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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to _____________.
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COMMISSION FILE NUMBER 0-19538
HYPERION SOFTWARE CORPORATION
(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.)
900 LONG RIDGE ROAD, STAMFORD, CONNECTICUT 06902
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (203) 703-3000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of September 15, 1997, there were 18,586,401 shares of the registrant's
Common Stock, $.01 par value, outstanding. The aggregate market value of the
registrant's voting stock held by nonaffiliates as of September 15, 1997 was
approximately $510 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its 1997 Annual Meeting of
Stockholders, scheduled to be held on November 12, 1997, are incorporated by
reference in Part III hereof.
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PART I
ITEM 1. BUSINESS
GENERAL
Founded in 1981, Hyperion Software Corporation (the "company") develops,
markets and supports comprehensive analytic solutions that enable large,
multinational companies to improve financial performance by maximizing the value
of information. The company's internet/intranet-enabled applications support and
enhance enterprise-wide financial processes, including planning, budgeting,
forecasting, accounting, consolidation and performance analysis.
INDUSTRY BACKGROUND
Large corporations generate significant amounts of accounting,
manufacturing, human resources, sales and marketing data. To be useful to senior
executives, managers and analysts, such transactional data must be retrieved
from a variety of financial and operational systems, then summarized and
organized into meaningful business information that is consistent and easily
accessible. The process of integrating the data is complicated because most
large corporations use multiple accounting systems and transactional databases,
conduct business in numerous locations and have diverse information requirements
across functions and throughout the management hierarchy.
Historically, corporations have attempted to collect, summarize, organize
and present information from fragmented computer systems and transactional data
sources in a number of ways. In many instances, business information reports are
assembled manually with the aid of spreadsheets and by using data from
accounting ledgers and other operational systems. Additionally, many
corporations have sought to automate business information systems through the
use of mainframe, minicomputer or PC software developed by their internal
information technology ("IT") departments. Hyperion believes that these
internally developed systems are becoming increasingly obsolete because they are
usually rigid in structure, complex to create, expensive to maintain, and
difficult to update when information requirements change. In addition, growing
corporate competition has increased the demand for more comprehensive and timely
business information that is accessible throughout the corporation.
Continuing advances in computer and networking technology increasingly
enable business information processing at large corporations to be moved to
client/server architectures running on networks of personal computers.
Client/server computing takes advantage of the power of personal computers by
appropriately segregating user interface and application processing tasks
between separate client and server machines. Networked PCs have significantly
increased the ability to share information among users throughout an
organization. The growth of internet/intranet technology has further enabled
broader and more powerful information access within, outside and among
corporations. While IT departments were initially slow to adopt network and
internet/intranet technology, they now view networked PCs as a strategic element
of information management. Network-based and internet/intranet-enabled solutions
are now being implemented as a means of decreasing computing costs while
improving the flow, accessibility and usefulness of corporate information.
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Most financial analysts, accountants and many executives rely on personal
computer spreadsheets for performance analysis, reporting and forecasting. While
spreadsheets and other PC software tools have been used to perform some
corporate business information tasks, they have limited capability for
information sharing and lack the necessary controls to ensure corporate
consistency. Existing custom or packaged software for mainframes or
minicomputers is impractical to modify for network computing because it is based
on operating systems and architectures which are incompatible with PCs and
client/server technology and lack the ease of use of PC software.
Enterprise Resource Planning (ERP) systems are one means of addressing
part of this market need. ERP systems are integrated software solutions that
combine multiple business applications such as finance, human resources,
marketing and distribution across the enterprise into a single system. This
alternative to the narrower, more distinct applications of past years delivers
benefits to corporations by coordinating an increasing number of functional
processes into a single system solution. As business process automation becomes
a higher and increasingly cost-effective priority for companies, ERP systems
will become transactional "backbones" within the corporate infrastructure.
A second critical dimension to meeting this market need is the software
applications which help organizations to make use of this transactional data.
Recently termed "analytic applications" by leading industry analysts, these
software solutions work on a stand-alone basis, or in conjunction with ERP
systems to translate data into business intelligence and thus to maximize the
value of financial information. The need for better business information has
created a significant market opportunity for analytic application software.
Since 1981, the company's experience in developing and marketing financial
management and analytical software applications for PCs and networks has
positioned it well for this market.
STRATEGY
The company's objective is to be the leading provider of client/server
and internet/intranet-enabled financial management and analytical solutions to
large, multidivision or multilocation companies worldwide. Hyperion focuses on
designing financially intelligent software applications that manage complex
business processes, access and distribute information, and measure and analyze
the performance of a business. Integrated across these applications, Hyperion
provides complete reporting and business analysis capabilities designed to
support the way people access, deliver and analyze results. The applications are
designed to be flexible, easy to maintain, cost-efficient, fast and functionally
complete, using an architecture based on connectivity and openness to ERP and
other best-of-class applications. The company intends to continue to extend and
enhance its suite of integrated client/server and internet/intranet-enabled
products through internal development and acquisition.
The company believes the use of evolving technology standards, when
coupled with software that reflects financial intelligence and business
applications expertise, produces clear and immediate benefits to an
organization.
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The company's strategy to achieve its objective includes the following
elements:
Increase Penetration of Multisource Consolidation and Budgeting Markets.
The company believes that a minority of potential customers has purchased
network-based, Windows multisource consolidation (the management of financial
information across multiple accounting and planning systems, operational data
sources and geographies) and budgeting software. The company intends to further
its penetration in these markets worldwide, and continue its leadership position
by enhancing its current products and dedicating significant resources to sales,
marketing, support and product development. In addition, the company intends to
continue to expand upon its sales channel strategy through reseller
relationships with other software providers that will provide access to markets
that Hyperion has not traditionally exploited.
Leverage Existing Market Leadership Position. The company believes that
the complementary set of planning, budgeting, forecasting, accounting,
consolidation and performance analysis applications provides the complete,
consistent results executives need to run their businesses. The quick, secure
access of this interrelated information, in a common set of user tools, supports
ad hoc analysis and reporting requirements. The company believes that its
established strength in providing solutions places it in a strong position to
market its applications to both new and existing customers, including the latest
offerings, Hyperion OLAP for business analysis; and Hyperion's Spider-Man, a
web-based business information access solution for an organization's global user
community.
Focus on Leading Network, Internet/Intranet and Software Technologies.
Hyperion Software is committed to the development of network-based software for
business information applications. The company's solutions are designed to run
in the Microsoft Windows environment, and all are compatible with widely-used PC
networks and leading internet/intranet technology. The company intends to
enhance its existing products and develop or acquire new products linked to
client/server software standards, including Windows 95, Windows NT, and Oracle,
Sybase and Microsoft SQL Server databases, as well as the emerging
internet/intranet technologies.
Design Applications for Specific Corporate Information Needs. The
company's product line is designed specifically for the collection, accounting,
planning, reporting and interactive analysis of business data. Hyperion's
applications fit business processes, with financial intelligence and
preprogrammed functionality. This orientation to specific tasks serves to reduce
implementation time and results in superior processing speed for fast data
compilation and data access. The company is also committed to a combination of
integrated, industry standard SQL and application specific databases.
Design for Ease of Implementation and Ease of Use. The company's products
are designed for an end-user role in maintenance, with minimal training.
Application expertise is built into products and is also provided by the company
through consulting services. Following implementation, customers are able to
operate self-sufficiently with trained administrators at headquarters locations
and independent end-users at headquarters and at remote sites.
Maintain Sales and Support Relationships. Unlike many other PC software
companies, the company licenses its products throughout the world primarily
through a direct sales force. Products also are licensed through independent
distributors and sales agents, including major accounting firms. Hyperion often
provides installation and post-sale consulting support to build long-term
customer relationships.
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Generate Follow-on Revenues. The company generates revenues from existing
customers through licensing for additional users, the introduction of new
products and license renewal fees. In addition, sales of training and consulting
services to existing customers represents a significant portion of the company's
total service revenues. Follow-on revenues leverage sales and marketing
resources and strengthen the company's relationships with its customers.
PRODUCTS AND SERVICES
The company's product line provides executives, managers, analysts and
accountants with the capability to collect, process, report and analyze business
information. The company's Hyperion Enterprise products consolidate and report
financial and other business data; Hyperion Pillar is used for corporate
budgeting and financial planning; Hyperion OLAP provides multidimensional
analysis and reporting capabilities regarding complex, high-volume business
data; the accounting products are used for corporate accounting; and Hyperion's
Spider-Man application is a web-based business information access solution for
the global user community of an organization. The company also offers
installation, training, consulting and support services.
PRODUCTS
Hyperion Enterprise. Hyperion Enterprise, released in July 1991 and now
in its fifth major release, is an advanced business information consolidation
and reporting application which is designed to provide a unified view of
accounting information across diverse general ledgers for management reporting,
tax and statutory reporting requirements. The product allows for changes in
corporate structure or reporting lines. The company began development of
Hyperion Enterprise in mid-1988 as a new product that combines powerful
consolidation and reporting capabilities with an open architecture, and
administrative ease of use made possible through the graphical user interface of
Windows. Hyperion Enterprise reflects the company's fifteen years of experience
in financial and business information software. In each of the past three years,
the company derived approximately 60% of its worldwide total revenues from
Hyperion Enterprise licenses and related services.
Hyperion Pillar. Pillar is a complete solution for corporate planning and
budgeting needs. It facilitates the collaborative, iterative process of
enterprise-wide budgeting and forecasting. Hyperion Pillar helps give the
corporate plan greater credibility by allowing line managers to assume full
accountability for their budgets. The software enables users to build up their
budgets from a series of line items the way they think--in units, rates and/or
amounts. Security features ensure that planning managers have control over each
user's access to specific data. Pillar is a Windows-based solution with flexible
import/export capabilities for interaction with virtually all financial software
systems. The product easily allows for changes in corporate structure or
reporting lines, making it easy to change the plan as the corporation evolves.
Hyperion OLAP. Hyperion OLAP, released in April 1996, provides powerful
multidimensional analysis and reporting capabilities to support complex,
high-volume business analysis of issues such as customer or product line
profitability. Hyperion OLAP combines built-in financial intelligence with a
high performance, on-line analytical processing (OLAP) engine and superior
information access capabilities. Continuing to leverage the company's experience
in financial and business information software, Hyperion OLAP complements the
overall integrated Hyperion solution as well as a wide range of ERP systems and
other information sources. Hyperion OLAP allows analysis in up to 16 dimensions
and is suitable for multi-user applications, "what-if" analysis and nomadic
usage.
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Hyperion's accounting products, initially released in March 1995, allow
an enterprise to control the detailed collection and reporting of day-to-day
business transactions. The accounting products are designed for fast
installation and easy maintenance. Superior integration among modules allows
users to drill-down from ledger information to supporting subsystem
transactions.
Hyperion Ledger. Hyperion Ledger is a Windows-based, general ledger
accounting system for large, corporate client/server environments. Hyperion
Ledger controls the management of a full range of advanced accounting functions,
including flexible account structures, intercompany transaction control and
complex consolidation processing. In addition to the general ledger, the
company's full suite of accounting products includes Hyperion Reporting,
Hyperion Tools, Hyperion Admin, Hyperion Payables, Hyperion Receivables and
Hyperion Assets.
The company offers several complementary modules integrated across the
product line:
Hyperion's Spider-Man Web Delivery. Hyperion's Spider-Man application,
released in August 1996, is a gateway into the Hyperion solution for the global
user community of a corporation. A web-based server application, it provides all
users, around the world, with an intelligent view of the reports within each
application--accounting, budgeting, multisource consolidation, business
analysis. It allows users to navigate through a consistent set of current
corporate data, as well as information from any other internet source.
Hyperion Analyst. Hyperion Analyst, released in April 1996, provides
multidimensional, on-line analysis capabilities tailored specifically to working
with financial and accounting data. Hyperion Analyst allows users to "slice and
dice" information seamlessly from our financial applications directly within a
Microsoft Excel or Lotus 1-2-3 spreadsheet.
Hyperion Schedules. Hyperion Schedules, released in November 1995,
provides schedule-based data entry within our financial processes to capture
corporate financial information. Hyperion Schedules provides complete control
and customization of data entry screens.
SERVICES
The company provides design consulting and implementation support for its
products and their operation on local or wide area networks and offers a range
of administrator and end-user courses at its training facilities or at the
customer's site. Implementation, consulting and training services are not
included in software license fees, but are provided on a time and materials
basis. This allows the customer to determine the level of support appropriate to
its needs and permits the company to provide high quality services on a
profitable basis.
Under the terms of the company's standard license agreement, customers,
at their option, pay a license renewal (maintenance) fee annually. The annual
fee charged to a customer is generally a fixed percentage of the then-current
list prices for the licensed software used by the customer. This fee entitles
customers to support, including a user hotline and electronic bulletin board,
and to any updates and enhancements provided for their software. The company's
product support function provides a hotline, collects and evaluates requests for
enhancement of products and, together with the product management and planning
group, coordinates the design, development and release of new products and
product enhancements.
An active user group, including a steering committee, works closely with
the company in helping to define product enhancement priorities and direction. A
user conference is held annually. This year's conference, in Orlando, was
attended by over 2,300 people from more than 850 companies. Regional user
meetings and product-specific focus groups are also scheduled periodically,
including an annual European user conference.
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CUSTOMERS
Hyperion Software markets its products worldwide to multidivision and/or
multilocation organizations with diverse information management requirements.
The company has licensed its software to more than 3,200 corporate headquarters
customers. In the past three fiscal years, no one customer accounted for more
than 10% of total revenues. The company's customers include the following:
ABN Amro Holding ING America Life
Aetna Life & Casualty ITT Industries Inc.
Ahold Johnson & Johnson
Aluminum Company of America Kimberly-Clark Corporation
American Brands Kmart Corporation
American Express Lotus Development Corporation
Amoco Corporation LVMH
AT&T GIS MCI Telecomm. Corp., Network Services
Automatic Data Processing McKesson Corporation
B.A.T. Industries Microsoft Corporation
Baxter Healthcare Motorola, Inc.
Bayer Corp. National Australia Bank Limited
Bell Atlantic Corporation Netscape Communications
BellSouth Corporation Nokia Mobile Phones
Berjaya Group Berhad Norsk Hydro
Black & Decker Corporation NYNEX Corporation
Bristol-Myers Squibb Company PepsiCo Inc.
Broken Hill Properties Price Costco Wholesale Corp.
BTR plc The Prudential Insurance Company of America
Campbell Soup Company PT Astra
Chase Manhattan Bank Qantas Airways
Chevron Corporation Roche Holding
Ciba-Geigy Corporation Rockwell International Corp.
Compaq Computer Sainsbury J
Creative Technology Ltd. San Miguel Corporation
Dean Witter Discover & Co. Sara Lee Corporation
Digital Equipment SBC Communications
DST Systems Inc. Sprint
Eastman Kodak Company Standard Chartered
Ford Motor Credit Company Swiss Bank Corporation
Fortis - AG Swiss Reinsurance Group
General Electric Company Telecom Italia
Glaxo Texaco Inc.
Granada Group The Travelers
Hanson plc Union Bank of Switzerland
Heineken United Parcel Service
Household Finance Corporation Wang Laboratories
HSBC Holdings The Washington Post
ICI plc Young & Rubicam
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SALES AND MARKETING
The company has a direct sales force comprised of 226 sales personnel as
of June 30, 1997. The company supports its sales force with lead generation and
marketing programs which include telemarketing, public relations, direct mail,
advertising, seminars, trade shows and ongoing customer communication programs
and third-party alliances. The company has sales offices at its headquarters in
Stamford, Connecticut and in: Alexandria, Amsterdam, Atlanta, Baltimore, Boston,
Brussels, Calgary, Chicago, Cleveland, Copenhagen, Dallas, Denver, Detroit,
Foster City, Frankfurt, Hong Kong, Houston, Linz, London, Los Angeles, Madrid,
Manchester, Milan, Milwaukee, Minneapolis, Montreal, Munich, Newark, Ottawa,
Paris, Philadelphia, Rome, San Francisco, Sao Paulo, Seattle, Singapore, St.
Louis, Stockholm, Syracuse, Tokyo, Toronto and Washington, DC. Product support
and training are available as well through many of these locations.
The company also markets its products through independent distributors
and sales agents. The company has license and distribution agreements with
independent distributors and sales agents in: Australia, Brazil, Finland,
Israel, Japan, Korea, Mexico, New Zealand, Poland, Singapore, South Africa and
Switzerland, as well as other territories of Europe and North America. The
company's distributors and agents include The Baan Company, affiliates of
Arthur Andersen & Co. (in Japan and Switzerland), and affiliates of KPMG Peat
Marwick (in Australia and New Zealand). The distributors generally maintain
sales and service personnel dedicated solely to the company's products. The
distribution agreements generally provide for the right to offer the company's
products within a territory, in return for royalties typically equal to 50% of
license and license renewal fees. In each of its 1997, 1996 and 1995 fiscal
years, approximately 36.4%, 33.2% and 28.1%, respectively, of the company's
total revenues were derived from sources outside of the United States.
Because the company generally ships its products shortly after license
agreements are signed, the company's software licensing backlog typically is
small.
PRODUCT DEVELOPMENT
To date, all of the company's principal products have been developed by
its internal staff except for Hyperion Pillar, which was acquired in connection
with the company's acquisition of Pillar Corporation (November 1994), and
portions of Hyperion OLAP. When developing a new product or enhancement, the
company works closely with current and prospective customers to determine their
requirements. A user product enhancement committee, comprised of representatives
of certain of the company's customers, meets quarterly and advises the company
of its priorities for product development and enhancement, as well as product
support service.
On July 1, 1997, the company joined forces with The Baan Company, a
leading provider of enterprise-wide business management software to companies
requiring best-of-class manufacturing capabilities, engaging Baan to remarket
Hyperion products and establishing a joint venture development effort for
accounting products. The two-year definitive alliance is intended to leverage
Baan's expertise in complex transactional Enterprise Resource Planning solutions
and Hyperion's command of corporate financial planning, reporting and
performance analysis. Hyperion and Baan have agreed to share equally in the cost
of developing next generation accounting products which may be licensed to end
users by either company.
The company's development efforts are focused on new products, as well as
on maintaining the competitiveness of its current product line, including
development of the next releases of Hyperion Enterprise, Hyperion Pillar,
Hyperion OLAP and Hyperion's Spider-Man. As of June 30, 1997, the company's
product development was performed by 247 employees primarily located at its
Foster City, California and Stamford, Connecticut facilities.
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During fiscal 1997, 1996 and 1995, the company's product development
expense, which is net of capitalized development costs, was $33 million, $26.8
million and $21 million, or 14.8%, 15.5% and 15.3% of total revenues,
respectively. In accordance with Statement of Financial Accounting Standards No.
86, the company capitalizes certain development costs. During fiscal 1997, 1996
and 1995, the company capitalized $4.8 million, $5.8 million and $5.2 million,
respectively, or 12.7%, 17.8% and 19.9% of total product development
expenditures (excluding purchased research and development).
COMPETITION
The company operates in an intensely competitive market which demands
product quality, functionality, performance, reliability, ease of use, customer
satisfaction, service, price, vendor reputation and financial stability. The
company believes that its products currently compete favorably with respect to
such factors, although it may be at a competitive disadvantage against companies
with greater financial, technological, marketing, service and support resources.
The company faces competition from a variety of business application
software vendors and software tool vendors, as well as from software developed
by IT departments of potential customers. Many of the company's existing and
potential customers utilize legacy software developed internally for mainframes
or minicomputers. The market for client/server and internet/intranet-enabled
corporate financial software is still an emerging one. As markets develop for
the company's products, additional competitors may enter or expand into those
markets and competition may intensify.
PROPRIETARY RIGHTS AND LICENSES
The company depends upon a combination of trade secret, copyright and
trademark laws, license agreements, nondisclosure and other contractual
provisions and technical measures to protect its proprietary rights in its
products. In addition, the company attempts to protect its trade secrets and
other proprietary information through agreements with employees and consultants.
Despite these precautions, it may be possible for unauthorized third parties to
copy aspects of the company's products or to obtain information that the company
regards as proprietary. The company also seeks to protect the source code of its
products as a trade secret.
The company distributes its products under software license agreements
which grant customers a nonexclusive, nontransferable license to the company's
products and contain terms and conditions prohibiting the unauthorized
reproductions or transfer of the company's products. The company does not
provide licensees with the source code for its products.
Customers are billed an initial license fee for the software upon
delivery and, subsequently, are billed an annual maintenance fee entitling them
to routine support and product updates. This fee is typically calculated at a
fixed percentage of the then-current price of all licensed software used by the
customer. The annual maintenance fee is optional; however, without payment, the
licensee is entitled only to use the software in its then current form, without
receiving future updates or product support. See "Services."
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(C) 1997 Hyperion Software Operations Inc. All rights reserved. Hyperion,
Hyperion Software, the Hyperion Software Logo, Hyperion Admin, Hyperion Analyst,
Hyperion Assets, Hyperion Financials, Hyperion Forms, Hyperion Ledger, Hyperion
OLAP, Hyperion OnTrack, Hyperion Payables, Hyperion Pillar, Hyperion
Receivables, Hyperion Reporting, Hyperion Retrieve, Hyperion Tools, Business
Intelligence, Financial Intelligence, IMRS, LedgerLink, Micro Control and Pillar
are registered trademarks and Hyperion Analytical Ledger, Hyperion Enterprise,
Hyperion Purchasing and Build&Link are trademarks of Hyperion Software
Operations Inc., a wholly-owned subsidiary of Hyperion Software Corporation.
MARVEL COMICS, SPIDER-MAN: TM & (C) 1997 Marvel Characters, Inc. All rights
reserved. All other trademarks and company names mentioned are the property of
their respective owners.
EMPLOYEES
As of July 31, 1997, the company employed a total of 1,226 employees,
including 309 in marketing and sales, 784 in product development, support and
technical services, and 133 in management, administration and finance. None of
the company's employees is represented by a labor union. The company has
experienced no work stoppages and believes that its employee relations are good.
The executive officers of the company are as follows:
Name Age Position
---- --- --------
James A. Perakis.........53 President, Chief Executive Officer and Chairman
Mark J. Bilger..........38 Senior Vice President, Product Development
Lucy Rae Ricciardi.......55 Senior Vice President and Chief Financial Officer
Craig M. Schiff..........42 Senior Vice President and Corporate Secretary
Mr. Perakis is Chairman of the Board of Directors, Chief Executive
Officer and President of the company. Mr. Perakis has served as Chief Executive
Officer and as a director of the company since September 1985. From 1983 to
September 1985, Mr. Perakis served as Senior Vice President and General Manager
of Chase Decision Systems, a division of Interactive Data Corporation, a
developer and marketer of mainframe software for planning and financial
applications. From 1979 to 1983, Mr. Perakis was Chief Financial Officer of
Interactive Data Corporation, a supplier of data and software to financial and
corporate markets.
Mr. Bilger was appointed Senior Vice President, Product Development in
July 1997. Prior to joining Hyperion, Mr. Bilger was Director of Software
Development, Emerging Markets for the IBM Software Group, a division of the IBM
Corporation. Mr. Bilger managed IBM's product development efforts for the
insurance industry worldwide, as well as for the finance and banking industry of
Asia-Pacific.
Ms. Ricciardi has served as Senior Vice President and Chief Financial
Officer of the company since July 1995. From February 1990 to July 1995, Ms.
Ricciardi served as Vice President - Finance and Chief Financial Officer of the
company. From February 1988 to February 1990, Ms. Ricciardi served as Director
of Finance of the company. Prior to 1988, Ms. Ricciardi was associated with
Dun & Bradstreet, most recently in its Acquisitions Analysis Group.
Mr. Schiff was appointed Senior Vice President and Corporate Secretary in
May 1996. From July 1985 to May 1996, Mr. Schiff served as Vice President -
Products and Services and Corporate Secretary of the company. Mr. Schiff
originally joined the company in July 1983. Prior to July 1983, Mr. Schiff
served in a variety of customer service and support positions with General
Electric Information Services.
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ITEM 2. PROPERTIES
The company's principal administrative, marketing and product development
and support functions are located in Stamford, Connecticut, where the company
owns and occupies approximately 230,000 square feet of office space. The
Stamford facilities permit future expansion of up to 300,000 square feet of
additional space. The company also leases regional office space for its local
sales and service needs.
ITEM 3. LEGAL PROCEEDINGS
From time to time, in the normal course of business, various claims are
made against the company. At this time, in the opinion of management, there are
no pending claims the outcome of which is expected to result in a material
adverse effect on the financial position of the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders through the solicitation of
proxies or otherwise.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The company's common stock trades on The Nasdaq Stock Market under the
symbol HYSW. The following table sets forth, for the periods indicated, the high
and low sales prices of the common stock as reported on The Nasdaq Stock Market.
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FISCAL 1996: HIGH LOW
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First quarter $28 3/8 $22
Second quarter 28 1/4 18 1/4
Third quarter 23 14
Fourth quarter 22 9 3/4
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FISCAL 1997: HIGH LOW
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First quarter $16 5/8 $10 1/2
Second quarter 25 14 3/8
Third quarter 26 3/8 16
Fourth quarter 22 3/4 13
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FISCAL 1998: HIGH LOW
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First quarter (through September 15th) 32 1/2 21 1/4
As of September 15, 1997, the company had 146 stockholders of record and
approximately 5,400 beneficial holders of its common stock.
The company has never declared or paid any cash dividends on its capital
stock. The company currently intends to retain all earnings to finance future
growth and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. The company's credit agreement with its lender contains
covenants that restrict the company regarding the payment of dividends.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
FOR THE YEAR ENDED JUNE 30
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1997 1996 1995 1994 1993
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STATEMENT OF INCOME DATA (a)
REVENUES
Software licenses $112,115 $ 90,304 $ 77,985 $51,687 $35,801
License renewals and services 110,715 82,520 59,156 42,575 30,844
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Total revenues 222,830 172,824 137,141 94,262 66,645
COSTS AND EXPENSES
Cost of revenues:
Software licenses 7,135 4,780 4,454 2,820 1,841
License renewals and services 69,076 53,258 36,443 24,921 18,541
Sales and marketing 72,277 55,484 44,324 30,036 21,325
Product development 33,046 26,839 20,980 12,767 9,196
Purchased research and development 2,000 2,600
General and administrative 19,216 16,443 11,302 9,703 8,407
Asset valuation and restructuring 4,400
Merger and integration 1,000
--------------------------------------------------------------
205,150 158,804 118,503 80,247 61,910
--------------------------------------------------------------
OPERATING INCOME 17,680 14,020 18,638 14,015 4,735
Interest income 1,747 1,480 1,620 851 605
Interest expense (349) (243) (119) (117) (137)
--------------------------------------------------------------
INCOME BEFORE INCOME TAXES 19,078 15,257 20,139 14,749 5,203
Provision for income taxes 7,200 5,800 8,000 6,140 2,860
--------------------------------------------------------------
NET INCOME $ 11,878 $ 9,457 $ 12,139 $ 8,609 $ 2,343
==============================================================
EARNINGS PER SHARE (b)
Primary $ .64 $ .53 $ .70 $ .52 $ .15
Fully diluted $ .64 $ .53 $ .69 $ .52 $ .15
AVERAGE NUMBER OF SHARES OUTSTANDING (b)
Primary 18,455 17,875 17,316 16,584 15,500
Fully diluted 18,698 17,933 17,480 16,600 15,904
CASH GENERATED BY OPERATING ACTIVITIES $ 47,118 $ 34,070 $ 28,936 $19,707 $ 6,626
JUNE 30
--------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------
BALANCE SHEET DATA (a)
Working capital $ 42,236 $ 27,449 $ 37,306 $34,829 $25,839
Total assets 218,639 179,448 146,158 94,715 67,358
Deferred revenue 44,619 36,832 30,599 21,055 12,026
Total long-term debt 7,823 8,336 8,910
Stockholders' equity 113,037 90,003 71,706 53,661 40,683
(a) Includes Pillar Corporation (see Note B to the accompanying financial
statements).
(b) All share and per share data have been retroactively adjusted to reflect
a two-for-one stock split effected in the form of a 100% stock dividend
paid in December 1995.
-13-
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Hyperion Software Corporation 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. A
license renewal fee entitling customers to routine support and
product updates is billed annually. Hyperion licenses its products throughout
the world primarily through a direct sales force. Products also are licensed
through independent distributors and sales agents, including major accounting
firms. The company includes in revenues its net share of revenues generated by
distributors. When an agent has facilitated the sale and Hyperion is the
licensor, the license revenue is reported gross and a commission charge is
reflected.
FISCAL 1997 COMPARED TO FISCAL 1996
REVENUES
1997 CHANGE 1996
- --------------------------------------------------------------------------------
(dollars in thousands)
Software licenses $112,115 24.2% $90,304
Percentage of total revenues 50.3% 52.3%
- --------------------------------------------------------------------------------
License renewals and services $110,715 34.2% $82,520
Percentage of total revenues 49.7% 47.7%
- --------------------------------------------------------------------------------
Software license revenues rose primarily as a result of an increase in the
number of licenses sold (unit volume) versus, for example, price increases.
Sales of budgeting and analysis solutions were particularly strong, as were
sales of consolidation and reporting applications in Europe.
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 fiscal 1997 and
1996 were $81 million and $57.4 million, or 36.4% and 33.2% of total revenues,
respectively. Revenue growth was particularly strong in Europe, most notably in
Germany, the Netherlands and the United Kingdom.
COST OF REVENUES
1997 CHANGE 1996
- --------------------------------------------------------------------------------
(dollars in thousands)
Software licenses $ 7,135 49.3% $ 4,780
Gross profit percentage 93.6% 94.7%
- --------------------------------------------------------------------------------
License renewals and services $69,076 29.7% $53,258
Gross profit percentage 37.6% 35.5%
- --------------------------------------------------------------------------------
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 principally reflects the associated increase in the amortization of
capitalized costs related to new products, product enhancements and the recent
acquisition of distribution rights to the company's corporate budgeting product
in Belgium, France and the United Kingdom. The amortization of capitalized
software costs begins upon the general release of the software to customers.
The increase in the cost of license renewal and service revenues was due
primarily to additional staffing expense for both installation and ongoing
support services.
-14-
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OPERATING EXPENSES
1997 CHANGE 1996
- --------------------------------------------------------------------------------
(dollars in thousands)
Sales and marketing $72,277 30.3% $55,484
Percentage of total revenues 32.4% 32.1%
- --------------------------------------------------------------------------------
Product development $33,046 23.1% $26,839
Percentage of total revenues 14.8% 15.5%
- --------------------------------------------------------------------------------
General and administrative $19,216 16.9% $16,443
Percentage of total revenues 8.6% 9.5%
- --------------------------------------------------------------------------------
The increase in sales and marketing expenses is primarily due to a net increase
in sales-marketing personnel, an increase in commission costs directly
associated with the increase in software license revenues and, to a lesser
extent, greater overall marketing initiatives.
The increase in product development expenses reflects additional personnel and
third-party development costs associated with expanded research and development
activities. In fiscal 1997 and 1996, the company capitalized $4.8 million and
$5.8 million of software development costs, respectively, in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." The
amounts capitalized primarily relate to the company's development of
enterprise-wide financial management and accounting solutions for client/server
environments and represented 12.7% and 17.8% of total product development
expenditures (excluding purchased research and development). Capitalized
software costs are amortized over the estimated economic life of the product,
but generally not more than four years.
In the second quarter of fiscal 1996, the company concluded two strategic
acquisitions involving application technologies and an important European client
base. The acquisitions, which amounted to $3.6 million, were accounted for as
purchase transactions and, accordingly, $2 million was allocated to purchased
research and development and $1.6 million was allocated to identifiable
intangible assets based on their estimated fair values. The purchased research
and development was reflected as a one-time charge in the company's 1996
operating results.
The increase in general and administrative expenses resulted, for the most part,
from increases in personnel and professional services costs incurred to support
the growth of the company's overall operations.
On July 1, 1997, the company joined forces with The Baan Company, a leading
provider of enterprise-wide business management software to companies requiring
best-of-class manufacturing capabilities, engaging Baan to remarket Hyperion
products and establishing a joint venture development effort for accounting
products. The two-year definitive alliance is intended to leverage Baan's
expertise in complex transactional Enterprise Resource Planning solutions and
Hyperion's command of corporate financial planning, reporting and performance
analysis. Baan has agreed to pay Hyperion royalties of at least $8 million for
fiscal 1998 and each has agreed to share equally in the cost of developing next
generation accounting products which may be licensed to end users by either
company. Hyperion incurred nonrecurring charges in its June 1997 quarter of $4.4
million for asset valuation and restructuring costs related to the joint
development agreement.
-15-
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
NONOPERATING INCOME AND EXPENSE
1997 CHANGE 1996
- --------------------------------------------------------------------------------
(dollars in thousands)
Interest income $1,747 18.0% $1,480
- --------------------------------------------------------------------------------
Interest expense $ (349) 43.6% $ (243)
- --------------------------------------------------------------------------------
Interest income increased due to the increase in cash available for investment
which resulted from operations.
PROVISION FOR INCOME TAXES
The company's effective income tax rate remained substantially unchanged at
approximately 38%. For the full year ending June 30, 1998, the company expects
its tax rate to decline to approximately 36%. The anticipated rate reduction is
mainly attributable to the recent tax law change that will yield the company
additional benefits with respect to export sales.
NET INCOME
As a result of the above factors (including the nonrecurring charges), net
income for 1997 increased to $11.9 million, or by 25.6%, from $9.5 million for
1996.
To date, the overall impact of inflation on the company has not been material.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which changes the methodology of calculating earnings per
share. The company will adopt SFAS No. 128 in December 1997. The company does
not expect the adoption of SFAS No. 128 to have a material effect on the
earnings per share information presented.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." In fiscal 1999, the company will
adopt the provisions of these statements, which will not impact the company's
financial position, results of operations or cash flows.
-16-
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUES
1996 CHANGE 1995
- --------------------------------------------------------------------------------
(dollars in thousands)
Software licenses $90,304 15.8% $77,985
Percentage of total revenues 52.3% 56.9%
- --------------------------------------------------------------------------------
License renewals and services $82,520 39.5% $59,156
Percentage of total revenues 47.7% 43.1%
- --------------------------------------------------------------------------------
Software license revenues rose primarily as a result of an increase in the
number of licenses sold (unit volume) versus, for example, price increases.
While the growth was led by demand for the company's enterprise financial
reporting and budgeting products, management believes that a slower than planned
orientation of its sales force to a multiproduct, complete financial solution
approach, together with delays in the commercial release of certain products,
were the reasons for the decline in sales growth as compared to prior years.
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 fiscal 1996 and
1995 were $57.4 million and $38.5 million, or 33.2% and 28.1% of total revenues,
respectively. Revenue growth was particularly strong in Canada, certain
territories of Asia, and in Europe, most notably in the Netherlands.
COST OF REVENUES
1996 CHANGE 1995
- --------------------------------------------------------------------------------
(dollars in thousands)
Software licenses $ 4,780 7.3% $ 4,454
Gross profit percentage 94.7% 94.3%
- --------------------------------------------------------------------------------
License renewals and services $53,258 46.1% $36,443
Gross profit percentage 35.5% 38.4%
- --------------------------------------------------------------------------------
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 principally reflects the associated increase in the amortization of
capitalized costs related to new products and product enhancements. The
amortization of capitalized software costs begins upon the general release of
the software to customers.
The increase in the cost of license renewal and service revenues was due
primarily to additional staffing expense for both installation and ongoing
support services. The professional services staff includes new members dedicated
to the company's recently released (March 1995) set of accounting products.
-17-
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OPERATING EXPENSES
1996 CHANGE 1995
- --------------------------------------------------------------------------------
(dollars in thousands)
Sales and marketing $55,484 25.2% $44,324
Percentage of total revenues 32.1% 32.3%
- --------------------------------------------------------------------------------
Product development $26,839 27.9% $20,980
Percentage of total revenues 15.5% 15.3%
- --------------------------------------------------------------------------------
General and administrative $16,443 45.5% $11,302
Percentage of total revenues 9.5% 8.2%
- -------------------------------------------------------------------------------
The increase in sales and marketing expenses is primarily due to a net increase
in sales-marketing personnel.
The increase in product development expenses reflects additional personnel and
third-party development costs associated with expanded research and development
activities. In fiscal 1996 and 1995, the company capitalized $5.8 million and
$5.2 million 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 primarily relate to the company's development of enterprise-wide
financial management and accounting solutions for client/server environments and
represented 17.8% and 19.9% of total product development expenditures (excluding
purchased research and development). Capitalized software costs are amortized
over the estimated economic life of the product, but generally not more than
four years.
In the second quarter of fiscal 1996, the company concluded two strategic
acquisitions involving application technologies and an important European client
base. Specifically, in December 1995, the company acquired certain assets and
application technologies, and assumed certain obligations of Trust Consult s.a.,
a Brussels-based financial solutions provider. Along with over 130 customers,
Hyperion gained significant European statutory consolidation and reporting
expertise and technology. In November 1995, the company acquired certain rights
from Sinper Corporation to its powerful database engine, TM/1, technology. The
new technology was used in the development of Hyperion OLAP (On-Line Analytical
Processing), a solution for customers' most complex and high volume
multidimensional analysis needs, such as product profitability and sales
analysis. Hyperion OLAP became commercially available in April 1996. The
acquisitions, which amounted to $3.6 million, were accounted for as purchase
transactions and, accordingly, $2 million was allocated to purchased research
and development and $1.6 million was allocated to identifiable intangible assets
based on their estimated fair values. The purchased research and development is
reflected as a one-time charge in the company's operating results.
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 and, to a lesser extent, the effect of currency
exchange rate changes and an increase in the provision for doubtful accounts.
In November 1994, the company completed a merger with Pillar Corporation, which
develops, markets and supports client/server corporate budgeting and planning
solutions. In connection with the acquisition, which was accounted for as a
pooling of interests, the company charged $1 million to operations in fiscal
1995 for nonrecurring merger and integration costs incurred.
-18-
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
NONOPERATING INCOME AND EXPENSE
1996 CHANGE 1995
- --------------------------------------------------------------------------------
(dollars in thousands)
Interest income $1,480 8.6% $1,620
- --------------------------------------------------------------------------------
Interest expense $ (243) 104.2% $ (119)
- --------------------------------------------------------------------------------
The slight decline in interest income, for the most part, was due to the
decrease in cash available for investment which resulted from a higher level of
funds reinvested in the business.
PROVISION FOR INCOME TAXES
The company's effective income tax rate decreased from 39.7% to 38%. The change
in the effective rate primarily relates to the nondeductible merger costs
incurred in fiscal 1995.
NET INCOME
As a result of the above factors (including the nonrecurring charges), net
income for 1996 decreased to $9.5 million, or by 22.1%, from $12.1 million for
1995.
RISK FACTORS AND QUARTERLY FINANCIAL INFORMATION
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 agreements 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 deferral and/or realization of deferred software license revenues according
to contract terms, the timing of new product introductions and product upgrade
releases, the company's hiring plans, the scheduling of sales and marketing
programs, new product development by the company or its competitors and currency
exchange rate movements. A significant portion of the company's quarterly
software licensing agreements is concluded in the last month of the fiscal
quarter, generally with a concentration of such revenues earned in the final ten
business days of that month. 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
corporate financial applications market during the March quarter, as many
potential customers are busy with their year-end closing and financial
reporting. In any case, due to the relatively fixed nature of certain costs,
including personnel and facilities expenses, a decline or shortfall in quarterly
and/or annual revenues typically results in lower profitability or may result in
losses.
-19-
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Except for the historical information contained in this report on Form 10-K, the
matters discussed herein are forward-looking statements that involve risks and
uncertainties. Actual events and the company's future results may vary
significantly based on a number of factors, including those discussed in the
preceding paragraph; whether the accounting products contemplated to be jointly
developed by Baan and Hyperion are developed in a timely fashion and are
accepted by the market; whether the proposed coordination of sales prospects
between the companies works in practice and results in increased revenues for
the company; whether the strategic advantages and synergies contemplated to be
gained by the parties are actually able to be realized; and the impact of
competitive products and pricing. Any forward-looking statements should be
considered in light of these factors as well as other risks as detailed
elsewhere in this Annual Report. Further, readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof.
The following table sets forth certain unaudited operating results for each of
the company's eight most recent fiscal quarters. This information has been
prepared by the company on the same basis as its audited financial statements
appearing elsewhere in this Annual Report and includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
this information when read in conjunction with the company's audited financial
statements and notes thereto. The company's operating results for any one
quarter or series of quarters are not necessarily indicative of results for any
future period.
Quarter Ended
------------------------------------------------------------------------------------------
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1996 1996 1996 1996 1995 1995
------------------------------------------------------------------------------------------
(in thousands, except per share data)
(unaudited)
Total revenues $73,624 $50,523 $52,696 $45,987 $58,610 $36,856 $40,725 $36,633
Operating income 8,963 1,746 3,971 3,000 8,423 383 2,032 3,182
Net income 5,886 1,315 2,636 2,041 5,351 369 1,521 2,216
Earnings per share .31 .07 .14 .11 .30 .02 .08 .12
-20-
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
- --------------------------------------------------------------------------------
To date, the company has financed its business principally through positive cash
flow from operations and sales of its common stock. For fiscal years 1997, 1996,
and 1995, the company generated positive cash flow from operations of $47.1
million, $34.1 million and $28.9 million, respectively.
Cash used by investing activities amounted to $30.2 million for fiscal 1997,
including $16.1 million primarily for purchases of computer equipment and
software, $4.8 million for product development costs, $1.6 million for deposits
and intangible assets, and $7.1 million to acquire the exclusive distribution
and service rights to the company's corporate budgeting product in Belgium,
France and the United Kingdom.
Financing activities in fiscal 1997, including stock options exercised by
employees and payments of indebtedness, generated cash of $8.6 million. In
connection with the stock options exercised by certain of its employees (for a
total of 1,214,811 common shares), the company recognized (as a credit to
additional paid-in capital) an income tax benefit of $2.8 million for the year
ended June 30, 1997.
As of June 30, 1997, the company had cash and cash equivalents of $67.1 million
and working capital of $42.2 million, no long-term debt other than the mortgage
loan (currently at an interest rate of 3.9%) for the Stamford, Connecticut
office and research facility, and its ratio of current assets to current
liabilities was 1.4 to 1. Cash equivalents are comprised primarily of
investment-grade U.S. state and political subdivision obligations with varying
terms of three months or less. The company has long-term credit availability of
$25 million under a revolving credit facility. For further details of the credit
facility, see Note E of the company's financial statements. The company
anticipates capital expenditures of approximately $35 million for its 1998
fiscal year. The company intends to continue to review potential acquisitions
and business alliances that it believes would enhance its growth and
profitability.
From time to time, in the normal course of business, various claims are made
against the company. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position of the company.
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.
In 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets to Be Disposed Of." The
company adopted SFAS No. 121 in fiscal 1997 and its impact on the company's
financial statements was not significant.
The company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The
company generally prices its stock options at fair market value on the date of
grant and, therefore, no compensation expense is recognized for the stock
options granted. In fiscal 1997, the company adopted the disclosure provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation" (see Note G of the
company's financial statements).
-21-
22
ITEM 8. REPORT OF INDEPENDENT AUDITORS FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
-22-
23
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Hyperion Software Corporation
We have audited the accompanying consolidated balance sheet of Hyperion Software
Corporation and subsidiaries as of June 30, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended June 30, 1997. Our audits also included
the financial statement schedule listed in the index at Item 14(a). These
financial statements and schedule are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hyperion Software
Corporation and subsidiaries at June 30, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Stamford, Connecticut
July 17, 1997
-23-
24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Hyperion Software Corporation
Consolidated Balance Sheet
(in thousands, except for share data)
JUNE 30,
1997 1996
-----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 67,059 $ 42,361
Accounts receivable--net of allowances of $5,300 and $4,900 64,831 55,674
Prepaid expenses and other current assets 3,243 3,925
Deferred income taxes 3,811 3,349
-----------------------
TOTAL CURRENT ASSETS 138,944 105,309
Property and equipment--at cost, less accumulated depreciation
and amortization of $31,029 and $21,063 57,853 54,606
Product development costs--at cost, less accumulated
amortization of $6,796 and $7,818 8,526 11,985
Product distribution rights, goodwill and other intangible
assets--at cost, less accumulated amortization of
$7,631 and $5,784 11,103 6,087
Deposits and other assets 2,213 1,461
-----------------------
Total assets $218,639 $179,448
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 22,746 $ 20,728
Accrued employee compensation and benefits 19,882 15,380
Income taxes payable 8,898 4,215
Deferred revenue 44,619 36,832
Notes payable 563 705
-----------------------
TOTAL CURRENT LIABILITIES 96,708 77,860
Mortgage payable 7,823 8,336
Deferred income taxes 1,071 3,249
COMMITMENTS AND CONTINGENCIES - Note H
Stockholders' equity:
Preferred stock--$.01 par value; authorized--1,000,000
shares; none issued
Common stock--$.01 par value; authorized--50,000,000
shares; issued--22,577,437 and 21,362,626 shares 226 214
Additional paid-in capital 85,706 73,440
Retained earnings 41,994 30,116
Currency translation adjustments (1,376) (534)
Treasury stock, at cost--4,344,599 and 4,329,464 shares (13,513) (13,233)
-----------------------
TOTAL STOCKHOLDERS' EQUITY 113,037 90,003
-----------------------
Total liabilities and stockholders' equity $218,639 $179,448
=======================
See accompanying notes.
-24-
25
Hyperion Software Corporation
Consolidated Statement of Income
(in thousands, except per share data)
YEAR ENDED JUNE 30,
1997 1996 1995
-----------------------------------
REVENUES
Software licenses $112,115 $ 90,304 $ 77,985
License renewals and services 110,715 82,520 59,156
-----------------------------------
Total revenues 222,830 172,824 137,141
COSTS AND EXPENSES
Cost of revenues:
Software licenses 7,135 4,780 4,454
License renewals and services 69,076 53,258 36,443
Sales and marketing 72,277 55,484 44,324
Product development 33,046 26,839 20,980
Purchased research and development 2,000
General and administrative 19,216 16,443 11,302
Asset valuation and restructuring 4,400
Merger and integration 1,000
-----------------------------------
205,150 158,804 118,503
-----------------------------------
OPERATING INCOME 17,680 14,020 18,638
Interest income 1,747 1,480 1,620
Interest expense (349) (243) (119)
-----------------------------------
INCOME BEFORE INCOME TAXES 19,078 15,257 20,139
Provision for income taxes 7,200 5,800 8,000
-----------------------------------
NET INCOME $ 11,878 $ 9,457 $ 12,139
===================================
EARNINGS PER SHARE
Primary $ .64 $ .53 $ .70
Fully diluted $ .64 $ .53 $ .69
AVERAGE NUMBER OF SHARES OUTSTANDING
Primary 18,455 17,875 17,316
Fully diluted 18,698 17,933 17,480
See accompanying notes.
-25-
26
Hyperion Software Corporation
Consolidated Statement of Stockholders' Equity
(in thousands, except for share data)
Common Stock
-------------------- Additional Currency
Par Paid-in Retained Translation Treasury
Shares Value Capital Earnings Adjustments Stock
---------------------------------------------------------------------------
Balance at June 30, 1994 19,582,310 $196 $57,398 $ 9,536 $ (436) $(13,033)
Charge reflecting change in
Pillar Corporation's
fiscal year (1,016)
Exercise of stock options 795,756 8 3,669
Income tax benefit from exercise
of stock options 3,195
Currency translation effect 50
Net income 12,139
---------------------------------------------------------------------------
Balance at June 30, 1995 20,378,066 204 64,262 20,659 (386) (13,033)
Exercise of stock options 984,560 10 5,790 (200)
Income tax benefit from exercise
of stock options 3,388
Currency translation effect (148)
Net income 9,457
---------------------------------------------------------------------------
Balance at June 30, 1996 21,362,626 214 73,440 30,116 (534) (13,233)
Exercise of stock options 1,214,811 12 9,506 (280)
Income tax benefit from exercise
of stock options 2,760
Currency translation effect (842)
Net income 11,878
---------------------------------------------------------------------------
BALANCE AT JUNE 30, 1997 22,577,437 $226 $85,706 $41,994 $(1,376) $(13,513)
===========================================================================
See accompanying notes.
-26-
27
Hyperion Software Corporation
Consolidated Statement of Cash Flows
(in thousands)
YEAR ENDED JUNE 30,
1997 1996 1995
----------------------------------------
OPERATING ACTIVITIES
Net income $ 11,878 $ 9,457 $ 12,139
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 20,983 14,032 8,338
Asset valuation and restructuring charges, net of
payments of $258 4,142
Accounts receivable allowance provisions 2,487 4,229 1,667
Deferred income taxes (2,640) (1,206) 210
Charge reflecting change in Pillar Corporation's fiscal year (1,016)
Changes in operating assets and liabilities:
Accounts receivable (11,644) (11,897) (15,843)
Prepaid expenses and other assets 803 235 (2,463)
Accounts payable and accrued expenses 5,879 8,492 11,286
Income taxes payable 7,444 4,495 5,074
Deferred revenue 7,786 6,233 9,544
----------------------------------------
Cash provided by operating activities 47,118 34,070 28,936
INVESTING ACTIVITIES
Office and research facilities (578) (15,492) (14,308)
Leasehold improvements and purchases of furniture,
equipment and software (16,123) (16,726) (12,880)
Product development costs (4,792) (5,798) (5,207)
Deposits and intangible assets (1,564) (636) (1,921)
Business acquisitions (7,104) (3,183)
----------------------------------------
Cash used by investing activities (30,161) (41,835) (34,316)
FINANCING ACTIVITIES
Principal payments on notes payable (655) (610) (309)
Mortgage payable--proceeds 9,500
Exercise of stock options by employees 9,238 5,390 3,720
----------------------------------------
Cash provided by financing activities 8,583 4,780 12,911
Effect of exchange rate changes (842) (148) 50
----------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 24,698 (3,133) 7,581
Cash and cash equivalents at beginning of year 42,361 45,494 37,913
----------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 67,059 $ 42,361 $ 45,494
========================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 2,398 $ 2,511 $ 2,716
Interest ($266 and $243 capitalized in 1996 and 1995) 326 497 311
See accompanying notes.
-27-
28
Hyperion Software Corporation
Notes to Consolidated Financial Statements
BUSINESS
Hyperion Software Corporation (the "company") develops, markets and supports
comprehensive analytic solutions that enable large, multinational companies to
improve financial performance by maximizing the value of information. The
company's internet/intranet-enabled applications support and enhance
enterprise-wide financial processes, including planning, budgeting, forecasting,
accounting, consolidation and performance analysis.
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the company and
its subsidiaries, all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated.
Assets and liabilities denominated in foreign currencies are translated at the
exchange rate on the balance sheet date. The related revenues, costs and
expenses are translated at average rates of exchange prevailing during the
reporting period. The resulting adjustments are charged or credited to
stockholders' equity. Translation adjustments relating to operations abroad that
are generally dependent on funding from the company's U.S. operations are
included in the statement of income.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Revenue Recognition
Software license revenues are recognized upon execution of the license agreement
and delivery of the software. In all cases, however, collection of any related
receivable must be probable and no significant post-contract obligations of the
company shall be remaining.
License renewal (maintenance) fees for routine support and product updates are
recognized ratably over the term of the license agreement.
Current Assets and Liabilities
The company considers highly liquid investment instruments with remaining terms
of three months or less at the time of acquisition to be cash equivalents. Cash
equivalents are comprised primarily of investment-grade U.S. state and political
subdivision obligations.
All current assets and current liabilities, because of their short-term nature,
are stated at cost, which approximates market value. The carrying amount of the
company's borrowings approximates market value, as the obligations provide for
interest at floating rates.
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29
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of." The company adopted SFAS No. 121 in fiscal
1997; the impact was not material.
Product Development Costs
The company begins capitalizing product development costs, principally wages and
contractor fees, only after establishing commercial and technical viability.
Product development costs are stated at the lower of cost or net realizable
value. Annual amortization of these costs represents the greater of the amount
computed using (i) the ratio that current gross revenues for the product(s) bear
to the total current and anticipated future gross revenues for the product(s),
or (ii) the straight-line method over the remaining estimated economic life of
the product(s); generally such deferred costs are amortized over four years.
Amortization commences when the product is available for general release to
customers. Amortization expense totaled $4.8 million for 1997, $3.2 million for
1996 and $2.2 million for 1995.
Depreciation/Amortization
Depreciation and amortization are computed principally using the straight-line
method over the estimated useful lives of the applicable assets.
Income Taxes
The company provides for taxes based on current taxable income and the future
tax consequences of temporary differences between the financial reporting and
income tax carrying values of its assets and liabilities.
Earnings Per Share
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 two-for-one stock split and merger with Pillar
Corporation (see Note B). 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 therefrom 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. All share and per share
data have been retroactively adjusted to reflect a two-for-one stock split
effected in the form of a 100% stock dividend paid in December 1995.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which changes the methodology of calculating earnings per
share. The company will adopt SFAS No. 128 in December 1997. The company does
not expect the adoption of SFAS No. 128 to have a material effect on the
earnings per share information presented.
-29-
30
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components as part of a complete set of
financial statements. Comprehensive income is a measure of all changes in equity
of any enterprise that results from recognized transactions and other economic
events of a period other than transactions with owners in their capacity as
owners. The company will adopt SFAS No. 130 in fiscal 1999.
Equity Based Compensation
The company accounts for stock option grants in accordance with Accounting
Principles Board Opinion ("APBO") No. 25, "Accounting for Stock Issued to
Employees." The company generally prices its stock options at fair market value
on the date of grant and, therefore, no compensation expense is recognized for
the stock options granted.
B. STRATEGIC ALLIANCE AND ACQUISITIONS
On July 1, 1997, the company joined forces with The Baan Company, a leading
provider of enterprise-wide business management software to companies requiring
best-of-class manufacturing capabilities, engaging Baan to remarket Hyperion
products and establishing a joint venture development effort for accounting
products. The two-year definitive alliance is intended to leverage Baan's
expertise in complex transactional Enterprise Resource Planning solutions and
Hyperion's command of corporate financial planning, reporting and performance
analysis. Baan has agreed to pay Hyperion royalties of at least $8 million for
fiscal 1998 and each has agreed to share equally in the cost of developing next
generation accounting products which may be licensed to end users by either
company. Hyperion incurred nonrecurring charges in its June 1997 quarter of $4.4
million ($2.8 million net of tax benefits or $.15 per share) for asset valuation
(write-off of certain capitalized software costs, $3.5 million) and
restructuring (employee and officer severance, and customer and professional
services) costs related to the joint development agreement.
In July 1996, the company acquired the exclusive distribution and service rights
to its corporate budgeting product in Belgium, France and the United Kingdom for
$7.6 million. The acquisition was accounted for as a purchase transaction and,
accordingly, the purchase price was allocated to identifiable intangible assets
based on their estimated fair values. The net operating results of the acquired
business from the date of purchase are included in the accompanying statement of
income. Pro forma statement of income data as if the acquisition had occurred on
July 1, 1994 is not shown, as it would not differ significantly from reported
results.
During the quarter ended December 1995, the company concluded two strategic
acquisitions, described below, involving application technologies and an
important European client base. The acquisitions, which amounted to $3.6
million, were accounted for as purchase transactions and, accordingly, $2
million was allocated to purchased research and development and $1.6 million was
allocated to identifiable intangible assets based on their estimated fair
values. The purchased research and development is reflected as a one-time charge
in the company's operating results. The charge had the effect of reducing net
income for fiscal 1996 by approximately $1.3 million or $.07 per share.
-30-
31
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
B. STRATEGIC ALLIANCE AND ACQUISITIONS (CONTINUED)
In December 1995, the company acquired certain assets and application
technologies, and assumed certain obligations of Trust Consult s.a., a
Brussels-based financial solutions provider. Along with over 130 customers,
Hyperion gained significant European statutory consolidation and reporting
expertise and technology. The net operating results of the acquired business
from the date of purchase are included in the accompanying statement of income.
Pro forma statement of income data as if the acquisition had occurred on July 1,
1994 is not shown, as it would not differ significantly from reported results.
In November 1995, the company acquired certain rights from Sinper Corporation to
its powerful database engine, TM/1, technology. The new technology was used in
the development of Hyperion OLAP (On-Line Analytical Processing), a solution for
customers' most complex and high volume multidimensional analysis needs, such as
product profitability and sales analysis. Hyperion OLAP became commercially
available in April 1996.
On November 29, 1994, the company issued 1,141,592 shares of its common stock
(including 146,970 shares underlying options and warrants assumed by Hyperion
Software) in connection with the merger with Pillar Corporation ("Pillar").
Pillar, based in California, develops, markets and supports client/server
corporate budgeting and planning solutions. The acquisition was accounted for as
a pooling of interests. Accordingly, the financial statements were restated for
all prior periods to include Pillar. Further, all common share and per share
data were restated for prior periods.
For the three-month, pre-merger period ended September 30, 1994, revenues and
net income of the company and Pillar were as follows, in thousands (unaudited):
REVENUES
Hyperion Software $22,470
Pillar 3,858
-------------------------------------------------------------
$26,328
=============================================================
NET INCOME
Hyperion Software $ 1,225
Pillar 1,016
adjustment (a) (370)
-------------------------------------------------------------
$ 1,871
=============================================================
(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 year ended September 30, 1994 were
included in Hyperion's consolidated statement of income for the year ended June
30, 1994. The accompanying statement of income reflects the operations of
Hyperion Software and Pillar for the years ended June 30, 1997, 1996 and 1995.
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 in fiscal 1995.
In connection with the acquisition, the company charged $1 million to operations
for nonrecurring merger and integration costs (principally professional fees)
incurred.
-31-
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Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
C. PROPERTY, EQUIPMENT AND RELATED MORTGAGE LOAN
Property and equipment consists of the following at June 30:
Depreciation/
Amortization
1997 1996 Period
- -----------------------------------------------------------------------------------------------
(in thousands) (years)
Land $ 3,800 $ 3,800
Office and research facilities 26,578 26,000 39
Furniture, equipment and software 56,223 43,866 3 to 7
Leasehold improvements 2,281 2,003 lease term*
- -----------------------------------------------------------------------------
88,882 75,669
Less accumulated depreciation and amortization 31,029 21,063
- -----------------------------------------------------------------------------
$57,853 $54,606
=============================================================================
* Leasehold improvements are amortized over the lesser of the remaining
life of the lease or the useful life of the improvements.
Depreciation and amortization of these assets totaled $13.5 million, $9.4
million and $5.4 million for 1997, 1996 and 1995, respectively.
On January 20, 1995, the company completed the purchase of an office and
research facility in Stamford, Connecticut 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
requirements, if any, would result in additional interest charges and/or a
penalty payment.
D. PRODUCT DISTRIBUTION RIGHTS, GOODWILL AND OTHER INTANGIBLE ASSETS
Components of intangible assets, which relate primarily to business
acquisitions, are as follows at June 30:
Amortization
1997 1996 Period
- ----------------------------------------------------------------------------------------------
(in thousands) (years)
Product distribution and service rights $ 9,123 $ 1,570 3 to 7
Goodwill 3,685 3,648 4 to 20
Software/technology 2,039 2,489 2 to 6
Customer base 2,219 2,219 3 to 5
Copyrights, trademarks and other 1,618 1,416 4 to 6
Noncompete agreements 50 529 3
- ----------------------------------------------------------------------------
18,734 11,871
Less accumulated amortization 7,631 5,784
- ----------------------------------------------------------------------------
$11,103 $ 6,087
============================================================================
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Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
D. PRODUCT DISTRIBUTION RIGHTS, GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
The carrying value of intangible assets will be reviewed by management if the
facts and circumstances suggest that the value(s) may be impaired. If this
review indicates that the carrying amount(s) will not be recoverable, as
determined based on the undiscounted cash flows attributable to such asset(s)
over the remaining amortization period, management will reduce the carrying
amount by the estimated shortfall of cash flows.
E. AVAILABLE CREDIT FACILITY
The company may borrow up to $25 million under an amended and restated credit
facility (the "Facility") with The Bank of New York. Key provisions of the
Facility are as follows: (i) the maturity date is June 30, 2000, (ii) the
interest rate is the bank's base rate plus .25% or, at the company's option,
LIBOR plus 1.5%, (iii) a commitment fee is charged based on any unused credit,
at the rate of .25% per annum, and (iv) borrowings under the Facility are
limited to the sum of (a) 85% of eligible accounts receivable, as defined, from
debtors located in the United States, plus (b) 75% of eligible accounts
receivable, as defined, from debtors located outside of the United States.
Other significant terms of the Facility restrict the company regarding the
payment of dividends, capital expenditures and acquisitions, and additional
indebtedness, including other fiscal commitments, and require the company to
maintain minimum net worth and working capital ratios and to meet certain
profitability criteria, as defined. Except for its office and research
facilities (see Note C), substantially all of the company's assets have been
pledged as security under terms of the Facility.
-33-
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Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
F. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their tax bases. Significant components of deferred tax assets and
liabilities at June 30 are as follows:
1997 1996
- -------------------------------------------------------------------------------
(in thousands)
Deferred income tax assets:
Net operating loss carryforwards $1,588 $ 4,054
Deferred revenue 1,048 1,510
Accounts receivable 2,240 1,893
Other intangible assets 1,213 1,418
Tax credit carryforwards 1,157 876
Property and equipment 684
Accrued expenses 523 310
Other 53 167
- -------------------------------------------------------------------------------
8,506 10,228
Less valuation allowance 2,356 4,944
- -------------------------------------------------------------------------------
6,150 5,284
- -------------------------------------------------------------------------------
Deferred income tax liabilities:
Product development costs 3,410 4,914
Property and equipment 270
- -------------------------------------------------------------------------------
3,410 5,184
- -------------------------------------------------------------------------------
Net deferred income tax asset $2,740 $ 100
===============================================================================
The provision for income taxes consists of the following charges (credits):
1997 1996 1995
- -------------------------------------------------------------------------------
(in thousands)
Current:
U.S. $ 6,282 $ 4,214 $5,211
State 1,376 1,419 1,709
Other countries 2,182 1,373 870
- -------------------------------------------------------------------------------
9,840 7,006 7,790
- -------------------------------------------------------------------------------
Deferred:
U.S. (1,880) (800) 252
State (760) (379)
Other countries (27) (42)
- -------------------------------------------------------------------------------
(2,640) (1,206) 210
- -------------------------------------------------------------------------------
$ 7,200 $ 5,800 $8,000
===============================================================================
-34-
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Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
F. INCOME TAXES (CONTINUED)
The effective income tax rate varied from the statutory U.S. federal tax rate as
follows:
1997 1996 1995
- ------------------------------------------------------------------------------------
Statutory U.S. tax rate 35.0% 35.0% 35.0%
State income taxes, net of U.S. tax benefit 2.1 4.5 5.6
Tax exempt interest (2.1) (1.9) (1.9)
Non-U.S. operations, including export sales 5.4 (0.6) (2.0)
Change in valuation allowance (3.9) (0.9) 1.6
Other--net 1.2 1.9 1.4
- ------------------------------------------------------------------------------------
Effective income tax rate 37.7% 38.0% 39.7%
====================================================================================
The company has U.S. and non-U.S. net operating loss (NOL) carryforwards of $4.1
million and U.S. federal and state tax credit carryforwards of $1.5 million,
which expire as follows:
NOL Tax Credit
Year Carryforwards Carryforwards
- ------------------------------------------------------------------------------
(in thousands)
2001 $ 232
2003 55
2004 $1,662 138
2005 and thereafter 326
No expiration date 2,402 750
- ------------------------------------------------------------------------------
$4,064 $1,501
==============================================================================
The company's utilization of NOL and tax credit carryforwards, acquired through
the merger with Pillar Corporation (see Note B), is subject to annual
limitations as prescribed by Sections 382 and 383 of the Internal Revenue Code
and similar state authority.
G. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS
The company has elected to follow APBO No. 25 and related interpretations in
accounting for its stock option and employee stock purchase plans because, as
discussed below, the alternative fair value accounting provided for under SFAS
No. 123 requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APBO No. 25, because generally the
exercise price of the company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
The company grants options to employees pursuant to its 1991 Stock Plan ("1991
Plan"). Under the 1991 Plan, the company may grant options to purchase in the
aggregate up to 4 million shares of common stock. At June 30, 1997, there were,
in the aggregate, outstanding options to purchase 2.4 million shares of common
stock pursuant to the 1991 Plan. Options granted under the 1991 Plan have
ten-year terms and are generally exercisable at 25% per year commencing one year
from the date of grant.
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36
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
G. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
The company grants options to its non-employee directors pursuant to its 1991
Non-Employee Director Stock Option Plan ("Director Plan"). The Director Plan
provides that options to acquire an aggregate of up to .2 million shares of
common stock may be granted to non-employee directors of the company. At June
30, 1997, there were, in the aggregate, outstanding options to purchase .1
million shares of common stock pursuant to the Director Plan. Options under the
Director Plan generally are exercisable in full on the date of grant, except
under certain circumstances under which they vest at 33% per year. Options
granted under the Director Plan have ten-year terms.
The company has granted options under certain other stock option plans and
certain employee compensation arrangements pursuant to which it no longer makes
any new option grants, but pursuant to which there continues to exist
outstanding options to purchase shares of common stock. These options generally
expire ten years after their grant date. Under these plans and employee
compensation arrangements, there are options outstanding to purchase .2 million
shares of common stock as of June 30, 1997. These stock option plans include
plans assumed by the company in connection with its acquisition of Pillar
Corporation (see Note B).
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, which also requires that the information be determined as if the
company had accounted for its employee stock options granted subsequent to June
30, 1995 under the fair value method of that statement. The fair value of these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for both fiscal 1997 and
1996: risk-free interest rate of 6.4%; volatility factors of the expected market
price of the company's common stock of .25; and a weighted-average average life
for the options of 5.5 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The company's pro
forma net income would have been approximately $9.4 million and $7.9 million and
pro forma primary and fully diluted earnings per share would have been $.50 and
$.44 for the fiscal years ended June 30, 1997 and 1996, respectively.
In accordance with provisions of SFAS No. 123, the pro forma disclosures include
only the effect of stock options granted in fiscal 1996 and fiscal 1997. These
pro forma effects may not be representative of the effects of SFAS No. 123 on
future years because of the fact that options vest over several years and new
grants are generally made each year.
-36-
37
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
G. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
The following table presents a summary of the company's stock option activity
and related information for the years ended June 30:
1997 1996 1995
---------------------- ---------------------- -----------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICE Shares Price Shares Price
--------- -------- --------- -------- --------- --------
Outstanding at beginning of year 3,059,751 $ 9.53 3,053,688 $ 6.36 3,269,132 $ 4.77
Granted:
Plans 984,999 13.63 1,566,279 18.55 456,332 12.66
Exercised:
Plans (807,446) 6.97 (497,258) 4.53 (283,034) 3.50
Compensation arrangements (191,500) 2.75 (297,500) 2.50 (359,800) 2.04
Forfeited/exchanged:
Plans (391,845) 14.04 (765,458) 21.33 (28,942) 6.81
--------- ------ --------- ------ --------- ------
Outstanding at year-end 2,653,959 $11.66 3,059,751 $ 9.53 3,053,688 $ 6.36
========= ====== ========= ====== ========= ======
Options exercisable at year-end 1,237,921 $ 9.24 1,663,658 $ 6.21 1,983,440 $ 4.21
========= ====== ========= ====== ========= ======
Weighted average fair value of
options granted during the year $ 5.06 $ 6.53
====== ======
The following table summarizes information about stock options outstanding at
June 30, 1997:
Options Outstanding Options Exercisable
-------------------------------------------------- -----------------------------
Weighted Average Weighted Weighted
Range of Number Remaining Years of Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ---------------- -------------------------------------------------- -----------------------------
$ .38 - 5.00 284,804 3.6 $ 2.99 284,214 $ 2.99
5.01 - 10.00 587,459 5.6 8.56 545,459 8.52
10.01 - 15.00 1,458,080 8.6 12.69 293,370 12.34
15.01 - 20.00 196,716 9.0 18.48 62,216 18.23
20.01 - 24.88 126,900 8.7 23.03 52,662 22.48
- ---------------------------------------------------------------------------------------------------------
$ .38 - 24.88 2,653,959 7.1 $11.66 1,237,921 $ 9.24
=========================================================================================================
Under the 1991 Employee Stock Purchase Plan ("Purchase Plan"), shares of the
company's common stock may be purchased at six-month intervals at 85% of the
lower of the fair market value on the first or the last business day of each
six-month period. Employees may purchase shares having a value not exceeding 10%
of their gross compensation, up to 1,000 shares, during an offering period. Two
million shares were originally reserved for under the Purchase Plan, which term
lasts for ten years.
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38
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
G. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
The following summarizes shares of common stock reserved for issuance as of June
30, 1997:
Stock options granted and outstanding 2,653,959
Stock options not yet granted 749,871
---------
3,403,830 (3.1 million at
========= September 15, 1997)
In addition, 1,158,916 shares are reserved for sale under the Purchase Plan.
The company maintains an employee savings plan that qualifies as a cash or
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating U.S. employees may defer up to 15% of their
pre-tax compensation, but not more than $9,500 per calendar year. The company
contributes to the plan, annually, up to a maximum of $1,000 per participant.
Similar savings plans are maintained with respect to certain non-U.S. employees.
In fiscal 1997, 1996 and 1995, the company contributed $1.1 million, $1 million
and $.7 million, respectively, to the savings plans.
H. COMMITMENTS AND CONTINGENCIES
The company leases office facilities and certain equipment under various
operating lease agreements. The leases expire at various times through the year
2003.
Future minimum lease payments under all operating leases with noncancellable
terms in excess of one year amount to $15.8 million as follows (in millions):
$5.4 in 1998, $4.2 in 1999, $3.1 in 2000, $1.9 in 2001, $1.1 in 2002 and $.1
thereafter. Certain of the office leases provide as well for contingent payments
based on building operating expenses. Rental expense for the years ended June
30, 1997, 1996 and 1995 under all lease agreements was $5.6 million, $5.9
million and $5 million, respectively.
From time to time, in the normal course of business, various claims are made
against the company. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position of the company.
I. STOCKHOLDER RIGHTS PLAN
In November 1995, the company adopted a stockholder rights plan (the "Rights
Plan") in which preferred stock rights were distributed as a rights dividend at
the rate of one right for each share of common stock held as of the close of
business on December 1, 1995. The Rights Plan is designed to deter coercive or
unfair takeover tactics and to prevent an acquirer from gaining control of the
company without offering a fair price to all of the company's stockholders. The
plan is intended to protect the interests of stockholders in the event the
company is confronted in the future with coercive or unfair takeover tactics.
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39
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
I. STOCKHOLDER RIGHTS PLAN (CONTINUED)
Each right will entitle holders of company common stock to buy one share of
Series A Junior Participating Preferred Stock of the company at an exercise
price of $150. The rights will be exercisable only if a person or group acquires
more than 15% of the common stock, or announces a tender or exchange offer which
would result in its ownership of 15% or more of the common stock, or a person
owning 10% or more of the common stock is determined by the board to be an
Adverse Person, as defined in the Rights Plan.
If any person or group becomes the beneficial owner of 20% or more of the common
stock except pursuant to a tender offer for all shares at a price that a
majority of the independent directors determines to be fair; a more-than-15%
stockholder engages in a merger with the company in which the company survives
and its common stock remains outstanding and unchanged; certain other
self-dealing events involving the company and a more-than-15% stockholder occur;
or, under certain circumstances, the board determines a 10% or more stockholder
to be an Adverse Person (collectively "Flip-In Events"), each right not owned by
such person or related parties will entitle its holder to purchase, at the then
current exercise price of the right, common stock of the company having a value
of twice the right's exercise price (or, in certain circumstances, a combination
of cash, property, common stock or other securities or a reduction in the
exercise price having an aggregate value equal to the value of the common stock
otherwise purchasable). After the occurrence of a Flip-In Event and before any
person or affiliated group becomes the owner of 50% or more of the then
outstanding common stock, the company may also exchange one share of common
stock for each right outstanding. In addition, if the company is involved in a
merger or other business combination transaction with another person in which
its common stock is changed or converted, or sells or transfers more than 50% of
its assets or earning power to another person, each right that has not
previously been exercised will entitle its holder to purchase, at the then
current exercise price of the right, shares of common stock of such other person
having a value of twice the right's exercise price.
The company can, in certain circumstances, redeem the rights at $.01 per right.
The rights will expire on November 17, 2005, unless earlier redeemed or
exchanged.
-39-
40
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
J. FINANCIAL DATA BY GEOGRAPHIC AREA
Other
U.S. U.K. International
Operations Operations Operations Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------
(in thousands)
1997
Revenues:
Customers $182,703 $21,233 $18,894 $222,830
Intercompany 11,504 23,958 $(35,462)
- ----------------------------------------------------------------------------------------------------------
Total 194,207 21,233 42,852 $(35,462) 222,830
==========================================================================================================
Operating income 13,499 2,931 1,250 17,680
==========================================================================================================
Identifiable assets $180,455 $14,713 $23,471 $218,639
==========================================================================================================
1996
Revenues:
Customers $140,888 $13,623 $18,313 $172,824
Intercompany 6,092 7,428 $(13,520)
- ----------------------------------------------------------------------------------------------------------
Total 146,980 13,623 25,741 $(13,520) 172,824
==========================================================================================================
Operating income 12,579 921 520 14,020
==========================================================================================================
Identifiable assets $150,977 $10,093 $18,378 $179,448
==========================================================================================================
1995
Revenues:
Customers $115,284 $13,290 $ 8,567 $137,141
Intercompany 6,212 3,935 $(10,147)
- ----------------------------------------------------------------------------------------------------------
Total 121,496 13,290 12,502 $(10,147) 137,141
==========================================================================================================
Operating income (loss) 23,120 928 (5,410) 18,638
==========================================================================================================
Identifiable assets $128,033 $ 9,781 $ 8,344 $146,158
==========================================================================================================
"Other International Operations" relate primarily to subsidiaries in Austria,
Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Singapore and
Spain. Operating income (loss) from operations outside the United States
approximates income (loss) before income taxes of such operations. Intercompany
revenues between geographic areas are accounted for at prices representative of
unaffiliated party transactions of a similar nature.
Revenues from markets outside the United States were as
follows (dollars in thousands):
1997 1996 1995
- --------------------------------------------------------------------------------
U.K. operations $21,233 $13,623 $13,290
Other international operations 18,894 18,313 8,567
Export 40,888 25,439 16,614
- --------------------------------------------------------------------------------
$81,015 $57,375 $38,471
================================================================================
Percentage of total revenues 36% 33% 28%
================================================================================
The majority of "Export" revenues, some of which are
generated through independent distributors and agents,
results from product licenses and services sold to
customers throughout Europe.
The above disclosures are made pursuant to SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." In fiscal 1999, the company will adopt the
provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which supersede the provisions of SFAS No. 14.
-40-
41
Hyperion Software Corporation
Notes to Consolidated Financial Statements (continued)
K. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations
for the two years ended June 30, 1997 (in thousands, except per share data):
- ---------------------------------------------------------------------------
FISCAL 1997 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
- ---------------------------------------------------------------------------
Total revenues $45,987 $52,696 $50,523 $73,624
Gross profit 29,772 34,709 31,306 50,832
Net income 2,041 2,636 1,315 5,886
Earnings per share .11 .14 .07 .31
- ---------------------------------------------------------------------------
Fiscal 1996 Sept. 30 Dec. 31 March 31 June 30
- ---------------------------------------------------------------------------
Total revenues $36,633 $40,725 $36,856 $58,610
Gross profit 24,199 26,845 22,473 41,269
Net income 2,216 1,521 369 5,351
Earnings per share .12 .08 .02 .30
-41-
42
PART II (CONTINUED)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the sections entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance," which are incorporated herein by
reference to the company's Proxy Statement for its 1997 Annual Meeting of
Stockholders. See also the section entitled "Employees" appearing in Part I
hereof.
ITEM 11. EXECUTIVE COMPENSATION
See the section entitled "Compensation Information Concerning Directors
and Officers," which is incorporated herein by reference to the company's Proxy
Statement for its 1997 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the section entitled "Principal Holders of Voting Securities," which
is incorporated herein by reference to the company's Proxy Statement for its
1997 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the section entitled "Certain Transactions," which is incorporated
herein by reference to the company's Proxy Statement for its 1997 Annual Meeting
of Stockholders.
-42-
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) The consolidated financial statements of Hyperion Software
Corporation are included in Item 8:
Consolidated Balance Sheet as of June 30, 1997 and 1996
Consolidated Statement of Income for the years ended June 30,
1997, 1996 and 1995
Consolidated Statement of Stockholders' Equity for the years ended
June 30, 1997, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended June 30,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial statement schedule, which is included at the end of this
report:
Schedule VIII - Valuation and Qualifying Accounts
All other schedules have been omitted since they are not required,
not applicable or the information has been included in the
consolidated financial statements or the notes thereto.
(3) Exhibits:
Exhibit No. Description
----------- -----------
3.1(b) - Restated Certificate of Incorporation of the
company
3.2(b) - By-laws of the company, as amended and restated
10.1(b) - 1985 Incentive Stock Option Plan
10.2(b) - 1989 Stock Option Plan
10.3(b) - 1991 Stock Plan
10.4(b) - 1991 Employee Stock Purchase Plan
10.5(b) - 1991 Non-Employee Director Stock Option Plan
10.6(b) - Sub-Lease Agreement with Amstar Corporation for
the lease of premises located at 777 Long Ridge
Road, Stamford, CT
10.7(b) - Sub-Lease Agreement with Citicorp North America,
Inc. for the lease of premises located at 777
Long Ridge Road, Stamford, CT
10.8(b) - Sub-Lease Agreement with National Reinsurance
Corporation for the lease of premises located
at 777 Long Ridge Road, Stamford, CT
10.9(c) - Amended and Restated Credit Agreement with The
Bank of New York and the signatory banks
thereto, dated as of May 1, 1992 (including
forms of guaranty and security agreement, and
pledge agreement)
10.10(b) - Registration Rights Agreement among the company
and certain holders of Common Stock of the
company, dated as of August 9, 1991
-43-
44
Exhibit No. Description
----------- -----------
10.11(f) - Employment Agreement with James A. Perakis,
dated as of August 1, 1993
10.12(f) - Employment Agreement with David M. Sample,
dated as of July 1, 1994
10.13(f) - Employment Agreement with Lucy Rae Ricciardi,
dated as of July 1, 1994
10.14(f) - Employment Agreement with Craig M. Schiff,
dated as of July 1, 1994
10.15(f) - Employment Agreement with John N. Adinolfi,
dated as of July 1, 1994
10.16(f) - Employment Agreement with Gordon O. Rapkin,
dated as of July 1, 1994
10.17(b) - Agreement with Marco Arese Lucini, dated as of
October 1, 1990
10.18(b) - Stock Option Agreement with Harry S. Gruner,
dated as of December 22, 1989
10.19(b) - Employment Agreement with Thomas Bell, dated as
of July 1, 1994
10.20(b) - Form of Software License Agreement
10.21(b) - Consulting Agreement with Natcom Consulting
Services Ltd., dated as of January 1, 1988
10.22(b) - Consulting Agreement with Natcom Consulting
Services Ltd., dated as of January 1, 1991, and
amendments thereto
10.23(b) - Software Development License Agreement with
Teknedata S.R.L.
10.24(b) - Lease with 1033 Washington Blvd. Associates,
dated as of December 23, 1985 and amended
thereto
10.25(h) - Purchase and Sale Agreement with Combustion
Engineering, Inc., dated January 20, 1995,
regarding the purchase of an office facility
10.26(h) - Loan Agreement with the Connecticut Development
Authority, dated January 20, 1995, regarding the
financing of an office facility (including
related Promissory Note and Mortgage Deed)
10.27(b) - License Agreement with KPMG Peat Marwick
Hungerfords Management Consultants dated as of
June 8, 1989
10.28(b) - Trademark and Tradename License Agreement with
KPMG of Hong Kong
10.29(b) - License Agreement with IMRS Nordic dated as of
January 1, 1989
10.30(b) - License Agreement with Prologic Decision Support
(PTY) Ltd. dated as of March 28, 1991
10.31(b) - License Agreement with Arthur Andersen Japan
dated as of December 17, 1990
10.32(a) - Software Development and License Agreement with
Channel Computing, Inc., dated February 27, 1992
10.33(b) - License Agreement with Arthur Andersen AG dated
as of November 2, 1989
10.34 [Reserved]
10.35 [Reserved]
10.36(a) - Distributor Agreement with Arthur Andersen
Auditors, S.A. dated March 1, 1992
10.37(a) - Distributor Agreement with Austrian Industries
Informatics Ges.m.b.H dated July 1, 1992
10.38(c) - Amendment to the Termination of the License
Agreement with Sema Group Systems Limited,
Government and Commerce Division, dated
March 31, 1992
10.39(c) - Exclusive Sales Agency Agreement with Sema Group
Systems Limited, Government and Commerce
Division, dated April 1, 1992
10.40(c) - Business Purchase and Sale Agreement with Sema
Group Systems Limited, Government and Commerce
Division, dated March 31, 1992, effective
July 1, 1992
-44-
45
Exhibit No. Description
----------- -----------
10.41(d) - Asset Purchase and Sale Agreement between
Columbia Software, Inc. and IMRS Inc., dated
January 21, 1993
10.42(d) - Asset Purchase and Sale Agreement between MAI
Systems Corporation and IMRS Inc., dated
February 12, 1993
10.43(e) - Letter Agreement with Arthur Andersen AG, dated
as of May 19, 1993, regarding distribution of
company products in Switzerland and
Liechtenstein
10.44(i) - Waiver and Amendment No. 2 to Amended and
Restated Credit Agreement with The Bank of New
York and signatory banks thereto, dated as of
June 30, 1995
10.45(e) - Employment Agreement with Terence W. Rogers,
dated as of July 16, 1993
10.46(f) - Distributor Agreement with Consultores de
Integracion de Sistemas S.A. de C.V.
10.47(f) - Distributor Agreement with Delteq Systems
Pte Ltd.
10.48(g) - Agreement and Plan of Reorganization dated as of
November 7, 1994 by and among IMRS Inc., IP
Merger, Inc., Pillar Corporation and American
Stock Transfer & Trust Company, as escrow Agent
10.49(g) - Agreement and Plan of Merger dated as of
November 29, 1994 among IMRS Inc., IP Merger,
Inc. and Pillar Corporation
10.50(j) - Employment Agreement with Peter F. DiGiammarino,
dated as of May 29, 1996
10.51(k) - Amendment No. 1 to Employment Agreement and
Senior Advisory Arrangement between the company
and Lucy R. Ricciardi, dated as of December 3, 1996
10.52 - Employment Agreement with Anthony A. Colangelo,
dated as of July 1, 1996 (filed herewith)
10.53 - Employment Agreement with William I. Kerr, dated
as of July 1, 1996 (filed herewith)
10.54 - Employment Agreement with Mark J. Bilger, dated
as of May 27, 1997 (filed herewith)
11.1 - Statement Re: Computation of Earnings Per Share
(filed herewith)
22.1 - Subsidiaries of the company (filed herewith)
23.1 - Consent of Ernst & Young LLP, independent
auditors (filed herewith)
27 - Financial Data Schedule
- -----------------
(a) Incorporated by reference to the exhibits to the
registrant's Registration Statement on Form S-1 File No.
33-50694
(b) Incorporated by reference to the exhibits to the
registrant's Registration Statement on Form S-1 File No.
33-42855
(c) Incorporated by reference to the exhibits to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1992
(d) Incorporated by reference to the exhibits to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1992
(e) Incorporated by reference to the exhibits to the
registrant's Annual Report on Form 10-K for the year ended
June 30, 1993
(f) Incorporated by reference to the exhibits to the
registrant's Annual Report on Form 10-K for the year ended
June 30, 1994
(g) Incorporated by reference to the exhibits to the
registrant's Current Report on Form 8-K, dated November 29,
1994, which was filed on December 14, 1994
-45-
46
(h) Incorporated by reference to the exhibits to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1994
(i) Incorporated by reference to the exhibits to the
registrant's Annual Report on Form 10-K for the year ended
June 30, 1995
(j) Incorporated by reference to the exhibits to the
registrant's Annual Report on Form 10-K for the year ended
June 30, 1996
(k) Incorporated by reference to the exhibits to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1996
(b) Reports on Form 8-K:
No reports on Form 8-K were filed or were required to be filed by the
registrant during the fourth quarter of the fiscal year ended June 30,
1997.
-46-
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 22, 1997 Hyperion Software Corporation
(Registrant)
By: /s/ James A. Perakis
---------------------------------
James A. Perakis
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ James A. Perakis Chief Executive Officer September 22, 1997
- -------------------------- and Chairman
James A. Perakis
/s/ Gary G. Greenfield Director September 24, 1997
- --------------------------
Gary G. Greenfield
/s/ Harry S. Gruner Director September 22, 1997
- --------------------------
Harry S. Gruner
/s/ Marco Arese Lucini Director September 23, 1997
- --------------------------
Marco Arese Lucini
/s/ Aldo Papone Director September 23, 1997
- --------------------------
Aldo Papone
/s/ Robert W. Thomson Director September 23, 1997
- --------------------------
Robert W. Thomson
/s/ Lucy Rae Ricciardi Senior Vice President September 22, 1997
- -------------------------- and Chief Financial Officer
Lucy Rae Ricciardi
/s/ Michael A. Manto Vice President September 22, 1997
- -------------------------- and Corporate Controller
Michael A. Manto
-47-
48
ITEM 14(a)(2) AND ITEM 14(d). FINANCIAL STATEMENT SCHEDULE
HYPERION SOFTWARE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
=====================================================================================================================
Additions
--------------------------
Charged
Balance at Charged to to Other Balance
Beginning Costs and Accounts Deductions- at End
Description of Period Expenses - Describe(a) Describe of Period
----------- --------------------------------------------------------------------
For the year ended June 30, 1995
Allowance for doubtful
accounts, returns
and discounts $1,640 320 1,347 807(b) $2,500
Valuation allowance
for deferred tax
assets 5,782 567 364(c) 5,985
For the year ended June 30, 1996
Allowance for doubtful
accounts, returns
and discounts $2,500 1,159 3,070 1,829(b) $4,900
Valuation allowance
for deferred tax
assets 5,985 486 1,527(c) 4,944
For the year ended June 30, 1997
Allowance for doubtful
accounts, returns
and discounts $4,900 368 2,119 2,087(b) $5,300
Valuation allowance
for deferred tax
assets 4,944 39 2,627(c) 2,356
(a) Charged to revenues
(b) Write-offs, returns and discounts, net of recoveries
(c) Recognition and adjustments