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THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF
REGULATION S-T.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 0-26146
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HNC SOFTWARE INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 33-0248788
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5930 CORNERSTONE COURT WEST
SAN DIEGO, CA 92121
(Address of principal executive offices)
(619) 546-8877
(Registrant's telephone number, including area code)
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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) YES X NO ___ AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO
--- ---
AS OF JULY 31, 1996 THERE WERE 15,583,911 SHARES OF $0.001 PAR VALUE COMMON
STOCK OUTSTANDING.
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INDEX LISTING
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Page
Number
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PART I FINANCIAL INFORMATION
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Item 1: FINANCIAL STATEMENTS
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Consolidated Balance Sheet at June 30, 1996 (unaudited) 3
and December 31, 1995
Consolidated Statement Of Income (unaudited) for the 4
three month and six month periods ended
June 30, 1996 and 1995
Consolidated Statement Of Cash Flows (unaudited) for 5
the six month periods ended June 30, 1996
and 1995
Notes To Consolidated Financial Statements (unaudited) 6
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
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PART II OTHER INFORMATION
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Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
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Item 6: EXHIBITS AND REPORTS ON FORM 8-K 19
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PART III EXHIBITS
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RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY FILED
JUNE 13, 1996
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BYLAWS OF THE COMPANY, AS AMENDED
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STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
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PART I - FINANCIAL INFORMATION
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Item 1: FINANCIAL STATEMENTS
HNC SOFTWARE INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
ASSETS
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,184 $19,929
Short-term investments 13,617 14,590
Trade accounts receivable, net 7,419 4,597
Current portion of deferred income 2,338 1,702
Other current assets 1,572 1,150
------- -------
Total current assets 26,130 41,968
Property and equipment, net 3,477 2,593
Deferred income taxes, less current portion 3,364 346
Other assets 454 187
Long-term investments 27,001 8,336
------- -------
$60,426 $53,430
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 721 $ 669
Accrued liabilities 2,060 2,451
Deferred revenue 2,006 2,041
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Total current liabilities 4,787 5,161
Common stock, $0.001 par value - 50,000 and 20,000 shares authorized:
15,461 and 14,719 shares issued and outstanding, respectively 15 15
Paid-in capital 54,714 49,124
Retained earnings (accumulated deficit) 910 (870)
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Total stockholders' equity 55,639 48,269
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$60,426 $53,430
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See accompanying notes to consolidated financial statements.
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HNC SOFTWARE INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
Revenues:
Software license and installation $ 5,659 $ 3,820 $10,448 $ 6,808
Contracts and other 3,051 2,100 6,030 4,200
------- ------- ------- -------
Total revenues 8,710 5,920 16,478 11,008
------- ------- ------- -------
Operating expenses:
Software license and installation 1,162 739 2,126 1,304
Contracts and other 1,930 1,493 4,009 3,080
Research and development 2,013 1,154 3,602 2,063
Sales and marketing 1,667 1,245 3,169 2,262
General and administrative 888 597 1,734 1,100
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Total operating expenses 7,660 5,228 14,640 9,809
------- ------- ------- -------
Operating income 1,050 692 1,838 1,199
Other income, net 555 57 1,116 91
------- ------- ------- -------
Income before income tax provision 1,605 749 2,954 1,290
Income tax provision 638 232 1,174 400
------- ------- ------- -------
Net income $ 967 $ 517 $ 1,780 $ 890
======= ======= ======= =======
Net income per share $ 0.06 $ 0.11
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Pro forma net income per share $ 0.04 $ 0.07
======= =======
Shares used in computing
net income per share 16,989 16,870
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Shares used in computing pro forma
net income per share 13,070 12,870
======= =======
See accompanying notes to consolidated financial statements.
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HNC SOFTWARE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six Months Ended
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June 30, 1996 June 30, 1995
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Cash flows from operating activities:
Net Income $ 1,780 $ 890
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 685 321
Changes in assets and liabilities:
Accounts receivable, net (2,822) (332)
Other assets (689) 424
Deferred tax assets 1,139 (48)
Accounts payable 52 (142)
Accrued liabilities (391) 355
Deferred revenue (35) 1,932
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Net cash (used in) provided by operating activities (449) 3,400
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Cash flows from investing activities:
Purchases of investments (21,164) (101)
Maturities of investments 1,655 1,182
Proceeds from sale of investments 1,649 --
Acquisitions of property and equipment (1,569) (787)
Net cash (used in) provided by investing activities (19,429) 294
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Cash flows from financing activities:
Net proceeds from issuance of common stock 965 15,601
Charges against issuance of common stock (476)
Repayments of bank notes payable -- (687)
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Net cash provided by financing activities 965 14,438
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Net (decrease) increase in cash and cash equivalents (18,745) 18,132
Cash and cash equivalents at beginning of period 19,929 4,786
-------- -------
Cash and cash equivalents at end of period $ 1,184 $22,918
======== =======
Supplemental cash flow disclosure:
Unrealized tax benefit from stock option plans $ 4,793 $ --
======== =======
Interest paid $ -- $ 16
======== =======
Income taxes paid $ 30 $ 20
======== =======
See accompanying notes to consolidated financial statements.
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HNC SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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NOTE 1 GENERAL
In management's opinion, the accompanying unaudited consolidated
financial statements for HNC Software Inc. (the "Company") for the three months
and six months ended June 30, 1996 and 1995 have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and include all adjustments (consisting only of normal recurring accruals) that
the Company considers necessary for a fair presentation of its financial
position, results of operations, and cash flows for such periods. Accordingly,
they do not contain all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. All such
financial statements are unaudited except the December 31, 1995 balance sheet.
This report and the accompanying unaudited and audited financial statements
should be read in conjunction with the Company's audited financial statements
and notes thereto presented in its 1995 Annual Report and Form 10-K for fiscal
year ended December 31, 1995. Footnotes and other disclosures for the fiscal
year ended December 31, 1995, which would substantially duplicate the
disclosures in the Company's audited financial statements for Fiscal Year 1995
contained in the 1995 Annual Report and Form 10-K for fiscal year ended
December 31, 1995, have been omitted. The interim financial information herein
is not necessarily indicative of the results to be expected for the full fiscal
year ending December 31, 1996.
Note 2 TERMINATED ACQUISITION
On May 23, 1996, the Company announced that it had terminated the
previously announced proposed acquisition of Credit and Risk Management
Associates because the transaction did not qualify for 'pooling of interests'
accounting treatment. In connection with this terminated acquisition, the
Company incurred transaction costs of approximately $99,000.
Note 3 PENDING ACQUISITION
On July 22, 1996, the Company announced that it had signed a
definitive agreement to acquire Risk Data Corporation, an insurance information
technology product and services firm located in Irvine, California. This
transaction has not yet been consummated and remains subject to the
satisfaction of certain conditions, including qualification of the transaction
for 'pooling of interests' accounting treatment. Under the terms of the
transaction, the consideration to be paid by the Company will
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consist of a number of shares of the Company's common stock and options to
purchase shares of the Company's Common Stock determined by dividing
$61,000,000 by the average closing price of the Company's common stock for the
ten days preceding the closing of the transaction. Accordingly, under the
current terms of the proposed acquisition, the maximum aggregate number of
shares of Common Stock to be issued outright and to be subject to stock options
issued in the transaction would be approximately 2,140,000 shares.
Note 4 STOCK SPLIT
On March 5, 1996, the Company announced that its Board of Directors
approved a two-for-one stock split effected in the form of a common stock
dividend. This stock dividend was paid to the corporation's stockholders of
record as of the close of business on March 18, 1996. Such stockholders of
record received stock certificates representing one additional share of HNC
Software Inc. common stock for each outstanding share of common stock then
held. Distribution of shares issued pursuant to the stock dividend occurred on
April 3, 1996. All references in the accompanying interim financial
information to share and per share amounts have been adjusted to give
retroactive effect to the stock split.
Note 5 NET INCOME PER SHARE
Net income per share is computed based on the weighted average number
of common shares and common stock equivalents, using the treasury stock method,
outstanding during the respective periods.
Pro forma net income per share is computed based on the weighted
average number of common shares and common stock equivalents, using the
treasury stock method, outstanding during the respective periods after giving
retroactive effect to the conversion of all outstanding shares of preferred
stock into 4,478,332 shares of common stock which occurred upon the closing of
the Company's initial public offering on June 26, 1995. Pursuant to Securities
and Exchange Commission Staff Accounting Bulletin No. 83, all stock options
granted since May 5, 1994 and through May 5, 1995 have been included as
outstanding for all periods prior to June 26, 1995 using the treasury stock
method.
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Note 6 STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (FAS) No. 123, "Accounting for
Stock-Based Compensation." FAS 123 was adopted by the Company as required for
its fiscal 1996 financial statements and did not have a material effect on the
Company's financial position or results of operations. The Company continues
to measure compensation expense for its stock-based employee compensation plans
using the intrinsic value method prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and will provide pro forma disclosures of net
income and earnings per share in its annual financial statements as if the fair
value-based method prescribed by FAS 123 had been applied in measuring
compensation expense.
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HNC SOFTWARE INC.
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Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Item 2 contains certain forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: the Company's ability to successfully develop new products
for new markets; the Company's loss of a large customer; the Company's
inability to secure new government contracts for technology development; the
impact of competition on the Company's revenues, market share or ability to
maintain its premium usage-based pricing terms and to generate recurring
revenue; the availability to the Company, at reasonable cost, of data required
to operate or update its intelligent decision software products; changes in law
or regulatory requirements that adversely affect or preclude customers from
using the Company's products for certain applications; delays in the Company's
introduction of new products; and failure by the Company to keep pace with
emerging technologies.
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
REVENUES. Revenues for the three months ended June 30, 1996 were $8.7
million, an increase of 47% over revenues of $5.9 million for the same period
in the prior year. This increase was primarily due to greater software license
and installation revenues which were $5.7 million for the quarter ended June
30, 1996, an increase of 48% from $3.8 million for the comparable quarter in
1995. This increase in software license and installation revenues resulted
primarily from an increase in revenues from the Company's Falcon credit card
fraud detection product and to a lesser extent from the Colleague automated
mortgage underwriting product, SkuPLAN, the demand forecasting product for the
retail market and the AREAS property valuation product. The Company's software
license and installation revenues are derived from monthly license fees,
perpetual license fees, annual maintenance fees and installation fees. The
Company typically licenses its products for a monthly usage fee under long-term
contracts that include software licenses, decision model updates, application
consulting, on-line or on-site support and maintenance.
Contracts and other revenues for the three months ended June 30, 1996 were
$3.0 million, an increase of 45% as compared to $2.1 million for the same
period in the prior year. The increase in contracts and other revenues was due
primarily to increased commercial contract revenues for new product pilots
including Eagle (a merchant risk management system), ProfitMax (a credit card
profitability management system) and
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Capstone (a credit card application processing system). Contracts and other
revenues are derived primarily from development and consulting contracts with
commercial customers and research contracts with the United States Government.
Revenues from contract services are generally recognized as the services are
performed using the percentage of completion method based on costs incurred to
date compared to total estimated costs at completion. All revenues for new
product pilots are reported as contract revenues.
In 1996 the Company has a significant number of new product development
projects and new product pilot installations in process which it expects to
begin shipping in production versions primarily in 1997. However, there can be
no assurance that these product development projects or pilot installations
will be successful or that the customers who serve as pilot installation sites
for these new products will be satisfied with these products or agree to
license them. If the Company's new product development efforts are
unsuccessful or are not well received by pilot customers, the Company may be
compelled to delay or entirely discontinue the release of production versions
of these products, which would have a material adverse effect on the Company's
results of operations.
The Company's success depends upon its ability to enter new markets by
developing new products on a timely and cost-effective basis. The Company's
products often require customer data for decision model development and system
installation. As a result, completion of new products may be delayed while the
Company extracts sufficient amounts of statistically relevant data and develops
the models. During this development process, the Company relies on its
potential customers in the new market to provide data and to help train Company
personnel in the use and meaning of the data in the specific industry. These
relationships also assist the Company in establishing presence and credibility
in the new market. There can be no assurance that these companies, most of
which have significantly greater financial and marketing resources than the
Company, will not compete with the Company in the future or will not otherwise
discontinue their relationships with or support of the Company, either during
development of the Company's products or thereafter.
The Company's success will depend upon its ability to maintain competitive
technologies, enhance its current products and develop new products in a timely
and cost-effective manner that meet changing market conditions, including
evolving customer needs, new competitive product offerings, emerging industry
standards and changing technology.
The sales cycle associated with the purchase of the Company's products is
typically lengthy and subject to a number of significant risks, including
customers' budgetary constraints and internal acceptance reviews, over which
the Company has little or no control.
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SOFTWARE LICENSE AND INSTALLATION EXPENSES. Software license and
installation expense primarily consists of the Company's expenses for personnel
engaged in installation and support and related costs. Software license and
installation expenses for the second quarter of 1996 were $1.2 million and
constituted 21% of software and installation revenues for the quarter, whereas
such expenses were $739,000 and represented 19% of software and installation
revenues in the second quarter of 1995. The primary reason for the increase in
these expenses was increased staffing and associated costs in client services
to support the increased volume of business.
CONTRACTS AND OTHER EXPENSES. Contracts and other expenses consist
primarily of personnel-related expenses associated with the Company's
performance of such contracts. Contracts and other expenses in the second
quarter of 1996 were $1.9 million or 63% of contracts and other revenues as
compared to $1.5 million or 71% of such revenues in the second quarter of 1995.
The reduction in expenses as a percent of revenues is due to increased pricing
on certain contracts.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in
the second quarter of 1996 were $2.0 million and 23% of total revenues compared
to $1.2 million and 19% of total revenues in the second quarter of the prior
year. The increase in expenses was due primarily to increases in staffing and
related costs to support increased new product development activities,
including the expenses for the Company's new text analysis products, which the
Company began commercial development of in January of 1996.
SALES AND MARKETING EXPENSES. Sales and marketing expenses were $1.7
million or 19% of total revenues in the second quarter of 1996 compared to $1.2
million and 21% of total revenues in the second quarter of 1995. The increase
in sales and marketing expenses was due primarily to increased staffing and
product promotion activities to support higher sales volumes and new product
introductions, including the Company's new text analysis products.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $888,000 and 10% of total revenues in the second quarter of 1996, compared
to $597,000 and 10% of total revenues in the prior year. The primary reason for
the increase in these costs was increased staffing and related expenses to
support higher levels of sales and development activity of the Company.
General and administrative expenses in the second quarter of 1996 also includes
$99,000 of costs associated with the terminated acquisition of Credit and Risk
Management Associates. Please see Note 2 to the Notes to Consolidated
Financial Statements included in this report.
OPERATING INCOME. The above factors resulted in operating income of $1.1
million and 12% of total revenues for the second quarter of 1996, compared to
an operating income of $692,000 and 12% of total revenues in the same quarter
of the prior year.
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The Company's quarterly revenues and operating results have varied
significantly in the past and may do so in the future. Although to date a
significant portion of the Company's revenues has come from monthly usage fees
under long-term contracts, there can be no assurance that the Company will
continue to realize such recurring revenues or that customers under such
contracts would not seek to cancel such contracts if the Company's products
were not competitive or did not achieve cost effective results. A significant
portion of the Company's business has been derived from substantial orders
placed by large organizations, and the timing of such orders has caused
material fluctuations in the Company's operating results. The Company's
expense levels are based in part on its expectations regarding future revenues
and in the short term are fixed to a large extent. Operating results also may
fluctuate due to factors such as the demand for the Company's products, product
life cycles, the introduction and acceptance of new products and product
enhancements by the Company or its competitors, changes in the mix of
distribution channels through which the Company's products are offered, changes
in the level of operating expenses, customer order deferrals in anticipation of
new products, competitive conditions in the industry and economic conditions
generally or in various industry segments. The Company has continued to invest
in research and development and sales and marketing in an effort to better
service its customers and markets. The Company expects to continue to increase
absolute dollar spending on both research and development and sales and
marketing in the future.
OTHER INCOME, NET. Other income for the second quarter of 1996 was
$555,000 compared to $57,000 in the second quarter of the prior year. The
increase was due to increased interest income in 1996 from higher cash and
investment balances which consisted primarily of the proceeds from the
Company's initial public offering in June, 1995 and secondary public offering
in December, 1995.
INCOME BEFORE INCOME TAX PROVISION. The resulting income before tax
provision for the second quarter of 1996 was $1.6 million or 18% of total
revenues, compared to income before tax provision of $749,000 or 13% of total
revenues for the comparable quarter of 1995.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
REVENUES. Revenues for the six months ended June 30, 1996 were $16.5
million, an increase of 50% over revenues of $11.0 million for the same period
in the prior year. This increase was primarily due to greater software license
and installation revenues which were $10.4 million for the six months ended
June 30, 1996, an increase of 53% from $6.8 million for the comparable quarter
in 1995. This increase in software license and installation revenues resulted
primarily from an increase in revenues from the Company's Falcon credit card
fraud detection product and to a lesser extent from the Colleague automated
mortgage underwriting product, SkuPLAN, the demand forecasting product for the
retail market and the AREAS property valuation product.
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Contracts and other revenues for the six months ended June 30, 1996 were
$6.0 million, compared to $4.2 million for the same period in the prior year, a
44% increase. The increase in contracts and other revenues was due primarily
to increased commercial contract revenues for new product pilots for Eagle (a
merchant risk management system), ProfitMax (a credit card profitability
management system) and Capstone (a credit card application processing system).
SOFTWARE LICENSE AND INSTALLATION EXPENSES. Software license and
installation expense primarily consists of the Company's expenses for personnel
engaged in installation and support and related costs. Software license and
installation expenses for the six months of 1996 were $2.1 million and
constituted 20% of software and installation revenues for the quarter, whereas
such expenses were $1.3 million and represented 19% of software and
installation revenues in the six months of 1995. The primary reason for the
increase in these expenses was increased staffing and associated costs in
client services to support the increased volume of business.
In 1996 the Company has a significant number of new product development
projects in process which it expects to begin installing in a production phase
primarily in 1997. However, there can be no assurance that these product
development projects or pilot installations will be successful or that the
customers who serve as pilot installation sites for these new products will be
satisfied with these products or agree to license them. If the Company's new
product development efforts are unsuccessful or are not well received by pilot
customers, the Company may be compelled to delay or entirely discontinue the
release of production versions of these products, which would have a material
adverse effect on the Company's results of operations.
CONTRACTS AND OTHER EXPENSES. Contracts and other expenses consist
primarily of personnel-related expenses. Contracts and other expenses during
the first six months of 1996 were $4.0 million or 66% of contracts and other
revenues as compared to $3.1 million or 73% of such revenues in the first six
months of 1995. The reduction in expenses as a percent of revenues is due to
increased pricing on certain contracts.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in
the first six months of 1996 were $3.6 million and 22% of total revenues
compared to $2.1 million and 19% of total revenues in the first six months of
1995. The increase in expenses was due primarily to increases in staffing and
related costs to support increased new product development activities,
including the Company's new text analysis products.
SALES AND MARKETING EXPENSES. Sales and marketing expenses were $3.2
million or 19% of total revenues in the first six months of 1996 compared to
$2.3 million and 21% of total revenues in the second quarter of 1995. The
increase in sales and marketing expenses was due primarily to increased
staffing and product promotion activities to support higher sales volumes and
new product introductions, including the Company's new text analysis products.
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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $1.7 million and 11% of total revenues in the first six months of 1996,
compared to $1.1 million and 10% of total revenues in the prior year. The
primary reason for the increase in these costs was increased staffing and
related expenses to support higher levels of activity of the Company and
includes costs of $99,000 associated with the terminated acquisition of CRMA.
See Note 2 to the Notes to Consolidated Financial Statements included in this
report.
OPERATING INCOME. The above factors resulted in operating income of $1.8
million and 11% of total revenues for the first six months of 1996, compared to
an operating income of $1.2 million and 11% of total revenues in the same
period of the prior year.
OTHER INCOME, NET. Other income for the first six months of 1996 was $1.1
million compared to $91,000 in the first six months of the prior year. The
increase was due to increased interest income in 1996 from higher cash and
investment balances which consisted primarily of the proceeds from the
Company's initial public offering in June, 1995 and secondary public offering
in December, 1995.
INCOME BEFORE INCOME TAX PROVISION. The resulting income before tax
provision for the first six months of 1996 was $3.0 million or 18% of total
revenues, compared to income before tax provision of $1.3 million or 12% of
total revenues for the comparable quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
FINANCING ACTIVITIES
During the six months ended June 30, 1996 the Company obtained $965,000 of
cash from financing activities. These funds came primarily from the exercise
of stock options and the purchase of shares under the Company's employee stock
purchase plan. As of June 30, 1996 the Company had $41.8 million in cash, cash
equivalents and investments. Management believes that the Company's cash and
investments and cash generated from operations will be adequate for the
Company's cash requirements for the next twelve months.
OPERATING ACTIVITIES
Cash used by operating activities for the six months ended June 30, 1996
was $449,000 compared to cash provided by operations of $3.4 million for the
first six months of the prior year. The increase in cash used by operating
activities was due primarily to increased accounts receivable balances due to
increased revenues and an increase in the average days outstanding of these
higher receivable balances. The days outstanding have increased largely
because of the increase in new product pilot contracts which generally pay more
slowly.
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INVESTING ACTIVITIES
Cash used in investing activities was $19.3 million for six months ended
June 30, 1996 compared to cash provided by investing activities of $294,000 for
the first six months of the prior year. This was due to net purchases of short
and long term investments of $17.7 million and acquisitions of property and
equipment, primarily computer equipment of $1.6 million.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1996 Annual Meeting of Stockholders on May 23,
1996 (the "Annual Meeting"). At the Annual Meeting the Company's stockholders
elected the Company's Board of Directors and approved the proposals described
more fully below. Proxies were solicited by the Company pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended.
As of April 5, 1996, the record date for the Annual Meeting, there
were approximately 15,169,455 shares of the Company's Common Stock outstanding
and entitled to vote, of which 11,386,868 shares were present in person or by
proxy at the Annual Meeting. The directors of the Company who were elected at
the Annual Meeting were: Edward K. Chandler, Oliver D. Curme, Roger L. Evans,
Thomas F. Farb, Charles H. Gaylord, Jr. and Robert L. North.
The proposals considered at the Annual Meeting were voted on as
follows:
1. Election of Directors. Proposal to elect six directors of the
Company, each to serve until the next Annual Meeting of Stockholders
and until his successor is duly elected and qualified or until his
earlier resignation or removal.
VOTES FOR VOTES WITHHELD
--------- --------------
Nominees
--------
Edward K. Chandler 11,324,807 62,061
Oliver D. Curme 11,324,807 62,061
Roger L. Evans 11,324,607 62,261
Thomas F. Farb 11,323,107 63,761
Charles H. Gaylord, Jr. 11,324,607 62,261
Robert L. North 11,324,807 62,061
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2. Amendment of Certificate of Incorporation. Proposal to amend the
Company's Certificate of Incorporation to increase the authorized
number of shares of the Company's Common Stock, $0.001 par value, from
20,000,000 to 50,000,000 shares.
BROKER
VOTES FOR VOTES AGAINST ABSTENTIONS NON-VOTES
--------- ------------- ----------- ---------
9,888,249 1,161,128 130,380 207,111
3. Ratification of Auditors. Proposal to ratify the appointment of Price
Waterhouse LLP as the Company's auditors for the Company's fiscal year
ending December 31, 1996.
BROKER
VOTES FOR VOTES AGAINST ABSTENTIONS NON-VOTES
--------- ------------- ----------- ---------
11,255,261 1,217 130,390 0
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.
HNC SOFTWARE INC.
Date: August 12, 1996 By: /s/ RAYMOND V. THOMAS
------------------------------------
Raymond V. Thomas
Vice President Finance & Administration and
Chief Financial Officer
(for Registrant as duly authorized officer
and as Principal Financial and Accounting
Officer)
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Item 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as exhibits with this
Report:
Exhibit 3(i).04 Restated Certificate of Incorporation of
the Company filed June 13, 1996.
Exhibit 3(ii).05 Bylaws of the Company, as amended.
Exhibit 11.01 Statement Regarding Computation of Pro
Forma Per Share Earnings.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
None
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INDEX TO EXHIBITS
-----------------
The following exhibits are filed with this Report:
Exhibit 3(i).04 Restated Certificate of Incorporation of the Company filed
June 13, 1996.
Exhibit 3(ii).05 Bylaws of the Company, as amended.
Exhibit 11.01 Statement Regarding Computation of Per Share Earnings.
Exhibit 27 Financial Data Schedule.
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