-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WONFQLon4pGLA8f8RAXDKeUbaWdMcyEiCvtDYMwXi5pInLmuOBnhb1lD1BWURyrK XewqRML4syLQI8H4fpx9WQ== 0000758004-95-000008.txt : 19950614 0000758004-95-000008.hdr.sgml : 19950614 ACCESSION NUMBER: 0000758004-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950429 FILED AS OF DATE: 19950613 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVELL INC CENTRAL INDEX KEY: 0000758004 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 870393339 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13351 FILM NUMBER: 95546710 BUSINESS ADDRESS: STREET 1: 122 EAST 1700 SOUTH CITY: PROVO STATE: UT ZIP: 84606 BUSINESS PHONE: 8014297000 MAIL ADDRESS: STREET 1: 122 E. 1700 S. CITY: PROVO STATE: UT ZIP: 84606 10-Q 1 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 Fiscal Quarter Ended April 29, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ------- to ------- Commission File Number: 0-13351 NOVELL, INC. (Exact name of registrant as specified in its charter) Delaware 87-0393339 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1555 N. Technology Way Orem, Utah 84057 (Address of principal executive offices and zip code) (801) 429-7000 (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 reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ As of May 27, 1995 there were 369,087,692 shares of the registrant's common stock outstanding. Part I. Financial Information, Item 1. Financial Statements NOVELL, INC. CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
Apr. 29, Oct. 29, Dollars in thousands, except per share data 1995 1994 - -------------------------------------------------------------------------- ASSETS Current assets Cash and short-term investments $1,118,887 $ 861,809 Receivables, less allowances ($95,548 - April; $82,934 - October) 399,353 391,342 Inventories 29,542 32,221 Prepaid expenses 57,912 69,324 Deferred income taxes 96,145 98,435 - -------------------------------------------------------------------------- Total current assets 1,701,839 1,453,131 Property, plant and equipment, net 383,700 394,682 Other assets 120,865 115,668 - -------------------------------------------------------------------------- Total assets $2,206,404 $1,963,481 ========================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 88,297 $ 67,176 Accrued compensation 87,918 81,639 Accrued marketing liabilities 73,606 66,800 Other accrued liabilities 97,168 121,165 Income taxes payable 66,372 78,139 Deferred revenue 49,598 47,801 - -------------------------------------------------------------------------- Total current liabilities 462,959 462,720 Minority interests 16,925 13,774 Shareholders' equity Common stock, par value $.10 a share Authorized - 600,000,000 shares Issued - 368,580,439 shares-April 364,354,887 shares-October 36,858 36,436 Additional paid-in capital 699,176 645,419 Retained earnings 990,486 805,132 - -------------------------------------------------------------------------- Total shareholders' equity 1,726,520 1,486,987 - -------------------------------------------------------------------------- Total liabilities and shareholders' equity $2,206,404 $1,963,481 ==========================================================================
See notes to consolidated unaudited condensed financial statements. NOVELL, INC. CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF INCOME
Fiscal Quarter Ended Six Months Ended -------------------- -------------------- Amounts in thousands, Apr. 29, Apr. 30, Apr. 29, Apr. 30, except per share data 1995 1994 1995 1994 - ---------------------------------------------------------------------------------- Net sales $529,508 $534,930 $1,022,733 $1,023,208 Cost of sales 124,455 145,397 241,330 249,174 - ---------------------------------------------------------------------------------- Gross profit 405,053 389,533 781,403 774,034 Operating expenses Sales and marketing 148,374 126,661 288,177 252,881 Product development 93,000 82,917 182,817 166,460 General and administrative 35,794 42,364 69,764 86,391 Nonrecurring charges -- -- -- 14,969 - ---------------------------------------------------------------------------------- Total operating expenses 277,168 251,942 540,758 520,701 Income from operations 127,885 137,591 240,645 253,333 Other income (expense) Investment income 15,037 7,912 24,604 18,861 Other, net 1,240 (692) 1,498 (939) - ---------------------------------------------------------------------------------- Other income, net 16,277 7,220 26,102 17,922 - ---------------------------------------------------------------------------------- Income before taxes 144,162 144,811 266,747 271,255 Income taxes 48,294 48,447 89,360 80,431 - ---------------------------------------------------------------------------------- Net income $ 95,868 $96,364 $177,387 $190,824 ================================================================================== Weighted average shares outstanding 374,383 368,482 373,205 368,279 ================================================================================== Net income per share $ 0.26 $ 0.26 $0.48 $0.52 ================================================================================== See notes to consolidated unaudited condensed financial statements.
NOVELL, INC. CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended ---------------------- Apr. 29, Apr. 30, Amounts in thousands 1995 1994 - --------------------------------------------------------------------------- Cash flows from operating activities Net income $ 177,387 $ 190,824 Adjustments to reconcile net income to net cash provided (used) by operating activities Write-off of purchased research and development -- 14,969 Depreciation and amortization 46,211 40,898 WordPerfect fiscal year conversion -- (39,856) Stock plans income tax benefits 15,409 14,278 (Increase) decrease in receivables (8,011) 48,479 Decrease (increase) in inventories 2,679 (2,303) Decrease (increase) in prepaid expenses 11,412 (1,841) Decrease (increase) in deferred income taxes 3,523 (19,004) Increase in current liabilities 239 11,404 - ---------------------------------------------------------------------------- Net cash provided from operating activities 248,849 257,848 - ---------------------------------------------------------------------------- Cash flows from financing activities Issuance of common stock, net 35,909 17,473 Borrowings -- 24,531 - ---------------------------------------------------------------------------- Net cash provided from financing activities 35,909 42,004 - ---------------------------------------------------------------------------- Cash flows from investing activities Expenditures for property, plant and equipment (32,532) (41,417) (Increase) in short-term investments (145,429) (166,557) Other 4,852 3,116 - ---------------------------------------------------------------------------- Net cash used by investing activities (173,109) (204,858) - ---------------------------------------------------------------------------- Total increase in cash and cash equivalents $ 111,649 $94,994 Cash and cash equivalents - beginning of period 228,426 383,596 - ---------------------------------------------------------------------------- Cash and cash equivalents - end of period 340,075 478,590 Short-term investments - end of period 778,812 502,158 - ---------------------------------------------------------------------------- Cash and short-term investments - end of period $1,118,887 $980,748 ============================================================================ See notes to consolidated unaudited condensed financial statements.
NOVELL, INC. NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS A. Quarterly Financial Statements The accompanying consolidated unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q but do not include all of the information and footnotes required by generally accepted accounting principles and should therefore, be read in conjunction with the Company's fiscal 1994 Annual Report to Shareholders. These statements do include all normal recurring adjustments which the Company believes necessary for a fair presentation of the statements. The interim operating results are not necessarily indicative of the results for a full year. B. Mergers, Acquisitions, and Strategic Investments In June 1994, the Company completed a merger with WordPerfect Corporation (WordPerfect) whereby WordPerfect was merged directly into Novell. Approximately 51 million shares of Novell common stock were exchanged for all of the outstanding common stock of WordPerfect. In addition, outstanding employee stock options to purchase WordPerfect common stock were converted into options to purchase approximately 8 million shares of Novell common stock. The transaction was accounted for as a pooling of interests and therefore, all prior period financial statements presented have been restated as if the merger took place at the beginning of such periods. In order to conform WordPerfect's year end to Novell's fiscal year end, the consolidated statement of income for fiscal 1994 includes two months (November and December 1993) for WordPerfect which are also included in the consolidated statement of income for the fiscal year ended October 30, 1993. Accordingly, an adjustment has been made in fiscal 1994 to retained earnings for the duplication of net income of $40 million for such two month period. Other results of operations for such two month period of WordPerfect include net sales of $137 million, income before taxes of $35 million, and income tax benefits of $5 million. Additionally, in June 1994, the Company acquired from Borland International, Inc. its Quattro Pro spreadsheet product line for $110 million of cash and assumed liabilities of $10 million, and purchased a three year license to reproduce and distribute up to one million copies of current and future versions of Borland's Paradox relational database product for $35 million of cash. The transaction was accounted for as a purchase and, on this basis, resulted in a one-time write-off of $114 million for purchased research and development. C. Cash and Short-term Investments The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities in the first quarter of fiscal 1995. All marketable debt and equity securities are included in cash and short-term investments and are considered available-for-sale and carried at fair market value. Such securities are anticipated to be used for current operations and are therefore classified as current assets, even though some maturities may extend beyond one year. The following is a summary of cash and short-term investments, all of which are considered available-for-sale.
Gross Gross Fair Cost at Unrealized Unrealized Market Value at Cost at (Dollars in thousands) Apr. 29, 1995 Gains Losses Apr. 29, 1995 Oct. 29, 1994 - ---------------------------------------------------------------------------------------------------------------- Cash and cash equivalents Cash $ 106,289 $ -- $-- $ 106,289 $101,331 Repurchase agreements 18,904 18,904 19,309 Tax exempt money market fund 61,989 -- -- 61,989 29,394 Taxable money market investments 56,818 -- -- 56,818 13,357 Municipal securities 96,075 -- -- 96,075 65,035 - ---------------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 340,075 $ -- $-- $ 340,075 $228,426 - ---------------------------------------------------------------------------------------------------------------- Short-term investments Municipal securities $ 178,155 $ 295 $-- $ 178,450 $201,491 Money market mutual funds 45,291 -- -- 45,291 104,388 Money market preferreds 446,000 67 -- 446,067 306,700 Mutual funds 78,658 -- 32 78,626 13,017 Equity securities 14,039 16,339 -- 30,378 7,787 - --------------------------------------------------------------------------------------------------------------- Short-term investments $ 762,143 $16,701 $32 $ 778,812 $633,383 - --------------------------------------------------------------------------------------------------------------- Cash and short-term investments $1,102,218 $16,701 $32 $1,118,887 $861,809 - ---------------------------------------------------------------------------------------------------------------
During the first six months of fiscal 1995 the Company had realized gains of $3 million on the sale of securities compared to realized gains in the first six months of fiscal 1994 of $7 million. D. Income Taxes The Company's estimated effective tax rate for the first six months of fiscal 1995 was 33.5%. Excluding non-tax deductible one-time charges related to the write-off of purchased research and development of $15 million in fiscal 1994 and adjusting fiscal 1994 to reflect a provision for income taxes as if WordPerfect and its S corporation subsidiaries had never been S corporations, the Company's effective tax rate would have been 34% in fiscal 1994. The Company paid cash amounts for income taxes of $76 million and $66 million, in the first six months of fiscal 1995 and 1994, respectively. E. Commitments and Contingencies The Company currently has a $10 million unsecured revolving bank line of credit, with interest at the prime rate. The line can be used for either letter of credit or working capital purposes. The line is subject to the terms of a loan agreement containing financial covenants and restrictions, none of which are expected to significantly affect the Company's operations. At April 29, 1995 there were no borrowings, letter of credit acceptances or commitments under such line. The Company has an additional $10 million credit facility with another bank which is not subject to a loan agreement. At April 29, 1995 standby letters of credit of approximately $100,000 were outstanding under this agreement. On November 10, 1993, a suit was filed against Novell and certain of its officers and directors alleging violation of federal securities laws. Another lawsuit alleging similar claims was filed August 26, 1994. Both lawsuits were brought as purported class actions on behalf of purchasers of Novell common stock. On February 22, 1995 the plaintiffs amended November 10, 1993 lawsuit was dismissed with prejudice and the plaintiffs have appealed that ruling. Novell does not believe that the resolution of the either lawsuit will have a material adverse effect on its financial position or results of operations. The Company is a party to a number of additional legal proceedings arising in the ordinary course of business. The Company believes the ultimate resolution of the claims will not have a material adverse effect on its financial position or results of operations. F. International Sales The Company markets internationally through distributors who sell to dealers and end users. For the six months ended April 29, 1995 and April 30, 1994, sales to international customers were approximately $470 million and $439 million, respectively. In the first six months of fiscal 1995 and fiscal 1994, 56% and 61%, respectively, of international sales were to European countries. No one foreign country accounted for 10% or more of total sales in either period. Except for one multi-national distributor, which accounted for 18% of revenue in the first six months of 1995 and 11% of revenue in the first six months of fiscal 1994, no customer accounted for more than 10% of revenue in any period. G. Net Income Per Share Net income per share is computed using the weighted average number of common shares outstanding during the periods, including common stock equivalents (unless antidilutive). Common stock equivalents consist of outstanding stock options. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction Novell's business is connecting people with other people and the information they need, enabling them to act on it anytime, anyplace. Novell is a leading provider of networking and application software. The Company's software products provide the distributed infrastructure, network services, advanced network access and network applications required to make networked information and computing an integral part of everyone's daily life. Over the past several years, the Company has issued common stock or paid cash to acquire technology companies, invested cash in other technology companies, and formed strategic alliances with still other technology companies. Novell undertook all of these transactions to promote a pervasive computing environment, and in many cases to also broaden the Company's business as a system and application software supplier. In June 1994, the Company completed a merger with WordPerfect Corporation (WordPerfect), whereby WordPerfect was merged directly into Novell. Approximately 51 million shares of Novell common stock were exchanged for all of the outstanding common stock of WordPerfect. In addition, the outstanding employee stock options to purchase WordPerfect common stock were converted into options to purchase approximately 8 million shares of Novell common stock. The transaction was accounted for as a pooling of interests and therefore, all prior financial statements presented herein have been restated as if the merger took place at the beginning of such periods. Additionally, in June 1994, the Company acquired from Borland International, Inc. its Quattro Pro spreadsheet product line for $110 million of cash and assumed liabilities of $10 million, and purchased a three year license to reproduce and distribute up to one million copies of current and future versions of Borland's Paradox relational database product for $35 million of cash. The transaction was accounted for as a purchase and, on this basis, resulted in a one- time write-off of $114 million for purchased research and development. The Company will continue to look for similar acquisitions, investments or strategic alliances which it believes complement its overall business strategy. Results of Operations Net Sales
Q2 Q2 YTD YTD 1995 Change 1994 1995 Change 1994 - -------------------------------------------------------------------------------------- Net sales (millions) $530 -1% $535 $1,023 -- $1,023 ======================================================================================
During the second quarter of fiscal 1994, the Company sold a one time fully paid license for UNIX technology to Sun Microsystems for $81 million. Excluding this transaction, net sales grew by 17% in the second quarter of fiscal 1995 compared to the second quarter of fiscal 1994 and by 8% in the first six months of fiscal 1995 compared to the first six months of fiscal 1994. With the acquisition of WordPerfect in fiscal 1994, Novell redefined itself into four product groups, all within the software industry. They are the NetWare Systems Group (NSG), the Novell Applications Group (NAG), the UNIX Systems Group (USG), and the Information Access and Management Group (IAMG). While revenue decreased slightly from the second quarter of fiscal 1994 to the second quarter of fiscal 1995 and remained flat in the first six months of fiscal 1995 compared to the first six months of fiscal 1994, analysis of the individual product groups characterizes the changes that have occurred. NSG revenues grew by 7% in the second quarter of fiscal 1995 compared to the like period in fiscal 1994 and by 12% in the first six months of fiscal 1995 compared to the first six months of fiscal 1994. Most of the growth was in the NetWare 4 product family, partially offset by a decrease in the NetWare 3 product family. NAG revenues increased by 25% in the second quarter of fiscal 1995 compared to the second quarter of fiscal 1994 and remained flat during the first six months of fiscal 1995 compared to the first six months of fiscal 1994. The increase in the second quarter of fiscal 1995 compared to the second quarter of fiscal 1994 is the result of revenue increases in the PerfectOffice suite as well as GroupWare applications, partially offset by a decrease in standalone WordPerfect products. Even thought NAG revenue remained flat for the first six months of fiscal 1995 compared to the first six months of fiscal 1994, the first six months of fiscal 1995 had higher PerfectOffice suite and GroupWare applications revenues, offset by lower standalone WordPerfect product revenues compared to the first six months of fiscal 1994. USG revenues decreased by 74% in the second quarter of fiscal 1995 compared to the second quarter of fiscal 1994 and decreased by 64% in the first six months of fiscal 1995 compared to the first six months of fiscal 1994. The decreases were attributable to a one time fully paid license for UNIX technology to Sun Microsystems for $81 million during the second quarter of fiscal 1994. Excluding this one-time license in fiscal 1994, USG revenues grew by 8% in the second quarter of fiscal 1995 compared to the second quarter of fiscal 1994 and decreased by 2% in the first six months of fiscal 1995 compared to the first six months of fiscal 1994. IAMG revenues increased by 26% in the second quarter of fiscal 1995 compared to the second quarter of fiscal 1994. The increase was a result of increases across all IAMG product lines. IAMG revenues also increased by 6% in the first six months of fiscal 1995 compared to the first six months of fiscal 1994. The increase is a result of higher shipments of network management products. Excluding the one-time license fee in fiscal 1994, international sales represented 46% of total sales in the first six months of fiscal 1995 compared to 47% in the first six months of fiscal 1994. Gross Profit
Q2 Q2 YTD YTD 1995 Change 1994 1995 Change 1994 - -------------------------------------------------------------------------------- Gross profit (millions) $405 4% $390 $781 1% $774 Percentage of net sales 76% 73% 76% 76% ================================================================================
In connection with the Sun Microsystems transaction described above, the Company revalued the software and other intangibles remaining on the balance sheet related to the USL acquisition in fiscal 1993. Accordingly, $35 million of costs associated with the sale of the license to Sun Microsystems were charged to cost of sales during the second quarter of fiscal 1994. Excluding the Sun Microsystems revenue and the related costs, the gross profit percentage would have been 76% in the second quarter of fiscal 1994 and 77% in the first six months of fiscal 1994. Excluding the Sun Microsystems revenue and related costs impact in fiscal 1994, the gross profit margin is flat for the second quarters of fiscal 1995 and fiscal 1994 and slightly down for the first six months of fiscal 1995 compared to the first six months in fiscal 1994. Future fluctuations in the gross profit margin will be primarily attributable to price changes, changes in sales mix by product or distribution channel, and special product promotions. The Company expects the gross profit margin in fiscal 1995 to not vary significantly from the gross profit margin in fiscal 1994. Operating Expenses
Q2 Q2 YTD YTD 1995 Change 1994 1995 Change 1994 - ------------------------------------------------------------------------------------------ Sales and marketing (millions) $ 148 17% $127 $288 14% $ 253 Percentage of net sale 28% 24% 28% 25% - ------------------------------------------------------------------------------------------ Product development (millions) $93 12% $ 83 $183 10% $ 166 Percentage of net sales 18% 16% 18% 16% - ------------------------------------------------------------------------------------------ General and administrative (millions) $ 36 -16% $ 42 $ 70 -19% $ 86 Percentage of net sales 7% 8% 7% 8% - ------------------------------------------------------------------------------------------ Nonrecurring charges (millions) -- -- -- -- -- $ 15 Percentage of net sales -- -- -- 1% - ------------------------------------------------------------------------------------------ Total operating expenses (millions) $277 10% $252 $541 4% $521 Percentage of net sales 52% 47% 53% 51% ==========================================================================================
Excluding the Sun Microsystems revenues in fiscal 1994, sales and marketing expenses were flat at 28% of net sales in the second quarter of both fiscal 1994 and 1995. On the same basis, sales and marketing expenses increased from 27% of net sales in the first six months of fiscal 1994 to 28% of net sales in the first six months of fiscal 1995. This increase is attributable to relatively higher corporate and product marketing expenses, partially offset by lower domestic and international selling expenses. Sales and marketing expenses fluctuate as a percentage of net sales in any given period due to product promotions, advertising or other discretionary expenses. Excluding the Sun Microsystems revenue in fiscal 1994, product development expenses remained flat at 18% of net sales in both the second quarter of fiscal 1995 compared to the second quarter of fiscal 1994 as well as in the first six months of fiscal 1995 compared to the first six months of fiscal 1994. Excluding the Sun Microsystems revenue in fiscal 1994, general and administrative expenses decreased from 9% to 7% of net sales in both the second quarter of fiscal 1995 compared to the second quarter in fiscal 1994 as well as in the first six months of fiscal 1995 compared to the first six months of fiscal 1994. The decrease is attributable to lower legal expenses and a reduction in headcount since the merger with WordPerfect. During the first quarter of 1994, the Company wrote off $15 million of non-tax deductible purchased research and development in connection with the acquisition of SoftSolutions. Excluding the Sun Microsystems revenue in fiscal 1994, total operating expenses, excluding nonrecurring charges, have grown less rapidly than revenues in both the second quarter of fiscal 1995 compared to the second quarter in fiscal 1994 as well as in the first six months of fiscal 1995 compared to the first six months of fiscal 1994 due primarily to headcount reductions. YTD YTD 1995 Change 1994 - ------------------------------------------------------------------------- Employees 7,572 -19% 9,350 Annualized revenue per employee (000's) $255 34% $191 ========================================================================= Early in fiscal 1994 WordPerfect reduced its workforce by approximately 1,000 employees. Subsequent to the merger between Novell and WordPerfect, there was an additional reduction in force of approximately 1,100. In the first quarter of 1995 an additional 650 employees functions were outsourced as part of the restructuring. As a result of these reductions, annualized revenue per employee increased 34% in the first six months of fiscal 1995 compared to the same period in fiscal 1994. Other Income (Expense)
Q2 Q2 YTD YTD 1995 Change 1994 1995 Change 1994 - --------------------------------------------------------------------------------------- Other income (expense), net (millions) $16 129% $7 $26 44% $18 Percentage of net sales 3% $1% 3% 2% =======================================================================================
The primary component of other income (expense) is investment income, which was $15 million in the second quarter of fiscal 1995 compared to $8 million the second quarter of fiscal 1994. During first six months of fiscal 1995, investment income was $25 million compared to $19 million in the first six months of fiscal 1994. The increase is the result of higher average yields on the Company's higher cash balances as well as increased capital gains on its investment portfolio. In order to achieve potentially higher returns, a limited portion of the Company's investment portfolio is invested in mutual funds which incur some market risk. The Company believes that the market risk has been limited by diversification and by use of a funds management timing service which switches funds out of mutual funds and into money market funds when preset signals occur. Income Taxes
Q2 Q2 YTD YTD 1995 Change 1994 1995 Change 1994 - -------------------------------------------------------------------------------- Income taxes (millions) $48 -- $48 $89 11% $80 Percentage of net sales 9% 9% 9% 8% Effective tax rate 34% 34% 33% 30% ================================================================================
The Company's estimated tax rate for fiscal 1995 is 33.5%, which is down slightly from the fiscal 1994 rate of 34%, excluding the effect of the non- tax deductible one-time charges related to the write-off of purchased research and development of $15 million in the first quarter of fiscal 1994 and adjusting to reflect a provision for income taxes as if WordPerfect and its S corporation subsidiaries had never been S corporations. The higher effective rate in fiscal 1994 was attributable to non-tax deductible merger expenses. Net Income and Net Income Per Share
Q2 Q2 YTD YTD 1995 Change 1994 1995 Change 1994 - ------------------------------------------------------------------------------------ Net income (millions) $96 -- $96 $177 -7% $191 Percentage of net sales 18% 18% 17% 19% Net income per share $.26 -- $.26 $.48 -8% $.52 ====================================================================================
Excluding the impact of nonrecurring items and normalizing income taxes, net income for the second quarter of fiscal 1995 would remain at $96 million or 18% of net sales compared to $66 million or 15% of net sales in the second quarter of fiscal 1994. In the first six months of fiscal 1995, net income would remain at $177 million or 17% of net sales while in the first six months of fiscal 1994 net income would have been $160 million or 17% of net sales. Liquidity and Capital Resources
YTD Q4 1995 Change 1994 - ----------------------------------------------------------------------------- Cash and short-term investments (millions) $1,119 30% $862 Percentage of total assets 51% 44% ==============================================================================
Cash and short-term investments increased to $1,119 million from April 29, 1995 from $862 million at October 29, 1994. The major reasons for this increase were the $249 million of cash provided by operating activities, the $36 million provided by financing activities and the $5 million provided from other investing activities, partially offset by the $33 million used for capital asset purchases. The Company's principal source of liquidity has been from operations. At April 29, 1995, the Company's principal unused sources of liquidity consisted of cash and short-term ents and available borrowing capacity of approximately $20 million under its credit facilities. The investment portfolio is diversified among security types, industry groups, and individual issuers. The Company's liquidity needs are principally for the Company's financing of accounts receivable, capital assets, acquisitions and strategic investments and to have flexibility in a dynamic and competitive operating environment. During fiscal 1995 the Company has continued to generate cash from operations. The Company anticipates being able to fund its current operations and capital expenditures planned for the foreseeable future with existing cash and short-term investments together with internally generated funds. Borrowings under the Company's credit facilities, or public offerings of equity or debt securities are available if the need arises. As the Company grows, investments will continue in product development in new and existing areas of technology. Cash may also be used to acquire technology through purchases and strategic acquisitions. Capital expenditures in fiscal 1995 are anticipated to be approximately $80 million, but could be reduced if the growth of the Company is less than presently anticipated. /PAGE Part II. Other Information Except as listed below, all information required by items in Part II is omitted because the items are inapplicable or the answer is negative. Item 1. Legal Proceedings. The information required by this item is incorporated herein by reference to Footnote E of the Company's financial statements contained in Part I, Item 1 of this Form 10-Q. Item 4. Submission of Matters to a Vote of Security Holders. The Company held its Annual Meeting of Shareholders on April 12, 1995 for the following purposes: 1. To elect nine directors; 2. To approve the adoption of an amendment to the Company's Restated Certificate of Incorporation to increase the number of shares of Common Stock that the Company is authorized to issue to 600,000,000 from 400,000,000; and 3. To approve and ratify the adoption of an amendment to the Novell, Inc. 1989 Employee Stock Purchase Plan to increase the shares reserved for issuance thereunder from 4,000,000 to 8,000,000. The following tables set forth the outcome of the matters voted upon at the meeting and the number of votes cast for, against or withheld.
Votes Votes Proposal 1 For Withheld - -------------------------------------------------------------------------- Election of Directors Robert J. Frankenberg 283,958,049 23,052,974 Alan C. Ashton 284,321,454 22,689,569 Bruce W. Bastian 284,150,865 22,866,158 Elaine R. Bond 283,638,514 23,372,709 Jack L. Messman 284,720,973 22,290,050 Kanwal S. Rekhi 282,308,421 24,702,602 Larry W. Sonsini 282,624,166 24,386,857 Ian R. Wilson 276,391,515 30,619,508 John A. Young 284,432,981 22,578,042 =========================================================================
Votes Votes Votes Proposal 2 For Against Withheld/Abstained - ------------------------------------------------------------------------------------------- Approval of the Adoption of an Amendment to the Company's Certificate of Incorporation 286,599,869 12,838,687 3,051,272 ===========================================================================================
Votes Votes Votes Proposal 3 For Against Withheld/Abstained - ------------------------------------------------------------------------------------------- Approval and Ratification of the Adoption of an Amendment to the Company's 1989 Employee Stock Purchase Plan 284,334,591 15,802,100 3,296,193 ===========================================================================================
Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description - ------- ----------- 27* Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Registrant during the quarter ended April 29, 1995. - ----------------------------- *Filed herewith /PAGE SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Novell,Inc. ----------- (Registrant) Date: June 9, 1995 /s/ Robert J. Frankenberg ----------------------------- Robert J. Frankenberg Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer) Date: June 9, 1995 /s/ James R. Tolonen --------------------------- James R. Tolonen Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: June 9, 1995 /s/ Stephen C. Wise -------------------------- Stephen C. Wise Senior Vice President, Finance (Principal Accounting Officer) EX-27 2
5 6-MOS OCT-28-1995 APR-29-1995 340,075 778,812 399,353 (95,548) 29,542 1,701,839 676,537 (292,837) 2,206,404 462,959 0 36,858 0 0 1,689,662 2,206,404 1,022,733 1,022,733 241,330 241,330 540,758 0 0 266,747 89,360 177,387 0 0 0 177,387 .26 .26
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