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KNOWLEDGEWARE ANNOUNCES FY 1993 THIRD-QUARTER OPERATING RESULTS EXPECTED NON-RECURRING CHARGES IDENTIFIED AS A KEY FACTOR IN PERFORMANCE

 ATLANTA, May 10 /PRNewswire/ -- As previously reported (March 18), KnowledgeWare (NASDAQ-NMS: KNOW) incurred significant non-recurring charges in the quarter ended March 31 related to two acquisitions that expanded the company's product line and direct distribution network.
 These charges total $21,976,000, and comprise approximately $7 million related to termination of European distribution rights, $7.2 million related to consolidation of real estate, $3.6 million related to reduction and relocation of personnel, $0.6 million of direct costs associated with the acquisition of Matesys Mathematics Systems. S.A., and $3.5 million of capitalized software costs written off.
 Net loss for the quarter totaled $30 million or $2.34 per share, compared to fiscal 1992 third quarter net profit of $1,531,000 or $0.12 per share. Revenues for the third quarter of fiscal year 1993 were $25,797,000 compared to $27,227,000 reported for the same period last year. The European distributor acquisition was closed on March 4 and therefore, reported revenues for the period included only one-month of direct KnowledgeWare European operations. Revenues for the nine-month period ending March 31 were $88,335,000 compared with $82,049,000 for the same period last year.
 "As we predicted in March, our aggressive expansion into client/server development solutions and direct international sales resulted in one-time charges during our third fiscal quarter," said KnowledgeWare Chairman Francis Tarkenton. "We expect these investments, coupled with our streamlined operation, to position KnowledgeWare to grow revenues and decrease costs beginning our fourth quarter."
 The company has restructured to operate at costs lower than the $36,700,000 incurred during the third quarter. For example, company headcount was reduced during the period, and remaining personnel were redeployed to support strategic business objectives. In addition, management layers were eliminated in various departments to enhance employee productivity.
 Revenues are expected to increase beginning in fourth quarter 1993 with a full quarter of European operations and the expansion of new client/server development tools. Consulting and training revenues are expected to continue increasing after growing by 128 percent from the third quarter 1992 to third quarter 1993. The company believes that its new revenue sources and reduced operating costs will allow a return to profitability in the fourth quarter 1993. However, third quarter operating results are expected to contribute to a loss for KnowledgeWare's fiscal year ending June 30.
 KnowledgeWare President and Chief Operating Officer Donald P. Addington explained: "We are already seeing market acceptance and growth from our delivery of client/server tools and consulting services. In addition, we have now staffed our European operation with local sales, support, training and consulting services in 12 countries. The fourth quarter should reflect results from our investments as well as the effect of decreased expenses."
 The operating loss for the third quarter was impacted by the lower level of revenues from Europe, compared to the same period last year, and the high costs of initial operations in that business unit. Other impacts include the costs of product development for new computing platforms, as well as the costs of selling and marketing in new distribution channels to handle the client/server product lines.
 KnowledgeWare is the market leader in providing application development solutions for client/server, mid-range and mainframe environments. KnowledgeWare's Application Development Workbench has become a de facto standard for business applications development, and is currently used by more than 4,200 companies and supported by more than 70 independent software vendor and consultant products. As of March 31, KnowledgeWare had shipped more than 108,000 products to 35 countries, and had revenue in excess of $115 million for the fiscal year ended June 30, 1992.
 KNOWLEDGEWARE, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data) (Unaudited)
 ASSETS 3/31/93 6/30/92
 Current assets:
 Cash and cash equivalents $ 14,448 $ 40,452
 Trade accounts receivable, net 34,550 25,975
 Inventories 1,648 745
 Prepaid expenses and other current
 assets 8,040 2,502
 Income taxes receivable 1,400 3,903
 Deferred income tax benefits 7,550 5,208
 Total current assets 67,636 78,785
 Property and equipment:
 Leasehold improvements 4,591 5,208
 Furniture and fixtures 16,870 16,754
 Computers and related equipment and
 software 24,735 20,617
 Total 46,196 42,579
 Less: accumulated depreciation and
 amortization 21,170 15,799
 Total 25,026 26,780
 Other assets:
 Acquired and developed software, net 21,054 23,928
 Goodwill 11,436 ---
 Other 1,464 637
 Total 34,954 24,565
 Total $126,616 $130,130
 LIABILITIES AND SHAREHOLDERS' EQUIT
 Current liabilities:
 Trade accounts payable $ 10,655 $ 3,947
 Deferred revenues 28,064 25,247
 Accrued expenses 19,978 11,215
 Accrued compensation and payroll taxes 5,017 6,601
 Commissions payable to related parties 99 878
 Current portion of note payable 3,761 ---
 Total current liabilities 67,574 47,888
 Deferred income taxes 4,616 4,616
 Note payable 3,866 ---
 Other non-current liabilities 1,047 ---
 Shareholders' equity:
 Common stock, without par value --
 100,000,000 shares authorized;
 12,949,349 and 11,814,545 shares
 issued and outstanding on March 31,
 1993, and June 30, 1992, respectively 52,901 52,436
 Retained earnings (deficit) (3,388) 25,190
 Total shareholders' equity 49,513 77,626
 Total $126,616 $130,130
 KNOWLEDGEWARE, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data) (Unaudited)
 3 mos. ended 3/31/93 3/31/92
 Revenues:
 Software product license $ 13,145 $18,383
 Service agreement 8,566 7,076
 Consulting and education 3,534 1,549
 Other 552 219
 Total 25,797 27,227
 Costs and expenses:
 Cost of revenues 7,473 3,518
 Selling and marketing 17,351 12,607
 General and administrative 3,609 2,929
 Research and development 8,231 5,925
 Restructuring 21,976 ---
 Total 58,640 24,979
 Income (loss) from operations (32,843) 2,248
 Interest income (expense), net 297 312
 Income (loss) before income taxes (32,546) 2,560
 Provision (credit) for income taxes (2,187) 1,029
 Net income (loss) $(30,359) $ 1,531
 Net income (loss) per common share $ (2.34) $ .12
 Weighted average number of common
 and common equivalent shares
 outstanding 12,949 13,265
 9 mos. ended 3/31/93 3/31/92
 Revenues:
 Software product license $ 54,181 $57,293
 Service agreement 25,819 19,048
 Consulting and education 7,341 4,682
 Other 994 1,026
 Total 88,335 82,049
 Costs and expenses:
 Cost of revenues 16,346 11,832
 Selling and marketing 47,182 44,210
 General and administrative 10,241 12,882
 Research and development 23,303 18,151
 Restructuring 21,976 ---
 Total 119,048 87,075
 Income (loss) from operations (30,713) (5,026)
 Interest income (expense), net 735 1,607
 Income (loss) before income taxes (29,978) (3,419)
 Provision (credit) for income taxes (1,400) (1,439)
 Net income (loss) $(28,578) $(1,980)
 Net income (loss) per common share $ (2.26) $ (.15)
 Weighted average number of common
 and common equivalent shares
 outstanding 12,622 12,916
 -0- 5/10/93
 /CONTACT: Analysts: Rick Gossett of KnowledgeWare, 404-231-8575, ext. 2138; Media: Denese Van Dyne or Len Dieterle of Crescent Communications, 404-698-8650, for KnowledgeWare/
 (KNOW)


CO: KnowledgeWare, Inc. ST: Georgia IN: CPR SU: ERN

BN-RA -- AT010 -- 6720 05/10/93 17:55 EDT
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