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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Earliest Event Reported: August 24, 1998
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COMMISSION FILE NUMBER 0-26934
HYPERION SOLUTIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0277772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1344 CROSSMAN AVENUE, SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (408) 744-9500
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Hyperion Solutions Corporation
Form 8-K
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Selected Consolidated Financial Data...................................................................2
Management's Discussion and Analysis of Financial Condition and Results of Operations..................3
Item 5. Other Events..................................................................................15
Item 7. Supplemental Financial Statements and Exhibits
(a) Supplemental Financial Statements
Report of Independent Accountants........................................................17
Report of Independent Auditors...........................................................18
Consolidated Balance Sheet--June 30, 1998 and 1997.......................................19
Consolidated Statement of Income--three years ended June 30, 1998........................20
Consolidated Statement of Stockholders' Equity--three years ended June 30, 1998..........21
Consolidated Statement of Cash Flows--three years ended June 30, 1998....................22
Notes to Consolidated Financial Statements...............................................23
(b) Supplemental Financial Statement Schedule II--Valuation and Qualifying Accounts,
included at the end of this report
All other schedules have been omitted since they are not required, not applicable,
or the information has been included in the accompanying financial statements or
the notes thereto.
(c) Exhibits, included at the end of this report
Exhibit No. Description
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3.2 Restated Certificate of Incorporation
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
23.2 Consent of Ernst & Young LLP, independent auditors
27 Financial Data Schedule
99.1 Text of Press Release dated August 24, 1998
Item 8. Change in Fiscal Year.........................................................................42
Signatures............................................................................................43
</TABLE>
For further information, refer to the Company's registration statement,
amendment no. 2 to Form S-4 declared effective July 13, 1998.
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SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
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1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
REVENUES
Software licenses $214,297 $151,202 $111,842 $ 88,253 $55,540
Maintenance and services 162,796 119,011 86,116 60,408 42,990
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Total revenues 377,093 270,213 197,958 148,661 98,530
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COSTS AND EXPENSES
Cost of revenues:
Software licenses 10,335 7,866 5,486 4,707 2,982
Maintenance and services 93,829 72,929 54,167 36,863 25,094
Sales and marketing 133,124 96,009 69,544 51,405 33,867
Research and development 48,957 40,000 30,524 22,979 14,026
Acquired in-process technology 3,000 2,000
General and administrative 35,557 23,807 19,091 13,542 10,674
Asset valuation and restructuring 4,400
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324,802 245,011 180,812 129,496 86,643
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OPERATING INCOME 52,291 25,202 17,146 19,165 11,887
Interest income 5,031 3,430 2,252 1,659 897
Interest expense (641) (591) (547) (287) (215)
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INCOME BEFORE INCOME TAXES 56,681 28,041 18,851 20,537 12,569
Provision for income taxes 21,924 10,337 6,516 8,024 6,140
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NET INCOME $ 34,757 $ 17,704 $ 12,335 $ 12,513 $ 6,429
==========================================================
EARNINGS PER SHARE
Basic $ 1.19 $ .64 $ .57 $ .73 $ .39
Diluted $ 1.13 $ .61 $ .45 $ .49 $ .27
AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 29,121 27,537 21,728 17,041 16,445
Diluted 30,770 29,261 27,544 25,352 23,646
CASH GENERATED BY OPERATING ACTIVITIES $ 87,571 $ 49,703 $ 42,946 $ 30,032 $17,863
<CAPTION>
JUNE 30,
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1998 1997 1996 1995 1994
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BALANCE SHEET DATA
Cash and short-term investments $257,347 $ 95,910 $ 79,024 $ 48,312 $40,187
Working capital 218,033 72,480 59,518 38,818 36,319
Total assets 476,665 278,228 225,331 152,652 99,004
Deferred revenue 63,724 50,573 40,613 31,845 21,728
Total long-term debt 107,314 8,102 9,429 9,743 406
Stockholders' equity 213,225 155,609 124,309 74,011 55,581
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
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The merger of Arbor Software Corporation (former name of the registrant) and
Hyperion Software Corporation was completed on August 24, 1998. Concurrently,
Arbor, the continuing entity, was renamed Hyperion Solutions Corporation (the
"Company" or "Hyperion"). The Company's financial statements have been restated
for all periods presented to reflect the business combination, which was
accounted for as a pooling of interests. The Company estimates it will incur
charges to operations related to the merger of approximately $20 million,
principally in the quarter ending September 30, 1998. These charges include
direct transaction costs primarily for financial advisory services and legal
fees, and costs associated with combining the operations of the two companies.
For further details of the merger, see Note B of the accompanying financial
statements.
Hyperion develops, markets and supports comprehensive analytic application
software for the workgroup, division, or extended enterprise. The Company's
offerings include packaged analytic applications that are quickly configured and
deployed, an industry leading OLAP (on-line analytical processing) server used
by IT and end-user departments to build fully customized analytic applications,
and a range of end-user reporting, analysis, and presentation tools. Packaged
analytic applications from Hyperion include the ability to draw data from
multiple sources across the enterprise for tasks such as reporting, ad hoc
analysis, consolidation, planning, and budgeting. The Company's solutions are
used by large organizations worldwide.
Hyperion 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 maintenance fee
entitling customers to routine support and product updates is billed annually.
With operations in twenty-six countries, Hyperion licenses its products
throughout the world primarily through a direct sales force. Products also are
licensed through independent distributors and sales agents, including other
technology and application software companies, and major accounting firms
("channel partners"). 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.
RESULTS OF OPERATIONS
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FISCAL 1998 COMPARED TO FISCAL 1997
REVENUES
1998 CHANGE 1997
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(dollars in thousands)
Software licenses $214,297 41.7% $151,202
Percentage of total revenues 56.8% 56.0%
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Maintenance and services $162,796 36.8% $119,011
Percentage of total revenues 43.2% 44.0%
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Software license revenues rose primarily as a result of an increase in the
number of licenses sold (unit volume) versus, for example, price increases.
Demand for the Company's OLAP server and tools, and packaged analytic
application products was strong.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The increase in service and annual maintenance revenue is mainly attributable to
the year-to-year growth of the Company's installed customer base.
Revenues, including export sales, generated from markets outside the United
States for fiscal 1998 and 1997 were $119.6 million and $86.7 million, or 31.7%
and 32.1% of total revenues, respectively. Revenue growth was particularly
strong in Canada, Germany, Southeast Asia and the United Kingdom.
Revenues derived from channel partners for fiscal 1998 and 1997 were 10.7% and
6.8% of total revenues, respectively.
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position 97-2, "Software Revenue Recognition" ("SOP"), which
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. The Company believes that the
requirements of this SOP, which supersede the revenue recognition guidance of
SOP 91-1, do not differ significantly from its revenue recognition practices and
policy requirements. Accordingly, adoption of the SOP, as amended (effective for
the Company in fiscal 1999), is not expected to materially impact the Company's
results of operations. However, should the Company adopt new or change its
current licensing practices, in response to a preference from the market or
otherwise, then the Company's revenue recognition practices may be subject to
change to comply with the accounting requirements of the SOP, as amended.
COST OF REVENUES
1998 CHANGE 1997
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(dollars in thousands)
Software licenses $10,335 31.4% $ 7,866
Gross profit percentage 95.2% 94.8%
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Maintenance and services $93,829 28.7% $72,929
Gross profit percentage 42.4% 38.7%
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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 amortization of capitalized software
costs begins upon the general release of the software to customers. The increase
in the cost of software license revenues principally reflects an increase in
royalty fees related to the increase in the number of software licenses sold.
The increase in the cost of maintenance and service revenues was due primarily
to additional staffing expense for both installation and ongoing support
services.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OPERATING EXPENSES
1998 CHANGE 1997
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(dollars in thousands)
Sales and marketing $133,124 38.7% $96,009
Percentage of total revenues 35.3% 35.5%
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Research and development $ 48,957 22.4% $40,000
Percentage of total revenues 13.0% 14.8%
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General and administrative $ 35,557 49.4% $23,807
Percentage of total revenues 9.4% 8.8%
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The increase in sales and marketing expenses is primarily due to a net increase
in sales-marketing personnel and an increase in commission costs directly
associated with the increase in software license revenues.
The increase in research and development expenses reflects additional personnel
and third-party development costs associated with expanded product research and
development activities. In fiscal 1998 and 1997, the Company capitalized $2.7
million and $4.8 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, packaged analytic application solutions for client/server
environments and represented 5.2% and 10.7% of total research and development
expenditures (excluding acquired in-process technology). Capitalized software
costs are amortized over the estimated economic life of the product, but
generally not more than three years. Amortization expense, which totaled $3.6
million for 1998 and $4.8 million for 1997, is included in cost of software
license revenues.
In December 1997, the Company acquired all of the outstanding shares of
AppSource Corporation, the Florida-based developer of Hyperion WIRED for OLAP, a
presentation, analysis and query tool that works with the Hyperion Essbase OLAP
Server. The total acquisition price of $6.7 million was funded from a
combination of the Company's existing working capital and newly issued common
stock. Approximately $3 million of the total purchase price represented the
value of in-process technology that had not yet reached technological
feasibility, had no alternative future uses and was charged to the Company's
operations in the quarter ended December 31, 1997. The charge resulting from
in-process technology is not deductible for income tax purposes. The acquisition
was accounted for under the purchase method of accounting. Accordingly, the
results of operations of AppSource are included in the accompanying financial
statements from the date of acquisition.
The increase in general and administrative expenses resulted, for the most part,
from increases in personnel and professional services costs incurred to manage
and support the growth of the Company's overall operations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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 certain
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. Under this alliance, as a Hyperion channel partner, Baan
pays sales royalties to the Company. Hyperion incurred charges in its June 1997
quarter of $4.4 million for asset valuation and restructuring costs related to
the joint development agreement.
INTEREST INCOME AND EXPENSE
1998 CHANGE 1997
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(dollars in thousands)
Interest income $5,031 46.7% $3,430
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Interest expense $ (641) 8.5% $ (591)
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Interest income grew due to the increase, from operations, in cash available for
investment.
PROVISION FOR INCOME TAXES
The Company's effective income tax rate increased to 38.7% for fiscal 1998, from
36.9% in 1997. The change in the effective rate was primarily due to the
nondeductible write-off of in-process technology incurred in connection with the
acquisition of AppSource Corporation. Excluding this write-off, the effective
tax rate for 1998 would have been 36.7%.
NET INCOME
As a result of the above factors, including the nonrecurring charges, net income
for 1998 increased to $34.8 million, or by 96.3%, from $17.7 million for 1997.
To date, the overall impact of inflation on the Company has not been material.
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" and Statement 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Statement 133
requires all derivative instruments (such as most foreign currency and interest
rate swaps, options, forwards, futures, collars, and warrants) to be recorded on
the balance sheet at fair value and establishes "special accounting" for the
following three different types of hedges: hedges of changes in the fair value
of assets, liabilities or firm commitments (fair value hedges), hedges of
variable cash flows of forecasted transactions (cash flow hedges), and hedges of
foreign currency exposures of net investments in foreign operations. Though the
accounting treatment and criteria for each of the three types of hedges is
unique, they all result in recognizing offsetting changes in value or cash flows
of both the hedge and the hedged item in earnings in the same period. Changes in
the fair value of derivatives that do not meet the criteria of one of these
three categories of hedges are to be included in earnings in the period of the
change. Statement 133 is effective for the Company beginning in fiscal 2000, and
the Company has not yet determined the impact, if any, the adoption of the
statement will have on its financial statements.
FISCAL 1997 COMPARED TO FISCAL 1996
REVENUES
1997 CHANGE 1996
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(dollars in thousands)
Software licenses $151,202 35.2% $111,842
Percentage of total revenues 56.0% 56.5%
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Maintenance and services $119,011 38.2% $ 86,116
Percentage of total revenues 44.0% 43.5%
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Software license revenues rose primarily as a result of an increase in the
number of licenses sold (unit volume) versus, for example, price increases. The
Company experienced strong demand for its OLAP server engine (for storage and
manipulation of multi-dimensional data), and its packaged analytic application
products.
The increase in service and annual maintenance 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 $86.7 million and $60.2 million, or 32.1% and 30.4% of total revenues,
respectively. Revenue growth was particularly strong in Europe, most notably in
Germany, the Netherlands and the United Kingdom.
Revenues derived from channel partners were 6.8% of total revenues for fiscal
1997 and 1996.
COST OF REVENUES
1997 CHANGE 1996
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(dollars in thousands)
Software licenses $ 7,866 43.4% $ 5,486
Gross profit percentage 94.8% 95.1%
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Maintenance and services $72,929 34.6% $54,167
Gross profit percentage 38.7% 37.1%
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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 (i) new products and product enhancements, and (ii)
the July 1996 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 maintenance and service revenues was due primarily
to additional staffing expense for both installation and ongoing support
services.
OPERATING EXPENSES
1997 CHANGE 1996
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(dollars in thousands)
Sales and marketing $96,009 38.1% $69,544
Percentage of total revenues 35.5% 35.1%
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Research and development $40,000 31.0% $30,524
Percentage of total revenues 14.8% 15.4%
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General and administrative $23,807 24.7% $19,091
Percentage of total revenues 8.8% 9.6%
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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 research and development expenses reflects additional personnel
and third-party development costs associated with expanded product 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 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, packaged analytic and accounting application solutions for
client/server environments and represented 10.7% and 16% of total research and
development expenditures (excluding acquired in-process technology). Capitalized
software costs are amortized over the estimated economic life of the product.
In the second quarter of fiscal 1996, the Company concluded two strategic
acquisitions involving analytic application technologies and a European client
base. The acquisitions, which amounted to $3.6 million, were accounted for as
purchase transactions and, accordingly, $2 million was allocated to in-process
technology and $1.6 million was allocated to identifiable intangible assets
based on their estimated fair values. The acquired in-process technology was
reflected as a charge in the Company's 1996 operating results.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The increase in general and administrative expenses resulted, for the most part,
from increases in personnel and professional services costs incurred to manage
and 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 certain
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. Under this alliance, as a Hyperion channel partner, Baan
pays sales royalties to the Company. Hyperion incurred charges in its June 1997
quarter of $4.4 million for asset valuation and restructuring costs related to
the joint development agreement.
INTEREST INCOME AND EXPENSE
1997 CHANGE 1996
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(dollars in thousands)
Interest income $3,430 52.3% $2,252
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Interest expense $ (591) 8.0% $ (547)
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Interest income increased due to the increase, largely from the issuance of
common stock, in cash available for investment.
PROVISION FOR INCOME TAXES
The Company's effective income tax rate rose to 36.9% for fiscal 1997, from
34.6% in 1996. The change in the effective rate was primarily the result of
operating expenses in certain jurisdictions for which no tax benefits were
recognized.
NET INCOME
As a result of the above factors, including the nonrecurring charges, net income
for 1997 increased to $17.7 million, or by 43.5%, from $12.3 million for 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RISK FACTORS, INCLUDING YEAR 2000 COMPLIANCE, AND QUARTERLY FINANCIAL
INFORMATION
Except for the historical information contained in this report on Form 8-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, but not limited to, those
discussed in the following paragraphs of this section; whether the process of
effecting the Arbor Software/Hyperion Software business combination can be
effectively managed to realize the synergies anticipated to result therefrom;
whether the merger itself causes uncertainty in the marketplace or customer
hesitation; 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 in the Company's most recent annual report on
Form 10-K, and its proxy statement included in Form S-4 filed with the
Commission on June 18, 1998, as amended. Further, readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof.
YEAR 2000 RISKS
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements.
State of Readiness of the Company's Year 2000 Issues
The Company has commenced its assessment of both the readiness of its internal
business information systems for handling the Year 2000 and the compliance of
products sold by the Company. The Company has determined that it will need to
modify or replace portions of its internal business information systems so that
the systems will function properly with respect to dates in the Year 2000 and
beyond. The Company anticipates that it will successfully address Year 2000
issues relating to its internal business information systems by the end of
fiscal 1999.
The Company believes that its current products are Year 2000 compliant. However,
prior versions of certain of these products currently installed at certain
customer sites will require upgrading or other modifications to become Year 2000
compliant. The Company believes that it is not legally responsible for costs
incurred by these customers to achieve Year 2000 compliance. However, there can
be no assurance that these customers will not assert claims against the Company
with respect to Year 2000 issues and, in the event such claims are asserted and
adjudicated in favor of these customers, the Company's liability could be
material. The Company is taking steps to identify affected customers, raise
customer awareness related to noncompliance of certain of the Company's older
products and assist its customers in assessing their risks. The Company may
incur increasing costs regarding customer satisfaction related to these actions
over the next few years. Since the Company's customer satisfaction programs are
currently ongoing, the scope of any resulting Year 2000 issues is not fully
known and potential liability resulting from these issues is unclear, the
potential impact on the Company's business, operating results and financial
condition with respect to these matters is not known at this time.
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<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company's Hyperion accounting software, a product set formerly offered by
the Company, was not originally Year 2000 compliant. The Company is aware of a
limited number of customers who continue to use this product set. The Company is
obligated under its agreements with certain of these customers to provide
upgrades to this product set which are Year 2000 compliant. The Company expects
to make available to these customers a Year 2000 compliant release of its
accounting software prior to the end of December 1998. The Company has also made
available to these customers a migration path to a product offered pursuant to
the Company's alliance with Baan/Coda, which the Company believes is Year 2000
compliant. However, there can be no assurance that such product is Year 2000
compliant. The Company does not expect the cost associated with this compliance
effort, including planning, implementation and testing, to be material to its
financial condition, although there can be no assurance that the Company will
not be required to incur significant unanticipated costs in relation to its
compliance obligations. Such unanticipated costs, if incurred, could have a
material adverse effect on the Company's business, operating results and
financial condition.
The Company has also initiated discussions with its significant vendors, service
providers and large customers to evaluate Year 2000 issues, if any, relating to
the interaction of their systems with the Company's internal systems. The
Company has received written compliance information from some of these third
parties and expects to receive all information on all outside system
dependencies by December 1998. At this time, despite the initiation of these
discussions, the Company does not possess the information necessary to estimate
the potential impact of Year 2000 compliance issues relating to these third
parties and their interaction with the Company, but expects to possess such
information prior to the end of December 1998.
Costs Associated with the Company's Year 2000 Issues
To date, the Company has not incurred any material expenditures in connection
with identifying or evaluating Year 2000 compliance issues. Most of its expenses
have related to the opportunity cost of time spent by employees of the Company
evaluating the Company's internal business information systems, the products
sold by the Company and the interaction of the Company's internal business
information systems with the internal systems of third parties. Although the
Company is not aware of any material operational issues or costs associated with
preparing its internal business information systems and its products for the
Year 2000, there can be no assurances that the Company will not experience
serious unanticipated negative consequences and/or material costs caused by
undetected errors or defects in the technology used in the Company's internal
business information systems or products the Company sells. Such unanticipated
negative consequences and/or material costs, if incurred, could have a material
adverse effect on the Company's business, operating results or financial
condition.
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<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Contingency Plan Regarding the Company's Year 2000 Issues
As the Company is not aware of any material Year 2000 compliance issues, it has
not developed a Year 2000-specific contingency plan. If Year 2000 compliance
issues are discovered, the Company will evaluate the need for one or more
contingency plans relating to such issues.
While the Company believes that its planning efforts are adequate to address its
Year 2000 issues on a timely basis, there can be no assurance that there will
not be a delay in, or increased costs associated with, implementation of changes
to address any such issues, which could have a material adverse effect on the
Company's business, operating results or financial condition.
MARKET RISKS
At June 30, 1998, the Company's investment portfolio consisted of
investment-grade debt securities, excluding those classified as cash
equivalents, of $35.5 million (see Notes A and C of the accompanying financial
statements). The portfolio is invested predominantly in short-term securities to
minimize interest rate risk and for liquidity purposes in the event of immediate
cash needs. Accordingly, if market interest rates were to increase immediately
and uniformly by 10% from levels as of June 30, 1998, the decline in the fair
value of the portfolio would not be material.
The Company's long-term debt bears interest, for the most part, at a fixed rate
(see Note G of the accompanying financial statements) and, therefore, relative
to its long-term debt, an immediate 10% change in market interest rates would
not materially impact the Company's financial statements.
Nearly one-third of the Company's sales, cost of sales and marketing is
transacted in local currencies. As a result, the Company's operations from
markets outside the United States are subject to foreign exchange rate
fluctuations.
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<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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.
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 report on Form 8-K 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.
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------------------
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1998 1998 1997 1997 1997 1997 1996 1996
------------------------------------------------------------------------------------------
(in thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $124,077 $88,764 $87,237 $77,015 $88,468 $62,997 $63,491 $55,257
Operating income 29,779 5,842 9,180 7,490 11,290 3,644 5,807 4,461
Net income 19,667 3,371 6,468 5,251 7,598 2,818 4,053 3,235
Diluted earnings per share .63 .11 .21 .17 .26 .10 .14 .11
</TABLE>
-13-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
To date, the Company has financed its business through positive cash flow from
operations and, to a lesser extent, through the issuance of its capital stock
and convertible subordinated notes. For fiscal years 1998, 1997 and 1996, the
Company generated positive cash flow from operations of $87.6 million, $49.7
million and $42.9 million, respectively.
Cash used by investing activities amounted to $46.3 million for fiscal 1998,
including $28.4 million primarily for purchases of computer equipment and office
facility expansion and improvements, and $12.3 million for net purchases of
short-term investments.
Financing activities in fiscal 1998--including the issuance of convertible
subordinated notes ($97 million), stock options exercised by employees ($12.9
million), and payments of indebtedness (-$1.3 million)--generated cash of $108.6
million. In March 1998, the Company issued $100 million of 4.5% convertible
subordinated notes (the "Notes"), due 2005. Net proceeds to the Company from the
issuance of the Notes were $97 million. The Notes are subordinated to all
existing and future senior debt and are convertible into shares of the Company's
common stock at a conversion price of $56.36 per share. The Notes are redeemable
at the option of the Company, in whole or in part, at any time on or after March
20, 2001 at 104.5% of the principal amount initially, and thereafter at prices
declining to 100% at maturity, in each case together with accrued interest. Each
holder of these Notes has the right, subject to certain conditions and
restrictions, to require the Company to offer to repurchase all outstanding
Notes, in whole or in part, owned by such holder, at specified repurchase prices
together with accrued interest upon the occurrence of certain events. The
Company incurred $3.3 million of costs in connection with the issuance of the
Notes which have been deferred and are included in other assets. These
unamortized costs will be recognized as interest expense over the term of the
Notes using the straight-line method, which approximates the effective interest
method. Interest on the Notes began accruing March 16, 1998 and is payable
semi-annually on March 15 and September 15, commencing September 15, 1998. The
Company expects to use the net proceeds of the offering to strengthen its
financial condition, to provide working capital and for general corporate
purposes, and to provide itself with additional financial flexibility to take
advantage of business opportunities as they may arise. In connection with the
stock options exercised by certain of its employees (for a total of 1 million
common shares), the Company recognized (as a credit to additional paid-in
capital) an income tax benefit of $7.2 million for the year ended June 30, 1998.
As of June 30, 1998, the Company had cash, cash equivalents and short-term
investments of $257.3 million, working capital of $218 million, and $107.3
million of long-term debt. Cash equivalents are comprised primarily of
investment-grade commercial paper, U.S. federal, state and political subdivision
obligations with varying terms of three months or less. The Company anticipates
capital expenditures of approximately $30 million for its 1999 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 its current cash and short-term investment balances,
and the funds generated from its operations, if any, will be sufficient to
finance the Company's business for at least the next year.
-14-
<PAGE> 16
ITEM 5. OTHER EVENTS
Name change; NASDAQ Symbol. Registrant changed its name to Hyperion Solutions
Corporation as of August 24, 1998. As of August 25, 1998 its common stock trades
under the symbol "HYSL" on the Nasdaq National Market.
Amendment to the Restated Certificate of Incorporation. On August 24, 1998, the
Registrant filed an amendment to its Restated Certificate of Incorporation with
the Delaware Secretary of State, a copy of which is included as Exhibit 3.2
hereto and is incorporated by reference herein.
Press Release. On August 24, 1998, the Registrant issued a Press Release
announcing its name change to Hyperion Solutions Corporation and a statement
that the Registrant intended to begin using the symbol "HYSL" on the Nasdaq
National Market on August 25, 1998. The information which is set forth in the
Registrant's News Release dated August 24, 1998 is incorporated by reference.
-15-
<PAGE> 17
ITEM 7. SUPPLEMENTAL FINANCIAL STATEMENTS AND EXHIBITS
-16-
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Hyperion Solutions Corporation
In our opinion, based upon our audits and the report of other auditors, the
supplemental consolidated financial statements listed in the index appearing
under Item 7.(a) and (b) on page 1 present fairly, in all material respects, the
financial position of Hyperion Solutions Corporation and its subsidiaries at
June 30, 1998 and 1997, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of Hyperion Software Corporation, which statements
reflect total assets of $218,639,000 at June 30, 1997 and total revenues of
$222,830,000 and $172,824,000 for the two years ended June 30, 1997 and 1996,
respectively. Those statements were audited by other auditors whose report
thereon has been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for Hyperion Software Corporation, is based
solely on the report of the other auditors. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
October 5, 1998
-17-
<PAGE> 19
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Hyperion Software Corporation
We have audited the consolidated balance sheet of Hyperion Software Corporation
and subsidiaries as of June 30, 1997, and the related consolidated statements of
income, stockholders' equity, and cash flows for the years ended June 30, 1997
and 1996 (not presented separately herein). These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements 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 consolidated 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 the
consolidated results of their operations and their cash flows for the years
ended June 30, 1997 and 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
July 17, 1997
-18-
<PAGE> 20
Hyperion Solutions Corporation
Supplemental Consolidated Balance Sheet
(in thousands, except per share data)
<TABLE>
<CAPTION>
JUNE 30,
1998 1997
---------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $221,868 $ 72,706
Short-term investments 35,479 23,204
Accounts receivable--net of allowances of $8,892 and $6,083 98,760 77,708
Prepaid expenses and other current assets 7,605 4,294
Deferred income taxes 10,447 8,014
---------------------
TOTAL CURRENT ASSETS 374,159 185,926
Property and equipment--at cost, less accumulated depreciation
and amortization of $54,247 and $34,828 76,142 69,277
Product development costs--at cost, less accumulated amortization
of $9,887 and $6,796 7,588 8,526
Product distribution rights, goodwill and other intangible assets--at
cost, less accumulated amortization of $9,472 and $7,631 10,730 11,103
Other assets 8,046 3,396
---------------------
Total assets $476,665 $278,228
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 44,216 $ 29,291
Accrued employee compensation and benefits 31,915 22,930
Income taxes payable 16,271 10,652
Deferred revenue 63,724 50,573
---------------------
TOTAL CURRENT LIABILITIES 156,126 113,446
Long-term debt 107,314 8,102
Deferred income taxes 1,071
COMMITMENTS AND CONTINGENCIES - Note H
Stockholders' equity:
Preferred stock--$.001 par value; 5,000 shares authorized;
none issued
Common stock--$.001 par value; 300,000 shares authorized;
29,574 and 28,447 shares issued and outstanding 30 28
Additional paid-in capital 135,172 111,625
Retained earnings 80,058 45,301
Currency translation adjustments (2,035) (1,345)
---------------------
TOTAL STOCKHOLDERS' EQUITY 213,225 155,609
---------------------
Total liabilities and stockholders' equity $476,665 $278,228
=====================
</TABLE>
See accompanying notes.
-19-
<PAGE> 21
Hyperion Solutions Corporation
Supplemental Consolidated Statement of Income
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
REVENUES
Software licenses $214,297 $151,202 $111,842
Maintenance and services 162,796 119,011 86,116
----------------------------------
Total revenues 377,093 270,213 197,958
----------------------------------
COSTS AND EXPENSES
Cost of revenues:
Software licenses 10,335 7,866 5,486
Maintenance and services 93,829 72,929 54,167
Sales and marketing 133,124 96,009 69,544
Research and development 48,957 40,000 30,524
Acquired in-process technology 3,000 2,000
General and administrative 35,557 23,807 19,091
Asset valuation and restructuring 4,400
----------------------------------
324,802 245,011 180,812
----------------------------------
OPERATING INCOME 52,291 25,202 17,146
Interest income 5,031 3,430 2,252
Interest expense (641) (591) (547)
----------------------------------
INCOME BEFORE INCOME TAXES 56,681 28,041 18,851
Provision for income taxes 21,924 10,337 6,516
----------------------------------
NET INCOME $ 34,757 $ 17,704 $ 12,335
==================================
EARNINGS PER SHARE
Basic $ 1.19 $ .64 $ .57
Diluted $ 1.13 $ .61 $ .45
AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 29,121 27,537 21,728
Diluted 30,770 29,261 27,544
</TABLE>
See accompanying notes.
-20-
<PAGE> 22
Hyperion Solutions Corporation
Supplemental Consolidated Statement of Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Common Stock
--------------- Additional Currency
Par Paid-in Retained Translation
Shares Value Capital Earnings Adjustments
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1995 17,626 $17 $ 59,122 $15,262 $ (394)
Exercise of stock options 1,661 2 5,861
Income tax benefit from
exercise of stock options 3,388
Issuance of common stock pursuant
to initial public offering 1,880 2 28,814
Conversion of preferred stock and
warrant to common stock upon
completion of initial public offering 5,873 6 33
Currency translation effect (139)
Net income 12,335
---------------------------------------------------------
Balance at June 30, 1996 27,040 27 97,218 27,597 (533)
Exercise of stock options 1,407 1 10,456
Income tax benefit from exercise
of stock options 3,951
Currency translation effect (812)
Net income 17,704
---------------------------------------------------------
Balance at June 30, 1997 28,447 28 111,625 45,301 (1,345)
Exercise of stock options 1,031 2 13,158
Issuance of common stock in
connection with a business
acquisition 96 3,200
Income tax benefit from exercise
of stock options 7,189
Currency translation effect (690)
Net income 34,757
---------------------------------------------------------
BALANCE AT JUNE 30, 1998 29,574 $30 $135,172 $80,058 $(2,035)
=========================================================
</TABLE>
See accompanying notes.
-21-
<PAGE> 23
Hyperion Solutions Corporation
Supplemental Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 34,757 $ 17,704 $ 12,335
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 28,616 23,338 15,094
Asset valuation and restructuring charges, net of
payments of $258 4,142
Accounts receivable allowance provisions 5,113 2,884 4,498
Deferred income taxes (5,364) (5,943) (2,106)
Acquired in-process technology 3,000 2,000
Changes in operating assets and liabilities:
Accounts receivable (25,875) (20,413) (14,842)
Prepaid expenses and other assets (2,962) (539) (212)
Accounts payable and accrued expenses 24,327 9,174 11,925
Income taxes payable 12,808 9,397 5,486
Deferred revenue 13,151 9,959 8,768
--------------------------------------
Cash provided by operating activities 87,571 49,703 42,946
--------------------------------------
INVESTING ACTIVITIES
Purchases of short-term investments, net (12,275) 2,761 (25,886)
Purchases of property and equipment (28,355) (27,527) (33,551)
Product development costs (2,673) (4,792) (5,798)
Business acquisitions (2,965) (7,104) (5,183)
Other assets (52) (1,564) (636)
--------------------------------------
Cash used by investing activities (46,320) (38,226) (71,054)
--------------------------------------
FINANCING ACTIVITIES
Issuance of convertible subordinated notes, net 97,000
Principal payments on notes payable (1,292) (1,419) (1,373)
Exercise of stock options by employees/sale of capital stock 12,893 10,401 34,446
--------------------------------------
Cash provided by financing activities 108,601 8,982 33,073
Effect of exchange rate changes (690) (812) (139)
--------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 149,162 19,647 4,826
Cash and cash equivalents at beginning of year 72,706 53,059 48,233
--------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $221,868 $ 72,706 $ 53,059
======================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 14,205 $ 6,876 $ 3,136
Interest ($266 capitalized in 1996) 420 568 801
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Common stock issued in connection with a business acquisition 3,200
Acquisition of equipment through capital leases 1,192
</TABLE>
See accompanying notes.
-22-
<PAGE> 24
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements
BUSINESS
Hyperion Solutions Corporation (the "Company" or "Hyperion") develops, markets
and supports comprehensive analytic application software for the workgroup,
division, or extended enterprise. The Company's offerings include packaged
analytic applications that are quickly configured and deployed, an industry
leading OLAP (on-line analytical processing) server used by IT and end-user
departments to build fully customized analytic applications, and a range of
end-user reporting, analysis, and presentation tools. Packaged analytic
applications from Hyperion include the ability to draw data from multiple
sources across the enterprise for tasks such as reporting, ad hoc analysis,
consolidation, planning, and budgeting. The Company's solutions are used by
large organizations worldwide.
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.
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. Otherwise, software license fees are deferred until
all of the requirements for revenue recognition have been satisfied. Maintenance
fees for routine support and product updates are recognized ratably over the
term of the license agreement, which is typically twelve months. Training and
consulting service revenues are recognized as the services are performed.
Allowances for estimated future returns and discounts are provided upon
recognition of revenues.
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position 97-2, "Software Revenue Recognition" ("SOP"), which
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. The Company believes that the
requirements of this SOP, which supersede the revenue recognition guidance of
SOP 91-1, do not differ significantly from its revenue recognition practices and
policy requirements. Accordingly, adoption of the SOP, as amended (effective for
the Company in fiscal 1999), is not expected to materially impact the Company's
results of operations. However, should the Company adopt new or change its
current licensing practices in response to a preference from the market or
otherwise, then the Company's revenue recognition practices may be subject to
change to comply with the accounting requirements of the SOP, as amended.
-23-
<PAGE> 25
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equity Based Compensation
The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. The Company generally prices its stock options at fair
market value on the date of grant and therefore, under Opinion 25, no
compensation expense is recognized for stock options granted.
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 and
those with remaining terms greater than three months but no more than a year are
considered short-term investments. Cash equivalents are comprised primarily of
investment-grade commercial paper, U.S. federal, state and political subdivision
obligations. All of the Company's short-term investments are classified as
available-for-sale (see Note C).
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 convertible subordinated
notes were issued only recently to independent third parties, and the mortgage
loan provides for interest at a floating rate (see Note G).
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 three years.
Amortization commences when the product is available for general release to
customers. Amortization expense totaled $3.6 million for 1998, $4.8 million for
1997 and $3.2 million for 1996.
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 (deferred income
taxes).
-24-
<PAGE> 26
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented and where necessary restated to conform to the
Statement 128 requirements.
The following table sets forth the computation of basic and diluted earnings per
share ("EPS") (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Numerator -- net income $34,757 $17,704 $12,335
====================================
Denominator for basic EPS-- weighted-average shares 29,121 27,537 21,728
Effect of dilutive securities:
Stock option rights 1,649 1,724 2,249
Convertible preferred stock 3,567
------------------------------------
Denominator for diluted EPS -- adjusted weighted-average
shares and assumed conversions 30,770 29,261 27,544
====================================
Basic earnings per share $ 1.19 $ .64 $ .57
Diluted earnings per share $ 1.13 $ .61 $ .45
</TABLE>
Substantially all outstanding stock options were included in the computation of
diluted earnings per share for fiscal 1998. Shares of common stock issuable upon
conversion of the convertible subordinated notes due 2005 which were issued in
March 1998 (see Note G) have been excluded from the computation for fiscal 1998
as their effect is antidilutive.
-25-
<PAGE> 27
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Statement 133
requires all derivative instruments (such as most foreign currency and interest
rate swaps, options, forwards, futures, collars, and warrants) to be recorded on
the balance sheet at fair value and establishes "special accounting" for the
following three different types of hedges: hedges of changes in the fair value
of assets, liabilities or firm commitments (fair value hedges), hedges of
variable cash flows of forecasted transactions (cash flow hedges), and hedges of
foreign currency exposures of net investments in foreign operations. Though the
accounting treatment and criteria for each of the three types of hedges is
unique, they all result in recognizing offsetting changes in value or cash flows
of both the hedge and the hedged item in earnings in the same period. Changes in
the fair value of derivatives that do not meet the criteria of one of these
three categories of hedges are to be included in earnings in the period of the
change. Statement 133 is effective for the Company beginning in fiscal 2000, and
the Company has not yet determined the impact, if any, the adoption of the
statement will have on its financial statements.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement 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 Statement 130 in fiscal 1999.
B. MERGER, ACQUISITIONS AND STRATEGIC ALLIANCE
On August 24, 1998, the Company issued 18.2 million shares of its common stock
in connection with its merger with Hyperion Software Corporation. Hyperion
Software, based in Stamford, Connecticut, develops, markets and supports
comprehensive, packaged analytic applications. Its products, which are sold to
large organizations worldwide, draw data from multiple sources across an
enterprise for applications such as reporting, ad hoc analysis, consolidation,
planning, and budgeting. The business combination, which qualifies as a tax-free
reorganization, has been accounted for as a pooling of interests. Accordingly,
the financial statements have been restated for all periods presented to include
Hyperion Software. Further, all common share and per share data have been
restated for the pre-merger periods presented.
Hyperion Software had a fiscal year end of June 30, while Arbor used a March 31
year end. In connection with the merger, the Company changed its fiscal year end
from March 31 to June 30 and, accordingly, the accompanying financial
statements, labeled June 30, reflect the combination of the separate, historical
annual financial statements of Arbor Software and Hyperion Software as of, and
for each of the three years in the periods ended, March 31, 1998 and June 30,
1998, respectively.
-26-
<PAGE> 28
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
B. MERGER, ACQUISITIONS AND STRATEGIC ALLIANCE (CONTINUED)
For the pre-merger periods indicated, revenues and net income of the Company and
Hyperion Software are as follows (in thousands):
YEAR ENDED JUNE 30,
1998 1997 1996
----------------------------------------
Revenues
Hyperion Software $294,856 $222,830 $172,824
Arbor Software 82,237 47,383 25,134
----------------------------------------
$377,093 $270,213 $197,958
========================================
Net income
Hyperion Software $ 27,841 $ 11,878 $ 9,457
Arbor Software 6,916 5,826 2,878
----------------------------------------
$ 34,757 $ 17,704 $ 12,335
========================================
The Company estimates it will incur charges to operations related to the merger
of approximately $20 million, principally in the quarter ending September 30,
1998. These charges include direct transaction costs primarily for financial
advisory services and legal fees, and costs associated with combining the
operations of the two companies.
In December 1997, the Company acquired all of the outstanding shares of
AppSource Corporation, the Florida-based developer of Hyperion WIRED for OLAP, a
presentation, analysis and query tool that works with the Hyperion Essbase OLAP
Server. Consideration for this purchase was $3.2 million in cash and .1 million
shares of the Company's common stock. The total value attributed to the common
stock issued by the Company was $3.2 million. The Company also incurred $.3
million in transaction costs. The acquisition was recorded under the purchase
method of accounting and, accordingly, the results of operations of AppSource
are included in the accompanying financial statements from the date of
acquisition. The purchase price has been allocated to the assets and liabilities
assumed based upon the fair market values as determined by the Company at the
date of acquisition, as summarized below (in thousands):
Cash and other current assets $ 715
In-process technology 3,000
Goodwill and other intangible assets 3,000
Current liabilities assumed (65)
------
$6,650
======
The amounts allocated to technology were estimated using a risk adjusted income
approach applied to specifically identified technologies. In-process technology
was expensed upon acquisition because technological feasibility had not been
established and no alternative future uses existed. Amounts allocated to
goodwill and other intangible assets, primarily existing technology, are being
amortized on a straight-line basis over four years. Pro forma disclosure giving
effect to the AppSource acquisition as if it had occurred at the beginning of
fiscal 1997 has not been presented since the effect of the acquisition is not
material to the Company's results of operations for either fiscal 1998 or 1997.
-27-
<PAGE> 29
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
B. MERGER, ACQUISITIONS AND STRATEGIC ALLIANCE (CONTINUED)
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 certain
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. Under this alliance, as a Hyperion channel partner, Baan
pays sales royalties to the Company. Hyperion incurred charges in its June 1997
quarter of $4.4 million 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, 1995 is not shown, as it would not differ significantly from reported
results.
During the quarter ended December 1995, the Company concluded two strategic
acquisitions involving analytic application technologies and a European client
base. The acquisitions, which amounted to $3.6 million, were accounted for as
purchase transactions and, accordingly, $2 million was allocated to in-process
technology and $1.6 million was allocated to identifiable intangible assets
based on their estimated fair values. The acquired in-process technology was
reflected as a charge in the Company's 1996 operating results. 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, 1995 is not shown, as it would not differ
significantly from reported results.
C. SHORT-TERM INVESTMENTS
The following table sets forth the Company's short-term investment portfolio at
June 30:
1998 1997
-------------------------------------------------------------------
(in thousands)
State and municipal bonds $ 8,000 $ 1,905
U.S. government and agency obligations 10,777 4,527
Corporate bonds 12,254 15,434
Foreign debt securities 4,448 1,338
-------------------------------------------------------------------
$35,479 $23,204
===================================================================
The portfolio of securities is classified as available-for sale. Gross realized
gains and losses from the sale of such securities were not material for the
years ended June 30, 1998, 1997 and 1996. For the purpose of determining gross
realized gains and losses, the cost of securities is based upon specific
identification.
-28-
<PAGE> 30
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
D. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30:
<TABLE>
<CAPTION>
Depreciation/
Amortization
1998 1997 Period
------------------------------------------------------------------------------------------
(in thousands) (years)
<S> <C> <C> <C>
Land $ 3,800 $ 3,800
Office and research facilities 30,475 26,578 39
Building improvements 3,180 5 to 15
Furniture, equipment and software 84,187 66,711 2 to 7
Leasehold improvements 8,747 7,016 lease term*
-------------------------------------------------------------------------
130,389 104,105
Less accumulated depreciation and amortization 54,247 34,828
-------------------------------------------------------------------------
$ 76,142 $ 69,277
=========================================================================
</TABLE>
* 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 $21.5 million, $15.8
million and $10.4 million for 1998, 1997 and 1996, respectively.
E. PRODUCT DISTRIBUTION RIGHTS, GOODWILL AND OTHER INTANGIBLE ASSETS
Components of intangible assets, which relate primarily to business
acquisitions, are as follows at June 30:
<TABLE>
<CAPTION>
Amortization
1998 1997 Period
---------------------------------------------------------------------------------
(in thousands) (years)
<S> <C> <C> <C>
Product distribution and service rights $ 9,123 $ 9,123 3 to 7
Goodwill 6,187 3,685 4 to 20
Software/technology 2,139 2,039 2 to 6
Customer base 1,019 2,219 3 to 5
Copyrights, trademarks and other 1,734 1,668 3 to 4
----------------------------------------------------------------
20,202 18,734
Less accumulated amortization 9,472 7,631
----------------------------------------------------------------
$10,730 $11,103
================================================================
</TABLE>
The carrying value of intangible assets is reviewed by management if and when
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.
-29-
<PAGE> 31
Hyperion Solutions 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:
1998 1997
-------------------------------------------------------------------
(in thousands)
Deferred income tax assets:
Net operating loss carryforwards $ 1,489 $ 1,588
Deferred revenue 2,362 3,737
Accounts receivable 4,258 2,740
Intangible assets 2,079 1,216
Tax credit carryforwards 736 1,157
Property and equipment 3,000 819
Accrued expenses 3,206 938
Other 371 514
-------------------------------------------------------------------
17,501 12,709
Less valuation allowance 2,159 2,356
-------------------------------------------------------------------
15,342 10,353
-------------------------------------------------------------------
Deferred income tax liabilities:
Product development costs 3,035 3,410
-------------------------------------------------------------------
3,035 3,410
-------------------------------------------------------------------
Net deferred income tax asset $12,307 $ 6,943
===================================================================
The provision for income taxes consists of the following charges (credits):
1998 1997 1996
-------------------------------------------------------------------
(in thousands)
Current:
U.S. $19,450 $10,953 $ 5,448
State 4,021 2,814 1,801
Other countries 3,817 2,513 1,373
-------------------------------------------------------------------
27,288 16,280 8,622
-------------------------------------------------------------------
Deferred:
U.S. (4,477) (4,195) (1,700)
State (691) (1,748) (379)
Other countries (196) (27)
-------------------------------------------------------------------
(5,364) (5,943) (2,106)
-------------------------------------------------------------------
$21,924 $10,337 $ 6,516
===================================================================
-30-
<PAGE> 32
Hyperion Solutions 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:
1998 1997 1996
-------------------------------------------------------------------------
Statutory U.S. tax rate 35.0% 35.0% 35.0%
State income taxes, net of U.S. tax benefit 3.8 3.5 5.0
Acquired in-process technology 1.9
Non-U.S. operations, including export sales (.6) 4.0 .1
Change in valuation allowance (.3) (5.2) (5.5)
Other--net (1.1) (.4)
-------------------------------------------------------------------------
Effective income tax rate 38.7% 36.9% 34.6%
=========================================================================
The Company has U.S. and non-U.S. net operating loss (NOL) carryforwards of
$3.8 million, $1.4 million of which expires in 2004, and $2.4 million of which
is carried forward indefinitely. The Company has U.S. federal and state tax
credit carryforwards of $.9 million, $.3 million of which expires through 2008
and the balance has no expiration date.
The Company's utilization of a $1.4 million NOL carryforward and tax credit
carryforwards of $.7 million is subject to annual limitations as prescribed by
Sections 382 and 383 of the Internal Revenue Code and similar state authority.
G. LONG-TERM DEBT
Long-term debt consists of the following at June 30:
1998 1997
---------------------------------------------------------------------
(in thousands)
4.5% convertible subordinated notes $100,000
Mortgage payable 7,314 $7,823
Other obligations 279
---------------------------------------------------------------------
$107,314 $8,102
=====================================================================
-31-
<PAGE> 33
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
G. LONG-TERM DEBT (CONTINUED)
In March 1998, the Company issued $100 million of 4.5% convertible subordinated
notes (the "Notes"), due 2005. The Notes are subordinated to all existing and
future senior debt and are convertible into shares of the Company's common stock
at a conversion price of $56.36 per share. The Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after March 20,
2001 at 104.5% of the principal amount initially, and thereafter at prices
declining to 100% at maturity, in each case together with accrued interest. Each
holder of these Notes has the right, subject to certain conditions and
restrictions, to require the Company to offer to repurchase all outstanding
Notes, in whole or in part, owned by such holder, at specified repurchase prices
together with accrued interest upon the occurrence of certain events. The
Company incurred $3.3 million of costs in connection with the issuance of the
Notes which have been deferred and are included in other assets. These
unamortized costs will be recognized as interest expense over the term of the
Notes using the straight-line method, which approximates the effective interest
method. Interest on the Notes began accruing March 16, 1998 and is payable
semi-annually on March 15 and September 15, commencing September 15, 1998.
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.
H. COMMITMENTS AND CONTINGENCIES
The Company leases office and research facilities, and certain computer and
other equipment under various operating lease agreements. The leases expire at
various dates through 2004.
Future minimum lease payments under all operating leases with noncancellable
terms in excess of one year amount to $32.3 million as follows (in millions):
$9.1 in 1999, $7.5 in 2000, $5.3 in 2001, $4.1 in 2002, $2.4 in 2003 and $3.9
thereafter. In addition, certain of the facility leases provide for contingent
payments based on building operating expenses. Rental expense for the years
ended June 30, 1998, 1997 and 1996 under all lease agreements was $8.6 million,
$6.9 million and $6.5 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.
-32-
<PAGE> 34
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS
Stock Option Programs
In August 1995, the Company's Board of Directors adopted, and the stockholders
subsequently approved, the 1995 Stock Option/Stock Issuance Plan (the "1995
Plan"). The 1995 Plan serves as the successor equity incentive program to the
Company's 1992 Stock Option Plan (the "Predecessor Plan"). Outstanding options
under the Predecessor Plan were incorporated into the 1995 Plan upon
effectiveness of the initial public offering. No further option grants were made
under the Predecessor Plan. The incorporated options will continue to be
governed by their existing terms which are essentially the same as options
granted under the Discretionary Option Grant Program described below. In
connection with the merger with Hyperion Software Corporation on August 24, 1998
(see Note B), the Company assumed all of the outstanding stock options of
Hyperion Software. Outstanding options assumed from Hyperion Software have terms
of ten years and are generally exercisable at 25% per year commencing one year
from the date of grant. No further option grants will be made under any of
Hyperion Software plans. Also in connection with the merger, in addition to the
.7 million shares available for grant under the 1995 Plan as of June 30, 1998,
the stockholders voted to increase the number of shares of common stock
available under the 1995 Plan by 5 million shares.
The 1995 Plan is divided into four separate components: (i) the Discretionary
Option Grant Program, (ii) the Stock Issuance Program, (iii) the Salary
Investment Option Grant Program, and (iv) the Automatic Option Grant Program.
The 1995 Plan will terminate on September 30, 2005, unless terminated earlier by
the Board.
Options granted under the Discretionary Option Grant Program are for periods not
to exceed ten years, and must be issued at prices not less than 100% and 85%,
for incentive and nonqualified stock options, respectively, of the fair market
value of the stock on the date of grant. Incentive stock options granted to
stockholders who own greater than 10% of the outstanding stock are for periods
not to exceed five years and must be issued at prices not less than 110% of the
fair market value of the stock on the date of grant. Twenty-five percent of the
options granted under the Discretionary Option Grant Program are exercisable one
year after the date of grant and the remainder exercisable ratably each month
thereafter over the remaining thirty-six month period. The Discretionary Option
Grant Program also provides for the grant of stock appreciation rights. Stock
appreciation rights provide the holders with the election to surrender their
outstanding options for an appreciation distribution from the Company equal to
the excess of the fair market value of the vested shares of common stock subject
to each surrendered option over the aggregate exercise price payable for those
shares. Such appreciation distribution may be made in cash or in shares of
common stock. No stock appreciation rights had been granted under the 1995 Plan
as of June 30, 1998.
Under the Stock Issuance Program, individuals may be issued shares of common
stock directly through the purchase of shares at a price per share not less than
85% of the fair market value at the time of issuance or as a fully paid bonus
for services rendered to the Company. No shares had been issued under the Stock
Issuance Program as of June 30, 1998.
-33-
<PAGE> 35
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
Under the Salary Investment Option Grant Program, each executive officer of the
Company may elect, prior to the start of a calendar year, to reduce his or her
base salary for that calendar year by a designated multiple of 1%, subject to a
maximum dollar amount. In return, the officer will automatically be granted, on
the first trading day in the calendar year for which the salary reduction is in
effect, a nonstatutory option to purchase that number of shares of common stock
determined by dividing the salary reduction amount by two-thirds of the fair
market value per share of common stock on the date of grant. The option will be
exercisable at a price per share equal to one-third of the fair market value of
the option shares on the date of grant. As a result, the total spread on the
option shares at the time of grant will be equal to the salary reduction amount.
The option will vest in a series of twelve equal monthly installments over the
calendar year for which the salary reduction is in effect. No executive officer
of the Company had elected to participate in the Salary Investment Option Grant
Program through June 30, 1998.
Under the Automatic Option Grant Program, each individual who becomes a
nonemployee Board member will receive an option grant for 20,000 shares of
common stock at the fair market value of the stock on the date he or she joins
the Board. In addition, at each Annual Stockholder Meeting, beginning with the
1996 Annual Meeting, each individual who is to continue to serve as a
nonemployee Board member after the meeting will receive an option grant to
purchase an additional 5,000 shares of common stock at the fair market value of
the stock on the date of grant, provided such individual has served on the Board
for at least six months. Each automatic option will have a term of ten years,
subject to earlier termination following the optionee's cessation of Board
service. The initial 20,000 share grant will vest in a series of four successive
equal annual installments over the optionee's period of Board service measured
from the grant date. Each additional 5,000 share grant will vest upon the
optionee's completion of one year of Board service measured from the grant date.
In recognition of the decline in the fair market value of the Company's common
stock in fiscal 1997, the Company repriced options to purchase approximately
533,000 shares of common stock with exercise prices ranging from $33.25 to
$42.75 on December 4, 1996 to an exercise price of $26.88, which was the fair
market value of the Company's common stock on that date.
-34-
<PAGE> 36
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
The following table presents a summary of the Company's stock option activity
for the years ended June 30 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICE Shares Price Shares Price
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,000 $13.68 3,820 $ 8.41 4,196 $ 4.72
Granted at market price 1,892 34.11 2,294 24.31 1,960 16.46
Exercised (775) 9.61 (1,159) 5.48 (1,489) 2.17
Forfeited/exchanged (503) 20.48 (955) 27.73 (847) 19.86
---------------------------------------------------------------------
Outstanding at year-end 4,614 $22.33 4,000 $13.68 3,820 $ 8.41
=====================================================================
Options exercisable at year-end 1,657 $11.72 1,851 $ 7.29 2,464 $ 4.97
=====================================================================
</TABLE>
The following table summarizes information about stock options outstanding at
June 30, 1998 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------------------------------
Weighted Average Weighted Weighted
Range of Number Remaining Years Average Number Average
Exercise Prices Outstanding of Contractual Life Exercise Price Exercisable Exercise Price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ .07 - 10.00 848 5.46 $ 4.42 848 $ 4.42
10.01 - 20.00 1,397 7.85 14.67 485 13.79
20.01 - 30.00 992 8.63 26.61 274 25.78
30.01 - 40.00 827 9.50 35.61 35 35.09
40.01 - 47.57 550 9.56 41.77 15 45.49
- -----------------------------------------------------------------------------------------------------------
$ .07 - 47.57 4,614 8.06 $22.33 1,657 $11.72
===========================================================================================================
</TABLE>
-35-
<PAGE> 37
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
Employee Stock Purchase Plan
In August 1995, the Company's Board of Directors adopted the 1995 Employee Stock
Purchase Plan (the "Purchase Plan") and reserved 150,000 shares of common stock
for issuance to eligible employees. The Purchase Plan, as amended in August
1997, permits eligible employees to purchase common stock through periodic
payroll deductions of up to 10% of their annual compensation. Each offering
period will have a maximum duration of six months and shares of common stock
will be purchased for each participant at the conclusion of each offering
period. The price at which the common stock is purchased under the Purchase Plan
is equal to 85% of the lower of the fair market value of the common stock on the
participant's entry date into the offering period or the fair market value on
the purchase date. In fiscal 1998 and 1997, a total of 74,000 and 57,000 shares,
respectively, were issued under the Purchase Plan. There were no shares issued
in 1996. (Including shares sold under the former Hyperion Software employee
stock purchase plan (see Note B), a total of 256,000, 262,000 and 181,000 shares
were issued in fiscal 1998, 1997 and 1996, respectively.) In August 1997 and
1998, the Company's stockholders approved amendments to increase the number of
shares of common stock reserved for issuance under the Purchase Plan by a total
of 1.1 million shares. Accordingly, 1.2 million shares are available for
issuance under the Purchase Plan.
Employee Savings Plans
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 $10,000 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 1998, 1997 and 1996, the Company contributed $1.2 million, $1.1
million and $1 million, respectively, to the savings plans.
Pro Forma Disclosure
The Company has elected to continue to follow the provisions of the Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," for
financial reporting purposes and has adopted the disclosure-only provisions of
Statement No. 123, "Accounting for Stock-Based Compensation," issued by the
Financial Accounting Standards Board.
-36-
<PAGE> 38
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
The weighted average estimated grant date fair value, as defined by
Statement 123, for options granted under the Company's stock option plans
in fiscal 1998, 1997 and 1996 was $12.89, $7.45 and $5.52 per share,
respectively. The weighted average estimated grant date fair value, as defined
by Statement 123, for purchase awards issued under the Company's employee stock
purchase plan in fiscal 1998, 1997 and 1996 was $6.91, $6.26 and $3.74 per
share, respectively. The estimated grant date fair value disclosed by the
Company was calculated using the Black-Scholes model. The Black-Scholes model,
as well as other currently accepted option valuation models, was developed to
estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which significantly differ from the Company's stock
option awards. These models also require highly subjective assumptions,
including future stock price volatility and expected time until exercise, which
greatly affect the calculated grant date fair value.
The following weighted average assumptions are included in the estimated grant
date fair value calculations for the Company's stock option and purchase awards:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
Stock option plans:
Expected dividend yield 0% 0% 0%
Expected stock price volatility 25% TO 60% 25% to 65% 25% to 65%
Risk free interest rate 5.5% TO 5.76% 6.28% to 6.4% 5.88% to 6.4%
Expected life (years) 2.79 TO 5.1 2.41 to 5.5 2.75 to 5.5
Stock purchase plan:
Expected dividend yield 0% 0% 0%
Expected stock price volatility 25% TO 60% 25% to 65% 25% to 65%
Risk free interest rate 5.19% TO 5.39% 5.34% to 5.44% 5.31% to 5.44%
Expected life (years) .5 .5 to .58 .5 to .97
</TABLE>
-37-
<PAGE> 39
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION AND EMPLOYEE SAVINGS PROGRAMS (CONTINUED)
Pro Forma Net Income and Earnings Per Share
Had the Company recorded compensation based on the estimated grant date fair
value, as defined by Statement 123, for awards granted under its stock option
plans and stock purchase plan, the Company's net income and earnings per share
would have been reduced to the pro forma amounts below for the fiscal years
ended June 30, 1998, 1997 and 1996 (in thousands, except per share amounts):
YEAR ENDED JUNE 30,
1998 1997 1996
-----------------------------------
Net income as reported $34,757 $17,704 $12,335
Pro forma net income 25,305 11,581 10,487
Earnings per share as reported:
Basic $ 1.19 $ .64 $ .57
Diluted 1.13 .61 .45
Pro forma earnings per share:
Basic $ .87 $ .42 $ .48
Diluted .82 .40 .38
In accordance with provisions of Statement 123, the pro forma disclosures
include only the effect of stock options granted in fiscal 1996, 1997 and 1998.
These pro forma effects may not be representative of the effects of
Statement 123 on future years because of the fact that options vest over
several years and new grants are generally made each year.
J. STOCKHOLDER RIGHTS PLAN
In June 1998, the Company adopted a stockholder rights plan (the "Rights Plan")
in which preferred stock purchase 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 July 3, 1998. 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.
Each right will entitle holders of Company common stock to buy one
one-thousandth of a share of Series A Junior Participating Preferred Stock of
the Company at an exercise price of $250 per one one-thousandth of a preferred
share. Generally, 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. Under the Rights Plan, the
ownership, tender offer and exchange offer thresholds of 15% increase to 25% for
certain grandfathered stockholders and approximately 20.5% for one stockholder
that held approximately 19.5% of the Company's issued and outstanding stock on
July 3, 1998.
-38-
<PAGE> 40
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
J. STOCKHOLDER RIGHTS PLAN (CONTINUED)
If any person or group becomes the beneficial owner of 15% or more of the common
stock (a "Flip-In Event"), 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 redeem the rights at $.01 per right prior to the date the
ownership thresholds are passed. The rights will expire on July 3, 2008, unless
earlier redeemed or exchanged.
-39-
<PAGE> 41
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
K. FINANCIAL DATA BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
Other
U.S. U.K. International
Operations Operations Operations Eliminations Consolidated
--------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
1998
Revenues:
Customers $327,569 $26,756 $22,768 $377,093
Intercompany 11,632 7,353 32,896 $(51,881)
--------------------------------------------------------------------------------------------------------
Total 339,201 34,109 55,664 (51,881) 377,093
========================================================================================================
Operating income 46,989 4,972 330 52,291
========================================================================================================
Identifiable assets $423,308 $21,288 $32,069 $476,665
========================================================================================================
1997
Revenues:
Customers $229,615 $21,664 $18,934 $270,213
Intercompany 11,509 5,507 25,428 $(42,444)
--------------------------------------------------------------------------------------------------------
Total 241,124 27,171 44,362 (42,444) 270,213
========================================================================================================
Operating income 20,255 3,662 1,285 25,202
========================================================================================================
Identifiable assets $239,623 $14,714 $23,891 $278,228
========================================================================================================
1996
Revenues:
Customers $164,421 $15,224 $18,313 $197,958
Intercompany 6,092 997 7,428 $(14,517)
--------------------------------------------------------------------------------------------------------
Total 170,513 16,221 25,741 (14,517) 197,958
========================================================================================================
Operating income 16,255 371 520 17,146
========================================================================================================
Identifiable assets $196,358 $10,595 $18,378 $225,331
========================================================================================================
</TABLE>
"Other International Operations" relate to subsidiaries in Austria,
Belgium, Canada, France, Germany, Italy, Japan, the Netherlands,
Singapore, Spain, Sweden and Switzerland. Operating income from operations
outside the United States approximates income 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):
1998 1997 1996
----------------------------------------------------------------------
U.K. operations $ 26,756 $21,664 $15,224
Other international operations 22,768 18,934 18,313
Export 70,044 46,148 26,617
----------------------------------------------------------------------
$119,568 $86,746 $60,154
======================================================================
Percentage of total revenues 32% 32% 30%
======================================================================
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 Statement No. 14, "Financial
Reporting for Segments of a Business Enterprise," issued by the Financial
Accounting Standards Board. In fiscal 1999, the Company will adopt the
provisions of Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which supersede the provisions of
Statement 14.
-40-
<PAGE> 42
Hyperion Solutions Corporation
Notes to Consolidated Financial Statements (continued)
L. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations
for the two years ended June 30, 1998 (in thousands, except per share data):
-----------------------------------------------------------------------------
FISCAL 1998 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
-----------------------------------------------------------------------------
Total revenues $77,015 $87,237 $88,764 $124,077
Gross profit 54,343 61,273 62,939 94,374
Net income 5,251 6,468 3,371 19,667
Diluted earnings per share .17 .21 .11 .63
-----------------------------------------------------------------------------
Fiscal 1997 Sept. 30 Dec. 31 March 31 June 30
-----------------------------------------------------------------------------
Total revenues $55,257 $63,491 $62,997 $88,468
Gross profit 38,155 44,404 42,572 64,287
Net income 3,235 4,053 2,818 7,598
Diluted earnings per share .11 .14 .10 .26
-41-
<PAGE> 43
ITEM 8. CHANGE IN FISCAL YEAR
On September 29, 1998, the Board of Directors of the Registrant adopted and
approved a change in the Registrant's fiscal year end from fiscal year end March
31 to fiscal year end June 30. The Registrant hereby files the transition report
for the financial and other information about the three-month transition period
ended June 30, 1998 by incorporating by reference such information from the
Registrant's report on Form 10-Q for the quarterly period ended June 30, 1998,
as filed with the Commission on August 13, 1998.
-42-
<PAGE> 44
Hyperion Solutions Corporation
Form 8-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hyperion Solutions Corporation
/s/ Michael A. Manto 10/7/98
---------------------------------------------------
Michael A. Manto Date
Vice President and Corporate Controller
/s/ Stephen V. Imbler 10/7/98
---------------------------------------------------
Stephen V. Imbler Date
Senior Vice President and Chief Financial Officer
-43-
<PAGE> 45
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE
HYPERION SOLUTIONS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
========================================================================================================================
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
----------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended June 30, 1996
Allowance for doubtful accounts,
returns and discounts $2,708 1,428 3,070 1,918(b) $5,288
Valuation allowance for deferred tax
assets 8,379 486 2,321(c) 6,544
For the year ended June 30, 1997
Allowance for doubtful accounts,
returns and discounts $5,288 765 2,119 2,089(b) $6,083
Valuation allowance for deferred tax
assets 6,544 39 4,227(c) 2,356
For the year ended June 30, 1998
Allowance for doubtful accounts,
returns and discounts $6,083 1,297 4,000 2,488(b) $8,892
Valuation allowance for deferred tax
assets 2,356 129 326(c) 2,159
</TABLE>
(a) Charged to revenues
(b) Write-offs, returns and discounts, net of recoveries
(c) Recognition and adjustments
<PAGE> 46
HYPERION SOLUTIONS CORPORATION
EXHIBIT INDEX
Exhibit No. Description
- --------------------------------------------------------------------------------
3.2 Restated Certificate of Incorporation
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
23.2 Consent of Ernst & Young LLP, independent auditors
27 Financial Data Schedule
99.1 Text of Press Release dated August 24, 1998
<PAGE> 1
EXHIBIT 3.2
RESTATED
CERTIFICATE OF INCORPORATION
OF
ARBOR SOFTWARE CORPORATION
A Delaware corporation
(Pursuant to Sections 242, 245 and 248 of the
Delaware General Corporation Law)
ARBOR SOFTWARE CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies as follows:
FIRST: That the name of this corporation is Arbor Software Corporation,
and that this corporation was originally incorporated on April 12, 1991 pursuant
to the General Corporation Law.
SECOND: The amendment to the Restated Certificate of Incorporation of
the Corporation set forth in this Certificate of Amendment has been duly
adopted in accordance with the provisions of Section 242 of the Delaware
General Corporation Law by (a) the Board of Directors of the Corporation having
duly adopted a resolution setting forth such amendment and declaring its
advisability and submitting it to the stockholders of the Corporation for their
approval, and (b) the stockholders of the corporation having duly adopted such
amendment by vote of the holders of a majority of the outstanding stock
entitled to vote thereon at a meeting of stockholders called and held upon
notice in accordance with Section 222 of the Delaware General Corporation Law;
THIRD: The amendment to the Restated Certificate of Incorporation of
the Corporation set forth in this Certificate of Amendment shall be effective at
4:16PM EDT, August 24, 1998;
NOW, THEREFORE, BE IT RESOLVED, that the Restated
Certificate of Incorporation of the Corporation be amended and
restated in its entirety as follows:
ARTICLE I
The name of the corporation is Hyperion Solutions Corporation.
ARTICLE II
The address of the registered office of this corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
<PAGE> 2
ARTICLE III
The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
ARTICLE IV
This corporation is authorized to issue two classes of stock, to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares that this corporation is authorized to issue is Three
Hundred and Five Million (305,000,000) shares of capital stock. Of such
authorized shares, Three Hundred Million (300,000,000) shares shall be
designated "Common Stock," and have a par value of $0.001 per share, and
Five Million (5,000,000) shares shall be designated "Preferred Stock," and
have a par value of $0.001 per share.
The Preferred Stock may be issued from time to time in one or more
series, without further stockholder approval. The Board of Directors is
hereby authorized, in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any wholly unissued series of
Preferred Stock, within the limitations and restrictions stated in this
Restated Certificate of Incorporation, to fix or alter the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), the redemption price or
prices, and the liquidation preferences of any wholly unissued series of
Preferred Stock, and the number of shares constituting any such series and
the designation thereof, or any of them, and to increase or decrease the
number of shares of any series subsequent to the issue of shares of that
series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the
shares constituting such decrease shall resume the status that they had
prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
Except as otherwise provided in this Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, repeal,
alter, amend, and rescind any or all of the Bylaws of this Corporation.
ARTICLE VI
The number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (regardless of any
existing vacancies in previously authorized directorships at the time any
such resolution is presented to the Board for adoption).
<PAGE> 3
Directors shall be divided into three classes, as equal in number
as reasonably possible, with the term of office of the first class to
expire at the 1999 annual meeting of stockholders, the term of office of
the second class to expire at the 2000 annual meeting of stockholders and
the term of office of the third class to expire at the 2001 annual meeting
of stockholders. At each annual meeting of stockholders following such
initial classification and election, directors elected to succeed those
directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election. All directors shall hold office until the expiration of term for
which elected, and until their respective successors are elected and
qualified, except in the case of the death, resignation or removal of any
director. Directors need not be stockholders.
Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and not by stockholders, and the directors so chosen
shall hold office until the next annual election and until their successors
are duly elected and shall qualify, unless sooner displaced. If there are
no directors in office, then an election of directors may be held in the
manner provided by statute.
The business of the corporation shall be managed by or under the
direction of its board of directors, which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these bylaws directed
or required to be exercised or done by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the
Bylaws of this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be
kept (subject to any provision contained in the statues) outside the State
of Delaware at such place or places as may be designated from time to time
by Board of Directors or in the Bylaws of this corporation
ARTICLE IX
A director of this corporation shall, to the fullest extent
permitted by the Delaware General Corporation Law as it now exists or as it
may hereafter be amended, not be liable to this corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director. Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the effect of
this Article in respect of any matter occurring, or any cause of action,
suit or claim that, but for this
<PAGE> 4
Article, would accrue or arise, prior to such amendment, repeal or adoption
of an inconsistent provision.
ARTICLE X
No action required to be taken or that may be taken at any annual
or special meeting of the stockholders of this corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
ARTICLE XI
Section 1. The corporation shall hold harmless and indemnify any
person entitled to the benefits of indemnification pursuant to this Article
XI (such person being hereinafter referred to as "Indemnitee") to the full
extent authorized or permitted by the provisions of Section 145 of the
Delaware General Corporation Law, as amended (the "Law"), as such may be
amended from time to time, and by this Article XI, as such may be amended.
In furtherance of the foregoing indemnification, and without limiting the
generality thereof:
(a) Proceedings Other Than Proceedings by or in the Right of
the Corporation. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 1(a) if, by reason of his Corporate Status (as
hereinafter defined), he is, or is threatened to be made, a party to or
participant in any Proceeding (as hereinafter defined) other than a Proceeding
by or in the right of the corporation. Pursuant to this Section 1(a), Indemnitee
shall be indemnified against all Expenses (as hereinafter defined), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal Proceeding, had no reasonable cause to believe his
conduct was unlawful.
(b) Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to or participant in any Proceeding brought by or in the right
of the corporation to procure a judgment in its favor. Pursuant to this Section
1(b), Indemnitee shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; provided, however, that, if
applicable law so provides, no indemnification against such Expenses shall be
made in respect of any claim, issue or matter in such Proceeding as to which
Indemnitee shall have been adjudged to be liable to the corporation unless and
to the extent than the Court of Chancery of the State of Delaware shall
determine that such indemnification may be made.
<PAGE> 5
(c) Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Article XI, to
the extent that Indemnitee is, by reason of his Corporate Status, a party to and
is successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified to the maximum extent permitted by law against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the corporation shall indemnify Indemnitee against
all Expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. For purposes
of this Section 1 and without limitation, the termination of any claim issue or
matter in such a Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
Section 2. In addition to, and without regard to any limitations on,
the indemnification provided for in Section 1, the corporation shall indemnify
and hold harmless Indemnitee against all Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf if, by reason of his Corporate Status he is, or is threatened to be made,
a party to or participant in any Proceeding (including a Proceeding by or in the
right of the corporation), including, without limitation, all liability arising
out of the negligence or active or passive wrongdoing of Indemnitee. The only
limitation that shall exist upon the corporation's obligations pursuant to these
Bylaws or any indemnification agreement between the corporation and Indemnitee
shall be that the corporation shall not be obligated to make any payment to
Indemnitee that is finally determined (under the procedures, and subject to the
presumptions, set forth in Sections 6 and 7 hereof) to be unlawful under
Delaware law.
Section 3.
(a) Whether or not the indemnification provided in Sections 1
and 2 hereof is available, in respect of any threatened, pending or completed
action, suit or proceeding in which corporation is jointly liable with
Indemnitee (or would be if joined in such action, suit or proceeding),
corporation shall pay, in the first instance, the entire amount of any judgment
or settlement of such action, suit or proceeding without requiring Indemnitee to
contribute to such payment and corporation hereby waives and relinquishes any
right of contribution it may have against Indemnitee. The corporation shall not
enter into any settlement of any action, suit or proceeding in which corporation
is jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding) unless such settlement provides for a full and final release of all
claims asserted against Indemnitee.
(b) Without diminishing or impairing the obligations of the
corporation set forth in the preceding subparagraph, if, for any reason,
Indemnitee shall elect or be required to pay all or any portion of any judgment
or settlement in any threatened, pending or completed action, suit or proceeding
in which corporation is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Indemnitee in
proportion to the relative benefits received by the corporation and all
officers, directors or employees of the corporation other than
<PAGE> 6
Indemnitee who are jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), on the one hand, and Indemnitee, on the other hand,
from the transaction from which such action, suit or proceeding arose; provided,
however, that the proportion determined on the basis of relative benefit may, to
the extent necessary to conform to law, be further adjusted by reference to the
relative fault of corporation and all officers, directors or employees of the
corporation other than Indemnitee who are jointly liable with Indemnitee (or
would be if joined in such action, suit or proceeding), on the one hand, and
Indemnitee, on the other hand, in connection with the events that resulted in
such expenses, judgments, fines or settlement amounts, as well as any other
equitable considerations which the law may require to be considered. The
relative fault of corporation and all officers, directors or employees of the
corporation other than Indemnitee who are jointly liable with Indemnitee (or
would be if joined in such action, suit or proceeding), on the one hand, and
Indemnitee, on the other hand, shall be determined by reference to, among other
things, the degree to which their actions were motivated by intent to gain
personal profit or advantage, the degree to which their liability is primary or
secondary, and the degree to which their conduct is active or passive.
(c) The corporation shall fully indemnify and hold Indemnitee
harmless from any claims of contribution which may be brought by officers,
directors or employees of the corporation other than Indemnitee who may be
jointly liable with Indemnitee.
Section 4. Notwithstanding any other provision of this Article XI, to
the extent that Indemnitee is, by reason of his Corporate Status, a witness in
any Proceeding to which Indemnitee is not a party, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 5. Notwithstanding any other provision hereof, the corporation
shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in
connection with any Proceeding by reason of Indemnity's Corporate Status within
ten days after the receipt by the corporation of a statement or statements from
Indemnitee requesting such advance or advances from time to time, whether prior
to or after final disposition of such Proceeding. Such statement or statements
shall reasonably evidence the Expenses incurred by Indemnitee and shall include
or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to
repay any Expenses advanced if it shall ultimately be determined that Indemnitee
is not entitled to be indemnified against such Expenses. Any advances and
undertakings to repay pursuant to this Section 5 shall be unsecured and interest
free. Notwithstanding the foregoing, the obligation of the corporation to
advance Expenses pursuant to this Section 5 shall be subject to the condition
that, if, when and to the extent that the corporation determines that Indemnitee
would not be permitted to be indemnified under applicable law, the corporation
shall be entitled to be reimbursed, within thirty (30) days of such
determination, by Indemnitee (who hereby agrees to reimburse the corporation)
for all such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the corporation that Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the corporation for
any advance of Expenses until a final judicial determination is
<PAGE> 7
made with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed).
Section 6. It is the intent of the corporation to secure for Indemnitee
rights of indemnity that are as favorable as may be permitted under the law and
public policy of the State of Delaware. Accordingly, the following procedures
and presumptions shall apply in the event of any question as to whether
Indemnitee is entitled to indemnification
(a) To obtain indemnification (including, but not limited to,
the advancement of Expenses and contribution by the corporation), Indemnitee
shall submit to the corporation a written request, including therein or
therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Secretary of the corporation
shall, promptly upon receipt of such a request for indemnification, advise the
Board of Directors in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case by one of the following three methods, which shall be at
the election of Indemnitee: (1) by a majority vote of the disinterested
directors, even though less than a quorum, or (2) by independent legal counsel
in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 6(b) hereof, the
Independent Counsel shall be selected as provided in this Section 6(c). The
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board of Directors). Indemnitee or
the corporation, as the case may be, may, within 10 days after such written
notice of selection shall have been given, deliver to the corporation or to
Indemnitee, as the case may be, a written objection to such selection; provided,
however, that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 12 hereof, and the objection shall set form with
particularity the factual basis of such assertion. Absent a proper and timely
objection, the person so selected shall act as Independent Counsel. If a written
objection is made and substantiated, the Independent Counsel selected may not
serve as Independent Counsel unless and until such objection is withdrawn or a
court has determined that such objection is without merit. If, within 20 days
after submission by Indemnitee of a written retest for indemnification pursuant
to Section 6(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the corporation or Indemnitee may petition the Court of
Chancery of the State of Delaware or other court of competent jurisdiction for
resolution of any objection which shall have been made by the corporation or
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the court or by such
other person as the court shall designate, and the person with respect to whom
an objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 6(b) hereof. The corporation shall pay any and
an reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with acting pursuant to Section 6(b) hereof,
and the corporation shall pay an reasonable fees and expenses incident to
<PAGE> 8
the procedures of this Section 6(c), regardless of the manner in which such
Independent Counsel was selected or appointed.
(d) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification if
Indemnitee has submitted a request for indemnification in accordance with
Section 6(a) hereof. Anyone seeking to overcome this presumption shall have the
burden of proof and the burden of persuasion, by clear and convincing evidence.
(e) Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise. In addition, the knowledge and/or actions, or failure to act, of
any director, officer, agent or employee of the Enterprise shall not be imputed
to Indemnitee for purposes of determining the right to indemnification under
this Article XI. Whether or not the foregoing provisions of this Section 6(e)
are satisfied, it shall in any event be presumed that Indemnitee has at all
times acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(f) The corporation acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which Indemnitee is a party is resolved in
any manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have the burden of
proof and the burden of persuasion, by clear and convincing evidence.
(g) If the person, persons or entity empowered or selected
under this Article XI to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within thirty (30) days
after receipt by the corporation of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 30 day period
may be extended for a reasonable time, not to exceed an additional fifteen (15)
days, if the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating documentation and/or information relating thereto;
and provided, further, that the foregoing provisions of this Section 6(g) shall
not apply if the determination of entitlement to indemnification is to be made
<PAGE> 9
by the stockholders pursuant to Section 6(b) hereof and if (A) within fifteen
(15) days after receipt by the corporation of the request for such determination
the Board of Directors or the Disinterested Directors, if appropriate, resolve
to submit such determination to the stockholders for their consideration at an
annual meeting thereof to be held within seventy five (75) days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within sixty (60) days after having been so called and such determination is
made thereat.
(h) Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Independent Counsel member of the Board of Directors, or stockholder of the
corporation shall act reasonably and in good faith in making a determination
under any indemnification agreement related to the Indemnitee's entitlement to
indemnification. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the corporation
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the corporation shall indemnify and hold Indemnitee
harmless therefrom.
Section 7.
(a) In the event that (i) a determination is made pursuant to
this Article XI that Indemnitee is not entitled to indemnification hereunder,
(ii) advancement of Expenses is not timely made pursuant to Section 5 hereof,
(iii) no determination of entitlement to indemnification shall have been made
pursuant to Section 6(b) hereof within 90 days after receipt by the corporation
of the request for indemnification, (iv) payment of indemnification is not made
pursuant to the terms of this Article XI or any indemnification agreement
between the corporation and the Indemnitee within ten (10) days after receipt by
the corporation of a written request therefor, or (v) payment of indemnification
is not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 6 hereof, Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of his entitlement to such indemnification.
Indemnitee shall commence such proceeding seeking an adjudication within 180
days following the date on which Indemnitee first has the right to commence such
proceeding pursuant to this Section 7(a). The corporation shall not oppose
Indemnitee's right to seek any such adjudication.
(b) In the event that a determination shall have been made
pursuant to Section 6(b) hereof that Indemnitee is not entitled to
indemnification, any judicial proceeding commenced pursuant to this Section 7
shall be conducted in all respects as a de novo trial, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination.
(c) If a determination shall have been made pursuant to
Section 6(b) hereof that Indemnitee is entitled to indemnification, the
corporation shall be bound by such
<PAGE> 10
determination in any judicial proceeding commenced pursuant to this Section 7,
absent a prohibition of such indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section 7,
seeks a judicial adjudication of his rights under, or to recover damages for
breach of, the terms of this Article XI or any indemnification agreement between
the corporation and Indemnitee, or to recover under any directors' and officers'
liability insurance policies maintained by the corporation the corporation shall
pay on his behalf, in advance, any and all expenses (of the types described in
the definition of Expenses in Section 12 hereof) actually and reasonably
incurred by him in such judicial adjudication, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advancement of
expenses or insurance recovery.
(e) The corporation shall be precluded from asserting in any
judicial proceeding commenced pursuant to this Section 7 that the procedures and
presumptions of contained in this Article XI are not valid, binding and
enforceable and shall stipulate in any such court that the corporation is bound
by all the provisions of this Article XI.
Section 8.
(a) The rights of indemnification provided hereunder shall not
be deemed exclusive any other rights to which Indemnitee may at any time be
entitled under applicable law, the certificate of incorporation of the
corporation, any indemnification agreement between the corporation and
Indemnitee, a vote of stockholders or a resolution of directors, or otherwise.
No amendment, alteration or repeal of these Bylaws or of any provision hereof
shall limit or restrict any right of Indemnitee hereunder in respect of any
action taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. To the extent that a change in the Law, whether
by statute or judicial decision, permits greater indemnification than would be
afforded currently hereunder and any indemnification agreement between the
corporation and Indemnitee, it is the intent of the parties hereto that
Indemnitee shall enjoy the greater benefits so afforded by such change. No right
or remedy herein conferred is intended to be exclusive of any other right or
remedy, and every other right and remedy shall be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other right or remedy.
(b) To the extent that the corporation maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, or agents or fiduciaries of the corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person serves at the request of the corporation,
Indemnitee shall be covered by such policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any such
director, officer, employee or agent under such policy or policies.
(c) In the event of any payment pursuant to this Article XI or
any indemnification agreement between the corporation and Indemnitee shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all
<PAGE> 11
papers required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the corporation to bring
suit to enforce such rights.
(d) The corporation shall not be liable to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
Section 9. Notwithstanding any other provision of hereunder, Indemnitee
shall not be entitled to indemnification with respect to any Proceeding brought
by Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding
or making of such claim shall have been approved by the Board of Directors or
(b) such Proceeding is being brought by the Indemnitee to assert his rights as
set forth herein or in any indemnification agreement between the corporation and
Indemnitee.
Section 10. All agreements and obligations of the corporation contained
in this Article XI shall continue during the period Indemnitee is a director or
officer of the corporation (or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and shall continue
thereafter so long as Indemnitee shall be subject to any Proceeding (or any
proceeding commenced under Section 7 hereof) by reason of his Corporate Status,
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement. The terms of this Article XI shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business or assets
of the Company), assigns, spouses, heirs, executors and personal and legal
representatives. The terms of this Article XI shall continue in effect
regardless of whether Indemnitee continues to serve as a director or officer of
the corporation or any other enterprise at the corporation's request.
Section 11. To the extent requested by the Indemnitee and approved by
the Board of Directors, the corporation may at any time and from time to time
provide security to the Indemnitee for the corporation's obligations hereunder
through an irrevocable bank line of credit, funded trust or other collateral.
Any such security, once provided to the Indemnitee, may not be revoked or
released without the prior written consent of the Indemnitee.
Section 12. For purposes of this Article XI:
(a) "Corporate Status" describes the status of a person who is
or was a director, officer, employee or agent or fiduciary of the corporation or
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the express
written request of the corporation.
(b) "Disinterested Director" means a director of the
corporation who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
<PAGE> 12
(c) "Enterprise" shall mean the corporation and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is or was serving at the express written request
of the corporation as a director, officer, employee, agent or fiduciary.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, participating, or being or preparing to
be a witness in a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the corporation or Indemnitee in any matter material to either such party (other
than with respect to matters concerning the Indemnitee under this Article XI or
any indemnification agreement between the corporation and Indemnitee, or of
other indemnitees under similar indemnification agreements), or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
corporation or Indemnitee in an action to determine Indemnitee's rights under
this Article XI or any indemnification agreement between the corporation and
Indemnitee. The corporation agrees to pay the reasonable fees of the Independent
Counsel referred to above and to fully indemnify such counsel against any and
all Expenses, claims, liabilities and damages arising out of or relating to this
Article XI or any indemnification agreement between the corporation and
Indemnitee or its engagement pursuant hereto or thereto.
(f) "Proceeding" includes any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the corporation
or otherwise and whether civil, criminal administrative or investigative, in
which Indemnitee was, is or will be involved as a party or otherwise, by reason
of the fact that Indemnitee is or was a director of the corporation, by reason
of any action taken by him or of any inaction on his part while acting as a
director of the corporation, or by reason of the fact that he is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise; in
each case whether or not he is acting or serving in any such capacity at the
time any liability or expense is incurred for which indemnification can be
provided under any indemnification agreement between the corporation and
Indemnitee; excluding, however, any suit initiated by an Indemnitee pursuant to
Section 7 hereof to enforce his rights under this Article XI.
Section 13. If any provision or provisions of this Article XI shall be
held by a court of competent jurisdiction to be invalid, void, illegal or
otherwise unenforceable for any reason whatsoever: (a) the validity, legality
and enforceability of the remaining provisions of this Article XI (including
without limitation, each portion of any section of this Article XI containing
any such provision held to be invalid, illegal or unenforceable, that is not
itself
<PAGE> 13
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby and shall remain enforceable to the fullest extent permitted by law, (b)
to the fullest extent possible, the provisions of this Article XI (including,
without limitation, each portion of any section of this Article XI containing
any such provision held to be invalid, illegal or unenforceable, that is not
itself invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested thereby.
ARTICLE XII
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
* * * *
THIRD: The Restated Certificate of Incorporation as set forth above has
been duly adopted by this corporation's Board of Directors in accordance with
the provisions of Section 245 of the General Corporation Law of the State of
Delaware.
<PAGE> 14
IN WITNESS WHEREOF, ARBOR SOFTWARE CORPORATION has caused this Restated
Certificate of Incorporation to be signed by its President and attested to by
its Secretary this 24 day of August, 1998.
ARBOR SOFTWARE CORPORATION
/s/ John M. Dillon
---------------------------------
John M. Dillon
President and Chief Executive
Officer
ATTEST:
/s/ Robert V. Gunderson, Jr.
- -----------------------------
Robert V. Gunderson, Jr.
Secretary
<PAGE> 1
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 333-56765
and 333-61727) and in the Registration Statements on Form S-8 (Nos. 333-10697,
333-38871, and 333-62275) of Hyperion Solutions Corporation of our report dated
October 5, 1998 appearing in this Current Report on Form 8-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
October 9, 1998
<PAGE> 1
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Prospectuses constituting
part of the Registration Statements on Form S-3 (Nos. 333-56765 and 333-61727)
and in the Registration Statements on Form S-8 (Nos. 333-10697, 333-38871 and
333-62275) of Hyperion Solutions Corporation of our report dated July 17, 1997,
with respect to the financial statements of Hyperion Software Corporation for
the year ended June 30, 1997 included in this Current Report on Form 8-K.
/s/ Ernst & Young LLP
Stamford, Connecticut
October 9, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HYPERION SOLUTIONS CORPORATION FOR THE YEAR
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 221,868
<SECURITIES> 35,479
<RECEIVABLES> 107,652
<ALLOWANCES> 8,892
<INVENTORY> 0
<CURRENT-ASSETS> 374,159
<PP&E> 130,389
<DEPRECIATION> 54,247
<TOTAL-ASSETS> 476,665
<CURRENT-LIABILITIES> 156,126
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> 213,195
<TOTAL-LIABILITY-AND-EQUITY> 476,665
<SALES> 377,093
<TOTAL-REVENUES> 377,093
<CGS> 104,164
<TOTAL-COSTS> 324,802
<OTHER-EXPENSES> 220,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 641
<INCOME-PRETAX> 56,681
<INCOME-TAX> 21,924
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,757
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.13
</TABLE>
<PAGE> 1
EXHIBIT NUMBER 99.1
-------------------
FOR IMMEDIATE RELEASE
- ---------------------
HYPERION SOLUTIONS MERGER COMPLETED
CONTACTS:
Joanna McMillan, Hyperion Solutions
(408) 220-8075, [email protected]
Alan Mangelsdorf, Hyperion Solutions
(203) 703-3137, [email protected]
HYPERION SOLUTIONS MERGER COMPLETED
SUNNYVALE, CALIF., AND STAMFORD, CONN., AUGUST 24, 1998 - Arbor Software
Corporation (Nasdaq: ARSW) and Hyperion Software Corporation (Nasdaq: HYSW)
today announced the completion of the merger between the two companies.
The combined company will operate under the name Hyperion Solutions Corporation
and will begin trading under the symbol "HYSL" on the Nasdaq National Market on
Tuesday, Aug. 25, 1998.
ABOUT HYPERION SOLUTIONS
Hyperion Solutions Corporation (Nasdaq: HYSL), formed through the merger of
Hyperion Software and Arbor Software, is a leading provider of analytic
application software for reporting, analysis, modeling and planning. Hyperion's
family of packaged analytic applications, OLAP server, and developer and
end-user tools helps organizations maximize performance and gain competitive
advantage. Hyperion's products are in use by more than 4,000 customers
worldwide, including more than 60 percent of the Fortune 100 and 40 percent of
the Financial Times European Top 100. Hyperion Solutions has established
strategic partnerships with more than 300 leading data warehousing, OLAP tools,
services, ERP, packaged application, and platform vendors to extend the value of
the company's products and services and deliver maximum flexibility and choice
to customers. The company is headquartered in Sunnyvale, California and has more
than 1,800 employees in 26 countries. Information on Hyperion's products and
services is available at http://www.hyperion.com, [email protected], or
1-800-286-8000.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: This press release includes statements which may constitute
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although Hyperion Solutions
Corporation believes the expectations contained in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to be correct. This information may involve risk and uncertainties that
could cause actual results to differ materially from the forward-looking
statements. Factors which could cause or contribute to such differences include,
but are not limited to, factors detailed in the Company's Securities and
Exchange Commission filings.
# # #
