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THE SOFTWARE TOOLWORKS TO REPORT SUBSTANTIAL LOSS FOR MARCH QUARTER AND FISCAL YEAR

 THE SOFTWARE TOOLWORKS TO REPORT SUBSTANTIAL LOSS
 FOR MARCH QUARTER AND FISCAL YEAR
 NOVATO, Calif., June 24 /PRNewswire/ -- As reported earlier, The Software Toolworks Inc. (NASDAQ: TWRX), a leading publisher of education, entertainment, and productivity software, will report a loss for its fourth fiscal quarter ended March 31, 1992. Although the company has not completed its financial close, it now appears that the company will report a loss of approximately $15.4 million for its fourth fiscal quarter and thus approximatley $13.9 million for its 1992 fiscal year. Revenues for the quarter and the fiscal year are expected to be approximately $23.8 million and $103.3 million, respectively.
 According to the company, a number of factors have contributed to the larger than expected fourth quarter loss. One of the company's larger customers, DAK Industries Inc. of Canoga Park, Calif., recently filed for Chapter 11 bankruptcy protection in federal court in Los Angeles. DAK owes the company approximately $2.5 million. The company is not able at this time to determine how much of this receivable it will ultimately be able to recover from DAK, and, therefore, has written down a substantial portion of this receivable. DAK has notified the company that, as a debtor in possession, its daily operations will continue.
 Other factors contributing to the fourth quarter loss include an increased accrual for litigation settlement expenses related to the shareholder class action litigation against the company ($3,200,000); a substantial write-off previously capitalized software development costs which are now deemed to be unrecoverable ($2,000,000); provisions for estimated sales returns and price protection claims ($2,300,000); increased provision for television production and other advertising related expenses ($1,200,000); a write-off of intangible assets related to the prior acquisition of two former subsidiaries of the company, DS Technologies Inc. and Intellicreations Inc. ($1,300,000); and increased allowances for doubtful accounts receivable ($700,000, excluding DAK).
 Finally, as previously disclosed, other contributing factors include lower gross margins on the sale of Nintendo products due in part to an increase in lower gross margin European sales; higher than expected expenses in the company's international business; an unfavorable mix in OEM sales resulting in lower than expected gross margins; and the fact that the Macintosh version of The Miracle Piano Teaching System did not commence shipping until after the end of the March quarter.
 As a result of the anticipated loss, the company may require an increase in its bank line to fund its working capital needs, and the company anticipates that it will be in violation of various financial covenants under its bank lending agreements. Therefore, the company is currently conducting discussions with its bank to extend and possibly increase the bank credit line and to obtain a waiver of any defaults on financial covenants. At this time these discussions have not been finalized.
 -0- 6/24/92
 /CONTACT: Vincent Turzo of The Software Toolworks, 415-883-3000, ext. 568/
 (TWRX) CO: The Software Toolworks ST: California IN: CPR SU: ERP


MM-MC -- SF003 -- 3075 06/24/92 07:00 EDT
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Publication:PR Newswire
Date:Jun 24, 1992
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