expensive or unavailable. Increased premiums for this insurance
could materially harm our financial results and cash flows in future
periods. The inability to obtain this coverage due to its
unavailability or prohibitively expensive premiums would make it more
difficult for us to retain and attract officers and directors.
o The Company has restated its fiscal 2001, 2000, 1999 and 1998
consolidated financial statements as a result of reevaluating the
accounting for several historical transactions. The Company is
uncertain whether the class action lawsuits, change in the application
of accounting principles and/or the restatement of prior period
financial results will have a material adverse effect on the Company's
customer, supplier or other business relationships.
o As a result of the Company's restatement of its prior consolidated
financial statements, it is likely that the Company will be subject
to inquiry or investigation by governmental authorities, including
the Securities and Exchange Commission. The Securities and Exchange
Commission has informally contacted the Company about the restatement
process, but the Company has not been notified of a formal inquiry or
investigation. 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, which could adversely affect the Company's
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 No assurance can be given that operating results will not vary.
Fluctuations in quarterly operating results may result in volatility
in the Company's stock price. 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. The Company's stock price may also become volatile, in
part, due to the announced change in the application of certain
accounting principles and/or the restatement of prior period
financial results.
o The Company will continue to derive a majority of its total revenue
from international operations and is subject to risks of conducting
international operations including: difficulties in staffing and
management, reliance on independent distributors, longer payment
cycles, volatilities of foreign currency exchange rates, compliance
with foreign regulatory requirements, variability of foreign economic
conditions, and changing restrictions imposed by U.S. export laws.
o The Company will continue to derive a substantial majority of its total
revenue from licensing its BASE24 family of software products and
providing services and maintenance related to those products. Any
reduction in demand for, or increase in competition with respect to,
BASE24 products would have a material adverse effect on the Company's
financial condition and results of operations.
o Prior to its May 2002 merger with HP, Compaq Computer Corporation
announced a plan to consolidate its high-end performance enterprise
servers on the Intel Corp. Itanium microprocessor by 2004. The Company
has not determined whether consolidation of the high-end servers, if it
occurs as announced, will materially affect the Company's business,
financial position or results of operations.
o The Company will continue to derive a substantial portion of its
revenues from licensing of software products that operate on HP NonStop
servers. Any reduction in demand for these servers or in HP's ability
to deliver products on a timely basis could have a material adverse
effect on the Company's financial condition and results of operations.
o The Company's business is concentrated in the banking industry, making
it susceptible to a downturn in that industry. Further, banks are
continuing to consolidate, decreasing the overall number of potential
buyers of the Company's products and services.
Any or all of the forward-looking statements may turn out to be wrong. They can
be affected by inaccurate assumptions or by known or unknown risks and
uncertainties. Many of these factors will be important in determining the
Company's actual future results. Consequently, no forward-looking statement can
be guaranteed. Actual future results may vary materially from those expressed or
implied in any forward-looking statements
These cautionary statements and any other cautionary statements that may
accompany such forward-looking statements, whether written or oral, expressly
qualify all of the forward-looking statements. In addition, the Company
disclaims any obligation to update any forward-looking statements after the date
of this report unless applicable securities laws require it to do so.
For a detailed discussion of these and other risk factors, interested parties
should review the Company's filings with the Securities and Exchange Commission.
FINANCIAL HIGHLIGHTS FOLLOW
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
September 30, September 30,
2002 2001
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Restated
ASSETS
Current assets:
Cash and cash equivalents $ 87,894 $ 32,004
Marketable securities 3,757 4,765
Billed receivables, net 35,755 55,690
Accrued receivables 13,132 23,414
Deferred income taxes, net 17,554 10,589
Other 4,560 9,420
Total current assets 162,652 135,882
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Property and equipment, net 11,597 14,474
Software, net 5,609 11,778
Goodwill, net 55,947 57,371
Deferred income taxes, net 27,546 47,097
Other 3,168 5,801
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Total assets $ 266,519 $ 272,403
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt
- financing agreements $ 18,444 $ 13,104
Line of credit - 12,000
Accounts payable 7,348 13,633
Accrued employee compensation 7,583 7,194
Accrued liabilities 11,494 18,130
Income taxes payable 7,847 2,013
Deferred revenue 59,598 47,358
Other 872 504
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Total current liabilities 113,186 113,936
----------- -----------
Debt - financing agreements 24,866 44,135
Deferred revenue 23,860 28,544
Other 1,749 1,818
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Total liabilities 163,661 188,433
Stockholders' equity:
Class A Common Stock 183 183
Additional paid-in capital 228,465 227,126
Accumulated deficit (83,927) (99,196)
Treasury stock, at cost (35,258) (35,258)
Accumulated other comprehensive
loss, net of taxes (6,605) (8,885)
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Total stockholders' equity 102,858 83,970
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Total liabilities and
stockholders' equity $ 266,519 $ 272,403
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TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months Ended September 30, Twelve Months Ended September 30,
-------------------------------- ---------------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Restated Restated Restated
Revenues:
Software license fees $ 39,301 $ 43,228 $ 158,453 $ 161,847
Maintenance fees 18,557 17,917 74,213 67,173
Services 12,525 17,695 50,163 66,576
----------- ----------- ----------- -----------
Total revenues 70,383 78,840 282,829 295,596
Expenses:
Cost of software license fees 7,215 10,069 31,053 43,616
Cost of maintenance and services 14,756 18,267 60,641 73,181
Research and development 8,351 8,883 35,029 41,240
Selling and marketing 13,820 16,776 59,145 74,578
General and administrative 17,100 12,462 53,770 58,839
Goodwill amortization - 4,222 - 14,793
Impairment of goodwill 1,524 30,366 1,524 36,618
Impairment of software - 8,880 - 8,880
----------- ----------- ----------- -----------
Total expenses 62,766 109,925 241,162 351,745
----------- ----------- ----------- -----------
Operating income (loss) 7,617 (31,085) 41,667 (56,149)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 623 365 1,667 1,759
Interest expense (1,220) (1,660) (5,596) (7,338)
Other (4,048) 1,774 (26) (15,414)
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Total other income (expense) (4,645) 479 (3,955) (20,993)
----------- ----------- ----------- -----------
Income (loss) before income taxes 2,972 (30,606) 37,712 (77,142)
Income tax benefit (provision) (1,915) (1,372) (22,443) (2,921)
----------- ----------- ----------- -----------
Net income (loss) $ 1,057 $ (31,978) $ 15,269 $ (80,063)
=========== =========== =========== ===========
Earnings (loss) per share information:
Weighted average shares outstanding:
Basic 35,396 35,170 35,326 34,116
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Diluted 35,562 35,170 35,572 34,116
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Earnings (loss) per share:
Basic $ 0.03 $ (0.91) $ 0.43 $ (2.35)
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Diluted $ 0.03 $ (0.91) $ 0.43 $ (2.35)
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