SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE TO
(RULE 14d-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSACTION SYSTEMS ARCHITECTS, INC.
(Name of Subject Company (Issuer) and Filing Person (Offeror))
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OPTIONS TO PURCHASE CLASS A COMMON STOCK, PAR VALUE $0.005 PER SHARE,
GRANTED TO ELIGIBLE EMPLOYEES AND ELIGIBLE DIRECTORS UNDER THE
ACI HOLDING, INC. 1994 STOCK OPTION PLAN AND
THE TRANSACTION SYSTEMS ARCHITECTS, INC.
1996 AND 1999 STOCK OPTION PLANS
(Title of Class of Securities)
893416107
(CUSIP Number of Class of Securities)
David P. Stokes
Vice President - Legal and Secretary
Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, Nebraska 68154
(402) 334-5101
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Filing Person)
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Copy to:
Albert G. McGrath, Jr.
Baker & McKenzie
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201
(214) 978-3000
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CALCULATION OF FILING FEE
--------------------------------------- ---------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE*
--------------------------------------- ---------------------------------
NOT APPLICABLE NOT APPLICABLE
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* A filing fee is not required in connection with this filing as it relates
solely to preliminary communications made before the commencement of a tender
offer.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
[X] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[_] third party tender offer subject to Rule 14d-l.
[X] issuer tender offer subject to Rule 13e-4.
[_] going-private transaction subject to Rule 13e-3.
[_] amendment to Schedule 13D under Rule 13d-2.
[_] Check the following box if the filing is a final amendment reporting the
results of the tender offer.
For more information contact:
LeRoy D. Peterson
Director, Investor Relations
402.390.7909
FOR IMMEDIATE RELEASE
TRANSACTION SYSTEMS ARCHITECTS REPORTS FISCAL 2001
THIRD QUARTER FINANCIAL RESULTS
Third Quarter Highlights:
o Revenues and pro forma diluted EPS for the quarter in line with
revised company guidance.
o Operating cash flow of $15 million, cash balance increased to $28
million.
o Seven new Consumer e-Payment customers added during the quarter.
o Operational restructuring plan and cost reduction initiatives
substantially completed during the quarter.
o Forecasting $72 to 75 million in revenue for the fourth quarter
fiscal 2001, and pro forma diluted EPS of $.03 to .08 per share.
(OMAHA, Neb. -- July 31, 2001) Transaction Systems Architects, Inc. (Nasdaq:
TSAI), a leading global provider of enterprise e-payments and e-commerce
software, announced today that revenue for the third quarter of fiscal 2001 was
$73.7 million, in line with revised company guidance of $72 to $74 million. Pro
forma earnings per diluted share were $.04, at the high end of the company's
revised earnings guidance range. Operating cash flow was $15 million, the best
cash flow results since the quarter ending September, 1999.
"This was clearly a transition quarter for the company," said Larry Fendley,
interim CEO. "We experienced softness around the world for our
enterprise-level e-payments software, consistent with the views expressed by
others in the technology sector; consequently our revenue was down seven
percent over the year-earlier quarter. We made significant changes in senior
management, and announced a major corporate restructuring of the company. We
remain confident in the company's market leadership position, but felt that
these moves were important if we expect to continue to enjoy that position."
"We will have reduced our cost structure significantly by the end of this
fiscal year, and protected our strategic R&D initiatives," added Fendley.
"With our costs under better control, we believe that we are in a much better
position to win market share and grow once the overall technology spending
environment improves. Market feedback has been positive for several of our
strategic initiatives, including our PRISM fraud and money laundering
detection product, our new secure document delivery technology and our
advanced e-payment authorization platform. We expect to benefit from those
investments in the quarters ahead."
"We generated over $15 million in operating cash flow, our best cash
performance in two fiscal years, and our cash balance is now $28 million"
said Dwight Hanson, CFO. "Current billed receivables are down 19 percent
compared to the third quarter of fiscal 2000, and down 20 percent
sequentially from the second quarter of fiscal 2001. In addition, we had
favorable improvement in our DSO and DBO levels, with our DBO levels at their
lowest point in over two years, and well below our goal of 60 days. We began
to see some benefit from our restructuring efforts in Q3, with pro-forma
expenses down 2 percent year-over-year. This should improve more in Q4 and
into next year."
Pro forma results are computed by excluding acquisition-related charges
(amortization of goodwill and software) and non-recurring items. The pro
forma results of operations are computed using an effective tax rate of 39
percent. Pro forma results for the quarter exclude $6.7 million of software
and goodwill amortization from the acquisitions of SDM International, Inc.,
Insession Inc., Hospital Health Plan Corporation, WorkPoint Systems, Inc. and
MessagingDirect, Ltd., and one-time non-recurring charges of $22 million for
the previously announced corporate restructuring.
The Company completed the third quarter of fiscal 2001 with $186 million in
backlog, consisting of $49 million in non-recurring backlog and $137 million in
recurring backlog. This compares to the backlog of $187 million at the end of
the second quarter of fiscal 2001. Non-recurring backlog is composed of fees
specified in software and services contracts that the company expects to
recognize in the next 12 months. Recurring backlog includes all monthly license
fees, maintenance fees and facilities management fees that the company expects
to recognize over the next 12 months. "While our backlog was flat, our
recurring backlog was up $3 million sequentially," said Hanson. "This is an
indication of our strong customer retention rate."
The Company also announced that it expects to commence an offer to its
eligible employees and directors to tender their outstanding options granted
under three of the company's stock plans in a voluntary stock option exchange
program. "Our employees and directors comprise the most important asset of our
company," said Fendley. "They enable us to serve our customers and achieve our
long-term goals, which enhances shareholder value. The offer is essential so we
may continue to attract, retain and reward our employees and directors." The
company expects to commence the offer during the fourth quarter of fiscal 2001.
Following commencement of the offer, the Company will send to eligible
employees and directors a copy of the written "Offer to Exchange." They will be
urged to read the Offer to Exchange when it becomes available, because it will
contain important information. Eligible employees and directors will be able to
obtain a free copy of the Schedule Tender Offer ("TO") which, when filed with
the SEC, will contain the Offer to Exchange and other important information, as
well as other filings containing information about us, at the SEC's Web site
(http://www.sec.gov). Following commencement of the offer, eligible employees
and directors will also be able to obtain, without charge, copies of the
Schedule TO and the Company's SEC filings incorporated by reference in the
Offer to Exchange directly from the Company.
Looking forward to the next quarter, TSA is expecting $72 to 75 million in
revenue, with pro forma diluted EPS of $.03 to $.08. "While we remain confident
regarding our leadership position in our core markets, we remain cautious with
our near term projections," said Hanson. "We have improved our cash position and
reduced our expense rate, which positions us to weather continued softness in
the market should that occur."
"We continue to win market share, adding seven new consumer e-payment customers
in the quarter," said Fendley. "Included were our first three customers for our
new secure document and delivery products, and a new top-100 U.S. retailer. We
win the majority of competitive situations in our core markets and continue to
see good transaction volume growth in areas like
debit, e-commerce and mobile commerce. We have a solid pipeline of
significant e-payment deals building, both in the consumer e-payment and
corporate e-payment markets, and we expect to make new product announcements
in the coming quarter regarding new initiatives which should help diversify
that pipeline in terms of geographic regions, solutions areas and hardware
platforms."
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 3,700 product systems in 79 countries on six
continents.
TSA will hold a teleconference at 5:00 p.m. EST, July 31, 2001, to discuss
third-quarter financial results. TSA will open the conference call to the
general public by broadcasting the call live over the Internet. Interested
persons may access a real-time audio broadcast of the teleconference at:
www.tsainc.com/ir/ir.asp
To access the web cast, enter the conference name (Transaction Systems
Architects, Inc.), viewer pass code (1409654) and the date (07/31/2001) along
with your registration information. The web cast will be archived for seven
days after the teleconference at the same web address listed above.
The statements in this report regarding projected results are preliminary and
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. In addition, this report contains other
forward-looking statements including statements regarding the Company's or third
parties' expectations, predictions, views, opportunities, plans, strategies,
beliefs, and statements of similar effect. The forward-looking statements in
this report are subject to a variety of risks and uncertainties. Actual results
could differ materially. Factors that could cause actual results to differ
include but are not limited to the following:
The acquisition of MessagingDirect is subject to numerous risks, including
the following: (i) MessagingDirect is in a highly competitive industry, (ii)
MessagingDirect does not have a significant market presence, significant
revenues, or widespread acceptance or prolonged use of its products, (iii)
MessagingDirect has not been profitable, (iv) the electronic statement
presentation and electronic bill presentment and payment markets may not achieve
the predicted growth rates, (v) MessagingDirect's products, personnel, and
operations may be difficult to combine with those of TSA, the products may not
be accepted by TSA's customer base, and there will be significant integration
costs of combining the businesses and (vi) the acquisition will have a dilutive
effect on earnings per share and amortization of intangible assets will have an
adverse effect on earnings.
TSA is subject to risks of conducting international operations including:
difficulties in staffing and management, reliance on independent distributors,
fluctuations in foreign currency exchange rates, compliance with foreign
regulatory requirements, variability of foreign economic conditions, and
changing restrictions imposed by U.S. export laws.
TSA will continue to derive a substantial majority of its total revenues
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 TSA's financial condition and
results of operations.
TSA's business is concentrated in the banking industry, making it
susceptible to a downturn in that industry.
Fluctuations in quarterly operating results may result in volatility in
TSA's stock price. No assurance can be given that operating results will not
vary. TSA'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.
In April 2001 TSA announced the resignation of its chief executive officer
and president, the organization of a search committee and the engagement of a
professional executive search firm to solicit and assist in the selection of
a permanent CEO and president. TSA estimates that the search process will
take up to six months to complete. Pending the selection of a permanent CEO,
a member of TSA's board of directors has been appointed to serve as interim
CEO. There can be no assurance that a suitable CEO candidate will be readily
identified, or identified and appointed within the six month period, or, if
identified, that a CEO candidate will be willing or able to accept the terms,
conditions or other arrangements relating to the CEO position, including
relocating, if necessary, to TSA's headquarters in Omaha, Nebraska. Further,
there can be no assurance that the transition from former CEO to interim CEO
to permanent CEO will be accomplished in a timeframe or in a manner that will
not have a material adverse effect on TSA's financial condition and results
of operations.
For a detailed discussion of these and other risk factors, interested parties
should review the Company's filings with the Securities and Exchange Commission,
including Exhibit 99.01 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2000.
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
June 30, September 30,
2001 2000
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ASSETS
Current assets:
Cash and cash equivalents $ 28,101 $ 23,400
Marketable securities 4,114 8,106
Billed receivables, net 48,843 63,556
Accrued receivables 46,919 51,659
Prepaid income taxes 8,079 2,710
Deferred income taxes 21,344 11,208
Other 11,180 13,134
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Total current assets 168,580 173,773
Property and equipment, net 15,471 19,614
Software, net 31,382 26,757
Intangible assets, net 86,084 65,254
Long-term accrued receivables 29,174 27,018
Investments and notes receivable 1,309 6,146
Deferred income taxes 3,631 2,958
Other 5,721 8,632
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Total assets $ 341,352 $ 330,152
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 16,699 $ 18,396
Accounts payable 13,045 16,023
Accrued employee compensation 8,542 7,472
Accrued liabilities 24,685 20,003
Deferred revenue 42,747 43,373
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Total current liabilities 105,718 105,267
Long-term debt 392 532
Long-term deferred revenue 11,394 13,993
Other 1,083 -
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Total liabilities 118,587 119,792
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Stockholders' equity:
Class A Common Stock 183 165
Additional paid-in capital 221,989 170,946
Retained earnings 45,563 85,033
Treasury stock, at cost (35,258) (35,258)
Accumulated other comprehensive income (9,712) (10,526)
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Total stockholders' equity 222,765 210,360
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Total liabilities and stockholders' equity $ 341,352 $ 330,152
============ ============
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share amounts)
Three Months Ended June 30, Nine Months Ended June 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
----------- ------------ ----------- ----------
Revenues:
Software license fees $ 41,716 $ 46,498 $ 129,342 $ 128,259
Maintenance fees 18,387 17,340 51,772 51,229
Services 13,568 15,064 43,685 41,920
------------ ------------ ------------ ------------
Total revenues 73,671 78,902 224,799 221,408
------------ ------------ ------------ ------------
Expenses:
Cost of software license fees 10,723 11,851 33,547 33,760
Cost of maintenance and services 20,311 17,952 57,033 52,008
Research and development 10,854 10,125 31,645 28,553
Selling and marketing 20,483 18,837 58,425 54,602
General and administrative 26,513 16,185 58,690 45,982
Amortization of goodwill and
purchased intangibles 4,293 2,035 10,073 5,970
------------ ------------ ------------ ------------
Total expenses 93,177 76,985 249,413 220,875
------------ ------------ ------------ ------------
Operating income (loss) (19,506) 1,917 (24,614) 533
------------ ------------ ------------ ------------
Other income (expense):
Interest income 1,725 985 3,265 2,649
Interest expense (349) (178) (1,717) (313)
Other (914) (1,065) (1,629) (933)
Non-recurring items (7,406) - (21,717) -
------------ ------------ ------------ ------------
Total other income (expense) (6,944) (258) (21,798) 1,403
------------ ------------ ------------ ------------
Income (loss) before income taxes (26,450) 1,659 (46,412) 1,936
Income tax benefit (provision) 4,935 (644) 6,941 (753)
------------ ------------ ------------ ------------
Net income (loss) $ (21,515) $ 1,015 $ (39,471) $ 1,183
============ ============ ============ ============
Earnings per share information:
Weighted average shares outstanding:
Basic 35,086 31,621 33,765 31,789
============ ============ ============ ============
Diluted 35,086 31,875 33,765 32,201
============ ============ ============ ============
Earnings per share:
Basic $ (0.61) $ 0.03 $ (1.17) $ 0.04
============ ============ ============ ============
Diluted $ (0.61) $ 0.03 $ (1.17) $ 0.04
============ ============ ============ ============
TRANSACTION SYSTEMS ARCHITECTS, INC.
RECONCILIATION OF ACTUAL RESULTS TO PRO FORMA RESULTS
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
(unaudited and in thousands, except per share amounts)
Three Months Ended June 30,
----------------------------------------------------------------------------
Restructuring
As and Other
Reported Amortization Charges Pro Forma
---------- -------------- --------------- -----------
Revenues:
Software license fees $ 41,716 $ - $ - $ 41,716
Maintenance fees 18,387 - - 18,387
Services 13,568 - - 13,568
----------- ------------ ------------ ----------
Total revenues 73,671 - - 73,671
----------- ------------ ------------ ----------
Expenses:
Cost of software license fees 10,723 (2,452) (47) 8,224
Cost of maintenance and services 20,311 - (2,217) 18,094
Research and development 10,854 - (340) 10,514
Selling and marketing 20,483 - (245) 20,238
General and administrative 26,513 - (11,716) 14,797
Amortization of goodwill and
purchased intangibles 4,293 (4,293) - -
----------- ------------ ----------- ----------
Total expenses 93,177 (6,745) (14,565) 71,867
----------- ------------ ----------- ----------
Operating income (loss) (19,506) 6,745 14,565 1,804
----------- ------------ ----------- ----------
Other income (expense):
Interest income 1,725 - (155) 1,570
Interest expense (349) - - (349)
Other (914) - - (914)
Non-recurring items (7,406) - 7,406 -
----------- ------------ ----------- ----------
Total other income (expense) (6,944) - 7,251 307
----------- ------------ ----------- ----------
Income (loss) before income taxes (26,450) $ 6,745 $ 21,816 2,111
============ ===========
Income tax benefit (provision) 4,935 (823) (1)
----------- -----------
Net income (loss) $ (21,515) $ 1,288
=========== ===========
Earnings per share information:
Weighted average shares outstanding:
Basic 35,086 35,086
=========== ============
Diluted 35,086 35,086
=========== ============
Earnings per share:
Basic $ (0.61) $ 0.04
=========== ============
Diluted $ (0.61) $ 0.04
=========== ============
-----------------------------
(1) The above pro forma results of operations were computed using an effective
income tax rate of 39 percent.