SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(b)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-21359
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0374596
(State of Incorporation) (I.R.S. Employer Identification No.)
Kungsgatan 12-14, Box 7733
103 95 Stockholm, Sweden
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (011)(468) 676-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period than the
<PAGE>
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.
Class: Outstanding January 31, 1997:
Common Stock ($.01 par value) 15,556,058 shares
Class B Common Stock ($.01 par value) 12,088,200 shares
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<TABLE>
PART I. - FINANCIAL INFORMATION
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands, except per share figures)
<CAPTION>
01/31/97 4/30/96
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $18,302 $ 558
Accounts receivable, less allowance
for doubtful accounts of $206
and $321 at January 31, 1997 and
April 30, 1996, respectively 14,290 13,067
Accrued receivables 1,457 1,190
Prepaid expenses 1,553 1,160
Net assets of discontinued operations 0 1,111
Income taxes receivable 25 48
Other current assets 3,124 169
-------- --------
Total current assets 38,751 17,303
Non-current assets:
Property and equipment, net 2,504 1,873
Deferred income taxes 2,334 1,988
Other non-current assets 249 160
-------- --------
Total non-current assets 5,087 4,021
-------- --------
Total Assets $43,838 $21,324
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS EQUITY
<S> <C> <C>
Current Liabilities:
Short term borrowings $ 0 $ 7,424
Current portion of capital
lease obligations 395 251
Accounts payable 1,403 1,464
Accrued expenses and other
current liabilities 3,284 3,777
Accrued payroll and employee benefits 2,810 3,365
Deferred revenue 2,825 2,386
-------- --------
Total current liabilities 10,717 18,667
-------- --------
Long-term liabilities:
Capital lease obligations 756 624
Accrued pensions liability 1,734 1,482
Deferred income taxes 9 49
-------- --------
Total long-term liabilities 2,499 2,155
-------- --------
Total liabilities $13,216 $20,882
======== ========
Shareholders' equity:
Convertible Preferred Stock;
$.01 par value; 15,000,000
shares authorized; 0
and 14,630,250 shares issued and
outstanding at January 31, 1997,
and April 30, 1996, respectively $ 0 $ 146
Common Stock; voting, $.01 par
value; 62,500,000 and 35,000,000
shares authorized at January 31,
1997, and April 30, 1996, respec-
tively; 15,556,058 and 9,480,003
shares issued and outstanding at
at January 31, 1997, and
April 30, 1996, respectively 156 94
Class B Common Stock; non-voting,
$.01 par value; 12,500,000 shares
authorized; 12,088,200 and 384,000
shares issued and outstanding at
January 31, 1997, and April 30,
1996, respectively 121 4
Additional paid-in capital 43,331 15,323
Accumulated deficit (8,075) (10,870)
Cumulative translation adjustment (2,385) (1,569)
Note receivable from stockholders (2,526) (2,626)
-------- --------
Total shareholders' equity 30,622 502
-------- --------
Total Liabilities and Shareholders' equity $43,838 $21,324
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
PAGE
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share figures)
<CAPTION>
THREE MONTHS ENDED
01/31/97 01/31/96
_____________ ______________
<S> <C> <C>
Revenues
Licenses $ 7,501 $ 6,258
Service and maintenance 7,781 6,149
Other 329 396
-------- --------
Total revenues 15,611 12,803
-------- --------
Cost of revenues:
Licenses 294 629
Service and maintenance 5,691 4,029
Other 245 220
-------- --------
Total cost of revenues 6,230 4,878
-------- --------
Gross profit 9,381 7,925
-------- --------
Operating expenses:
Product development 2,420 1,716
Sales and marketing 4,162 2,508
General and administrative 1,108 886
-------- --------
Total operating expenses 7,690 5,110
-------- --------
Income (loss) from operations 1,691 2,815
Other income (expense):
Interest income 223 5
Interest expense 0 (188)
Miscellaneous expense 167 (259)
-------- --------
Income (loss) from continuing operations
before income taxes 2,081 2,373
Benefit for income taxes (120) 62
-------- --------
Income (loss) from continuing operations 2,201 2,311
Income (loss) from discontinued operations 152 189
Gain on sale of discontinued operations
(net of income tax of $372) 955 0
-------- --------
Net income (loss) $ 3,308 $ 2,500
======== ========
Earnings per share $ 0.12
========
Weighted average number of
shares outstanding 28,442,889
===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share figures)
<CAPTION>
NINE MONTHS ENDED
01/31/97 01/31/96
__________________ __________________
<S> <C> <C>
Revenues
Licenses $14,633 $ 7,991
Service and maintenance 22,435 16,191
Other 1,264 1,158
-------- --------
Total revenues 38,332 25,340
-------- --------
Cost of revenues:
Licenses 1,047 784
Service and maintenance 16,510 11,516
Other 745 793
-------- --------
Total cost of revenues 18,302 13,093
-------- --------
Gross profit 20,030 12,247
-------- --------
Operating expenses:
Product development 7,000 4,641
Sales and marketing 9,537 5,522
General and administrative 3,178 2,621
-------- --------
Total operating expenses 19,715 12,784
-------- --------
Income (loss) from operations 315 (537)
Other income (expense):
Interest income 324 9
Interest expense (230) (573)
Miscellaneous expense 0 (17)
-------- -------
Income (loss) from continuing operations
before income taxes 409 (1,118)
Benefit for income taxes (912) (803)
-------- -------
Income (loss) from continuing operations 1,321 (315)
Income from discontinued operations 519 245
Gain on sale of discontinued operations
(net of income tax of $372) 955 0
-------- -------
Net income (loss) $ 2,795 $ (70)
======== ========
Earnings per share $ 0.10
========
Weighted average number of
shares outstanding 26,678,699
===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
PAGE
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<CAPTION>
NINE MONTHS ENDED
01/31/97 01/31/96
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) $ 2,795 $ (70)
-------- --------
Adjustments to reconcile net profit
(loss) to net cash provided by operat-
ing activities:
Depreciation and amortization 714 542
Provision for doubtful accounts (111) 68
Deferred income taxes (528) (253)
(Gain) loss on disposal of plant
Property and equipment (2) 0
(Gain) loss on disposal of other shares (97) 0
(Gain) loss on disposal of discontinued
operations (1,327) 0
Write-down on plant and equipment 3 0
Changes in operating assets
and liabilities:
Accounts receivable (923) 1,424
Accrued receivables and
prepaid expenses (738) 344
Income taxes 22 (172)
Other assets (714) (76)
Accounts payable 388 (607)
Accrued expenses and other
current liabilities (948) (110)
Accrued payroll, employee benefits
and deferred revenue (105) (351)
Accrued pensions liability 355 44
-------- --------
Net cash provided by continuing
operations (1,216) 1,485
Net assets of discontinued
operations (417) (238)
------- --------
Net cash provided by operating
activities (1,633) 1,247
-------- --------
Cash flows from investing activities:
Additions to property and equipment (932) (324)
Proceeds from sale of property
and equipment 7 7
Proceeds from sale of other equity 138 0
-------- --------
Net cash flows used in investing
activities (787) (317)
-------- --------
Cash flows from financing activities:
Net borrowings (payments) under
lines of credit (7,764) 4,929
(Payments) on short-term borrowings (97) (5,790)
Principal payments on capital
lease obligations (302) (146)
Issuance of shares 28,140 1,225
Other 250 (189)
-------- -------
Net cash flows used in financing
activities 20,227 29
-------- -------
Translation differences on cash and
cash equivalents (63) 6
-------- -------
Net increase (decrease) in cash and
cash equivalents $17,744 $ 965
======== ========
Cash and cash equivalents at beginning
of period $ 558 $ 160
Cash and cash equivalents at end -------- --------
of period $18,302 $ 1,125
-------- --------
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 346 $ 616
------- --------
Income taxes $ 13 $ 3
------- --------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
<PAGE>
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Interim Financial Statements
The unaudited condensed consolidated financial statements included
herein have been prepared by Industri-Matematik International Corp. and its
subsidiaries (collectively, "Company") pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not con-
tain all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying condensed consolidated financial statements
reflect all adjustments (consisting of normal recurring adjustments) con-
sidered necessary for a fair presentation of the Company's financial condi-
tion at April 30, 1996 (audited), and January 31, 1997 (unaudited), and the
results of operations and cash flows for the nine months ended January 31,
1996, and 1997. These financial statements should be read in conjunction
with the audited consolidated financial statements of the Company as pre-
sented in the registration statement for the Company's initial public
offering dated September 25, 1996. Results of operations and cash flows
for the period ended January 31, 1997, are not necessarily representative
of the results that may be expected for the fiscal year ending April 30,
1997, or any other future period.
2. Net Income per Share
For the three and nine months ended January 31, 1997, net income per
share was based on the weighted average number of common stock and common
stock equivalents outstanding during the period. Common stock equivalents
are calculated using the treasury stock method and represent shares issu-
able upon the exercise of outstanding stock options. Historical net income
(loss) per share data has not been presented as such information is not
considered to be relevant or meaningful.
3. Other Current Assets
<TABLE>
<CAPTION>
January 31, 1997 April 30, 1996
(unaudited)
(in thousands)
<S> <C> <C>
Receivable from TurnIt AB $2,929 $ 0
Other 195 169
------ ------
$3,124 $ 169
====== ======
</TABLE>
4. Accrued Expenses and Other Current Liabilities
<TABLE>
<CAPTION>
January 31, 1997 April 30, 1996
(unaudited)
(in thousands)
<S> <C> <C>
Accrued purchases $1,411 $1,731
Accrued royalty 1,323 1,372
Accrual for loss contract 0 237
Accruals for contract expenses 96 153
Value-added tax 7 131
Other 447 153
------ ------
$3,284 $3,777
====== ======
</TABLE>
The accrual for loss contract relates to a reserve for obsolete
software that was part of an operating lease contract for computer hard-
ware. The amount accrued represents the software portion of the future
minimum lease payments based on the fair value of the software in relation
to the fair value of both the hardware and software provided under the
total lease contract. Accruals for contract expenses are primarily license
fees to third parties for software included in the sale of System ESS.
5. Accrued Payroll and Employee Benefits
<TABLE>
<CAPTION>
January 31, 1997 April 30, 1996
(unaudited)
(in thousands)
<S> <C> <C>
Accrued commissions $ 638 $ 776
Accrued payroll taxes 594 960
Accrual vacation pay 664 750
Accrued salaries and bonus 914 879
------ ------
$2,810 $3,365
====== ======
</TABLE>
6. Income Taxes
For the three and nine month periods ended January 31, 1997, and
the three month period ended January 31, 1996, a reduction of the deferred
tax asset was partially utilized to offset tax expenses incurred during the
period. For the nine month period ended January 31, 1996, a deferred tax
asset was recognized relating to the Company's net loss for the period. At
January 31, 1997, the Company had approximately $4.3 million of gross
deferred tax assets comprised primarily of net operating loss carryforwards
in Sweden. During the three and nine month periods ended January 31, 1996,
and 1997, the Company reduced its valuation allowance relating to its net
operating loss carryforwards based upon positive evidence indicating an
increased likelihood of the utilization of such net operating loss carry-
forwards in offsetting future tax expense. Estimated future earnings
necessary to fully realize the net deferred tax asset are $8.3 million.
Such earnings are forecasted to be realized within approximately three
years. There can be no assurance that future earnings, if any, will meet
currently forecasted levels, however it is management's opinion that the
realization of such earnings in the future is more likely than not.
7. Stock Options
Under the Industri-Matematik International Corp. Stock Option Plan,
205,000 options were granted during the nine months ended January 31, 1997,
85,000 of which were issued, cancelled, and reissued in the same period.
All options were issued or reissued at an exercise price of $9.00 per share
of Common Stock, which was equal to the estimated fair market value at the
date of grant.
8. Stockholder's Equity
On October 1, 1996, the Company completed an initial public offering
of 3,200,000 shares of Common Stock at an offering price of $10.00 per
share. The net proceeds, after underwriting discounts and offering
expenses payable by the Company, were approximately $28.5 million. A
portion of the proceeds were used to pay off short-term borrowings. Upon
the completion of the Company's initial public offering, in accordance with
the Restated Certificate of Incorporation of the Company then in effect,
all of the Company's Convertible Preferred Stock outstanding as of that
date was converted to Common Stock (20%) and Class B Common Stock (80%).
9. Discontinued Operations
On January 20, 1997, the Company sold its stock representing 55%
ownership of Paragon AB to TurnIt AB for $2.9 million in cash. Paragon AB
operated in two segments constituting the production and sale of
microprocessor compilers and consultancy services for relational data base
management systems. The Company recorded a gain of $1.0 million after tax
on the sale.
<PAGE>
<PAGE>
ITEM 2.
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements that involve risks and
uncertainties. The actual future results of the Company could differ
materially from those statements. Factors that could cause or contribute
to such differences include, but are not limited to, uncertainties regard-
ing continued market acceptance of new products and product enhancements,
delays in the introduction of new products and product enhancements, and
risks associated with managing the Company's rapid growth, as well as
factors discussed in the Company's Prospectus dated September 25, 1996,
relating to the initial public offering of its Common Stock.
Overview.
The Company develops, markets and supports client/server application
software that enables manufacturers, distributions, wholesalers, and third-
party logistics companies to manage more effectively the "demand chain".
Demand chain management encompasses the execution of multiple customer-
centric order fulfillment processes, including order management, dis-
tribution logistics, inventory replenishment, and demand planning. The
Company's principal product, System ESS, has been designed specifically to
meet complex or high-volume demand chain management requirements of large
manufacturers, distributors, wholesalers, and third-party logistics
companies. System ESS allows customers to leverage the value of their
existing systems by integrating with legacy and new client/server manu-
facturing, planning, and financial information systems.
Agreement with Oracle.
In January, 1997, the Company entered into an Agreement with Oracle
Corporation ("Oracle") which joins the Company, Oracle, and other leading
software vendors in a partnership alliance which will integrate the
Company's solution for the consumer packaged goods industry ("CPG"). The
Company will be able to take advantage of Oracle's global sales and support
resources in enterprise wide ("ERP") sales to the specific vertical CPG
market. Pursuant to the Agreement, the Company and Oracle will work
closely in the integration, development, application, and support of System
ESS as part of the ERP CPG solution. The Company will continue to sell
System ESS as a point solution in the CPG market and in all other vertical
markets with its own sales and support resources.
Results of Operations.
The following table sets forth, for the periods indicated, the per-
centages that selected items in the unaudited Condensed Consolidated
Statements of Operations bear to total revenues. The period to period
comparisons of financial results are not necessarily indicative of future
results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
January 31, January 31,
---------------- ------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Licenses 38.2% 31.5% 48.1% 48.9%
Service and maintenance 58.3 63.9 49.8 48.0
Other 3.3 4.6 2.1 3.1
------ ------ ------ ------
Total revenues 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
Cost of revenues:
Licenses 2.7% 3.1% 1.9% 4.9%
Service and maintenance 43.1 45.4 36.4 31.5
Other 1.9 3.1 1.6 1.7
------ ------ ------ ------
Total cost of revenues 47.7 51.6 39.9 38.1
------ ------ ------ ------
Gross profit 52.3 48.4 60.1 61.9
------ ------ ------ ------
Operating expenses:
Product Development 18.2 18.3 15.5 13.4
Sales and marketing 24.9 21.8 26.7 19.6
General & administrative 8.3 10.3 7.1 6.9
------ ------ ------ ------
Total operating expenses 51.4 50.4 49.3 39.9
------ ------ ------ ------
Income (loss) from operations 0.9 (2.0) 10.8 22.0
------ ------ ------ ------
Other income (expenses):
Interest income 0.8 0.0 1.4 0.0
Interest expense (0.6) (2.3) 0.0 (1.5)
Miscellaneous expense 0.0 (0.1) 1.1 (2.0)
------ ------ ------ ------
Income (loss) from continuing
operations before income taxes 1.1 (4.4) 13.3 18.5
Provision (benefit) for income
taxes (1.4) (3.2) 1.6 0.4
------ ------ ------ ------
Income (loss) from continuing
operations 2.5 (1.2) 11.7 18.1
Income from discontinued
operations 1.4 1.0 1.0 1.4
Gain on sale of discontinued
operations 3.4 0.0 8.5 0.0
------ ------ ------ ------
Net Income (loss) 7.3% (0.2%) 21.2% 19.5
====== ====== ====== ======
</TABLE>
<PAGE>
REVENUES
The Company's revenues consist of software license revenues, service
and maintenance revenues, and other revenues. Software license revenues
consist of sales of software licenses which are recognized upon execution
of a contract and shipment of the software, provided that no significant
vendor obligations remain outstanding, amounts are due within one year, and
collection is considered probable by management. Service revenues are
derived from fees for consulting, training, and client-specific development
services and are recognized as services are performed. Maintenance
revenues are derived from customer support agreements generally entered
into in connection with the initial license sales and subsequent renewals.
Maintenance revenues are recognized ratably over the term of the main-
tenance period. Payments for maintenance fees are generally made in
advance. Other revenues are primarily third-party hardware sales necessary
to help certain customers implement System ESS.
Total revenues increased 21.9% to $15.6 million in the quarter ended
January 31, 1997 from $12.8 million in the quarter ended January 31, 1996.
In the first nine months of fiscal 1997, total revenues increased 51.3% to
$38.3 million from $25.3 million in the first nine months of fiscal 1996.
The Company currently derives substantially all of its revenues from System
ESS licenses and related service and maintenance. As a result of the
Company's dependence on the continued market acceptance of System ESS,
there can be no assurance that total revenues will continue to grow at the
rates experienced in prior periods, if at all.
Revenues generated in the United States were approximately 55% and 28%
of total revenues in the quarters ended January 31, 1997, and 1996, respec-
tively, and approximately 44% and 27% of total revenues in the first nine
months of fiscal 1997 and fiscal 1996, respectively. The significant
increase in these revenues in fiscal 1997 from 1996 is primarily due to the
expansion of the Company's sales and services operations in the United
States over last year.
License Revenues. Revenues from software licenses increased 19.9% to
$7.5 million in the quarter ended January 31, 1997, from $6.3 million in
the quarter ended January 31, 1996. In the first nine months of fiscal
1997, revenues from software licenses increased 83.1% to $14.6 million from
$8.0 million in the first nine months of fiscal 1996. The significant
increase in software license revenues was due primarily to the growing
market acceptance of System ESS and the expansion of the Company's sales
and marketing organizations in the U.S. and Europe.
Service and Maintenance Revenues. Revenues from service and main-
tenance increased 26.5% to $7.5 million in the quarter ended January 31,
1997, from $6.3 million in the quarter ended January 31, 1996. In the
first nine months of fiscal 1997, revenues from service and maintenance
increased 38.6% to $22.4 million from $16.2 million in the first nine
months of fiscal 1996. The increase in the absolute dollar amount of
service and maintenance revenues was related primarily to an increase in
the number of System ESS licenses sold during fiscal 1997 from fiscal 1996
and a significant expansion of the Company's consulting organization in the
U.S. and Europe. The increase in service and maintenance revenues is lower
than the increase in license revenues as a result of the Company's use,
where advantageous, of third-party consultants to provide services to the
Company's customers as well as the fact that service and maintenance
revenues are not necessarily proportional to license revenues. Service and
maintenance revenues as a percentage of total revenues increased to 49.8%
in the quarter ended January 31, 1997, from 48.0% in the quarter ended
January 31, 1996, and decreased to 58.5% in the first nine months of fiscal
1997, from 63.9% in the first nine months of fiscal 1996.
Other Revenues. Other revenues are primarily third-party hardware
sales to help certain customers implement System ESS. Other revenues
decreased 16.9% to $329,000 in the quarter ended January 31, 1997, from
$396,000 in the quarter ended January 31, 1996. In the first nine months
of fiscal 1997, other revenues increased 9.1% to $1.3 million from $1.2
million in the first nine months of fiscal 1996. Other revenues as a
percentage of total revenues decreased to 2.1% in the quarter ended
January 31, 1997, from 3.1% in the quarter ended January 31, 1996, and
decreased to 3.3% in the first nine months of fiscal 1997 from 4.6% in the
first nine months of fiscal 1996. The decrease in other revenues as a
percentage of total revenues reflects a reduction by the Company in its
efforts to provide third-party hardware and support.
Cost of Revenues.
Cost of License Revenues. Cost of software licenses consists primarily
of license fees paid with respect to third-party software included with the
sales of System ESS, and, occasionally, the cost of third-party complemen-
tary software that is sold together with System ESS without being an in-
tegral part of System ESS. Cost of license revenues was $294,000 and
$629,000 in the quarters ended January 31, 1997, and 1996, representing
3.9% and 10.1% of license revenues, respectively. Cost of license revenues
was $1.0 million and $784,000 in the first nine months of fiscal 1997 and
1996, representing 7.2% and 9.8% of license revenues, respectively. The
decrease in cost of license revenues for the quarter ended January 31,
1997, compared to the same quarter in 1996 both in absolute dollar amount
and as a percentage of license revenues was primarily due to the decrease
in sales of third-party complementary software.
Cost of Service and Maintenance Revenues. Cost of services and main-
tenance consists primarily of costs associated with consulting, imple-
mentation, and training services and, occasionally, the use by the Company
of third-party consultants to perform implementation services for the
Company's customers. Cost of service and maintenance revenues also in-
cludes the cost of providing software maintenance to customers, such as
telephone hotline support.
Cost of service and maintenance revenues was $5.7 million and $4.0
million in the quarters ended January 31, 1997, and 1996, representing
73.1% and 65.5% of service and maintenance revenues, respectively. Cost of
service and maintenance revenues was $16.5 million and $11.5 million in the
first nine months of fiscal 1997 and fiscal 1996, representing 73.6% and
71.1% of service and maintenance revenues, respectively. The increases in
cost of services and maintenance both in absolute dollar amounts and as a
percentage of service and maintenance revenues were primarily due to the
increase in the number of consultants, product support, and training staff
<PAGE>
and the increased use of third-party consultants. The Company expects to
continue to increase the number of consultants and product support and
training staff in the future as the number of System ESS licenses in-
creases.
Cost of Other Revenues. Cost of other revenues consists primarily of
the cost of third-party hardware supplied to certain customers. Cost of
other revenues was $245,000 and $220,000 in the quarters ended January 31,
1997, and 1996, representing 74.5% and 55.6% of other revenues, respec-
tively. Cost of other revenues was $745,000 and $793,000 in the first nine
months of fiscal 1997 and fiscal 1996, representing 58.9% and 68.5% of
other revenues, respectively.
Product Development. Product development expenses were $2.4 million
and $1.7 million in the quarters ended January 31, 1997, and 1996, repre-
senting 15.5% and 13.4% of total revenues, respectively. These same
expenses were $7.0 million and $4.6 million in the first nine months of
fiscal 1997 and 1996, representing 18.3% and 18.3% of total revenues,
respectively. The increases in product development expenses in dollar
amount were primarily due to an increase in the number of product develop-
ment personnel and other related costs incurred in connection with expand-
ing the Company's product development department and, to a lesser extent,
the costs relating to third-party translation work. The Company expects
that the dollar amount of product development expenses will continue to
increase as the Company continues to invest in developing new applications,
product enhancements, and localization and translation of System ESS.
In accordance with Statement of Financial Accounting Standards No. 86,
software development expenses are expensed as incurred until technological
feasibility has been established, at which time such costs are capitalized
until the product is available for general release to customers. To date
the establishment of technological feasibility of the Company's products
and general release of such software have substantially coincided. As a
result, software development costs qualifying for capitalization have been
insignificant, and, therefore, the Company has not capitalized any software
development costs.
Sales and Marketing. Sales and marketing expenses include personnel
costs, commissions and related costs for sales and marketing personnel, as
well as the cost of office facilities, travel, promotional events, and
public relations programs. Sales and marketing expenses were $4.2 million
and $2.5 million in the quarters ended January 31, 1997, and 1996, repre-
senting 26.7% and 19.6% of total revenues, respectively. These same
expenses were $9.5 million and $5.5 million in the first nine months of
fiscal 1997 and 1996, representing 24.9% and 21.8% of total revenues,
respectively. The increase in sales and marketing expenses in absolute
dollar amount was primarily due to (i) increased staffing as the Company
established new sales offices and expanded its existing direct sales force
and (ii) increased sales commissions associated with significantly higher
license revenues. The Company expects to continue to increase signifi-
cantly its sales and marketing expenses in order to expand its interna-
tional sales operations and to enter into new vertical markets.
<PAGE>
General and Administrative. Ongoing general and administrative
expenses consist primarily of salaries and costs of the Company's finance,
human resources, information systems, administrative, and executive staff
and the fees and expenses associated with legal, accounting and other
requirements. General and administrative expenses were $1.1 million and
$.9 million in the quarters ended January 31, 1997, and 1996, representing
7.1% and 6.9% of total revenues, respectively. These same expenses were
$3.2 million and $2.6 million in the first nine months of fiscal 1997 and
1996, representing 8.3% and 10.3% of total revenues, respectively. The
increase in the absolute dollar amounts of general and administrative
expenses was primarily the result of increased staffing and related costs
associated with the growth of the Company's business during fiscal 1997 and
1996. The decrease in general and administrative expenses as a percentage
of total revenues was primarily due to the Company's ability to leverage
its staff to support expanded revenues. The Company expects that the
absolute dollar amounts, but not necessarily as a percentage of total
revenue, of general and administrative expenses will continue to increase
in the foreseeable future.
Other Income (Expense)
Other income (expense) consists of interest income on short-term
investments and interest expense on the Company's bank loans. Such bank
loans were repaid upon receipt of the proceeds of the Company's public
offering which closed on October 1, 1996. Other income (expense) also
include gains and losses from currency transactions. Other income
(expense) was $390,000 and ($442,000) in the quarters ended January 31,
1997, and 1996, representing 1.5% and 2.8% of total revenues, respectively.
Other income (expense) was ($94,000) and ($581,000) in the first nine
months of fiscal 1997 and 1996, representing (0.2%) and (1.5%) of total
revenues, respectively. The net increase in other expense both in absolute
dollar amounts and as a percentage of total revenues were primarily due to
currency transaction losses.
Gain on Sale of Discontinued Operations
In the three month period ended January 31, 1997, the Company sold its
55% holding in the Swedish company Paragon AB for $2.9 million in cash.
The capital gain on this transaction was $955,000.
Liquidity and Capital Resources
As of January 31, 1997, the Company had $28.0 million of working
capital, including $18.3 million in cash, cash equivalents, and short-
term investments as compared to ($1.4) million of working capital as of
April 30, 1996, including $0.6 million of cash and cash equivalents. The
increase in working capital was primarily caused by the initial public
offering of 3,200,000 shares of the Company's common stock which closed on
October 1, 1996 and generated net proceeds of $28.5 million after deducting
offering expenses payable by the Company and underwriting discounts.
Accounts receivable decreased to $14.3 million at January 31, 1997,
from $13.1 million at April 30, 1996, and the average days' sales out-
standing, excluding contract receivables, was 82 days at January 31, 1997,
as compared to 89 days at April 30, 1996. The Company expects its average
days' sales outstanding to fluctuate in future periods from the level at
January 31, 1997. Average days' sales outstanding can vary for a variety
of reasons including the timing and billing of receivables for which the
related revenues may not yet be recognizable.
The Company believes that existing cash and cash equivalent balances,
short-term investments, available borrowings under the revolving credit
agreement, and potential cash flow from operations will satisfy the
Company's working capital and capital expenditure requirements for at least
the next 12 months.
<PAGE>
<PAGE>
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 11. Computation of Per Share Earnings
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during the quarter
ended January 31, 1997.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
BY: s/ Stig Durlow
---------------------------
Stig Durlow
Principal Executive Officer
BY: s/ Lars-Goran Peterson
---------------------------
Lars-Goran Peterson
Principal Financial Officer
DATE: March 14, 1997
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share figures)
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
01/31/97 01/31/97
----------------- ------------------
<S> <C> <C>
Income from continuing
operations $ 1,321 $2,201
Income from discontinued
operations 519 152
Gain on sale of discontinued
operations 955 955
------- ------
Net income $ 2,795 $3,308
======= ======
Weighted average common
shares outstanding 25,904 27,655
Net effect of dilutive
stock options 775 788
------- ------
Total 26,679 28,443
======= ======
Per share amounts:
Income from continuing
operations $ 0.05 $ 0.08
Income from discontinued
operations 0.02 0.01
Gain on sale of discontinued 0.03 0.03
operations
------- ------
Net income $ 0.10 $ 0.12
======= ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF EARNINGS AND BALANCE SHEETS OF
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES ANNEXED HERETO AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001016243
<NAME> INDUSTRI-MATEMATIK INTERNATIONAL CORP.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> APR-30-1997 APR-30-1997
<PERIOD-START> NOV-1-1996 MAY-1-1996
<PERIOD-END> JAN-31-1997 JAN-31-1997
<CASH> 18,302,000 18,302,000
<SECURITIES> 0 0
<RECEIVABLES> 14,496,000 14,496,000
<ALLOWANCES> 206,000 206,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 38,751,000 38,751,000
<PP&E> 5,864,000 5,864,000
<DEPRECIATION> 3,360,000 3,360,000
<TOTAL-ASSETS> 43,838,000 43,838,000
<CURRENT-LIABILITIES> 10,717,000 10,717,000
<BONDS> 0 0
<COMMON> 277,000 277,000
0 0
0 0
<OTHER-SE> 30,345,000 30,345,000
<TOTAL-LIABILITY-AND-EQUITY> 43,838,000 43,838,000
<SALES> 15,282,000 37,068,000
<TOTAL-REVENUES> 15,611,000 38,332,000
<CGS> 5,985,000 17,557,000
<TOTAL-COSTS> 6,230,000 18,302,000
<OTHER-EXPENSES> 7,690,000 19,715,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 230,000
<INCOME-PRETAX> 2,081,000 409,000
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 1,829,000 949,000
<DISCONTINUED> 152,000 519,000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,308,000 2,795,000
<EPS-PRIMARY> .12 .10
<EPS-DILUTED> .12 .10
</TABLE>
