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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 December 31, 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)
d/b/a Hyperion Software
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 January 31, 1995, there were 7,841,377 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 - December 31, 1994 and June 30, 1994 2
Condensed Consolidated Statement of Income - Three Months Ended
December 31, 1994 and 1993; Six Months Ended December 31, 1994 and 1993 3
Condensed Consolidated Statement of Cash Flows -
Six Months Ended December 31, 1994 and 1993 4
Notes to Condensed Consolidated Financial Statements - December 31, 1994 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<FN>
Hyperion, Financial Intelligence, Executive Forum, IMRS, Micro Control
and OnRequest are registered trademarks and Hyperion Financials, Hyperion
Enterprise, Hyperion Connect, Hyperion Reporting, Hyperion Forms, Hyperion
OnTrack, Hyperion Ledger, Hyperion Payable, Hyperion Admin, Hyperion Tools,
Hyperion Purchasing, Hyperion Receivables, Hyperion Assets and LedgerLink are
trademarks of Hyperion Software Corporation. FYPlan is a registered trademark
and FYControl is a trademark of Pillar Corporation, a wholly-owned
subsidiary of Hyperion Software Corporation. 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)
DECEMBER 31, JUNE 30,
1994 1994
----------------------------
ASSETS (Unaudited) (Note)
Current assets:
Cash and cash equivalents $41,089 $37,913
Accounts receivable-net of allowances of $1,700 and $1,640 25,681 33,830
Prepaid expenses and other current assets 2,434 1,704
Deferred income taxes 710 770
----------------------------
TOTAL CURRENT ASSETS 69,914 74,217
Property and equipment-at cost, less accumulated
depreciation and amortization of $10,799 and $8,607 14,243 10,265
Product development costs-at cost, less
accumulated amortization of $3,138 and $2,355 8,091 6,443
Goodwill and other intangible assets-at cost, less
accumulated amortization of $3,956 and $3,605 2,336 2,671
Deposits and other assets 2,686 1,119
----------------------------
Total assets $97,270 $94,715
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 8,664 $ 7,917
Accrued employee compensation and benefits 5,171 8,727
Income taxes payable 423 1,229
Deferred revenue 21,180 21,055
Notes payable 410 460
----------------------------
TOTAL CURRENT LIABILITIES 35,848 39,388
Deferred income taxes 2,151 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-9,944,300 and 9,791,155 shares 99 98
Additional paid-in capital 60,245 57,496
Retained earnings 12,402 9,536
Currency translation adjustments (442) (436)
Treasury stock, at cost-2,160,420 shares (13,033) (13,033)
----------------------------
TOTAL STOCKHOLDERS' EQUITY 59,271 53,661
----------------------------
Total liabilities and stockholders' equity $97,270 $94,715
============================
Note: The balance sheet at June 30, 1994 has been derived from the combination
of the audited consolidated financial statements of IMRS Inc. at that
date and the audited financial statements of Pillar Corporation as of
September 30, 1994.
See accompanying notes.
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IMRS Inc. and Subsidiaries
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
------------------ ----------------
REVENUES
Software licenses $16,080 $10,784 $29,671 $18,723
License renewals and services 13,975 9,489 26,712 18,575
----------------- ----------------
Total revenues 30,055 20,273 56,383 37,298
COSTS AND EXPENSES
Cost of revenues:
Software licenses 721 498 1,471 1,057
License renewals and services 8,341 5,400 15,995 10,467
Sales and marketing 9,763 6,782 18,099 12,574
Product development 4,799 2,500 9,135 5,221
General and administrative 2,422 3,029 4,854 5,105
Merger and integration 1,000 1,000
----------------- ----------------
27,046 18,209 50,554 34,424
----------------- ----------------
OPERATING INCOME 3,009 2,064 5,829 2,874
Interest income 405 181 754 350
Interest expense (33) (30) (61) (52)
----------------- ----------------
INCOME BEFORE INCOME TAXES 3,381 2,215 6,522 3,172
Provision for income taxes 1,370 920 2,640 1,320
----------------- ----------------
NET INCOME $ 2,011 $ 1,295 $ 3,882 $ 1,852
================= ================
EARNINGS PER SHARE
Primary $.23 $.16 $.45 $.23
Fully diluted $.23 $.16 $.45 $.22
AVERAGE NUMBER OF SHARES OUTSTANDING
Primary 8,620 8,308 8,551 8,199
Fully diluted 8,647 8,341 8,624 8,280
See accompanying notes.
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IMRS Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
Six Months Ended
December 31,
1994 1993
------------------
CASH PROVIDED BY OPERATING ACTIVITIES $11,655 $ 6,572
INVESTING ACTIVITIES
Leasehold improvements and purchases of furniture,
equipment and software (6,170) (2,821)
Product development costs (2,431) (1,774)
Deposits and other assets (1,530)
-----------------
Cash used by investing activities (10,131) (4,595)
FINANCING ACTIVITIES
Notes payable-proceeds (payments), net (50) 258
Exercise of stock options by employees/
sale of Common Stock 1,708 2,325
-----------------
Cash provided by financing activities 1,658 2,583
Effect of exchange rate changes (6) (28)
-----------------
INCREASE IN CASH AND CASH EQUIVALENTS 3,176 4,532
Cash and cash equivalents at beginning of period 37,913 24,520
-----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $41,089 $ 29,052
==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 1,816 $2,076
Interest 35 42
See accompanying notes.
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IMRS Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
December 31, 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 six-month period ended December 31, 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 after giving effect to the merger with Pillar Corporation (see Note B
below). 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. ACQUISITIONS
On November 29, 1994, the Company issued 570,796 shares of its common stock
(including 73,485 shares underlying options and warrants assumed by IMRS) in
connection with the merger with Pillar Corporation. Pillar, based in California,
develops, markets and supports Microsoft Windows and Macintosh-based corporate
budgeting and planning products. The acquisition has been accounted for as a
pooling of interests. Accordingly, the financial statements have been restated
for all prior periods to include Pillar. Further, all common share and per share
data have been restated for prior periods.
For the (pre-merger) periods indicated, revenues and net income of the Company
and Pillar are as follows, in thousands:
Three Months Ended Three Months Ended Six Months Ended
September 30, 1994 December 31, 1993 December 31, 1993
------------------ ------------------ -----------------
REVENUES
IMRS $22,470 $19,236 $34,588
Pillar 3,858 1,037 2,710
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$26,328 $20,273 $37,298
======= ======= =======
NET IMCOME
IMRS $ 1,225 $ 2,043 $ 2,853
Pillar 1,016 (1,322) (1,758)
adjustments(s) (370) 574 757
------- ------- -------
$ 1,871 $ 1,295 $ 1,852
======= ======= =======
<FN>
(a) To adjust the provision for income taxes to reflect on a combined company
basis, the annual effective tax rate.
Pillar previously used the fiscal year ended September 30 for its financial
reporting. Pillar's operating results for the three and six-month periods ended
March 31, 1994 have been included in the accompanying statement of income for
the respective 1993 periods. The statement of income's comparative 1994 results
reflect the operations of IMRS and Pillar for the three and six-month periods
ended December 31, 1994. The balance sheet at June 30, 1994 has been derived
from the combination of the audited consolidated financial statements of IMRS
at that date and the audited financial statements of Pillar as of September 30,
1994. Accordingly, the duplication of Pillar's net income, for the three months
ended September 30, 1994, in retained earnings has been adjusted by a $1
million charge to retained earnings as of December 31, 1994.
In connection with the acquisition, the Company charged $1 million to operations
for nonrecurring merger and integration costs (principally professional fees)
incurred.
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IMRS Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
December 31, 1994
B. ACQUISITIONS (CONTINUED)
On January 20, 1995, the Company completed the purchase of an office facility in
Stamford, Connecticut, reported last September, for $11.4 million. The purchase
price was financed by the Connecticut Development Authority ("CDA," an agency
of the State of Connecticut) through a $9.5 million mortgage loan, with Company
funds used for the balance. In the interest of Connecticut-based jobs, the CDA
agreed to such financing over a 15-year period at LIBOR minus 2%, subject to,
among other things: (i) the creation of a specified number of new
Connecticut-based jobs, (ii) a 10-year residency in the state, and (iii) the
payment of the remaining unpaid principal at the end of year ten. Violations of
certain such covenants, if any, would result in additional interest charges
and/or a penalty payment.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands)
OVERVIEW
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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,
budgeting 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 recently announced it will begin to transfer business using the name
Hyperion Software.
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 $30,055 and $2,011, respectively,
for the second quarter of fiscal 1995, and $26,328 and $1,871, respectively, for
the first quarter of fiscal 1995.
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
Second Quarter Ended Six Months Ended
December 31, 1994 CHANGE 1993 1994 CHANGE 1993
- - ------------------------------------- --------------------------- --------------------------
Software licenses $16,080 49.1% $10,784 $29,671 58.5% $18,723
Percentage of total revenues 53.5% 53.2% 52.6% 50.2%
- - ------------------------------------- --------------------------- --------------------------
License renewals and services $13,975 47.3% $ 9,489 $26,712 43.8% $18,575
Percentage of total revenues 46.5% 46.8% 47.4% 49.8%
- - ------------------------------------- --------------------------- --------------------------
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 continues to be strong. In the December 1994 quarter and six-month
period, Windows-based product licenses comprised more than 97% of the Company's
total software license revenues, up from approximately 85% for the corresponding
periods 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 first half of
fiscal 1995 and 1994 were $16,025 and $8,735, or 28.4% and 23.4% of total
revenues, respectively.
COST OF REVENUES
Second Quarter Ended Six Months Ended
December 31, 1994 CHANGE 1993 1994 CHANGE 1993
- - ------------------------------------- --------------------------- -----------------------------
Software licenses $ 721 44.8% $ 498 $ 1,471 39.2% $ 1,057
Gross profit percentage 95.5% 95.4% 95.0% 94.4%
- - ------------------------------------- --------------------------- -----------------------------
License renewals and services $8,341 54.5% $ 5,400 $ 15,995 52.8% $ 10,467
Gross profit percentage 40.3% 43.1% 40.1% 43.7%
- - ------------------------------------- --------------------------- -----------------------------
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 reflects principally the associated increase in the number of
software licenses sold.
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.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
OPERATING EXPENSES
Second Quarter Ended Six Months Ended
December 31, 1994 CHANGE 1993 1994 CHANGE 1993
- - ------------------------------------- --------------------------- -----------------------------
Sales and marketing $9,763 44.0% $6,782 $18,099 43.9% $12,574
Percentage of total revenues 32.5% 33.5% 32.1% 33.7%
- - ------------------------------------- --------------------------- -----------------------------
Product development $4,799 92.0% $2,500 $ 9,135 75.0% $ 5,221
Percentage of total revenues 16.0% 12.3% 16.2% 14.0%
- - ------------------------------------- --------------------------- -----------------------------
General and administrative $2,422 20.0% $3,029 $ 4,854 4.9% $ 5,105
Percentage of total revenues 8.1% 14.9% 8.6% 13.7%
- - ------------------------------------- --------------------------- -----------------------------
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 first half of fiscal 1995 and 1994, the Company capitalized
$2,431 and $1,774 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 1995 and 1994 primarily relate to the
Company's development of Microsoft Windows-based financial management and
accounting applications for client/server environments and represented 21.0%
and 25.4%, 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 decrease in general and administrative expenses resulted primarily from a
decrease in the provision for doubtful accounts from the requirement of the
prior period.
On November 29, 1994, the Company issued 570,796 shares of its common stock
(including 73,485 shares underlying options and warrants assumed by IMRS) in
connection with the merger with Pillar Corporation. Pillar, based in
California, 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. The acquisition
has been accounted for as a pooling of interests. Accordingly, the financial
statements have been restated for all prior periods to include Pillar. Further,
all common share and per share data have been restated for prior periods. In
connection with the acquisition, the Company charged $1,000 to operations for
nonrecurring merger and integration costs incurred during its second quarter
ended December 31, 1994. For further details, see Note B of the accompanying
consolidated financial statements.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
INTEREST INCOME
Interest income increased due to a general rise in interest rates and the
increase in cash available for investment which resulted from operations.
PROVISION FOR INCOME TAXES
The Company's effective income tax rate decreased from approximately 42% to 41%,
reflecting tax benefits from the utilization of Pillar net operating loss
carryovers. The rate for the current period reflects the Company's expectations
for the full year ending June 30, 1995.
NET INCOME
As a result of the above factors, net income for the three and six-month periods
ended December 31, 1994 increased to $2,011 or by 55.3% from $1,295 and $3,882
or by 109.6% from $1,852, respectively, for the corresponding periods of 1993.
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 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 1993 and 1994, and for the six months ended
December 31, 1994, the Company generated positive cash flow from operations of
$6,626, $19,707 and $11,655, respectively.
Cash used by investing activities amounted to $10,131 for the first half of
fiscal 1995, $6,170 for leasehold improvements and purchases of equipment and
software, $2,431 for product development costs and $1,530 for deposits and
other assets (primarily related to the purchase of an office facility).
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
Financing activities in the first half of fiscal 1995, including stock options
exercised by employees and payment of short-term debt, generated cash of $1,658.
In connection with the stock options exercised by certain of its employees (for
a total of 153,145 common shares), the Company recognized (as a credit to
additional paid-in capital) an income tax benefit of $1,085 for the six months
ended December 31, 1994.
As of December 31, 1994, the Company had cash and cash equivalents of $41,089
and working capital of $34,066, no long-term debt, and its ratio of current
assets to current liabilities was 2.0 to 1. The Company has long-term credit
availability of $10,000 under a revolving credit facility. The Company
anticipates capital expenditures of approximately $30,000 for its 1995 fiscal
year, including $15,000 relating to the purchase of an office facility (of which
$9,500 was financed by an agency of the State of Connecticut, through a reduced
rate mortgage loan, on January 20, 1995) 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.
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IMRS Inc. and Subsidiaries
Part II. Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At IMRS' Annual Meeting of Stockholders held on November 15, 1994, the
following proposals were adopted by the margins indicated:
1. To elect two members to the Board of Directors to serve for a three-year
term or until their successors are duly elected and qualified.
Number of Shares
For Withheld
-------------------
James A. Perakis 5,123,848 40,809
Gary G. Greenfield 5,123,848 40,809
2. To ratify the selection of the firm, Ernst & Young LLP, as the independent
auditors of the Company for the fiscal year ending June 30, 1995.
For 5,141,563
Against 1,339
Abstain 21,755
3. To approve an amendment to the Company's 1991 Non-Employee Director Stock
Option Plan.
For 3,693,284
Against 1,439,314
Abstain 32,059
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
----------- -----------
10.25 Purchase and Sale Agreement dated January 20, 1995 between Hyperion Software Corporation
(formerly IMRS Operations, Inc.) and Combustion Engineering, Inc., regarding the purchase
of an office facility.
10.26 Promissary Note of Hyperion Software Corporation to the Connecticut Development Authority,
with related Loan Agreement dated January 20, 1995 between Hyperion Software Corporation,
IMRS Inc., and the Connecticut Development Authority, regarding the financing of an office
facility, and related Mortgage Deed dated January 20, 1995 between Hyperion Software
Corporation and the Connecticut Development Authority.
On December 14, 1994, the Company filed a report on Form 8-K regarding
disclosures of Item 5 of the form.
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IMRS Inc. and Subsidiaries
Form 10-Q
for the three-month period ended December 31, 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 2/13/95
-------------------------------------------
Lucy Rae Ricciardi Date
Vice President - Finance
(principal financial and accounting officer)
/s/ James A. Perakis 2/13/95
-------------------------------------------
James A. Perakis Date
Chief Executive Officer
(authorized officer)
13