CHICAGO--(BUSINESS WIRE)--May 20, 1999--System Software Associates, Inc. (NASDAQ: SSAX), a global provider of enterprise resource planning (ERP) software and services, today issued results for its second fiscal quarter ending April 30, 1999. Second-quarter revenue was $86.7 million, down 15 percent from the second quarter a year ago. Software license fee revenue was $28.3 million in the quarter, and services revenue was $58.4 million. Services revenue was above $58 million for the third consecutive quarter and services gross profit margin improved to 42.6 percent. "Weak second-quarter client demand continued to reflect the pause in the overall ERP market, which is affecting virtually all of the companies in the market," said William M. Stuek, chairman and chief executive officer. "While we view this situation as being temporary, we are rebalancing our business accordingly and adapting our strategy to enable SSA to fully participate as the industry rebounds in the future." SSA reported a second-quarter loss of $7.7 million after preferred dividends, or 16 cents a share, compared with a loss of $9.7 million, or 20 cents a share, in the second quarter of 1998. Cash balances were $32.1 million at the end of the second quarter, down from $44.9 million at the end of the first quarter of 1999. The $12.8 million decline in cash from the prior quarter reflected $5 million due to interest payments, $5 million in restructuring expense and $2.8 million from operations. About SSA System Software Associates is a worldwide ERP software and services provider with fiscal year 1998 revenue of $421 million. Its principal product, BPCS Client/Server Version 6.0 is primarily sold to the industrial sector including: automotive, chemicals, consumer goods, electronics, general manufacturing, food and beverage, forest products and pharmaceuticals. Safe Harbor Provision The statements contained in this release regarding SSA's future operating results and performance and business prospects are "forward-looking statements" subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Where possible, the words "expect," "outlook" and similar expressions, as they relate to SSA or its management, have been used to identify such forward-looking statements. These statements reflect SSA's current beliefs and specific assumptions with respect to future business decisions and are based on information currently available to SSA. Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause SSA's actual operating results, performance or business prospects to differ from those expressed in, or implied by, these statements. SYSTEM SOFTWARE ASSOCIATES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Three Months Ended Six Months Ended April 30, April 30, ---------------- ---------------- 1999 1998 1999 1998 ------- ------- ------- ------- Revenues: License fees $ 28.3 $ 49.7 $ 59.9 $ 110.5 Client services and other 58.4 52.7 116.5 90.8 ------- ------- ------- ------- Total revenues 86.7 102.4 176.4 201.3 ------- ------- ------- ------- Costs and Expenses: Cost of license fees 13.0 22.0 26.1 40.1 Cost of client services and other 33.5 36.4 68.6 63.3 Sales and marketing 16.8 22.0 33.8 42.1 Research and development 12.7 13.5 25.4 25.8 General and administrative 19.9 20.9 39.4 41.1 Special charges -- -- -- 1.1 ------- ------- ------- ------- Total costs and expenses 95.9 114.8 193.3 213.5 ------- ------- ------- ------- Operating income (loss) (9.2) (12.4) (16.9) (12.2) Non-operating income (expense), net (2.4) (2.3) (5.4) (4.6) Gain on sale of investment -- -- 2.8 -- ------- ------- ------- ------- Income (loss) before income taxes (11.6) (14.7) (19.5) (16.8) Provision (benefit) for income taxes (4.2) (5.3) (7.0) (6.0) ------- ------- ------- ------- Net income (loss) (7.4) (9.4) (12.5) (10.8) Preferred dividends 0.3 0.3 0.6 0.6 ------- ------- ------- ------- Net income (loss) available for common stockholders $ (7.7) $ (9.7) $ (13.1) $ (11.4) ======= ======= ======= ======= Basic and diluted earnings (loss) per share of common stock $ (0.16) $ (0.20) $ (0.27) $ (0.25) ======= ======= ======= ======= Weighted average common shares outstanding 47.8 47.4 47.7 45.5 ======= ======= ======= ======= SYSTEM SOFTWARE ASSOCIATES, INC. CONSOLIDATED BALANCE SHEETS ASSETS (in millions) April 30, October 31, 1999 1998 ---------- ---------- CURRENT ASSETS: Cash and equivalents $ 32.1 $ 52.4 Accounts receivable, less allowance for doubtful accounts of $16.5 and $16.5 122.9 144.4 Income taxes receivable 5.8 3.9 Deferred income taxes 38.5 31.2 Prepaid expenses and other current assets 28.0 27.6 ---------- ---------- Total current assets 227.3 259.5 ---------- ---------- PROPERTY and EQUIPMENT: Data processing equipment 41.9 41.5 Furniture and office equipment 15.7 16.3 Leasehold improvements 8.3 8.4 Transportation equipment 1.7 1.7 ---------- ---------- 67.6 67.9 Less - Accumulated depreciation and amortization 51.8 48.8 ---------- ---------- Total property and equipment 15.8 19.1 ---------- ---------- OTHER ASSETS: Software costs, less accumulated amortization of $49.7 and $42.9 35.4 39.5 Cost in excess of net assets of acquired businesses, less accumulated amortization of $15.0 and $13.0 19.1 21.1 Deferred income taxes 17.5 16.6 Investments in associated companies - 1.0 Miscellaneous 2.1 4.0 ---------- ---------- Total other assets 74.1 82.2 ---------- ---------- TOTAL ASSETS $317.2 $360.8 ========== ========== SYSTEM SOFTWARE ASSOCIATES, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (in millions, except share data) April 30, October 31, 1999 1998 ---------- ---------- CURRENT LIABILITIES: Accrued commissions and royalties $ 18.0 $ 20.3 Accounts payable and other accrued liabilities 68.3 77.9 Accrued compensation and related benefits 18.7 23.1 Deferred revenue 38.2 44.3 ---------- ---------- Total current liabilities 143.2 165.6 ---------- ---------- LONG-TERM OBLIGATIONS: Convertible subordinated notes 137.4 137.3 Other 4.2 4.6 ---------- ---------- Total long-term obligations 141.6 141.9 ---------- ---------- DEFERRED REVENUE 22.0 29.9 REDEEMABLE SERIES A PREFERRED STOCK, ---------- ---------- $.01 par value, convertible, 10,000 shares issued and outstanding (liquidation preference of $10.0 million) 9.4 9.3 ---------- ---------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 100,000 shares authorized,10,000 shares issued as Series A Preferred Stock - - Common stock, $.0033 par value, 250,000,000 shares authorized,47,843,000 and 47,621,000 shares issued 0.2 0.2 Capital in excess of par value 73.4 72.5 Retained earnings (deficit) (66.0) (52.9) Accumulated other comprehensive income - cumulative translation adjustment (6.6) (5.7) ---------- ---------- Total stockholders' equity 1.0 14.1 ========== ========== TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $317.2 $360.8 ========== ==========  