<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington D.C. 20549

                                   FORM 10-Q


             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 1999

                                      OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                        Commission file number 0-19872


                       WALKER INTERACTIVE SYSTEMS, INC.
                       --------------------------------  
            (Exact name of registrant as specified in its charter)


            DELAWARE                                        95-2862954
            --------                                        ----------
  (State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                     Identification Number)



                  303 SECOND STREET, SAN FRANCISCO, CA 94107
                  ------------------------------------------  
          (Address of principal executive offices including zip code)



                                (415) 495-8811
                                --------------
              (Registrant's telephone number including area code)


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 report) and (2) has been subject to such filing
requirements for the past 90 days.

                            Yes    X     No ______      
                                 -----

     There were 13,949,833 Shares of $.001 Par Value Common Stock outstanding as
of May 11, 1999.
<PAGE>
 
                       WALKER INTERACTIVE SYSTEMS, INC.
                                   FORM 10-Q
                                     INDEX

<TABLE> 
<CAPTION> 
                        PART I.  FINANCIAL INFORMATION                    Page
                                                                          ----  
<S>                                                                       <C>  
ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS
          
          Consolidated Balance Sheets as of March 31, 1999 and December 
            31, 1998....................................................     3
          
          Consolidated Statements of Operations for the three months 
            ended March 31, 1999 and 1998...............................     4
          
          Consolidated Statements of Cash Flows for the three months 
            ended March 31, 1999 and 1998...............................     5
          
          Notes to Consolidated Financial Statements....................     6
          
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
            AND RESULTS OF OPERATIONS...................................     8
          
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....    15 

                                   PART II.
                               OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K..............................    16

SIGNATURES..............................................................    17
</TABLE> 

                                       2
<PAGE>
 
PART I.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                       WALKER INTERACTIVE SYSTEMS, INC.
                          CONSOLIDATED BALANCE SHEETS
                     (in thousands, except share amounts)

<TABLE> 
<CAPTION>
                                                                   MARCH         DECEMBER
                                      ASSETS                      31, 1999       31, 1998
                                                                 -----------    ----------
                                                                 (unaudited)    
<S>                                                              <C>            <C>                
Current assets:                                                                 
     Cash and cash equivalents                                   $     7,539    $   15,556
     Short-term investments                                            3,843         5,135
     Accounts receivable, net                                         32,560        30,457
     Prepaid expenses                                                  4,463         2,347
                                                                 -----------    ----------
        Total current assets                                          48,405        53,495
                                                                                
Long-term investments                                                  2,714         1,906
Property and equipment, net                                            4,889         4,962
Capitalized software, net                                             18,800        18,186
Deferred tax assets, net                                              13,138        12,501
Other assets                                                           2,595         4,047
                                                                 -----------    ----------
                                                                                
TOTAL ASSETS                                                     $    90,541    $   95,097
                                                                 ===========    ==========
                                                                                
                         LIABILITIES AND STOCKHOLDERS' EQUITY                   
                                                                                
Current liabilities:                                                            
     Accounts payable and accrued liabilities                    $    17,056    $   18,496
     Deferred revenue                                                 14,030        14,819
                                                                 -----------    ----------
        Total current liabilities                                     31,086        33,315
                                                                                
Deferred revenue                                                       1,949         1,600
Accrued rent                                                             980           954
Other long-term obligations                                            1,530         2,177
                                                                 -----------    ----------
        Total liabilities                                             35,545        38,046
                                                                 -----------    ----------
                                                                                
Commitments and Contingencies                                              -             -
Stockholders' equity:                                                           
     Common stock, $.001 par value: 50,000,000 shares                           
        authorized; issued 14,184,685 shares - March 31,                        
        1999; 14,184,685 shares - December 31, 1998                       14            14
     Additional paid-in capital                                       74,719        74,719
     Accumulated other comprehensive income                              121           232
     Accumulated deficit                                             (18,700)      (17,662) 
     Treasury stock at cost (234,852 shares - March 31, 1999;                   
        49,207 shares - December 31, 1998)                            (1,158)         (252) 
                                                                 -----------    ----------    
        Total stockholders' equity                                    54,996        57,051
                                                                 -----------    ----------
                                                                                
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $    90,541    $   95,097
                                                                 ===========    ==========
</TABLE> 

See notes to consolidated financial statements

                                       3
<PAGE>
 
                       WALKER INTERACTIVE SYSTEMS, INC.
               CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                   (in thousands, except per share amounts)

<TABLE> 
<CAPTION> 
                                                                             THREE MONTHS
                                                                            ENDED MARCH 31,
                                                                          1999          1998
                                                                       ----------    ----------
<S>                                                                    <C>           <C>  
REVENUES:                                                                            
                                                                                     
     License                                                           $    3,390    $    6,407
     Maintenance                                                            7,909         7,725
     Consulting                                                            12,608         9,530
                                                                       ----------    ---------- 
        Total revenues                                                     23,907        23,662
                                                                                     
OPERATING EXPENSES:                                                                  
                                                                                     
     Costs of revenues:                                                              
        Costs of licenses, maintenance and consulting                      11,444         9,736
        Amortization of capitalized software                                1,489         1,033
     Sales and marketing                                                    5,936         5,639
     Product development                                                    3,350         3,201
     General and administrative                                             3,601         2,723
                                                                       ----------    ---------- 
        Total operating expenses                                           25,820        22,332
                                                                                     
Operating income (loss)                                                    (1,913)        1,330
        Interest income, net                                                  239           308
                                                                       ----------    ---------- 
Income (loss) before income taxes                                          (1,674)        1,638
        Income tax expense (benefit)                                         (636)          589
                                                                       ----------    ----------
                                                                                     
NET INCOME (LOSS)                                                         ($1,038)   $    1,049
                                                                       ==========    ==========
                                                                                     
BASIC NET INCOME (LOSS) PER SHARE                                          ($0.07)   $     0.08
                                                                       ==========    ==========
                                                                                     
Shares used in computing                                                             
     basic net income (loss) per share                                     14,081        13,974
                                                                       ==========    ==========
                                                                                     
DILUTED NET INCOME (LOSS)  PER SHARE                                       ($0.07)   $     0.07
                                                                       ==========    ==========
                                                                                     
Shares used in computing                                                             
     diluted net income (loss) per share                                   14,081        15,100
                                                                       ==========    ==========
</TABLE> 

See notes to consolidated financial statements

                                       4
<PAGE>
 
                       WALKER INTERACTIVE SYSTEMS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                       THREE MONTHS
                                                                                      ENDED MARCH 31,
                                                                                  1999             1998
                                                                                --------         -------- 
<S>                                                                             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

       Net income (loss)                                                         ($1,038)        $  1,049 
       Adjustments to reconcile net income (loss) to net cash                                             
               provided (used) by operating activities:                                                   
               Depreciation and amortization                                       2,389            1,628 
               Tax benefit of nonqualified stock options                               -               76 
       Changes in operating assets and liabilities:
               Accounts receivable, net                                           (2,068)          (2,094)
               Prepaids & other assets                                              (876)            (199)
               Accounts payable & accrued liabilities                             (2,029)          (1,397)
               Deferred tax asset                                                   (637)             589  
               Deferred revenue                                                     (477)          (1,059)
               Other                                                                 (70)             216 
                                                                                --------         -------- 
                           Net cash used by operations                            (4,806)          (1,191)
                                                                                --------         -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:

       Proceeds from employee stock purchase plan
               issuances and stock options exercised                                   -              218  
       Treasury stock acquired                                                      (906)            (823)
       Capital lease payments                                                        (32)             (18)
       Repayment of borrowings                                                         -           (1,422)
                                                                                --------         -------- 
                           Net cash used by financing activities                    (938)          (2,045)
                                                                                --------         -------- 

CASH FLOWS FROM INVESTING ACTIVITIES:

       Purchases of short- and long-term investments                              (3,287)          (2,513)
       Maturities of short-term investments                                        2,250            5,650 
       Sales of short-term investments                                             1,508              642 
       Purchases of property                                                        (636)            (438)
       Additions to capitalized software                                          (2,098)          (1,935)
       Other                                                                         (10)               2  
                                                                                --------         -------- 
                           Net cash provided (used) by investing activities       (2,273)           1,408 
                                                                                --------         -------- 

NET DECREASE IN CASH AND CASH EQUIVALENTS                                         (8,017)          (1,828)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                   15,556            7,646  
                                                                                --------         -------- 

CASH AND CASH EQUIVALENTS - END OF PERIOD                                       $  7,539         $  5,818 
                                                                                ========         ======== 
</TABLE> 

See notes to consolidated financial statements



                       WALKER INTERACTIVE SYSTEMS, INC.

                                       5
<PAGE>
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES
   -------------------------------

     BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles for
     interim financial statements and include all adjustments (consisting only
     of normal recurring adjustments) which the Company considers necessary for
     a fair presentation of the financial position, operating results and cash
     flows for those periods. Results for the interim periods are not
     necessarily indicative of the results for the entire year. These
     consolidated financial statements and any notes thereto, should be read in
     conjunction with the audited consolidated financial statements included in
     the Walker Interactive Systems, Inc. Annual Report on Form 10-K for the
     year ended December 31, 1998.

     RECLASSIFICATIONS

     Certain previously reported amounts have been reclassified to confirm with
     the current presentation format.

2. EARNINGS PER SHARE
   ------------------

     The Company calculates basic earnings per share ("EPS") and diluted EPS in
     accordance with Statement of Financial Accounting Standards ("SFAS") No.
     128, "Earnings per Share". Basic EPS is computed by dividing net income
     (loss) by the weighted average number of common shares outstanding for that
     period. Diluted EPS takes into account the effect of dilutive instruments,
     such as stock options, and uses the average share price for the period in
     determining the number of incremental shares that are to be added to the
     weighted average number of shares outstanding.

     The following is a summary of the calculation of the number of shares used
     in calculating basic and diluted EPS (in thousands):

                                                          THREE MONTHS
                                                         ENDED MARCH 31,
                                                          1999      1998
                                                       --------- ----------

     Shares used to compute basic EPS                     14,081     13,974
     Add: effect of dilutive securities                        -      1,126
                                                       --------- ----------
     Shares used to compute diluted EPS                   14,081     15,100
                                                       ========= ==========

                                       6
<PAGE>
 
3. COMPREHENSIVE INCOME
   --------------------

     SFAS No. 130 requires disclosure of total non-stockholder changes in
     equity, which include unrealized gains and losses on securities classified
     as available-for-sale under SFAS No. 115, foreign currency translation
     adjustments accounted for under SFAS No. 52, and minimum pension liability
     adjustments made pursuant to SFAS No. 87.

     The reconciliation of net income (loss) to comprehensive income (loss) for
     the three months ended March 31, 1999 and 1998 is as follows (in
     thousands):

                                                           THREE MONTHS
                                                          ENDED MARCH 31,
                                                        1999         1998
                                                     ----------   ----------
     Net income (loss)                                  ($1,038)      $1,049
     Other comprehensive income (loss)                     (111)           3
                                                     ----------   ----------
     Total comprehensive income (loss)                  ($1,149)      $1,052    
                                                     ==========   ==========

                                       7
<PAGE>
 
                       WALKER INTERACTIVE SYSTEMS, INC.

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

The report on this Form 10-Q contains forward-looking statements, including
statements related to working capital requirements and Year 2000 related issues.
Discussions containing such forward-looking statements may be found in the
material set forth in this section, generally and specifically herein under the
captions "Liquidity and Capital Resources", "Year 2000 Readiness" and
"Additional Risk Factors." Actual events or results may differ materially from
those discussed herein. The Company disclaims any obligation to update these
forward-looking statements as a result of subsequent events. The risk factors on
pages 11 through 15, among others, should be considered in evaluating the
Company's prospects and future financial performance.

Walker Interactive Systems, Inc. (hereinafter "Walker" or the "Company") was
incorporated in California in 1973 and reincorporated in Delaware in March 1992.
Walker designs, develops, markets and supports, on a worldwide basis, a family
of client-server/network computing-enabled enterprise financial, operational and
analytic application software products that enable large and medium-sized
organizations, higher education institutions, and federal, state and government
agencies to accelerate time-to-benefit, lower cost of ownership and reduce
information systems risks stemming from changes in information technology and/or
business processes or structure.

Walker designs its software products specifically for the client/server and
network computing models and believes that its architecture is among the most
scalable and adaptable available for enterprise-level financial applications
software. The Company's strategy is to offer enterprise financial, operational
and analytical application software solutions to a variety of industries with
best-of-breed software products utilized in a wide variety of cross-industry
solutions. The Walker applications support and enhance enterprise-wide
financial, operational and analytic processes, including planning, budgeting,
forecasting, consolidation, financial, performance, work, materials and
procurement management. The Company's software products utilize the Microsoft
Windows operating systems on the desktop, NT, UNIX and OS/390 operating systems
on the server and industry-leading On Line Analytical Processing ("OLAP"),
Relational Database Management Systems ("RDBMS") including Hyperion Solutions
Essbase, IBM's DB2, Oracle Express and Microsoft SQL/Server.

The Tamaris product line represents the Company's core suite of business and
financial solutions utilizing the power of the enterprise server, while the
Aptos suite of financial applications runs on UNIX and Windows NT servers. The
Company also develops and markets Horizon best-of-breed analytic applications
which provide financial reporting, budgeting and financial consolidation
solutions for large and mid-sized organizations. The Horizon analytic
applications products integrate with Tamaris and Aptos solutions and also work
standalone with leading Enterprise Resource Planning ("ERP") applications. In
addition, Walker's IMMPOWER product line provides best-of-breed Enterprise Asset
Management solutions for capital intensive industries.

The Company's software products include productivity tools that allow the
Company's applications to be customized to fit the customer's particular
requirements. The Company complements its software products by providing
specialized professional consulting services to assist customers with
customization and implementation of financial, analytical and operational
solutions to fuel business advantage.

The Company derives its revenues primarily from software licenses, software
maintenance and professional consulting services. The Company's products and
services are marketed primarily to Fortune 1000 companies and similarly-sized
business and governmental organizations utilizing direct sales forces located in
the Company's three geographic regions of North America, Europe and Asia
Pacific.

RESULTS OF OPERATIONS
---------------------

REVENUES. The Company recorded total revenues of $23.9 million and $23.7 million
for the three months ended March 31, 1999 and 1998, respectively. Although total
revenues were relatively unchanged from 1998 to 1999, the Company's revenue mix
had increases in consulting revenues offset by a decrease in license revenues.
Maintenance revenues have remained relatively flat in 1999 from 1998.

License revenues in the first quarter of 1999 decreased $3.0 million or 47
percent from the three months ended March 31, 1998 primarily as a result of a
decrease in license revenues generated from North American operations. Further

                                       8
<PAGE>
 
contributing to the change were slight decreases in license revenues generated
in Europe and the Asia Pacific region. The Company believes that the decrease in
license revenues is primarily attributable to a general softness in the
enterprise financial application software industry as a whole. The Company
believes that potential customers are utilizing resources to ensure that current
software applications are Year 2000 compatible instead of immediately purchasing
and implementing new software applications. The ongoing downturn in the Asia
Pacific economy continues to negatively impact license revenues generated in
that region.

Consulting revenues of $12.6 million for the three months ended March 31, 1999
increased $3.1 million or 32 percent compared to $9.5 million for the comparable
prior year period. Consulting revenues are generated from new and existing
customers for services related to training, implementation, customization,
migration, enhancement, Year 2000 readiness engagements, best practice
consulting engagements and other special projects. The Company generates a
majority of its consulting revenues from implementation-related projects. The
increase in consulting revenues during the first quarter of 1999 is attributable
to revenues generated from Year 2000 readiness engagements, best practice
consulting engagements, and implementation-related projects associated with the
Company's Tamaris, Aptos and Horizon product lines.

COSTS OF LICENSES, MAINTENANCE AND CONSULTING. Costs of licenses, maintenance
and consulting represented 48 percent and 41 percent of total revenues for the
three months ended March 31, 1999 and 1998, respectively. The increase is partly
attributable to a decrease in license revenue which has a lower cost of revenue
than consulting revenue. Further contributing to the increase in 1999 were lower
profit margins in Europe associated with fixed-fee consulting engagements,
partially offset by relatively higher profit margins recognized on Year 2000
readiness and best practice consulting engagements.

AMORTIZATION OF CAPITALIZED SOFTWARE. Amortization of capitalized software
increased $0.5 million or 44 percent in 1999 compared to the same period in
1998. The increase is due to additional amortization associated with the
Company's ongoing practice of evaluating the lives of capitalized software
products and additional amortization resulting from recent product releases.

SALES AND MARKETING. In absolute dollars, sales and marketing expenses of $5.9
million for the three months ended March 31, 1999 increased $0.3 million or 5
percent compared to $5.6 million for the comparable prior year period. The
increase is attributable to higher sales and marketing expenses in Europe and
the Asia Pacific region as the Company opened sales offices during the first
quarter of 1999. Partially offsetting the increase in international expenses was
a reduction in sales and marketing expenses in North America as the Company
reduced marketing and promotions in 1999 compared to 1998. As a percent of total
revenues, sales and marketing expense increased to 25 percent in 1999 from 24
percent in 1998. The increase is attributable to higher sales and marketing
expenses for 1999 coupled with relatively unchanged total revenues in 1999 when
compared to the prior year.

PRODUCT DEVELOPMENT. Product development-related expenses, excluding
amortization of capitalized software, are detailed as follows (in thousands):

<TABLE>
<CAPTION>
                                                        THREE MONTHS
                                                       ENDED MARCH 31,
                                                      1999             1998
                                                  ------------     ------------ 
<S>                                               <C>              <C>
Product development costs including additions     
 to capitalized software (gross)                    $  5,448         $  5,136
Less: additions to capitalized software                2,098            1,935
                                                  ------------     ------------ 
Product development expenses                        $  3,350         $  3,201
                                                  ============     ============
</TABLE>
                                                                               
During the first quarter of 1999, the Company acquired $0.2 million in software
technology which complemented internally developed products and related
technology. Excluding the acquired software, gross product development expenses
remained relatively unchanged. The decrease in additions to capitalized software
in absolute dollars and as a percentage of gross product development costs is
attributable to product development resources which were allocated to non-
capitalizable projects. Historical additions to capitalized software, in
absolute dollars and as a percentage of gross product development costs, are not
a reliable indicator of additions to capitalized software that will be incurred
in the future.

                                       9
<PAGE>
 
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $3.6
million and $2.7 million for the three months ended March 31, 1999 and 1998,
respectively. The increase of $0.9 million or 32 percent is attributable to
increased usage of outside contractors and increased labor and facility
expenses.

INCOME TAX EXPENSE (BENEFIT). Income tax expense (benefit) is recorded each
quarter based on the Company's estimated effective income tax rate for the year.
The Company estimates that the 1999 effective income tax rate will be 38
percent.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company's operating activities used cash of $4.8 million in the first
quarter of 1999 and $1.2 million during the comparable 1998 period. The
Company's net loss of $1.0 million in the first quarter of 1999 compared to net
income of $1.0 million in the same period of 1998 was the primary reason for the
increase.

Financing activities used $0.9 million in cash during the first quarter of 1999
and $2.0 million during the same period in 1998. There were no proceeds from
employee stock purchase plan issuances and stock options exercises in the first
quarter of 1999 compared to $0.2 million in the same 1998 period. The Company
used $0.9 million in cash in the first quarter of 1999 and $0.8 million in cash
in the same 1998 period for the acquisition of common stock from the open
market. All stock repurchases were made pursuant to resolutions of the Company's
Board of Directors authorizing the repurchase of the Company's outstanding
shares of common stock, which in aggregate is not to exceed a total cost of
$17.5 million. As of March 31, 1999, the Company had acquired 1,007,000 shares
of its common stock at a cost of $10.9 million. As of March 31, 1999, the
Company had reissued 803,000 of the repurchased shares in connection with the
Company's employee stock purchase plan, one of its employee stock option plans
and the December 1997 acquisition of Revere.

In connection with the acquisition of Revere, the Company assumed a line of
credit with an outstanding balance of $1.5 million. The outstanding balance on
the assumed line of credit was subsequently paid in full in January 1998.

The Company has a line of credit in the amount of $6.0 million, secured by
marketable securities. The line of credit expires on August 1, 1999. The Company
has never borrowed against this line of credit.

Investing activities used cash of $2.3 million in the first quarter of 1999
compared to providing cash of $1.4 million for the same period in 1998. The
increase in cash used is primarily attributable to a decrease in short-term
maturities and an increase of investment purchases in 1999.

As of March 31, 1999, the Company's principal sources of liquidity included
cash, cash equivalents and short- and long-term investments aggregating $14.1
million. The following sentence is a forward looking statement. The Company
believes that its principal sources of liquidity, together with funds expected
to be generated from operations, will satisfy the Company's currently
anticipated working capital and capital expenditure requirements for at least
the next twelve months.

YEAR 2000 READINESS
-------------------

The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Company's computer
equipment and software and devices with imbedded technology that are time-
sensitive may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in normal business activities.

The Company has completed an assessment to determine the effect that the Year
2000 issue will have on it. The Company believes that its current commercial
application software products generally offered for license by the Company to
end-user customers are Year 2000 ready. However, certain versions of these
products currently installed at customers' sites will require upgrading or other
modifications to become Year 2000 ready. The Company has identified those
affected customers who are on the Company's warranty maintenance program, has
contacted those customers and is assisting those customers to assess their
readiness. The Company is making available to those customers a Year 2000 ready
release of its software and will assist such customers to become Year 2000
ready. The following sentence is a forward-looking statement. The Company
believes that the costs associated with making 

                                       10
<PAGE>
 
certain versions of the Company's products Year 2000 ready will not be material
to the Company's business, results of operations or financial condition.

The Company has completed an assessment of its computer equipment and software,
including information technology systems, such as accounting, data processing
and telephone/PBX systems, and non-information technology systems, such as fax
machines and alarm systems, to determine if they are Year 2000 ready. The
following three sentences are forward-looking statements. The Company believes
that certain of its non-critical computer equipment and software will require
replacement or modification, at a total cost which is not material to the
Company's results of operations or financial condition. The Company believes
that even if such replacements or modifications were not completed, the Year
2000 issue would not have a material adverse effect on the Company's business,
results of operations or financial condition. In addition, even if the Company's
vendors or suppliers fail to become Year 2000 ready in a timely manner, the
Company believes that such failure would not have a material adverse effect on
the Company's business, results of operations or financial condition.

The costs and impact of the Year 2000 issue are based upon management's best
estimates, which were derived using numerous assumptions regarding future
events, including the continued availability of certain resources, the
functioning of its products in accordance with specifications and other factors.
There can be no assurance that these estimates will prove to be accurate and
actual results could differ from those currently anticipated. Specific factors
that could cause such material differences include, but are not limited to, the
availability and cost of personnel trained in Year 2000 issues and the
functioning of the Company's products in accordance with specifications. In
addition, variability of definitions of "Year 2000 ready" and the number of
products that the Company has sold, may lead to claims for which the impact on
the Company is not currently estimable. No assurance can be given that the
aggregate cost of defending and resolving such claims, if any, would not
materially adversely affect the Company's business, results of operations or
financial condition.

ADDITIONAL RISK FACTORS
-----------------------

The Company operates in a rapidly changing environment that involves numerous
risks and uncertainties which could have a material adverse effect on the
Company. The following discussion details some, but not all, of these risks and
uncertainties.

LIQUIDITY AND CAPITAL RESOURCES.

There can be no assurance that the Company will not need to raise substantial
additional capital to fund its operations in the future. There can be no
assurance that additional financing will be available on acceptable terms or
will be available at all.

FLUCTUATION IN OPERATING RESULTS.

The Company's operating results fluctuate as a result of a variety of factors
including:

          (i)    the execution of new license agreements;
          (ii)   the shipment of software products;
          (iii)  customer acceptance criteria for services performed;
          (iv)   completion of milestone or other significant development
                 requirements pursuant to the Company's license agreements;
          (v)    the financial terms of consulting agreements and the inclusion
                 of fixed as opposed to variable pricing;
          (vi)   third-party royalty payments for licensed software;
          (vii)  the demand for the Company's products and services;
          (viii) changes in the Company's product mix;
          (ix)   the development and launch of new products, and the life cycles
                 of the Company's existing products;
          (x)    research and development expenditures required to update and
                 expand the Company's product portfolio and related third-party
                 consulting costs;
          (xi)   sales and marketing expenses generally related to the entry
                 into new markets with new or existing products and maintenance
                 of market share in existing markets;
          (xii)  acquisitions and the integration and development of acquired
                 entities or products;
          (xiii) competitive conditions in the industry; and
          (xiv)  general economic conditions.

                                       11
<PAGE>
 
As a result, the Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful and should not be relied upon
as indications of future performance.

The Company's quarterly operating results are particularly dependent on the
number of license agreement bookings executed in each quarter. The amount of
quarterly bookings has varied substantially from quarter to quarter due to a
variety of reasons including:

          (i)    a high proportion of license agreements are negotiated during
                 the latter part of each quarter and may not be completed before
                 the quarter end;
          (ii)   the sales cycles for some of the Company's products are
                 relatively long due to the Company's focus on "enterprise
                 solutions" as opposed to individual products, which adds
                 complexity to the customer's selection, negotiation and
                 approval process;
          (iii)  the amount related to each booking may vary significantly due
                 to the need for different solutions for different customers;
          (iv)   procurement procedures may vary from customer to customer,
                 which may affect the timing of the bookings;
          (v)    customers may continue to forego or delay software purchases
                 due to increased attention and spending on Year 2000 related
                 projects;
          (vi)   the period for a customer to complete product evaluations and
                 to complete any subsequent purchase approval may be delayed due
                 to resource limitations; and
          (vii)  economic, political and industrial conditions can adversely
                 affect business opportunities without notice.

In addition, bookings that are executed during a particular quarter may not be
recognized as revenue during such quarter because such bookings may not have met
the Company's revenue recognition criteria. No assurance can be given that the
Company will be able to effect new bookings in accordance with historical
results or management's expectations, and the inability of the Company to do so
could have a material adverse effect on the Company's operating results.

The Company believes that Year 2000 pressures have caused customers to forego or
delay the licensing of new software as they utilize resources to ensure that
their existing software products are Year 2000 ready. Continuation of this trend
will have an adverse impact on Company revenues and results of operations. There
can be no assurance that revenues will return to historical levels or obtain
historical growth rates in the Year 2000 or beyond.

While the Company typically sells its software under a standard license
agreement, license agreements associated with large enterprise solutions often
require the negotiation of terms and conditions that differ substantially from
the Company's standard license agreement terms. The negotiation of these
agreements may extend the sales cycle. The Company may not always obtain terms
and conditions that permit the recognition of revenue upon shipment of the
licensed product or under the percentage of completion method of contract
accounting rules. Accordingly, revenue may not be recognized after shipment of a
product because specified milestones have not been met or because applicable
services have not been completed or cash is secured.

The Company has and expects to enter into fixed-price consulting agreements,
particularly in response to increased competition in the industry. The Company
has recognized lower profit margins on certain fixed-price service agreements
when compared to variable agreements. No assurance can be given that the Company
will be able to conclude fixed-price agreements on terms that will allow the
Company to retain its historical operating margins.

The Company has historically generated a majority of its consulting revenue from
pre- and post-implementation services. Recently, the Company has provided
services which include, but are not limited to, Year 2000 readiness engagements,
best practice solution engagements and other hardware and software solutions.
The Company intends to continue its pursuit of consulting engagements for which
the Company believes it is qualified. There can be no assurances that these
engagements will result in profit margins equal to or greater than those
engagements that are specific to a customer's product implementation. Also,
there can be no assurances that consulting revenue generated from non-
implementation-related projects will continue in the future.

Employee- and facility-related expenditures comprise a significant portion of
the Company's operating costs and expenses, and are therefore relatively fixed
over the short term. In addition, the Company's expense levels are based, in
significant part, on the Company's forecasted revenue. If revenue levels fall
below expectations, net income is likely to be adversely affected. There can be
no assurance that the Company will be profitable on a quarterly or annual basis
in the future. Any of the foregoing factors could cause the Company's future
operating results to fall 

                                       12
<PAGE>
 
below the expectations of public securities market analysts, which could have an
adverse effect on the trading price of the Company's common stock. See
"Volatility of Stock Price."

RELIANCE ON THIRD PARTY TECHNOLOGY.

The Company generates revenue from internally developed software products, some
of which utilize technology licensed from third parties. The Company expects to
continue utilizing third party technology and may enter into agreements with
additional business partners. If sales of software utilizing third party
technology increase disproportionately, gross margins may be below historical
levels due to third party royalty obligations. There can be no assurances that
the third parties will renew existing agreements with the Company or will not
require financial conditions which are unfavorable to the Company. In addition,
there can be no assurances that existing third party agreements will not be
terminated.

INDUSTRY.

Certain software companies, including the Company, have experienced significant
economic downturns as a result of technological shifts, competitive pressures
and uncertainties caused by the Year 2000 transition. These downturns are
characterized by decreased product demand, price erosion, work slowdowns and
layoffs. The Company's operations may, in the future, experience substantial
fluctuations from period to period because of such industry patterns and general
economic and political conditions which could affect the timing of orders from
customers. There can be no assurance that such factors will not have a
materially adverse effect on the Company's business, operating results or
financial condition.

INTERNATIONAL.

The Company plans to increase its presence in international markets by marketing
its product lines in additional countries. Risks associated with such pursuits
include, but are not limited to, the following:

          (i)    changing market demands,
          (ii)   economic and political conditions in foreign markets,
          (iii)  foreign exchange fluctuations, longer collections cycles,
          (iv)   difficulty in managing a geographically dispersed organization
                 and
          (v)    changes in international tax laws.

The downturn in the Asia Pacific business climate has had and may continue to
have an adverse effect on some market opportunities. Operating results are
likely to be adversely affected if the Company's expansion into international
markets is not successful.

COMPETITION.

The business and financial applications software market for large complex
organizations is intensely competitive. The Company's principal competitors with
Tamaris solutions are SAP AG, Oracle Corporation and PeopleSoft, Inc. With Aptos
solutions, the Company principally competes with Oracle Corporation, Lawson
Software, Inc., Platinum Software, Inc., Systems Union Group Ltd and Agresso AS.
With the Horizon suite of products, the Company principally competes with
Hyperion Solutions Corporation, Oracle Corporation and Comshare, Inc. With the
IMMPOWER suite of products, the Company principally competes with
Datastream/SQL, Indus International, Marcam, Mincom, PSDI and SAP AG.

The Company also competes to a lesser extent with other independent software
application vendors. Some of the Company's current and potential competitors
have substantially greater financial, technical, marketing and sales resources
than the Company. Some of these competitors also offer business application
products not offered by the Company, primarily in the areas of human resources
and manufacturing. However, Walker remains one of the few companies committed to
providing and enhancing applications for the mainframe environment. Most of the
competitors listed above compete with Walker by offering UNIX-based
applications.

The Company encounters competition from a broader range of firms in the market
for professional services. Principal competitors include Andersen Consulting,
IBM Global Services and the consulting divisions of the major accounting firms.
These competitors possess greater resources than the Company. Niche consulting
firms which specialize in the Company's products also compete with the Company
primarily on the basis of price.

The principal competitive factors in the market for business and financial
applications software and services include:

          (i)    product functionality,
          (ii)   flexibility,
          (iii)  portability,

                                       13
<PAGE>
 
          (iv)   integration,
          (v)    reliability,
          (vi)   performance,
          (vii)  product availability,
          (viii) speed of implementation,
          (ix)   quality of customer support and user documentation,
          (x)    vendor reputation,
          (xi)   experience,
          (xii)  financial stability,
          (xiii) cost effectiveness and
          (xiv)  price.

The Company believes that it competes favorably with respect to these factors.
There can be no assurance, however, that the Company will be able to compete
successfully in the future.

RAPID TECHNOLOGICAL CHANGE.

The software industry is characterized by rapid technological change. The pace
of change has accelerated due to advances in mainframe and client/server
technology and the growth in Internet, Intranet and extranet utilization. The
Company expects to evaluate potential opportunities and may invest in those
which are compatible with the Company's strategic direction. However, there can
be no assurance that any such investments will be profitable. The Company's
products are also designed primarily for use with certain mainframe and
client/server systems. The introduction of products embodying new technologies
and the emergence of new industry standards can render existing products
obsolete. Accordingly, the Company's future success depends in part upon its
ability to continue to enhance its current products and to develop and introduce
new products that respond to evolving customer requirements and keep pace with
technological development and emerging industry standards, such as new operating
systems, hardware platforms, interfaces and third party applications software.
There can be no assurances that:

          (i)   the Company will be successful in developing and marketing
                product enhancements or new products that respond to
                technological change, changes in customer requirements or
                emerging industry standards;
          (ii)  the Company will not experience difficulties that could delay or
                prevent the successful development, introduction and marketing
                of such products and enhancements; or
          (iii) any new products or enhancements that it may introduce will
                achieve market acceptance.

PRODUCT DEVELOPMENT.

The Company's continued success is dependent on its continued ability to
introduce, develop and market new and enhanced versions of its software
products, although there can be no assurance that such ability can be
maintained. The Company plans to continue its investment in product development
in future periods. However, there can be no assurance that revenues will be
sufficient to support the future product development which is required for the
Company to be competitive. Although the Company may be able to release new
products in addition to enhancements to existing products, there can be no
assurance that the Company's new or upgraded products will be accepted, will not
be delayed or canceled, or will not contain errors or "bugs" that could affect
the performance of the product or cause damage to users' data.

PROPRIETARY RIGHTS.

The Company regards its products as proprietary. Through its license agreements
with customers and its internal security systems, confidentiality procedures and
employee agreements, the Company has taken steps to maintain the trade secrecy
of its products. However, there can be no assurances that misappropriation will
not occur. In addition, the laws of some countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. There
can be no assurance that the confidentiality of any proprietary information will
provide any meaningful competitive advantage. The Company has no patents
relating to its products. The Company believes that, because of the rapid pace
of technological change in the computer software industry, that patents and
copyrights are less significant than factors such as the knowledge, ability and
experience of the Company's employees, frequent product enhancements and the
timeliness and quality of support services. There can be no assurance that the
Company's current efforts to retain its products as proprietary will be
adequate.

Although the Company believes that its products do not infringe upon the
proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products or that any such assertions will not
require the Company to enter into royalty arrangements or result in costly
litigation.

                                       14
<PAGE>
 
PRODUCT LIABILITY.

The Company's license agreements with its customers contain provisions designed
to limit the Company's exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in such
license agreements may not be enforced as a result of international, federal,
state and local laws or ordinances or unfavorable judicial decisions. The
license and support of the Company's software for use in mission critical
applications creates the risk of product liability claims against the Company.
Damage liability or injunctive relief resulting from such a claim could cause a
materially adverse impact on the Company's business, operating results and
financial condition.

EMPLOYEES.

The Company believes that its continued success will depend in large part upon
its ability to attract, train and retain highly-skilled technical, sales,
marketing and managerial personnel. Because of a high level of demand,
competition for such personnel is intense and the Company sometimes experiences
difficulty in locating candidates with appropriate qualifications or within
desired geographic locations. Revenue growth is dependent on the Company's
ability to attract, train, retain and productively manage such personnel.

ACQUISITION-RELATED RISKS.

The Company has acquired and may continue to acquire complimentary businesses,
products or technology. The process of integrating an acquired company's
business into the Company's operations may result in unforeseen operating
difficulties and expenditures and may require significant management attention
that would otherwise be available for the ongoing development of the Company's
business. There can be no assurance that any anticipated benefits of an
acquisition will be realized. Future acquisitions by the Company could result in
potentially dilutive issuances of equity securities, the incurrence of debt and
contingent liabilities and amortization related to goodwill and other intangible
assets, which could materially affect the Company's operating results and
financial condition. Acquisitions involve numerous risks, including difficulties
in the assimilation of operations, technologies and products of the acquired
company, risks associated with entering markets in which the Company has no or
limited direct prior experience and the potential loss of key employees of the
acquired company.

VOLATILITY OF STOCK PRICE.

High technology companies, including the Company, frequently experience
volatility in their common stock prices. Factors such as quarterly fluctuations
in results of operations, announcements of technological innovations by the
Company or its competitors or the introduction of new products by the Company or
its competitors and macroeconomic conditions in the computer hardware and
software industries generally may have a significant adverse impact on the
market price of the Company's stock. If revenues or earnings in any quarter fail
to meet the expectations of the investment community, there could be an
immediate impact on the Company's stock price. In addition, the Company has
issued shares and stock options which if sold directly or exercised and sold on
the open market in large concentrations, could cause the Company's stock price
to decline in the short term. Furthermore, the stock market has from time to
time experienced extreme price and volume fluctuations which have particularly
affected the market price for many high technology companies, in some cases
unrelated to the operating performance of those companies. These broad market
fluctuations may materially adversely affect the market price of the stock of
the Company.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has U.S. dollar interest-bearing investments that are subject to
interest rate risk. The Company analyzed its investments at year-end to
determine the sensitivity to interest rate changes. The fair values of these
instruments were determined by net present values. The Company's sensitivity
analysis used the same change in interest rates for all maturities. All other
factors were held constant. If interest rates increased by 10 percent the
expected effect on net income related to the Company's investments would be
immaterial.

The majority of the Company's revenues are denominated in the U.S. dollar. The
Company does not engage in interest rate swaps or enter in foreign currency
forward contracts.

No material changes have occurred since December 31, 1998.

                                       15
<PAGE>
 
PART II.  OTHER INFORMATION
---------------------------

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

                 10.2    1992 Employee Stock Purchase Plan, as amended to date
                 10.9    1993 Non-Employee Directors' Stock Option Plan, as
                         amended to date
                 10.14   1995 Non-Statutory Stock Option Plan for Non-Officer
                         Employees , as amended to date
                 10.18   Separation Agreement between Barbara M. Hubbard and the
                         Registrant.
                 27.1    Financial Data Schedule (electronic filing only)

          (b)  Reports on Form 8-K

               The Company filed no reports on Form 8-K during the quarter ended
               March 31, 1999.

                                       16
<PAGE>
 
                       WALKER INTERACTIVE SYSTEMS, INC.
                                   FORM 10-Q
                                  SIGNATURES

Pursuant to the requirements 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.


                       WALKER INTERACTIVE SYSTEMS, INC.
                       --------------------------------
                                 (REGISTRANT)
                                        



Date:  May 14, 1999                   By:   /s/ Michael B. Shahbazian
       ------------                        --------------------------
                                           Michael B. Shahbazian
                                           Senior Vice President and
                                           Chief Financial Officer
                                           (Principal Financial Officer)

                                       17
<PAGE>
 
                       WALKER INTERACTIVE SYSTEMS, INC.
                                   FORM 10-Q
                               INDEX TO EXHIBITS

10.2      1992 Employee Stock Purchase Plan, as amended to date (1)
10.9      1993 Non-Employee Directors' Stock Option Plan, as amended to date (1)
10.14     1995 Non-Statutory Stock Option Plan for Non-Officer Employees, as
          amended to date
10.18     Separation Agreement between Barbara M. Hubbard and the Registrant
27.1      Financial Data Schedule (electronic filing only)

(1)  Incorporated by reference to the attachment to the Company's 1999 Proxy
     Statement.

                                       18