-----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, TEhuH8lNo89mK0t1pUQgtCvBd2Tf4K1XRHX/6bKHzMc4TSEvG/yq+Pw2+dVPuUk5 Gy1OEqaT9VDshVRQ7ggBvA== 0000799089-96-000025.txt : 19960515 0000799089-96-000025.hdr.sgml : 19960515 ACCESSION NUMBER: 0000799089-96-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMIX CORP CENTRAL INDEX KEY: 0000799089 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943011736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15325 FILM NUMBER: 96564039 BUSINESS ADDRESS: STREET 1: 4100 BOHANNON DR CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 4159266300 MAIL ADDRESS: STREET 1: 4100 BOHANNON DRIVE CITY: MENLOW PARK STATE: CA ZIP: 94025 10-Q 1 Q196 10-Q 28 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period ended March 31, 1996 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 0-15325 INFORMIX CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3011736 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4100 Bohannon Drive, Menlo Park, CA 94025 (Address of principal executive office) 415-926-6300 (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 . At April 26, 1996, 146,720,472 shares of the Registrant's Common Stock were outstanding. Total number of pages 20. FORWARD LOOKING STATEMENTS This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those projected in the forward-looking statements as a result of certain factors described herein and in other documents. Readers should pay particular attention to the section of this Report entitled "Business Risks" and should also carefully review the risk factors described in the other documents the Company files from time to time with the Securities and Exchange Commission. PART I. FINANCIAL INFORMATION INDEX Part I. Financial Information Page Item 1. Condensed Consolidated Financial Statements (Unaudited): Condensed Consolidated Statements of Income for the three-month periods ended March 31, 1996 and April 2, 1995 3 Condensed Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 4 Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 1996 and April 2, 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 16 Signature page 17 INFORMIX CORPORATION Condensed Consolidated Statements of Income (in thousands, except per share data) (Unaudited)
Three months ended March 31, April 2, 1996 1995 ---------- ---------- (Note) Net revenues: Licenses $ 153,726 $ 110,488 Services 50,295 37,549 ---------- ---------- 204,021 148,037 Costs and expenses: Cost of software distribution 10,028 7,893 Cost of services 33,409 18,251 Sales and marketing 91,143 65,472 Research and development 25,544 18,754 General and administrative 14,681 11,341 Expenses related to Illustra merger 5,914 - ---------- ---------- 180,719 121,711 ---------- ---------- Operating income 23,302 26,326 Interest income 2,250 1,591 Interest expense (264) (64) Other income/(expense), net (64) 125 ---------- ---------- Income before income taxes 25,224 27,978 Income taxes 9,333 10,332 ---------- ---------- Net income $ 15,891 $ 17,646 ========== ========== Net income per share:* $ 0.10 $ 0.12 Weighted average number of common and common equivalent shares outstanding:* 155,788 146,730
(Note) The unaudited quarterly data presented above applicable to the prior period has been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. * Share and per-share amounts applicable to the prior periods have been restated to reflect the two-for-one stock split (effected in the form of a stock dividend) which was effective June 26, 1995. See Notes to Condensed Consolidated Financial Statements. INFORMIX CORPORATION Condensed Consolidated Balance Sheets (in thousands)
March 31, December 31, 1996 1995 ----------- ----------- (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 137,100 $ 164,305 Short-term investments 115,376 88,904 Accounts receivable, net 184,840 185,452 Deferred taxes 21,504 21,504 Other current assets 27,097 25,924 ---------- ---------- Total current assets 485,917 486,089 Property and equipment, net 88,551 81,632 Software costs 39,853 36,866 Deferred taxes 16,248 16,248 Long-term investments 1,005 9,781 Intangible assets 38,731 40,730 Other assets 6,645 19,800 ---------- ---------- Total assets $ 696,950 $ 691,146 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 26,975 $ 29,655 Accrued expenses 33,662 34,919 Accrued employee compensation 39,342 49,911 Income taxes payable 41,952 42,833 Deferred revenue 71,351 66,681 Other liabilities 3,377 9,248 ---------- ---------- Total current liabilities 216,659 233,247 Deferred taxes 24,363 24,488 Other liabilities 2,342 2,846 Stockholders' equity: Common stock 1,487 1,480 Additional paid-in capital 210,102 204,448 Retained earnings 242,688 226,797 Unrealized gain on available- for-sale securities, net of tax 6,410 4,064 Foreign currency translation adjustment (7,101) (6,224) ---------- ---------- Total stockholders' equity 453,586 430,565 ---------- ---------- Total liabilities and stockholders' equity $ 696,950 $ 691,146 ========== ==========
(Note) Consolidated balance sheet data at December 31, 1995 presented above applicable to the prior period has been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of- interests. See Notes to Condensed Consolidated Financial Statements. INFORMIX CORPORATION Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
Three months ended ------------------------ March 31, April 2, 1996 1995 ---------- ---------- (Note) OPERATING ACTIVITIES Net income $ 15,891 $ 17,646 Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: Depreciation and amortization 8,798 5,947 Amortization of capitalized software 3,624 3,080 Deferred tax expense (134) 149 Provisions for losses on accounts receivable 2,350 1,684 Foreign currency transaction (gain) loss 1,138 (6,473) Loss on disposal of property and equipment 713 - Changes in operating assets and liabilities: Accounts receivable (2,464) 9,393 Other current assets (1,442) (2,874) Accounts payable and accrued expenses (22,383) (5,670) Deferred revenue 5,037 4,725 ---------- ---------- Net cash and cash equivalents provided by operating activities 11,128 27,607 INVESTING ACTIVITIES Purchases of held-to-maturity securities - (34,755) Purchases of available-for-sale securities (55,827) - Maturities of held-to-maturity securities - 21,888 Maturities of available-for-sale securities 38,053 23,690 Purchase of property and equipment (15,797) (9,886) Proceeds from disposal of property and equipment 1,064 - Additions to software costs (6,742) (4,695) Business combinations, net of cash acquired (1,000) (32,182) Other (3,087) (1,825) ---------- ---------- Net cash and cash equivalents used in investing activities (43,336) (37,765) FINANCING ACTIVITIES Proceeds from issuance of stock 5,661 4,627 Principal payments on capital leases, net (207) (125) ---------- ---------- Net cash and cash equivalents provided by financing activities 5,454 4,502 ---------- ---------- Effect of exchange rate changes on cash and cash equivalents (451) 4,695 ---------- ---------- Decrease in cash and cash equivalents (27,205) (961) Cash and cash equivalents at beginning of period 164,305 134,509 ---------- ---------- Cash and cash equivalents at end of period $ 137,100 $ 133,548 ========== ==========
(Note) The unaudited quarterly data presented above applicable to the prior period has been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. See Notes to Condensed Consolidated Financial Statements. INFORMIX CORPORATION Notes to Condensed Consolidated Financial Statements March 31, 1996 (Unaudited) Note A - Presentation of Interim Financial Statements All significant adjustments, in the opinion of management, which are normal, recurring in nature and necessary for a fair presentation of the financial position and results of the operations of the Company, have been consistently recorded. The operating results for the interim periods presented are not necessarily indicative of expected performance for the entire year. The unaudited quarterly data presented applicable to prior periods has been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests, which was consummated on February 19, 1996. Note B - Net Income Per Share Net income per share is based on the weighted average number of common and dilutive common equivalent shares outstanding during each period. All stock options are considered common stock equivalents and are included in the weighted average computations when the effect is dilutive. Note C - Stockholders' Equity Reconciliation of outstanding shares: Shares outstanding at December 31, 1995 147,984,393 Shares issued upon exercises of stock options 604,448 Shares sold under terms of the Employee Stock Purchase Plan 84,101 ------------ Shares outstanding at March 31, 1996 148,672,942 ============ Note D - Business Combinations In February 1996, the Company acquired Illustra Information Technologies, Inc. (Illustra), a company that provides dynamic content management database software and tools for managing complex data in the Internet, multimedia/entertainment, financial services, earth sciences and other markets. Approximately 12.7 million shares of Informix common stock were issued to acquire all outstanding shares of Illustra common stock. An additional 2.3 million shares of Informix common stock were reserved for issuance in connection with the assumption of Illustra's outstanding options. The transaction has been accounted for as a pooling of interests, and accordingly, the consolidated financial statements for all periods presented include the accounts and operations of Illustra. Related merger and transaction fees of approximately $5.9 million have been recorded in the first quarter of 1996. In January 1995, the Company acquired a 90 percent interest in the database division of ASCII Corporation, a distributor of its products in Japan. The Company acquired the remaining 10 percent in January 1996. This acquisition has been recorded as a purchase. The purchase price of this business was approximately $46.0 million, of which $35.4 million has been allocated to intangible assets acquired which are being amortized over a weighted average life of seven years. The operating results of this business have not been material in relation to those of the Company and are included in the Company's consolidated results of operations from the date of acquisition. In April 1995, the Company acquired an 80 percent interest in the database division of Daou Corporation, a distributor of its products in Korea. The Company will acquire the remaining 20 percent by January 1997. The acquisition was recorded as a purchase. The initial purchase price of this business was approximately $4.6 million, of which approximately $4.0 million has been allocated to intangible assets acquired. In October 1995, the Company acquired Stanford Technology Group (STG), a U.S.-based company that provides on-line analytical processing technology, in exchange for approximately 533,000 shares of its common stock. The transaction has been accounted for as a pooling of interests. However, since the operating results of STG were insignificant to the Company, prior period annual and quarterly financial statements of the Company have not been restated for this transaction. The operating results of ASCII Corporation, Daou Corporation and STG have not been material in relation to those of the Company and are included in the Company's consolidated results of operations from the date of acquisition. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following table sets forth operating results as a percentage of net revenues for the three-month periods ended March 31, 1996 and April 2, 1995, respectively, and the percent change in the operating results for three-month period ended March 31, 1996 compared to the respective three- month period ended April 2, 1995.
Period-to- Period Percent Percent of Increase Net Revenues (Decrease) ------------------- ------------ Three months Three months ended ended ------------------- ------------ March 31, April 2, March 31, 1996 1995 1996 vs. April 2, 1995 --------- --------- ------------ NET REVENUES: Licenses 75% 75% 39% Services 25% 25% 34% ---- ---- Total net revenues 100% 100% 38% COSTS AND EXPENSES: Cost of software distribution 5% 5% 27% Cost of services 16% 12% 83% Sales and marketing 45% 44% 39% Research and development 13% 13% 36% General and administrative 7% 8% 29% Merger expenses with Illustra 3% 0% N/A ---- ---- Total operating expenses 89% 82% 48% ---- ---- OPERATING INCOME 11% 18% (11%) INTEREST INCOME 1% 1% 41% INTEREST EXPENSE 0% 0% N/A OTHER INCOME / (EXPENSE), NET 0% 0% N/A ---- ---- INCOME BEFORE INCOME TAXES 12% 19% (10%) INCOME TAXES 4% 7% (10%) ---- ---- NET INCOME 8% 12% (10%) ==== ====
Informix's operating income was affected negatively in the first quarter of 1996 as a result of operating expenses growing more rapidly than revenues, primarily in the North America region as Informix continues to invest heavily in personnel in the areas of sales, marketing and customer service; and of integration expenses and fees associated with the acquisitions of Illustra Information Technologies, Inc. (Illustra) and Stanford Technology Group (STG). Informix is investing in extensive training for sales, marketing, and customer service to educate employees of both the acquired companies and Informix regarding the products of the combined companies and revisions to Informix operations required to integrate the operations of the companies. The Company is investing in the development of a database management system, the Informix Universal Server, that will merge technology from both Illustra and Informix. Informix incurred significant marketing expenses in connection with the initial announcement of the Universal Server in the first quarter of 1996 and will continue to heavily market this product in 1996. This product is now scheduled to be commercially available in either late 1996 or early 1997. In addition, both STG and Illustra businesses operate in developing technology markets with relatively low operating margins. These integration and marketing expenses and the relatively low operating margins of the acquired companies have adversely affected Informix's ability to achieve quarterly operating margins consistent with recent quarters. Also, Informix is continuously developing specific market channels and specific products for such channels. In the near term, these development efforts will negatively affect the Company's operating margins. . Revenues The Company derives revenues principally from licensing its software and providing technical product support and updates to customers. License revenues may involve the shipment of product by the Company or the granting of a license to a customer to manufacture products. Service revenue consists of customer telephone or direct support, update rights for new product versions, consulting, and training fees. The Company's products are sold directly to end-user customers or through resellers, including original equipment manufacturers (OEM's), distributors, and application vendors. The Company's revenues have been increasingly derived from sales contracts directly with end users and less from the distributor or OEM sales channels. These end-user sales contracts can be relatively large in size and are difficult to forecast both in timing and dollar value. In addition, these revenue contracts have lower associated software distribution and selling costs. From time to time, the Company has recognized substantial net revenue from these large software license agreements. These transactions, which are difficult to predict, have caused fluctuations in net revenues and net income because of the relatively high gross margin on such revenues. The Company expects that these sorts of transactions and the resulting fluctuations will continue. The overall revenue growth in the first quarter of 1996 compared to the first quarter of 1995 primarily reflects continued strong worldwide acceptance for the Company's new and existing technology and products. Although the Company expects revenues in the aggregate to grow in the remainder of 1996 compared to the first quarter of 1996, there can be no assurance that quarterly revenues growth rates or geographical growth rates will be comparable with those achieved in the first quarter of 1996. As it has done from time to time in the past, Informix restructured its sales organization effective in the first quarter of 1996. The reorganization includes new management in the North America sales organization and the worldwide integration of Illustra products and personnel. The increase in service revenue, as a percentage of total revenue, was primarily attributable to the continued growth of the installed customer base, and resulting renewal of maintenance contracts and increased consulting revenue. The Company continues to emphasize support services as a source of revenue. The Company's revenues, along with those of the relational database management system (RDBMS) industry as a whole, have shown substantial growth over the last several years. The industry has benefited from trends to downsize from large proprietary computer systems and market acceptance of UNIX(R), Windows(TM), Windows NT(TM) and other open operating environments. The Company has also developed and released connectivity products to allow access to other relational databases, both proprietary and open, and access to this data through various protocols such as IBM's DRDA(TM). The industry movement to new, open operating systems like Windows NT, access through low-end desktop machines, and access to data through the Internet may cause downward pressure on prices of database and related products. If such downward pressure on prices were to occur, margins would be adversely affected. The license revenue growth in the first quarter of 1996 compared to the first quarter of 1995 reflects strong demand for the Company's products, particularly for the Company's flagship database server, INFORMIX-OnLine Dynamic Server(TM). In February 1996, the Company announced the development of an enterprise-capable, fully extensible database management system that can manage all information assets - including numbers, images, maps, sound, video, Web pages, and text, as well as other user-defined rich data types. This product, the Informix Universal Server, will incorporate Illustra's object-relational technology into Informix's core database technology. It is now scheduled to be commercially available in late 1996 or early 1997. Over half of the Company's net revenues are derived from its international operations. In Europe, Asia/Pacific, and Japan, most revenues and expenses are now denominated in local currencies. The U.S. dollar strengthened in the first quarter of 1996 against the major European and Asia/Pacific currencies, which resulted in lower revenue and expenses recorded when translated into U.S. dollars, compared with the prior year period. The Company has also increased its direct presence in Latin America, although a significant percentage of the revenue is still denominated in U.S. dollars. In the future, the Company expects currency fluctuations in Mexico, and to a lesser extent, other Latin American countries, to continue. The Company's operating and pricing strategies take into account changes in exchange rates over time; however, the Company's results of operations may be significantly affected in the short term by fluctuations in foreign currency exchange rates. Approximately 61 percent and 60 percent of Informix's net revenues were derived from sales to foreign customers in the first quarters of 1996 and 1995, respectively. The increase in foreign revenues in absolute dollars is primarily attributable to the continued international acceptance for Informix's new and existing technology, the establishment of new subsidiaries and sales offices in Europe, Asia/Pacific, Japan, and Latin America and the acquisition of several foreign distributors. Informix expects that foreign revenues will continue to provide a significant portion of total revenues. However, changes in foreign currency exchange rates, the strength of local economies, and the general volatility of software markets may result in a higher or lower proportion of foreign revenues as a percentage of total revenues in the future. The Company enters into forward foreign exchange contracts primarily to hedge the value of accounts receivable or accounts payable denominated in foreign currencies against fluctuations in exchange rates until such receivables are collected or payables are disbursed. This program involves the use of forward foreign exchange contracts in the primary European and Asian currencies. The Company has limited unhedged transaction exposures in certain secondary currencies in Latin America, Eastern Europe, and Asia Pacific because there are limited forward currency exchange markets in these currencies. The Company does not attempt to hedge the translation to U.S. dollars of foreign denominated revenues and expenses not yet earned or incurred, respectively. Cost of Software Distribution
(DOLLARS IN MILLIONS) First First Quarter Quarter Percentage 1996 1995 Change ------- ------- ---------- Manufactured cost of software distribution $ 6.4 $ 4.8 33% Percentage of license revenue 4% 4% Amortization of capitalized software $ 3.6 $ 3.1 16% Percentage of license revenue 3% 3% Cost of software distribution $10.0 $ 7.9 27% Percentage of license revenue 7% 7%
Software distribution costs consist primarily of: 1) manufacturing and related costs such as media, documentation, product assembly and purchasing costs, freight, customs, and third party royalties; and 2) amortization of previously capitalized software development costs and any write-offs of previously capitalized software. Excluding amortization of previously capitalized software development costs, cost of software distribution as a percentage of license revenue remained flat at 4 percent in the first quarter of 1996 compared to the same period in 1995. In the future, the cost of software distribution as a percentage of revenue may vary depending upon whether the product is reproduced by the Company or by customers. The increase of amortization of capitalized software in the first quarter of 1996 compared to the first quarter of 1995 is due to the release of several products in the latter half of 1995. The absolute value of amortization of capitalized software will vary slightly quarter to quarter as new products are released and other products become fully amortized. Cost of Services (DOLLARS IN MILLIONS) First First Quarter Quarter Percentage 1996 1995 Change ------- ------- ---------- Cost of Services $ 33.4 $ 18.3 83% Percentage of service revenue 66% 49% Cost of services consists primarily of maintenance, consulting and training expenses. The increase in cost of services in the first quarter of 1996 in absolute dollars and as a percentage of net revenues compared to the prior year period is primarily due to the Company's increased expenses to expand consulting and support service capabilities. In the future, the Company expects that cost of services as a percentage of net service revenue will approximate the rate in the first quarter of 1996. Sales and Marketing Expenses (DOLLARS IN MILLIONS) First First Quarter Quarter Percentage 1996 1995 Change ------- ------- ---------- Sales and marketing expenses $ 91.1 $ 65.5 39% Percentage of net revenue 45% 44% The increase in sales and marketing expenses in the first quarter of 1996 in absolute dollars and as a percentage of net revenues compared to the first quarter of 1995 was a result of the addition of sales personnel worldwide as the Company expanded its investment in the worldwide direct sales organizations, opening of new subsidiaries, higher commission expense associated with the increase in revenues, and increased marketing programs associated with new product launches. With the continuing expansion throughout 1996 of worldwide operations, as well as increased sales and marketing expenditures in 1996 aimed at positioning the Company and its new and existing products in the marketplace, the Company expects that sales and marketing expenses for the remainder of 1996, as a percentage of net revenues, will be similar to those of the first quarter of 1996. However, sales and marketing expenses as a percentage of net revenues would be higher should there be a shortfall in expected revenues. Research and Development Expenses The Company accounts for its product development costs in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." This statement requires that once technological feasibility of a developing product has been established, all subsequent costs incurred in developing that product to a commercially acceptable level be capitalized and amortized ratably over the revenue life of the product. The following table summarizes research and development costs for the periods ended March 31, 1996 and April 2, 1995:
(DOLLARS IN MILLIONS) First First Percent- Quarter Quarter age 1996 1995 Change ------- ------- ---------- Incurred product development costs $ 31.6 $ 22.7 39% Expenditures capitalized 6.1 3.9 56% Research and development expenses $ 25.5 $ 18.8 36% Expenditures capitalized as a percentage of incurred 19% 17% The increase in research and development expenditures in absolute dollars in the first quarter of 1996 was attributed to an increase in staff working on new products and product extensions. The proportion of capitalized expenditures as a percentage of total incurred expenses increased in the first quarter of 1996 compared to the first quarter of 1995 as several major projects in development had reached technological feasibility just prior to or during the first quarter of 1996. The Company expects the proportion of work on capitalized projects for the remainder of 1996 to remain relatively stable compared to the first quarter of 1996 as other major new products reach technological feasibility, and capitalization of the related software development costs begins. Major new programs currently under development in 1996 include the Informix Universal Server, an enterprise- capable, fully extensible database management system that can manage all information assets - including numbers, images, maps, sound, video, Web pages, and text, as well as other user-defined rich datatypes, the expansion of the DSA family servers and connectivity products; and subsequent versions of the Company's graphical, object-oriented tool, Informix-NewEra(TM). The Company believes that research and development expenditures are essential to maintaining its competitive position in its primary markets and expects the expenditure levels for the remainder of 1996 to increase in absolute dollars. General and Administrative Expenses (DOLLARS IN MILLIONS) First First Quarter Quarter Percentage 1996 1995 Change ------- ------- ---------- General and administrative expenses $ 14.7 $ 11.3 29% Percentage of net revenue 7% 8% General and administrative expenses increased in absolute dollars in the first quarter of 1996 compared to the same prior year period as a result of the continued expansion in international operations. The Company expects that general and administrative expenses as a percentage of net revenues for the remainder of 1996 will continue at this level. Merger expenses In the first quarter of 1996, the Company had expenses of approximately $5.9 million as a result of the acquisition of Illustra, which was accounted for as a pooling of interests. These costs consist primarily of investment banking, legal and accounting fees. Provision for Income Taxes The Company's effective tax rate was 37.0 percent of pretax income in the first quarter of 1996 compared to 37.5 percent for the same period in 1995. The Company anticipates its fiscal 1996 effective tax rate to be approximately 37.0 percent; however, this rate could change based on a change in the geographic mix of the Company's earnings and the amount of permanent reinvestment offshore of a portion of the 1996 earnings of the Company's lower-taxed Irish operations and the reinstatement of the U.S. federal research and development tax credit. Impact of Inflation The effect of inflation on the Company's financial position has not been significant. Liquidity and Capital Resources (in millions of dollars) First Quarter 1996 1995 ------ ------ Cash, cash equivalents, and investments $252.5 $178.6 Working capital 269.3 165.6 Cash provided by operations 11.1 27.6 Cash used for investment activities, excluding investments of excess cash 25.6 48.6 Cash provided by financing activities 5.5 4.5 Cash generated by operations provided sufficient resources to fund the Company's headcount growth and capital asset needs in all periods presented. The increase in net cash and cash equivalents provided by operations in the first quarter of 1996 was lower compared to the increase in the same period last year primarily due to a reduction in accounts payable and accruals and an increase in accounts receivable, partially offset by higher depreciation and amortization, and lower foreign currency gains. Accounts receivable increased by $2.5 million in the first quarter of 1996 as compared to the fourth quarter of 1995. Days sales outstanding increased from approximately 76 days in the fourth quarter of 1995 to 82 days in the first quarter of 1996. The days sales outstanding ratio is dependent on many factors, including the mix of contract- based revenue with significant OEMs and large corporate and government end-users versus revenue recognized on shipments to application vendors and distributors and the success of the Company's financing programs. The Company has programs whereby third-party financing institutions provide financing for extended credit terms instead of such financing being provided by the Company. In the future, the Company expects this ratio to vary within the range which prevailed in the last several quarters. Excluding investments of excess cash, net cash and cash equivalents used in investing activities decreased in the first quarter of 1996 compared with the same period in 1995 due to a decrease in corporate acquisition activity (the Company acquired 90% of the database division of ASCII in the first quarter of 1995). In the first quarters of 1996 and 1995, the Company acquired $15.8 million and $9.9 million, respectively, of capital equipment consisting primarily of computer equipment, computer software and office equipment. The increase of capital equipment purchases in the first quarter of 1996 resulted from the Company's growing employee headcount, the investment in new equipment as well as new technology. In the future, the Company anticipates the actual level of capital spending will be dependent on a variety of factors, including the Company's business requirements and general economic conditions. The Company's investments in software costs were previously discussed under "Results of Operations." In February 1996, the Company acquired Illustra Information Technologies, Inc. (Illustra), a company that provides dynamic content management database software and tools for managing complex data in the Internet, multimedia/ entertainment, financial services, earth sciences and other markets. Approximately 12.7 million shares of Informix common stock were issued to acquire all outstanding shares of Illustra stock. An additional 2.3 million shares of Informix common stock were reserved for issuance in connection with the assumption of Illustra's outstanding options. The transaction has been accounted for as a pooling of interests. Merger expenses of approximately $5.9 million were recorded in the first quarter of 1996. Net cash and cash equivalents provided by financing activities in the first quarter of 1996 and 1995 included proceeds from the sale of the Company's common stock to employees, partially offset by payments on capital leases. In 1993 and 1994, the Board of Directors authorized the repurchase of up to 8 million shares of the Company's common stock in the open market. There were no repurchases during the first quarter of 1996, and through March 31, 1996, the Company had repurchased 3,580,000 shares with an aggregate cost of approximately $32.1 million on the open market. The Company expects current balances of cash, cash equivalents, and short-term investments will be sufficient to fund anticipated levels of operations at least through the first quarter of 1997 and may be used for investments and acquisitions to supplement internal revenue growth and for other corporate purposes. Business Risks Fluctuations in Quarterly Results. The Company's operating results can vary substantially from period to period. The timing and amount of the Company's license revenues are subject to a number of factors that make estimation of operating results prior to the end of a quarter extremely uncertain. The Company has operated historically with little or no backlog and, as a result, license revenues in any quarter are dependent on contracts entered into or orders booked and shipped in that quarter. The Company's operating margins have generally followed a historic pattern, with second half revenues and operating margins being higher than those of the preceding first half. The Company believes that this pattern has been primarily related to customers' capital spending cycles at the end of a calendar year as well as to the Company's selling efforts, influenced by annual sales incentive plans, at the end of the calendar year, which is the end of the Company's fiscal year. Additionally, as is common in the industry, a disproportionate amount of the Company's license revenues is derived from transactions that close in the last few weeks of a quarter. The timing of closing large license agreements also increases the risks of quarter-to-quarter fluctuations and the uncertainty of estimating quarterly operating results. The Company's operating expenses are based on projected annual and quarterly revenue levels, which have been increasing at rates approaching the rate of total revenue growth and are incurred approximately ratably throughout each quarter. As a result, if projected revenues are not realized in the expected period, the Company's operating results for that period would be adversely affected as the operating expenses are relatively fixed in the short term. The Company's revenue generation is also highly dependent on the economic conditions. If the economy were to slow down, existing and potential customers might delay the purchase of the Company's products, which would negatively affect the Company's revenue. Failure to achieve revenue, earnings and other operating and financial results as forecasted or anticipated by brokerage firm analysts or industry analysts could result in an immediate and adverse effect on the market price of the Company's common stock. Further, the Company may not learn of, or be able to confirm, revenue or earnings shortfall until the end of each quarter, which could result in an even more immediate and adverse effect on the trading price of the Company's common stock. Volatility of Informix Stock Prices. The market for the Company's common stock is highly volatile. The trading price of the Company's common stock could be subject to wide fluctuations in response to quarterly variations in operating and financial results, announcements of technological innovations or new products by the Company or its competitors, changes in prices of the Company's or its competitors' products and services, changes in product mix, change in the Company's revenue and revenue growth rates for the Company as a whole or for individual geographic areas, business units, products or product categories, as well as other events or factors. Statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to the market in which the Company does business or relating to the Company specifically have resulted, and could in the future result, in an immediate and adverse effect on the market price of the Company's common stock. In addition, the stock market has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for the securities of many high technology companies and which often have been unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of the Company's common stock. Competition. The market for the Company's software products and services is extremely competitive. Some of the Company's current competitors and many potential competitors have greater financial, technical and marketing resources than the Company. To the extent that market acceptance for personal computer oriented technologies increases at the expense of UNIX or other non-PC platforms, this could result in greater price pressure on certain of the Company's database products and services. The availability and market acceptance of Microsoft Corporation's Windows NT operating system may increase the competition faced by the principal operating system platforms on which the Company's products operate and may result in greater price pressure on certain of the Company's database products and services. Also, new or enhanced products introduced by existing or future competitors could have an adverse effect on the Company's business, results of operations and financial condition. Existing and future competition or changes in the Company's product or services pricing structure or product or service offerings could result in an immediate reduction in the prices of the Company's products or services. If this were to result in significant price declines - the effects of which were not offset by any resulting increases in sales volume of the Company's products or services - the Company's business, results of operations and financial condition would be adversely affected. There can be no assurance that the Company will continue to compete successfully with its existing competitors or will be able to compete successfully with new competitors. Technological Change and New Products. The market for the Company's products and services is characterized by rapidly changing technology and frequent new product introductions. The Company's success will depend upon its ability to enhance its existing products and to introduce new products on a timely and cost-effective basis that meet dynamic customer requirements. There can be no assurance that the Company will be successful in developing new products or enhancing its existing products or that such new or enhanced products will receive market acceptance or be delivered timely to the market. The Company has experienced product delays in the past and may have delays in the future. Delays in the scheduled availability or a lack of market acceptance of its products or failure to accurately anticipate customer demand and meet customer performance requirements could have a material adverse effect on the Company's business, results of operations and financial condition. In addition, products as complex as those offered by the Company may contain undetected errors or bugs when first introduced or as new versions are released. There can be no assurance that, despite testing, new products or new versions of existing products will not contain undetected errors or bugs that will delay the introduction or commercial acceptance of such products. A key factor in determining the success of the Company will continue to be the ability of the Company's products to interoperate and perform well with existing and future leading, industry-standard leading application software products intended to be used in connection with relational database management systems. Failure to meet existing or future interoperability and performance requirements of certain independent vendors marketing such applications in a timely manner could adversely affect the market for the Company's products. Commercial acceptance of the Company's products and services could also be adversely affected by critical or negative statements or reports by brokerage firms, industry and financial analysts and industry periodicals concerning the Company, its products, business or competitors or by the advertising or marketing efforts of competitors, or other factors that could affect consumer perception. International Operations. Over half of the Company's net revenues are derived from its international operations. The Company's operations and financial result could be significantly affected by factors associated with international operations could be significantly affected by factors associated with international operations such as changes in foreign currency exchange rates and uncertainties relative to regional economic circumstances, as well as by other risks associated with international activities. Most of the Company's international revenue and expenses are denominated in local currencies. Although the Company takes into account changes in exchange rates over time in its pricing strategy, the Company's business, results of operations and financial condition could be materially and adversely affected by fluctuations in foreign currency exchange rates. There can be no assurance that the Company will not experience fluctuations in international revenues. Integration of Acquired Companies. The Company has completed several acquisitions during the last eighteen months, including the database division of ASCII Corporation in Japan; distributors in Germany, Korea and Malaysia; STG and, most recently, Illustra in the United States. The Company may acquire other distributors, companies, products or technologies in the future. There can be no assurance that these acquisitions can be effectively integrated, that such acquisitions will not result in costs and liabilities that could adversely affect the Company's results of operations and financial condition, or that the Company will obtain the anticipated or desired benefits of such acquisitions. Infringement Claims. As the number of software products and software patents in the industry increases, the Company believes that software developers may become increasingly subject to infringement claims. There can be no assurance that a third party will not assert that its patents or other proprietary rights are violated by products offered by the Company. Any such claims, with or without merit, can be time consuming and expensive to defend and could have an adverse effect on the Company's business, results of operations, financial position, and cash flows. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A) Exhibits Exhibit 11.1 - Statement Regarding Computation of Earnings Per Share Exhibit 27 - Financial Data Schedule. B) Reports on Form 8-K. The Company filed a Report on Form 8-K on February 7, 1996 reporting under Item 5 the execution of a definitive agreement for the Company's acquisition of Illustra. This Report included unaudited Pro Forma Combined Condensed Financial Statements assuming a business combination between the Company and Illustra accounted for on a pooling-of- interests basis. The Company filed a Report on Form 8-K on March 1, 1996 reporting under Item 2 the completion of the Company's acquisition of Illustra effective February 16, 1996. 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. INFORMIX CORPORATION Dated: May 14, 1996 /s/ Howard H. Graham ------------------------------ Howard H. Graham Senior Vice President, Finance and Chief Financial Officer EXHIBIT INDEX Exhibit Exhibit Title Page Number - --------- ---------------------------- ------ 11.1 Statement re Computation of Earnings per Share 19 27 Financial Data Schedule 20
EX-11 2 INFORMIX CORPORATION EXHIBIT 11.1 STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (in thousands, except per-share data) FOR THE PERIODS ENDED ---------------------- MARCH 31, APRIL 2, 1996 1995 ---------- ---------- (Note) Net income $ 15,891 $ 17,646 Weighted average outstanding shares (1) 148,289 141,250 Net effect of outstanding options (1) 7,499 5,480 ---------- ---------- Weighted average common and common equivalent shares outstanding (1) 155,788 146,730 ========== ========== Net income per share (1) $ 0.10 $ 0.12 ========== ========== Fully diluted computation not presented since such amounts differ by less than 3 percent of the net income per share amounts shown above. (Note) The unaudited quarterly data presented above applicable to the prior period has been restated to reflect the Company's business combination with Illustra Information Technologies, Inc. as a pooling-of-interests. (1) Share and per-share information applicable to prior period has been restated to reflect a two-for-one stock split (effected in the form of a stock dividend) which was effective June 26, 1995. EX-27 3
5 This schedule contains summary financial information extracted from the financial statements contained in the Company's Form 10-Q for the period ending March 31, 1996 and is qualified in its entirety by reference to such financial statements. 0000799089 INFORMIX CORPORATION 1,000 3-MOS DEC-31-1996 JAN-1-1996 MAR-31-1996 137,100 116,381 198,498 13,658 2,577 485,917 165,499 76,948 696,950 216,659 0 1,487 0 0 452,099 696,950 153,726 204,021 10,028 180,719 64 0 264 25,224 9,333 15,891 0 0 0 15,891 0.10 0.10
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