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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________.
Commission file number 0-20034
BROADWAY & SEYMOUR, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1522214
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
128 South Tryon Street
Charlotte, North Carolina 28202
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(Address of principal executive (Zip code)
offices)
(704) 372-4281
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value
(Title of class)
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 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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
The aggregate market value of voting stock held by non-affiliates of
the registrant as of February 26, 1999 computed by reference to the closing sale
price on such date, was $31,728,006. As of the same date, 9,228,623 shares of
Common Stock, $.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1998 Annual Report (the "Annual Report"), filed as
an Exhibit hereto, and the Notice of Annual Meeting of Stockholders and
definitive Proxy Statement pertaining to the 1999 Annual Meeting of Stockholders
(the "Proxy Statement") to be filed pursuant to Regulation 14A (no later than
April 30, 1999) are incorporated herein by reference into Parts II and IV, and
Part III, respectively.
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Total pages - 19
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Item 1. Description of Business
Overview
Broadway & Seymour, Inc. (the "Company") is a software product and
services company, providing integrated solutions to the financial, legal and
professional services markets. The Company serves these markets through three
separately managed operating segments which are summarized below:
Elite Information Systems, Inc. ("Elite"), the Company's legal and
professional services business, is based in Los Angeles, California and provides
an integrated suite of practice management software for the legal and
professional services markets. Elite's products are focused primarily on time
tracking, billing, internal accounting and other administrative functions,
including marketing, records management, case management and conflicts of
interest prevention. Elite's software products are often sold with related
services to aid the customer in implementation, data conversion, user training,
support and maintenance of those products.
Broadway & Seymour, the Company's customer relationship management
business (the "CRM business"), is based in Charlotte, North Carolina and
provides product-based and services-based solutions that address the customer
relationship management needs of the financial services industry. The CRM
business' product-based solutions for customer relationship management include
the proprietary software products TouchPoint(TM), CRISP(TM) and BANCStar(R),
which are generally integrated and customized to provide a tailored business
solution to banks and other financial institutions. Through its services-based
solutions the CRM business provides consulting and custom system integration and
development services focused on customer relationship management.
The MiniComputer Company of Maryland, Inc. ("TMC"), based in
HuntValley, Maryland, is a marketer of proprietary time and billing software,
custom programming services and other computer related services primarily to law
firms. The majority of TMC's operations are focused on supporting existing
customers that have previously licensed TMC's software product. Subsequent to
the period covered by this report the Company signed a definitive stock purchase
agreement (effective March 5, 1999) to sell all of the outstanding shares of TMC
to a holding company owned by TMC management.
General Development of the Business
The Company was incorporated in 1985 in connection with the acquisition
of Broadway & Seymour, Inc., a North Carolina corporation that had been doing
business since 1981. The Company followed a strategy of growth through the
acquisition of products and businesses through mid-1995. At the end of 1995, the
Company changed its strategic direction to focus on achieving sustained
performance of core operations and growth through internally developed
product-based solutions and other selected services, rather than acquisitions.
Operations were reorganized to integrate independent business units, and certain
non-core business units were disposed of in 1995, 1996 and 1997 (see
Management's Discussion and Analysis - Significant Transactions).
Business Strategy
The Company's strategy is to develop and provide business solutions
that address the business management and customer relationship management needs
of its targeted markets which include legal and other service firms of all sizes
and top financial institutions.
In the legal and professional service industries, Elite will continue
to develop and market its client-server Windows and internet/intranet practice
management products (see "Product and Services Based Solutions" below), while
also focusing efforts such as the planned release of its 32-bit system with
enhanced
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query capabilities and object-oriented architecture. Elite markets its practice
management tools principally to law firms in the United States, Canada, the
United Kingdom and Europe. In addition, Elite will continue to focus on
expanding its market presence in other segments of the services
industry, including accounting, actuarial, consulting, advertising, public
relations and other services firms.
Elite has an extensive field operations unit that performs services
including installation, implementation, data conversion, training and consulting
on Elite products. Elite's Professional Services unit also provides follow-on
consulting and technical services to its client base on a fee for services
basis. Principally all Elite customers contract with Elite for maintenance and
telephone support services on an annual basis.
The Company's CRM business' strategy is to continue to address the
customer relationship management needs of large, market leading financial
services organizations that will offer opportunities for growth through
value-added relationships. CRM will continue to focus its primary marketing
efforts on its TouchPoint customer relationship management solution, targeting
large banks and thrifts and insurance companies in North America. CRM intends to
continue providing client and market support of its BANCStar and CRISP products
(see "Product and Services Based Solutions" below). CRM also plans to continue
providing consulting, system integration and custom development services in
conjunction with its product offerings and on a consulting-only basis by
leveraging its knowledge, software and services into financial services and
other markets with customer relationship management needs.
Product and Services Based Solutions
Software products mentioned in this document are for identification
purposes only and may be trademarks of Broadway & Seymour, Inc., its
subsidiaries or third parties.
Solutions for the Legal and Professional Services Markets
Elite's solutions incorporate client-server and open systems
architecture using either a Windows or internet browser interface and
can be run on multiple operating systems and major databases including
Unix, Windows NT Server, Microsoft SQL Server and Informix.
Elite Billing System is a comprehensive accounting and
information management software product serving legal and professional
service firms. The Elite Billing System responds to clients' billing
requirements with on-line management information and processes.
Elite Financial Management System is a general ledger and
accounts payable software product that supports multi-currency and
simultaneous cash and accrual-based accounting as well as budgeting
features.
Elite Case Management System is a case tracking software
system and conflicts/related-party database. This system also includes
calendar and docket functions, a case database, a related-party
tracking system, on-line viewing of case information and personal
calendars and a user-defined reporting system.
Elite Practice Development System is a comprehensive marketing
and practice development tool that tracks relationships, manages
mailings and monitors the effectiveness of client development efforts.
Elite Conflict of Interest Module is an integrated software
tool for checking conflicts of interest, based on a full-text search
engine.
Elite Records Management Module is a software tool for
managing both internal and external records, with bar code support and
integration with the Elite Conflict of Interest System.
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Elite Professional's Desktop is a software tool that
summarizes key information from all Elite applications in a simple and
concise manner within a web-browser. By using built in HTML hyperlinks,
a user can quickly move from application to application.
Solutions for the Financial Services Market
TouchPoint(TM) is a software solution that is integrated with a
financial institution or other company's existing hardware and software
systems to retrieve customer data and present it through a variety of
delivery channels, including call centers, offices and branches.
TouchPoint can be modified to address specific requirements and the
solution may involve integrated third party hardware and software
developed and provided by other vendors. TouchPoint allows improved
customer service by consolidating customer and account information from
existing legacy systems and presenting it on a universal workstation to
a customer service representative. The open client/server architecture
also makes TouchPoint scaleable so that it can be implemented in single
departments or enterprise-wide using a phased installation approach.
BANCStar(R) is a branch automation software product used to automate
branch and teller bank operations and integrate branch networks.
BANCStar supports teller, customer service, sales and loan calculation
activities, as well as basic system functions such as providing branch
statistics and storing and forwarding information to other computers.
BANCStar Prism(TM) is an automated banking system that supports a
graphical user interface, allowing for video and sound, dynamic data
exchange and a multi-tasking environment to help streamline banking
operations to the bank's other computers without interrupting
workstation activity. Custom systems integration and development
services, as well as third party hardware and software, may be provided
as part of the BANCStar solution.
CRISP(TM) is a decision support software product that assists
commercial bankers in the management of their relationships, products
and employees. Fully graphical and intuitive, CRISP delivers
comprehensive product and profitability analyses on a variety of bank
or customer organizational levels. CRISP provides a single repository
of on-line customer information from multiple other systems. Custom
systems integration and development services, as well as third party
hardware and software, may be provided as part of the CRISP solution.
Systems Integration, Consulting and Custom Development
Services are provided as services-based solutions. These engagements
typically involve the development of technology solutions for difficult
business and technical problems and are often provided as part of a
complex system that may include third party hardware and software
products and training and documentation services. The Company may be
retained to perform all aspects of a complex project or a discrete
portion of a project.
Support Services
The Company views its customer support services as a
significant part of its strategy to establish and maintain strong
customer relationships. The Company offers system maintenance and
support at fixed prices under renewable contracts as well as conversion
and installation services as needed by its customers. The degree of
maintenance service provided to customers differs depending on the
system being supported. Generally, support contracts entitle users to
telephone support and regular upgraded product releases. In addition,
the Company offers certain training classes and multi-media based
instruction to customers that aid in the implementation and effective
use of the Company's solutions.
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Year 2000 Issues
Overview
Many software products, custom-developed software, and products
embedded with microprocessor chips were designed to store, process or perform
calculations using only the last two digits of a four-digit year date, for
example, "98" rather than "1998". These software systems and embedded products
may assume the first two digits of the year date to be "19" and as such they may
not be able to process dates with years following 1999. For example, "00" may be
treated by certain software systems as the year 1900 rather than the year 2000.
Results of this failure to process the date correctly could include
miscalculations, unpredictable or inconsistent results or complete system
failures. Companies in all lines of business face issues in addressing whether
their software products, custom developed software and third party software used
internally, sold by the company or used by its vendors or customers or other
entities upon which the company relies, will be able to process data properly
relating to dates subsequent to December 31, 1999 ("Year 2000 compliance").
State of Readiness
The Company has recognized the need to address the Year 2000 compliance
issues and in 1997 established a Year 2000 compliance committee to supervise and
monitor the planning, performance and assessment of the Company's Year 2000
compliance efforts. This committee has involved members of senior management,
product development leaders, information systems management, facilities
management and corporate finance management in efforts to develop a
comprehensive and coordinated Year 2000 compliance effort. The chairman of the
committee periodically reports plans, progress and issues to executive
management and the audit committee of the Board of Directors.
Beginning in the second half of 1997, the Company began developing an
inventory list of all its proprietary software products, third party products it
incorporates in its products or resells, infrastructure and internal use
products, facilities and office service systems and hardware products upon which
it relies. Upon completion of the inventory list, the Company's Year 2000
committee appointed individual team leaders from various functional areas to be
responsible for the efforts of assessing Year 2000 compliance for each of the
inventory list items.
Proprietary Software Products and Custom Developed Software: In 1997,
the Company adopted the widely accepted definition for Year 2000 readiness set
out in the "Compliance with British Standards Institution DISC PD2000-1 for Year
2000". In May 1998, following a period of assessment and testing, the Company
issued its Year 2000 readiness statement which specifically identified the
current versions of each of the Company's proprietary products that met the
adopted standard. The Company continues to test new versions of its products for
compliance with this standard on an ongoing basis. The Company believes that its
current versions of proprietary software products are Year 2000 compliant;
however, no assurance can be given that additional modifications for Year 2000
compliance will not be necessary. The Company's software products are integrated
with its customers' software and hardware systems and have, in many cases, been
uniquely customized to the customers' specifications. The Company has generally
not tested its products as integrated in its customers' operating environments,
although it is in the process of developing methods to do so for current
TouchPoint customers. The customers' systems with which the Company's products
interoperate may not be Year 2000 compliant which may affect the operation of
the Company's products. As a result the Company, in the course of providing its
software maintenance services, may incur costs in ascertaining the cause(s) of
system failures not caused by its own products. Such costs, if any that the
Company may incur are not estimable, but will generally be charged to customers.
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Many of the Company's former customers and current customers presently
use earlier versions of the Company's software products, and/or associated
custom or systems integration code, that are not Year 2000 compliant. The
Company has made efforts to communicate with these customers to advise them that
they will need to upgrade to a Year 2000 compliant version of the Company's
software product, revise custom code or implement other alternatives to meet
their business needs. Customers paying support fees are entitled to receive
software product upgrades as part of their regular maintenance contracts.
Customers who have not maintained support agreements with the Company may
purchase such upgrades. Changes to custom or systems integration code provided
by the Company that is not Year 2000 compliant are not covered by customer
maintenance agreements. Customers may perform such changes themselves, engage
the Company to perform such changes, or, in some cases, engage third parties to
perform such changes. Customers may need to upgrade third party products and
their host software and hardware systems that share data or interoperate with
the Company's products in order to utilize the Company's software upgrades or
modified custom or systems integration code. Such costs could impact customer
purchasing decisions and may lead customers to choose alternatives to the
Company's products or services.
Third Party Products: Third party products embedded within the
Company's products are included in the test plans and compliance efforts that
the Company already has underway for its own products. In addition, the Company
has obtained certification of Year 2000 compliance from each third party vendor
whose products are embedded in the Company's products or that are resold by the
Company.
Infrastructure and Third Party Products Used Internally: The Company
has obtained certification of Year 2000 compliance from each of the vendors of
its internal use information technology systems. The Company is developing test
plans for these internal use systems following the same guidelines and standards
that it has used for its own products. Currently the Company anticipates having
all test plans developed for critical internal use technology systems by
mid-1999. The Company also intends to begin testing during that period and will
continue testing through 1999.
During the first half of 1999, the Company will begin developing a
contingency plan against Year 2000 failure for its mission critical software
applications, hardware and other systems.
The majority of non-information technology systems on which the Company
relies in its operations are owned and managed by the lessors of the buildings
in which the Company's offices are located. The Company has developed checklists
of critical systems upon which it relies and certification documents are being
sought from its lessors and other appropriate providers as applicable regarding
Year 2000 compliance of their systems. The Company will prioritize these systems
and develop test plans based on the responses it receives, or does not receive,
from its lessors and other providers. This effort is scheduled for completion in
the first half of 1999.
Risks and Costs
Because of the nature of the Company's business, the Company may be
subject to Year 2000 claims or litigation by its customers or other parties.
Many customers will incur significant costs in making their information
processing systems Year 2000 compliant and may seek to transfer such costs
through litigation to information processing industry vendors such as the
Company. Although the ultimate outcome of any litigation is uncertain, the
Company does not believe that the ultimate amount of liability, if any, from
such actions would have a material adverse affect on the Company.
The Company believes that Year 2000 issues may affect the purchasing
patterns of its customers and potential customers in a variety of ways. Many
companies are expending significant amounts and rededicating personnel to
correct or patch their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase software products
such as those offered by the Company. It is possible that certain of the
Company's customers are purchasing support contracts with the intent of
discontinuing such support after January 1, 2000 when they have satisfied
themselves that the supported product is Year 2000 compliant. Many potential
customers may also choose to defer purchasing Year 2000 compliant products until
they believe it is absolutely necessary, thus resulting in potentially stalled
market sales within the industry. Additionally, Year 2000 compliance issues
could cause a significant number of companies, including current Company
customers, to reevaluate their current system needs and as a result to consider
switching to other systems or suppliers.
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The Company has not specifically hired additional personnel or made
material purchases of products to address Year 2000 compliance issues, nor does
the Company expect it will be necessary to do so. The expenditures made to date
have principally related to salary costs of existing personnel assigned to
participate at various levels in the Company's compliance efforts. All costs
related to achieving Year 2000 compliance are being expensed as incurred. The
Company estimates that the costs incurred to date related to Year 2000
compliance efforts range between $.5 and $1.0 million. The Company expects to
continue to test current and new versions of its proprietary software, work with
vendors of third party software that the Company uses or resells, update and
test its inventory of potentially affected internal systems and communicate with
vendors and customers regarding the Year 2000 compliance issue. The Company
estimates the costs of these efforts will be below $.5 million.
Euro Currency
Beginning in January 1999, a new currency called the ECU or the "euro"
was introduced in certain Economic and Monetary Union (the "EMU") countries.
During 2002, all EMU countries are expected to be operating with the euro as
their single currency. As a result, computer software used by many organizations
headquartered or maintaining a subsidiary in an EMU country will need to be euro
currency enabled, and in less than three years all organizations headquartered
or maintaining a subsidiary in an EMU country are expected to need to be euro
currency enabled.
The transition to the euro currency will involve the handling of
parallel currencies and conversion of legacy data. Uncertainty exists as to the
effects the euro currency will have on the marketplace. Additionally, all of the
final rules and regulations have not yet been defined and finalized by the
European Commission with regard to the euro currency.
The Company is monitoring the rules and regulations as they become
known in order to make any changes to the software that the Company deems
necessary to comply with such rules and regulations. Although the Company
currently offers certain software products that are designed to be
multi-currency enabled and the Company believes that it will be able to
accommodate any required euro currency changes in its software products, there
can be no assurance that once the final rules and regulations are completed that
the Company's software will contain all of the necessary changes or meet all of
the euro currency requirements.
Research and Development
To meet the changing needs of the financial and professional services
industries, the Company expends resources to continually develop and enhance its
proprietary software products. The Company believes that ongoing commitment to
research and development is important to the long-term success of the business.
For the years ended December 31, 1998, 1997 and 1996, the Company's
total research and development expenditures (including capitalized costs) were
$8.5 million, $6.0 million and $7.4 million, respectively.
There are inherent risks in the development and introduction of a new
product. For example, new products may have quality or other defects in the
early stages of introduction that were not anticipated in the design of those
products. The Company cannot determine the effects on operating results of
unanticipated complications in product introductions or transitions.
Sales and Marketing
New customer contacts are generated by a variety of methods, including
customer referrals, personal sales calls, attendance at trade shows and
seminars, advertising in trade publications, direct mailings to targeted
customers and telemarketing.
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The Company's sales personnel are given sales responsibility within
their targeted customer markets. Additionally, senior management and technical
subject matter experts within the Company are directly involved in obtaining and
supporting relationships.
The Company's business strategy also emphasizes sales to existing
customers. Follow-on sales to existing customers include system upgrades,
expansion of license rights, migration to new products and maintenance and
support services.
Customers
The Company serves a client base of law firms and other professional
service firms through its Elite and TMC operations. Elite's customers include
over half of the 100 largest law firms in the United States and several large
firms in the United Kingdom and the largest law firm in the world. In addition,
the CRM business' customers include a broad variety of institutions and
companies in the financial services industry, including several of the largest
banks in the United States.
The Company provides software solutions under a variety of financial
arrangements, including fixed fee contracts and billings on a time and materials
basis.
The majority of Elite's revenue is concentrated in the legal services
industry. However, no single customer accounts for 10% or more of Elite's
revenue.
A majority of the CRM business revenue is concentrated among a few
customers in the financial services industry. In 1998, 1997 and 1996 the five
largest CRM business customers accounted for approximately 73%, 62% and 68%,
respectively, of the CRM business' revenue and 25%, 37% and 24% of consolidated
revenue for the same periods.
For the periods presented, the CRM business had two customers that
exceeded certain disclosure requirement thresholds and are therefore classified
as significant customers. In 1998 and 1997, Chase Manhattan Bank ("Chase")
accounted for $8.3 million, or 12.1%, and $10.3 million, or 13%, of the
Company's consolidated revenue, respectively. Also, in 1997 and 1996 First Data
Corp. ("FDC") accounted for $8.0 million, or 10.1%, and $9.6 million, or 10.6%,
of consolidated revenue, respectively.
Geographic Information
The Company's assets are principally located in the United States. The
Company's revenue is principally generated in United States, however for the
years ending December 31, 1998, 1997, and 1996 Elite revenue generated in Europe
represented 8%, 9%, and 5% of consolidated revenue, respectively, and 14%, 22%
and 11% of Elite's revenue for the same periods. In addition, for the years
ending December 31, 1998 and 1997, Elite's other international revenue was
approximately 2% and 1% of consolidated revenue, respectively, and 4% and 2% of
Elite's revenue for the same periods. Since the Company's contracts with
non-U.S. customers generally denominate the amount of payments to be received by
the Company in local currencies, exchange rate fluctuations between such local
currencies and the U.S. dollar will subject the Company to currency translation
risks. Also, the Company may be subject to currency transaction risks when the
Company's contracts are denominated in a currency other than the currency in
which the Company incurs expenses related to such contracts.
Competition
The Company's businesses are competitive. The Company is not aware of
any one competitor that offers the same combination of services and products
offered by the Company, but believes that a number of firms compete with the
Company in all areas. In the markets in which it competes, the Company believes
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there are participants that have greater financial, technical and marketing
resources. However, the Company believes that no one competitor is dominant in
its markets.
Elite principally competes for engagements with two other companies
that target similar prospects with office automation solutions for the legal and
professional services industry.
The CRM business is focused in an increasingly competitive environment
of software solutions for customer relationship management. A wide variety of
computer hardware and software companies are becoming involved in offering
similar solutions. Many large accounting and management consulting firms offer
services that overlap with at least a portion of the CRM business' solutions and
services. In addition, the CRM business also competes with the internal
operations of its customers and prospects.
The Company believes that competitive factors for engagements in both
the legal and professional services industry and the financial services industry
include knowledge of the respective industry, capabilities of resources, ease of
use or abilities to customize the solution, breadth of functionality and price.
Backlog
A significant portion of the Company's revenue is derived from work to
be performed under long-term, cancelable contracts entered into in the ordinary
course of business. These contracts often relate to ongoing projects with
respect to which the continuation of work is at the option of the customer. At
December 31, 1998 and 1997, the Company's Elite and CRM businesses had unearned
revenue in the following approximate amounts from signed contracts.
Substantially all of TMC's unearned revenue at those dates related to
maintenance services.
December 31,
1998 1997
($ in thousands)
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Elite $25,959 $14,100
CRM $9,535 $6,772
Employees and Recruitment
The Company believes that its future success will depend in part on its
continued ability to hire and retain qualified employees. The Company believes
its relations with employees are good. Competition for personnel in the
Company's industry is intense. Although it actively recruits personnel and
provides professional employees with career path opportunities, there can be no
assurance that the Company will be successful in attracting and retaining
sufficient numbers of qualified personnel to conduct its business in the future.
The Company actively recruits at college campuses and also seeks employees with
expertise and experience in its chosen markets.
At February 28, 1999, the Company had approximately 465 full-time
employees. Elite had 231 employees, the CRM business had 216 and TMC had 18.
None of the Company's employees is represented by a labor union.
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Copyrights, Trademarks, Patents and Licenses
The Company currently markets several proprietary software products.
The Company attempts to protect its rights in its proprietary software by
retaining the title to and copyright in the software and documentation and
attempts to protect rights in all software it markets (including third-party
software) by including appropriate contractual restrictions on use and
disclosure in its licenses and by requiring its employees to execute
non-disclosure and assignment of inventions agreements. However, the Company
sometimes provides source code for some of its software products to users for
their internal use in connection with the license of these products. The Company
believes that, due to the rapid pace of innovation within its industry, factors
such as the technological and creative skills of its personnel are more
important in establishing and maintaining a leadership position within the
industry than are the various legal protections of its technology. The Company
believes that the nature of its customers, the importance of the Company's
products to them and their need for continuing product support reduce the risk
of unauthorized reproduction. However, there can be no assurance that any such
steps taken by the Company in this regard will be adequate to deter
misappropriation of its proprietary rights or independent third-party
development of functionally equivalent products.
The Company's business includes the development of custom software in
connection with specific customer engagements. Although the Company sometimes
assigns to its customer the copyright and other intellectual property rights in
the software and documentation developed for the customer, in these cases the
Company negotiates to retain the right to develop similar products for other
customers. In a limited number of circumstances, the Company has agreed not to
use certain specific technological code or functionality developed in an
engagement for one customer to perform projects for other customers or to
develop a system for a competitor of the customer that is similar to the system
developed for the customer. However, the Company believes these restrictions
will not have a material adverse effect on the Company.
The Company believes that its services and products do not infringe on
the intellectual property rights of its customers or other third parties.
However, particularly given the rapid changes in copyright and patent law, there
can be no assurance that an infringement claim will not be asserted against the
Company in the future. Any such claim, if resolved against the Company, could
adversely affect the Company's reputation, preclude it from offering certain
products and services, and subject it to substantial liability.
Item 2. Properties
The Company's corporate and the CRM business offices and are located at
128 South Tryon Street in Charlotte, North Carolina. The Company's lease of
those premises (approximately 107,000 square feet) expires December 31, 2000,
with two five-year renewal options thereafter. The Company has subleased
approximately 29,000 square feet of this space. Elite maintains its offices
(approximately 25,000 square feet) in Los Angeles, California under a lease that
expires July 2008. The Company also leases additional facilities, as needed,
principally as sales offices in other cities in North America and the United
Kingdom. The Company believes that its facilities are adequate for its current
needs.
Item 3. Legal Proceedings
The Company is involved in litigation from time to time that is routine
in nature and incidental to the conduct of its business. The Company believes
that the outcome of any such litigation would not have a material adverse effect
on the financial condition or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's stockholders
during the fourth quarter of the fiscal year ended December 31, 1998.
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PART II
Item 5. Market for Registrant's Common Stock and Related Stockholders' Matters
Market for Common Stock
The information under the caption "Market for Common Stock" on page 2
of the Annual Report is incorporated herein by reference.
Holders of Record
As of February 26, 1999, there were approximately 115 holders of record
of the Company's Common Stock.
Dividends
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain any earnings for use in its
business and therefore does not anticipate paying any cash dividends in the
foreseeable future.
Item 6. Selected Financial Data
The information under the caption "Selected Financial Data" on page 2
of the Annual Report is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 3 through 14 of the
Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Financial Statements:
The consolidated financial statements and related notes, together with
the report thereon of PricewaterhouseCoopers LLP dated February 6, 1999 except
as to Note 14, which is as of March 5, 1999 appearing in the Annual Report are
incorporated herein by reference.
Financial Statement Schedules:
Item 14 includes an index to the financial statement schedules.
11
12
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information under the captions "Election of Directors" and "Stock
Ownership of Directors and Executive Officers" in the Proxy Statement is
incorporated herein by reference.
Item 11. Executive Compensation
The information under the captions "Executive Officers, Compensation
and Other Information", "Employment Agreement" and "Compensation Committee
Report on Executive Compensation" in the Proxy Statement is incorporated herein
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information under the captions "Principal Stockholders", "Election
of Directors" and "Stock Ownership of Directors and Executive Officers" in the
Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information under the captions "Employment Agreements" in the Proxy
Statement is incorporated herein by reference.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements.
The following consolidated financial statements and related notes,
including the report thereon of PricewaterhouseCoopers LLP dated February 6,
1999, except as to note 14, which is as of March 5, 1999 appearing in the Annual
Report, are incorporated herein by reference:
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Accountants
(a)(2) Financial Statement Schedules.
The following schedules are filed as a part of this report:
Page
----
Schedule II - Valuation and Qualifying Accounts and Reserves 18
Report of Independent Accountants on the
Financial Statement Schedule 19
All other schedules for which provision is made in the applicable
regulation of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable, or the required information is included
elsewhere in the financial statements.
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14
(a)(3) Exhibits:
Exhibit No. Description
----------- -----------
3.1 Restated Certificate of Incorporation of Broadway & Seymour, Inc., dated June 16,
1992 (Incorporated by reference to Exhibit 3.1 to the Registrants Annual Report on
Form 10-K for the Fiscal Year Ended January 31, 1993)
3.2 Restated By-laws of the Company (Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, SEC File No. 33-46672)
4.1 Specimen share certificate (Incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1, SEC File No. 33-46672)
4.2 Articles 4 and 5 of Broadway & Seymour, Inc.'s Restated Certificate of
Incorporation (Incorporated by reference to Exhibit 4.2 to the Registrant's
Registration Statement on Form S-1, SEC File No. 33-46672)
4.3 Article II, Section 2.2 of the Company's Restated By-laws (Incorporated by reference
to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, SEC File
No. 33-46672)
10.01+ Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated June 12,
1985 (Incorporated by reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form S-1, SEC File No. 33-46672)
10.02+ Amendment No. 1 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour,
Inc. dated February 25, 1993 (Incorporated by reference to Exhibit 10.2 to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1993)
10.03+ Amendment No. 2 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour,
Inc. dated February 17, 1994 (Incorporated by reference to Exhibit 10.16 to the
Registrant's Transition Report on Form 10-K for the Eleven Months Ended December 31,
1993)
10.04+ Amendment No. 3 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour,
Inc. dated May 15, 1995 (Incorporated by reference to Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995)
10.05+ Broadway & Seymour, Inc. 1996 Stock Option Plan dated September 16, 1996
(Incorporated by reference to Appendix B to the Registrant's Definitive Proxy
Statement on Form DEFS14A dated August 14, 1996)
10.06 Asset Purchase Agreement between Unisys Corporation and Broadway & Seymour, Inc.
dated as of July 24, 1997. (Incorporated by reference to Exhibit 10.35 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997)
10.07 Amendment to Asset Purchase Agreement between Unisys Corporation and Broadway &
Seymour, Inc. dated September 17, 1997. (Incorporated by reference to Exhibit 10.36
to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September
30, 1997)
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10.08 Loan Agreement by and among Broadway & Seymour, Inc., Elite Information Systems,
Inc., The Minicomputer Company of Maryland, Inc., Elite Information Systems
International, Inc., Pragmatix Telephony Solutions, Inc., and Fleet National Bank
(as agent and lender) for $15,000,000 secured revolving credit loan dated as of July
23, 1997. (Incorporated by reference to Exhibit 10.21 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter Ended June 30, 1997)
10.09 Security Agreement by and between Broadway & Seymour, Inc. and Fleet National Bank
dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.22 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997)
10.10 Security Agreement by and between Elite Information Systems, Inc. and Fleet National
Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.23 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997)
10.11 Security Agreement by and between Elite Information Systems International, Inc. and
Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit
10.24 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June
30, 1997)
10.12 Security Agreement by and between The Minicomputer of Maryland, Inc. and Fleet
National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.26
to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1997)
10.13 Security Agreement by and between Pragmatix Telephony Solutions, Inc. and Fleet
National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.26
to the Registrant's Quarterly Report of Form 10-Q for the Quarter Ended June 30,
1997)
10.14 Conditional Trademark Assignment by and between Broadway & Seymour, Inc. and Fleet
National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.27
to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1997)
10.15 Conditional Trademark Assignment by and between Elite Information Systems, Inc. and
Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit
10.28 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June
30, 1997)
10.16 Conditional Trademark Assignment by and between Elite Information Systems
International, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated
by reference to Exhibit 10.29 to the Registrant's Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 1997)
10.17 Conditional Trademark Assignment by and between The Minicomputer of Maryland, Inc.
and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to
Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1997)
10.18 Conditional Trademark Assignment by and between Pragmatix Telephony Solutions, Inc.
and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to
Exhibit 10.31 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1997)
10.19 Stock Pledge Agreement by and between Broadway & Seymour, Inc. and Fleet National
Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.32 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997)
10.20 Stock Pledge Agreement by and between Elite Information Systems, Inc. and Fleet
National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.33
to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1997)
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16
10.22 First Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite
Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite
Information Systems International, Inc., and Fleet National Bank (as agent and
lender) dated September 30, 1997 (Incorporated by reference to Exhibit 10.31 to the
Registrant's Annual Report on form 10-K for the year ended December 31, 1997)
10.23 Second Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite
Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite
Information Systems International, Inc., and Fleet National Bank (as agent and
lender) dated February 6, 1998 (Incorporated by reference to Exhibit 10.32 to the
Registrant's Annual Report on form 10-K for the year ended December 31, 1997)
10.24 Third Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite
Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite
Information Systems International, Inc., and Fleet National Bank (as agent and
lender) dated May 6, 1998
10.25 Fourth Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite
Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite
Information Systems International, Inc., and Fleet National Bank (as agent and
lender) dated August 7, 1998
10.26* Fifth Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite
Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite
Information Systems International, Inc., and Fleet National Bank (as agent and
lender) dated February 19, 1999
10.27+ Employment Agreement, dated as of May 29, 1997 (executed June 1, 1997), by and
between Broadway & Seymour, Inc. and Keith B. Hall (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997)
10.28+ Amendment No. 1 to Employment Agreement for Keith B. Hall dated February 19, 1998
10.29+ Employment Agreement dated as of September 1, 1995 by and between Broadway &
Seymour, Inc. and Alan C. Stanford (Incorporated by reference to Exhibit 10.28 to
the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30,
1995)
10.30+ Amendment No. 1 to Employment Agreement for Alan C. Stanford dated February 19, 1998
10.31* Stock Purchase Agreement among TMC Holding Corporation
and Broadway & Seymour, Inc. dated March 5, 1999.
11* Computation of earnings per share
13* Portions of the Broadway & Seymour, Inc. 1998 Annual Report.
21* Subsidiaries of the Registrant
23* Consent of Independent Accountants dated March 8, 1999.
27* Financial Data Schedule, which is submitted electronically to the Securities and
Exchange Commission for information only and not filed.
* Filed herewith.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit.
16
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BROADWAY & SEYMOUR, INC.
Date: March 8, 1999 By:/s/ Keith B. Hall
---------------------------------
Keith B. Hall, Vice President and
Chief Financial Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities set forth below and on the 8th
day of March 1999.
Signature Title
--------- -----
/s/ Alan C. Stanford
- ----------------------------
Alan C. Stanford Chairman, President, Chief Executive
Officer and Director
/s/ William G. Seymour
- ----------------------------
William G. Seymour Vice Chairman and Director
/s/ David A. Finley
- ----------------------------
David A. Finley Director
/s/ Roger Noall
- ----------------------------
Roger Noall Director
/s/ George L. McTavish
- ----------------------------
George L. McTavish Director
/s/ Christopher K. Poole
- ----------------------------
Christopher K. Poole Director
/s/ Robert J. Kelly
- ----------------------------
Robert J. Kelly Director
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Item 14a(2) Schedule II - Valuation and Qualifying Accounts and Reserves:
Broadway & Seymour, Inc.
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years ended December 31, 1998, 1998 and 1996
($ in thousands)
Balance at Additions Balance at
beginning charged to Deductions end
of period expense of period
---------- ---------- ---------- -----------
Allowance for doubtful accounts
December 31, 1998 $ 922 $ 1,400 $ 684 $ 1,638
December 31, 1997 892 1,046 1,016 922
December 31, 1996 941 1,076 1,125 892
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Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Broadway & Seymour, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 6, 1999, except as to Note 14, which is as of March 5, 1999,
appearing in the Company's 1998 Annual Report (which is incorporated by
reference in this Form 10-K) also included an audit of the Financial Statement
Schedule listed in Item 14 (a)(2) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
February 6, 1999
19