1
- --------------------------------------------------------------------------------
UNITED STATES
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 December 31, 2000
[ ] 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 0-27030
INFINIUM SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2734036
------------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
25 Communications Way, Hyannis, MA 02601
(Address of principal executive offices, including Zip Code)
(508) 778-2000
(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 12 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
--- ---
The number of shares outstanding of the registrant's Common Stock on February 8,
2001, was 12,883,666.
- --------------------------------------------------------------------------------
2
INFINIUM SOFTWARE, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheet at December 31, 2000 (unaudited) and
September 30, 2000............................................... 3
Consolidated Statement of Operations for the three months ended
December 31, 2000 (unaudited) and 1999 (unaudited)............... 4
Consolidated Statement of Cash Flows for the three month periods
ended December 31, 2000 (unaudited) and 1999 (unaudited)......... 5
Notes to Consolidated Financial Statements....................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 10
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk....... 14
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings................................................ 15
ITEM 2. Changes in Securities............................................ 15
ITEM 3. Defaults Upon Senior Securities.................................. 15
ITEM 4. Submission of Matters to a Vote of Security Holders.............. 15
ITEM 5. Other Information................................................ 15
ITEM 6. Exhibits and Reports on Form 8-K................................. 15
SIGNATURES ................................................................. 16
EXHIBITS ................................................................. 17
2
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFINIUM SOFTWARE, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, SEPTEMBER, 30
2000 2000
----------- -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 17,036 $ 17,665
Marketable securities at fair market value ............................. 3,314 3,073
Accounts receivable, less allowance for doubtful accounts of $2,024
and $3,455 at December 31, 2000 and September 30, 2000, respectively . 11,047 16,218
Prepaid expenses and other current assets .............................. 2,936 4,465
-------- --------
Total current assets ............................................. 34,333 41,421
Property and equipment, net ............................................ 15,710 16,574
Capitalized software development costs, net ............................ 5,600 5,569
Goodwill and other intangible assets, net .............................. 4,969 5,327
Other assets ........................................................... 2,358 2,358
-------- --------
Total assets ..................................................... $ 62,970 $ 71,249
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 5,460 $ 6,836
Accrued expenses ....................................................... 11,958 14,293
Income taxes payable ................................................... 1,375 441
Lease obligation, short-term portion ................................... 94 71
Deferred revenue ....................................................... 30,635 35,273
-------- --------
Total current liabilities ........................................ 49,522 56,914
-------- --------
Lease obligation, long-term portion .................................... 473 291
Deferred revenue ....................................................... 1,734 1,381
Other long-term liabilities ............................................ 1,000 1,000
-------- --------
Total liabilities ............................................ 52,729 59,586
-------- --------
Common stock, $0.01 par value; authorized 40,000 shares, issued 12,927 and
12,927 shares at December 31, 2000 and September 30, 2000, respectively 129 129
Additional paid-in capital ............................................... 38,389 38,327
Retained earnings (accumulated deficit) .................................. (27,781) (26,876)
Deferred stock compensation .............................................. (47) ---
Accumulated other comprehensive income (loss) ............................ (239) 293
Less: treasury stock at cost, 43 and 43 shares at December 31,
2000 and September 30, 2000, respectively .............................. (210) (210)
-------- --------
Total stockholders' equity ....................................... 10,241 11,663
-------- --------
Total liabilities and stockholders' equity ....................... $ 62,970 $ 71,249
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
3
4
INFINIUM SOFTWARE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
----------------------
2000 1999
-------- --------
Revenue:
Software license fees .................. $ 3,767 $ 3,758
Services revenue ....................... 18,637 19,763
-------- --------
Total revenue .................... 22,404 23,521
-------- --------
Operating costs and expenses:
Cost of software license fees .......... 1,416 1,561
Cost of services ....................... 7,115 8,731
Research and development ............... 3,918 5,017
Sales and marketing .................... 8,552 8,317
General and administrative ............. 2,538 2,706
-------- --------
Total operating costs and expenses 23,539 26,332
-------- --------
Loss from operations ..................... (1,135) (2,811)
Other income, net ........................ 230 404
-------- --------
Loss before benefit from
income taxes ........................... (905) (2,407)
Benefit from income taxes ................ - (891)
-------- --------
Net loss ................................. $ (905) $ (1,516)
======== ========
Basic and diluted loss per share ......... $ (0.07) $ ( 0.12)
======== ========
Weighted average number of common shares
outstanding-basic and diluted .......... 12,884 12,242
======== ========
The accompanying notes are an integral part of the consolidated financial
statements
4
5
INFINIUM SOFTWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
----------------------
2000 1999
-------- --------
Cash flows from operating activities:
Net loss ........................................................... $ (905) $ (1,516)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization ...................................... 2,346 1,764
Allowance for doubtful accounts .................................... (1,431) (100)
Other non cash ..................................................... 15 --
Changes in operating assets and liabilities, net of effects from the
acquisitions of businesses:
Accounts receivable ............................................ 6,653 298
Prepaid expenses and other current assets ...................... 1,529 (145)
Other assets ................................................... -- 42
Accounts payable ............................................... (1,390) (2,113)
Accrued expenses ............................................... (2,132) (2,036)
Income taxes payable ........................................... 930 (783)
Deferred revenue ............................................... (4,350) (1,855)
-------- --------
Net cash provided by (used in) operating activities .......... 1,265 (6,444)
-------- --------
Cash flows from investing activities:
Purchase of marketable securities .................................. (1,276) (3,151)
Sale of marketable securities ...................................... 499 10,202
Purchase of property and equipment ................................. (333) (675)
Capitalized software ............................................... (819) (584)
Acquisitions of businesses, net of cash acquired ................... -- (722)
-------- --------
Net cash provided by (used in) investing activities .......... (1,929) 5,070
-------- --------
Cash flows from financing activities:
Payments on capitalized lease obligations ............................ (22) --
Proceeds from exercise of stock options and employee stock
purchase plan ...................................................... -- 666
-------- --------
Net cash provided by financing activities ................... (22) 666
-------- --------
Effect of foreign exchange rate changes on cash ...................... 57 (66)
-------- --------
Net decrease in cash and cash equivalents ............................ (629) (774)
-------- --------
Cash and cash equivalents, beginning of period ....................... 17,665 23,099
-------- --------
Cash and cash equivalents, end of period ............................. $ 17,036 $ 22,325
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
5
6
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
1. BASIS OF PRESENTATION
The information at December 31, 2000 and 1999 and for the three month
periods then ended is unaudited, but includes all adjustments (consisting only
of normal recurring entries) which the Company's management believes to be
necessary for the fair presentation of the financial position, results of
operations, and changes in cash flows for the periods presented. The
accompanying interim consolidated financial statements should be read in
conjunction with the financial statements and related notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2000. Certain information and notes normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the Securities and Exchange Commission rules
and regulations. Interim results of operations for the three month period ended
December 31, 2000 are not necessarily indicative of operating results for the
full fiscal year.
2. STOCK REPURCHASE PROGRAM
In February 1998, the Company announced that it would be initiating a stock
repurchase program of up to $6,000 of common stock to use to meet requirements
of its employee stock option and stock purchase plans. No minimum number or
value of shares to be repurchased has been fixed nor has a time limit as to the
duration of the program been established.
On October 29, 1999, the Company's Board of Directors approved a new stock
repurchase program authorizing the Company to repurchase an additional $10,000
of common stock to use to meet requirements of its employee stock option and
stock purchase plan. No minimum number or value of shares to be repurchased has
been fixed for the new program nor has a time limit as to the duration of the
program been established.
No shares were repurchased by the Company during the three month period
ended December 31, 2000 under either of the repurchase plans. The Company
reissued 366,000 shares which had been purchased under the February 1998 Plan
during the fiscal year ended September 30, 2000 and did not reissue any shares
during the three month period ended December 31, 2000.
3. COMPREHENSIVE LOSS
The table below sets forth comprehensive income and loss as defined by
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, for the three month periods ended December 31, 2000 and 1999:
THREE MONTHS ENDED
DECEMBER 31,
--------------------
2000 1999
------- -------
Net loss $ (905) $(1,516)
Other comprehensive income (loss):
Foreign currency translation adjustments 4 (18)
Unrealized gain (loss) on investments, net
of related tax effect: (536) 42
------- -------
Comprehensive loss $(1,437) $(1,492)
======= =======
6
7
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
4. NET LOSS PER COMMON SHARE
The Company computes basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings
per Share." The following table reconciles the numerator and denominator of the
basic and diluted earnings per share computations shown in the Consolidated
Statement of Operation:
The difference between basic shares outstanding and dilutive shares
outstanding is the assumed conversion of common stock equivalents (stock
options) in the amounts of 32,000 for the three month period ended December 31,
2000 and 146,000 for the three months ended December 31, 1999.
As per generally accepted accounting principles, the computation of net
loss per share is based on the weighted average basic shares outstanding. The
computation of basic and diluted earnings per share for the three month periods
ended December 31, 2000 and 1999 is as follows:
THREE MONTHS ENDED
DECEMBER 31,
------------------------
2000 1999
-------- --------
(in thousands)
BASIC AND DILUTED EPS:
Numerator:
Net loss: $ (905) $ (1,516)
======== ========
Denominator:
Common shares outstanding-basic 12,884 12,242
Dilutive options: --- ---
-------- --------
Common shares outstanding 12,884 12.242
======== ========
Basis and diluted EPS
Income available to common $ (0.07) $ (0.12)
======== ========
Options to purchase 32,000 and 146,000 shares of common stock outstanding
for the periods ended December 31, 2000 and 1999 respectively were excluded from
the calculation of diluted net loss per share as the effect of their inclusion
would have been anti-dilutive.
7
8
INFINIUM SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
5. SEGMENT INFORMATION AND GEOGRAPHIC AREAS
The following table presents a summary of operating information for the
three month periods ended December 31, 2000 and 1999:
THREE MONTHS ENDED
DECEMBER 31,
------------------------
2000 1999
-------- --------
Revenue:
North American operations:
Infinium $ 18,802 $ 20,682
1,380 1,066
Cort payroll unit
ASP 406 --
-------- --------
Total North American operations 20,588 21,748
International operations 1,816 1,773
-------- --------
Total $ 22,404 $ 23,521
======== ========
Operating loss:
North American operations:
Infinium $ 1,804 $ (1,364)
Cort payroll unit (176) (462)
ASP (1,926) --
-------- --------
Total North American operations (298) (1,826)
International operations (837) (985)
-------- --------
Total $ (1,135) $ (2,811)
======== ========
The following table summarizes identifiable assets by business segment as
of December 31, 2000 and September 30, 2000:
DECEMBER 31, SEPTEMBER 30,
2000 2000
----------- -------------
Identifiable assets:
North American operations:
Infinium $49,333 $57,519
Cort payroll unit 1,866 1,902
ASP 7,121 7,211
------- -------
Total North American operations 58,320 66,632
International operations 4,650 4,617
------- -------
Consolidated $62,970 $71,249
======= =======
8
9
INFINIUM SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, as amended by SAB 101A and SAB 101B, which is effective in the
fourth quarter of fiscal year 2001 for the Company. SAB 101 clarifies the
Securities and Exchange Commission's view regarding recognition of revenue. The
Company is currently evaluating the effects of this change but anticipates that
the adoption of SAB 101 will not have a material effect on the Company's
financial position or results of operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities - a
replacement of FASB Statement No. 125". SFAS No. 140 revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS
No. 125's provisions without reconsideration. This statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001. This Statement is effective for recognition and
reclassification of collateral and for disclosures relating to securitized
transactions and collateral for fiscal years ending after December 15, 2000. The
Company does not expect the adoption of SFAS No. 140 to have a material impact
on its financial position or results of operations.
7. EXECUTIVE COMPENSATION
On October 4, 2000 the Company issued 200,000 options to purchase the
Company's stock to an executive of the Company at a price of $2.25 per share.
The difference between the market value and the exercise price of the options is
recorded as deferred stock compensation in the stockholders equity section of
the balance sheet and is amortized over the vesting period of two years. For the
quarter ended December 31, 2000, the Company recorded $16 of expense associated
with this transaction.
8. SUBSEQUENT EVENTS
On January 10, 2001, the Company instituted a Stock Option Exchange Program
(the Program). Under the provisions of the program, employees were allowed to
exchange any of their stock options for shares of restricted stock on January
31, 2001, in general, at a rate of three options for each share of restricted
stock. At January 31, 2001, the company issued approximately 175,000 shares and
cancelled approximately 525,000 options. At the close of business on January 31,
2001 the share price of the Company's stock was $2.13 per share. On February 9,
2001, additional restricted stock grants of 225,000 shares were awarded to
executive management. The combined cost of these two events approximates $806,
which will be amortized over a two year period.
On February 9, 2001, the Company announced that it had appointed James E.
McGowan to the position of President and Chief Executive Officer of the Company,
effective immediately. The Company's founder, Robert A. Pemberton, will continue
as the Chairman of the Company's Board of Directors.
Also, on February 9, 2001, the Board of Directors of the Company, voted to
enlarge the size of the board to seven members and that James E. McGowan was
elected as a Class 2 Director, to serve for a 3 year term.
9
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
All statements contained herein that are not historical facts, including
but not limited to, statements regarding anticipated future revenue and expense
levels and capital requirements, the Company's future product development and
marketing plans, the Company's ability to generate cash from operations, and the
Company's ability to attract and retain employees, are based on current
expectations. These statements are forward looking in nature, involve a number
of risks and uncertainties, as more fully described under "Factors Affecting
Future Performance" and are made pursuant to the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those described in
the forward-looking statements.
OVERVIEW
Infinium Software, Inc. ("Infinium", "the Company") develops, markets and
supports enterprise-level business software applications and provides software
application services. Infinium offers Web- and server-based financial, human
resources, supply management, process manufacturing, business analytics and
customer relationship management solutions, services, support and deployment
options to its customers.
During the first three months of fiscal year 2001, the Company continued
its focus on extending its offerings from traditional back-office applications
and services to e-business solutions and application hosting services. The
Company continued to retool its traditional applications for delivery over the
Web, and added Web-based front office applications.
10
11
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 31, 2000 COMPARED TO QUARTER ENDED DECEMBER 31, 1999
The following table sets forth the Company's consolidated statement of
operations data expressed as a percentage of total revenue and the percentage of
dollar increase or decrease from period to period for the three months ended
December 31, 2000 and 1999:
THREE MONTHS ENDED DECEMBER 31,
--------------------------------------
% OF $
% OF TOTAL INCREASE
REVENUE (DECREASE)
2000 1999 1999 TO 2000
---- ---- ------------
Revenue:
Software license fees ....... 17% 16% 0%
Services revenue ............ 83 84 (6)
---- ----
Total revenue ............ 100 100 (5)
---- ----
Operating costs and expenses:
Cost of software license fees 6 7 (9)
Cost of services ............ 32 37 (19)
Research and development .... 18 21 (22)
Sales and marketing ......... 38 35 3
General and administrative .. 11 12 (6)
---- ----
Total operating costs and
expenses ...................... 105 112 (11)
---- ----
Loss from operations .......... (5) (12) (60)
Other income, net ............. 1 2 (43)
---- ----
Loss before benefit from
Income taxes ................ (4) (10) (62)
Benefit from income
Taxes ....................... (-) (4) (100)
---- ----
Net loss ...................... (4) (6) (40)%
==== ====
REVENUE. Total revenue declined $1.1 million, or 5%, from $23.5 million for
the quarter ended December 31, 1999 to $22.4 million for the quarter ended
December 31, 2000. Software license fees remained constant at $3.8 million for
the quarters ended December 31, 1999 and 2000. This consistency from year to
year actually reflects a recovery in back-office applications because of the
inclusion of revenues related to discontinued products of $0.3 million for the
quarter ended December 31, 1999. Service revenue, comprised of maintenance fee
revenue, consulting services revenue and revenue derived from ASP-related
services, declined 6%, from $19.8 million for the quarter ended December 31,
1999 to $18.6 million for the quarter ended December 31, 2000. This decrease was
related to the inclusion of Y2K consulting revenues in the first quarter of
fiscal year 2000, which was partially offset by an increase in ASP-related
service revenues in the first quarter of 2001. The components of service revenue
are as follows:
THREE MONTHS ENDED DECEMBER 31,
---------------------------------------
(in thousands,
except % data) % DECREASE
2000 1999 1999 TO 2000
------- ------- ------------
Maintenance fee revenue $10,745 $10,745 (1)%
Consulting services revenue 7,486 8,887 (16)
ASP revenue 406 -- --
------- -------
Total services revenue $18,637 $19,763 (6)%
======= =======
11
12
COST OF SOFTWARE LICENSE FEES. Cost of software license fees consists
primarily of royalties on the sale of third party products, amortization expense
related to capitalized software and the cost of product media, manuals and
shipping. Cost of software license fees decreased 9%, from $1.6 million for the
quarter ended December 31, 1999 to $1.4 million for the quarter ended December
31, 2000. Cost of software license fees as a percentage of software license fee
revenue decreased from 42% for the quarter ended December 31, 1999 to 38% for
the quarter ended December 31, 2000 mostly due to cost reductions related to the
Company's cost rollback measures which commenced in the fourth quarter of fiscal
year 2000.
COST OF SERVICES. Cost of services consists of costs to provide product and
technical support, consulting services and training services to licensees of the
Company's software products and costs related to the ASP line of business. Cost
of services decreased 19%, from $8.7 million, for the quarter ended December 31,
1999 to $7.1 million for the quarter ended December 31, 2000. The decrease in
the dollar amount is due to lower third party consulting fees and cost savings
as a result of lower support levels due to the discontinuation of support for
discontinued product lines. Cost of services as a percentage of service revenue
was 44% and 38% for the quarters ended December 31, 1999 and 2000, respectively.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of engineering personnel, related facilities overhead, computer and
communications overhead, and third party contractor costs. Research and
development costs are reduced by capitalized software development costs and,
when applicable, research funding. Research and development expenses decreased
22% from $5.0 million for the quarter ended December 31, 1999 to $3.9 million
for the quarter ended December 31, 2000. Research and development expense as a
percentage of total revenue was 21% for the quarter ended December 31, 1999 and
18% for the quarter ended December 31, 2000. The decrease in dollar amount is
due to a reduction in personnel costs related to the Infinium Financials for
Windows NT and Infinium Human Resources for Windows NT products. In September
1999, the Company decided to discontinue new release development for those
products. For the quarter ended December 31, 1999, research and development
expenses relating to the discontinued product lines was $1.2 million.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions, travel, promotional expenses, facilities and computers
and communications costs for direct sales offices. Sales and marketing expenses
increased 3% from $8.3 million for the quarter ended December 31, 1999 to $8.5
million for the quarter ended December 31, 2000. The increase in sales and
marketing expense is due mainly to increased marketing costs related to the
Company's ASP business. Sales and marketing expense as a percentage of total
revenue was 35% and 38% for the first quarters of fiscal year 2000, and fiscal
year 2001, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries of executive and administrative personnel as well as
provisions for doubtful accounts, insurance, investor relations and outside
professional fees. General and administrative expenses decreased 6% from $2.7
million for the quarter ended December 31, 1999 to $2.5 million for the quarter
ended December 31, 2000. General and administrative expense as a percentage of
total revenue was 12% and 11% for the first quarters of fiscal year 2000 and
fiscal year 2001, respectively. The decrease in percentage and dollar amount was
primarily due to cost savings associated with the Company's reduction in
workforce which occurred in the fourth quarter of fiscal year 2000.
BENEFIT FROM INCOME TAXES. The provision for federal, state, and foreign
income tax for the quarter ended December 31, 1999 resulted in a tax benefit of
$0.9 million, representing an effective income tax rate of 37% for the quarter.
During the fourth quarter of fiscal 2000, the Company established a full
valuation allowance for its deferred tax assets. This allowance was established
in accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109), Accounting for Income Taxes, and accordingly, no tax benefits were
recognized in the Company's first quarter results. The Company will continue to
assess the valuation of the deferred tax asset each quarter.
12
13
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2000, the Company had cash, cash equivalents and
marketable securities of $20.4 million resulting from a net use of cash, cash
equivalents and marketable securities of $0.4 million during the first three
months of fiscal year 2001. Operating activities provided $1.3 million, $0.8
million was used to fund capitalized software and $0.3 million was used for
purchases of property, computers and equipment.
In July, 2000, the Company entered into an agreement with a major financial
institution for a $3.0 million line of credit. At this time, no borrowings are
outstanding against this line of credit. This agreement is subject to renewal on
July 31, 2001.
Days sales outstanding ("DSO") decreased to 44 days at December 31, 2000
compared to 58 days at September 30, 2000. The Company calculates DSO by
dividing the ending accounts receivable balance, net of allowance for doubtful
accounts, by the annualized revenue for the quarter, multiplied by 360. The
Company believes that this method of deriving DSO is indicative of actual
results due to the cyclical nature of software license and service transactions,
which are often consummated nearer the end of the quarter, as well as the
fluctuation of transactions from one quarter to the next. The decrease in DSO is
primarily due to increased collection efforts during the quarter ended December
31, 2000.
Deferred revenue decreased $4.3 million, from $36.7 million at September
30, 2000 to $32.4 million at December 31, 2000. The decrease in deferred revenue
primarily resulted from a decrease in the deferred consulting services component
of revenue due to lower customer bookings during the first quarter of fiscal
2001.
The Company believes that cash, cash equivalents and marketable securities
on hand and cash flows from operations will be sufficient to fund its operations
at least through fiscal 2001. While operating activities may provide cash in
certain periods, to the extent the Company experiences growth in the future, or
in the event the Company uses cash in excess of cash generated by operations,
the Company anticipates that its operating and investing activities may use
cash, and consequently, such growth may require the Company to obtain additional
sources of financing.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, as amended by SAB 101A and SAB 101B, which is effective in the
fourth quarter of fiscal year 2001. SAB 101 clarifies the Securities and
Exchange Commission's view regarding recognition of revenue. The Company is
currently evaluating the effects of this change but anticipates that the
adoption of SAB 101 will not have a material effect on the Company's financial
position or results of operations.
In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a replacement
of FASB Statement No. 125". SFAS No. 140 revises the standards for accounting
for securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but it carries over most of SFAS No. 125's
provisions without reconsideration. This statement is effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after March 31, 2001. This Statement is effective for recognition and
reclassification of collateral and for disclosures relating to securitized
transactions and collateral for fiscal years ending after December 15, 2000. The
Company does not expect the adoption of SFAS No. 140 to have a material impact
on its financial position or results of operations.
FACTORS AFFECTING FUTURE PERFORMANCE
The factors affecting the Company's future performance have not changed
significantly from those enumerated in the Company's Annual Report on Form 10-K
for the year ended September 30, 2000.
13
14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's market risk involves
forward-looking statements. Actual results could differ materially from those
discussed in the forward-looking statements. The Company is exposed to market
risk related to changes in interest rates and foreign currency exchange rates.
The Company does not use derivative financial instruments for speculative or
trading purposes.
INTEREST RATE RISK
The Company is exposed to market risk from changes in interest rates
primarily through its investing and borrowing activities. In addition, the
Company's ability to finance future acquisition transactions may be impacted if
the Company is unable to obtain appropriate financing at acceptable rates. The
Company's investing strategy to manage interest rate exposure is to invest in
short-term, highly liquid investments. The Company maintains a portfolio of
highly liquid cash equivalents and short-term investments (primarily in high
grade municipal notes). At December 31, 2000, the fair value of the Company's
short-term investments approximated market value.
FOREIGN CURRENCY RISK
The Company faces exposure to movements in foreign currency exchange rates.
These exposures may change over time as business practices evolve and could have
a material adverse effect on the Company's business, financial condition and
results of operations. The Company does not use derivative financial instruments
to hedge foreign currency exposures or for trading. Historically, the Company's
primary exposures have been related to the operations of its foreign
subsidiaries. In the three month period ended December 31, 2000, the net impact
of foreign currency changes was not material.
14
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on Friday,
February 9, 2001. At the meeting, the stockholders elected the
following Class II directors to the Board of Directors:
Name For Against
---- --- -------
Robert A. Pemberton 10,185,209 101,909
Robert P. Schechter 12,205,814 81,304
The terms of Manuel Correia and Fred L. Luconi as Class I directors and
Roland D. Pampel and Michael Cusumano as Class III directors continued
after the meeting.
Following the Annual Meeting of the Stockholders, the Board of
Directors of the Company approved a vote to enlarge the size of
the Board and fix it at seven members. Additionally, the Board
of Directors voted to elect James E. McGowan a Class II
Director, to serve for a three-year term.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NONE
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 2000.
15
16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Infinium Software, Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: February 14, 2001
INFINIUM SOFTWARE, INC.
by:
/s/ John J. Whyte
---------------------------
John J. Whyte
Chief Operating Officer
(Principal Financial Accounting Officer)
16