-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PR+VLdXUmJRTJNafdOBKgfJCIevtBgJl8sYuRo08yDhFPZnQ/sFNnscWd4kSTLyb 4uaiXAEnCJW7naCZmQPqbA== 0000758004-97-000009.txt : 19970318 0000758004-97-000009.hdr.sgml : 19970318 ACCESSION NUMBER: 0000758004-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970317 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVELL INC CENTRAL INDEX KEY: 0000758004 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] 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: 97557607 BUSINESS ADDRESS: STREET 1: 122 EAST 1700 SOUTH CITY: PROVO STATE: UT ZIP: 84097 BUSINESS PHONE: 8012226600 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 January 31, 1997 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) dentification No.) 122 East 1700 South Provo, Utah 84606 (Address of principal executive offices and zip code) (801) 861-7000 (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 February 28, 1997 there were 346,876,410 shares of the registrant's common stock outstanding. Part I. Financial Information, Item 1. Financial Statements NOVELL, INC. CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS Jan. 31, Oct. 26, Dollars in thousands, except per share data 1997 1996 - --------------------------------------------------------------------------- ASSETS Current assets Cash and short-term investments $ 1,102,321 $ 1,024,755 Receivables, less allowances ($58,669 - January; $60,940 - October) 393,490 452,327 Inventories 20,201 16,837 Prepaid expenses 53,578 59,009 Deferred income taxes 51,085 37,831 - --------------------------------------------------------------------------- Total current assets 1,620,675 1,590,759 Property, plant and equipment, net 400,516 394,684 Other assets 61,812 64,023 - --------------------------------------------------------------------------- Total assets $ 2,083,003 $ 2,049,466 =========================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 73,518 $ 96,933 Accrued compensation 50,207 54,731 Accrued marketing liabilities 50,999 48,402 Other accrued liabilities 94,651 118,133 Income taxes payable 34,231 Deferred revenue 49,976 46,573 - --------------------------------------------------------------------------- Total current liabilities 353,582 364,772 Minority interests 16,540 17,035 Put Warrants 46,650 52,150 Shareholders' equity Common stock, par value $.10 a share Authorized - 600,000,000 shares Issued - 346,742,970 shares-January 346,059,050 shares-October 34,674 34,606 Additional paid-in capital 316,004 309,831 Retained earnings 1,317,469 1,266,657 Unearned stock compensation (2,239) (4,141) Cumulative translation adjustment 679 1,183 Unrealized gain (loss) on investments (356) 7,373 - --------------------------------------------------------------------------- Total shareholders' equity 1,666,231 1,615,509 - --------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 2,083,003 $ 2,049,466 =========================================================================== See notes to consolidated unaudited condensed financial statements.
NOVELL, INC. CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF INCOME Fiscal Quarter Ended --------------------------------- Amounts in thousands, Jan. 31, Jan. 27, except per share data 1997 1996 - --------------------------------------------------------------------------- Net sales $374,847 $437,919 Cost of sales 75,971 96,011 - --------------------------------------------------------------------------- Gross profit 298,876 341,908 Operating expenses Sales and marketing 127,890 123,465 Product development 71,755 78,633 General and administrative 37,731 38,538 Restructuring charges __ 18,442 - --------------------------------------------------------------------------- Total operating expenses 237,376 259,078 Income from operations 61,500 82,830 Other income (expense) Investment income 16,614 14,900 Other, net (2,837) (2,150) - --------------------------------------------------------------------------- Other income, net 13,777 12,750 - --------------------------------------------------------------------------- Income before taxes 75,277 95,580 Income taxes 24,465 32,019 - --------------------------------------------------------------------------- Net income $ 50,812 $ 63,561 =========================================================================== Weighted average shares outstanding 347,095 371,585 =========================================================================== Net income per share $ 0.15 $ 0.17 =========================================================================== See notes to consolidated unaudited condensed financial statements.
NOVELL, INC. CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS Fiscal Quarter Ended ------------------------ Jan. 31, Jan. 27, Amounts in thousands 1997 1996 - ----------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 50,812 $ 63,561 Adjustments to reconcile net income to net cash provided (used) by operating activities Depreciation and amortization 23,816 24,919 Stock plans income tax benefits 1,803 2,343 Decrease (increase) in receivables 58,837 (47,590) (Increase) in inventories (3,364) (2,444) Decrease in prepaid expenses 5,431 3,935 (Increase) in deferred income taxes (13,049) (1,122) (Decrease) in current liabilities, net (11,190) (17,046) - ----------------------------------------------------------------------------------- Net cash provided from operating activities 113,096 26,556 - ----------------------------------------------------------------------------------- Cash flows from financing activities Issuance of common stock, net 2,685 5,597 Repurchases of common stock -- (106,117) Sale of put warrants 2,300 -- Settlement of put warrants (6,250) -- - ----------------------------------------------------------------------------------- Net cash (used) from financing activities (1,265) (100,520) - ----------------------------------------------------------------------------------- Cash flows from investing activities Expenditures for property, plant and equipment (27,543) (12,784) Purchases of short-term investments (714,467) (1,062,216) Maturities of short-term investments 506,110 889,193 Sales of short-term investments 166,868 161,820 Other 1,007 3,469 - ----------------------------------------------------------------------------------- Net cash (used) by investing activities (68,025) (20,518) - ----------------------------------------------------------------------------------- Total Increase (decrease) in cash and cash equivalents $ 43,806 $ (94,482) Cash and cash equivalents - beginning of period 145,521 312,164 - ----------------------------------------------------------------------------------- Cash and cash equivalents - end of period 189,327 217,682 Short-term investments - end of period 912,994 1,030,242 - ----------------------------------------------------------------------------------- Cash and short-term investments - end of period $1,102,321 $1,247,924 =================================================================================== See notes to consolidated unaudited condensed financial statements.
NOVELL, INC. NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS A. Quarterly Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 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 1996 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. In the first quarter of fiscal 1997, the Company implemented a change to its fiscal year and month ending dates. The Company will now recognize its fiscal year end on the last calendar day of October, as opposed to prior years on the last Saturday in October. Likewise, each fiscal month end will now end on the last calendar day of each month, and each fiscal quarter will have a unique number of days as opposed to the consistent 13 weeks in prior years. Implementing this change, resulted in an extra five days in the first fiscal quarter of 1997 which the Company believes did not have a material impact on its financial position, results of operations, or cash flows. B.Significant Events In December 1995, Novell sold its UnixWare product line to the Santa Cruz Operation, Inc. (SCO). The Company realized a small gain and recorded $19 million of UNIX technology royalty revenue from this transaction in the first quarter of fiscal 1996. Under the agreement, Novell received approximately 6 million shares of SCO common stock, resulting in ownership of approximately 17% of the outstanding SCO common stock. The agreement also calls for Novell to receive a revenue stream from SCO based on revenue performance of the purchased UnixWare product line. This revenue stream is not to exceed $84 million net present value, and will end by the year 2002. In addition, Novell will continue to receive revenue from existing licenses for older versions of UNIX System source code. In March 1996, the Company completed the sale of its personal productivity applications product line to Corel Corporation (Corel). The Company received approximately 10 million shares of Corel common stock and approximately $11 million in cash. This resulted in an ownership position of approximately 17% of the outstanding Corel common stock. The Company reported a one-time gain of $20 million in the second quarter of fiscal 1996 related to this transaction. Net of tax, the gain was $13 million, or $0.04 per share. Additionally, Corel licensed GroupWise client software, Envoy electronic publishing software, and other technologies from Novell for a minimum royalty obligation of approximately $50 million over the next five years. During the second quarter of fiscal 1996, the Company implemented a change to its traditional distribution stocking policy that significantly reduced revenue and earnings in that quarter. Because the Company has experienced strong growth in revenue from software licensing programs, the Company decided to reduce channel inventories to better match evolving purchase patters. The Company estimates that it reduced product inventories in the worldwide distribution channel during the second fiscal quarter of 1996 by approximately $225 million. This was accomplished primarily by reducing shipments to distributors during the second quarter. Additionally, net returns of approximately $20 million were accepted during the second quarter related to this policy change. C. Cash and Short-term Investments 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, with the unrealized gains and losses, net of tax, included in shareholders equity. Municipal securities included in short-term investments have contractual maturities from 1-5 years. Money market preferreds have contractual maturities of less than 90 days. No other short-term investments have contractual maturities. The cost of securities sold is based on the specific identification method. 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 (Dollars in thousands) Jan. 31, 1997 Gains Losses Jan. 31, 1997 - ------------------------------------------------------------------------------------------------- Cash and cash equivalents Cash $ 98,985 $ -- $ -- $ 98,985 Repurchase agreements 19,740 -- 19,740 Taxable money market fund 40,590 -- 40,590 Municipal securities 31,565 -- 31,565 - ------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 190,880 $ $ -- $ 190,880 - ------------------------------------------------------------------------------------------------- Short-term investments Municipal securities $ 408,805 $ 2,481 $ -- $ 411,286 Money market preferreds 237,800 -- -- 237,800 Mutual funds 95,682 30 (3) 95,709 Equity securities 169,734 33,617 (36,705) 166,646 - ------------------------------------------------------------------------------------------------- Short-term investments $ 912,021 $ 36,128 $ (36,708) $ 911,441 - ------------------------------------------------------------------------------------------------- Cash and short-term investments $1,102,901 $ 36,128 $ (36,708) $1,102,321 - ------------------------------------------------------------------------------------------------- Gross Gross Fair Cost at Unrealized Unrealized Market Value at (Dollars in thousands) Oct. 26, 1996 Gains Losses Oct. 26, 1996 - ------------------------------------------------------------------------------------------------- Cash and cash equivalents Cash $ 77,374 $ -- $ -- $ 77,374 Repurchase agreements 4,526 -- -- 4,526 Tax exempt money market fund 36,821 -- -- 36,821 Municipal securities 26,800 -- -- 26,800 - ------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 145,521 $ -- $ -- $ 145,521 - ------------------------------------------------------------------------------------------------- Short-term investments Municipal securities $ 376,510 $ 1,524 $ (12) $ 378,022 Money market mutual funds 78,514 -- -- 78,514 Money market preferreds 224,000 -- -- 224,000 Mutual funds 14,151 14 (10) 14,155 Equity securities 174,054 35,432 (24,943) 184,543 - ------------------------------------------------------------------------------------------------- Short-term investments $ 867,229 $36,970$ (24,965) $ 879,234 - ------------------------------------------------------------------------------------------------- Cash and short-term investments $1,012,750 $36,970 $ (24,965) $1,024,755 - ------------------------------------------------------------------------------------------------- During the first quarter of fiscal 1997 the Company had realized gains of $6 million on the sale of securities compared to realized gains of $4 million in the first quarter of fiscal 1996.
D. Income Taxes The Company's estimated effective tax rate for the first quarter of fiscal 1997 was 32.5% compared to 33.5% in the first quarter of fiscal 1996. The Company paid cash amounts for income taxes of $3 million and $2 million, in the first quarter of fiscal 1997 and 1996, 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 January 31, 1997 there were no borrowings, letter of credit acceptances or commitments under such line. The Company has an additional $5 million credit facility with another bank which is not subject to a loan agreement. At January 31, 1997 standby letters of credit of approximately $300,000 were outstanding under this agreement. The Company is a party to a number of legal claims 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, results of operations, or cash flows. F. Put Warrants In the first quarter of fiscal 1997, the Company sold put warrants on 2 million shares of its common stock for $2 million, callable on specific dates in the third quarter of fiscal 1997, giving a third party the right to sell shares of Novell common stock to the Company at contractually specified prices. During the first quarter of fiscal 1997, the Company settled put warrants obligations on 2 million shares for cash of $6 million. During fiscal 1996, the Company sold put warrants on 9 million shares of its common stock for $12 million, callable on specific dates in the third and fourth quarters of fiscal 1996 and the first and second quarters of fiscal 1997. During fiscal 1996, the Company settled put warrant obligations on 5 million shares for cash of $6 million. The put warrant liability is the amount the Company would be obligated to pay if all the outstanding put warrants were exercised at the strike price without a cash settlement. The proceeds from the issuance of the put options were accounted for as additional paid-in-capital. The Company expects to settle the put warrant obligations with cash and thereby eliminate the liability. As of the end of the first quarter of fiscal 1997, the cash settlement would be approximately $2 million. G. International Sales The Company markets internationally both directly to end users and through distributors who sell to dealers and end users. For the fiscal quarters ended January 31, 1997 and January 27, 1996, sales to international customers were approximately $172 million and $218 million, respectively. In the first quarters of fiscal 1997 and fiscal 1996, 62% and 63%, 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 quarter of 1997 and 13% of revenue in the first quarter of fiscal 1996, no customer accounted for more than 10% of revenue in any period. H. 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 is the world s leading network software provider. The Company offers a wide range of network solutions for distributed network, Internet, intranet and small-business markets. During fiscal 1996, Novell sold its UnixWare and personal productivity applications product lines in exchange for significant ownership interests in the two acquiring companies. Also during fiscal 1996, the Company significantly reduced the amount of its product held by distributors by reducing shipments into the distribution channel by approximately $225 million in the second quarter. These actions significantly reduced fiscal 1996 reported revenue and make meaningful year-to-year comparisons difficult. In the first quarter of fiscal 1997, the Company implemented a change to its fiscal year and month ending dates. The Company will now recognize its fiscal year end on the last calendar day of October, as opposed to prior years on the last Saturday in October. Likewise, each fiscal month end will now end on the last calendar day of each month, and each fiscal quarter will have a unique number of days as opposed to the consistent 13 weeks in prior years. Implementing this change, resulted in an extra five days in the first fiscal quarter of 1997 which the Company believes did not have a material impact on its financial position, results of operations, or cash flows Results of Operations Net Sales Q1 Q1 1997 Change 1996 - ------------------------------------------------------------------- Net sales (millions) $375 -14% $438 =================================================================== Novell s product lines can be categorized into three areas, all within the software industry. They are server operating environments; network services; UNIX royalties, and education, service and other. While revenue decreased from the first quarter of 1996 to the first quarter of 1997, analysis of the individual product categories characterizes the changes that have occurred. Server operating environments revenues increased by 10% or $23 million in the first quarter of 1997 compared to the first quarter of 1996. Growth in the IntranetWare product family of $54 million or 41% growth from the first quarter of 1996 was somewhat offset by a decrease in the NetWare 3 product family of $31 million or a 32% decline from the first quarter of 1996. Network services revenues decreased by 14% or $13 million in the first quarter of 1997 compared to the first quarter of 1996. The decrease is mainly the result of decreases in TCP/IP access products of $13 million, Host Connectivity products of $3 million and NetWare multi-protocol router of $2 million, somewhat offset by 34% growth or a $7 million increase in GroupWise, the Company s electronic messaging workgroup application. UNIX royalties revenue decreased 68% or $21 million in the first quarter of 1997 compared to the first quarter of 1996. The decrease was attributable to a one-time $19 million paid up royalty recognized in the sale of UNIX and the UnixWare product line to SCO in the first quarter of 1996. Education, service and other revenues decreased by 21% or $9 million in the first quarter of 1997 compared to the first quarter of 1996. The decrease was a result of lower revenues in training and other product categories, with an increase in service related revenue. International sales represented 46% of total sales in the first quarter of 1997 compared to 50% in the first quarter of 1996. This change is a result of a 8% decrease in domestic revenues compared to a 21% decrease in international revenues in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996. Gross Profit Q1 Q1 1997 Change 1996 - ------------------------------------------------------------------ Gross profit (millions) $299 -13% $342 Percentage of net sales 80% 78% ================================================================== The gross margin percentage increased in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 due to lower material costs due to an increase in licensing revenue and the decrease in sales from the lower margin personal productivity applications product line. Operating Expenses Q1 Q1 1997 Change 1996 - ----------------------------------------------------------------- Sales and marketing (millions) $128 4% $123 Percentage of net sales 34% 28% - ----------------------------------------------------------------- Product development (millions) $72 -9% $79 Percentage of net sales 19% 18% - ------------------------------------------------------------------ General and administrative (millions) $38 -3% $39 Percentage of net sales 10% 9% - ------------------------------------------------------------------ Restructuring charges (millions) -- -- $18 Percentage of net sales -- 4% - ------------------------------------------------------------------ Total operating expenses (millions) $237 -8% $259 Percentage of net sales 63% 59% ================================================================== Sales and marketing expenses increased as a percentage of net sales in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996. The increase as a percentage of net sales and in absolute dollars is attributable to higher corporate marketing 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. Product development expenses increased as a percentage of net sales in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 but decreased in absolute dollars primarily due to the sale of the UnixWare and personal productivity application product lines. General and administrative expenses increased as a percentage of net sales in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996, while decreasing slightly in absolute dollars. During the first quarter of fiscal 1996 the Company incurred 18 million of tax deductible restructuring charges for redundant facilities and excess personnel as the Company prepared for the sale of its personal productivity applications product line. Overall, operating expenses, excluding nonrecurring charges, have declined less rapidly than revenues in the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 due to sales and marketing expenses associated with new product releases. Q1 Q1 1997 Change 1996 - ------------------------------------------------------------------ Employees 5,796 -19% 7,137 Annualized revenue per employee (000's) $257 9% $235 ================================================================== In fiscal 1996, the Company reduced its employment by 1,725 employees as the Company completed the sale of it s UnixWare and personal productivity applications product lines and terminated or transitioned former UnixWare and personal productivity group employees to Corel, SCO, and other third parties. Other Income (Expense) Q1 Q1 1997 Change 1996 - ------------------------------------------------------------------ Other income (expense), net (millions) $14 8% $13 Percentage of net sales 4% 3% ================================================================== The primary component of other income (expense) is investment income, which was $17 million in the first quarter of fiscal 1997 compared to $15 million in the first quarter of fiscal 1996. The increase is the result of higher realized capital gains as well as higher average yields on lower average cash balances. 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 Q1 Q1 1997 Change 1996 - ------------------------------------------------------------------- Income taxes (millions) $24 -25% $32 Percentage of net sales 6% 7% Effective tax rate 33% 34% =================================================================== The Company's estimated tax rate for fiscal 1997 is 32.5%, compared to 30.0% in fiscal 1996. The effective tax rate for fiscal 1997 is higher than the effective tax rate for fiscal 1996 as a result of higher anticipated earnings in fiscal 1997. Net Income and Net Income Per Share Q1 Q1 1997 Change 1996 - ------------------------------------------------------------------- Net income (millions) $51 -20% $64 Percentage of net sales 14% 15% Net income per share $.15 -12% $.17 =================================================================== Liquidity and Capital Resources Q1 Q4 1997 Change 1996 - ------------------------------------------------------------------- Cash and short-term investments (millions) $1,102 8% $1,025 Percentage of total assets 53% 50% =================================================================== Cash and short-term investments increased to $1,102 million at January 31, 1997 from $1,025 million at October 26, 1996. The major reason for this increase was the $113 million provided by operation activities, offset by the $28 million of cash used for expenditures on property, plant and equipment, and the $8 million used by other investing activities. The investment portfolio is diversified among security types, industry groups, and individual issuers. The Company's principal source of liquidity has been from operations. At January 31, 1997, the Company's principal unused sources of liquidity consisted of cash and short-term investments and available borrowing capacity of approximately $15 million under its credit facilities. The Company's liquidity needs are principally for the Company's financing of accounts receivable, capital assets, strategic investments and flexibility in a dynamic and competitive operating environment. During the first fiscal quarter of 1997, 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. Investments will continue in product development and in new and existing areas of technology. Cash may also be used to acquire technology through purchases and strategic acquisitions. Capital expenditures in fiscal 1997 are anticipated to be approximately $80 million, but could be reduced if the growth of the Company is less than presently anticipated. Future Results The Company s future results of operations involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from historical results are the following: business conditions and the general economy; competitive factors, such as rival operating systems, acceptance of new products and price pressures; availability of third-party compatible products of reasonable prices; risk of nonpayment of accounts or notes receivable; risks associated with foreign operations; risk of inventory obsolescence due to shifts in technologies or market demand; timing of software product introductions; and litigation. Novell believes that it has the product offerings, facilities, personnel, and competitive and financial resources for continued business success, but future revenues, costs, margins, product mix, and profits are all influenced by a number of factors, as discussed above. 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 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 January 31, 1997. - ----------------------------- *Filed herewith 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: March 12, 1997 /s/ Joseph A. Marengi --------------------- Joseph A. Marengi President and Chief Operating Officer Principal Executive Officer) Date: March 12, 1997 /s/ James R. Tolonen -------------------- James R. Tolonen Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2
5 3-MOS OCT-31-1997 JAN-31-1997 139,327 912,994 393,490 (58,669) 20,201 1,620,675 747,289 (346,773) 2,083,003 353,582 0 0 0 34,674 1,631,557 2,083,003 374,847 374,847 75,971 75,971 237,376 0 0 75,277 24,465 50,812 0 0 0 50,812 .15 .15
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