<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                   Form 10-Q




                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934





For quarter ended                                    Commission File No. 1-10151
December 31, 1995



                          THE CONTINUUM COMPANY, INC.
                           9500 Arboretum Boulevard
                           Austin, Texas 78759-6399
                           Telephone: (512) 345-5700






A Delaware Corporation                            I.R.S. Employer Identification
                                                  Number:  74-1609363


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 for 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 __

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
Common Stock as of the latest practical date.

As of January 31, 1996, there were 19,333,000  shares of the  registrant's  $.10
par value Common Stock outstanding.


<PAGE>


                          THE CONTINUUM COMPANY, INC.
                             10-Q December 31, 1995
                                     INDEX

                                                                            PAGE

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

     Condensed consolidated balance sheets - December 31,
     1995 and March 31, 1995                                                   3

     Consolidated statements of operations - Three and nine
     months ended December 31, 1995 and 1994                                   4

     Condensed consolidated statements of cash flows - Three
     and nine months ended December 31, 1995 and 1994                          5

     Notes to condensed consolidated financial statements -
     December 31, 1995                                                         6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                             8

PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                                     12

SIGNATURE                                                                     12



                                       2

<PAGE>

<TABLE>
<CAPTION>
                                  THE CONTINUUM COMPANY, INC.
                             CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                 DECEMBER 31,           MARCH 31,
                                                                    1995                  1995
                                                               ---------------      ----------------
                                                                 (UNAUDITED)            (AUDITED)
<S>                                                            <C>                   <C> 
ASSETS
Current assets:
  Cash and cash equivalents .................................  $   10,402,000        $   44,525,000
  Receivables, net of allowance for doubtful accounts .......     121,611,000            78,062,000
  Other current assets ......................................      18,859,000            14,721,000
                                                               ---------------       ----------------
                                                                  150,872,000           137,308,000

Property and equipment, net of depreciation .................      31,020,000            26,896,000
Goodwill, net of amortization ...............................      35,894,000            15,995,000
Software systems, net of amortization .......................      14,688,000            14,178,000
Other assets ................................................      24,005,000             5,323,000
                                                               ---------------       ----------------
TOTAL ASSETS ................................................  $  256,479,000        $  199,700,000
                                                               ===============       =================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable ..........................................  $   21,557,000        $   18,832,000
  Deferred revenue ..........................................      18,235,000            15,981,000
  Accrued liabilities and other .............................      56,029,000            40,228,000
  Current portion of long-term debt .........................      27,144,000               822,000
                                                               ---------------       ----------------
                                                                  122,965,000            75,863,000
                                                               ---------------       ----------------

Long-term debt ..............................................      17,828,000            25,379,000
Other obligations ...........................................      32,074,000            16,167,000
                                                               ---------------       ----------------
                                                                   49,902,000            41,546,000
                                                               ---------------       ----------------
Stockholders' equity:
  Common Stock, $.10 par value ..............................       1,936,000             1,919,000
  Capital in excess of par value ............................     124,697,000           122,279,000
  Retained deficit ..........................................     (41,236,000)          (39,870,000)
  Other .....................................................      (1,785,000)           (2,037,000)
                                                               ----------------      ----------------
                                                                   83,612,000            82,291,000
                                                               ----------------      ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................  $  256,479,000        $  199,700,000
                                                               ================      ================

</TABLE>

                                           3

<PAGE>

<TABLE>
<CAPTION>
                                               THE CONTINUUM COMPANY, INC.
                                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                                      (UNAUDITED)



                                                             THREE MONTHS ENDED                        NINE MONTHS ENDED
                                                                 DECEMBER 31,                              DECEMBER 31,
                                                      --------------------------------          --------------------------------
                                                           1995               1994                   1995               1994
                                                      --------------     -------------          --------------     --------------
<S>                                                   <C>                <C>                    <C>                <C>
REVENUE:
  Service revenues .................................  $  94,499,000      $  76,515,000          $ 274,658,000      $ 217,347,000
  Software system licensing ........................      8,616,000          5,838,000             22,445,000         15,084,000
  Interest income ..................................        186,000            182,000                729,000            312,000
                                                      --------------     -------------          --------------     --------------
                                                        103,301,000         82,535,000            297,832,000        232,743,000
                                                      --------------     -------------          --------------     --------------

EXPENSES:
  Service expenses .................................     72,161,000         58,528,000            209,905,000        164,132,000
  Marketing and administration .....................     18,105,000         13,592,000             50,160,000         39,580,000
  Interest expense .................................        563,000            655,000              1,822,000          1,576,000
  Charge for purchased research and development ....     26,000,000                --              26,000,000                --
                                                      --------------     -------------          --------------     --------------
                                                        116,829,000         72,775,000            287,887,000        205,288,000
                                                      --------------     -------------          --------------     --------------

Income (loss) before income taxes ..................    (13,528,000)         9,760,000              9,945,000         27,455,000
Income tax provision ...............................      3,427,000          2,912,000             10,470,000          8,729,000
                                                      --------------     -------------          --------------     --------------
Net income (loss) ..................................  $ (16,955,000)     $   6,848,000          $    (525,000)     $  18,726,000
                                                      ==============     =============          ==============     ===============

Earnings (loss) per common share ...................  $       (0.88)     $        0.36          $       (0.03)     $        0.99
                                                      ==============     =============          ==============     ===============

Average number of common shares and
  common equivalent shares outstanding .............     19,260,000         19,042,000             19,191,000         19,011,000
                                                      ==============     =============          ==============     ===============
</TABLE>


                                                         4

<PAGE>

<TABLE>
<CAPTION>
                                                   THE CONTINUUM COMPANY, INC.
                                        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         (UNAUDITED)


                                                                   THREE MONTHS ENDED                       NINE MONTHS ENDED
                                                                       DECEMBER 31,                            DECEMBER 31,
                                                            --------------------------------         -------------------------------
                                                                 1995               1994                  1995             1994
                                                            --------------     -------------         -------------     -------------

<S>                                                         <C>                <C>                   <C>               <C>  
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) ......................................  $ (16,955,000)     $  6,848,000          $   (525,000)     $ 18,726,000
  Items included in income which do not affect cash:
    Depreciation, amortization and other .................      3,695,000         2,664,000            10,794,000         8,098,000
    Purchased research and development ...................     26,000,000               --             26,000,000               -- 
  Changes in operating assets and liabilities:
    (Increase) decrease in receivables ...................    (18,085,000)       (3,379,000)          (37,246,000)        1,480,000
    (Decrease) in accounts payable .......................     (1,183,000)       (4,993,000)             (615,000)       (2,647,000)
    Increase (decrease) in deferred revenue ..............      6,006,000         2,427,000             2,193,000          (989,000)
    Decrease (increase) in other net assets ..............        192,000           356,000            (4,889,000)       (2,331,000)
                                                             -------------     -------------         -------------     -------------
  Net cash (used) provided by operating activities .......       (330,000)        3,923,000            (4,288,000)       22,337,000
                                                             -------------     -------------         -------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Additions to property, equipment and software ..........     (1,996,000)       (2,212,000)           (9,262,000)       (4,681,000)
  Purchase of business, net of cash received .............    (36,065,000)              --            (38,518,000)              -- 
                                                             -------------     -------------         -------------     -------------
  Net cash (used) by investing activities ................    (38,061,000)       (2,212,000)          (47,780,000)       (4,681,000)
                                                             -------------     -------------         -------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Debt borrowings (payments) , net .......................     22,836,000          (133,000)           15,562,000           871,000
  Common Stock transactions ..............................        912,000           333,000             2,337,000         2,937,000
                                                             -------------     -------------         -------------     -------------
  Net cash provided by financing activities ..............     23,748,000           200,000            17,899,000         3,808,000
                                                             -------------     -------------         -------------     -------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ..................         29,000          (167,000)               46,000          (415,000)
                                                             -------------     -------------         -------------     -------------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .........    (14,614,000)        1,744,000           (34,123,000)       21,049,000

Cash and cash equivalents at beginning of period .........     25,016,000        29,969,000            44,525,000        10,664,000
                                                             -------------     -------------         -------------     -------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............  $  10,402,000      $ 31,713,000          $ 10,402,000      $ 31,713,000
                                                            ==============     =============         =============     =============
</TABLE>


                                                           5

<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE (1) SUMMARY OF ACCOUNTING POLICIES

The  condensed  consolidated  financial  statements  included  herein  have been
prepared by the Company  without  independent  audit,  pursuant to the rules and
regulations  of the  Securities  and  Exchange  Commission.  In the  opinion  of
management,   the  condensed   consolidated  financial  statements  include  all
adjustments necessary to present fairly the information required to be set forth
therein and these adjustments were of a normal recurring nature.  The results of
operations  for the periods  presented  are not  necessarily  indicative  of the
results to be expected for the full fiscal year.  Certain  footnote  disclosures
normally included in financial  statements prepared in accordance with generally
accepted  accounting  principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the disclosures included herein
are adequate to make the information  presented not misleading.  It is suggested
that these condensed  consolidated  financial  statements be read in conjunction
with the financial  statements and notes thereto  included in the Company's Form
10-K annual report for the fiscal year ended March 31, 1995.

NOTE (2)  EARNINGS PER SHARE

For the three and nine months ended  December  31, 1995,  earnings per share are
computed  using the  weighted  average  number of  shares  outstanding.  In both
periods, the effect of common equivalent shares was excluded because the special
acquisition  charge  resulted in a loss for the  quarter  and nine month  period
ended  December  31,  1995.  These common  stock  equivalents,  mostly  unvested
employee stock options, were included in the previous two quarters,  ending June
and September 1995, due to the recent  appreciation in Continuum's  share price.
For the three and nine months ended December 31, 1994, the effect of options was
excluded due to immateriality.

NOTE (3) ACQUISITIONS

RA SYSTEMS

On May 3, 1995, the Company acquired all of the outstanding shares of Ra Systems
for  $10,823,000.  A cash payment of $5,423,000  was remitted at closing and the
remainder was paid in January 1996. The  acquisition was accounted for using the
purchase method and, accordingly,  the operating results of Ra Systems have been
included in the consolidated  financial statements from the date of acquisition.
Ra Systems'  tangible  assets,  including cash of  $2,970,000,  were recorded at
their  estimated  fair value of  $7,242,000  and Ra  Systems'  liabilities  were
recorded at their  estimated fair value of $3,965,000.  The estimated  excess of
$7,546,000  was assigned to goodwill.  The  acquisition  did not have a material
impact on operations.

SOCS GROUPE, SA

On December 28, 1995,  Continuum  acquired all of the shares of SOCS Groupe,  SA
("SOCS"), a Paris-based software and services company, for $37,600,000.  SOCS is
the leading provider of insurance  application  software and related services to
the  French   insurance   industry.   SOCS  employs  200  people  and  generated


                                       6

<PAGE>

approximately  $20,000,000  in revenues for the fiscal year ended  September 30,
1995.  The  acquisition  has been  accounted  for using the  purchase  method of
accounting and,  accordingly,  the operating results of SOCS will be included in
the financial statements from the date of acquisition. Continuum utilized expert
independent  appraisers  to  determine  an  estimated  valuation of the acquired
assets and to advise on the  allocation of the purchase  price.  SOCS'  tangible
assets were  recorded at their  estimated  fair value of  $11,100,000  and SOCS'
liabilities  were recorded at their  estimated  fair value of  $15,600,000.  The
estimated  excess of  the purchase  price over the net assets  acquired  totaled
$42,100,000,  with  $2,400,000  assigned  to  purchased  software,   $13,700,000
assigned  to  goodwill,  and  $26,000,000 assigned  to  purchased  research  and
development, which was expensed in connection with the acquisition.

NOTE (4) PROPOSED ACQUISITION

HOGAN SYSTEMS, INC.

On December  10, 1995,  Continuum  Acquisition  Corporation  ("Merger  Sub"),  a
wholly-owned subsidiary of Continuum,  and Hogan Systems, Inc. ("Hogan") entered
into an Agreement  and Plan of Merger that provides for the merger of Merger Sub
with and into Hogan. On February 7, 1996, the terms of the previously  announced
merger agreement were modified.  Hogan provides integrated software applications
and related consulting services to financial institutions worldwide.  Hogan will
become a  wholly-owned  subsidiary of Continuum  with  continuing  operations in
Dallas, Texas; Frankfurt,  Germany;  London, England; and Melbourne,  Australia.
The  merger,  expected  to be  completed  in March  1996,  is subject to various
conditions, including the approval of the stockholders of each company.

Under the terms of the Agreement,  each outstanding  share of Hogan Common Stock
will be converted into the right to receive 0.315 of a share of Continuum Common
Stock.  The  business  combination  is  intended to be  accounted  for using the
pooling  of  interests   method  of   accounting   for  business   combinations.
Approximately  4,800,000  shares of Continuum common stock will be exchanged for
the outstanding shares of Hogan common stock.

NOTE (5) RESEARCH AND DEVELOPMENT VENTURE

During  fiscal  1992,  a subsidiary  of Paxus  entered into an agreement  with a
financial  institution  whereby the Company  carried  out certain  research  and
development activities funded by the venture and received special tax incentives
from the Australian government. During fiscal 1995, the Company renegotiated the
agreement.  As a result  of the  renegotiation  and  subsequent  reviews  of the
anticipated  liabilities,  the Company recognized a reduction to service expense
of  approximately  $2,300,000  for the three and nine months ended  December 31,
1995, and $1,000,000 and $2,400,000, respectively, for the three and nine months
ended  December 31, 1994.  These  reductions to service  expenses were offset by
increased development expenses incurred during the same periods. At December 31,
1995, the balance sheet included approximately $1,200,000 for anticipated future
liabilities under the terms of the agreement.


                                       7

<PAGE>

NOTE (6) INCOME TAXES

The effective tax rate for the three and nine months ended  December 31, 1995 on
income after the one-time  acquisition  charge was higher than the statutory tax
rate  because  the  special   acquisition  charge  for  purchased  research  and
development does not give rise to a tax benefit.

For the three and nine months ended December 31, 1995, the effective tax rate on
income  before the one-time  acquisition  charge of  $26,000,000  for  purchased
research and development related to the SOCS acquisition discussed below was 28%
and 29%,  respectively.  The  effective  tax rate for the three and nine  months
ended December 31, 1994 was 30% and 32%, respectively.  The tax rates for fiscal
1995 and 1994 were lower than the statutory rate primarily due to utilization of
foreign net operating losses.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

MATERIAL CHANGES IN RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1994.

For the three months ended  December 31, 1995,  the Company  recorded  income of
$9,045,000 or $.47 per share, before a special  acquisition charge,  compared to
net  income  of  $6,848,000  or $.36 per share for the same  period  last  year,
representing an increase of 32% year to year.

On  December  28,  1995,  Continuum  acquired  SOCS  Groupe,  SA, a Paris  based
insurance software and services company,  for $37,600,000.  Continuum  allocated
$26,000,000  of the purchase  price to purchased  research and  development  and
expensed such amount in the quarter.  This one-time  acquisition  charge without
tax  benefit  was $1.35  per  share and  caused a loss  during  the  quarter  of
$16,955,000 or $.88 per share.

Revenue for the three months ended December 31, 1995  increased to  $103,301,000
compared  to  $82,535,000  for the same  quarter a year ago, an increase of 25%.
North American customers accounted for 45% of revenue for the three months ended
December  31,  1995,  European  customers  accounted  for  23% and  Pacific  Rim
customers accounted for 32%.

License  revenue  for the  December  1995  quarter  was  $8,616,000  compared to
$5,838,000  for the same quarter a year ago.  Approximately  55% of the December
quarter  total  came  from  North  American  customers  and  30%  from  European
customers.  The December 1995 quarter was  geographically  more broad-based than
recent  quarters with Capsil,  LIFE/400 and COLOSSUS sales in Europe,  Automated
Work Distributor ("AWD") and COLOSSUS sales in North America, and a COLOSSUS and
healthcare sale in the Pacific.

Service revenue for the December 1995 quarter totaled  $94,499,000,  an increase
of 24%  compared  to the same  quarter  a year  ago.  North  American  customers
accounted  for 44% of service  revenue for the three months  ended  December 31,


                                       8

<PAGE>

1995,  European customers  accounted for 22% and Pacific Rim customers accounted
for 34%. The  following  table  summarizes  the  increase in service  revenue by
region ($ in millions):
<TABLE>
<CAPTION>
                             Quarter ended                   Dec 95 vs Dec 94
                         ---------------------                  increase
                          Dec 31,      Dec 31,             ------------------
                           1995         1994                  $          %
                         -------       -------             -------    -------
<S>                      <C>           <C>                 <C>           <C>
Outsourcing Revenue
  North America          $ 20.5        $ 16.9              $  3.6        21%
  Europe                    2.3           2.0                  .3        15%
  Pacific                  11.5           9.1                 2.4        26%
                         -------       -------             -------
                           34.3          28.0                 6.3        23%
                         -------       -------             -------
Other Service Revenue
  North America            20.7          13.9                 6.8        49%
  Europe                   18.7          15.0                 3.7        25%
  Pacific                  20.8          19.5                 1.3         7%
                         -------       -------             -------
                           60.2          48.4                11.8        24%
                         -------       -------             -------
Total Service Revenue
  North America            41.2          30.8                10.4        34%
  Europe                   21.0          17.0                 4.0        24%
  Pacific                  32.3          28.6                 3.7        13%
                         -------       -------             ------- 
                         $ 94.5        $ 76.4              $ 18.1        24%
                         =======       =======             =======
</TABLE>

Continuum's  recurring  revenue  from  outsourcing  customers,  mostly  in North
America and the Pacific  Rim, was 36% of service  revenue in the  December  1995
quarter.  In the  December  1995  quarter  compared  to a year ago,  outsourcing
revenue grew 23%.  The  increase is  attributed  to new  outsourcing  agreements
signed in North  America and  Australia  during the second half of fiscal  1995.
During the December 1995 quarter, Continuum announced outsourcing contracts with
Fidelity and Guaranty Life  Insurance  Company (F&G Life), a subsidiary of USF&G
($80,000,000 over eight years) and Penncorp  Financial Group, Inc.  ($50,000,000
over seven years). The two contracts will produce revenue beginning in the March
1996  quarter.  The F&G Life  contract  is  between  F&G Life and  Alliance  One
services, L.P., a 60% owned subsidiary of Continuum.

Other service revenue increased 24% to $60,200,000,  including  increases in all
regions.  The increase in North American  service revenue  reflects an increased
demand for consulting and implementation services associated with VANTAGE-ONE(R)
and AWD, and utilization and support fees and services for the COLOSSUS product.
The  increase in European  service  revenue of 25% to  $18,700,000  is primarily
attributable  to the  acquisition of Ra Systems on May 3, 1995.  Continuum Ra is


                                       9

<PAGE>

the leading provider of systems to insurance brokers in the United Kingdom.  The
incremental  revenues  generated  by Ra were  partially  offset by  declines  in
mainframe consulting  revenues.  The increase in the Pacific region is primarily
attributable to an increased demand for programming services in Australia.

Compared to a year  earlier,  service gross profit  increased  $4,300,000 or 24%
with  service  revenue  increasing  $18,000,000  or  24%  and  service  expenses
increasing $13,700,000 or 23%. Compared to the September 1995 quarter,  revenues
grew $2,600,000 or 3% and service gross profit increased $600,000 or 3%.

Marketing  and  administration  expenses  for the  December  1995  quarter  were
$18,105,000  or 18% of total  revenue,  compared  to a year ago when  they  were
$13,592,000  or 16% of total  revenue.  The  increase  in expense  is  primarily
attributable to increased  sales  investments in Continuum  Strategic  Solutions
International, Continuum's global outsourcing marketing organization. Commission
expense  for  outsourcing  contracts  announced  during  the  quarter  were also
accrued.

The  effective  tax rate for the three months ended  December 31, 1995 on income
after the one-time acquisition charge was higher than the statutory rate because
the special  acquisition  charge for purchased research and development does not
give rise to a tax benefit.  The  effective  tax rate for the three months ended
December 31, 1995, before the one-time acquisition charge for purchased research
and  development,  was 28% and the effective tax rate for the three months ended
December  31,  1994 was 30%.  These  rates were lower  than the  statutory  rate
primarily due to the use of foreign net operating losses.

In  summary,  net  loss  for the  three  months  ended  December  31,  1995  was
$16,955,000  compared  to a net income of  $6,848,000  for the same  period last
year. Income before the charge for purchased research and development and income
taxes for the quarter was $12,472,000 compared to $9,760,000 for the same period
last year. The improved  performance was due to an increase in license  revenue,
service  revenue and service  gross profit,  partially  offset by an increase in
sales and marketing expense.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

NINE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO THE NINE MONTHS ENDED 
DECEMBER 31, 1994.

For the nine months  ended  December 31, 1995,  the Company  recorded  income of
$25,475,000 or $1.33 per share, before a special acquisition charge, compared to
a net income of  $18,726,000 or $.99 per share for the same period last year. As
discussed above, the impact of the purchased research and development expense in
the December  1995 quarter  caused a loss during the nine months ended  December
31, 1995 of $525,000 or $.03 per share.

Revenue for the nine months ended  December 31, 1995  increased to  $297,832,000
compared to $232,743,000 for the same period last year, an increase of 28%.

License  revenue was  $22,445,000  for the nine months  ended  December 31, 1995
compared to $15,084,000 for the same period last year.  Approximately 75% of the
product sales came from North  American  customers,  while most of the remainder
came from European life  insurance  customers. 

                                       10

<PAGE>

Service   revenue  for  the  nine  months   ended   December  31,  1995  totaled
$274,658,000,  an increase of 26% compared to a year ago,  due to  approximately
equivalent growth of $28,000,000 in outsourcing and $28,000,000 in other service
revenue.  The  following  table  summarizes  the increase in service  revenue by
region ($ in millions):
<TABLE>
<CAPTION>
                           Nine months ended                 Dec 95 vs Dec 94
                         ---------------------              increase (decrease)
                         Dec 31,       Dec 31,             --------------------
                          1995          1994                  $            %
                         -------       -------             -------      -------
<S>                      <C>           <C>                 <C>           <C> 
Outsourcing Revenue
  North America          $ 66.5        $ 43.3              $ 23.2        54 %
  Europe                    5.2           5.7                 (.5)       (9)%
  Pacific                  33.8          27.9                 5.9        21 %
                         -------       -------             -------
                          105.5          76.9                28.6        37 %
                         -------       -------             -------
Other Service Revenue
  North America            55.6          41.6                14.0        34 %
  Europe                   51.0          42.8                 8.2        19 %
  Pacific                  62.6          56.0                 6.6        12 %
                         -------       -------             -------
                          169.2         140.4                28.8        21 %
                         -------       -------             -------
Total Service Revenue
  North America           122.1          84.9                37.2        44 %
  Europe                   56.2          48.5                 7.7        16 %
  Pacific                  96.4          83.9                12.5        15 %
                         -------       -------            --------
                         $274.7        $217.3             $  57.4        26 %
                         =======       =======            ========
</TABLE>

Outsourcing  revenues increased 37% to $105,500,000  compared to the same period
last year.  Other  service  revenue  increased  21% to  $169,200,000,  including
increases in all regions. The increase in outsourcing and other service revenues
are attributable to the factors discussed above.

Marketing  and  administration  expenses for the nine months ended  December 31,
1995 were  $50,160,000 or 17% of total revenue  compared to a year ago when they
were $39,580,000 or 17% of total revenue.

The  effective  tax rate for the nine months  ended  December 31, 1995 on income
after the one-time acquisition charge was higher than the statutory rate because
the special  acquisition  charge for purchased research and development does not
give rise to a tax  benefit.  The  effective  tax rate for the nine months ended
December 31, 1995, before the one-time acquisition charge for purchased research
and  development, was 29% and the  effective tax rate for the three months ended
December  31,  1994 was 32%.  These  rates were lower  than the  statutory  rate
primarily due to the use of foreign net operating losses.


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<PAGE>

In summary,  net loss for the nine months  ended  December 31, 1995 was $525,000
compared to net income of  $18,726,000  for the same  period  last year.  Income
before the charge for purchased  research and  development  and income taxes for
the nine month  period was  $35,945,000  compared  to  $27,455,000  for the same
period last year. The improvement was due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

During the three months ended December 31, 1995 cash decreased  $14,614,000  and
totaled  $10,402,000.  Approximately  $12,200,000  of cash was used to partially
fund the acquisition of SOCS Groupe,  SA.  Additional cash  requirements for the
quarter included  investments in outsourcing  contracts,  including additions to
equipment and software.

In December 1995, Continuum renewed and increased its $20,000,000 revolving bank
line of credit to $60,000,000.  Approximately $26,000,000 of the credit line was
used to fund the $38,000,000 acquisition of SOCS Groupe, SA.

The Company had no material  commitments for capital expenditures as of December
31, 1995.

Continuum,  VANTAGE-ONE  and COLOSSUS are  trademarks of The Continuum  Company,
Inc. AWD is a registered trademark of DST Systems, Inc.


                          PART II -- OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

Form 8-K reporting date - December 11, 1995.
Items reported:  Acquisitions of Hogan Systems, Inc. and SOCS Groupe, SA.

Form 8-K reporting date - December 28, 1995.
Items reported: Acquisition of SOCS Groupe, SA.




                                   SIGNATURE

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date:  February 14, 1996                             THE CONTINUUM COMPANY, INC.


                                                     JOHN L. WESTERMANN III
                                                     Vice President and 
                                                     Chief Financial Officer



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