- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 0-14713 [LOGO] INTERLEAF, INC. (exact name of registrant as specified in its charter) MASSACHUSETTS 04-2729042 (State or other jurisdiction (I.R.S. employer identification number) of incorporation or organization) 62 FOURTH AVENUE, WALTHAM, MA 02154 (Address of principal executive offices) (Zip Code) (612) 290-0710 (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 ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares outstanding of the issuer's Common Stock, $.01 par value, as of July 31, 1996 was 17,454,646. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INTERLEAF, INC. TABLE OFCONTENTS PAGE ---- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated balance sheets at June 30, 1996 and March 31, 1996. . . . . . . . . . . . . . . . . . . 3 Consolidated statements of operations for the three months ended June 30, 1996 and 1995. . . . . . . 4 Consolidated statements of cash flows for the three months ended June 30, 1996 and 1995. . . . . . . 5 Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 8 PART II - OTHER INFORMATION Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2 INTERLEAF, INC. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS June 30, 1996 March 31, 1996 In thousands, except for share and per share amounts (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 11,353 $ 12,725 Accounts receivable, net 15,339 19,771 Prepaid expenses and other current assets 2,222 2,112 --------- --------- TOTAL CURRENT ASSETS 28,914 34,608 Property and equipment, net 8,000 7,800 Intangible assets 8,617 6,164 Other assets 689 344 --------- --------- TOTAL ASSETS $ 46,220 $ 48,916 --------- --------- --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,886 $ 2,908 Accrued expenses 13,002 13,252 Unearned revenue 13,612 15,986 Other current liabilities 989 1,348 --------- --------- TOTAL CURRENT LIABILITIES 30,489 33,494 Other liabilities 260 3 --------- --------- TOTAL LIABILITIES 30,749 33,497 --------- --------- SHAREHOLDERS' EQUITY Preferred stock, par value $.10 per share, authorized 5,000,000 shares: Series A Junior Participating, none issued and outstanding Senior Series B Convertible, issued and outstanding, 861,911 at June 30, 1996 and 923,304 at March 31, 1996 86 92 Common stock, par value $.01 per share, authorized 30,000,000 shares, issued and outstanding 17,453,978 at June 30, 1996 and 16,697,988 at March 31, 1996 175 167 Additional paid-in capital 76,210 72,348 Retained earnings (deficit) (60,758) (56,958) Cumulative translation adjustment (242) (230) --------- --------- TOTAL SHAREHOLDERS' EQUITY 15,471 15,419 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 46,220 $ 48,916 --------- --------- --------- --------- SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 INTERLEAF, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended June 30 1996 1995 In thousands, except for per share amounts (unaudited) REVENUES: Products $ 7,046 $ 9,437 Maintenance 7,472 7,792 Services 4,536 5,898 --------- --------- TOTAL REVENUES 19,054 23,127 --------- --------- COSTS OF REVENUES: Products 1,626 1,660 Maintenance 1,308 1,369 Services 4,200 4,809 --------- --------- TOTAL COSTS OF REVENUES 7,134 7,838 --------- --------- Gross margin 11,920 15,289 --------- --------- OPERATING EXPENSES: Selling, general and administrative 11,422 10,982 Research and development 4,270 3,926 --------- --------- TOTAL OPERATING EXPENSES 15,692 14,908 --------- --------- Income (loss) from operations (3,772) 381 Other income (expense) (28) 91 --------- --------- Income (loss) before income taxes (3,800) 472 Provision for income taxes - - --------- --------- NET INCOME (LOSS) $ (3,800) $ 472 --------- --------- --------- --------- Net income (loss) per share $ (0.22) $ 0.03 --------- --------- --------- --------- Shares used in computing net income (loss) per share 16,998 17,648 --------- --------- --------- --------- SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 INTERLEAF, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended June 30 1996 1995 In thousands (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (3,800) $ 472 Adjustments to reconcile net income (loss) to net cash provided bY (used in) operating activities: Depreciation and amortization expense 2,009 2,017 Loss from disposal of property and equipment - 22 Changes in assets and liabilities, net of effect of acquisition: Decrease in accounts receivable, net 4,491 4,927 Decrease in other assets 76 198 Decrease in accounts payable and accrued expenses (911) (1,349) Decrease in unearned revenue (2,312) (869) Decrease in other liabilities (354) (1,340) Other, net 62 (32) --------- --------- Net cash provided by (used in) operating activities (739) 4,046 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,201) (196) Capitalized software development costs (605) (1,066) --------- --------- Net cash used in investing activities (1,806) (1,262) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of common stock 1,237 1,058 Repayment of long-term debt and capital leases (2) (1,658) --------- --------- Net cash provided by (used in) financing activities 1,235 (600) --------- --------- Effect of exchange-rate changes on cash (62) (1) --------- --------- Net increase (decrease) in cash and cash equivalents (1,372) 2,183 Cash and cash equivalents at beginning of period 12,725 10,441 --------- --------- Cash and cash equivalents at end of period $ 11,353 $ 12,624 --------- --------- --------- --------- SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 INTERLEAF, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The consolidated financial statements include the accounts of Interleaf, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Interleaf, Inc. and its subsidiaries are collectively referred to as the "Company." Certain 1995 amounts have been reclassified to conform to the 1996 method of presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all financial information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, these financial statements include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods reported and of the financial condition of the Company as of the date of the interim balance sheet. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended March 31, 1996. 2. Net Income (Loss) Per Share Per share amounts are calculated using the weighted average number of common shares and common share equivalents outstanding during periods of net income. Common share equivalents are attributable to stock options, common stock warrants and convertible preferred stock. Per share amounts are calculated using only the weighted average number of common shares outstanding during periods of net loss. Fully diluted earnings per share is not materially different from reported primary earnings per share. 3. Acquisition On May 1, 1996, the Company purchased all of the outstanding equity securities of The Learning Alliance, Inc. ("TLA") for $2,690,000. The Company issued 341,500 shares of common stock to the selling shareholders of TLA for the entire purchase amount. TLA provides sales training services and develops and markets related software for the sales force automation and integration marketplace. The acquisition was accounted for using the purchase method of accounting, whereby the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair market values. The acquisition resulted in goodwill of approximately $2.6 million which is being amortized over five years and is included in Intangible Assets. The operating results of TLA have been included in the consolidated financial statements since the date of the acquisition. Pro forma presentations have not been included as the acquisition was not material to the results of operations of the Company 4. Noncash Financing Activities Senior Series B Convertible Preferred Stock holders converted 61,393 shares of preferred stock into 82,496 shares of the Company's common stock during the three months ended June 30, 1996. 6 INTERLEAF, INC. 5. Credit Agreement The Company has a revolving line of credit of up to $10 million from a major commercial lender. The credit agreement also provides for the issuance of letters of credit of up to $2 million. Borrowings from the line of credit bear interest at the higher of 9% or prime rate plus 2% and are secured by substantially all tangible and intangible domestic assets of the Company. Outstanding letters of credit bear interest at 2%. The credit agreement expires in May 1997, but may be extended annually for successive one year periods with the consent of the lender. At June 30, 1996, there were no loans outstanding under this line of credit. Borrowings under the credit agreement are based on the level of eligible North American accounts receivable, modified by cash collections during the previous 90 days. As of July 31, 1996, approximately $1.0 million of standby letters of credit were outstanding and the amount available for borrowings was approximately $0.7 million. The agreement contains certain financial covenants relating to the Company's current ratio, tangible net worth, and working capital, as well as restrictions on certain additional indebtedness, acquisitions, capital expenditures, and dividend payments. 6. Restructuring In July 1996, the Company announced a restructuring plan to reduce employment by approximately 75 people, close or reduce space in seven sales offices, and reduce and relocate part of corporate headquarters to less expensive space. The employee terminations affected all groups throughout the organization. During the second quarter of fiscal 1997, the Company will record a one-time charge of approximately $4.8 million to cover costs associated with this restructuring. Of this amount, approximately $1.3 million is for employee termination benefits and $3.5 million for other exit costs, primarily related to facility leases. Cash outlays are anticipated to be approximately $4.1 million and will require lease payments through December 2000. During the first quarter ended June 30, 1996, the Company paid approximately $0.4 million, net of sublease receipts, related to the fiscal 1995 restructuring. Expenditures for facility closures, primarily lease payments, are expected to continue through December 2000. 7. Contingencies Interleaf's German subsidiary, Interleaf GmbH, has been notified that it is liable for certain German withholding taxes related to payments remitted to the United States from Germany in 1990. The Company is appealing this assessment, however, approximately $1.1 million of the cash and cash equivalents balance at June 30, 1996 has been reserved for potential payment of the German withholding taxes. The Company believes the final outcome will not have a material adverse effect on the financial position or results of operations of the Company. 7 INTERLEAF, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW The Company recorded a net loss of approximately $3.8 million, on total revenues of approximately $19.1 million, for its first quarter ended June 30, 1996, compared with net income of approximately $0.5 million, on total revenues of approximately $23.1 million, for the same period a year ago. As a result of the losses during its last two quarters and continued review of the Company's business strategy and outlook, the Company announced a restructuring plan in July 1996 to reduce employment and facility costs. A one-time charge to operations of approximately $4.8 million will be incurred during the second quarter of fiscal 1997 to reduce employment by approximately 75 people, close or reduce space in seven sales offices, and reduce and relocate part of corporate headquarters to less expensive space. Savings from the restructuring and other expense reductions are anticipated to be over $2 million per quarter by the third quarter of fiscal 1997. In light of the continued revenue decline from its stand-alone software products, the Company is accelerating its strategy of developing and marketing integrated document management ("IDM") offerings for specific markets, such as sales force automation and integration, quality and health and safety compliance in manufacturing, and customer reporting in the financial services industry. These offerings, which utilize the Company's core software products, will be designed to solve specific business requirements in such markets. REVENUES Total revenues decreased approximately $4.1 million (18%) for the first quarter ended June 30, 1996, when compared with the same period a year ago, primarily due to declines in product license and services revenue. Revenue declined in all geographic regions. Product license revenue decreased approximately $2.4 million (25%) primarily due to lower licensing of the Company's stand-alone authoring and distribution products. This decrease was a result of the continued decline in demand for UNIX-based high-end authoring software, due to the popularity and power of PC-based authoring software, and the increased usage of internet technology for viewing simple documents in the United States. The Company believes that this increase in commercial usage of the internet and intranets will lead to higher demand for IDM solutions in the future. 8 Maintenance revenue, resulting from contracts to provide telephone support and upgrades to the Company's software products, remained relatively stable as compared to a year ago. This stability, during a time of decreasing product licensing, was largely attributable to renewals from the Company's very large, long-term customers primarily in the aerospace / defense industry. Future maintenance revenue is dependent on the Company's ability to maintain its existing customer base, as the aerospace/defense industry continues to consolidate, and to increase maintenance contract volume related to the new IDM solution sales. Services revenue, consisting of consulting and customer training revenue, decreased approximately $1.4 million (23%) for the first quarter ended June 30, 1996, when compared with the same period a year ago. The Company leverages software product licensing with services to provide IDM solutions to its customers. In fiscal 1996, the Company had several large consulting projects, which were completed during early fiscal 1996, that have not been replaced with similar sized projects. This was primarily attributable to the decline in product licensing over the past few quarters. Revenues from the Company's international operations were approximately $6.1 million (32%) and $8.3 million (36%) of total revenues for the first quarter ended June 30, 1996 and 1995, respectively. The decrease from prior year was primarily related to a significant decline in product license revenue in Europe and decreased demand from resellers in Japan. Future revenue will be largely dependent on the Company's ability to replace the declining revenue related to stand-alone product licensing with revenue from IDM solution sales. This will be contingent on the effectiveness of the Company's increased investment in marketing and lead generation programs, and the Company's ability to successfully develop IDM-based product offerings that solve the specific business problems of organizations. COSTS OF REVENUES 9 Cost of product revenues remained relatively stable as increased amortization of capitalized software development costs was offset by lower direct product costs associated with the decrease in product license revenue. Cost of maintenance revenues remained relatively stable from the prior year. Cost of services revenue decreased approximately $0.6 million (13%) primarily related to a decline in services personnel. OPERATING EXPENSES Selling, general and administrative ("SG&A") expenses increased approximately $0.4 million (4%) from the prior year due to the Company's increased investment in marketing programs and advertising campaigns. SG&A expenses are expected to decrease as a result of the fiscal 1997 restructuring plan announced in July and other anticipated expense reductions. Research and development ("R&D") expenses increased approximately $0.3 million (9%) from the prior year primarily due to a reduction in capitalized software development costs partially offset by lower personnel expenses. For the first quarter ended June 30, 1996 and 1995, R&D expenses were approximately 22% and 17%, respectively, of total revenues. R&D spending, which excludes the offset for capitalized software development costs, represented approximately 26% and 22% of total revenues for the first quarter ended June 30, 1996 and 1995, respectively. The Company's product development plans are to focus on IDM-based product offerings as well as enhancements to existing products. R&D spending is expected to decline as a result of the fiscal 1997 restructuring plan announced in July and other anticipated expense reductions. LIQUIDITY AND CAPITAL RESOURCES The Company had approximately $11.4 million of cash and cash equivalents at June 30, 1996, a decrease of approximately $1.4 million from March 31, 1996. The decrease was primarily attributable to the Company's operating loss during the first quarter of fiscal 1997. Capital expenditures of approximately $1.2 million were principally for improvements to the Company's information systems infrastructure. These cash outflows were partially offset by common stock issuances related to the Company's incentive stock option plans and employee stock purchase plan of approximately $1.2 million. Capital expenditures for improvements to the Company's information systems infrastructure will decline from the first quarter level until operating results improve. Interleaf's German subsidiary, Interleaf GmbH, has been notified that it is liable for German withholding taxes related to payments 10 remitted to the United States from Germany in 1990. The Company is appealing this assessment. At June 30, 1996, the Company had approximately $1.1 million of cash restricted for potential payment of German withholding taxes, and approximately $0.3 million as collateral for various lease commitments. As part of the Company's strategy to develop sales force automation and integration applications, the Company acquired The Learning Alliance, Inc. ("TLA") in May 1996 for $2,690,000. The Company issued 341,500 shares of common stock to the selling shareholders of TLA for the entire purchase amount (see Note 3 to the Consolidated Financial Statements for further discussion). Accrued restructuring charges associated with the fiscal 1995 restructuring plan were approximately $1.0 million at June 30,1996. This reserve should be sufficient to cover remaining operating lease payments, net of sub-lease receipts, for closed facilities. These expenditures are expected to continue until December 2000. As previously discussed, the Company announced a new restructuring plan in July (see Note 6 to the Consolidated Financial Statements for additional information). Cash payments related to this fiscal 1997 restructuring are anticipated to be approximately $1 million during the second quarter ending September 30, 1996. The Company has a revolving line of credit from a major commercial lender. Borrowings from the line of credit are secured by substantially all tangible and intangible domestic assets of the Company. At June 30, 1996, there were no loans outstanding under this line of credit. As of July 31, 1996, approximately $1.0 million of standby letters of credit were outstanding and the amount available for borrowings was approximately $0.7 million. See Note 5 to the Consolidated Financial Statements regarding borrowing limits and restrictive covenants associated with the credit agreement. 11 The Company expects that cash and cash equivalents will decline significantly during the next two quarters principally due to its operating performance. Also contributing to the expected decline will be expenditures associated with the restructuring plan announced in July. To meet its liquidity needs the Company is seeking additional financing from financial institutions and/ or the capital markets. While the Company believes that it can secure the necessary financing it is seeking, there can be no assurances that such financing will be obtained, or that it can be obtained without dilution to existing shareholders. The Company will continue to closely monitor its operating results and cost structure. RISK FACTORS From time to time, information provided by the Company or statements made by its employees may contain forward-looking information. The Company's actual future results may differ materially from those projections or suggestions made in such forward-looking information as a result of various potential risks and uncertainties including, but not limited to, the factors discussed below. The Company's future operating results are dependent on its ability to develop and market integrated document management software products and services that meet the changing needs of organizations with complex document management requirements. There are numerous risks associated with this process, including rapid technological change in the information technology industry and the requirement to bring to market IDM solutions that solve complex business needs in a timely manner. In addition, the existing document publishing, electronic distribution, and document management markets are highly competitive. The Company competes against a number of companies for sales of its software products on both an individual product basis and integrated with services in large IDM solution sales. Sales cycles associated with IDM solution sales are long as organizations frequently require the Company to solve complex business problems which typically involve reengineering of their business processes. In addition, a high percentage of the Company's product license revenues are generally realized in the last month of a fiscal quarter and can be difficult to predict until the end of a fiscal quarter. Accordingly, given the Company's relatively fixed cost structure, a shortfall or increase in product license revenue will have a significant impact on the Company's operating results. 12 The Company markets its software products and services worldwide. Global and / or regional economic factors, currency exchange rate fluctuations, and potential changes in laws and regulations affecting the Company's business could impact the Company's financial condition or future operating results. The market price of the Company's common stock may be volatile at times in response to fluctuations in the Company's quarterly operating results, changes in analysts' earnings estimates, market conditions in the computer software industry, as well as general economic conditions and other factors external to the Company. 13 INTERLEAF, INC. PART II - OTHER INFORMATION Item 5. Other Information On May 3, 1996, the Board of Directors elected G. Gordon M. Large, the Company's Executive Vice President and Chief Financial Officer, a Class I Director. Effective August 6, 1996, Rory Cowan, private investor and former chief executive officer of Stream International, was elected a Class II Director by the Board of Directors. Item 6. Exhibits and Reports on Form 8-K (a) The exhibits listed in the accompanying Exhibit Index are filed as part of this Quarterly Report on Form 10-Q. (b) No reports were filed on Form 8-K by the Company during the quarter ended June 30, 1996. SIGNATURE 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. INTERLEAF, INC. August 12, 1996 /s/ G. Gordon M. Large ------------------------------------- G. Gordon M. Large Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 14 INTERLEAF, INC. EXHIBIT INDEX Exhibit Number Description Method of Filing - ------- ----------- ----------------- 10(a) Company's 1983 Stock Option Plan, as amended [v] 10(a1) 1994 Employee Stock Option Plan [vi] 10(a2) 1993 Incentive Stock Option Plan, as amended [viii] 10(b) Company's 1989 Director Stock Option Plan [i] 10(b2) Company's 1987 Employee Stock Purchase Plan, as amended [v] 10(c) Company's 1989 Officer and Employee Severance Benefit Plans [i] 10(cc) Company's 1993 Director Stock Option Plan [v] 10(d) Agreements between PruTech Research and Development Partnership III and the Company, dated October 21, 1988. [ii] 10(e) Exclusive Marketing and Licensing Agreement, between Interleaf South America, Ltd. and the Company, and related Option Agreement, dated March 31, 1989. [i] 10(f) Distribution and License Agreement between Interleaf Italia, S.r.l. and the Company, and related Joint Venture Agreement, dated October 31, 1988. [i] 10(g) Preferred Stock Purchase Agreements, for the issuance of 2,142,857 shares of the Company's Senior Series B Convertible Preferred Stock, dated September 29, 1989. [ii] 10(h) Notification to Preferred Shareholder of increase in conversion ratio, dated May 18, 1992. [iii] 10(i) Lease of Prospect Place, Waltham, MA, between Prospect Place Limited Partnership and Interleaf, Inc., and related Agreements, dated March 30, 1990. [iv] 10(k) Letter Agreement between the Company and Richard P. Delio, the Company's former Sr. Vice President of Finance and Administration and Chief Financial Officer, dated March 30, 1994, concerning his employment and severance with the Company. [v] 10(l) Letter of Separation and Management Consulting Agreement between the Company and Mark K. Ruport, the Company's former President, Chief Executive Officer and Director, dated July 25, 1994, concerning his separation and consulting obligations to the Company. [vi] 10(m) Letter Agreement between the Company and Richard P. Delio, the Company's former Sr. Vice President of Finance and Administration and Chief Financial Officer and Acting President, dated August 3, 1994, concerning his employment and severance with the Company. [vi] 10(n) Letter of Separation and Management Consulting Agreement between the Company and Peter Cittadini, the Company's former Sr. Vice President Worldwide Operations, dated July 27, 1994, concerning his separation and consulting obligations to the Company. [vi] 10(o) Executive Compensation Arrangement for David A. Boucher, the Company's Chairman of the Board, dated July 20, 1994. [vi] 10(p) Letter of Separation and Management Consulting Agreement between the Company and Lawrence S. Bohn, the Company's former Sr. Vice President, Marketing and Business Development, dated September 20, 1994, concerning his separation and consulting obligations to the Company. [vi] 15 INTERLEAF, INC. Exhibit Number Description Method of Filing - ------- ----------- ----------------- 10(q) Employment and severance agreement between the Company and Edward Koepfler, the Company's President, dated October 3, 1994. [vii] 10(r) Loan and Security Agreement between the Company and Foothill Capital Corporation, dated May 2, 1995. [ix] 10(s) Employment and severance agreement between the Company and G. Gordon M. Large, the Company's Executive Vice President and Chief Financial Officer, dated June 5, 1995 [ix] 10(t) Net Lease, dated August 14, 1995, between Principal Mutual Insurance Company and the Company. [x] 10(u) Sublease, dated September 15, 1995, between Parametric Technology Corporation and the Company. [x] 10(v) Employment and severance agreement between the Company and Mark Cieplik, the Company's Vice President, Americas, dated March 17, 1995. [xi] 10(w) Agreement between PruTech Research and Development Partnership III and the Company, dated November 14, 1995. [xii] 11 Computation of Earnings Per Share Included 27 Financial Data Schedule Included ________________________ [i] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1989, File Number 0-14713. [ii] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1990, File Number 0-14713. [iii] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1992, File Number 0-14713. [iv] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 8-K filed April 13, 1990, File Number 0-14713. [v] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1994, File Number 0-14713. [vi] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended September 30, 1994, File Number 0-14713. [vii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended December 31, 1994, File Number 0-14713. [viii] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1995, File Number 0-14713. [ix] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended June 30, 1995, File Number 0-14713. [x] Incorporated herein by reference is the applicable Exhibit to Company's Registration Statement on Form S-2, File Number 33-63785. [xi] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended September 30, 1995, File Number 0-14713. [xii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended December 31, 1995, File Number 0-14713. 16