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_________________________________________________________________________
_________________________________________________________________________
UNITED STATES
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 September 30, 1994
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 0-19538
IMRS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1326879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 LONG RIDGE ROAD, STAMFORD, CONNECTICUT 06902
(Address of principal executive offices, including zip code)
(203) 321-3500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
As of November 1, 1994, there were 7,210,151 shares of the Registrant's
Common Stock, $.01 par value, outstanding.
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IMRS Inc. and Subsidiaries
Form 10-Q
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -- September 30, 1994
and June 30, 1994 2
Condensed Consolidated Statement of Income --
Three Months Ended September 30, 1994 and 1993 3
Condensed Consolidated Statement of Cash Flows --
Three Months Ended September 30, 1994 and 1993 4
Notes to Condensed Consolidated Financial Statements --
September 30, 1994 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
Fastar, FinalForm, Financial Intelligence, Hyperion, IMRS, IMRS
OnTrack, Interactive MC, Micro Control and Retrieve-MC are registered
trademarks, and Hyperion Financials, Hyperion SQL and IMRS Forms are
trademarks of IMRS Inc. All other trademarks and company names
mentioned are the property of their respective owners.
For further information, refer to the IMRS Inc. annual report on Form
10-K for the year ended June 30, 1994.
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IMRS Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands, except for share data)
SEPTEMBER 30, JUNE 30,
1994 1994
----------------------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $38,024 $35,404
Accounts receivable--net of allowances of $1,500 21,845 31,843
Prepaid expenses and other current assets 2,204 1,540
Deferred income taxes 894 770
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TOTAL CURRENT ASSETS 62,967 69,557
Property and equipment--at cost, less accumulated
depreciation and amortization of $8,321 and $7,389 12,145 9,731
Product development costs--at cost, less accumulated
amortization of $2,746 and $2,355 7,188 6,443
Goodwill and other intangible assets--at cost, less
accumulated amortization of $3,813 and $3,605 2,489 2,671
Deposits and other assets 1,484 969
---------------------------
Total assets $86,273 $89,371
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $7,380 $7,323
Accrued employee compensation and benefits 4,032 7,638
Income taxes payable 478 1,229
Deferred revenue 18,364 19,210
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TOTAL CURRENT LIABILITIES 30,254 35,400
Deferred income taxes 1,546 1,666
Stockholders' equity:
Preferred stock--$.01 par value; authorized--
1,000,000 shares; none issued
Common stock--$.01 par value; authorized--
15,000,000 shares; issued--9,362,071 and
9,298,721 shares 94 93
Additional paid-in capital 44,721 43,811
Retained earnings 23,095 21,870
Currency translation adjustments (404) (436)
Treasury stock, at cost--2,160,420 shares (13,033) (13,033)
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TOTAL STOCKHOLDERS' EQUITY 54,473 52,305
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Total liabilities and stockholders' equity $86,273 $89,371
===========================
Note: The balance sheet at June 30, 1994 has been derived from the
audited financial statements at that date.
See accompanying notes.
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IMRS Inc. and Subsidiaries
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except per share data)
THREEE MONTHS ENDED
SEPTEMBER 30,
1994 1993
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REVENUES
Software licenses $11,032 $6,927
License renewals and services 11,438 8,425
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Total revenues 22,470 15,352
COSTS AND EXPENSES
Cost of revenues:
Software licenses 719 536
License renewals and services 7,473 4,933
Sales and marketing 7,136 4,886
Product development 3,683 2,239
General and administrative 1,669 1,505
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20,680 14,099
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OPERATING INCOME 1,790 1,253
Interest income 341 163
Interest expense (16) (21)
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INCOME BEFORE INCOME TAXES 2,115 1,395
Provision for income taxes 890 585
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NET INCOME $1,225 $810
====================
EARNINGS PER SHARE
Primary $.15 $.11
Fully diluted $.15 $.11
AVERAGE NUMBER OF SHARES OUTSTANDING
Primary 7,931 7,579
Fully diluted 8,035 7,579
See accompanying notes.
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IMRS Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
THREE MONTHS ENDED
SEPTEMBER 30,
1994 1993
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CASH PROVIDED BY OPERATING ACTIVITIES $6,785 $2,100
INVESTING ACTIVITIES
Leasehold improvements and purchases of
furniture, equipment and software (3,346) (997)
Product development costs (1,136) (733)
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Cash used by investing activities (4,482) (1,730)
FINANCING ACTIVITIES
Principal payments on capital lease/notes
payable (5) (45)
Exercise of stock options by employees 330 91
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Cash provided by financing activities 325 46
Effect of exchange rate changes (8) 15
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INCREASE IN CASH AND CASH EQUIVALENTS 2,620 431
Cash and cash equivalents at beginning
of period 35,404 22,887
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $38,024 $23,318
=======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $1,303 $1,161
Interest 4 11
See accompanying notes.
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IMRS Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1994
A. BASIS OF PRESENTATION
The accompanying unaudited condensed 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 Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting only of normal
recurring accruals, considered necessary for a fair presentation have
been included in the accompanying unaudited financial statements.
Operating results for the three-month period ended September 30, 1994
are not necessarily indicative of the results that may be expected for
the full year ending June 30, 1995. For further information, refer to
the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended June
30, 1994.
Earnings per share (EPS) are calculated by dividing net income by the
weighted average number of common and common equivalent shares
outstanding during the period. For primary EPS, common equivalent
shares are shares which would be issuable upon the exercise of
outstanding stock options, reduced by the number of shares assumed to
be purchased by the Company with the proceeds obtained thereby at the
average market price during the period. For the fully diluted EPS
calculation, shares are assumed to be purchased by the Company at the
higher of the average or period-end market price and, therefore, this
calculation may include additional equivalent shares.
B. SUBSEQUENT EVENT
On November 7, 1994, the Company signed a definitive agreement
providing for the acquisition of Pillar Corporation in a stock for
stock transaction to be accounted for as a pooling of interests (e.g.,
combine the historical financial statements of the two companies to
present them as consolidated entities since inception). Under the
terms of the agreement, IMRS will issue shares of its Common Stock,
based on the price of IMRS Common Stock prior to the completion of the
acquisition. Based on the last reported sale price for shares of IMRS
Common Stock on November 7, 1994, IMRS would issue approximately
578,000 shares to the stockholders of Pillar (including shares
underlying options and warrants to be assumed by IMRS), which
translates to a transaction value of approximately $22 million. All
other costs associated with the merger will be charged against
operations as incurred. Completion of the transaction is subject to
the approval of Pillar stockholders and is expected to occur before
November 30, 1994.
Pillar develops, markets and supports Microsoft Windows and Macintosh-
based corporate budgeting and planning products. Pillar generated
revenues of approximately $10 million for its year ended September
30, 1994.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands)
OVERVIEW
- - ----------------------------------------------------------------------
IMRS, incorporated in 1981, develops, markets and supports financial
management applications for enterprise client/server environments.
IMRS software addresses the diverse accounting, financial
consolidation, management reporting and information access needs of
large corporations worldwide. The Company designs products
specifically for network implementation, providing fast, multi-user
access to centrally controlled and secure corporate data.
The Company derives revenues from licensing its software products and
providing related product installation, support and training services.
Customers are billed an initial fee for the software upon delivery
and, subsequently, are billed an annual license renewal fee, entitling
them to routine support and product updates. IMRS licenses its
products throughout the world primarily through a direct sales force.
In certain territories outside of North America, products are licensed
through independent distributors, including major accounting firms.
The Company includes in revenues its net share of revenues generated
by distributors.
The Company operates with a minimal software licensing backlog.
Therefore, quarterly revenues and operating results are quite
dependent on the volume and timing of the signing of licensing
agreement and product deliveries during the quarter, which are
difficult to forecast. The Company's future operating results may
fluctuate due to these and other factors, such as customer buying
patterns, the timing of new product introductions and product upgrade
releases, the Company's hiring plans, the scheduling of sales and
marketing programs, and new product development. The Company
generally has realized lower revenues in its first (September) and
third (March) fiscal quarters than in the immediately preceding
quarters. The Company believes that these revenue fluctuations are
caused by customer buying patterns, including traditionally slow
purchase activity in the summer months and low purchase activity in
the financial reporting and consolidation market during the March
quarter, as many potential customers are busy with their year-end
closing and financial reporting. Due to the relatively fixed nature
of certain costs, including personnel and facilities expenses, the
decline in revenues in the first and third fiscal quarters typically
results in lower profitability or may result in losses in these
quarters. Total revenues and net income were $22,470 and $1,225,
respectively, for the first quarter of fiscal 1995, and $31,758 and
$4,414 respectively, for the fourth quarter of fiscal 1994.
For further information, refer to the IMRS Inc. annual report on Form
10-K for the year ended June 30, 1994.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
RESULTS OF OPERATIONS
- - ----------------------------------------------------------------------
REVENUES
First Quarter Ended September 30,
1994 CHANGE 1993
- - ------------------------------ ------------------------------------
Software licenses $11,032 59.3% $6,927
Percentage of total revenues 49.1% 45.1%
- - ------------------------------ ------------------------------------
License renewals and services $11,438 35.8% $8,425
Percentage of total revenues 50.9% 54.9%
- - ------------------------------ ------------------------------------
Software license revenues rose primarily as a result of an increase in
the number of licenses sold. Demand for the Company's Microsoft
Windows-based products continue to be strong. In the September 1994
quarter, Windows-based software licenses comprised 97.7% of the
Company's total software license revenues, up from 84.0% for the
corresponding quarter of 1993.
The increase in license renewal and service revenue is mainly
attributable to the year-to-year growth of the Company's installed
customer base.
Revenues generated from markets outside the United States for the
quarter ended September 1994 and 1993 were $5,980 and $3,801, or 26.6%
and 24.8% of total revenues, respectively
COST OF REVENUES
First Quarter Ended September 30,
1994 CHANGE 1993
- - ------------------------------- ---------------------------------------
Software licenses $719 34.1% $536
Gross profit percentage 93.5% 92.3%
- - ------------------------------- ---------------------------------------
License renewals and services $7,473 51.5% $4,933
Gross profit percentage 34.7% 41.4%
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
Cost of software license revenues consists primarily of the cost of
product packaging and documentation materials, amortization of
capitalized software costs, amortization of certain intangible assets
related to business acquisitions, and royalty expenses. The increase
in the cost of software license revenues resulted principally from the
amortization of capitalized costs related to new products and product
enhancements, which commenced upon the general release of the software
to customers in second quarter of fiscal 1994.
The increase in the cost of license renewal and services revenues was
due primarily to additional staffing expense for both installation and
ongoing support services.
OPERATING EXPENSES
First Quarter Ended September 30,
1994 CHANGE 1993
- - -------------------------------- -----------------------------------
Sales and marketing $7,136 46.0% $4,886
Percentage of total revenues 31.8% 31.8%
- - -------------------------------- -----------------------------------
Product development $3,683 64.5% $2,239
Percentage of total revenues 16.4% 14.6%
- - -------------------------------- -----------------------------------
General and administrative $1,669 10.9% $1,505
Percentage of total revenues 7.4% 9.8%
- - -------------------------------- -----------------------------------
The increase in sales and marketing expenses is primarily due to a net
increase of sales-marketing personnel, greater overall marketing
initiatives and an increase in commission costs directly associated
with the significant increase in software license revenues.
The increase in product development expenses reflects additional
personnel and third-party development costs associated with expanded
research and development activities. In the quarter ended
September 30, 1994 and 1993, the Company capitalized $1,136 and
$733 of software development costs, respectively, in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed." The amounts capitalized by the Company in 1994 and 1993
primarily relate to the Company's development of Microsoft Windows-
based financial management and accounting applications for client/
server environments and represented 23.6% and 24.7%, respectively,
of total product development expenditures. Capitalized software costs
are amortized over the estimated useful life of the product, but not
more than four years.
The increase in general and administrative expenses resulted
from increases in personnel and professional services costs incurred
to support the growth of the Company's overall operations.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
PROVISION FOR INCOME TAXES
The Company's effective income tax rate remained substantially unchanged.
NET INCOME
As a result of the above factors, net income for the three months
ended September 30, 1994 increased to $1,225 or by 51.2% from $810 for
the corresponding period of fiscal 1994.
To date, the overall impact of inflation on the Company has not been
material.
Effective July 1, 1994, the Company adopted the provisions of
Financial Accounting Standards Board Statement 115, "Accounting for
Certain Investments in Debt and Equity Securities." The adoption of
this new statement had no material effect on the Company's financial
statements.
Accounting standards promulgated by, among others, the Financial
Accounting Standards Board change periodically. Changes in such
standards, including currently proposed changes in the accounting for
stock options, may have a negative impact on the Company's future
financial results.
LIQUIDITY AND CAPITAL RESOURCES
- - ----------------------------------------------------------------------
To date, the Company has financed its business principally through
positive cash flow from operations, long-term and short-term
borrowings and sales of its Common Stock. For fiscal years 1992, 1993
and 1994, and for the three months ended September 30, 1994, the
Company generated positive cash flow from operations of $7,890,
$7,343, $19,834 and $6,785, respectively.
Cash used by investing activities amounted to $4,482 for the three
months ended September 30, 1994, $3,346 for leasehold improvements and
purchases of equipment and software, and $1,136 for product
development costs.
Financing activities in the quarter ended September 30, 1994,
including stock options exercised by employees and payment of short-
term debt, generated cash of $325. In connection with the stock
options exercised by certain of its employees (for a total of 63,350
common shares), the Company recognized (as a credit to additional paid-
in capital) an income tax benefit of $582 for the three months ended
September 30, 1994.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
As of September 30, 1994, the Company had cash and cash equivalent of
$38,024 and working capital of $32,713, no long-term debt, and its
ratio of current assets to current liabilities was 2.1 to 1. The
Company has long-term credit availability of $10,000 under a revolving
credit facility. The Company anticipates capital expenditures of
approximately $25,000 for its 1995 fiscal year, including $15,000
relating to the purchase of an office facility (of which $9,500
is to be financed by an agency of the State of Connecticut through a
reduced rate mortgage loan) and $4,000 of capitalized product
development costs.
The Company believes that funds generated from operations, existing
cash balances and its available credit facility will be sufficient
to finance the Company's operations for at least the next two years.
RECENT DEVELOPMENT
On November 7, 1994, the Company signed a definitive agreement
providing for the acquisition of Pillar Corporation in a stock for
stock transaction to be accounted for as a pooling of interests (e.g.,
combine the historical financial statements of the two companies to
present them as consolidated entities since inception). Under the
terms of the agreement, IMRS will issue shares of its Common Stock,
based on the price of IMRS Common Stock prior to the completion of the
acquisition. Based on the last reported sale price for shares of IMRS
Common Stock on November 7, 1994, IMRS would issue approximately
578,000 shares to the stockholders of Pillar (including shares
underlying options and warrants to be assumed by IMRS), which
translates to a transaction value of approximately $22,000. All other
costs associated with the merger will be charged against operations as
incurred. Completion of the transaction is subject to the approval of
Pillar stockholders and is expected to occur before November 30, 1994.
Pillar develops, markets and supports Microsoft Windows and Macintosh-
based corporate budgeting and planning products. Pillar generated
revenues of approximately $10,000 for its year ended September
30, 1994.
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IMRS Inc. and Subsidiaries
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No exhibits are required.
The Company did not file any reports on Form 8-K during the three
months ended September 30, 1994.
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IMRS Inc. and Subsidiaries
Form 10-Q
for the three month period ended September 30, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
IMRS Inc.
/s/ Lucy Rae Ricciardi 11/11/94
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Lucy Rae Ricciardi Date
Vice President-Finance
(principal financial
and accounting officer)
/s/ James A. Perakis 11/11/94
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James A. Perakis Date
Chief Executive Officer
(authorized officer)
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