PLANNING SCIENCES INTERNATIONAL PLC
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the above named
Company will be held at the Grosvenor House Hotel, 80/90 Park Lane, London, W1A
3AA on July 1st, 1997 at 10:00 am for the following purposes.
ORDINARY BUSINESS
-----------------
A.(i) To consider and adopt the Company's accounts and reports of the
directors and auditors for the period to December 31, 1996
B. To re-appoint Messrs. Ernst & Young of Rolls House, 7 Fetter Lane,
London, EC4A INH as auditors of the Company until the next general
meeting at which accounts are laid before the Company, at a fee to be
agreed with the Board of Directors.
C. To re-elect Mr. P.R. Rolph and Mr. R.A. Wallman who are retiring by
rotation as directors.
D. To confirm the following appointments to the Board:
1. Mr. J. Buchanan on February 28, 1996;
2. Mr. T. Jones on November 11, 1996.
SPECIAL BUSINESS
----------------
E. To consider and, if thought fit, pass the following resolutions which
will be proposed as to resolution number 1 as an ordinary resolution of
the Company and as to resolutions number 2 to 4 as special resolutions
of the Company.
ORDINARY RESOLUTION
-------------------
1.(ii) That in place of the authority given in the Company's articles of
association:
a) the directors are generally and unconditionally authorized for the
purposes of section 80 of the Companies Act 1985 at any time or times
during the period of five years from the date of this resolution to
allot, or to grant any right to subscribe for or to convert any security
into shares in the authorized share capital of the Company at that date;
b) at the expiry of the period of five years, the authority contained in
paragraph (a) shall expire, but the Directors may make an offer or
agreement before the expiry of the authority which would or might
require shares to be allotted or rights to subscribe for or to convert
any security into shares to be granted, after the expiry of the
authority.
- --------------------------------
(i) The report and accounts delivered to ADR holders are prepared in
accordance with US GAAP. The Company must lay its accounts prepared in
accordance with UK accounting principles and practice before the AGM.
Those accounts which are not materially different from the accounts
prepared in accordance with US GAAP are available on request from the
registered office of the Company.
(ii) Under English law, the directors' authority to allot shares is granted
in the Company's articles of association or by shareholder resolution.
Such authority can be granted for a maximum period of five years. This
resolution grants such authority to the directors and is intended to be
renewed at each successive annual general meeting.
<PAGE>
SPECIAL RESOLUTIONS
-------------------
2.(iii) That in place of the authority given in the Company's articles of
association and in accordance with section 95(1) of the Companies Act
1985 the Directors are given power to allot equity securities (as
defined in section 94 of that Act) pursuant to the authority conferred
by resolution 1 as if section 89(1) of the Act did not apply to the
allotment.
3. That the proposed contract between First Albany Corporation and the
Company for the purchase by the Company of ordinary shares of 15 pence
each in the capital of the Company represented by American Depositary
Shares and the subsequent cancellation of the ordinary shares so
purchased and the ADSs representing such ordinary shares (the
"Contract") be approved and the Company be authorized to purchase such
number of its own shares as shall be determined by the board of
directors pursuance to the Contract at any time or times during the
period of 18 months from the date of this resolution.
4. That the name of the Company be changed to Gentia Software plc.
- ---------------------------
(iii) This resolution disapplies statutory pre-emption rights, under which the
Company must offer to its existing shareholders all new shares to be
allotted for cash. Like resolution number 1, the disapplication can only
be given for up to five years. It is intended that the disapplication be
renewed at each successive annual general meeting.
Dated May 30, 1997
By order of the Board
A.K. Fox
Secretary
Registered Office:
Tuition House,
St. George's Road,
Wimbledon,
London,
SW19 4EU
A member convened by this Notice entitled to attend and vote at the meeting is
entitled to appoint a proxy to attend and vote on a poll in his place. A proxy
need not be a member of the Company.
There are no directors' service contracts of more than one year's duration.
A copy of the proposed contract for the purchase by the Company of its own
shares will be available for inspection at the registered office of the Company
during normal business hours, from the date of this notice until the conclusion
of the meeting.
<PAGE>
THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1784 BY ALEXANDER HAMILTON
101 BARCLAY STREET, NEW YORK, N.Y. 10286
AMERICAN DEPOSITARY RECEIPTS
Planning Sciences International plc
cusip 727114 10 0
---------------
Notice to Holders of American Depositary Receipts
---------------
Holders of record on May 23, 1997 of American Depositary Receipts (each
representing one deposited Ordinary Shares of Planning Sciences International
plc of par value 15 pence) issued under the Deposit Agreement between Planning
Sciences International plc, The Bank of New York, as Depositary, and the owners,
from time to time, of Depositary Receipts issued thereunder, are hereby notified
that The Bank of New York, as Depositary, has received Notice of an Annual
General Meeting of Planning Sciences International plc to be held on July 1,
1997 Grosvenor House Hotel, Park Lane, London.
By provision of section 4.07 of the Deposit Agreement, registered owners of
Depositary Receipts for Ordinary Shares are entitled to instruct The Bank of New
York, as Depositary, as to the exercise of the voting rights pertaining to the
number of deposited Ordinary Shares represented by their respective Receipts.
Upon the written request of an owner of a Depositary Receipt on such record
date, received on or before June 24, 1997, the Depositary shall endeavor, in so
far as practicable, to vote or cause to be voted the number of Shares or other
Deposited Securities represented by the American Depositary Shares evidenced by
such Receipt in accordance with the instructions set forth in such request. The
Depositary shall not vote or attempt to exercise the right to vote that attaches
to the shares or other Deposited Securities, other than in accordance with such
instructions.
In view of the fact that requests from owners must be received prior to the
close of business day on June 24, 1997, to be effective, there is enclosed a
form of proxy for the Annual General Meeting instructing the Depositary as to
the exercise of voting rights, together with a postage paid and addressed
envelope for the return of such form.
The Bank of New York
as Depositary
Mail Date: May 30, 1997
<PAGE>
1 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
SELECTED FINANCIAL DATA
---------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Ended Ended Year Ended
March 31, December 31, December 31, December 31,
- --------------------------------------------------------------------------------------------------------------------------------
1994 1995 1994(i) 1995 1995(i) 1996
================================================================================================================================
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License $ 2,931 $ 6,364 $ 3,794 $ 7,657 $ 10,227 $16,861
Services and other 3,314 4,398 3,153 4,918 6,163 9,104
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues 6,605 10,762 6,947 12,575 16,390 25,965
- --------------------------------------------------------------------------------------------------------------------------------
Cost of revenues:
License 128 148 80 103 171 804
Services and other 980 2,455 1,691 2,816 3,580 4,937
- --------------------------------------------------------------------------------------------------------------------------------
Total cost of revenues 1,108 2,603 1,771 2,919 3,751 5,741
- --------------------------------------------------------------------------------------------------------------------------------
Gross profit 4,957 8,159 5,176 9,656 12,639 20,224
- --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Sales and marketing 2,340 3,782 2,282 4,301 5,801 10,271
Research and development 551 1,113 734 1,284 1,663 3,185
General and administrative 2,062 2,517 1,823 3,017 3,711 3,926
Goodwill amortization -- -- -- -- -- 122
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 4,953 7,412 4,839 8,602 11,175 17,504
- --------------------------------------------------------------------------------------------------------------------------------
Income from operations 4 747 337 1,054 1,464 2,720
Other income (expense) (74) (77) (28) 4 (45) 965
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision
for income taxes (70) 670 309 1,058 1,419 3,685
Provisions for income taxes 12 254 117 384 521 1,216
- --------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (82) $ 416 $ 192 $ 674 $ 898 $ 2,469
================================================================================================================================
Net income (loss) per share $ (0.01) $ 0.05 $ 0.02 $ 0.08 $ 0.11 $ 0.24
================================================================================================================================
Shares used to compute net
income (loss) per share 7,895,647 7,895,647 7,895,647 8,765,486 8,532,462 10,447,811
================================================================================================================================
</TABLE>
(i) The figures for the year ended December 31, 1995 compromise audited figures
for the nine months to December 31, 1995 plus figures for the three months
to March 31, 1995 derived from the audited results for the year ended March
31, 1995. The figures for the nine-month period ended December 31, 1994 are
derived from the audited results for the year ended March 31, 1995.
<PAGE>
2 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
This section contains a number of forward looking statements. These statements
are based on current expectations and actual results may differ materially.
OVERVIEW
The Company was founded in 1983 to develop, market and support financial
modeling software for business planning and analysis. Prior to the release of
Gentia, the Company marketed PC-based departmental decision support software
products. The Company commenced commercial shipments of its Gentia software in
October 1993. Since then, predominately all of the Company's revenues have been
derived from licenses for Gentia and related maintenance, support, training and
consulting services. The Company currently expects that Gentia license and
services revenues will continue to account for all or substantially all of the
Company's revenues for the foreseeable future. As a result, the Company's future
operating results are dependent upon continued market acceptance of Gentia and
enhancements thereto.
Revenues from Gentia consist of license revenues as well as related software
maintenance and support, training and consulting revenues. The sales cycle for a
typical Gentia sale, from initial customer contact through product evaluation,
contract negotiation and signing, ranges from two to six months. License
revenues are recognized upon shipment of the product if no significant vendor
obligations remain and collection of the resulting receivable is probable. In
instances where a significant vendor obligation exists, revenue recognition is
delayed until such obligation has been satisfied. Maintenance and support
revenues, including the element of licensing fees attributable to the initial
warranty period, consist of fees for ongoing support and product updates and are
recognized ratably over the term of the contract, which is typically twelve
months. Revenues from training and consulting are recognized when the services
are performed. See Note 3 of Notes to Consolidated Financial Statements.
Cost of license revenues consist primarily of product packaging, documentation
and production costs together with any fees payable in respect of software
products embedded in the Gentia software. Cost of services and other revenues
consist primarily of customer support costs, consulting costs and development
costs which are generally expensed as incurred. See Note 3 of Notes to
Consolidated Financial Statements. Accordingly, cost of license revenues have
been, and are expected to continue to be, quite low in relation to license
revenues. The Company's gross profit is significantly higher on license revenues
than on services and other revenues.
The price of a Gentia license depends in part upon the number of users
contracted for by the customer. Therefore, license revenues depend not only on
the number of licenses sold but also on the size of the license. The average
size of Gentia licenses sold has increased from approximately $100,000 for the
nine-month period ended December 31, 1995 to approximately $105,000 for the
year ended December 31, 1996.
Sales and marketing expenses consist primarily of personnel costs, including
sales commissions, of all personnel involved in the sales process, as well as
costs of advertising, public relations, seminars and trade shows. Research and
development expenses, which are expensed as incurred, consist primarily of
salaries and other personnel- related expenses, depreciation of development
equipment and supplies and occupancy costs related to the Company's dedicated
research facilities. General and administrative expenses consist primarily of
personnel costs for finance, MIS, human resources and general management, as
well as insurance and professional expenses. Other income (expense) represents
the net of interest income, interest expense and foreign exchange gains or
losses. Interest income is received on cash deposits, interest expense relates
primarily to interest paid on credit lines and foreign exchange gains or losses
relate primarily to various cash transactions on operating accounts.
Since 1992, the Company has invested significant resources in developing its
Gentia software, as well as in developing its worldwide sales and marketing
organization. Total employees have increased from 54 as of April 1, 1994 to 186
as of December 31, 1996, primarily due to the growth of direct sales and support
functions. As a result, since 1993 the Company's operating expenses have
increased in absolute dollar amounts. The Company has increased its revenues
from the United States and the 'Rest of the World' significantly over the past
three years. See Note 11 - "Description of Business - Sales and Marketing" and
Note 11 of Notes to Consolidated Financial Statements. The Company intends to
hire additional sales, support and marketing personnel and to increase its
promotion and advertising expenditures, particularly in the United States.
<PAGE>
3 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Although the Company has experienced significant growth in total revenues in
recent years, there can be no assurance that such growth rates are sustainable.
The Company's expense levels are based in significant part on the Company's
expectations of future revenues and therefore are relatively fixed in the short
run. If revenue levels are below expectations, net income is likely to be
disproportionately affected. There can be no assurance that the Company will
remain profitable on a quarterly or annual basis.
The pound sterling is the functional currency of the Company as it is the
currency of the principal economic environment in which the Company conducts its
operations. A significant portion of the Company's revenues are received in
pounds sterling, and the majority of costs and expenses, particularly research
and development expenses, are incurred in pounds sterling. The financial
statements of the Company are translated from their functional currency into the
reporting currency, the U.S. dollar, utilizing the current rate method.
Accordingly, assets and liabilities are translated at exchange rates in effect
at the end of the reporting period, and revenues and expenses are translated at
the average exchange rate during the period. All translation gains or losses
from the translation into the Company's reporting currency are included as a
separate component of shareholders' equity. Fluctuations in the U.S. dollar and
pound sterling exchange rates will affect period to period comparisons of the
Company's reported results of operations.
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues represented by
the respective line items in the Company's Consolidated Statements of Operations
for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Nine Months
Year Ended Ended Ended Year Ended
March 31, December 31, December 31, December 31,
- ----------------------------------------------------------------------------------------------------
1994 1995 1994 1995 1995 1996
- ----------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License fees 48.3% 59.1% 54.6% 61.0% 62.4% 64.9%
Services and other 51.7 40.9 45.4 39.0 37.6 35.1
- ----------------------------------------------------------------------------------------------------
Total revenues 100.0 100.0 100.0 100.0 100.0 100.0
====================================================================================================
Cost of revenues:
License fees 2.1 1.4 1.2 0.8 1.1 3.1
Services and other 16.2 22.8 24.3 22.4 21.8 19.0
- ----------------------------------------------------------------------------------------------------
Total cost of revenues 18.3 24.2 25.5 23.2 22.9 22.1
====================================================================================================
Gross profit 81.7 75.8 74.5 76.8 77.1 77.9
====================================================================================================
Operating expenses:
Sales and marketing 38.6 35.1 32.8 34.2 35.4 39.5
Research and development 9.0 10.3 10.6 10.2 10.1 12.3
General and administrative 34.0 23.4 26.2 24.0 22.7 15.2
Goodwill amortization -- -- -- -- -- 0.4
- ----------------------------------------------------------------------------------------------------
Total operating expenses 81.6 68.8 69.6 68.4 68.2 67.4
====================================================================================================
Income from operations 0.1 7.0 4.9 8.4 8.9 10.5
Other income (expense) (1.2) (0.7) (0.4) -- (0.2) 3.7
- ----------------------------------------------------------------------------------------------------
Income before provision
for income taxes (1.1) 6.3 4.5 8.4 8.7 14.2
Provision for income taxes 0.3 2.4 1.7 3.0 3.2 4.7
- ----------------------------------------------------------------------------------------------------
Net income (loss) (1.4)% 3.9% 2.8% 5.4% 5.5% 9.5
====================================================================================================
</TABLE>
<PAGE>
4 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUES
The Company's total revenue increased 58.4% from $16.4 million for the year
ended December 31, 1995 to $26.0 million for the year ended December 31, 1996,
primarily as a result of an increase in the number and average size of licenses
sold and increased consulting, maintenance and other services, reflecting
increased acceptance of Gentia and expansion of the Company's direct sales and
support organization.
Revenues for the year ended December 31, 1996 were $8.9 million in the United
Kingdom, $10.2 million in North America, $1.7 million in Australia and $5.2
million from the rest of the world (predominantly from Europe and including
$622,000 of export sales from the United Kingdom). Revenues for the year ended
December 31, 1995 were $7.3 million in the United Kingdom, $6.1 million in North
America, $820,000 in Australia and $2.1 million from the rest of the world
(predominantly from Europe and including $1.6 million of export sales from the
United Kingdom). The Company has experienced growth in all its major markets,
particularly North America and Europe (excluding the United Kingdom). These
increased revenues are primarily a result of increased worldwide acceptance of
Gentia and increased consulting and maintenance services related thereto.
License Revenues: License revenues increased 64.9% from $10.2 million for the
year ended December 31, 1995 to $16.9 million for the year ended December 31,
1996 primarily due to the higher sales of Gentia. License revenues increased
from 62.4% of total revenues for the year ended December 31, 1995 to 64.9% for
the year ended December 31, 1996 primarily due to the increased number and
average size of Gentia licenses sold.
Services and Other Revenues: Services and other revenues increased 47.7% from
$6.2 million in the year ended December 31, 1995 to $9.1 million in the year
ended December 31, 1996. This was largely due to increased maintenance and
support revenues together with increased consulting assignments from the growing
Gentia customer base.
COST OF REVENUES
Cost of License Revenues: Cost of license revenues was $171,000 and $804,000 in
the years ended December 31, 1995 and 1996, respectively, representing 1.1% and
3.1% of revenues for those periods. The increase was primarily due to the
payment of introduction fees on two contracts.
Cost of Services and Other Revenues: Cost of services and other revenues was
$3.6 million and $4.9 million in the years ended December 31, 1995, and 1996,
respectively, representing 21.8% and 19.0% of total revenues for those periods.
The decrease is due to the faster growth of license revenue over other revenue
and improved margins relating to consultancy revenues.
OPERATING EXPENSES
Sales and Marketing: Sales and marketing expenses increased by 77.1% from $5.8
million for the year ended December 31, 1995 to $10.3 million for the year ended
December 31, 1996. This increase reflected the hiring of additional sales and
marketing personnel in connection with the expansion of the Company's sales
organization as well as higher sales commissions associated with increased sales
volume. As a percentage of total revenues, sales and marketing expenses
increased from 35.4% to 39.5% of total revenues for the years ended December 31,
1995 and 1996 respectively.
Research and Development: Research and development expenses increased by 91.5%
from $1.7 million for the year ended December 31, 1995 to $3.2 million for the
year ended December 31, 1996. This increase was primarily attributable to the
addition of twenty seven people to the Company's technical and research staff.
As a percentage of total revenues, research and development expenses were 10.1%
and 12.3% of total revenues for the years ended December 31, 1995 and 1996
respectively. The Company believes that a significant level of investment in
research and development is required to remain competitive and, accordingly, the
Company anticipates that it will continue to devote substantial resources to
product research and development and that research and development costs will be
expensed as incurred. See Note 3 of Notes to Consolidated Financial Statements.
General and Administrative: General and administrative expenses increased 5.8%
from $3.7 million for the year ended December 31, 1995 to $3.9 million for the
year ended December 31, 1996. Expenses increased slightly due to the increased
staffing and administrative costs necessary to manage and support the Company's
current and anticipated growth. In addition, in the year
<PAGE>
5 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
ended December 31, 1996, the Company provided an additional $188,000 against
accounts receivable to cover potential bad debts. General and administrative
expenses represented 22.7% and 15.2% of total revenues for the years ended
December 31, 1995 and 1996, respectively. The Company believes that its general
and administrative expenses will continue to increase in absolute dollar amounts
in fiscal 1997, as the Company expands its administrative staff, adds
infrastructure on a global basis and incurs additional costs related to being a
public company, but that as a percentage of total revenue such expenses will
continue to fall.
INCOME FROM OPERATIONS
Income from operations for the year ended December 31, 1996 was $2.4 million in
the United Kingdom, $586,000 in North America, $1,000 in Australia and $1.1
million in the rest of the world. Income from operations for the year ended
December 31, 1995 was $2.2 million in the United Kingdom; a loss of $4,000 in
North America, break-even in Australia and a loss of $7,000 in the rest of the
world. The increase in profitability in the United Kingdom was due to the
receipt of additional intracompany royalties. The change from a loss to a profit
in North America was due to additional sales in that area. The change from a
loss to a profit in the rest of the world was due to the Company's increased
presence in other countries due to acquisitions in South Africa, Belgium, the
Netherlands, the setting up of companies in Hong Kong and Germany and new
distribution agreements.
OTHER INCOME (EXPENSE)
Other income (expense) was $(45,000) and $965,000 in years ended December 31,
1995 and 1996, respectively, and relates primarily to interest earned (paid) on
interest bearing deposits (overdrafts). The increase in income was due to
significant interest income received on funds raised by the Company's initial
public offering in April 1996.
PROVISION FOR INCOME TAXES
The provision for income taxes was $521,000 and $1.2 million in the years ended
December 31, 1995 and 1996, respectively, representing 36.7% and 33.0% of income
before provision for income taxes for those periods. This decrease reflected the
wider geographical spread of earnings during the year and improved tax
management.
NINE MONTHS ENDED DECEMBER 31, 1995
COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 1994
REVENUES
The Company's total revenues increased 81.0% from $6.9 million for the nine
months ended December 31, 1994 to $12.6 million for the nine months ended
December 31, 1995, primarily as a result of an increase in the number and
average size of licenses sold and increased consulting, maintenance and other
services, reflecting increased acceptance of Gentia and expansion of the
Company's direct sales and support organization.
Revenues for the nine months ended December 31, 1995 were $6.4 million in the
United Kingdom (including $852,000 of export sales), $4.9 million in North
America, $607,000 in Australia and $593,000 from the rest of the world,
(predominantly from Europe). Revenues for the nine months ended December 31,
1994 were $4.3 million in the United Kingdom (including $1.1 million of export
sales), $2.4 million in North America, and $249,000 in Australia. The decrease
in export sales from the United Kingdom from $1.1 million to $852,000 is as a
result of the formation of the Company's European subsidiary to undertake sales
to European countries other than the United Kingdom. The Company has experienced
growth in all its major markets, particularly North America. These increased
revenues are primarily as a result of increased acceptance of Gentia and
increased consulting and maintenance services related thereto.
Because the Company commenced shipping its Gentia product in October 1993,
revenues for the nine months ended December 31, 1994 included revenues derived
from the Company's previous products, EPIC and MasterModeller. Revenues from
these products were $1.8 million for the nine months ended December 31, 1994 and
$451,000 for the nine months ended December 31, 1995 and, accordingly, revenues
from sales of Gentia accounted for substantially all of the Company's revenues
for the period ended December 31, 1995. No revenues are expected from these
previous product lines in the future.
License Revenues. License revenues increased 101.8% from $3.8 million for the
nine months ended December 31, 1994 to $7.7 million for the nine months ended
December 31, 1995 primarily due to the higher sales of Gentia. License revenues
increased from 54.6% of total revenues for the nine months ended December 31,
1994 to 61.0% for the nine months ended
<PAGE>
6 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
December 31, 1995 primarily due to the increased number and average size of
Gentia licenses sold.
Services and Other Revenues. Services and other revenues increased 56.0% from
$3.2 million in the nine months ended December 31, 1994 to $4.9 million in the
nine months ended December 31, 1995. This was due largely to increased
maintenance and support revenues together with increased consulting assignments
from the growing Gentia customer base. Services and other revenues did not
increase in proportion with the growth in revenues in the same period due to the
declining maintenance and support revenues from previous products.
COST OF REVENUES
Cost of License Revenues. Cost of license revenues was $80,000 and $103,000 in
the nine months ended December 31, 1994 and 1995, respectively, representing
1.2% and 0.8% of total revenues for those periods.
Cost of Services and Other Revenues. Cost of services and other revenues was
$1.7 million and $2.8 million in the nine months ended December 31, 1994 and
1995, respectively, representing 24.3% and 22.4% of total revenues for those
periods. This increase was the result of increased staffing in response to
increases in maintenance, support and consulting revenues and in anticipation of
future growth.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased by 88.5% from $2.3
million for the nine months ended December 31, 1994 to $4.3 million for the nine
months ended December 31, 1995. This increase reflected the hiring of additional
sales and marketing personnel (nine in the United States; eight in the United
Kingdom; one in Australia) in connection with the expansion of the Company's
sales organization as well as higher sales commission associated with increased
sales volume. As a percentage of total revenues, sales and marketing expenses
increased from 34.2% of total revenues for the nine months ended December 31,
1994 and 1995, respectively.
Research and Development. Research and development expenses increased from
$734,000 for the nine months ended December 31, 1994 to $1.3 million for the
nine months ended December 31, 1995. This increase was primarily attributable to
the addition of nine people to the Company's research staff. As a percentage of
total revenues, research and development expenses were 10.6% and 10.2% of total
revenues for the nine months ended December 31, 1994 and 1995, respectively.
|The Company believes that a significant level of investment in research and
development is required to remain competitive and, accordingly, the Company
anticipates that it will continue to devote substantial resources to product
research and development and that research and development expenses will
increase in absolute dollars in fiscal 1996. To date, all research and
development costs have been expensed as incurred. See Note 3 of Notes to
Consolidated Financial Statements.
General and Administrative. General and administrative expenses increased by
65.5% from $1.8 million for the nine months ended December 31, 1994 to $3.0
million for the nine months ended December 31, 1995. Expenses increased
primarily due to the increased staffing and administrative costs necessary to
manage and support the Company's current and anticipated growth. In addition, in
the period to December 31, 1995 the Company provided $178,000 against accounts
receivable for support and maintenance on old product lines and its $55,000
investment in three non-operating subsidiaries. General and administrative
expenses represented 26.2% and 24.0% of total revenues for the nine months ended
December 31, 1994 and 1995, respectively. The decrease as a percentage of total
revenues was due to growth in the Company's total revenues. The Company believes
that its general and administrative expenses will increase in absolute dollar
amounts in fiscal 1996 as the Company expands its administrative staff, adds
infrastructure on a global basis and incurs additional costs related to being a
public company.
INCOME FROM OPERATIONS
Income from operations for the nine months ended December 31, 1995 was $1.4
million in the United Kingdom and $145,000 in North America; the Company had
losses from operations of $62,000 in Australia and $7,000 in the rest of the
world and unallocated corporate costs of $463,000. Income from operations for
the nine months ended December 31, 1994 was $989,000 in the United Kingdom; the
Company had losses from operations of $75,000 in North America and $74,000 in
Australia and unallocated corporate costs of $503,000. The increase in
profitability in the United Kingdom was due to additional revenue from
<PAGE>
7 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
customers as well as additional royalties received from subsidiaries. The change
from a loss to profit in North America was due to one exceptional sale to a
customer which accounted for 15% of the Company's revenues during the nine month
period ended December 31, 1995. The loss in the rest of the world in the nine
month period ended December 31, 1995 was incurred in the European subsidiary
formed to undertake sales to European countries other than the United Kingdom.
OTHER INCOME (EXPENSE)
Other income (expense) was ($28,000) and $4,000 in the nine months ended
December 31, 1994 and 1995, respectively.
PROVISION FOR INCOME TAXES
The provision for income taxes was $117,000 and $384,000 in the nine months
ended December 31, 1994 and 1995, respectively, representing 37.9% and 36.3% of
income before provision for income taxes for those periods. This increase
reflected the increase in net income indicated above.
LIQUIDITY AND CAPITAL RESOURCES
Until September 29, 1995, the Company funded its operations solely from its
initial capital base, operations cash flows and limited bank facilities. On
September 29, 1995, the Company completed a $1 million private placement of
equity with Lucas Holdings Limited.
The Company generated cash from operations of $1.9 million and $1.1 million in
the years ended December 31, 1995 and 1996, respectively. On April 30, 1996, the
Company completed an initial public offering of 3,450,000 ADSs, representing
3,450,000 Ordinary Shares at $16.00 per share, of which 2,000,000 shares were
sold by the Company and 1,450,000 were sold by certain shareholders.
In May 1996, the Company acquired the business goodwill and certain tangible
assets from its exclusive South African distributor for approximately $139,000
in cash, and commenced its own operations via a wholly owned subsidiary in South
Africa.
In July 1996 the Company acquired the business goodwill from its exclusive
distributor in Germany for approximately $220,000 and commenced its own
operations via a wholly owned subsidiary in Germany.
In July 1996 the Company also acquired for $1,000,000 all of the outstanding
capital stock held by third parties in Planning Sciences International BV, which
manages the group distributors in Continental Europe.
In September 1996, the Company acquired the entire issued capital stock of its
distributors in Belgium, the Netherlands and Luxembourg for $1,790,000
consisting of $1,200,000 in cash and $590,000 paid through the issuance of
40,000 Ordinary Shares. Further payments up to a maximum of $2,000,000 may
become payable depending on the profitability of the businesses acquired based
on the achievement of quarterly targets to December 31, 1997.
All the acquisitions above were all accounted for under the purchase method and
resulted in the recording of approximately $3.5 million in identified
intangibles and goodwill. The goodwill and intangible assets acquired in all the
above transactions are being amortized over their estimated useful life of 10
years.
Aside from acquisitions, the Company's investing activities consisted of
purchases of property and equipment, primarily computer equipment and office
furniture and equipment, amounting to $849,000 and $1.4 million in the years
ended December 31, 1995 and 1996, respectively.
As a result of these investments, the Company's cash increased from $2.3 million
at December 31, 1995 to $25.2 million at December 31, 1996. The Company's
working capital increased from $1.6 million at December 31, 1995 to $26.7
million; and the Company's total assets increased from $7.8 million at December
31, 1995 to $41.6 million at December 31, 1996.
As of December 31, 1996, the Company had no material commitments to make any
capital expenditures. The Company's principal commitments consist of
non-cancelable operating lease and capital lease agreements as detailed in Note
9 of Notes to Consolidated Financial Statements.
The Company believes that the net proceeds from the April 1996 initial public
offering, together with its current cash, and the cash flows generated by
operations, if any, will be sufficient to meet its anticipated cash needs for
working capital and capital expenditures for at least the next twelve months.
Thereafter, if cash generated from operations is insufficient to satisfy the
Company's liquidity requirements, the Company may seek to sell additional equity
or convertible debt securities or obtain additional credit facilities. The sale
of additional equity or convertible debt securities could
<PAGE>
8 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- ------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
result in additional dilution to the Company's shareholders. A portion of the
Company's cash may be used to acquire or invest in complementary businesses or
products or to obtain the right to use complementary technologies. From time to
time, in the ordinary course of business, the Company evaluates potential
acquisitions of such businesses, products or technologies. The Company has no
current plans, agreements or commitments, and is not currently engaged in any
negotiations with respect to any such transaction.
The Company's accounts receivable are relatively high in terms of revenues, due
in part to the inclusion in accounts receivable of deferred revenues invoiced in
advance. The Company is continually reviewing its credit control procedures with
a view to improving receivables collections.
There was no significant impact as a result of inflation on the Company's
operations during 1996, and 1995.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS PLANNING SCIENCES INTERNATIONAL PLC
We have audited the accompanying consolidated balance sheets of Planning
Sciences International plc as of December 31, 1996 and 1995, and the related
consolidated statements of operations, cash flows and changes in shareholders'
equity for the year ended December 31, 1996 and the nine month period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Planning Sciences
International plc at December 31, 1996 and 1995, and the consolidated results of
its operations and its consolidated cash flows for the year ended December 31,
1996 and the nine month period ended December 31, 1995 in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young
Ernst & Young
Chartered Accountants
London, England
February 13, 1997
<PAGE>
9 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS PLANNING SCIENCES INTERNATIONAL PLC
We have audited the accompanying consolidated statements of operations, cash
flows and changes in shareholders' equity of Planning Sciences International
plc for the year ended March 31, 1995. 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 audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by the management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and consolidated
cash flows of Planning Sciences International plc for the year ended March 31,
1995, in conformity with accounting principles generally accepted in the
United States.
/s/ Clark Whitehill
Clark Whitehill
Chartered Accountants
Reading, England
February 28, 1996, except for
Note 6 - Share Option Plans and
Note 14 - Share Capital, as to
which the date is April 29, 1996
<PAGE>
10 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
December 31,
- -----------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------
ASSETS
Current assets
Cash $25,228 $ 2,280
Accounts receivables, net
of allowance $478 (1995: $290) 9,953 4,001
Prepaid expenses 821 381
- -----------------------------------------------------------------
Total current assets 36,002 6,662
Property and equipment, net 2,013 1,093
Goodwill on acquisitions, net
of amortization $122 (1995:$ nil) 3,388 -
Deferred taxation 148 -
- -----------------------------------------------------------------
Total assets $41,551 $ 7,755
=================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdraft $ - $ 391
Current portion of lease obligations 194 84
Accounts payable 1,648 546
Taxes payable 1,373 310
Accrued liabilities 1,778 1,030
Deferred revenue 2,969 1,967
U.K. value added tax 346 373
Other accounts payable 985 355
- -----------------------------------------------------------------
Total current liabilities 9,293 5,056
- -----------------------------------------------------------------
Non-current liabilities
Deferred taxation 29 34
Long-term portion of lease obligations 225 175
- -----------------------------------------------------------------
Total non-current liabilities 254 209
- -----------------------------------------------------------------
Total liabilities 9,547 5,265
- -----------------------------------------------------------------
Shareholders' equity
Preference Shares (pound)1.00 par value:
2,000,000 shares authorized,
none issued and outstanding - -
Ordinary Shares, 15p par value:
30,000,000 shares authorized,
8,999,167 issued and outstanding
at December 31, 1996 (1995: 6,459,167) 2,152 1,565
Additional paid-in capital 27,182 715
Retained earnings 2,747 278
Cumulative translation adjustment (77) (68)
- -----------------------------------------------------------------
Total shareholders' equity 32,004 2,490
- -----------------------------------------------------------------
Total liabilities and
shareholders' equity $41,551 $7,755
=================================================================
The accompanying notes are an integral part of these statements
<PAGE>
11 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
Nine
Year Ended Months Ended Year Ended
December 31, December 31, March 31,
- --------------------------------------------------------------------------------
1996 1995 1995 1995
- --------------------------------------------------------------------------------
(UNAUDITED)
Revenues:
License $16,861 $10,227 $ 7,657 $ 6,364
Services and other 9,104 6,163 4,918 4,398
- --------------------------------------------------------------------------------
Total revenues 25,965 16,390 12,575 10,762
- --------------------------------------------------------------------------------
Cost of revenues:
License 804 171 103 148
Services and other 4,937 3,580 2,816 2,455
- --------------------------------------------------------------------------------
Total cost of revenues 5,741 3,751 2,919 2,603
- --------------------------------------------------------------------------------
Gross profit 20,224 12,639 9,656 8,159
- --------------------------------------------------------------------------------
Operating expenses:
Sales and marketing 10,271 5,801 4,301 3,782
Research and development 3,185 1,663 1,284 1,113
General and administrative 3,926 3,711 3,017 2,517
Goodwill amortization 122 - - -
- --------------------------------------------------------------------------------
Total operating expenses 17,504 11,175 8,602 7,412
- --------------------------------------------------------------------------------
Income from operations 2,720 1,464 1,054 747
Other income (expense) 965 (45) 4 (77)
Income before provision
for income taxes 3,685 1,419 1,058 670
Provision for income taxes 1,216 521 384 254
- --------------------------------------------------------------------------------
Net income $ 2,469 $ 898 $ 674 $ 416
================================================================================
Net income per share $ 0.24 $ 0.11 $ 0.08 $ 0.05
================================================================================
Shares used to compute
net income per share 10,447,811 8,532,462 8,765,486 7,895,647
================================================================================
The accompanying notes are an integral part of these statements
The figures for the year ended December 31, 1995 comprise audited results for
the nine months ended December 31, 1995 plus figures for the three months to
March 31, 1995 derived from the audited results for the year ended March 31,
1995.
<PAGE>
12 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Share Capital
Ordinary shares
of 15p each Additional Capital Cumulative Total
------------------------ Paid-in Redemption Retained Translation Shareholders'
Shares Amount Capital(i) Reserve(i) Earnings(i) Adjustment Equity
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1994 48,667 $ 11 $ 218 $ 61 $ 239 $(73) $ 456
Stock dividend (ii) 4,818,000 1,178 (218) (61) (899) - -
Exchange translation
adjustments - - - - - 88 88
Net income - - - - 416 - 416
Dividends - - - - (81) - (81)
- --------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1995 4,866,667 1,189 - - (325) 15 879
Issuance of shares net of
issuance costs of $144(iii) 877,333 208 648 - - - 856
Issuance of shares pursuant
to exercise of options:
Employees 364,167 86 33 - - - 119
Lucas Holdings Limited(iii) 351,000 82 34 - - - 116
Exchange translation
adjustments - - - - - (83) (83)
Net income - - - - 674 - 674
Dividends - - - - (71) - (71)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 6,459,167 1,565 715 - 278 (68) 2,490
Issuance of shares (net of
issuance costs of $5,710) 2,000,000 453 25,837 - - - 26,290
Issuance of shares pursuant
to exercise of options:
Employees 500,000 125 50 - - - 175
Issuance of shares
pursuant to acquisition 40,000 9 580 - - - 589
Exchange translation
adjustments - - - - - (9) (9)
Net income - - - - 2,469 - 2,469
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 8,999,167 $2,152 $27,182 $ - $2,747 $(77) $32,004
==========================================================================================================================
</TABLE>
(i) The amount of shareholders' equity available for distribution to
shareholders is the amount of profits determined under U.K. GAAP as
distributable in the statutory accounts of the parent company. At
December 31, 1996 such distributable profits amounted to $2,329
(1995: $787)
(ii) On October 26, 1994, the Company capitalized $1,178 of its retained
earnings and other reserves by way of a bonus issue (stock dividend) of
99 shares for each share held at that date.
(iii) Pursuant to an agreement with the Company dated September 29, 1995, Lucas
Holdings Limited, a Bahamian corporation not previously affiliated with
the Company, acquired the equivalent of 877,333 Ordinary Shares for
$1,000 and was granted an option to purchase an additional 351,000 shares
at $0.33 per share which it exercised on November 1, 1995.
The accompanying notes are an integral part of these statements
<PAGE>
13 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
Nine
Year Ended Months Ended Year Ended
December 31, December 31, March 31,
- --------------------------------------------------------------------------------
1996 1995 1995 1995
- --------------------------------------------------------------------------------
(UNAUDITED)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $2,469 $ 898 $ 674 $ 416
Adjustment to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 598 248 241 227
Goodwill 122 - - -
Changes in operating
assets and liabilities:
Accounts receivable (6,140) (1,206) 136 (2,107)
Provision for bad
and doubtful debts 188 262 254 18
Supplies - 42 45 (3)
Prepaid expenses and
other assets (439) 113 (125) 194
Accounts payable 1,102 246 74 234
Accrued payroll and
related expenses
and other accrued
liabilities 2,188 908 49 1,061
Deferred revenues 1,002 362 215 790
- --------------------------------------------------------------------------------
Net cash provided by
operating activities 1,090 1,873 1,563 830
- --------------------------------------------------------------------------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from disposal
of property and assets 104 75 75 -
Purchases of property
and equipment (1,428) (849) (589) (405)
Costs of acquisitions (2,722) - - -
- --------------------------------------------------------------------------------
Net cash used in investing
activities (4,046) (774) (514) (405)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends paid - (71) (71) (81)
Net (repayment) of capital
lease obligations (160) (37) (36) (3)
Net proceeds from
issuance of shares 26,464 1,091 1,091 -
(Decrease) increase
in bank overdraft. (391) 154 (409) 270
- --------------------------------------------------------------------------------
Net cash provided by
financing activities 25,913 1,137 575 186
Effect of exchange rate
changes on cash (9) 1 (64) 88
- --------------------------------------------------------------------------------
Net increase in cash 22,948 2,237 1,560 699
Cash at beginning of period 2,280 43 720 21
- --------------------------------------------------------------------------------
Cash at end of period $25,228 $2,280 $2,280 $ 720
================================================================================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest (received)
paid, net $ (922) $ 37 $ 27 $ 41
Taxes paid $ 310 $ 63 $ 63 $ 50
Non-cash investing and
financing activities
Acquisition of property
and equipment
through capital leases $ 360 $ 199 $ 170 $ 116
Shares issued for
acquisition $ 590 - - -
The accompanying notes are an integral part of these statements
<PAGE>
14 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
1. THE COMPANY
(A) BUSINESS OF THE COMPANY
The Company develops, markets and supports high performance client/server
decision support software for business, planning and decision making. Its
principal product is marketed under the name Gentia. The Company's revenues are
derived from license revenues for its Gentia software as well as software
support and maintenance, training and consulting revenues from Gentia licensees.
Information on the Company's operation by geographic area is included in Note
11.
Predominantly all of the Company's revenues are derived from licenses for Gentia
and related services and the Company currently expects that Gentia-related
revenues, including maintenance and support contracts, will continue to account
for all or substantially all of the Company's revenues for the foreseeable
future. As a result, the Company's future operating results are dependent upon
continued market acceptance of Gentia and enhancements thereto. A decline in
demand for, or market acceptance of, Gentia would have a material adverse effect
on the Company's business, operating results and financial condition.
(B) INCORPORATION, REORGANIZATION AND BASIS OF PREPARATION
Planning Sciences International plc (the "Company") was incorporated in England
and Wales in September 1993 as Rorycreek Limited and changed its name to
Planning Sciences Holdings Limited in October 1993 on its acquisition by the
controlling shareholders of Planning Sciences plc ("PSP").
In March 1994 the Company acquired all of the issued and outstanding shares of
PSP in a share for share exchange of one Ordinary Share of (pound)0.15 par value
of the Company for every thirty shares of (pound)0.05 par value in PSP. The
acquisition by the Company of PSP has been treated as a combination of entities
under common control (the accounting of which is similar to that of a pooling of
interests).
On March 1, 1996, the Company was re-registered as a public limited company and
changed its name to Planning Sciences International plc. On the same date PSP
re-registered as a private limited company and changed its name to Impact
Information Systems Limited.
(C) REORGANIZATION OF SHARE CAPITAL
On April 30, 1996, the effective date of the initial public offering, the
Company reorganized its authorized and issued share capital as follows: its
Deferred Shares of 5p each and its "B" Shares of 5p each were converted into "A"
Shares of 5p each and all of its "A" Shares of 5p each were consolidated and
redesignated as Ordinary Shares of 15p each on the basis of one Ordinary Share
for every three "A" Shares. All shares and references thereto in these financial
statements have been restated to show the effect of this reorganization.
2. BASIS OF FINANCIAL STATEMENTS
(A) CHANGE OF FISCAL YEAR
In 1995, the Company changed its fiscal year end from March 31 to December 31.
Accordingly, these financial statements are presented for the years ended
December 31, 1996 and March 31, 1995 and for the nine month period ended
December 31, 1995. For comparative purposes, unaudited statements of operations
and cash flows are also presented for the year ended December 31, 1995. These
unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments (consisting only of
normal recurring adjustments) that in the opinion of the Company are necessary
for a fair presentation thereof.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of the
Company and its wholly-owned subsidiaries in the United States, the United
Kingdom, Germany, the Netherlands, Belgium, Australia, South Africa, Hong Kong
and Guernsey. All material intercompany balances and transactions have been
eliminated on consolidation.
(C) USE OF ESTIMATES
The preparation of financial statements in conformity with United States
generally accepted accounting principles ("U.S. GAAP") requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
(D) COMPANIES ACT 1985
These financial statements do not comprise statutory accounts within the meaning
of section 240 of the
<PAGE>
15 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------------------
Companies Act 1985 of Great Britain (the "Companies Act"). The Company's
statutory accounts, which are its primary financial statements, are prepared in
accordance with accounting principles generally accepted in the United Kingdom
("U.K. GAAP") in compliance with the Companies Act. Statutory accounts for the
year ended December 31, 1996, the nine-month period ended December 31, 1995 and
the year ended March 31, 1995 have been prepared and the auditors have given
unqualified audit reports thereon. Such accounts for the nine month period ended
December 31, 1995 and the year ended March 31, 1995 have been, and for the year
ended December 31, 1996, will be delivered to the Registrar of Companies for
England and Wales.
3.SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION
License revenues are recognized upon shipment of the product if it is fully
functional and no significant vendor obligations remain and collection of the
resulting receivable is probable. In instances where a significant vendor
obligation exists, revenue recognition is delayed until the obligation has been
satisfied.
Services and other revenues comprise revenues for support and maintenance
services for ongoing support and product updates, training and consulting.
Support and maintenance revenues are deferred and recognized ratably over the
term of the contract, which is typically twelve months. Revenues from training
and consultancy are recognized when the services are performed. At December 31,
1996 deferred support and maintenance revenues and deferred training and
consultancy revenues amounted to $2,899 (1995: $1,249) and $69 (1995: $718),
respectively.
(B) TRANSLATION OF FINANCIAL
STATEMENTS OF FOREIGN ENTITIES
The functional currency of the Company and its U.K. subsidiaries is sterling.
The functional currencies of the other subsidiaries are the local currencies.
For U.S. reporting purposes these financial statements are presented in
accordance with U.S. GAAP and in U.S. dollars using the translation principles
set out in the Statement of Financial Accounting Standards ("SFAS") No. 52. The
consolidated balance sheets are translated into dollars at the exchange rates
prevailing at the balance sheet dates and the statements of operations and cash
flows at average rates for the relevant periods. Gains and losses resulting from
translation are accumulated as a separate component of shareholders' equity. Net
gains and losses resulting from foreign exchange transactions, which are not
material in any of the reported periods, are included in the consolidated
statement of operations.
Although the Company has no current intentions to pay dividends, were it to pay
dividends they would be declared in sterling out of profits available for that
purpose as determined under U.K. GAAP and in accordance with the Companies Act.
Due to the number of currencies involved, the constantly changing exposures, and
the substantial volatility of currency exchange rates, the effect of exchange
rate fluctuations upon future operating results could be significant. To date,
the Company has not undertaken hedging transactions to cover its currency
translation exposure.
(C) INCOME TAXES
Income taxes are computed using the liability method. Under this method,
deferred income tax assets and liabilities are determined based on temporary
differences between the financial reporting and tax bases of assets and
liabilities and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
(D) NET INCOME PER SHARE
Net income per share information is computed based on the weighted average
number of shares outstanding and dilutive share equivalents of outstanding share
options using the treasury stock method. For the nine month period ended
December 31, 1995 and the year ended March 31, 1995, in accordance with the
requirements of the Securities and Exchange Commission, the computation takes
into account the retroactive effect in both periods of share options and shares
issued in the twelve months ended March 31, 1996 which have been treated as
outstanding for both periods. In the application of the treasury stock method
with respect to such issuances, the IPO price of $16.00 has been used as the
repurchase price.
(E) PROPERTY AND EQUIPMENT
Property and equipment, including leasehold improvements, are stated at cost.
Depreciation is
<PAGE>
16 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
computed using the straight-line method over the estimated useful lives of the
assets as follows:
Computer equipment - 4 years
Furniture, fixtures and
office equipment - 4 years
Leasehold improvements - period of lease
Motor vehicles - 4 years
(F) CAPITAL LEASES
Assets held under capital leases are capitalized in the balance sheet and are
depreciated over their useful lives. Depreciation on these assets is combined in
the consolidated statements of operations with depreciation on owned assets. The
interest element of the rental obligations is charged to the consolidated
statements of operations over the period of the lease at the interest rate
implicit in the lease.
(G) SOFTWARE DEVELOPMENT COSTS
Software development costs are included in research and development and are
expensed as incurred. SFAS No. 86 requires the capitalization of certain
software development costs once technological feasibility is established. With
respect to Gentia, technological feasibility was achieved when all planning,
designing, coding and testing activities were complete. The capitalized cost is
then amortized on a straight-line basis over the estimated product life, or on
the ratio of current revenues to total projected product revenues, whichever is
greater. To date, the period between achieving technological feasibility and the
general availability of such software has been short and software development
costs qualifying for capitalization have been insignificant. Accordingly, the
Company has not capitalized any software development costs.
(H) PENSION COSTS
The Company sponsors and contributes to a number of defined contribution plans.
Contributions are charged in the statement of operations as they become payable
in accordance with the rules of the plans.
(I) STOCK BASED COMPENSATION
The Company uses the intrinsic value method of APB Opinion No. 25 "Accounting
for Stock Issued to Employees" for director and employee stock options. The pro
forma effect of using the fair value method for such options of SFAS 123 is
shown in Note 6.
4. PROPERTY AND EQUIPMENT
Property and equipment comprises:
December 31,
- ----------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------
Computer equipment $2,706 $1,480
Furniture, fixtures and office equipment 525 460
Leasehold improvements 515 209
Motor vehicles 318 271
- ----------------------------------------------------------------
4,064 2,420
Less: accumulated depreciation 2,051 1,327
- ----------------------------------------------------------------
$2,013 $1,093
================================================================
5. ACCRUED LIABILITIES
December 31,
- ----------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------
Accrued expenses and other
current liabilities:
Accrued commissions $ 805 $408
Other 973 622
- ----------------------------------------------------------------
$1,778 $1,030
================================================================
<PAGE>
17 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
6. SHARE OPTION PLANS
The Company has a share option plan which was adopted in February 1994 (the
"1994 Plan") and which succeeded a prior PSP plan. Outstanding options under the
PSP plan were exchanged for the equivalent number of options under the Plan.
Options granted under the Plan are for periods not to exceed seven years, and
must be issued at the higher of par value or the fair market value of the shares
on the date of grant as determined by the Board of Directors in accordance with
the U.K. Capital Gains Tax Act 1979.
Details of options under the 1994 Plan are as follows:
<TABLE>
<CAPTION>
Number of Shares Price Per Share
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at April 1, 1994 ............................... 13,000 (pound) 21.00 $ 31.18(i)
Adjustment for stock dividend ........................... 1,287,000
Granted in year ..................................... 1,378,834 0.21 0.342
- ------------------------------------------------------------------------------------------------------------------
Balance at March 31,1995 ................................ 2,678,834 0.21 0.342
Granted in period ................................... 192,333 0.60 0.950
Exercised in period ................................. (364,167) 0.21 0.325-0.331(ii)
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 ............................ 2,507,000 0.21-0.60 0.326-0.331
Exercised in year ....................................... (500,000) 0.21 0.35
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 ........................... 2,007,000 (pound) 0.21-0.60 $ 0.36-1.03
==================================================================================================================
Exercisable at December 31,1996 ........................ 410,000 (pound) 0.21 $ 0.36
==================================================================================================================
</TABLE>
(i) The exercise prices of the above options are fixed in pounds sterling. The
U.S. dollar equivalents have been derived by translating the pound sterling
amounts at the rates of exchange on the respective dates of grant,
cancellation or exercise as appropriate and at period end rates with
respect to the options outstanding at each period end.
(ii) The U.S. dollar equivalent at the exercise dates were $0.325 in respect of
30,833 options and $0.331 in respect of 333,334 options.
The remaining options are exercisable up to November 2003.
The 1996 Equity Incentive Plan (the "1996 Plan") was adopted by the Board of
Directors on March 7, 1996, and is intended to serve as the successor equity
incentive program to the Company's 1994 Plan under which no further share
options have been or will be granted. Under the 1996 Plan, the Compensation
Committee may grant stock options and restricted stock grants to directors,
employees and other persons providing services to the Company for up to an
aggregate of 2,000,000 Ordinary Shares. The option or restricted stock prices
may be greater than, less than, or equal to the fair market value of the
underlying shares on the date of the grant. As of December 31, 1996, options
under the 1996 Plan for the purchase of 833,350 Ordinary Shares by directors,
employees and persons providing services to the Company had been granted and
were outstanding at an exercise price from $8.50 to $18.75 per Ordinary Share.
Details of options under the 1996 Plan are as follows:
Number of Shares Price per Share
- --------------------------------------------------------------------------------
Granted in year 572,500 $ 8.50
230,00 $ 10.00
13,500 $ 18.75
31,000 $ 12.50
38,000 $ 11.00
25,000 $ 12.50
- --------------------------------------------------------------------------------
910,000
Lapsed in year (76,650) $8.50 - 18.75
- --------------------------------------------------------------------------------
Balance at December 31, 1996 833,350 $8.50 - 18.75
================================================================================
Exercisable at December 31, 1996 none
================================================================================
<PAGE>
18 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
Pro forma information regarding net income and net income per share is required
by SFAS 123, and has been determined as if the Company had accounted for its
employee share options under the fair value method consistent with the method
prescribed by that Statement. The fair value for these options was estimated at
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions for 1996 and 1995: risk-free interest
rates of 5%, dividend yield of 0%, volatility factor of 0.714, and an expected
life of the option of two years. The weighted average fair value of options,
calculated using the Black-Scholes option pricing model, granted during the year
ended December 31, 1996 was $3.91 and during the nine-month period ended
December 31, 1995 was $0.17. The pro forma information is as follows:
Year Ended Nine Months Ended
December 31, December 31,
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Pro forma net income $ 2,243 $ 603
================================================================================
Pro forma net income per share $ 0.21 $ 0.08
================================================================================
The following table summarizes information about the Company's share options
outstanding and exercisable at December 31, 1996 under the 1994 Plan:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------------------------------------
Number Weighted Average Number
Outstanding at Remaining Weighted Average Outstanding at Weighted
Exercise Price December 31, 1996 Contractual Life Exercise Price December 31, 1996 Exercise Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
21p 1,814,667 56 months 21p 410,000 21p
60p 192,333 69 months 60p - 60p
- -------------------------------------------------------------------------------------------------------------
21p - 60p 2,007,000 57 months 25p 410,000 21p
=============================================================================================================
</TABLE>
The following table summarizes information about the Company's share options
outstanding and exercisable at December 31, 1996 under the 1996 Plan:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------------------------------------
Number Weighted Average Number
Range Of Outstanding at Remaining Weighted Average Outstanding at Weighted
Exercise Price December 31, 1996 Contractual Life Exercise Price December 31, 1996 Exercise Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.50 - $11.00 770,850 74 months $ 9.07 - -
$12.50 - $18.75 62,500 80 months $13.15 - -
- -------------------------------------------------------------------------------------------------------------
$ 8.50 - $18.75 833,350 75 months $ 9.38 - -
=============================================================================================================
</TABLE>
<PAGE>
19 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
7. EMPLOYEE PENSION PLANS
The Company sponsors and contributes to a number of defined contribution pension
plans. The assets of these plans are held separately from those of the Company
in independently administered funds. Contributions are expensed as they become
payable. The amount of contributions expensed was $241 for the year ended
December 31, 1996 and $200 for the nine month period ended December 31, 1995 and
$146 for the year ended March 31, 1995.
8. INCOME TAXES
Income before income taxes is analyzed as follows:
Nine Months
Year Ended Ended Year Ended
December 31, December 31, March 31,
- --------------------------------------------------------------------------------
1996 1995 1995
- --------------------------------------------------------------------------------
United Kingdom $1,868 $ 964 $1,150
Overseas 1,817 94 (480)
- --------------------------------------------------------------------------------
$3,685 $1,058 $ 670
================================================================================
Significant components of the provision for income taxes are as follows:
Nine Months
Year Ended Ended Year Ended
December 31, December 31, March 31,
- --------------------------------------------------------------------------------
1996 1995 1995
- --------------------------------------------------------------------------------
Current:
United Kingdom $ 732 $ 391 $ 209
United States 293 3 -
Other 347 - -
- --------------------------------------------------------------------------------
Total current $1,372 $ 394 $ 209
Deferred:
United Kingdom (12) - -
United States (144) (10) 45
- --------------------------------------------------------------------------------
Total provision for income taxes $1,216 $ 384 $ 254
================================================================================
The following table analyzes the difference between the U.K. tax rate and the
effective tax rate:
Nine Months
Year Ended Ended Year Ended
December 31, December 31, March 31,
- --------------------------------------------------------------------------------
1996 1995 1995
- --------------------------------------------------------------------------------
Current:
U.K. Statutory rate 33.0% 33.0% 33.0%
Permanent disallowables for U.K. tax 1.2 5.0 3.7
Utilization of net operating losses 1.1 (3.7) -
Deferred tax valuation adjustments (3.6) (1.8) 1.0
Other - net 1.3 3.8 0.2
- --------------------------------------------------------------------------------
Effective tax rate 33.0% 36.3% 37.9%
================================================================================
<PAGE>
20 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
Significant components of the deferred tax liabilities and assets are as
follows:
December 31,
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Liabilities:
Fixed asset temporary differences $ 29 $ 16
Other - 18
- --------------------------------------------------------------------------------
29 34
Assets:
Fixed asset temporary differences 42 37
Net operating loss carryforwards 98 139
Deferred revenue 163 283
Accrued expenses 159 -
Accounts receivable 18 7
- --------------------------------------------------------------------------------
480 466
Less: valuation allowance (332) (466)
- --------------------------------------------------------------------------------
Deferred tax assets after valuation allowance $ 148 $ -
- --------------------------------------------------------------------------------
Total net deferred tax asset (liability) $ 119 $ (34)
================================================================================
At December 31, 1996, the Company had net operating loss carry forwards in
Australia of $278 (December 31,1995: $270) which may be carried forward
indefinitely.
On September 16, 1996, both Planning Sciences Inc. and Planning Sciences Pacific
Pty Ltd. relinquished their residency status in the United Kingdom and are now
taxed solely in the United States and Australia respectively. For U.K. tax
purposes, any losses that have been sustained by these companies to September
16, 1996, have been utilized where possible by the U.K. subgroup.
9. COMMITMENTS
The Company leases its facilities under non-cancelable operating lease
agreements which expire at various dates through 2008. In addition, the Company
leases certain equipment under long-term lease agreements that are classified as
capital leases. These capital leases terminate at various dates through 1999.
Total property and equipment acquired under these capitalized leases, which
collateralize such borrowings, are as follows:
December 31,
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Computer equipment $ 302 $ 185
Furniture, fixtures and office equipment 60 -
Motor vehicles 298 203
- --------------------------------------------------------------------------------
660 388
Less: accumulated depreciation (253) (131)
- --------------------------------------------------------------------------------
$ 407 $ 257
================================================================================
<PAGE>
21 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
Future minimum annual lease payments under all non-cancelable operating and
capital leases at December 31, 1996 are as follows:
Year Ending December 31, Operating Leases Capital Leases
- --------------------------------------------------------------------------------
1997 $1,076 $ 240
1998 880 151
1999 612 70
2000 340 38
2001 247 2
2002-2008 270 -
---------
Total minimum payments $3,425 501
=========
Less: amounts representing interest (82)
---------
Present value of capital lease obligation 419
Less: current portion (194)
---------
Lease obligations, long-term $ 225
=========
Rental expenses under operating leases totalled $945 for the year ended December
31, 1996, $609 for the nine-month period ended December 31, 1995 and $456 for
the year ended March 31, 1995.
================================================================================
10. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Potential concentrations of credit risk to the Company consist principally of
cash, cash equivalents and trade receivables. The Company only deposits
short-term cash surpluses with high credit quality banks.
During the years ended December 31, 1996 and March 31, 1995 no customer
accounted for more than 10% of the Company's net sales. During the nine-month
period ended December 31, 1995 sales to one customer accounted for approximately
15% of the Company's net sales.
The Company provides credit in the normal course of business and accordingly
performs ongoing credit evaluations of its customers and maintains allowances
for potential credit losses. To date such losses have been within management's
expectations.
<PAGE>
22 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
11. INDUSTRY AND GEOGRAPHIC INFORMATION
The Company and its subsidiaries operate in one industry segment: the
development, marketing and support of high performance client/server decision
support software.
Information about the Company's operations by geographic area is as follows:
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended Year Ended
December 31, December 31, March 31,
- -----------------------------------------------------------------------------------------
1996 1995 1995 1995
- -----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers:
United Kingdom $13,947 $10,979 $ 8,232 $ 7,938
Less: Inter-area eliminations (i) (4,455) (2,110) (1,796) (1,022)
- ---------------------------------------------------------------------------------------
9,492 8,869 6,436 6,916
North America(ii) 10,154 6,108 4,939 3,409
Australia 1,713 820 607 437
Rest of World 4,606 593 593 -
- ---------------------------------------------------------------------------------------
Total revenue $25,965 $16,390 $12,575 $10,762
=======================================================================================
United Kingdom includes exports to:
Rest of Europe $ 622 $ 1,181 $ 688 $ 1,132
Middle East - 139 68 199
Africa - 167 68 321
Asia - 71 28 98
- ---------------------------------------------------------------------------------------
$ 622 $ 1,558 $ 852 $ 1,750
=======================================================================================
Income from operations:
United Kingdom(i) $ 2,350 $ 2,197 $ 1,441 $ 1,779
North America(ii) 586 (4) 145 (337)
Australia 1 - (62) (48)
Rest of world 1,057 (7) (7) -
Corporate costs (United Kingdom) (1,274) (722) (463) (647)
- ---------------------------------------------------------------------------------------
Income from operations $ 2,720$ 1,464 $ 1,054 $ 747
=======================================================================================
</TABLE>
December 31, March 31,
- --------------------------------------------------------------------------------
1996 1995 1995
- --------------------------------------------------------------------------------
Total assets:
United Kingdom $ 9,056 $5,321 $ 4,669
North America(ii) 5,217 1,438 1,266
Australia 683 576 156
Rest of World 26,595 420 -
- --------------------------------------------------------------------------------
Total assets(iii) $41,551 $7,755 $ 6,091
================================================================================
(i) Inter-area eliminations consist of intra-group royalties payable by the
Company's overseas subsidiaries to the United Kingdom operations in respect
of license sales and support and maintenance revenues. Such royalties are
based upon 25%-35% of the relevant customer sales for all reported periods.
(ii) North America consists primarily of the United States.
(iii)Corporate assets are insignificant.
<PAGE>
23 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
-----------------------------------------------------------------------------
12. ACQUISITIONS
In May 1996, the Company acquired the business goodwill and certain tangible
assets from its exclusive South African distributor for approximately $139,000
in cash. Goodwill amounting to $192,000 arose on this acquisition.
In July 1996 the Company acquired the business goodwill from its exclusive
distributor in Germany for approximately $220,000 in cash, all of which has been
allocated to goodwill.
In July 1996 the Company also acquired all of the outstanding capital stock held
by third parties in Planning Sciences International BV for $1,000,000 in cash.
Goodwill amounting to $1,001,000 was allocated to this acquisition.
In September 1996 the Company acquired the entire issued capital stock of its
distributors in Belgium, the Netherlands and Luxembourg for $1,790,000
consisting of $1,200,000 in cash and $590,000 paid through the issuance of
40,000 shares of the Company's Ordinary Shares. Further payments up to a maximum
of $2,000,000 may become payable depending on the profitability of the
businesses acquired based on the achievement of quarterly targets to December
31, 1997. Such contingent payments will be allocated to goodwill as they
crystallize. To date $2,010,000 has been allocated to goodwill.
All of the above acquisitions were accounted for under the purchase method and
the assets and liabilities were recorded at their fair values on the acquisition
dates. Results of operations include all of these acquisitions from the dates of
acquisition. The goodwill and intangible assets acquired in all the above
transactions are being amortized over their useful life of ten years.
The following unaudited pro forma financial information assumes the respective
acquisitions occurred at the beginning of the periods in which the acquisitions
took place and, for comparative purposes, at the beginning of the immediately
preceding year. These results have been prepared for informational purposes only
and are not necessarily indicative of the operating results that would have
occurred had the acquisitions been made as discussed above. In addition, they
are not intended to be a projection of future results.
Year Ended Nine Months Ended
December 31, December 31,
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
(unaudited) (unaudited)
Revenues $27,302 $13,571
================================================================================
Net income $ 2,377 $ 623
================================================================================
Net income per share $ 0.23 $ 0.07
================================================================================
13. RECENT PRONOUNCEMENTS
In February 1997 the Financial Accounting Standards Board issued SFAS 128,
"Earnings per Share". This standard applies to accounting periods ending after
December 15, 1997 and establishes new simplified standards for computing and
presenting earnings per share. Although early adoption is not permitted, the
standard requires restatement of all price period earnings per share data once
adopted.
14. SHARE CAPITAL
The Share capital of the Company was reorganized upon the effective date of the
Company's initial public offering as described in Note 1(c).
<PAGE>
24 o PLANNING SCIENCES INTERNATIONAL PLC o 1996 ANNUAL REPORT
- -------------------------------------------------------------
CORPORATE & SHAREHOLDER INFORMATION
----------------------------------------------------------------------------
CORPORATE INFORMATION
HEAD OFFICES
PLANNING SCIENCES INC.
201 Edgewater Drive
Wakefield, MA 01880-6215
USA
PLANNING SCIENCES INTERNATIONAL PLC
Tuition House
St. George's Road
Wimbledon
London SW19 4EU
UK
BOARD OF DIRECTORS
Paul R. Rolph
Chief Executive Officer and
Chairman of the Board of Directors
ANTHONY K. FOX
Chief Financial Officer, Director and
Company Secretary
TIMOTHY S. JONES
Development Director
R. ALAN WALLMAN
Founder and Director
JAMES R.H. BUCHANAN
Director
SHAREHOLDER INFORMATION
STOCK MARKET DATA
The ADSs are quoted on the Nasdaq National Market under the symbol "PLNSY". The
following table sets forth the range of quarterly high and low closing sale
prices of the ADSs on the Nasdaq National Market since the Company's initial
public offering on April 30, 1996.
High Low
- ----------------------------------------------
1996
Second Quarter
(from April 30, 1996) $ 32.125 $ 18.750
Third Quarter 22.250 11.000
Fourth Quarter 15.375 11.000
1997
First Quarter (through
March 31, 1997) 19.000 8.500
On March 31, 1997, the last sale price for the ADSs as reported on the Nasdaq
National Market was $9.00.
AUDITORS
ERNST & YOUNG
Rolls House
7 Rolls Buildings
Fetter Lane
London EC4A 1NH
200, Clarendon Street
Boston, MA 02116
UKBANKERS
NATIONAL WESTMINSTER BANK PLC
13 Market Place
Reading
Berks RG1 2EN
US BANKERS
KEY BANK OF COLORADO
555 17th Street
Denver, CO 80202
UK SOLICITORS
ALLISON & HUMPHREYS
East India House
109-117 Middelsex Street
London EC1 7JF
UK COUNSEL
WILKIE, FARR & GALLAGHER
35, Wilson Street
London EC2M 2SJ
US COUNSEL
WILKIE, FARR & GALLAGHER
1 Citicorp Center
153 East 53RD Street
New York, NY 10022-4677
DAVIS, MALM & D'AGOSTINE
1 Boston Place
Boston, MA 02108-4470
DEPOSITARY
THE BANK OF NEW YORK
101 Barclay Street
New York, NY 10266
INVESTOR INFORMATION
FINANCIAL RELATIONS BOARD
John Hancock Center
875 North Michigan Avenue
Chicago IL 60611
675, 3rd Avenue
New York, NY 10017
<PAGE>
Planning Sciences International plc
Instructions to THE BANK OF NEW YORK, as Depositary
(must be received prior to the close of business on June 18, 1997)
The undersigned registered holder of American Depositary Shares hereby
requests and instructs The Bank of New York, as Depositary, through its Agent,
to endeavor, in so far as practicable, to vote or cause to be voted the amount
of Deposited Securities underlying the American Depositary Shares evidenced by
Receipts registered in the name of the undersigned on the books of the
Depositary as of the close of business on June 24, 1997 at the Annual General
Meeting of Shareholders of Planning Sciences International PLC to be held in
London, England, on July 1, 1997 in respect of the matters to be voted upon, or
on any other business (including amendments to resolutions) which comes before
the Meeting.
NOTES:
1. Instructions as to voting on the specified resolutions should be indicated by
an "x" in the appropriate box.
(Continued and to be dated and signed on the reverse side)
<PAGE>
Resolutions FOR AGAINST
A. Directors' report and accounts [ ] [ ]
B. Reappoint Ernst & Young as auditors [ ] [ ]
C. Reappoint Directors retiring by rotation:
(a) Robert Alen Wallman [ ] [ ]
(b) Paul Roger Rolph [ ] [ ]
D. Confirm appointments to the Board:
(a) James Robert Hamilton Buchanan [ ] [ ]
(b) Timothy Simon Jones [ ] [ ]
E. 1. Authority to allot shares pursuant to section
80 of the Companies Act 1985 [ ] [ ]
2. Disapply section 89 of the Companies Act
1985 [ ] [ ]
3. Approval of contract for purchase of own
shares [ ] [ ]
4. Approval of change of name of the Company
to Gentia Software plc [ ] [ ]
Change of Address and
or Comments Mark Here [ ]
The Form must be signed by the person in whose name the relevant Receipt is
registered on the books of the Depositary. In the case of a Corporation, the
Form should be executed by a duly authorized Officer or Attorney.
DATE _________________________, 1997
SIGNATURE __________________________
Please mark, sign, date and return the Voting Instruction Card promptly using
the enclosed envelope.
Votes must be indicated (X) in Black or Blue Ink. [ ]
