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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-27030
INFINIUM SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
MASSACHUSETTS 04-2734036
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25 COMMUNICATIONS WAY, HYANNIS, MA 02601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 778-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01
(TITLE OF CLASS)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant based upon the closing price of such stock as reported on the Nasdaq
National Market on November 19, 1998, was $71,762,474.
As of November 19, 1998, 12,606,745 shares of the registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Specifically identified information in the registrant's definitive proxy
statement for its Annual Meeting of Stockholders which is currently expected to
be held on February 5, 1999, to be filed pursuant to Regulation 14A, is
incorporated by reference into Part III of this Form 10-K. Portions of the
registrant's 1998 Annual Report to Stockholders for the fiscal year ended
September 30, 1998 are incorporated by reference into Parts II and IV hereof.
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PART I
ITEM 1. BUSINESS
All statements contained herein that are not historical facts, including
but not limited to, statements regarding anticipated future capital
requirements, the Company's future products and product development plans, the
Company's ability to obtain debt, equity or other financing, and the Company's
ability to generate cash from operations, are based on current expectations.
These statements are forward looking in nature and involve a number of risks and
uncertainties, as more fully described under "Factors Affecting Future
Performance" in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Actual results may differ materially.
Infinium Software, Inc. (the "Company", "Infinium Software" or "Infinium")
develops, markets and supports enterprise-level business software applications
for dynamic growing organizations (typically companies with revenues of $25
million to $5 billion). The Company has two primary product lines. One product
line is designed exclusively for AS/400 servers. These applications capitalize
on native IBM AS/400 capabilities to automate the financial management, human
resource management and materials management functions of organizations in a
broad range of industries worldwide. The Company also offers a specialized
AS/400 manufacturing system designed to manage process manufacturing operations.
The Company's second product line is designed exclusively for Microsoft Windows
NT servers. These applications capitalize on native Microsoft Windows NT
capabilities to automate the financial management and human resource management
operations of service organizations. Additional Microsoft Windows NT
applications are under development and expected to be available during 1999. The
Company's more than 1,800 customers include Abbott Laboratories, Circus Circus
Enterprises, Coca-Cola Enterprises, Warner Bros. Records, Mirage Resorts, and
MCA/Universal Studios.
INDUSTRY BACKGROUND
For many years businesses have used packaged software applications to
cost-effectively automate back-office accounting and payroll functions.
Recently, heightened competitive pressures and rapidly changing market
conditions have forced many organizations to reduce costs, increase the
productivity of their personnel and become more responsive to customer
requirements. In addition, many dynamic growing companies have expanded their
operations and now require software applications that support more product
lines, international operations and a larger workforce. These businesses also
are demanding applications that take advantage of the capabilities of the
Internet to manage relationships with their employees, customers, partners and
suppliers. As a result, businesses are replacing their existing accounting,
human resource and payroll software applications with new, more flexible
systems. These new systems are designed to not only keep track of basic
accounting records but also provide best practice capabilities to monitor and
measure the operational performance of the business.
There have also been advances in technology which have stimulated the
replacement and augmentation of enterprise business applications. Network
centric computing has become the standard business computing environment,
incorporating personal computers for user interaction networked together with
large servers for database computing, internet access, email routing, workflow
processing, and other capabilities. IBM commonly refers to this collection of
technologies as e-Business. Microsoft commonly refers to this technology as DNA,
Distributed iNternet Architecture. The network centric environment facilitates
widespread access from both within the organization and from outside the
organization via the Internet by business professionals seeking access to
corporate information. This information is presented through an easy-to-use
graphical user interface and integrates with commonly used desktop productivity
tools such as spreadsheets, all while allowing the enterprise business
applications to be more readily customized to meet changes in business
requirements. In addition, there is a preference among users of enterprise
business systems to acquire entire suites of integrated applications that are
designed to work together rather than to purchase single components, such as a
general ledger or accounts payable system.
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The requirement for more flexible business applications and the resulting
shift to network centric computing has created a strong demand for new software
applications for financial management, human resources and other areas of
business. For example, International Data Corporation ("IDC") estimates that the
worldwide market for accounting software across all platforms is in excess of
$6.12 billion in 1998 and is predicted to grow at a 14.8% compounded annual rate
through 2002 with projected spending of approximately $10.5 billion in 2002.
There is an additional factor driving the demand for new business
application software packages. Many businesses today use financial, human
resources and other application software systems that were either developed by
their own internal information systems staff or were acquired in the 1970's or
1980's. Such systems may not be able to process transactions beginning in the
year 2000, since they were programmed to assume that every year begins with
'19xx'. These systems must now be revised or replaced in order to prevent a
business interruption. Many businesses are choosing to replace their older or
internally developed systems with purchased application software that has been
designed to support processing in the year 2000 and beyond.
With over 500,000 systems installed, the IBM AS/400 is one of the world's
most popular business computing systems. Shipments of new AS/400 systems in 1998
are estimated at approximately 60,000 units, partly as the result of new models
introduced by IBM which offer improved price performance and more industry
standard "open" features. These new models include networking capabilities to
facilitate electronic commerce, multi-processor architectures and expanded
interoperability with other systems, all of which facilitate the use of the
AS/400 as a server in a network centric computing architecture. The Company
believes that the AS/400 is widely used because of the large number of business
application software packages available for it and because fewer skilled
technical professionals are required to implement and maintain it, resulting in
a lower cost of ownership compared to other systems. This is important in
today's market, where organizations must implement and support business
applications with fewer, more productive resources than ever before.
The Microsoft Windows NT server is currently the fastest growing computing
platform for business applications. The Company believes that NT will rapidly
become the most popular application software platform for dynamic growing
organizations. According to IDC, the markets for NT based financial and human
resources applications are expected to grow at an annual rate of 32% and 46%,
respectively, through the year 2002. The Company believes that Microsoft Windows
NT is being widely accepted because of the market dominance of Microsoft, the
low cost of ownership of NT servers, and the benefits of integration with other
Microsoft technologies and software applications.
THE INFINIUM SOFTWARE SOLUTION
Infinium Software is a provider of enterprise-level business software
applications for dynamic growing organizations. The Company offers two separate
application product lines. It provides applications for the financial
management, human resource management and materials management functions of
dynamic growing organizations that use IBM AS/400 servers. The Company also
offers a fully integrated solution for process manufacturing operations.
Infinium's AS/400 products run in either a network centric or a traditional
host/terminal configuration.
In 1997, the Company began offering applications that automate the finance
operations of organizations that utilize the Microsoft Windows NT servers. In
June 1998, the Company launched an NT Human Resource product line, designed to
automate workforce management, and acquired an NT Payroll solution.
The Company's products enable businesses to automate their financial
management, human resource management, materials management and process
manufacturing operations with highly functional software
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products that afford them the flexibility and ease of use of network centric
computing while retaining low cost of ownership. Infinium's products are
designed based on the following principles:
AS/400 PRODUCT LINE:
- ROBUST FUNCTIONALITY AND SCALABILITY. Infinium's products are designed
to provide high-end features and transaction processing functionality
while providing flexibility and ease of use features that have not been
attained on mainframe platforms. In addition, the Company's products
operate in integrated suites of applications which provide users with a
consistent user interface and the ability to easily access data and
perform operations that span multiple applications. The Company's
products are scalable to support increasing and changing levels of
operations as customers' businesses expand.
- HIGH DEGREE OF FLEXIBILITY. Infinium's products are designed to function
within a wide range of organizations. Infinium enables individual users
to customize their desktop environments to respond to business changes
and to streamline their daily operations. For example, the Company
believes the flexible chart of accounts scheme within its General Ledger
product facilitates monitoring the performance of a wide range of
operating and financial measurements as well as record keeping for
accounting and financial statement purposes.
- YEAR 2000 SUPPORT. The Company's financial management and human
resources product lines have been designed from the beginning to support
processing in the Year 2000 and beyond. The Company's materials
management and process manufacturing product lines have been revised to
support Year 2000 processing. The Company is continuing to validate its
products' ability to support Year 2000 processing.
- SUPERIOR DATA ACCESS AND ANALYSIS THROUGH OBJECT-ORIENTED USER
INTERFACE. The Company's AS/400 product line is designed to allow
business professionals to "mine" the information contained in the
application databases without knowledge of the underlying database
structure. The Company's "drag and drop" object-oriented user interface
represents the underlying data in the form of graphical icons and allows
the end user to interactively access data by manipulating the icons.
- INTERNET/INTRANET EXTENSIONS. The Company's e-Business extensions allow
Infinium customers to extend application functionality to their
employees, customers, partners and suppliers through the Internet or
their internal intranet. For example, employees are provided with secure
access to their personnel information via the Internet/Intranet. Infinium
e-Business extensions utilize IBM's Lotus Domino technology, running on
the AS/400 or other supported Domino platforms, to extend the
functionality of Infinium business to connect employees, customers,
partners and suppliers to manage relationships, lower transaction costs
and optimize business practices.
- PRODUCTS OPTIMIZED FOR THE AS/400. Infinium Software currently has a
line of products specifically designed for the AS/400 computing
environment. The Company's products take full advantage of the many
unique characteristics of the AS/400 operating system and database to
maximize performance for its customers.
WINDOWS NT PRODUCT LINE:
The Company's product line for Windows NT servers is the result of a
combination of internal development and acquired technology. In January 1997,
the Company acquired Time Open Systems, Ltd. ("Time"), a privately-held
application software company based in Chatham, England. The products acquired
from Time form the foundation for the Company's Financials for Microsoft Windows
NT product line and its OneBook design. Subsequent to the acquisition, Infinium
significantly enhanced the product and introduced Infinium Financials for
Microsoft Windows NT in September 1997.
In June 1998, the Company introduced its new Human Resource Management
application, Infinium Human Resources for Microsoft Windows NT. The product's
OneForce design offers unique capabilities in
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workforce management, giving companies using it the ability to track the skills
and competencies of their entire workforce, including employees, applicants,
contractors, and retirees. The OneForce design enables strategic management of
individuals and dynamic, cross-functional teams. In June 1998, the Company
acquired Cort Directions, Inc. ("Cort"), a privately held application software
vendor based in Bend, Oregon which offered a robust payroll application for
Microsoft Windows NT servers. The payroll system complements the OneForce design
of the human resource management system.
In addition to Infinium Financials for Microsoft Windows NT and Infinium
Human Resources for Microsoft Windows NT, the Company is currently developing
new purchasing and inventory systems specifically designed and optimized for
Microsoft Windows NT.
The design principals behind the Windows NT applications include:
- TOTAL TEAM MANAGEMENT THROUGH THE ONEFORCE DESIGN. Infinium's Human
Resources for Microsoft Windows NT features a design that delivers
instant access to one integrated source of workforce information from
anywhere, at any time. The OneForce design provides up-to-the-minute,
multiple profile access of an individual in an organization's workforce,
regardless of current employment status, that flows back to a single
portfolio of available talent. This design gives managers the knowledge
and power to build and deploy world-class teams at the click of a mouse.
Infinium believes service-based, team-oriented organizations looking to
optimize the utilization of available workforce talent, skills, and
knowledge will benefit from this design.
- LOW COST, BEST-PRACTICE SELF-SERVICE CAPABILITIES. Infinium's Human
Resources for Microsoft Windows NT offers employee and manager
self-service capabilities including Internet, intranet, and kiosks to
enable remote users to easily retrieve data, update employee records and
communicate with managers. The self-service capabilities help
organizations dramatically reduce costs and errors associated with manual
procedures. In addition, the OneForce design features time saving,
collaborative workflow processes triggered by user-defined events.
- BEST-PRACTICE ACCOUNTING THROUGH THE ONEBOOK DESIGN. Infinium's
Financials for Microsoft Windows NT features a design that delivers
real-time financial management to dynamic growing organizations. All
subledgers (such as accounts payable, accounts receivable) immediately
post to the General Ledger system giving operating and financial managers
the ability to always know where the company stands as of the last
transaction without having to go through time consuming batch updates and
adjustments at month end closes. The major advantage of this OneBook
design is that time-consuming monthly closing cycles are substantially
reduced.
- PROJECT ACCOUNTING & CUSTOMER PROFITABILITY. The Company's Financials
for Microsoft Windows NT product has been designed for dynamic growing
project-oriented service businesses. Companies that need to determine
customer profitability by attributing associated revenues and expenses to
a particular project or customer can easily do so with the Job Management
module of the Company's Financials for Microsoft Windows NT product.
- FLEXIBLE BUSINESS RULES. The Company's Financials for Microsoft Windows
NT products can be tailored to meet the specific needs of an organization
quickly with business rules that are delivered with the applications. The
application business rules can be modified by customers without changing
the source code of the application. This design allows changes to be made
without corrupting future enhancements delivered by the Company.
- OPTIMIZED FOR MICROSOFT WINDOWS NT. The Company has chosen to design and
optimize its products exclusively on the Microsoft Windows NT operating
system. The applications are built on Microsoft's DNA (Distributed
iNternet Architecture) and take full advantage of Microsoft's Backoffice
suite of products and technologies. The Company believes that optimizing
its applications for use solely on Windows NT servers gives it an
advantage over competitors whose applications are ported from UNIX or
other operating systems.
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- YEAR 2000 SUPPORT. The Company's Microsoft Windows NT products are
designed to support processing in the year 2000 and beyond. The Company
is continuing to validate its products' ability to support Year 2000.
STRATEGY
Infinium Software's objective is to be a leading provider of business
software applications for dynamic growing organizations. The Company believes
that the Microsoft Windows NT and the IBM AS/400 servers will be the two most
popular application software platforms for dynamic growing organizations because
they offer customers the lowest cost-of-ownership. These integrated computing
platforms shield customers from significant systems integration work and are
valued by resource-constrained organizations.
The Company's AS/400 products are specifically designed and optimized for
use on the AS/400 operating system and database platforms for enterprise-level
use. Likewise, the Company's NT products are specifically designed and optimized
for use on the Microsoft Windows NT operating system and accompanying
components. The Company believes that application software products deliver the
best performance and reliability only when they are designed for specific target
computing platforms, and that products written in a "one size fits all" manner
to run on multiple platforms perform poorly on platforms other than the one for
which they were designed. The Company is committed to enhancing its core
competencies in the areas of financial management, human resource management,
materials management and process manufacturing and delivering systems which can
interoperate with other applications within an organization. The key elements of
the Company's strategy are:
- BECOME A LEADING APPLICATION SOFTWARE SUPPLIER TO SERVICES INDUSTRIES.
The Company's strategy is to increase its marketing activities and focus
them on gaining market share in selected services industry sectors. The
Company believes that the effective management of professional knowledge
workers is becoming a critical requirement for success among service
organizations, especially business and professional service
organizations. Consequently, the Company believes its NT-based product
line, revolving around its innovative human resource management system
written with the OneForce design, offers significant competitive
advantage to companies using it to make sure they match the right skills
and competencies with the needs of their clients.
- PROVIDE NETWORK CENTRIC SOLUTIONS TO THE AS/400 MARKET. The Company
targets dynamic growing organizations that use the IBM AS/400 server and
plan to capitalize on network centric capabilities. The Company's server
products were initially designed for the AS/400 and the Company had
traditionally served the AS/400 market exclusively. The Company has added
new capabilities to its AS/400 products supporting network computing. The
Company believes that it has established a strong reputation and a loyal
base of more than 1,400 customers within the AS/400 market, which it
intends to continue to leverage with its new products.
- PROVIDE INDUSTRY-LEADING APPLICATIONS FOR MICROSOFT WINDOWS NT
SERVERS. The Company's strategy is to focus a significant part of its
new product development efforts on the Microsoft Windows NT server
market, similar to the strategy it used to establish its position in the
AS/400 market. The Company introduced its Financials for Windows NT
series of products in fiscal 1997, its Human Resources and Payroll
applications in fiscal 1998, and intends to build as well as acquire
additional application products for the Microsoft Windows NT platform in
fiscal 1999.
- BUILD LONG TERM COMPETITIVE ADVANTAGE FOR ITS MICROSOFT WINDOWS NT
PRODUCTS THROUGH USE OF NATIVE MICROSOFT CORE TECHNOLOGIES. The Company
believes that as the Microsoft Windows NT environment becomes more mature
as an enterprise application software platform, customers will demand
that applications take maximum advantage of all of NT's system
capabilities. To deliver optimal systems capabilities, Infinium is
designing its new internally-developed applications to be native to the
Windows NT "DNA" technologies. The Company believes this design strategy
will become an increasingly important purchasing criteria in the market
for NT business applications, and that cross-platform applications or
applications ported from UNIX will be at a disadvantage to applications
designed expressly for the Microsoft DNA environment.
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- INVEST TO DELIVER PRODUCT FEATURE/FUNCTION LEADERSHIP. The Company plans
to continuously enhance its products to respond to changes in customer
requirements, improve functionality and performance, and incorporate
relevant new technologies. In particular, the Company plans to deliver
numerous enhancements to its Windows NT products, and incorporate
Domino-based workflow and e-Business extensions for its AS/400 products.
- PROVIDE WORLD CLASS IMPLEMENTATION CAPABILITIES. The Company is
continuing to invest in its people, infrastructure, and methodology to
insure that our applications are implemented in a rapid, professional
manner, as well as aggressively hiring experienced consulting
professionals to maintain the growth and quality of the services
business. The Company believes that customers select Infinium for its
ability to provide a total solution with the right combination of
software, consulting services, and professional customer support.
- EXTEND THE CAPABILITIES OF PRODUCTS THROUGH COMPLEMENTARY RELATIONSHIPS
AND ALLIANCES. The Company will continue to develop relationships with
third parties that provide software products that add value to the
solution offered by the Company. Furthermore, the Company will continue
to develop relationships with service providers who can supplement the
Company's staff and assist in installing and customizing the Company's
products and addressing customers' networking needs.
- INCORPORATE INTERNET TECHNOLOGIES. Infinium's Human Resources for
Microsoft Windows NT is a complete Internet application. Through the
Company's e-Business extensions, the Company has released enhancements to
its AS/400 products that will enable them to operate over the Internet
and within corporate intranets. The Company is also utilizing World Wide
Web technologies to provide its customers with rapid and low-cost access
to customer support and service applications through its electronic
customer support offerings called Infinium Link and Infinium Weblink.
PRODUCTS
Infinium Software offers enterprise-level business software applications
designed to automate the back-office operations of dynamic growing
organizations. The Company's products can function as stand-alone applications
or as integrated suites of applications and may be interfaced with products from
other vendors. The Company offers business applications that automate the
financial management, human resources management, materials management and
process manufacturing functions.
AS/400 PRODUCT LINE
The Company's AS/400 series of products are server-based products that can
function in a traditional host/terminal configuration or in a network centric
configuration with a graphical user interface on the users' desktop. The
Company's Infinium Advanced Desktop object-oriented software products can be
added to the AS/400-based Financial Management, Human Resources or Materials
Management product lines to provide a network centric computing architecture. In
this configuration, some of the product functions traditionally provided by the
AS/400 host application are distributed to the users' personal computers,
providing more intuitive data access and analytical capabilities. The Infinium
Advanced Desktop and Desktop Manager products run under the Microsoft Windows
3.1, Windows 95, Windows 98, and Windows NT operating systems for personal
computers.
The Infinium Advanced Desktop product line is designed to allow business
professionals to "mine" the information contained in the application databases
without knowledge of the underlying database structure. The Company believes
that Infinium's "drag and drop" object-oriented user interface is an advance
over standard graphical user interfaces because it represents the underlying
data in the form of graphical icons and allows the user to interactively access
data by manipulating the icons. For example, a user can simply drag the Vendor
icon and drop it on an Invoice icon to see the invoice data for that particular
company. Successive drag and drop operations can take the user to successively
lower levels of detail as needed. In addition, the data in an Infinium
application can be easily moved into popular spreadsheets or word processors for
incorporation into reports or presentations. As a result, users spend less time
searching for data and can devote more time to
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analysis and decision making. The Company believes that its object-oriented user
interface represents a competitive advantage in the business application
software market.
The Company believes that the Infinium Advanced Desktop and Desktop Manager
architecture, which allows the Company's AS/400 applications to function as
either traditional host/terminal applications or object-oriented network centric
applications, provides the Company's base of more than 1,400 customers with a
means of migrating to network centric without replacing their existing Infinium
AS/400 business applications. This also offers a competitive solution to
customers seeking to combine the benefits of network centric computing with the
performance, stability and low cost of ownership of an AS/400 server-based
architecture.
The AS/400 product suites and included applications currently offered by
Infinium Software are as follows:
FINANCIAL MANAGEMENT
Infinium FM Advanced
General Ledger
Payables Ledger
Accounts Receivable
Fixed Assets
Currency Management
Global Taxation
Project Accounting
MATERIALS MANAGEMENT
Infinium MM Advanced
Purchase Management
Inventory Control
Order Processing
HUMAN RESOURCES/PAYROLL
Infinium HR Advanced
Payroll
Human Resources
Flexible Benefits
Training Administration
Occupational Health
PROCESS MANUFACTURING
Regulatory Management
Formula Management
Advanced Planning
Manufacturing Control
Laboratory Analysis
FINANCIAL MANAGEMENT. The Company's Financial Management products provide
key financial management and accounting functions for dynamic growing
organizations and business units of large companies. Infinium Financial
Management provides these applications with icon-based user access to the
underlying accounting, statistical and performance data through graphical "drag
and drop" operations. The Company's primary Financial Management applications
are currently available in English, French, German, Dutch and Spanish versions
for multi-national and international businesses. The current list license fees
for Financial Management server products range from $8,000 to $300,000 per
application. License fees vary based on a number of factors, including hardware
configuration, number of users and application options licensed.
HUMAN RESOURCES/PAYROLL. The Company's Human Resources/Payroll products
are designed to handle the requirements of dynamic growing organizations and
business units of large companies. For example one customer produces payroll for
more than 160,000 employees weekly using Infinium Software's Human Resources
products. Infinium HR Advanced provides these applications with icon-based user
access to the underlying accounting, statistical and performance data through
graphical "drag and drop" operations. While the Company offers versions of its
Human Resources systems for use around the world, the Payroll system is
localized and currently available for use in the United States, Canada, United
Kingdom, Australia, New Zealand, Spain, Sweden, Indonesia, Malaysia,
Philippines, and Thailand. The current list license fees for Human
Resources/Payroll server products range from $9,000 to $292,000 per application.
License fees vary based on a number of factors, including hardware
configuration, number of users and application options licensed.
MATERIALS MANAGEMENT. The Company's Materials Management products are
targeted mainly to non-manufacturing businesses, such as hospitals, hotels,
transportation companies, service organizations and utilities. These products
integrate closely with the Financial Management product line, and are often
considered an extension of the core financial applications. The current list
license fees for Materials
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Management products range from $15,000 to $191,000 per application. License fees
vary based on a number of factors, including hardware configuration, number of
users and application options licensed.
PROCESS MANUFACTURING. The Company's Process Manufacturing products cover
a full range of formula-based process manufacturing operations. These products
are fully integrated with the Company's Financial Management product line. The
current list license fees for Process Manufacturing products range from $15,000
to $191,000 per application. License fees vary based on a number of factors,
including hardware configuration, number of users and application options
licensed.
WINDOWS NT PRODUCT LINE
The Company offers enterprise-level business software applications for
Microsoft Windows NT servers designed to automate the back-office and workforce
management operations of dynamic growing organizations. The Company's products
can function as stand-alone applications or as integrated suites of applications
and may be interfaced with products from other vendors. The Company currently
offers internally developed Microsoft Windows NT business applications that
automate the human resource management, payroll and financial management
functions, and is currently developing its purchasing and inventory applications
for Microsoft Windows NT.
The Company's Microsoft Windows NT series of products are designed and
built for a Microsoft-standard architecture. Infinium's applications take full
advantage of Microsoft Back Office technologies, including Windows NT, ActiveX,
and Microsoft Transaction Server. The applications operate with the Microsoft
SQL Server database on Windows NT. In addition, the Company's Windows NT
applications will operate with the Oracle database on all supported Oracle
platforms, including Microsoft Windows NT.
The Company's Financials for Windows NT applications are designed to give
corporate accounting departments and end users the ability to make better
business decisions and give faster responses, improving an organization's
ability to react quickly to changes in their business. Infinium's OneBook design
provides users with a single unified accounting system that improves the
efficiency and quality of information while significantly reducing the time and
costs of the monthly accounting closing cycle. All transactions recorded in the
detail ledgers (such as accounts payable, accounts receivable, etc.) are
immediately posted to the summary records in the general ledger. In this way,
the books are always up-to-date. Separate closing and reconciliation steps are
significantly removed. Accounting and operating managers can see business
activity and results at any time without needing to wait for a monthly closing
and reporting cycle. The OneBook design turns accounting systems into a real
time financial management system. The Company believes that the OneBook
capabilities provide a competitive advantage both to Infinium and to its
customers.
The Company released its Human Resources for Windows NT applications in
1998. They allow businesses to automate the management of their entire workforce
using the OneForce design. The applications have been designed to include
features that support many of the emerging trends in human resource management,
including numerous sophisticated compensation planning and management features,
skill and competency-based tracking and querying, robust performance management
and monitoring features for both individuals and teams, extensive use of
Internet/intranet capabilities, employee and manager self service and numerous
other capabilities. Infinium has optimized the Human Resource solution for
professional service organizations whose primary asset is human capital -- the
skills and knowledge of their workforce. Infinium's Human Resources for NT
allows users to search their talent pool and manage relationships within the
entire workforce to strategically deploy the right team to the right project at
the right time.
Infinium's acquisition of Cort in 1998 added a comprehensive payroll system
to augment the Human Resources for Microsoft Windows NT application suite. The
Cort Payroll system is designed to easily manage the most complex payroll
requirements, including job-based pay, cash and non-cash compensation
processing, multi-state taxing issues, retroactive pay, and non-standard pay
cycles. The payroll system features user-defined, rules based processing
capabilities, allowing users to customize the system for their unique
requirements without the need for custom programming or IS department support.
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Infinium believes that there have been dramatic changes in the workforce
over the past few years. Use of third party workers at all levels has risen
dramatically, yet most Human Resource systems are designed for tracking and
managing only employees or potential employees. Likewise, employee compensation
and benefit policies have changed and are no longer driven by longevity of
employment. Many industries are facing a shortage of skilled workers. The
Infinium Human Resources for NT product line was designed to help dynamic
growing organizations manage these and many other human resource management
issues as we approach the 21st century.
<TABLE>
<S> <C>
INFINIUM FINANCIALS FOR MICROSOFT WINDOWS NT HUMAN RESOURCES FOR MICROSOFT WINDOWS NT
Infinium Ledger Infinium Personnel
Infinium Payables Infinium Benefits Administration
Infinium Receivables Infinium Skill & Competency Management
Infinium Job Management Infinium Performance Management
Infinium Cash Book Infinium Recruiting
Infinium Compensation Management
Infinium Payroll
</TABLE>
CUSTOMER SUPPORT AND PRODUCT MAINTENANCE
The Company believes that providing a high level of support to its
customers is a critical requirement for customer satisfaction and the long-term
success of the Company. The Company believes that it has established a strong
history of responsiveness to customer requirements and a high level of support,
which has resulted in a loyal customer base. As of September 30, 1998, the
Company had 94 employees in its customer support operations.
The Company provides product updates and enhancements and customer support
services under an annual maintenance agreement. Initial maintenance fees are
based on a percentage of the list price of the licensed software products. The
renewal rate for annual maintenance agreements with customers for the Company's
products has been in excess of 90% for each of the previous three fiscal years.
The Company's primary customer support center is located at the Company's
headquarters in Hyannis, Massachusetts. The Company also maintains support
operations in Bend, Oregon supporting the NT Payroll customers, and in its
United Kingdom and Singapore offices, servicing customers outside North America.
First-line support services for customers outside North America and the United
Kingdom are typically provided by the Company's independent distributors for
those areas. The Company also offers an electronic support capability, called
"Infinium Link," which is accessible over the Internet. It allows customers to
have 24 hour, 7 day per week access to product release information, product
bulletins and updates, and tip and technique information as well as to pursue
ordinary customer support dialogues.
CONSULTING AND EDUCATION SERVICES
Infinium Software's consulting services organization provides fee-based
services, including implementation assistance, project management, application
extension or customization, integration with existing customer applications and
similar services to the Company's customers. The Company also trains and
certifies third-party organizations, such as consulting firms and system
integrators, to complement the Company's own service operation. The Company has
developed an implementation methodology called the ROI Methodology ("Return On
Investment") which offers a structure for companies together with Infinium to
rapidly implement the Company's solutions. The objective of the methodology is
to provide a proven implementation roadmap, that together with the Company's
business know how and expertise, facilitates a rapid implementation which
accelerates an organization's return on its software investment. The Company
believes that it is able to differentiate itself on its level of service, the
speed of implementation and the quality of personnel that it provides to
customers during the implementation cycle. The Company had 130 employees in its
consulting services organization as of September 30, 1998.
9
<PAGE> 11
The Company offers a comprehensive series of fee-based training courses to
its customers. Courses can be taken at the Company's headquarters in Hyannis,
Massachusetts, or at regional training centers in the Atlanta, Boston, Chicago,
Los Angeles, Oregon, London and Toronto metropolitan areas. Course offerings can
also be delivered at a customer's site.
CUSTOMERS
The Company's products are used by more than 1,800 customers in a wide
range of industries. No single customer accounted for 10% or more of revenue in
fiscal years 1996, 1997 or 1998. A representative list of current major
customers, segmented by industry concentration, who are currently active on
maintenance with the Company and who have generated at least $100,000 in total
revenue during the last five years, is shown below:
AUTOMOTIVE
Discount Auto Parts
Mazda Motor of America
Porsche Cars North America
Rolls-Royce Motor Cars
Volvo North America
CONSUMER PRODUCTS
Nintendo of America
NordicTrack
Playtex Apparel
Timberland
Lost Arrow
FINANCIAL AND INSURANCE SERVICES
Blue Cross and Blue Shield of Maryland
Countrywide Credit Industries
The FINOVA Group
Texas Workers Insurance Compensation Fund
Experian Information Systems
HEALTH CARE
Tenet Healthcare
Catholic Healthcare West
Landmark Medical Center
Optima Health
York County Hospital
MANUFACTURING
Alberta-Pacific Forest Industries
Crown Cork & Seal Company
General Electric Canada
Harley-Davidson
Saint Gobain Corporation
RESTAURANTS
Arby's
Baskin Robbins
Brinker International
McDonalds
Red Robin
COMMUNICATIONS
Hearst Magazines
MCA/Universal Studios/MCA Records
Newsweek Data Center
USA Network
Warner Bros. Records
DISTRIBUTION AND TRANSPORTATION
BOC Distribution Services
Burlington Motor Carriers
M.S. Carriers
Caliber Logistic Systems
Maverick Transportation
FOOD AND BEVERAGE PROCESSING
Blue Diamond Growers
Coca-Cola Enterprises
Sunkist Growers
Sysco
Universal Foods
HOSPITALITY
Circus Circus Enterprises
Promus Hotels
Harrah's
MGM Grand Hotel
Mirage Resorts
BUSINESS AND PROFESSIONAL SERVICES
Wackenhut Corporation
Keane
Todd AO Corporation
Woodbridge Engineering
BPI Financial Corporation
UTILITIES
Northwestern Public Service Company
Southern Union Company
Florida Public Utilities Co.
Buckeye Pipeline Company
Pacific Energy
10
<PAGE> 12
SALES AND MARKETING
The Company offers its products and services through direct sales and
business partner channels throughout the world.
Regional sales and consulting services offices are located in Atlanta,
Boston, Chicago, Los Angeles, Oregon, London, Toronto and Singapore. In
addition, the Company has authorized resellers that license Infinium
applications directly to customers. The Company also has a telesales operation
that markets training and consulting services to the Company's existing customer
base. The Company conducts comprehensive marketing programs that include
advertising, direct mail, telemarketing, seminars, public relations, trade shows
and customer relations. The Company's sales and marketing organizations
consisted of 182 employees as of September 30, 1998.
The Company believes that its continued growth and profitability will
require it to expand its existing domestic and international sales channels. The
Company's strategy is to substantially expand its direct sales operations and
its network of independent distributors to provide a greater worldwide sales and
marketing presence for its products. The Company currently has relationships
with distributors, agents, and resellers world-wide.
PRODUCT DEVELOPMENT
The Company devotes substantial resources to research and development in
order to enhance and maintain the competitiveness of its products. The Company's
research and development priorities fall into two principal areas: first, the
development of versions of the Company's products that operate on Microsoft
Windows NT, including development of new features and functions for the existing
NT applications, development of new NT applications and integration with third
party products running on Windows NT; and second, AS/400 product enhancements,
including the development of new product features and functions, the
incorporation of Internet/intranet-related technologies, the further
internationalization of the Company's product lines and integration with third
party complementary products.
The Company maintains multiple research and development operations, located
in Hyannis, Massachusetts; Lexington, Massachusetts; London, England; Chatham,
England; and Paris, France. In addition, the Company uses outsourcing
relationships to supplement its internal development resources. For example, a
portion of the development activity on the Company's Human Resources for Windows
NT product line is currently being outsourced to NIIT in Delhi, India. The
Company has also entered into a development relationship with Cambridge
Technology Partners to develop new Microsoft Windows NT purchasing and inventory
applications. As of September 30, 1998, the Company had 165 employees in its
research and development operations, exclusive of contractors and consultants.
The Company's research and development spending was approximately $17.3 million,
$20.5 million, and $24.2 million for the fiscal years ended September 30, 1996,
1997 and 1998, respectively.
STRATEGIC RELATIONSHIPS
IBM RELATIONSHIP
Infinium Software has maintained a strategic relationship with IBM in a
number of key areas, including sales, marketing and research and development.
The Company participates in several formal and informal programs with IBM that
the Company believes affords it valuable experience with IBM's AS/400 products
and insights into IBM's marketing plans. The Company is one of IBM's designated
"Premier Business Partners" and has, in recent years, received numerous awards
and recognitions from IBM, including IBM's Mark of Quality for its high-quality
management practices and standards, the International Rightsizing Leadership
Award and the IBM National Business Partner of the Year Award.
The Company is a member of IBM's Market Development Program and has
received funding and other assistance from IBM for the purposes of jointly
marketing the Company's products and IBM AS/400 systems. In 1998, the Company
participated in IBM's announcement of its pre-loaded "Infinium Custom Server",
which offers customers the ability to purchase an AS/400 server with Infinium
Applications preloaded and
11
<PAGE> 13
shipped from IBM's manufacturing facility. In addition, in 1998 Infinium earned
"Server Proven" status for the Company's NT applications running on IBM's
Netfinity NT servers.
As a prime provider of AS/400 business solutions, the Company has served as
a test site for new IBM AS/400 products, obtaining valuable early experience
with these technologies. The Company is a member of IBM's "Partners in
Development" program, providing IBM with feedback regarding the design and
development of the database and operating system of the AS/400 Advanced Server.
MICROSOFT RELATIONSHIP
Infinium Software has entered into a relationship with Microsoft
Corporation as part of the Company's overall strategy to provide a line of
application products for the Windows NT server platform. The relationship
includes participation in the Windows ISV Advisory Board, Microsoft Solution
Developers Program, Solution Providers Program, the Microsoft Global Summit and
other less formal programs. In 1998, the Company participated in the keynote
address at Microsoft's Internet World Conference to over 5,000 customers,
developers and press.
The Company's Human Resources for Windows NT application is currently
running in the Microsoft Executive Briefing Center that Microsoft uses to
showcase Infinium and Microsoft technologies.
SALES AND MARKETING RELATIONSHIPS
The Company has entered into arrangements with several third party software
vendors to market their products along with the Infinium network centric product
lines in order to provide a more comprehensive solution to Infinium Software
customers. Those vendors include:
FOR AS/400 PRODUCTS:
- SHOWCASE CORPORATION, for its Strategy Server, Query and Report Writer
products, which provide a network centric, graphical user interface for
AS/400 query and report writing
- FRX SOFTWARE CORPORATION, a provider of financial report writing, with
remote distribution of reports via email or Internet
- RIPPE AND KINGSTON SYSTEMS, INC., for its plant and facility
maintenance/management and fleet management applications
- PREMENOS CORPORATION, for its EDI/400 product line used in conjunction
with the Infinium Software Materials Management and Process Manufacturing
product suites
- SKILLSET CORPORATION, for its Lotus Domino recruiting and applicant
management software
- MOMENTUM CORPORATION, for its Lotus Domino based automated employee
expense reporting software
- TIMELINE CORPORATION, a provider of budgeting and financial reporting
products
- KRONOS CORPORATION, a provider of time and attendance management products
FOR WINDOWS NT PRODUCTS:
- COGNOS CORPORATION, for its Impromptu query and reporting product and
PowerPlay data analysis product
- FRX SOFTWARE CORPORATION, a provider of financial report writing, with
remote distribution of reports via e-mail or Internet
- CONDUIT CORPORATION, for its Internet-based employee self service
application for Human Resource Management
12
<PAGE> 14
- TIMELINE CORPORATION, a provider of budgeting and financial reporting
products
- BEST! SOFTWARE, a provider of asset management products
COMPETITION
The business applications software market is highly competitive and rapidly
changing. A number of companies offer products similar to the Company's products
and target the same customers as the Company. The Company believes its ability
to compete depends upon many factors within and outside its control, including
the timely development and introduction of new products and product
enhancements, product functionality, performance, price, reliability, customer
service and support, sales and marketing efforts and product distribution.
The Company's primary competitors are presently J.D. Edwards & Company,
Lawson Software, PeopleSoft and SAP AG. The Company believes, however, that
competition in its industry is undergoing rapid change and that the barriers to
competition between market segments that have previously existed are decreasing.
For example, SAP AG and PeopleSoft, which are currently major competitors within
the UNIX and the Microsoft Windows NT market, have entered the AS/400 market.
Due to the relatively low barriers to entry in the software market, the Company
expects additional competition from these and other emerging companies as the
business application software market continues to develop and expand. Many of
the Company's existing and potential competitors are substantially larger than
the Company and have significantly greater financial, technical and marketing
resources and have established extensive direct and indirect channels of
distribution. As a result, they may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products than the
Company. The Company also expects that competition will increase as a result of
software industry consolidation. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
prospective customers. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which would have a material adverse
effect on the Company's business, results of operations and financial condition.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressure will not have
a material adverse effect on the Company's business, operating results and
financial condition.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES
The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of contract, copyright, trademark and trade secret laws and other measures to
protect its proprietary intellectual property. The Company has no patents, and
existing copyright laws afford only limited protection. The Company believes
that, because of the rapid rate of technological change in the computer software
industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability and experience of the Company's
employees, frequent product enhancements and the timeliness and quality of
support services.
The Company provides its products to customers under non-exclusive,
nontransferable licenses. The Company generally licenses its products solely for
the customer's internal operations and only on designated computers. In certain
circumstances, the Company makes available enterprise-wide licenses. The Company
provides source code to its customers for certain of its products and has
escrowed its source code with a commercial bank for the benefit of all its
customers. The Company's provision of source code to its customers may increase
the likelihood of misappropriation or other misuse of the Company's intellectual
property.
From time to time, the Company licenses software from third parties for use
with its products. The Company believes that no such license agreement to which
it is presently a party is material and that if any such license agreement were
to terminate for any reason, the Company would be able to obtain a license or
otherwise acquire other comparable technology or software on terms that would
not be materially adverse to the Company.
13
<PAGE> 15
EMPLOYEES
As of September 30, 1998, the Company had 658 full-time-equivalent
employees, including 182 in sales and marketing, 165 in product development, 224
in customer support and field services, and 87 in administration. The Company's
success will depend in large part upon its ability to continue to attract and
retain qualified employees. None of the Company's employees is represented by a
labor union or is subject to a collective bargaining agreement. The Company
believes that its relations with its employees are good.
ITEM 2. PROPERTIES
The Company is headquartered in Hyannis, Massachusetts, where it leases an
aggregate of 58,200 square feet of space. Administrative, marketing, product
development and customer support operations are located in the Hyannis space.
The Company is currently expanding this facility by 13,000 square feet to
accommodate growth in these functions. The Company also leases 30,900 square
feet of space in Lexington, Massachusetts and 12,000 square feet of space in
London, England which are shared for product development, marketing, and field
operations (sales and consulting services). The locations in Chatham, England
and Paris, France, where the Company leases 6,000, and 1,200 square feet,
respectively, are also used for product development operations. In addition, the
Company leases an aggregate of 53,500 square feet predominately for use by field
operations located in Atlanta, Chicago, Houston, Irvine, Louisville, Toronto,
Singapore and South Africa. Office facilities and suites are also being leased
for field representatives throughout various locations in North America
aggregating 2,000 square feet. The Cort Payroll Unit is located in Bend, Oregon,
in which the Company leases 12,300 square feet of space for support, field
operations, training, marketing, and administration of the Company's payroll
product for Windows NT. The Company believes that its existing facilities are
adequate to meet current needs and that suitable additional space will be
available as needed to accommodate any further physical expansion of corporate
operations and for additional sales and service field offices.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
ended September 30, 1998 to a vote of security holders of the Company, through
the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item may be found in the section captioned
"Stock Information" appearing in the 1998 Annual Report to Stockholders, and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item may be found in the section captioned
"Selected Financial Data" appearing in the 1998 Annual Report to Stockholders,
and is incorporated herein by reference.
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<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item may be found in the section captioned
" Management's Discussion and Analysis of Financial Condition and Results of
Operations " appearing in the 1998 Annual Report to Stockholders, and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information with respect to this item may be found in the 1998 Annual
Report to Stockholders, and is incorporated herein by reference and indexed by
reference under Item 14(a)(1) and (2) below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to the directors of the
Company is hereby incorporated by reference from the information contained under
the heading "Election of Directors" in the Company's definitive proxy statement
of the Company's 1998 Annual Meeting of Stockholders which will be filed with
the Securities and Exchange Commission within 120 days after the close of the
fiscal year (the "Definitive Proxy Statement").
Certain information concerning directors and executive officers is hereby
incorporated by reference to the information contained under the headings
"Occupations of Directors and Executive Officers" and "Section 16(a) Beneficial
Ownership Compliance Reporting" in the Definitive Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference
to the information contained under the heading "Compensation of Executive
Officers" in the Definitive Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by reference
to the information contained under the heading "Management and Principal Holders
of Voting Securities" in the Definitive Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by reference
to the information contained under the heading "Certain Relationships and
Related Transactions" in the Definitive Proxy Statement.
15
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(A)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Company are included
in the Company's 1998 Annual Report to Stockholders and are incorporated herein
by reference:
Report of independent accountants;
Consolidated balance sheet at September 30, 1997 and 1998;
Consolidated statement of operations for the years ended September 30,
1996, 1997 and 1998;
Consolidated statement of stockholders' equity for the years ended
September 30, 1996, 1997 and 1998;
Consolidated statement of cash flows for the years ended September 30,
1996, 1997 and 1998;
Notes to consolidated financial statements.
The Company's 1998 Annual Report to Stockholders is not to be deemed filed
as part of this report except for those parts thereof specifically incorporated
herein by reference.
(A)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedules of the Company are filed as
part of this Report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule I Report of Independent Accountants on Financial
Statement Schedule........................................ S-1
Schedule II Valuation and Qualifying Accounts and
Reserves.................................................. S-2
</TABLE>
Schedules not listed above have been omitted because they are not
applicable, not required, or the information required to be set forth therein is
included in the consolidated financial statements or the notes thereto.
(A)(3) INDEX TO EXHIBITS
See attached Index to Exhibits.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of fiscal
1998.
16
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, this 23rd
day of December 1998.
INFINIUM SOFTWARE, INC.
By: /s/ DANIEL J. KOSSMANN
--------------------------------------
Daniel J. Kossmann
Vice President and Chief Financial
Officer
We the undersigned officers and directors of Infinium Software, Inc.,
hereby severally constitute and appoint Frederick J. Lizza and Daniel J.
Kossmann, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities to do all things in our names and on behalf in such capacities to
enable Infinium Software, Inc. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all requirements of the Securities
Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT A. PEMBERTON Chairman of the Board and December 23, 1998
- - ------------------------------------------------ Director
Robert A. Pemberton
/s/ FREDERICK J. LIZZA President, Chief Executive December 23, 1998
- - ------------------------------------------------ Officer and Director
Frederick J. Lizza (Principal Executive Officer)
/s/ DANIEL J. KOSSMANN Chief Financial Officer, December 23, 1998
- - ------------------------------------------------ (Principal Financial and
Daniel J. Kossmann Accounting Officer)
/s/ R. STEPHEN CHEHEYL Director December 23, 1998
- - ------------------------------------------------
R. Stephen Cheheyl
/s/ MANUEL CORREIA Director December 23, 1998
- - ------------------------------------------------
Manuel Correia
/s/ ROLAND D. PAMPEL Director December 23, 1998
- - ------------------------------------------------
Roland D. Pampel
/s/ ROBERT P. SCHECHTER Director December 23, 1998
- - ------------------------------------------------
Robert P. Schechter
</TABLE>
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<PAGE> 19
SCHEDULE I
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULE
To the Board of Directors of
Infinium Software, Inc.:
Our audits of the consolidated financial statements referred to in our
report dated October 20, 1998 appearing on page 26 of the 1998 Annual Report to
Shareholders of Infinium Software, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, the Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 20, 1998
F-1
<PAGE> 20
SCHEDULE II
INFINIUM SOFTWARE, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN C
COLUMN A COLUMN B CHARGED TO CHARGED TO COLUMN D COLUMN E COLUMN F
DESCRIPTION BEGINNING EXPENSE OTHER DEDUCTIONS OTHER ENDING
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FY 1998
Allowance for Doubtful Accounts... $1,569 $977 $-- $(916) $ 20 $1,650
FY 1997
Allowance for Doubtful Accounts... 1,250 397 -- (243) 165 1,569
FY 1996
Allowance for Doubtful Accounts... 1,145 662 -- (557) 1,250
</TABLE>
S-1
<PAGE> 21
INFINIUM SOFTWARE, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- - ------- -----------
<S> <C> <C>
3.1 -- Second Restated Articles of Organization of the Registrant
(incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
3.2 -- Articles of Amendment of the Company (incorporated by
reference to Exhibit 3(I) to the Company's Form 10-Q for the
quarterly period ended March 31, 1997).
3.3 -- Third Amended and Restated By-Laws of the Company
(incorporated by reference to Exhibit 3(I) to the Company's
Form 10-Q for the quarterly period ended March 31, 1997).
4.1 -- Specimen certificate representing the Common Stock
(incorporated by reference to Exhibit 4 to the Company's
Form 10-Q for the quarterly period ended March 31, 1997)
10.1* -- 1984 Incentive Stock Option Plan, as amended as of August
23, 1988 (incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
10.2* -- 1989 Stock Option Plan, as amended as of October 1, 1994
(incorporated by reference to Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
10.3* -- 1995 Stock Plan (incorporated by reference to Exhibit 10.3
to the Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
10.4* -- 1995 Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.4 to the Registrant's Registration Statement
on From S-1, Registration No. 33-97866).
10.5* -- 1995 Non-Employee Director Stock Option Plan (incorporated
by reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-1, Registration No.
33-97866).
10.6 -- Lease dated March 31, 1995 between the Registrant and
Independence Park Associates Realty Trust as of August 1995
(incorporated by reference to Exhibit 10.6 to the
Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
10.7* -- Form of Executive Compensation Plan (incorporated by
reference to Exhibit 10.9 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-97866).
10.8 -- IBM Assistance Agreement, as amended as of June 30, 1995,
between the Registrant and International Business Machines
Corporation (incorporated by reference to Exhibit 10.10 to
the Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
10.9* -- Form of 1995 Stock Plan Option Agreement (incorporated by
reference to Exhibit 10.16 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-97866).
10.10* -- Register of Amendments, Subsections 3.1 and 7.3.4, 1989
Stock Option Plan (incorporated by reference to Exhibit
10.17 to the Registrant's Registration Statement on Form
S-1, Registration No. 33-97866).
10.11* -- Register of Amendments, Article 5, 1995 Employee Stock
Purchase Plan (incorporated by reference to Exhibit 10.18 to
the Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
13.1 -- 1998 Annual Report to Stockholders (which shall be deemed
filed only with respect to those portions specifically
incorporated by reference herein).
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of PricewaterhouseCoopers LLP.
24.1 -- Power of Attorney (included on page 17).
27 -- Financial Data Schedule
</TABLE>
- - ---------------
* Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an exhibit to Item 14(c).
X-1
<PAGE> 1
[LOGO] INFINIUM
SOFTWARE
1998 ANNUAL REPORT
WHAT IS IT ABOUT THESE PEOPLE?
<PAGE> 2
[LOGO] INFINIUM
SOFTWARE
Infinium Software, Inc. is a $114-million company with more than 650 employees,
and offices in the US, Canada, the UK, France, and Singapore.
Infinium(R) produces innovative market-leading solutions for financial, human
resources, and materials management, and process manufacturing. Infinium's
software is optimized for organizations that require quick installation,
sophisticated, flexible functionality, and ease of use in an affordable
solution. One of the first companies to introduce applications for the AS/400,
Infinium is leading the way again with sophisticated Windows NT solutions based
on the latest Microsoft technology.
<PAGE> 3
INFINIUM is a global company of individuals
genuinely dedicated to helping today's businesses
run more efficiently and creatively by supplying
them with business software that does more
than expected. Infinium people are passionate
about what they do, and our 1,800 customers
notice. That's why we enjoy a customer retention
rate in excess of 90% and consistently win
Midrange Systems Buyers Choice Awards.
It's also why we achieved record-setting
revenue growth in 1998. We'd like to tell
you about our successful year in
1998, put the spotlight on what
our customers have to say
about us, and let you in
on our growth plans
for 1999 and
beyond.
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<PAGE> 4
TO OUR STOCKHOLDERS:
Fiscal year 1998 was a remarkable growth and transition year for
Infinium Software. We accelerated growth in our IBM(R) AS/400(R)
business, especially in consulting and training operations, and
added new desktop and Internet capabilities to our AS/400 software
using IBM's Lotus(R) Domino(TM) technology. In addition, we
launched our flagship human resources application for Microsoft(R)
Windows NT(R), an application based on the newest Microsoft
technologies, which has often been featured in Microsoft's
technical conferences as a model for future NT applications. We
also acquired an exciting NT payroll application. Both of these
applications help us accelerate the growth of our emerging Windows
NT application software business. Due to these and other
successes, we enjoyed outstanding financial results and set a host
of new financial records.
INFINIUM SOFTWARE'S BUSINESS
Infinium Software specializes in providing high-quality enterprise
financial management, human resources, materials management, and
process manufacturing applications and services to growing
organizations. Our typical customers are individual companies or
divisions of larger organizations in the $25 million to $5 billion
revenue range, although we have customers both larger and smaller.
Our goal is to deliver applications that provide these customers
not only with solutions to their business application requirements
but also low cost of ownership.
To that end, we target only those computing platforms that
offer integrated environments supporting low cost of ownership:
IBM AS/400 and Microsoft Windows NT servers. Our applications are
designed, developed, and optimized exclusively for these
platforms, allowing Infinium to develop a core of service and
support expertise particular to those environments. Our belief is
that these are, and will remain, the primary platforms of choice
for customers to run their packaged application software systems.
Infinium Software is committed to helping our customers
successfully manage all of their critical business application
issues. For example, we are investing considerable time and
resources to adapt our financial applications to support the
complex requirements for handling multiple currency transactions
in the European Monetary Union. We have grown the number of people
in our consulting operation by 50% during the fiscal year to
address our customers' need for additional help in a labor market
where it is increasingly difficult to find and retain technical
staff.
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<PAGE> 5
[PICTURES]
INFINIUM
FRED LIZZA
President and CEO
[PHOTO OF
FRED LIZZA]
"Infinium has
demonstrated
that it is
a world-class
organization
with products
for the future."
-- Barry Humby
Systems
Development
Manager,
Air Ontario
|
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<PAGE> 6
RECORD FINANCIAL PERFORMANCE FOR FISCAL YEAR 1998
Fiscal year 1998 financial results, described in detail in the
attached financial statements, reflected another year of
accelerated total revenue growth--31% overall compared with 21%
revenue growth in fiscal year 1997. While we did meet some
unexpected slowness in closing deals in the fourth quarter, for
the year, we grew our application software license fees by 37%,
versus 23% last year; and we increased the consulting and training
services revenue by 50% in FY 1998, compared with 34% growth in FY
1997.
The addition of Windows NT financial applications in
September 1997 and human resources and payroll applications for
Windows NT in June 1998, the expansion of our sales and consulting
services organizations, and increased market demand for
applications that are Year 2000-compliant all contributed to the
Company's FY 1998 revenue growth.
On the strength of this growing revenue, we maintained solid
operating profitability (excluding acquisition related
write-offs) while making substantial investments to enter the NT
market--a source of future growth for Infinium. Our balance sheet
remains strong, including approximately $46 million in cash, cash
equivalents and marketable securities, and no debt other than
normal trade payables and accruals.
We continue to attract top new technical, sales, and
managerial talent to the Company despite an increasingly
competitive labor market. We grew to a total market of 658
employees as of September 30, 1998, and increased our
productivity--measured by revenue per employee--to $174,000, up
from $158,000 in FY 1997. In short, we became stronger, larger,
and more efficient during the past year.
INFINIUM
[PHOTO OF
BEATRIX PADRON]
"Our account executive
was extremely honest,
open, and candid while we
investigated our options. Her
integrity was refreshing, and it
helped us work out exactly
the kind of system we
needed."
-- Lissette Lacomba,
Controller,
Caribbean Restaurants
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<PAGE> 7
President
and CEO
[PHOTO]
"Thanks to
their web specialists,
Infinium has an incredibly
useful on-line technical
resource center called
WebLink, which helps us
solve 85% of our technical
problems without calling
customer support. That INFINIUM
saves us staff time KEITH BIRR
and money." Customer Support
-- Scott Bremer, Web Specialist
IS Project Manager,
Hoag Memorial [PHOTO]
Hospital
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<PAGE> 8
Account
Executive
[PHOTO]
"During the
implementation plan,
our Infinium consultant
was our eyes in the
dark. She knew Infinium
inside and out, and
helped us design
what we believe
will be the perfect
system for our
company." INFINIUM
-- Kim Lemon, CAROLINE ASHLEE
Head of Employee Professional Services
Services, Consultant
Burmah Castrol
Trading Ltd.
[PHOTO]
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<PAGE> 9
President
and CEO
[PHOTO]
CONTINUING GROWTH FOR THE AS/400 BUSINESS
The AS/400 continues to sell well in the market, retaining
and building a loyal customer following. We believe its Customer Support
continued popularity is due to the AS/400's extremely high Web Specialist
degree of reliability, its overall simplicity--allowing
customers to implement enterprise-scale applications rapidly [PHOTO]
with fewer resources than other platforms--and its consistent
low cost of ownership. Customers needing to implement Year
2000-compliant applications in a short time frame view the
AS/400 as a safe, dependable alternative to accomplish that
goal. All of these factors contributed to another successful
year for our AS/400 software business.
We added a major new program to our AS/400 product
development activities during the year--new desktop and
Internet capabilities using IBM's Lotus Domino technology. A
large portion of our new AS/400 development activity is now
focused on adding new capabilities to the Infinium
AS/400-based applications that allow our customers to use
the Internet to complete transactions with their customers
and suppliers, route transaction documents through their
workforce, and resolve issues electronically.
Several of these capabilities were previewed to over
1,200 customers at our Infinium World User Conference in
June 1998 and received an enthusiastic response. Most of
these "e-Business" features are now scheduled for
availability in late calendar 1998 or early 1999.
Late in the fiscal year, we acquired a new project
accounting system, extending the depth and breadth of our
AS/400 suite of applications. This system is being
integrated into the suite for FY 1999. The combination of
rapid implementation to address Year 2000 requirements, new
e-Business functionality using Lotus Domino, and our new
project accounting system give us a positive outlook for our
AS/400 business in FY 1999.
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<PAGE> 10
President
and CEO
[PHOTO]
ESTABLISHING AND GROWING THE WINDOWS NT BUSINESS
In late fiscal year 1996, we made a decision to focus
substantial product development efforts on a new human
resource management product line designed exclusively
for Microsoft Windows NT servers. We delivered on that
commitment during fiscal year 1998, when we shipped the
first release of Infinium Human Resources for Windows NT
in June 1998.
This HR system is based on the latest Microsoft
technologies. In fact, Microsoft has demonstrated it at
technical conferences to show what future NT-based
applications can be. The Infinium Human Resources system
for Windows NT provides customers with an innovative
approach to managing their workforce by focusing on
skills and competencies rather than the particular title
or job level of an individual--a capability especially
useful to service-oriented companies whose workforce is
their most critical asset.
Customer Support
Web Specialist Human Resources for Windows NT is now complemented
by the NT payroll system we added in June 1998 through
[PHOTO] the acquisition of Cort Directions, Inc. We welcome to
the Infinium family the more than 300 customers who use
the Cort payroll system. This NT-based payroll system
offers unbelievable power and flexibility without
sacrificing reliability.
We believe our Windows NT-based suite of workforce
management products will become known as the best in the
industry and will be the core of a growing offering of
innovative applications for service industry customers.
In early 1998, Infinium entered into a relationship
with Cambridge Technology Partners to jointly develop
additional software applications for our Windows
NT-based product line. Purchasing and inventory
management applications are currently in development,
adding further value to our Infinium financial
applications for Windows NT.
We increased our investment in building a dedicated
sales force for the Windows NT-based product line, and
we started to see positive results from that move in the
second half of the fiscal year when revenue from these
products grew to 21% of our total fourth quarter
software license fees. During FY 1999, we plan to grow
both our sales and services operation as we look to
increase our NT market share.
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<PAGE> 11
Account Executive
[PHOTO]
INFINIUM
JEFF ERNST
Product
Strategist
[PHOTO]
"Infinium's product
strategists displayed
an extensive knowledge
of the NT platform, which
gave us confidence in
their ability to
produce quality
applications for
this new
technology."
-- Dave Fraedrich,
Director of Application
Support, Prison
Fellowship Ministries
Professional Services
Consultant
[PHOTO]
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<PAGE> 12
INFINIUM
TEAM
[GROUP PHOTO]
"We chose
Infinium for a
variety of reasons,
but the main reason
was the people we met
and their high degree
of professionalism.
Essentially, we bought into
Infinium's people."
- - -- Bob Gilbert, Manager of
Information Services,
Crestbrook Forest
Industries Ltd.
LOOKING AHEAD TO FISCAL YEAR 1999
Infinium Software continues its growth program as we
transition into a larger, multi-platform, global application
software vendor. We are entering the new fiscal year with a
clear strategy, a capable, motivated management team and
workforce, and a healthy financial condition.
We have a sizable AS/400 business, a rapidly growing
Windows NT business, and a large and growing services
operation. We now have more than 1,800 customers, and we
continue to grow our customer base. We have new products in
development and have launched a major new marketing campaign
to enhance the awareness and visibility of Infinium in the
market.
All of us at Infinium Software remain committed to
deliver on our mission: To provide the best, most
cost-effective business software and services to growing
companies around the world.
/s/ Frederick J. Lizza
Frederick J. Lizza
President and CEO
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<PAGE> 13
FINANCIALS
Financial Highlights 12
Selected Financial Data 14
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Report of Independent Accountants 26
Consolidated Balance Sheet 27
Consolidated Statement of Operations 28
Consolidated Statement of Stockholders' Equity 29
Consolidated Statement of Cash Flows 30
Notes to Consolidated Financial Statements 31
Stock Information 41
Corporate Information 42
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<PAGE> 14
INFINIUM SOFTWARE, INC.
FINANCIAL HIGHLIGHTS
Infinium's fiscal year, which ended on September 30, 1998, was highlighted by
outstanding financial performance. It included accelerated growth, record
revenue, record profits (before acquisition related write-offs), and increased
financial strength.
ANNUAL REVENUE GROWTH RATES
Infinium's fiscal year 1998 revenue grew 31% vs. a growth rate of 21% in FY
1997. This is the highest total revenue growth rate the Company has enjoyed
since FY 1992. Strong demand for the Company's proven AS/400 products, the early
customer acceptance of Infinium's new products designed for Windows NT, coupled
with an increased demand for the Company's award winning services and support
were the primary growth drivers. In FY 1998, software license fees grew 37%,
consulting services revenue grew 50%, and maintenance revenue grew 14%.
[CHART]
TOTAL REVENUE GROWTH RATES
35%
30%
25%
20%
15%
10%
5%
0%
FY '94 FY '95 FY '96 FY '97 FY '98
A BALANCED BUSINESS MODEL
Infinium's mix of revenue is well balanced. Approximately one third of
Infinium's revenue is derived from the licensing of the Company's software
products, one third from the Company's consulting and training services, and one
third from maintenance and support services. The balance between Infinium's
revenue sources and our large loyal customer base provide Infinium with
financial stability and resilience.
With the addition of our new products designed and optimized for Windows NT
servers, we have diversified our product line. We now offer competitive
application software products for customers using either Microsoft NT or IBM
AS/400 servers. Of the $40.7 million in software license fees generated in FY
1998, $35.2 million came from the licensing of Infinium's products designed and
optimized for IBM's AS/400 line of computers, a 20% increase over the prior
year. License fees from our new Windows NT-based products totaled $5.5 million
in FY 1998, up from only $0.5 million in FY 1997.
[CHART}
REVENUE
($ millions)
120
100
80
60
40
20
0
FY '94 FY '95 FY '96 FY '97 FY '98
- Software License Fees
- Consulting and Training Services
- Maintenance
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<PAGE> 15
INFINIUM SOFTWARE, INC.
EARNINGS
Net Income for FY 1997 and FY 1998 has been dramatically impacted by our
aggressive strategy to grow our application software business on Microsoft's
Windows NT servers.
In FY 1997, Infinium acquired a Windows NT-based Financial Management
application software company and invested heavily to design and build a Windows
NT-based Human Resources Management System. We also increased marketing, sales,
services, and support costs to begin selling and supporting these new
NTproducts. Acquisition related write-offs totaled $6.8 million ($4.4 million
after tax) and NT product related costs totaled $11.2 million ($7.2 million
after tax). The net result was a dilution of the Company's earnings from the
prior year.
In FY 1998, we acquired a Windows NT-based payroll application software company
and also acquired technology which is being used to build a Windows NT-based
Purchasing and Inventory system. These two transactions resulted in $11.2
million in write-offs ($7.6 million after tax).
Infinium continued to ramp up sales, services, and support costs in FY 1998 to
sell and support its new Windows NT-based products. These investments in our NT
business generated incremental NT revenue, which helped us grow FY 1998 net
income (before acquisition related write-offs) by 63% to $7.8 million ($0.57 per
share).
[CHART]
NET INCOME (EXCLUDING ACQUISITION RELATED
WRITE-OFFS)
($ millions)
8
7
6
5
4
3
2
1
0
FY '94 FY '95 FY '96 FY '97 FY '98
FINANCIAL STRENGTH
Despite aggressive investments in FY 1998, Infinium improved its financial
strength. Total assets grew to over $106 million, and the Company remains free
of debt other than normal trade payables and accruals. Cash and marketable
securities as of September 30, 1998 totaled $46.3 million.
[CHART]
TOTAL ASSETS
($ millions)
120
100
80
60
40
20
0
FY '94 FY '95 FY '96 FY '97 FY '98
Our financial results for fiscal year 1998 were outstanding. We not only posted
strong results but also invested heavily in the Company's future. With our
balanced business model, solid AS/400 business, emerging NT business, the
momentum we have built up, and our strong balance sheet, we are well positioned
to continue to thrive.
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<PAGE> 16
INFINIUM SOFTWARE, INC.
SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended August 31,(1) Fiscal Year Ended September 30,(1)
-------------------------------- ----------------------------------------
1994 1995 1996 1997 1998
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Software license fees $20,163 $21,080 $24,115 $29,781 $ 40,704
Services revenue 36,637 42,083 47,693 57,220 73,676
----------------------------------------------------
TOTAL REVENUE 56,800 63,163 71,808 87,001 114,380
- - ----------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of software license fees 2,845 3,829 3,823 5,070 7,210
Cost of services 13,396 15,333 16,562 22,400 32,330
Research and development 12,980 12,725 13,775 16,614 19,071
Sales and marketing 20,008 19,651 23,822 30,449 36,632
General and administrative 5,330 6,245 6,616 7,336 9,351
Write-off of in-process research and development acquired(2) -- -- -- 6,846 11,196
----------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 54,559 57,783 64,598 88,715 115,790
----------------------------------------------------
INCOME (LOSS) FROM OPERATIONS 2,241 5,380 7,210 (1,714) (1,410)
Other income (expense), net (83) 293 1,526 1,923 1,744
----------------------------------------------------
INCOME BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 2,158 5,673 8,736 209 334
Provision for (benefit from) income taxes 916 1,989 3,146 (148) 106
----------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,242 3,684 5,590 357 228
Cumulative effect of change in accounting principle 260 -- -- -- --
----------------------------------------------------
NET INCOME $ 1,502 $ 3,684 $ 5,590 $ 357 $ 228
- - ----------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Basic $ 0.15 $ 0.45 $ 0.56 $ 0.03 $ 0.02
Weighted average shares outstanding-basic 9,870 8,252 10,051 11,777 12,399
Diluted $ 0.15 $ 0.42 $ 0.49 $ 0.03 $ 0.02
Weighted average shares outstanding-diluted 10,227 8,812 11,378 12,539 13,808
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
INFINIUM SOFTWARE, INC.
CONSOLIDATED BALANCE SHEET DATA
(in thousands)
August 31,(1) September 30,(1)
-------------- ---------------------------------------
1994 1995 1996 1997 1998
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents, and marketable securities $ 15,222 $16,183 $43,337 $48,319 $ 46,293
- - ------------------------------------------------------------------------------------------------------------
Total assets 43,495 44,004 75,704 91,307 106,415
- - ------------------------------------------------------------------------------------------------------------
Deferred revenue 22,531 25,017 24,853 31,990 37,577
- - ------------------------------------------------------------------------------------------------------------
Total liabilities 35,635 39,172 40,054 49,368 63,453
- - ------------------------------------------------------------------------------------------------------------
Mandatorily redeemable common stock (3) 7,752 -- -- -- --
- - ------------------------------------------------------------------------------------------------------------
Treasury stock at cost -- -- -- -- (1,293)
- - ------------------------------------------------------------------------------------------------------------
Stockholders' equity $ 108 $ 4,832 $35,650 $41,939 $ 42,962
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company changed its fiscal year end to September 30, effective with the
fiscal year ended September 30, 1995.
(2) In connection with the acquisition of Time Open Systems Ltd. in 1997 and
Cort Directions, Inc. in 1998, $6,846 and $7,796, respectively, allocated to
in-process research and development had not reached technological
feasibility and was charged to operations at the acquisition date. Also in
1998, the Company acquired software code developed by a third party for
$3,400 and determined that it had not reached technological feasibility.
Accordingly, $3, 400 was written off at the acquisition date, aggregating a
write-off of $11,196 of in-process research and development acquired in
1998. (See Note 6 to consolidated financial statements.)
(3) The Company repurchased 1,632 shares of common stock from venture capital
investors in September 1994. See Note 8 to consolidated financial
statements.
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<PAGE> 18
INFINIUM SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements contained in this annual report that are not historical facts,
including but not limited to, statements regarding anticipated future revenue
and expense levels and capital requirements, future product development and
marketing plans, the ability to generate cash from operations, and the ability
to attract and retain employees, are based on current expectations. These
statements are forward looking in nature, involve a number of risks and
uncertainties, as more fully described under "Factors Affecting Future
Performance," and are made pursuant to the Private Securities Litigation Reform
Act of 1995. Actual results may differ materially from those described in the
forward-looking statements.
OVERVIEW
Founded in 1981, Infinium Software develops, markets, and supports
enterprise-level business software applications for growing organizations
(typically companies with revenue of $25 million to $5 billion). The Company has
two primary product lines. One product line, designed for AS/400 servers,
automates the financial management, human resource management, and materials
management functions of organizations in a broad range of industries worldwide.
The Company also offers a specialized AS/400 manufacturing system designed to
manage process-manufacturing operations. The Company's second product line is
designed for use by customers using Microsoft Windows NT servers. These products
also automate the financial management and human resource management operations
of customer organizations. Additional NT-based applications are under
development.
In January 1997, the Company acquired all the outstanding capital stock of Time
Open Systems Ltd. (Time), a UK-based privately held software concern which
developed and marketed a suite of client/server financial management application
software products. Since the acquisition of Time, the Company continues to
invest in the development and marketing of these products for Microsoft NT
servers. The Company released Infinium Financials for Microsoft Windows NT
servers for general availability in September 1997.
In late fiscal year 1996, Infinium began developing a new workforce management
product line. In the third quarter of fiscal 1998, the Company announced the
availability of these new products called Infinium Human Resources for Microsoft
Windows NT. In addition, in June 1998, the Company acquired Cort Directions,
Inc. (Cort), which primarily develops and markets a payroll application for
Microsoft Windows NT servers. Together these products comprise Infinium's suite
of human resource management products for Microsoft Windows NT servers. The
Company continues to invest in these products.
The Company is developing purchasing and inventory applications that will
complement existing financial and human resource management applications for the
Microsoft Windows NT environment.
The Company's revenue is derived from two sources: software license fees and
service revenue. Software license fees include revenue from non-cancelable
software license agreements entered into between the Company and its customers
with respect to both the Company's products and third party products marketed
and/or distributed by the Company. Software license fee revenue is recognized in
accordance with Statement of Position 97-2, Software Revenue Recognition, which
requires evidence of an arrangement, shipment of the software, that fees be
fixed and determinable, and that collection be considered probable.
The Company's service revenue comprises software maintenance fees and fees for
consulting and training services. Maintenance fees are billed separately and are
recognized ratably over the period of the maintenance agreement, which is
typically one year. Consulting service revenue, which is not essential to the
functionality of the software products, is recognized as the services are
performed.
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<PAGE> 19
INFINIUM SOFTWARE, INC.
RESULTS OF OPERATIONS
Included in operating costs and expenses are charges of $6.8 million for fiscal
year 1997 and $11.2 million for fiscal year 1998, as a result of the write-off
of in-process research and development acquired in connection with acquisitions.
See Note 6 to the consolidated financial statements. On a pro forma basis,
exclusive of the write-offs of in-process research and development acquired,
discussed above, results of operations would be comparatively reported as
follows (in thousands except per share and percentage data):
<TABLE>
<CAPTION>
Fiscal Year Ended % of Total % of $
September 30, Revenue Increase
--------------------------------------------
1997 1998 1997 1998 97-98
- - --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $87,001 $114,380 100% 100% 31%
Operating costs and expenses 81,869 104,594 94 91 28
-----------------------------------
Income from operations 5,132 9,786 69 9 1
Other income, net 1,923 1,744 2 1 (9)
-----------------------------------
Income before provision
for income taxes 7,055 11,530 8 10 63
Provision for income taxes 2,247 3,689 3 3 64
- - -----------------------------------------------------------------
NET INCOME $ 4,808 $ 7,841 5% 7% 63%
-----------------------------------
Earnings per share:
Basic $ 0.41 $ 0.63 54%
--------------------
Weighted shares
outstanding - basic 11,777 12,399
--------------------
Diluted $ 0.38 $ 0.57 50%
--------------------
Weighted shares
outstanding - diluted 12,539 13,808
- - --------------------------------------------------------------------------
</TABLE>
YEAR ENDED SEPTEMBER 30, 1998, COMPARED TO
YEAR ENDED SEPTEMBER 30, 1997
REVENUE
Total revenue increased 31%, from $87.0 million for the year ended September 30,
1997, to $114.4 million for the year ended September 30, 1998. The increase was
primarily due to greater market acceptance of the Company's products including
the addition of revenue from Windows NT products. This growth is further
attributed to the increased demand for the Company's application software
products, which were designed to be Year 2000 compliant. Generally, in addition
to software license fees attained with each license agreement entered into,
consulting services and maintenance commitments are typically also contracted,
resulting in an increase to service revenue as these contracted services are
delivered.
Revenue in North America (United States and Canada) increased 37%, from $77.1
million for the year ended September 30, 1997, to $106.0 million for the year
ended September 30, 1998. This is representative of 89% of total revenue for
fiscal 1997 and 93% for fiscal 1998. EMEA (Europe, Middle East and Africa)
revenue decreased from $8.2 million for the year ended September 30, 1997, to
$7.0 million for the year ended September 30, 1998, which was 9% and 6% of total
revenue for fiscal 1997 and 1998, respectively. Other international regions,
including Asia Pacific and Latin America, contributed 2% of total revenue for
fiscal 1997 compared to 1% for fiscal 1998.
Software license fee revenue increased 37%, from $29.8 million for the year
ended September 30, 1997, to $40.7 million for the year ended September 30,
1998. For fiscal year 1998, software license fee revenue derived from Windows NT
products was $5.5 million compared to $0.5 million in fiscal year 1997. All
other software license fee revenue was predominantly derived from sale of
applications for IBM AS/400 servers.
Service revenue increased 29%, from $57.2 million for the year ended September
30, 1997, to $73.7 million for the year ended September 30, 1998. The increase
was primarily attributable to an increase in the installed base of customers
resulting in an increase in both maintenance and consulting services revenue.
Also contributing to the increase in consulting services revenue was an increase
in larger consulting service engagements as well as expanded service offerings
including increased project management and programming services. The table below
summarizes the composition and growth in the Company's service revenue.
<TABLE>
<CAPTION>
Fiscal Year Ended % of $
September 30, Increase
-----------------------------
(in thousands) 1997 1998 97-98
- - -------------------------------------------------------------
<S> <C> <C> <C>
Software maintenance revenue $33,886 $38,716 14%
Consulting services revenue 23,334 34,960 50
- - --------------------------------------------------
TOTAL SERVICE REVENUE $57,220 $73,676 29%
- - -------------------------------------------------------------
</TABLE>
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<PAGE> 20
INFINIUM SOFTWARE, INC.
COST OF SOFTWARE LICENSE FEES
Cost of software license fees consists primarily of amortization expense related
to capitalized software development costs, royalties on the sale of third-party
products, and the cost of product media, manuals, and shipping. Cost of software
license fees increased 42%, from $5.1 million for the year ended September 30,
1997, to $7.2 million for the year ended September 30, 1998. Cost of software
license fees as a percentage of software license fee revenue increased from 17%
for the year ended September 30, 1997, to 18% for the year ended September 30,
1998. The increase in the dollar amount of such costs and as a percentage of
software license fees resulted primarily from an increase in third-party royalty
expense.
COST OF SERVICES
Cost of services consists of costs to provide support, implementation,
consulting, and training services to licensees. Cost of services increased 44%,
from $22.4 million for the year ended September 30, 1997, to $32.3 million for
the year ended September 30, 1998. Cost of services as a percentage of service
revenue increased from 39% for the year ended September 30, 1997, to 44% for the
year ended September 30, 1998. The increase in the cost of services as a
percentage of service revenue is attributed to a relatively greater increase in
the amount of consulting service revenue versus maintenance revenue which
carries a lower gross margin than maintenance revenue. The increase in cost of
services resulted primarily from increased staffing and contracting in the
consulting services organization in response to greater demand for consulting
services as a result of the increase in the installed base of customers.
RESEARCH AND DEVELOPMENT
Research and development expense consists primarily of engineering personnel
costs, contractor costs, and related facilities, computers and communications
overhead, reduced by capitalized internal software development costs and
research funding. The foll owing table sets forth for the periods indicated the
relationship between the Company's research and development expense as recorded
on its consolidated statements of income and its total research and development
spending.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
(in thousands) 1997 1998
- - --------------------------------------------------------------------------------
<S> <C> <C>
Research and development expense $16,614 $19,071
Capitalized internal software development costs 3,594 4,698
Funded research 255 430
- - --------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT SPENDING $20,463 $24,199
- - --------------------------------------------------------------------------------
</TABLE>
Research and development expense increased 15%, from $16.6 million for the year
ended September 30, 1997, to $19.1 million for the year ended September 30,
1998. Research and development expense as a percentage of total revenue was 19%
for the year ended September 30, 1997, and 17% for the year ended September 30,
1998. The Company capitalized $3.6 million of software development costs for the
year ended September 30, 1997, and $4.7 million for the year ended September 30,
1998. Additionally, research and development spending increased 18%, from $20.5
million for the year ended September 30, 1997, to $24.2 million for the year
ended September 30, 1998. The Company continues to make significant investments
in research and development. The Company believes that this significant level of
research and development spending is critical to building long-term product and
technology advantages in the market.
SALES AND MARKETING
Sales and marketing expense consists primarily of salaries, commissions, travel,
promotional expenses, and facilities, computers, and communications overhead
costs. Sales and marketing expense increased 20%, from $30.4 million for the
year ended September 30, 1997, to $36.6 million for the year ended September 30,
1998. Sales and marketing expense as a percentage of total revenue decreased
from 35% for the year ended September 30, 1997, to 32% for the year ended
September 30, 1998. The increase in sales and marketing expense was attributable
to an increase in staffing of the direct sales operation as well as an increase
in commission expense due to increased software license fees. In connection with
the roll-out of the Microsoft Windows NT product lines, additional direct sales
personnel were added during fiscal 1998, and the Company is continuing to add
additional sales personnel to market both its AS/400 and NT products. The
Company is also expanding its indirect distribution channels, both domestically
and internationally, with an emphasis on agent and distributor channel
partnering. Accordingly, sales and marketing expense is expected to continue to
increase in the future. Sales and marketing expense decreased as a percentage of
total revenue as the services component of total revenue grew at a greater rate
than the software license fee component. From a sales and marketing expense
perspective, services revenue carries a lower cost of origination than that of
software license fees.
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<PAGE> 21
INFINIUM SOFTWARE, INC.
GENERAL AND ADMINISTRATIVE
General and administrative expense consists primarily of compensation of
executive and administrative personnel, associated facilities, computers, and
communications overhead, provision for doubtful accounts, amortization of
intangible assets, insurance, and outside professional fees. General and
administrative expense increased 27%, from $7.3 million for the year ended
September 30, 1997, to $9.4 million for the year ended September 30, 1998.
General and administrative expense remained consistent as a percentage of total
revenue at 8% for both years ended September 30, 1997 and 1998. The increase in
general and administrative expense was attributed to an increase in the
provision for doubtful accounts, incremental costs associated with the
acquisition of Cort, including the amortization of intangible assets, and an
increase in overhead commensurate with the Company's growth.
WRITE-OFF OF IN-PROCESS RESEARCH
AND DEVELOPMENT ACQUIRED
As discussed in Note 6 to the consolidated financial statements, the Company
recorded a charge to operations of $6.8 million during the year ended September
30, 1997, and $11.2 million during the year ended September 30, 1998,
representing purchased in-process research and development.
In fiscal year 1997, the company acquired Time Open Systems Ltd., whereby the
Company immediately expensed $6.8 million of in-process research and development
that had not yet reached technological feasibility and had no alternative future
use. This amount ascribed to in-process research and development was determined
by an independent appraiser. The value was determined by estimating the
resulting net cash flows from such projects and discounting the net cash flows
back to their present value. The discount rate includes a factor that takes into
account the uncertainty surrounding the successful development of the purchased
in-process technology. If these projects are not successfully developed, future
revenue and profitability of the Company may be adversely affected.
In fiscal year 1998, the company acquired Cort Directions, Inc. Upon
consummation of the Cort acquisition, the Company expensed $7.8 million of
in-process research and development that had not yet reached technological
feasibility and had no alternative future use as determined by an independent
appraiser. The value was determined by estimating the resulting net cash flows
from such projects and discounting the net cash flows back to their present
value. The discount rate includes a factor that takes into account the
uncertainty surrounding the successful development of the purchased in-process
technology. If these projects are not successfully developed, future revenue and
profitability of the Company may be adversely affected.
The resulting net cash flows from the aforementioned projects are based on
management's estimates of revenue, cost of sales, research and development
costs, sales and marketing costs, general and administrative costs, and income
taxes from such projects. If these projects are not successfully developed, the
revenue and profitability of the Company may be adversely affected in future
periods. Additionally, the value of goodwill and other intangible assets
acquired may become impaired.
Also in fiscal year 1998, the Company acquired software code that will support
and enable operation of transaction-based functionality specific to Microsoft NT
server-based applications (the research and development) for $3.4 million. The
research and development as received had not met technological feasibility as
defined by Statement of Financial Accounting Standards No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.
Accordingly, the acquisition of the research and development for $3.4 million
was written off upon delivery.
OTHER INCOME, NET
Other income, net consists of interest income, interest expense, and foreign
exchange loss. Other income, net decreased 9%, from $1.9 million for the year
ended September 30, 1997, to $1.7 million for the year ended September 30, 1998.
The decrease was primarily attributed to lower interest income earned on
invested funds as a result of lower rates of return in fiscal 1998 compared to
fiscal 1997.
PROVISION (BENEFIT) FOR INCOME TAXES
The provision (benefit) for federal, state, and foreign income taxes was
($148,000) and $106,000 for the years ended September 30, 1997, and 1998,
respectively. The tax benefit realized during fiscal 1997 was attributed to the
charge to operations of $6.8 million for the write-off of in-process research
and development acquired, which, when combined with the benefit of research and
development credits, resulted in an overall tax benefit. The effective tax rate
was 32% for the year ended September 30, 1998. See Note 8 to the consolidated
financial statements.
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<PAGE> 22
INFINIUM SOFTWARE, INC.
YEAR ENDED SEPTEMBER 30, 1997, COMPARED TO
YEAR ENDED SEPTEMBER 30, 1996
REVENUE
Total revenue increased 21%, from $71.8 million for the year ended September 30,
1996, to $87.0 million for the year ended September 30, 1997. Revenue in North
America (United States and Canada) increased 20%, from $64.2 million for the
year ended September 30, 1996, to $77.1 million for the year ended September 30,
1997. This is representative of 89% of total revenue for fiscal 1996 and 88.6%
for fiscal 1997. EMEA (Europe, Middle East, and Africa) revenue grew 8%, from
$7.6 million for the year ended September 30, 1996, to $8.2 million for the year
ended September 30, 1997, predominantly due to greater market penetration within
the region. Other international regions, including Asia Pacific and Latin
America, contributed 3% of total revenue for fiscal 1996 compared to 2% for
fiscal 1997.
Software license fee revenue increased 24%, from $24.1 million for the year
ended September 30, 1996, to $29.8 million for the year ended September 30,
1997. The growth was due primarily to continued acceptance of the Company's
products. For fiscal 1997, software license fee revenue derived from Windows NT
products was $0.5 million. All other software license fee revenue was derived
from sale of applications for IBM AS/400 servers.
Service revenue increased 20%, from $47.7 million for the year ended September
30, 1996, to $57.2 million for the year ended September 30, 1997. The increase
was primarily attributable to an increase in the installed base of customers
resulting in an increase in both maintenance and consulting services revenue.
The table below summarizes the composition and growth of the Company's service
revenue.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
(in thousands) 1996 1997
- - ----------------------------------------------------------------
<S> <C> <C>
Software maintenance revenue $30,300 $33,886
Consulting services revenue 17,393 23,334
- - ----------------------------------------------------------------
TOTAL SERVICE REVENUE $47,693 $57,220
- - ----------------------------------------------------------------
</TABLE>
COST OF SOFTWARE LICENSE FEES
Cost of software license fees increased 33%, from $3.8 million for the year
ended September 30, 1996, to $5.1 million for the year ended September 30, 1997.
Cost of software license fees as a percentage of software license fee revenue
increased from 16% for the year ended September 30, 1996, to 17% for the year
ended September 30, 1997. The increase in cost of software license fees resulted
primarily from an increase in third-party royalty expense and an increase in
amortization of capitalized software development costs. The increase in the cost
of software license fees as a percentage of software license fee revenue was
primarily due to an increase in third-party royalty expense offset in part by a
decrease in amortization of capitalized software development costs.
COST OF SERVICES
Cost of services increased 35%, from $16.6 million for the year ended September
30, 1996, to $22.4 million for the year ended September 30, 1997. Cost of
services as a percentage of service revenue increased from 35% for the year
ended September 30, 1996, to 39% for the year ended September 30, 1997. The
increase in the cost of services as a percentage of service revenue is
attributed to a relatively greater increase in the amount of consulting services
versus maintenance which carries a lower gross margin than maintenance revenue.
The increase in cost of services resulted primarily from increased staffing in
the consulting and support organizations in response to increased demand for
consulting services, a continued growth in the customer base and an increase in
payments to third-party contractors.
RESEARCH AND DEVELOPMENT
Research and development expense increased 21%, from $13.8 million for the year
ended September 30, 1996, to $16.6 million for the year ended September 30,
1997. Research and development expense as a percentage of total revenue was 19%
for the years ended September 30, 1996 and 1997. The Company capitalized $3.5
million of software development costs for the year ended September 30, 1996, and
$3.6 million for the year ended September 30, 1997. Additionally, research and
development spending increased 18%, from $17.3 million for the year ended
September 30, 1996, to $20.5 million for the year ended September 30, 1997. The
following table sets forth for the periods indicated the relationship between
the Company's research and development expenses as recorded on its consolidated
statements of income and its total research and development spending.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
(in thousands) 1996 1997
- - --------------------------------------------------------------------------------
<S> <C> <C>
Research and development expense $13,775 $16,614
Capitalized internal software development costs 3,544 3,594
Funded research -- 255
- - --------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT SPENDING $17,319 $20,463
- - --------------------------------------------------------------------------------
</TABLE>
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<PAGE> 23
INFINIUM SOFTWARE, INC.
SALES AND MARKETING
Sales and marketing expense increased 28%, from $23.8 million for the year ended
September 30, 1996, to $30.4 million for the year ended September 30, 1997.
Sales and marketing expense as a percentage of total revenue increased from 33%
for the year ended September 30, 1996, to 35% for the year ended September 30,
1997. The increase in dollar amount as well as the percentage of total revenue
was attributable to an increase in staffing as well as an increase in commission
expense due to increased software license fees. In connection with the roll-out
of the Microsoft Windows NT product lines, additional direct sales personnel
were added during fiscal 1997 and the Company incurred various incremental
promotional costs.
GENERAL AND ADMINISTRATIVE
General and administrative expense increased 11%, from $6.6 million for the year
ended September 30, 1996, to $7.3 million for the year ended September 30, 1997.
General and administrative expenses as a percentage of total revenue decreased
from 9% for the year ended September 30, 1996, to 8% for the year ended
September 30, 1997. The increase in dollar amount of general and administrative
expense was primarily attributed to incremental costs associated with the
acquisition of Time including the amortization of intangible assets.
WRITE-OFF OF IN-PROCESS RESEARCH
AND DEVELOPMENT ACQUIRED
As discussed in Note 6 to the consolidated financial statements, the Company
recorded a charge to operations of $6.8 million during the year ended September
30, 1997, representing purchased in-process research and development.
In fiscal year 1997, the company acquired Time Open Systems Ltd., whereby the
Company immediately expensed $6.8 million of in-process research and development
that had not yet reached technological feasibility and had no alternative future
use. This amount ascribed to in-process research and development was determined
by an independent appraiser. The value was determined by estimating the
resulting net cash flows from such projects and discounting the net cash flows
back to their present value. The discount rate includes a factor that takes into
account the uncertainty surrounding the successful development of the purchased
in-process technology. If these projects are not successfully developed, future
revenue and profitability of the Company may be adversely affected.
The resulting net cash flows from the aforementioned project are based on
management's estimates of revenue, cost of sales, research and development
costs, sales and marketing costs, general and administrative costs, and income
taxes from such projects. If these projects are not successfully developed, the
revenue and profitability of the Company may be adversely affected in future
periods. Additionally, the value of goodwill and other intangible assets
acquired may become impaired.
OTHER INCOME, NET
Other income, net consists of interest income, interest expense, and foreign
exchange loss. Other income, net increased 26%, from $1.5 million for the year
ended September 30, 1996, to $1.9 million for the year ended September 30, 1997.
The increase is primarily attributed to interest income earned from invested
funds attained in connection with the Company's public stock offerings during
fiscal 1996, which were available to earn income throughout the full year during
fiscal 1997.
PROVISION (BENEFIT) FOR INCOME TAXES
The provision (benefit) for federal, state, and foreign income taxes was $3.1
million and ($148,000) for the years ended September 30, 1996, and 1997,
respectively. The effective tax rate was 36% for the year ended September 30,
1996. The tax benefit realized during fiscal 1997 was attributed to the charge
to operations of $6.8 million for the write-off of in-process research and
development acquired, which, when combined with the benefit of research and
development credits, resulted in an overall tax benefit. See Note 8 to the
consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had cash, cash equivalents, and marketable
securities of $46.3 million resulting in a net use of cash, cash equivalents,
and marketable securities of $2.0 million during fiscal year 1998. Operating and
financing activities provided $17.4 million, while $5.5 million was used to fund
capitalized software, $3.5 million for purchases of property and equipment, and
$0.9 million invested in unaffiliated entities generating a net $7.5 million
inflow of cash, cash equivalents, and marketable securites before the $9.4
million used in connection with acquisitions and effect of foreign exchange.
Included in financing activities was the use of $2.9 million to repurchase
common shares under a stock repurchase program which allows up to $6.0 million
to be repurchased.
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<PAGE> 24
INFINIUM SOFTWARE, INC.
Days sales outstanding ("DSO") increased to 73 days at September 30, 1998,
compared to 64 days at September 30, 1997. The Company calculates DSO by
dividing the ending accounts receivable balance, net of allowance for doubtful
accounts, by the annualized revenue for the most recent quarter, multiplied by
360. The Company believes that this method of deriving DSO is indicative of
actual results due to the cyclical nature of software license and service
transactions, which are often consummated nearer the end of the quarter, as well
as the fluctuation of transactions from one quarter to the next. The increase in
DSO from fiscal 1997 to fiscal 1998 was primarily attributed to the increase in
accounts receivable at the balance sheet date related to the growing services
transactions in which the revenue is substantially recognized after this period.
The Company's accounts receivable balances net of the allowance for doubtful
accounts increased 45%, from $18.9 million at September 30, 1997, to $27.4
million at September 30, 1998.
Deferred revenue increased $5.6 million, from $32.0 million at September 30,
1997, to $37.6 million at September 30, 1998. The increase in deferred revenue
was primarily due to an increase in deferred maintenance and consulting services
revenue as a result of continued growth in the customer base.
The Company plans to continue expanding its offering of complementary products
and technology via third-party software relationships and/or acquisition.
Consummation of additional agreements may result in the use of cash, cash
equivalents, and marketable securities for prepaid royalties, development
funding, and acquisition. Although there are no current agreements with respect
to additional material acquisitions of complementary businesses, such
transactions could, if they were to occur, require additional sources of
financing. In connection with the acquisition of Cort in June 1998, deferred
consideration of $1.9 million is scheduled for payment within fiscal 1999.
The Company believes that cash, cash equivalents, and marketable securities on
hand and cash flows from operations will be sufficient to fund its operations at
least through fiscal 1999. While operating activities may provide cash in
certain periods, to the extent the Company experiences growth in the future, the
Company anticipates that its operating and investing activities may use cash,
and, consequently, such growth may require the Company to obtain additional
sources of financing.
IMPACT OF THE YEAR 2000
The Year 2000 issue relates primarily to computer software and operating systems
in which dates have been abbreviated. Unless corrected, these systems may
recognize the date of "January 1, 2000" as "January 1, 1900." As a result,
computer software and operating systems used by many companies may need to be
upgraded to comply with Year 2000 requirements. The Company has instituted a
Year 2000 project in which Year 2000 issues are assessed and addressed in the
development of its software systems, its relationships with third parties, and
its internal operating systems.
READINESS
The human resource, financial management, materials management, and process
manufacturing systems owned, developed, and marketed by the Company to run on
the IBM AS/400 and the Microsoft Windows NT servers are designed to store four
digit date formats for years and to process (calculate, compare, and sequence)
date/time data from the twentieth century into the twenty-first century.
Beginning in 1995, in anticipation of the Year 2000, the Company began testing
its systems for defects in date formats. The Company has developed Year 2000
plans under which that testing will continue through the Year 2000 on currently
available releases and as new releases of the software systems are developed.
The Company is certified by the Information Technology Association of America
(ITAA) regarding Year 2000 methods and processes used in the development of its
AS/400 products. The Company has not sought ITAA certification for the methods
and processes used in the development of its other software systems. Although
the software systems developed by the Company are designed to be Year 2000
compliant and are being tested for compliance on an ongoing basis, there can be
no assurance that such software systems do not contain undetected errors or
defects or that, when combined or interoperating with other hardware, software,
firmware, or modifications that are not fully compliant, will process data in a
manner that is Year 2000 compliant. Additionally, some of the Company's
customers are running older versions of the systems, which may have defects in
date formats. The Company encourages its customers to migrate to current product
versions so that they will get the benefit of all error and defect corrections
that are currently available.
The Company's financial management and human resource management internal
business information systems are primarily made up of the same commercial
application software products developed and marketed by the Company to end
users. The Company does not expect any significant Year 2000 compliance issues
to arise in connection with those primary internal business information systems.
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<PAGE> 25
INFINIUM SOFTWARE, INC.
The Company has completed the first two phases of its Year 2000 project related
to third parties with whom it has development, marketing, services, and other
types of relationships, as well as third parties from whom the Company acquires
supplies for its internal operations. Those phases were preparing an inventory
of such third parties and assigning priorities for such third parties.
Additionally, the Company is in the midst of the third phase of the project,
which is to obtain from third parties that are material to the business of the
Company responses to questionnaires regarding Year 2000 readiness of the third
party and its products. This phase is expected to be completed by March 1999. In
the final phases of this part of the Company's Year 2000 project, the Company
will be testing material items (scheduled for completion by June 1999),
repairing or replacing material items that are determined not to be Year 2000
compliant (scheduled for completion by September 1999), and designing and
implementing contingency and business continuation plans (scheduled for
completion by June 1999).
COSTS
The total cost associated with the Year 2000 project is not expected to be
material to the Company's financial position. The Company has not separately
tracked costs of the Year 2000 project but has, as part of its existing
operating budget, budgeted the anticipated costs related to both efforts in the
Research and Development organization to continue ongoing testing of the
Company's systems and to begin testing of third party products, and efforts in
its Internal Systems organization to test other third party products and repair
or replace internal systems.
RISKS
The Company believes that the Year 2000 problem has resulted, on balance, in an
increased demand for its software systems, because of the speed in which
customers can implement the Company's systems. Such demand is subject to change
as the Year 2000 draws closer and as the lead time to complete required system
implementations precludes system replacement as a timely solution to the Year
2000 issue. Additionally, as the Year 2000 approaches, potential customers may
consider outsourcing their systems needs to data center outsourcing and service
bureau alternatives. Also, application software system acquisitions may slow
down as potential customers decide to postpone acquisitions and implementations
which are not required by their own Year 2000 projects. The Company's ability to
accurately forecast the impact of these issues on the software industry and on
its own quarter to quarter revenue is limited.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity, and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third parties, the Company is unable
to determine at this time whether the consequences of Year 2000 failures will
have a material impact on the Company's results of operations, liquidity, or
financial condition.
None of the Company's customers, on its own, is considered material to the
business of the Company and none are being contacted regarding its own Year 2000
readiness. Other third parties are being contacted as part of the Company's Year
2000 Project, as described above. The Year 2000 project is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of the
material third parties with which it has a relationship. The Company believes
that, with the implementation of new business systems and completion of the Year
2000 project as scheduled, the possibility of significant interruptions of
normal operations should be reduced.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union
are scheduled to establish fixed conversion rates between their existing
sovereign currencies and the euro. The participating countries have agreed to
adopt the euro as their common legal currency on that date.
The Company does not believe that the consequences of the euro conversion at
January 1, 1999, will have a material impact on the Company's results of
operations, liquidity, or financial condition.The Company's revenue from Europe
was approximately 6% of the Company's revenue in fiscal 1998.
The Company is in the process of modifying the financial, human resources, and
materials management application software products it has developed and marketed
to end users so that the systems, as modified, will substantially comply with
the Euro currency requirements known generally as 'triangulation' and as 'no
compulsion/no prohibition,' as described under Articles 3, 4, and 5 of Council
Regulation (EC) No 1103/7 of 17 June 1997 on certain provisions relating to the
introduction of the euro. Such modifications are expected to be made generally
available to its customers by the end of December 1998. Despite the foregoing,
there can be no assurance that such software products will not contain
undetected errors or
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<PAGE> 26
INFINIUM SOFTWARE, INC.
defects or that, when combined or interoperating with other hardware, software,
firmware or modifications which have not been modified for euro conversion, will
convert currency data in a manner compliant with the euro conversion adopted by
the member countries.
The Company's financial management and human resources management internal
business information systems are primarily made of the same commercial
application software products developed and marketed by the Company to end
users. Once those systems have been modified as provided above, the Company does
not expect significant euro conversion issues to arise in connection with those
primary internal business information systems.
The Company has begun to identify and ensure that all other euro conversion
compliance issues are addressed.
FACTORS AFFECTING FUTURE PERFORMANCE
The Company's quarterly revenue and operating results have varied significantly
in the past and are likely to vary substantially from quarter to quarter in the
future. Such fluctuations may result in volatility in the price of the Company's
common stock. Quarterly revenue and operating results may fluctuate as a result
of a variety of factors, including the Company's lengthy sales cycle, the
proportion of revenue attributable to license fees versus service revenue,
changes in the level of operating expenses, demand for the Company's products,
the introduction of new products and product enhancements by the Company or its
competitors, changes in customer budgets, competitive conditions in the
industry, the Year 2000 and euro conversion issues described above, and general
economic conditions. Further, the purchase of the Company's products often
involves a significant commitment of capital by its customers with the attendant
delays frequently associated with large capital expenditures and authorization
procedures within an organization. For these and other reasons, the sales cycles
for the Company's products are typically lengthy and subject to a number of
significant risks over which the Company has little or no control. The Company
historically has operated with little software license backlog because its
software products are generally shipped as orders are received. The Company has
often recognized a substantial portion of its revenue in the last month of the
quarter and often in the last week of that month. As a result, license fees in
any quarter are substantially dependent on orders booked and shipped in the last
month or last week of that quarter. Accordingly, a small variation in the timing
of recognition of revenue for specific transactions is likely to adversely and
disproportionately affect the Company's operating results for a quarter because
the Company establishes its expenditure levels on the basis of its expected
future revenue and only a small portion of the Company's expenses vary with its
revenue. The Company believes that period-to-period comparisons of results of
operations are not necessarily meaningful and should not be relied upon as
indicative of future performance.
The Company's business has experienced and is expected to continue to experience
significant seasonality. In recent years, the Company has had greater demand for
its products in its fourth fiscal quarter and has experienced lower revenue in
its succeeding first and second fiscal quarters. The fluctuations are caused
primarily by customer purchasing patterns and the Company's sales recognition
programs which reward and recognize sales personnel on the basis of achievement
of annual performance quotas. Due to the foregoing factors and the factors set
forth under "Results of Operations" above, it is likely that in some future
quarter the Company's operating results will be below the expectations of the
Company and public market analysts and investors. In such event, the price of
the Company's common stock would likely be materially adversely affected.
The business applications software market is characterized by rapid
technological change, frequent new product introductions, evolving industry
standards, and changes in customer demands. The introduction of products
embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. The Company's future success
will depend in part on its ability to enhance products and services and to
develop and introduce new products and services to meet changing customer
requirements. There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products that respond to
technological change or evolving industry standards; that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction, and marketing of these products and enhancements; or that any new
products and product enhancements it may introduce will achieve market
acceptance. In addition, there can be no assurance that the Company will not
encounter product development delays in the future or that, despite testing by
the Company, errors will not be found in new products or product enhancements
after commencement of commercial shipments, resulting in loss of market share,
delay in market acceptance, or warranty claims which could have a material
adverse effect upon the Company's business, operating results, and financial
condition.
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<PAGE> 27
INFINIUM SOFTWARE, INC.
As the Company's primary current source of revenue comes from customers using
IBM midrange computers, future revenue from licenses of present products and
sales of services and recurring maintenance revenue are therefore dependent on
continued widespread use of the AS/400 and the continued support of such
computers by IBM. In addition, because the Company's current AS/400 product line
requires the use of IBM's OS/400 operating system, the Company may be required
to adapt its products to any changes made in such operating system in the
future. The Company's inability to adapt to future changes in the OS/400
operating system, or delays in doing so, could have a material adverse effect on
the Company's business, operating results, and financial condition.
The Company is continuing to develop software applications to operate on the
Microsoft Windows NT operating system as well as to operate over the Internet
and within corporate intranets. The Company's development and implementation of
versions of its business software applications to run on Microsoft Windows NT
servers involves more intense competition from a larger number of competitors.
Although the Company has been successful in generating some revenue from these
new products, there can be no assurance that the Company will continue to be
able to compete successfully against current or future competitors.
The business applications software market is highly competitive and rapidly
changing. A number of companies offer products similar to the Company's products
and target the same customers as the Company. The Company believes its ability
to compete depends upon many factors within and outside its control, including
the timely development and introduction of new products and product
enhancements, product functionality, performance, price, reliability, customer
service and support, sales and marketing efforts, and product distribution. The
Company believes that competition in its industry is undergoing rapid change and
that the barriers to competition between market segments that have previously
existed are decreasing. Due to the relatively low barriers to entry in the
software market, the Company expects additional competition from other
established and emerging companies as the client/server business applications
software market continues to develop and expand. Increased competition may
result in price reductions, reduced gross margins, and loss of market share, any
of which would have a material adverse effect on the Company's business,
operating results, and financial condition. There can be no assurance that the
Company will be able to compete successfull y against current or future
competitors or that competitive pressures will not have a material adverse
effect on the Company's business, operating results, and financial condition.
Revenue from customers outside North America represented 11%, 11%, and 7% of the
Company's total revenue in fiscal 1996, 1997, and 1998, respectively. The
Company believes that its revenue and future operating results will depend, in
part, on its ability to increase sales in international markets. There can be no
assurance that the Company will be able to maintain or increase its current
level of international revenue. An important part of the Company's strategy is
to expand its indirect distribution channels in international markets. There can
be no assurance that the Company will be able to attract and retain
international distributors and resellers that will be able to market the
Company's products effectively and will be qualified to provide timely and
cost-effective customer support and service. The inability to attract and retain
important resellers could materially and adversely affect the Company's
business, operating results, and financial condition. Other risks inherent in
the Company's international business activities generally include unexpected
changes in regulatory requirements, tariffs, and other trade barriers, costs,
and difficulties of localizing products for foreign countries, lack of
acceptance of localized products in foreign countries, longer accounts
receivable payments cycles, difficulties in managing international operations,
potentially adverse tax consequences including restrictions on the repatriation
of earnings, the burdens of complying with a wide variety of foreign laws and
economic instability. There can be no assurance that such factors would not have
a material adverse effect on the Company's future international revenue and,
consequently, on the Company's business, operating results and financial
condition.
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<PAGE> 28
INFINIUM SOFTWARE, INC.
REPORT OF
INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF INFINIUM SOFTWARE, INC.
In our opinion, the accompanying consolidated
balance sheets and the related consolidated
statements of operations, stockholders' equity and
of cash flows present fairly, in all material
respects, the financial position of Infinium
Software, Inc. and its subsidiaries at September
30, 1997 and 1998, and the results of their
operations and their cash flows for each of the
three years in the period ended September 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 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 provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 20, 1998
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<PAGE> 29
INFINIUM SOFTWARE, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30,
----------------------
1997 1998
- - --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,779 $ 12,708
Marketable securities at fair market value 38,540 33,585
Accounts receivable, less allowance for doubtful
accounts of $1,569 and $1,650 at September 30,
1997 and 1998, respectively 18,930 27,383
Deferred income taxes 1,167 2,482
Prepaid expenses and other current assets 4,946 6,103
----------------------
TOTAL CURRENT ASSETS 73,362 82,261
----------------------
Property and equipment, net 6,901 7,442
Capitalized software development costs, net 6,946 9,643
Goodwill and other intangible assets, net 1,656 2,245
Deferred income taxes 471 1,731
Other assets 1,971 3,093
----------------------
TOTAL ASSETS $ 91,307 $ 106,415
----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,221 $ 8,136
Accrued expenses 9,763 14,672
Income taxes payable 2,394 3,068
Deferred revenue 31,662 35,991
----------------------
TOTAL CURRENT LIABILITIES 49,040 61,867
----------------------
Deferred revenue 328 1,586
----------------------
TOTAL LIABILITIES 49,368 63,453
----------------------
Commitments (Note 13)
Common stock, $.01 par value; authorized 40,000 shares,
issued 12,162 and 12,607 shares at
September 30, 1997 and 1998, respectively 122 126
Additional paid-in capital 33,325 36,644
Retained earnings 8,502 7,804
Cumulative translation adjustment (10) (319)
----------------------
41,939 44,255
----------------------
Less: treasury stock at cost, none and 89 shares at
September 30, 1997 and 1998, respectively -- (1,293)
----------------------
TOTAL STOCKHOLDERS' EQUITY 41,939 42,962
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 91,307 $ 106,415
- - --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 30
INFINIUM SOFTWARE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
1996 1997 1998
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Software license fees $24,115 $29,781 $ 40,704
Service revenue 47,693 57,220 73,676
-------------------------------
TOTAL REVENUE 71,808 87,001 114,380
- - ---------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of software license fees 3,823 5,070 7,210
Cost of services 16,562 22,400 32,330
Research and development 13,775 16,614 19,071
Sales and marketing 23,822 30,449 36,632
General and administrative 6,616 7,336 9,351
Write-off of in-process research and development acquired (Note 6) -- 6,846 11,196
-------------------------------
TOTAL OPERATING COSTS AND EXPENSES 64,598 88,715 115,790
-------------------------------
INCOME (LOSS) FROM OPERATIONS 7,210 (1,714 (1,410)
Other income, net 1,526 1,923 1,744
-------------------------------
INCOME BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES 8,736 209 334
-------------------------------
Provision for (benefit from) income taxes 3,146 (148) 106
-------------------------------
NET INCOME $ 5,590 $ 357 $ 228
- - ---------------------------------------------------------------------------------------------------------
BASIC PER SHARE DATA:
Net income per share - basic $ 0.56 $ 0.03 $ 0.02
Weighted shares outstanding - basic 10,051 11,777 12,399
DILUTED PER SHARE DATA:
Net income per share - diluted $ 0.49 $ 0 .03 $ 0.02
Weighted shares outstanding - diluted 11,378 12,539 13,808
- - ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
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<PAGE> 31
<TABLE>
<CAPTION>
INFINIUM SOFTWARE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITI
(in thousands, except per share amounts)
COMMON ADDITIONAL NOTES CUMULATIVE TREASURY TOTAL
SHARES COMMON PAID-IN RETAINED RECEIVABLE- TRANSLATION STOCK STOCKHOLDERS'
ISSUED STOCK CAPITAL EARNINGS STOCKHOLDERS ADJUSTMENT AT COST EQUITY
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 8,258 $ 83 $ 2,573 $ 2,555 $(379) $ -- $ -- $ 4,832
Stock issued in connection with
initial public stock offering,
net of offering expenses 1,334 13 12,814 12,827
Stock issued in connection with
follow-on public stock offering, net
of offering expenses 500 5 6,558 6,563
Stock issued upon exercise of
stock options and warrants 974 10 3,052 3,062
Stock issued in connection with
employee stock purchase plan 48 -- 447 447
Income tax benefit from
exercise of stock options 1,950 1,950
Repayments of notes receivable--
stockholders 379 379
Net income for the year 5,590 5,590
- - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1996 11,114 111 27,394 8,145 -- -- -- 35,650
- - ---------------------------------------------------------------------------------------------------------------------------------
Stock issued in connection with
acquisition 770 8 4,506 4,514
Stock issued upon exercise of
stock options 205 2 748 750
Stock issued in connection with
employee stock purchase plan 73 1 528 529
Income tax benefit from exercise
of stock options 149 149
Cumulative translation adjustment (10) (10)
Net income for the year 357 357
- - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1997 12,162 122 33,325 8,502 -- (10) -- 41,939
- - ---------------------------------------------------------------------------------------------------------------------------------
Stock issued upon exercise of
stock options 405 4 1,990 1,994
Stock issued in connection with
employee stock purchase plan 40 326 326
Income tax benefit from exercise
of stock options 1,003 1,003
Purchase of treaury stock at cost (2,944) (2,944)
Treasury stock reissued upon
exercise of stock options and
employee stock purchase plan (926) 1,651 725
Cumulative translation adjustment (309) (309)
Net income for the year 228 228
- - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1998 12,607 $126 $36,644 $ 7,804 $ -- $(319) $(1,293) $42,962
- - ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
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</TABLE>
<PAGE> 32
INFINIUM SOFTWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended September, 30,
----------------------------------
1996 1997 1998
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- - ----------------------------------------------------------------------------------------------------------
Net income $ 5,590 $ 357 $ 228
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,801 5,939 6,780
Allowance for doubtful accounts 662 397 977
Deferred income taxes 737 (1,249) (2,575)
Write-off of in-process research & development acquired (Note 6) -- 6,846 11,196
Changes in operating assets and liabilities, net of effects from
acquisitions (Note 6)
Accounts receivable (1,180) (6,427) (9,165)
Prepaid expenses and other current assets (1,125) (1,345) (1,123)
Other assets (265) (172) (272)
Accounts payable 1,320 453 2,829
Accrued expenses 236 1,860 1,713
Income taxes payable 943 1,172 1,750
Deferred revenue (164) 6,159 5,029
- - ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,555 13,990 17,367
- - ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (82,815) (78,185) (55,640)
Sale of marketable securities 55,317 75,165 60,595
Purchase of property and equipment (4,051) (3,240) (3,528)
Capitalization of software development costs (3,544) (3,594) (5,473)
Acquisitions, net of cash acquired (Note 6) -- (3,443) (9,371)
Investment in unaffiliated entities -- -- (850)
- - ----------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (35,093) (13,297) (14,267)
- - ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from public stock offerings 19,390 -- --
Proceeds from the exercise of stock options, warrants,
and employee stock purchase plan 3,509 1,279 3,021
Purchase of treasury stock -- -- (2,944)
Principal payments under capital lease obligations (84) -- --
Proceeds from repayments of notes receivable -- stockholders 379 -- --
- - ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 23,194 1,279 77
- - ----------------------------------------------------------------------------------------------------------
EFFECT OF FOREIGN EXCHANGE RATE ON CASH -- (10) (248)
- - ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (344) 1,962 2,929
- - ----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,161 7,817 9,779
- - ----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,817 $ 9,779 $ 12,708
- - ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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<PAGE> 33
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. THE COMPANY
Founded in 1981, Infinium Software, Inc., develops, markets, and supports
enterprise-level business software applications for growing organizations
(typically companies with revenue of $25 million to $5 billion). The Company has
two primary product lines. One product line, designed for AS/400 servers,
automates the financial management, human resource management, and materials
management functions of organizations in a broad range of industries worldwide.
The Company also offers a specialized AS/400 manufacturing system designed to
manage process-manufacturing operations. The Company's second product line is
designed for use by customers using Microsoft Windows NT servers. These products
automate the financial management and human resource management operations of
growing organizations. Additional NT applications are under development.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned domestic and foreign subsidiaries. All significant intercompany
transactions and balances have been eliminated.
RECLASSIFICATION
Certain amounts in the consolidated financial statements have been reclassified
to conform to the current year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosures of
contingent assets and liabilities, at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with the provisions of Statement of
Position 97-2 Software Revenue Recognition. Revenue from software license fees
is recognized when there is evidence of an arrangement, the product has been
shipped, fees are fixed and determinable, and collection of the related
receivable is probable. Revenue from sales through distributors is recorded net
of distributor commissions. Maintenance revenue, including those bundled with
the initial license fee, are deferred and recognized ratably over the service
period. Consulting and training service revenue is recognized as the services
are performed.
CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company invests its excess cash primarily in securities of government
agencies, high-grade commercial paper, and mutual funds that invest primarily in
the securities of government agencies. These investments are subject to minimal
credit and market risk. The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents. Marketable securities include securities purchased with an original
maturity of greater than three months.
The Company accounts for its investments under the provisions of Statement of
Financial Accounting Standards No. 115 (SFAS 115), Accounting for Certain
Investments in Debt and Equity Securities. SFAS 115 requires that, except for
debt securities classified as held-to-maturity, investments in debt and equity
securities should be reported at fair value. At September 30, 1997 and 1998, all
of the Company's investments are classified as available-for-sale.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the depreciable assets.
Leasehold improvements are depreciated over the lesser of the lease term or
useful life of the assets. Repair and maintenance costs are expensed as
incurred.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially expose the Company to concentrations of
credit risk include accounts receivable. To minimize this risk, the Company
generally requires a cash deposit upon contract signing. In addition, the
Company maintains reserves for potential credit losses. Such losses, in the
aggregate, have not exceeded management expectations.
RESEARCH AND DEVELOPMENT AND CAPITALIZED
SOFTWARE DEVELOPMENT COSTS
Research and development expenses, other than certain software development
costs, are charged to expense as incurred. In accordance with the provisions of
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed, the Company
capitalizes certain software development costs upon technological feasibility.
Amortization of capitalized software development costs is provided upon
commercial release of the products at the greater of the ratio of current
product revenue to the total of current and anticipated product revenue or on a
straight-line basis over the estimated economic life of the software, which the
Company has determined is not more than five years.
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<PAGE> 34
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
FOREIGN CURRENCY TRANSLATION
Effective for fiscal 1997, the Company changed the functional currency of the UK
subsidiary to that of the local currency. During fiscal 1998, the functional
currency of the Canadian entity was also determined to be the local currency and
changed from the U.S. dollar. During fiscal 1998 the Company commenced direct
operations in South Africa. It was determined that the South Africa subsidiary's
functional currency would be the local currency. Under this approach, assets and
liabilities are translated at current exchange rates. Income and expense items
are translated using average rates during the year. Translation adjustments are
not included in determining consolidated net income but rather are accumulated
and reported as a separate component of stockholders' equity.
The functional currency of the Company's other foreign subsidiaries is the U.S.
dollar. Monetary assets and liabilities of the subsidiaries are translated into
U.S. dollars at the exchange rate in effect at period end and nonmonetary assets
and liabilities are remeasured at historic exchange rates. Income and expenses
are remeasured at the average exchange rate for the period. Translation gains
and losses are reflected in Other income, net in the consolidated statement of
operations.
NET INCOME PER SHARE
In February, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), Earnings per Share. This
Statement, which the Company adopted with the quarter ended December 31, 1997,
establishes and simplifies standards for computing and presenting earnings per
share. SFAS 128 requires restatement of all previously reported earnings per
share data that are presented.
Basic earnings per share is determined by dividing net income applicable to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is determined by dividing net
income applicable to common stockholders by the weighted average number of
common shares and common share equivalents outstanding during the period. Common
share equivalents are included in the diluted earnings per share calculation
when dilutive. Common share equivalents consisting of common stock issuable upon
exercise of outstanding common stock options and warrants are computed using the
treasury stock method.
THE COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE FOR THE YEARS ENDED
SEPTEMBER 30, 1996, 1997, AND 1998 IS AS FOLLOWS:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
1996 1997 1998
- - ----------------------------------------------------------------------- --------------------------- ---------------------------
Income Shares Per Share Income Shares Per Share Income Shares Per Share
- - ----------------------------------------------------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Income available to common stockholders $5,590 10,051 $0.56 $357 11,777 $0.03 $228 12,399 $0.02
EFFECT OF DILUTIVE SECURITIES:
Stock options 1,319 762 1,409
Warrants 8 -- --
- - ----------------------------------------------------------------------- --------------------------- ---------------------------
DILUTED EARNINGS PER SHARE:
Income available to common stockholders $5,590 11,378 $0.49 $357 12,539 $0.03 $228 13,808 $0.02
- - ----------------------------------------------------------------------- --------------------------- ---------------------------
</TABLE>
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<PAGE> 35
INFINIUM SOFTWARE, INC.
STOCK COMPENSATION
The Company's employee stock option plans are accounted for in accordance
with Accounting Principle Board Opinion No. 25, Accounting for Stock Issued
to Employees. In October 1996, the Company adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation. (See Note 8)
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive
Income, and SFAS No. 131, Disclosures About Segments of an Enterprise and
Related Information. These statements are effective for fiscal years beginning
after December 15, 1997 (October 1, 1998 for the Company). The Company will
implement these statements as required. The future adoption of SFAS 130 and SFAS
131 is not expected to have a material effect on the Company's consolidated
financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (October 1, 1999 for
the Company). SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Company anticipates that the
adoption of SFAS 133 will not have a significant effect on the results of
operations or its financial position.
3. CASH EQUIVALENTS AND MARKETABLE SECURITIES
FOLLOWING IS A SUMMARY OF THE FAIR MARKET VALUE OF AVAILABLE-FOR-SALE
SECURITIES, BY BALANCE SHEET CLASSIFICATION, AS OF SEPTEMBER 30, 1997 AND 1998:
<TABLE>
<CAPTION>
September 30,
-------------------
1997 1998
- - ---------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENTS:
State government obligations $6,500 $ 2,566
Money market funds 2,292 5,957
MARKETABLE SECURITIES:
U.S. government obligations 5,428 --
State government obligations 27,201 33,271
Corporate debt obligations 5,122 --
Foreign debt obligations 789 314
- - ---------------------------------------------------------
$47,332 $42,108
- - ---------------------------------------------------------
</TABLE>
Cash equivalents and marketable securities are carried at fair market value,
which approximates amortized cost. The contractual maturities of all available
- - -for-sale securities classified as cash equivalents are less than three months.
Available-for-sale securities classified as marketable securities with fair
market values of $4,484, $27,849, $0, and $1,252 have contractual maturities of
less than one, one to five, five to ten, and greater than ten years,
respectively. All of the Company's marketable securities are classified as
current at September 30, 1997 and 1998, as these funds are highly liquid and are
available to meet working capital needs and to fund current operations. Gross
unrealized gains and losses as of September 30, 1997 and 1998, and realized
gains and losses on sales of securities for the years ended September 30, 1997
and 1998, were not significant.
4. BALANCE SHEET COMPONENTS
PROPERTY AND EQUIPMENT, NET CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
September 30,
--------------------
USEFUL LIFE 1997 1998
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment 2 to 5 years $ 14,204 $ 15,200
Furniture and fixtures 5 years 1,960 1,656
Leasehold improvements Lease term 1,097 1,458
Land 287 287
- - -------------------------------------------------------------------------
17,548 18,601
Less accumulated depreciation and amortization (10,647) (11,159)
- - -------------------------------------------------------------------------
$ 6,901 $ 7,442
- - -------------------------------------------------------------------------
</TABLE>
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
September 30,
--------------------
1997 1998
- - -------------------------------------------------------------------------
<S> <C> <C>
Internal development costs $ 18,746 $ 23,444
Purchased from third parties 312 1,653
- - -------------------------------------------------------------------------
19,058 25,097
Less accumulated amortization (12,112) (15,454)
- - -------------------------------------------------------------------------
$ 6,946 $ 9,643
- - -------------------------------------------------------------------------
</TABLE>
Included in capitalized software development costs at September 30, 1997 and
1998 are $1,892 and $3,526, respectively, related to products which had not yet
been commercially released. Accordingly, amortization of these costs had not
commenced.
Amortization expense of capitalized software development costs for the years
ended September 30, 1996, 1997, and 1998, amounted to $2,744, $2,998, and
$3,341, respectively.
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<PAGE> 36
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
GOODWILL AND OTHER INTANGIBLE ASSETS, NET CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
September 30,
--------------------
1997 1998
- - ------------------------------------------------------------------------
<S> <C> <C>
Goodwill, net of tax benefit of $62 and $144
at September 30, 1997 and 1998, respectively $1,415 $2,355
Workforce in place 468 468
- - ------------------------------------------------------------------------
1,883 2,823
Less accumulated amortization (227) (578)
- - ------------------------------------------------------------------------
$1,656 $2,245
- - ------------------------------------------------------------------------
</TABLE>
ACCRUED EXPENSES CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
September 30,
--------------------
1997 1998
- - ------------------------------------------------------------------------
<S> <C> <C>
Employee compensation and benefits $5,596 $ 7,132
Accrued royalties 1,283 1,537
Accrued professional fees 324 556
Deferred Cort acquisition (Note 6) -- 1,904
Other 2,560 3,543
- - ------------------------------------------------------------------------
$9,763 $14,672
- - ------------------------------------------------------------------------
</TABLE>
5. OTHER INCOME, NET
OTHER INCOME, NET CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
----------------------------------
1996 1997 1998
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $1,620 $2,035 $ 1,891
Interest expense (4) (2) --
Foreign exchange loss (90) (110) (147)
- - ------------------------------------------------------------------------
$1,526 $1,923 $ 1,744
- - ------------------------------------------------------------------------
</TABLE>
Cash paid for interest totaled $4, $1, and $0 for the years ended September 30,
1996, 1997, and 1998, respectively.
6. ACQUISITIONS
CORT DIRECTIONS, INC.
On June 11, 1998, the Company acquired all of the outstanding capital stock of
Cort Directions, Inc., (Cort), a privately held software concern which primarily
developed and marketed a payroll application for the Microsoft NT platform. The
transaction was consummated for $7,857 in cash of which $5,953 was paid upon
closing, $952 to be paid February 1, 1999, and $952 on June 11, 1999, as well as
$375 of acquisition costs.
The acquisition was accounted for as a purchase. Accordingly, the results of
operations of Cort and the fair market values of the acquired assets and assumed
liabilities were included in the Company's financial statements as of the date
of the acquisition.
THE PURCHASE PRICE HAS BEEN ALLOCATED TO THE ACQUIRED ASSETS AND ASSUMED
LIABILITIES AS FOLLOWS:
- - -----------------------------------------------------------------
Accounts receivable $ 184
- - -----------------------------------------------------------------
Other current assets 23
- - -----------------------------------------------------------------
Property and equipment 109
- - -----------------------------------------------------------------
In-process research and development 7,796
- - -----------------------------------------------------------------
Acquired software 566
- - -----------------------------------------------------------------
Goodwill 1,022
- - -----------------------------------------------------------------
Current liabilities (1,468)
- - -----------------------------------------------------------------
$ 8,232
- - -----------------------------------------------------------------
The amount allocated to in-process research and development was determined by an
independent appraiser and represents technology which had not reached
technological feasibility and had no alternative future use. Accordingly, this
amount of $7,796 was charged to operations at the acquisition date. The amounts
allocated to acquired software and goodwill are being amortized on a
straight-line basis over the expected useful lives of three and five years,
respectively. Pro forma statements of operations are not shown, as they would
not differ materially from reported results.
TIME OPEN SYSTEMS LIMITED
On January 6, 1997, the Company acquired all of the outstanding stock of Time
Open Systems Limited (Time), a UK-based privately held software concern which
developed and marketed a suite of client/server financial applications. The
transaction was consummated for $2,793 in cash, approximately 770 shares of the
Company's common stock. The shares were
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<PAGE> 37
INFINIUM SOFTWARE, INC.
issued at the closing of the acquisition and are being held pursuant to an
escrow agreement under which the shares are released ratably over a three year
period, and $650 of related acquisition costs. The value ascribed to the shares
issued was $4,514. The amount of $6,846 was allocated to in-process research and
development and was charged to operations at the acquisition date. Goodwill of
$1,477 was also acquired and is being amortized over the expected useful life
of 7 years. Pro forma statements of operations are not shown as they would not
differ materially from reported results.
OTHER IN-PROCESS RESEARCH AND DEVELOPMENT ACQUIRED
In 1998, the Company acquired software code that will support and enable the
operation of transaction-based functionality specific to Microsoft NT
server-based applications (the research and development) for $3,400. The
research and development as received had not met technological feasibility as
defined by Statement of Financial Accounting Standards No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.
Accordingly, the acquisition of the research and development for $3,400 was
written off upon delivery.
7. INCOME TAXES
THE COMPONENTS OF THE PROVISION (BENEFIT) FOR INCOME TAXES ARE AS FOLLOWS:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
--------------------------------
1996 1997 1998
- - --------------------------------------------------------------
<S> <C> <C> <C>
CURRENT:
Federal $2,496 $ 1,193 $ 2,370
State 143 77 249
Foreign 59 154 356
- - --------------------------------------------------------------
Total current 2,698 1,424 2,975
- - --------------------------------------------------------------
DEFERRED:
Federal 382 (1,464) (2,694)
State 66 (108) (175)
- - --------------------------------------------------------------
Total deferred 448 (1,572) (2,869)
- - --------------------------------------------------------------
$3,146 $ (148) $ 106
- - --------------------------------------------------------------
</TABLE>
THE INCOME TAX PROVISION DIFFERS FROM AN AMOUNT COMPUTED BY APPLYING THE U.S.
STATUTORY FEDERAL INCOME TAX RATE TO PRETAX INCOME AS FOLLOWS:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
--------------------------------
1996 1997 1998
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax $2,971 $ 71 $ 113
State income taxes 138 (22) 49
Research and development credits (139) (429) (942)
Foreign tax rate differential (90) 028 246
Other 266 204 640
- - ------------------------------------------------------------------
$3,146 $(148) $ 106
- - ------------------------------------------------------------------
</TABLE>
DEFERRED TAX ASSETS AND LIABILITIES ARE COMPRISED OF THE FOLLOWING:
<TABLE>
<CAPTION>
September 30,
------------------
1997 1998
- - -----------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 108 $ 72
Intangible assets 2,396 4,265
Deferred revenue 1,817 2,951
Accrued expenses and reserves
not currently deductible 468 499
Other 71 70
- - -----------------------------------------------------------------
Total deferred tax assets 4,860 7,857
- - -----------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Prepaid expenses deducted currently 925 773
Capitalized software development costs 2,290 2,851
Other 7 20
- - -----------------------------------------------------------------
Total deferred tax liabilities 3,222 3,644
- - -----------------------------------------------------------------
$1,638 $4,213
- - -----------------------------------------------------------------
</TABLE>
As of September 30, 1998, the Company had federal net operating loss
carryforwards of $212 which expire at various dates through 2010.
Ownership changes, as defined in the Internal Revenue Code, may limit the amount
of net operating loss and tax credit carryforwards that can be utilized to
offset future taxable income or tax liability. The amount of the annual
limitation is determined in accordance with Section 382 of the Internal Revenue
Code.
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries because those earnings are
intended to be permanently reinvested.
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<PAGE> 38
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Such earnings would become taxable upon the sale or liquidation of these foreign
subsidiaries or upon the remittance of dividends. It is not practicable to
estimate the amount of additional tax that might be payable on the foreign
earnings. Upon remittance, certain foreign countries impose withholding taxes
that are then available, subject to certain limitations, for use against the
Company's U.S. tax liability. The amount of with- holding tax that would be
payable upon remittance of the entire amount of undistributed earnings would not
be material.
Cash paid for income taxes, net of refunds received, totaled $1,707, $9, and
$804 for the years ended September 30, 1996, 1997, and 1998, respectively.
8. STOCKHOLDERS' EQUITY
RECAPITALIZATION
On October 2, 1995, the Company's Board of Directors authorized 1,000 shares of
$0.01 par value preferred stock. Preferred stock may be issued at the discretion
of the Board of Directors of the Company (without stockholder approval) with
such designations, rights, and preferences as the Board of Directors may
determine from time to time. The preferred stock may have dividend, liquidation,
redemption, conversion, voting or other rights which may be more expansive than
the rights of the holders of the common stock.
On October 2, 1995, the Company's Board of Directors approved an increase in the
authorized number of shares of common stock from 10,000 shares to 40,000 shares.
On November 13, 1995, the Company's Board of Directors declared a 1.4-for-1
stock split, effected in the form of a stock dividend paid to stockholders of
record. All shares and per share amounts included in the consolidated financial
statements have been adjusted to give retroactive effect to the stock split for
all periods presented.
PUBLIC OFFERINGS
The Company completed an initial public offering of common stock on November 17,
1995. A total of 2,300 shares were sold at $11.00 per share, of which 1,334 were
sold by the Company and 966 by selling stockholders. Proceeds to the Company
were $12,827, net of underwriting discounts and offering expenses. Additionally,
the Company completed a follow-on public offering of common stock on May 9,
1996. A total of 2,870 shares were sold at $14.75 per share, of which 500 were
sold by the Company and 2,370 by selling stockholders. Proceeds to the Company
were $6,563, net of underwriting discounts and offering expenses.
STOCK OPTIONS
In October 1995, the Board of Directors approved the 1995 Stock Plan (the 1995
Plan) which provides for the issuance of up to 3,500 shares of common stock
pursuant to the grant of qualified and non-qualified stock options, stock awards
or purchase rights to employees, consultants, directors, and officers of the
Company. The options are generally exercisable over three-to five-year periods,
as determined by the Compensation Committee. The Compensation Committee is
comprised of two outside directors. The option price is set at the fair market
value of the Company's stock on the date of the option grant, as determined by
the Compensation Committee.
The Company also has a 1989 Incentive Stock Option Plan (the 1989 Plan) and a
1984 Incentive Stock Option Plan (the 1984 Plan), with authorized options for
2,800 and 1,400 shares of common stock, respectively, under terms similar to
those described in the preceding paragraph. In conjunction with the approval of
the 1995 Plan, the Board of Directors formally terminated the 1989 Plan and, as
such, no future grants will be made under this plan. Authority to grant
additional options under the 1984 Plan has expired.
In October 1995, the Board of Directors approved the 1995 Non-Employee Director
Stock Option Plan (the Director Plan) under which options to purchase a maximum
of 210 shares of the Company's common stock may be granted to non-employee
directors. Under the Director Plan, each non-employee director will be granted
an option to purchase 28 shares of common stock upon first joining the Board of
Directors and 4 shares at each successive annual meeting of stockholders,
beginning at the Company's annual meeting of stockholders for the fiscal year
ended September 30, 1996, at an exercise price per share equal to the then fair
market value per common share. Options granted under the Director Plan become
exercisable in four equal annual installments commencing one year after the date
of grant provided that the optionee then remains a director or consultant. The
term of each option granted under the Director Plan will be for a period of ten
years from the date of the grant.
At September 30, 1998, the Company had 1,346 shares of its common stock
available for future grant and had reserved 2,926 shares of its common stock for
issuance upon exercise of outstanding stock options and warrants under the 1984,
1989, 1995, and Director Plans (the Plans).
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<PAGE> 39
INFINIUM SOFTWARE, INC.
TRANSACTIONS UNDER THE PLANS DURING THE YEARS ENDED SEPTEMBER 30, 1996, 1997,
AND 1998, ARE SUMMARIZED AS FOLLOWS:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
1996 1997 1998
- - ---------------------------------------------------------------------------------------------------------------------------
Weighted average Weighted average Weighted average
Shares exercise price Shares exercise price Shares exercise price
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING AT BEGINNING OF PERIOD 2,397 $ 3.69 1,927 $ 5.74 3,036 $ 6.34
Granted 721 10.43 1,467 6.70 609 15.36
Exercised (974) 3.35 (206) 3.66 (475) 4.93
Cancelled (217) 8.23 (152) 5.83 (244) 8.55
- - ---------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT END OF PERIOD 1,927 5.74 3,036 6.34 2,926 8.28
- - ---------------------------------------------------------------------------------------------------------------------------
OPTIONS EXERCISABLE AT END OF PERIOD 539 3.63 800 4.87 1,196 6.03
- - ---------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE FAIR VALUE OF OPTIONS
GRANTED DURING THE PERIOD $ 5.96 $ 4.08 $10.13
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE FOLLOWING TABLE SUMMARIZES THE PLANS STOCK OPTIONS OUTSTANDING AT
SEPTEMBER 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- -------------------------------
Weighted average
Range of Number remaining Weighted average Number Weighted average
Exercise prices outstanding contractual life exercise price exercisable exercise price
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2.85 - 4.10 597 5.5 $ 3.82 492 $ 3.79
- - ----------------------------------------------------------------------------------------------------------------
5.17 - 7.63 1,140 8.1 6.22 419 6.00
- - ----------------------------------------------------------------------------------------------------------------
8.00 - 12.00 607 7.6 9.74 276 9.83
- - ----------------------------------------------------------------------------------------------------------------
12.06 - 18.00 570 9.3 15.26 9 14.46
- - ----------------------------------------------------------------------------------------------------------------
19.38 - 22.38 012 9.5 20.00 0 0.00
- - ----------------------------------------------------------------------------------------------------------------
2,926 1,196
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
FAIR VALUE DISCLOSURES
HAD COMPENSATION COST FOR THE COMPANY'S OPTION PLANS AND EMPLOYEE STOCK PURCHASE
PLAN BEEN DETERMINED BASED ON THE FAIR VALUE AT THE GRANT DATES, AS PRESCRIBED
IN SFAS 123, THE COMPANY'S NET INCOME AND NET INCOME PER SHARE WOULD HAVE BEEN
AS FOLLOWS:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
--------------------------------------
1996 1997 1998
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME:
As reported $5,590 $ 357 $ 228
Pro forma 5,237 (931) (1,483)
- - --------------------------------------------------------------------------
BASIC INCOME PER SHARE:
As reported 0.56 0.03 0.02
Pro forma 0.52 (0.08) (0.12)
- - --------------------------------------------------------------------------
DILUTED INCOME PER SHARE:
As reported 0.49 0.03 0.02
Pro forma $ 0.46 $(0.08) $ (0.12)
- - --------------------------------------------------------------------------
</TABLE>
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<PAGE> 40
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
The fair value of each option grant is estimated on the date of grant using the
Black Scholes method with the following assumptions used for grants during the
applicable period: dividend yield of 0.0% for all periods; risk-free interest
rates of 5.36% to 6.39% for options granted during the year ended September 30,
1996, 5.51% to 6.76% for options granted during the year ended September 30,
1997, and 4.62% to 5.93% for options granted during the year ended September 30,
1998; weighted average expected option term of 5 years for all periods; and
volatilities of 68.06% for the year ended September 30, 1996, 65.67% for the
year ended September 30, 1997, and 75.85% for the year ended September 30, 1998.
1995 EMPLOYEE STOCK PURCHASE PLAN
On October 2, 1995, the Board of Directors approved the 1995 Employee Stock
Purchase Plan (the Purchase Plan) which enables eligible employees to purchase
shares of the Company's common stock. The Purchase Plan is administered by the
Compensation Committee of the Board of Directors. Under the Purchase Plan,
eligible employees may purchase common stock during six-month payment periods.
The exercise price per share is 85% of the lesser of the market price per share
on the first or last business day of the six-month period. The maximum number of
shares of common stock that an employee may purchase in any six-month period is
five hundred shares. An employee's rights under the Purchase Plan terminate upon
voluntary withdrawal from the plan at any time or upon termination of
employment. The Company has reserved 1,400 shares of common stock for issuance
under the Purchase Plan.
The first period commenced on November 17, 1995, (the effective date of the
Company's initial public offering) and ended on June 30, 1996. Employees
purchased 48 shares of stock at $9.35 per share. In subsequent six-month
periods, employees purchased 40 shares of stock at $7.12 per share, 33 shares of
stock at $7.44 per share, 39 shares of stock at $8.29 per share, and 32 shares
of stock at $11.79 per share.
COMMON STOCK WARRANTS
In connection with a revolving line of credit agreement which expired October
1996, warrants were issued for the purchase of 49 shares of the Company's common
stock. The warrants are exercisable at an initial per share price of $6.07,
subject to adjustment under the terms of the agreement, and expire in June 1999.
The value of the warrants at the issuance date was immaterial. In July 1996, the
warrants were exercised in full and 31 shares were issued.
STOCK REPURCHASE PROGRAM
In February 1998, the Company announced that it would be initiating a stock
repurchase program of up to $6,000 of common stock to use to meet requirements
of its employee stock option and stock purchase plans. No minimum number or
value of shares to be repurchased has been fixed nor has a time limit as to the
duration of the program been established. During the year ended September 30,
1998, the Company repurchased 191 shares at a cost of $2,944. Through the period
ended September 30, 1998, 102 shares were reissued in connection with employee
stock option exercises and stock purchase plan distributions.
9. RETIREMENT SAVINGS PLAN
The Company has a savings and profit-sharing plan covering all eligible
employees which is qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended. The Company may, at its option, provide matching
contributions up to 50% of each participating employee's contributions to the
plan, subject to a maximum of 21/2 % of compensation. Total contributions by the
Company to the plan for the years ended September 30, 1996, 1997, and 1998, were
$283, $553, and $705, respectively.
In June 1996, a Group Personal Pension Plan was established for eligible
employees in the United Kingdom allowing employees to contribute a percentage of
their salary into a personal retirement savings plan. For those employees
electing to contribute more than 3% of their salary into their plan, the Company
contributes a fixed 3% on their behalf. Company contributions to individual
plans aggregated $32, $83, and $81 for the years ended September 30, 1996, 1997,
and 1998, respectively.
A Registered Retirement Savings Plan was established in August 1997 allowing
eligible employees in Canada to contribute a percentage of their compensation
into a retirement savings plan. Total contributions by the Company to this plan
for the years ended September 30, 1997 and 1998, were $11 and $32, respectively.
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<PAGE> 41
INFINIUM SOFTWARE, INC.
10. INDUSTRY SEGMENT, GEOGRAPHIC INFORMATION, AND CUSTOMER INFORMATION
The Company operates in a single industry segment: the design, development,
sale, service, and support of proprietary software products.
THE COMPANY OPERATES IN DIVERSE GEOGRAPHIC AREAS. INCOME (LOSS) FROM OPERATIONS
BY GEOGRAPHIC AREA IS AS FOLLOWS:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
1996 1997 1998
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
North America (principally the United States) $7,197 (485) $ 3,905
Europe (principally the United Kingdom) (272) (1,292) (4,407)
Other international 285 63 (908)
- - -------------------------------------------------------------------------------
$7,210 $(1,714) $(1,410)
- - -------------------------------------------------------------------------------
</TABLE>
No geographic area outside North America accounted for more than 10% of the
Company's consolidated revenue or identifiable assets for the years ended
September 30, 1996, 1997, and 1998.
No single customer accounted for more than 10% of the Company's consolidated
revenue for the years ended September 30, 1996, 1997, and 1998.
11. RELATED PARTY TRANSACTIONS
NOTES RECEIVABLE -- STOCKHOLDERS
In connection with a business combination in September 1991, which was accounted
for as a purchase, the Company loaned an aggregate of $500 to two owners of the
acquired company. Such owners became stockholders of the Company in connection
with the business combination. The notes, which bore interest at 9.0%, were
payable in minimum semi-monthly installments. In addition, any bonuses and
severance pay earned by the holders and any proceeds to the holders from the
sale of common stock of the Company were offset against the notes until the
entire principal and interest due on the notes were paid. The notes were
collateralized by, among other things, any proceeds from the sale of common
stock by the holders and, accordingly, are included as a reduction of
stockholders' equity in the consolidated balance sheets. The notes were repaid
in full on November 24, 1995.
LIFE INSURANCE TRUSTS
One current principal stockholder and two former principal stockholders of the
Company have split-dollar life insurance policies (the Policies). The Policies
are owned by various trusts. The trusts have executed Collateral Assignment
Agreements for the benefit of the Company. Under the Collateral Assignment
Agreements, the Company originally paid the annual premiums under the Policies.
Effective October 1, 1996, the Collateral Assignment Agreements for the two
former principal stockholders were amended so that the trusts (rather than the
Company) were obligated from that date to make all premium payments under the
Policies. In March 1998, the Company paid the last premium payments required
under the current principal stockholder's Policies to make them self-funding as
of that date. The Company has made premium payments under the Policies of $263,
$143, and $88 for the years ended September 30, 1996, 1997, and 1998,
respectively. The premium payments made under the Policies are recorded as
advances to the trusts and are secured by the cash surrender value of related
insurance policies. Cash advances in excess of the cash surrender value of the
related insurance policies were expensed when advanced. Total advances to the
trusts of $1,799, $1,971, and $2,096 at September 30, 1996, 1997, and 1998,
respectively, are included in other assets in the consolidated balance sheet.
The Collateral Assignment Agreement for the current principal stockholder can be
terminated at any time on 30 days' notice by either the Company or the related
trust. Upon termination of the Collateral Assignment Agreement for the principal
stockholder, (i) the Company, and the trust can agree on disposition of the
Policy, (ii) the trust can repay the advances to the Company, or (iii) the net
cash surrender value would be distributed to the Company to the extent of the
advances with the balance of the net cash surrender value being paid to the
trust. The Collateral Assignment Agreements for the two former principal
stockholders can be terminated (i) by the trust on 30 days written notice to the
Company, (ii) upon the failure of the trust to make annual premium payments,
(iii) at the trust's election to receive a release of the assignment of the
Policies from the Company, or (iv) by the Company if the cash surrender value
declines and the Company is not willing to accept substitute collateral. Upon
termination of the Collateral Assignment Agreement for either of the former
principal stockholders, the trust must immediately repay to the Company the
amount of premium advances made by the Company. If a Collateral Assignment
Agreement is not terminated and the principal stockholder dies, the death
benefits will be paid first to the Company to the extent of the advances. There
is no agreement between the Company and the remaining principal stockholder as
to whether the Collateral Assignment Agreement would be terminated on the
disassociation of the stockholder from the Company.
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<PAGE> 42
INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
In October 1994, the three principal stockholders waived their right to the cash
surrender value of the Policies through that date. Advances to the trusts equal
to the cash surrender value at October 1, 1994, of $1,275, were recorded as
other assets in the consolidated balance sheet as a noncash capital
contribution.
During 1995, the trusts borrowed $875 of the cash surrender value of the
Policies. The trusts' obligations to repay those funds were secured by a pledge
of an aggregate of 330 shares of the Company's common stock owned by the current
and a former principal stockholder. The trusts assigned the stock pledges to the
Company as replacement collateral. During fiscal 1996, the trusts repaid a net
of $565 of those borrowings and released 232 shares of the Company's common
stock from the pledge. During fiscal 1997, the trusts borrowed an additional
$47. During fiscal 1998, all loans were repaid in full.
12. RESEARCH AND DEVELOPMENT AGREEMENT
In August 1994, the Company entered into an arrangement whereby a third party
agreed to fund certain research and development activities of the Company.
Product development fees received under the agreement for research and
development activities were recorded as a reduction of research and development
expenses on a percentage-of-completion basis. Payments received for previously
developed products were recorded as liabilities in light of the Company's future
royalty obligations. Through September 30, 1995, the Company received cumulative
product development fees of $1,911, of which $1,318 was recorded as a reduction
of research and development expenses and $593 was recorded as a liability. There
was no external funding in fiscal 1996 or 1997 under this agreement.
The agreement provides for future royalty payments based on revenue generated by
products resulting from the funded activities. Total payments, which are based
on a percentage of the related product revenue, are limited to 130% of the funds
received by the Company under the agreement. Royalties of $242, $296, and $371
were incurred during the years ended September 30, 1996, 1997, and 1998,
respectively.
During fiscal 1998, the Company and the third party amended the research funding
agreement, releasing the Company from future royalty payments due on the sale of
products after December 31, 1998, which the business partner helped fund. In
return for the release of future royalty payments, the Company is obligated to
develop certain e-Business extensions to existing products, as defined. The
amendment also resulted in $400 of funded research offset against research and
development expense that was previously recorded as liability in the
consolidated balance sheet.
In October, 1996, the Company entered into a research funding agreement with a
business partner to fund development activities for enabling double byte
character set capabilities of the Company's Human Resource product, as defined.
The agreement provided $490 of assistance towards this initiative, of which $255
was recorded as a reduction of research and development expense and $235 was
recorded as a liability during fiscal 1997. During 1998, an additional $30 of
this amount was used as an offset to research and development expense.
13. COMMITMENTS AND CONTINGENCIES
LEASES
The Company has several operating lease agreements primarily involving real
estate, computers, and equipment. These leases are noncancelable and expire on
various dates through 2005 except for the Company's London, England facility
lease, which expires in 2015; and its Chatham, England facility lease, which
expires in 2019.
FUTURE MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES WITH INITIAL OR REMAINING
TERMS OF ONE YEAR OR MORE ARE AS FOLLOWS:
FISCAL YEAR
- - ----------------------------------------------------------
1999 $ 4,337
- - ----------------------------------------------------------
2000 3,440
- - ----------------------------------------------------------
2001 2,717
- - ----------------------------------------------------------
2002 2,533
- - ----------------------------------------------------------
2003 2,468
- - ----------------------------------------------------------
THEREAFTER 10,954
- - ----------------------------------------------------------
TOTAL FUTURE MINIMUM LEASE PAYMENTS $26,449
- - ----------------------------------------------------------
Total rent expense for operating leases was $4,515, $4,764, and $4,731 for the
years ended September 30, 1996, 1997, and 1998, respectively.
LEGAL MATTERS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
results of operations or financial position.
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<PAGE> 43
INFINIUM SOFTWARE, INC.
STOCK INFORMATION
PRICE RANGE OF COMMON STOCK
The Company's common stock is traded on the NASDAQ National Market under the
symbol "INFM." Public trading of the common stock commenced on November 17, 1995
on the NASDAQ National Market under the symbol "SFWR" until February 18, 1997,
when the Company changed the corporate name to Infinium Software, Inc. Prior to
that time, there was no public market for the Company's common stock.
THE FOLLOWING TABLE SETS FORTH THE HIGH AND LOW CLOSING PRICES, AS REPORTED BY
NASDAQ, FOR THE PERIODS INDICATED.
High Low
=============================================================
FISCAL 1998
First Quarter $18 1/2 $10 1/4
- - -------------------------------------------------------------
Second Quarter 21 13/16 12 1/8
- - -------------------------------------------------------------
Third Quarter 22 3/8 9 7/8
- - -------------------------------------------------------------
Fourth Quarter 15 7/8 9 3/8
=============================================================
FISCAL 1997
- - -------------------------------------------------------------
First Quarter $10 3/8 $ 6 7/8
- - -------------------------------------------------------------
Second Quarter 8 3/4 5 1/2
- - -------------------------------------------------------------
Third Quarter 10 1/2 5 1/2
- - -------------------------------------------------------------
Fourth Quarter 14 13/16 9 5/8
=============================================================
FISCAL 1996
- - -------------------------------------------------------------
First Quarter (from November 17) $10 3/4 $ 7 1/8
- - -------------------------------------------------------------
Second Quarter 17 1/8 7 3/8
- - -------------------------------------------------------------
Third Quarter 19 3/8 12 3/4
- - -------------------------------------------------------------
Fourth Quarter 18 3/8 8 1/4
=============================================================
At November 19, 1998, there were 464 holders of record.
The Company has never paid any cash dividends on its common stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to fund the development and growth
of its business.
STOCK LISTING
NASDAQ National Market Trading Symbol: INFM
INTERNET
Additional corporate information is available on the World Wide Web at
http://www.infinium.com
ANNUAL MEETING
The Annual Meeting of Stockholders of the Company will be held on Friday,
February 5, 1999, at 3:00 p.m., local time, at the Sheraton Hyannis Resort,
located at the West End Circle, Hyannis, Massachusetts.
TRANSFER AGENT
BankBoston, N.A. c/o Boston EquiServe, LP
PO Box 8040
Boston, MA 02266-8040
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, is available in print form without charge to stockholders
upon request, and is available on the Company's Internet site: www.infinium.com.
To obtain a printed copy, please contact Investor Relations, Infinium Software,
Inc., 25 Communications Way, Hyannis, MA 02601, (508) 778-2000.
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<PAGE> 44
INFINIUM SOFTWARE, INC.
CORPORATE INFORMATION
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS INFINIUM OFFICES
<S> <C>
ROBERT A. PEMBERTON CORPORATE HEADQUARTERS
Chairman of the Board 25 Communications Way
Hyannis, MA 02601
FREDERICK J. LIZZA Telephone: (508)778-2000
President and Chief Executive Officer www.infinium.com
JOHN W. BAUMSTARK ATLANTA
Senior Vice President, Field Operations 2500 NorthWinds Parkway
Suite 600
DANIEL J. KOSSMANN Alpharetta, GA 30004
Chief Financial Officer, Vice President, and Treasurer Telephone: (678)319-4000
ANNE MARIE MONK BOSTON
General Counsel, Vice President, Secretary, and Clerk 10 Maguire Road
Lexington, MA 02421
FRANCIS J. TORBEY Telephone: (781)372-4500
Senior Vice President, Application Development
CHICAGO
ROBERT G. PARKER One Tower Lane
Senior Vice President, Marketing Suite 2500
Oakbrook Terrace, IL 60181
Telephone: (630)573-0711
DIRECTORS
LOS ANGELES
ROBERT A. PEMBERTON 2010 Main Street
Chairman of the Board, Suite 300
Infinium Software, Inc. Irvine, CA 92614
Telephone: (714)851-0490
FREDERICK J. LIZZA
President and Chief Executive Officer, OREGON
Infinium Software, Inc. 500 SW Bond Street
Bend, OR 97702
R. STEPHEN CHEHEYL Telephone: (541)388-3800
MANUEL CORREIA CANADA
Chief Operating Officer, 90 Allstate Parkway
CoWare, Inc. Suite #101
Markham, ON L3R 6H3
ROLAND D. PAMPEL Telephone: (905)940-6700
ROBERT P. SCHECHTER SINGAPORE
President, Chief Executive Officer and Director, 10 Science Park Road, #02-01
Natural MicroSystems Corporation The Alpha, Singapore Science Park II
Singapore 117684
Telephone: +65-778-7337
INVESTOR INFORMATION
UNITED KINGDOM
GEOFF SPILLANE Crosby House, Meadowbank
Corporate Communications Manager Furlong Road, Bourne End
Telephone: (508)790-6863 Buckinghamshire SL8 5AJ
[email protected] Telephone: +44(0)1628-850850
</TABLE>
Trade names referenced are the servicemarks, trademarks, or registered
trademarks of their respective manufacturers
|
| 42
|
<PAGE> 45
[LOGO] INFINIUM
SOFTWARE
25 Communications Way
Hyannis, MA 02601
www.infinium.com
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
The following lists all Infinium Software, Inc. subsidiaries:
<TABLE>
<CAPTION>
Name of Subsidiary State of Organization Principal Business Address
------------------ --------------------- --------------------------
<S> <C> <C>
INFINIUM SOFTWARE EUROPE, INC. Massachusetts, United States 25 Communications Way
Post Office Drawer 6000
Hyannis, MA 02601
INFINIUM CORP. Massachusetts, United States 25 Communications Way
Post Office Drawer 6000
Hyannis, MA 02601
INFINIUM SOFTWARE ASIA/PACIFIC, INC. Massachusetts, United States 25 Communications Way
Post Office Drawer 6000
Hyannis, MA 02601
CORT DIRECTIONS, INC. Oregon, United States Cort Payroll Unit
94 SE Wilson Avenue
Bend, OR 97702
INFINIUM SOFTWARE LIMITED Buckinghamshire, United Kingdom Crosby House
Unit A Meadowbank
74 Furlong Road
Bourne End
Buckinghamshire SL8 5AJ
United Kingdom
INFINIUM HOLDINGS LIMITED Buckinghamshire, United Kingdom Crosby House
Unit A Meadowbank
74 Furlong Road
Bourne End
Buckinghamshire SL8 5AJ
United Kingdom
INFINIUM OPEN SYSTEMS LIMITED Kent, United Kingdom Montague Place, Quayside
Chatham Maritime
Kent, ME4 4QU
United Kingdom
INFINIUM SOFTWARE PROPRIETARY Johannesburg, South Africa Post Office Box 2880
LIMITED Rivonia-2128
Johannesburg
Republic of South Africa
INFINIUM INTERNATIONAL, INC. United States Virgin Islands 11A/11B Curacao Gade
St. Thomas
United States Virgin Islands
00804
DOMAIN SOFTWARE, B.V.(1) Amsterdam NL 1067 AZ
(corporate seat) Amsterdam
The Netherlands
</TABLE>
- - -----------------------------
(1) Inactive and in the process of being dissolved.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-05439) of Infinium Software, Inc. of our report
dated October 20, 1998 appearing in the 1998 Annual Report to Stockholders which
is incorporated by reference in this Annual Report on Form 10-K. We also consent
to the incorporation by reference of our report on the Financial Statement
Schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 12,708
<SECURITIES> 33,585
<RECEIVABLES> 29,033
<ALLOWANCES> 1,650
<INVENTORY> 0
<CURRENT-ASSETS> 82,261
<PP&E> 18,601
<DEPRECIATION> 11,159
<TOTAL-ASSETS> 106,415
<CURRENT-LIABILITIES> 61,867
<BONDS> 0
0
0
<COMMON> 126
<OTHER-SE> 42,836
<TOTAL-LIABILITY-AND-EQUITY> 106,415
<SALES> 40,704
<TOTAL-REVENUES> 114,380
<CGS> 7,210
<TOTAL-COSTS> 39,540
<OTHER-EXPENSES> 75,273
<LOSS-PROVISION> 977
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 334
<INCOME-TAX> 106
<INCOME-CONTINUING> 228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 228
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
