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, 1998
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
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate 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, 1998:
Common Stock ($.01 par value) 32,463,979 shares
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share figures)
<CAPTION>
01/31/98 4/30/97
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $22,90 $ 9,023
Short-term investments 89,156 9,952
Accounts receivable, less allowance
for doubtful accounts of $324
and $205 at January 31, 1998, and
April 30, 1997, respectively 24,392 22,463
Contract receivables 678 1,010
Prepaid expenses 1,557 1,773
Income taxes receivable 353 28
Other current assets 322 111
------ ------
Total current assets 139,358 44,360
------ ------
Non-current assets:
Property and equipment, net 4,580 3,484
Deferred income taxes ----- 1,643
Goodwill 981 1,107
Other non-current assets 350 369
------ ------
Total non-current assets 5,911 6,603
------ ------
Total Assets $145,269 $50,963
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS EQUITY
<S> <C> <C>
Current Liabilities:
Current portion of capital lease
obligations $ 340 $ 422
Current portion of notes payable 475 $ -
Accounts payable 2,098 1,426
Accrued expenses and other
current liabilities 2,557 2,455
Accrued payroll and employee benefits 6,330 5,509
Deferred revenue 8,291 3,717
------ ------
Total current liabilities 20,091 13,529
------ ------
Long-term liabilities:
Capital lease obligations 311 554
Notes payable 966 -
Accrued pension liability 1,984 1,674
Deferred income taxes 605 68
Other long-term liabilities 369 384
------ ------
Total long-term liabilities 4,235 2,680
------ ------
Total liabilities 24,326 16,209
Shareholders' equity:
Common Stock; voting, $.01 par value;
62,500,000 shares authorized;
32,463,979 and 15,591,558 shares
issued and outstanding at
January 31, 1998, and April 30,
1997, respectively 325 156
Class B Common Stock; non-voting,
$.01 par value; 12,500,000 shares
authorized; 0 and 12,088,200
shares issued and outstanding
at January 31, 1998, and
April 30, 1997, respectively --- 121
Additional paid-in capital 125,234 43,379
Retained Earnings 4,055 (4,106)
Cumulative translation adjustment (2,520) (2,270)
Notes receivable from stockholders (6,151) (2,526)
------- -------
Total shareholders' equity 120,943 34,754
------- -------
Total Liabilities and Shareholders' equity $145,269 $50,963
======== =======
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
1/31/98 1/31/97
--------------- ----------------
<S> <C> <C>
Revenues:
Licenses $11,381 $ 7,501
Services and maintenance 15,094 7,781
Other 477 329
------- -------
Total revenues 26,952 15,611
------- -------
Cost of revenues:
Licenses 135 294
Services and maintenance 10,613 5,691
Other 308 245
------- -------
Total cost of revenues 11,056 6,230
------- -------
Gross profit 15,896 9,381
------- -------
Operating expenses:
Product Development 4,037 2,420
Sales and marketing 5,740 4,162
General and administrative 1,595 1,108
------- -------
Total operating expenses 11,372 7,690
------- -------
Income from operations 4,524 1,691
------- -------
Other income (expense):
Interest income 1,310 223
Interest expense (44) 0
Miscellaneous income (expense) (23) 167
------- -------
Income from continuing operations
before income taxes 5,767 2,081
Provision (benefit) for income
taxes 1,626 (120)
------- -------
Income from continuing operations 4,141 2,201
Income from discontinued operations
(net of income tax of $43) 0 109
Gain on sale of discontinued operations
(net of income tax of $372) 0 1,100
------- -------
Net income $ 4,141 $ 3,410
======= =======
Earnings per share
Income from continuing
operations $0.13 $0.08
Income from discontinued operations,
net of tax - 0.00
Gain on sale of discontinued operations,
net of tax - 0.04
Net income $0.13 $0.12
Earnings per share - assuming dilution
Income from continuing
operations $0.13 $0.08
Income from discontinued operations,
net of tax - 0.00
Gain on sale of discontinued operations,
net of tax - 0.04
Net income $0.13 $0.12
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
1/31/98 1/31/97
--------------- ---------------
<S> <C> <C>
Revenues
Licenses $27,208 $14,633
Services and maintenance 37,903 22,435
Other 781 1,264
------- -------
Total revenues 65,892 38,332
------- -------
Cost of revenues:
Licenses 416 1,047
Services and maintenance 27,547 16,510
Other 482 745
------- -------
Total cost of revenues 28,445 18,302
------- -------
Gross profit 37,447 20,030
------- -------
Operating expenses:
Product Development 9,428 7,000
Sales and marketing 14,145 9,537
General and administrative 5,127 3,178
------- -------
Total operating expenses 28,700 19,715
------- -------
Income from operations 8,747 315
------- -------
Other income (expense):
Interest income 1,817 324
Interest expense (79) (230)
Miscellaneous income (expense) (122) 0
------- -------
Income from continuing operations
before income taxes 10,363 409
Provision (benefit) for income taxes 2,402 (912)
------- -------
Income from continuing operations 7,961 1,321
Income from discontinued operations
(net of income tax of $145) 0 374
Gain on sale of discontinued operations
(Net of income tax of $372) 0 1,100
------- -------
Net income $ 7,961 $ 2,795
======= =======
Earnings per share
Income from continuing operations $0.27 $0.05
Income from discontinued operations,
net of tax - 0.02
Gain on sale of discontinued operations,
net of tax - 0.04
Net income $0.27 $0.11
Earnings per share - assuming dilution
Income from continuing operations $0.26 $0.05
Income from discontinued operations,
net of tax - 0.01
Gain on sale of discontinued operations,
net of tax - 0.04
Net income $0.26 $0.10
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
01/31/98 01/31/97
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,961 $ 2,795
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 1,356 714
Provision for doubtful accounts 117 (111)
Deferred income taxes 2,213 (900)
(Gain) loss on disposal of plant
property and equipment 7 (2)
(Gain) on disposal of
other shares 0 (97)
(Gain) on disposal of
discontinued operations 0 (1,100)
Write-down on plant and equipment 0 3
Changes in operating assets
and liabilities:
Accounts receivable (2,201) (923)
Contract receivables and
prepaid expenses 495 (738)
Income taxes receivable (353) 22
Other assets (205) (714)
Accounts payable 741 388
Accrued expenses and other
current liabilities 1,213 (948)
Accrued payroll, employee benefits
and deferred revenue 5,617 (105)
Accrued pension liability 393 355
------- -------
Net cash provided by continuing operations 17,354 (1,361)
Net cash provided by discontinued operations 0 (288)
------- -------
Net cash provided by (used in) operating
activities 17,354 (1,649)
------- -------
Cash flows from investing activities:
Purchase of short-term investments (174,840) 0
Proceeds from sale of short-term
investments 95,747 0
Additions to property and equipment (2,647) (932)
Payment for Ceratina (1,025) 0
Proceeds from sale of property
and equipment 210 7
Proceeds from sale of other equity 0 138
Collection of notes receivable 521 0
------- -------
Net cash provided by (used in) investing
activities (82,034) (787)
------- -------
Cash flows from financing activities:
Net payments under lines of credit 0 (7,764)
Payments on short-term borrowings 0 (97)
Proceeds from notes payable 1,539 0
Payments on notes payable (99) 0
Principal payments on capital
lease obligations (317) (302)
Issuance of Common Stock 77,756 28,140
Other (203) 266
------- -------
Net cash flows provided by (used in)
financing activities 78,676 20,243
------- -------
Translation differences on cash and
cash equivalents (119) (63)
------- -------
Net increase in cash and cash
equivalents $13,877 $17,744
======= =======
Cash and cash equivalents at beginning
of period $ 9,023 $ 558
Cash and cash equivalents at end ------- -------
of period $22,900 $18,302
------- -------
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 118 $ 346
------- -------
Income taxes $ 361 $ 13
------- -------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
<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 contain all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting of normal recurr-
ing adjustments) considered necessary for a fair presentation of the
Company's financial condition at April 30, 1997 (audited), and January 31,
1998 (unaudited), and the results of operations and cash flows for the nine
months ended January 31, 1997, and January 31, 1998. Income from and gain
on discontinued operations previously reported for the three months and
nine months ended January 31, 1997 have been adjusted to reflect tax
expenses accounted for at April 30, 1997.
These financial statements should be read in conjunction with the
audited consolidated financial statements of the Company as presented in
the Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1997. Results of operations and cash flows for the period ended
January 31, 1998, are not necessarily representative of the results that
may be expected for the fiscal year ending April 30,1998, or any other
future period.
2. Earnings per share
Earnings per share has been computed in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". For
each of the periods presented, earnings per share was based on the weighted
average number of shares of Common Stock outstanding during the period.
Earnings per share - assuming dilution was based on the weighted average
number of shares of Common Stock and potential shares of Common Stock
outstanding during the period. Potential shares of Common Stock relates to
stock options outstanding for which the dilutive effect is calculated using
the treasury stock method.
For each of the periods presented, income available to common
shareholders (the numerator) used in the computation of earnings per share
was the same as the numerator used in the computation of earnings per share
- - assuming dilution. A reconciliation of the denominators used in the
computations of earnings per share and earnings per share - assuming
dilution is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
January 31, January 31,
------------------ ---------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding 32,164,036 27,655,257 29,390,718 25,903,514
Effect of dilutive stock
options 703,284 787,632 700,356 775,185
Adjusted weighted average ----------- ---------- ---------- --------
shares outstanding assuming
dilution 32,867,320 28,442,889 30,091,074 26,678,699
----------- ----------- ---------- ----------
</TABLE>
3. Accrued Expenses and Other Current Liabilities
<TABLE>
<CAPTION>
January 31, 1998 April 30, 1997
---------------- --------------
(unaudited)
(in thousands)
<S> <C> <C>
Accrued purchases $1,200 $ 651
Acquisition of Ceratina 0 1,025
Accrued pension taxes 586 407
Employee withholding taxes 439 0
Value-added tax 248 160
Other 84 212
------ ------
$2,557 $2,455
====== ======
</TABLE>
4. Accrued Payroll and Employee Benefits
<TABLE>
<CAPTION>
January 31, 1998 April 30, 1997
---------------- --------------
(unaudited)
(in thousands)
<S> <C> <C>
Accrued commissions $1,046 $2,500
Accrued payroll taxes 887 1,392
Accrued vacation pay 1,090 1,030
Accrued salaries and bonus 2,083 297
Accrued pension expenses 354 290
Accrued expenses ESPP 870 0
------ ------
$6,330 $5,509
====== ======
</TABLE>
5. Income Taxes
As of April 30, 1997, the Company had net operating loss carryforwards of
approximately $10,020,000 available to offset future taxable income of
which $9,793,000 was related to net operating loss carryforwards in IMAB.
The deferred tax asset as of April 30, 1997 was reduced by a valuation
allowance of $1,113,000.
During the nine months ending January 31, 1998, the Company was able to
utilize the remaining net operating loss carryforwards and the gross amount
of the deferred tax asset was fully realized. The release of the valuation
allowance which was assessed on the deferred tax asset in prior periods has
been reflected in the benefit for income taxes for the nine months ending
January 31, 1998.
6. Stock Option Plan, Restricted Stock Program, and Employee Stock
Purchase Plan
Under the Industri-Matematik International Corp. Stock Option Plan,
617,500 options were granted during the nine months ended January 31, 1998,
330,000 of which have lapsed. All options were issued at an exercise price
equal to the market price at the date of grant. In addition, 325,000 shares
of Common Stock were sold pursuant to the Restricted Stock Program during
the nine months ended January 31, 1998, and 134,106 shares have been issued
pursuant to the Employee Stock Purchase Program.
7. Secondary Public Offering
The Company completed in November, 1997, a secondary public offering of
8,136,250 common shares, priced at $20.00 per share, of which 4,030,625
shares were sold by the Company and 4,105,625 by existing shareholders.
After deducting the underwriter's discount, the net proceeds to the Company
were $19.075 per share, or $76,884,171. At the closing of the secondary
offering, all outstanding shares of Class B Common Stock were converted to
common stock.
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 these 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 Annual Report on Form 10-K for the
fiscal year ended April 30, 1997, and the Prospectus dated October 31,
1997, relating to the secondary public offering of the Company's 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.
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,
---------------- ------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Licenses 41.3% 38.2% 42.2% 48.1%
Service and maintenance 57.5 58.5 56.0 49.8
Other 1.2 3.3 1.8 2.1
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Cost of revenues:
Licenses 0.6 2.7 0.5 1.9
Service and maintenance 41.8 43.1 39.4 36.4
Other 0.7 1.9 1.1 1.6
----- ----- ----- -----
Total cost of revenues 43.1 47.7 41.0 39.9
----- ----- ----- -----
Gross profit 56.9 52.3 59.0 60.1
----- ----- ----- -----
Operating expenses:
Product Development 14.3 18.2 15.0 15.5
Sales and marketing 21.5 24.9 21.3 26.7
General & administrative 7.8 8.3 5.9 7.1
----- ----- ----- -----
Total operating expenses 43.6 51.4 42.2 49.3
----- ----- ----- -----
Income from operations 13.3 0.9 16.8 10.8
----- ----- ----- -----
Other income (expenses):
Interest income 2.7 0.8 4.9 1.4
Interest expense (0.1) (0.6) (0.2) 0.0
Miscellaneous income (expense) (0.2) 0.0 (0.1) 1.1
----- ----- ----- -----
Income from continuing
operations before income taxes 15.7 1.1 21.4 13.3
Provision (benefit) for income
taxes 3.6 (2.3) 6.0 (0.8)
----- ----- ----- -----
Income from continuing
operations 12.1 3.4 15.4 14.1
Income from discontinued
operations 0.0 1.0 0.0 0.7
Gain on sale of discontinued
operations 0.0 2.9 0.0 7.0
----- ----- ----- -----
Net Income 12.1% 7.3% 15.4% 21.8%
===== ===== ===== =====
</TABLE>
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
maintenance 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 72.6% to $27.0 million in the quarter ended
January 31, 1998, from $15.6 million in the quarter ended January 31, 1997.
In the first nine months of fiscal 1998, total revenues increased 71.9% to
$65.9 million from $38.3 million in the first nine months of fiscal 1997.
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 65% and 57%
of total revenues in the quarters ended January 31, 1998, and January 31,
1997, respectively. U.S. revenues were approximately 60% and 50% of total
revenues in the first nine months of fiscal 1998 and fiscal 1997,
respectively. The significant increase in U.S. revenues in fiscal 1998
from 1997 is primarily due to the expansion of the Company's U.S. sales and
services operations in the last year.
LICENSE REVENUES. Revenues from software licenses increased 51.7% to
$11.4 million in the quarter ended January 31, 1998, from $7.5 million in
the quarter ended January 31, 1997. In the first nine months of fiscal
1998, revenues from software licenses increased 85.9% to $27.2 million
from $14.6 million in the first nine months of fiscal 1997. 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 94.0% to $15.1 million in the quarter ended January 31,
1998, from $7.8 million in the quarter ended January 31, 1997. In the
first nine months of fiscal 1998, revenues from services increased 68.9% to
$37.9 million from $22.4 million in the first nine months of fiscal 1997.
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 the first nine months of fiscal 1997 and fiscal 1998
and a significant expansion of the Company's consulting organization in the
U.S. and Europe. Service and maintenance revenues as a percentage of total
revenues increased to 56.0% in the quarter ended January 31, 1998, from
49.8% in the quarter ended January 31, 1997, and have decreased to 57.5% in
the first nine months of fiscal 1998 from 58.5% in the first nine months of
fiscal 1997.
Other Revenues. Other revenues are primarily third-party hardware
sales to the Company's Scandinavian customer base. Other revenues
increased 45.0% to $477,000 in the quarter ended January 31, 1998, from
$329,000 in the quarter ended January 31, 1997. In the first nine months
of fiscal 1998, other revenues decreased 38.2% to $0.8 million from $1.3
million in the first nine months of fiscal 1997. Other revenues as a
percentage of total revenues decreased to 1.8% in the quarter ended January
31, 1998, from 2.1% in the quarter ended January 31, 1997, and has
decreased to 1.2% in the first nine months of fiscal 1998 from 3.3% in the
first nine months of fiscal 1997. 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
licenses of System ESS and, occasionally, the cost of third-party comple-
mentary software included with the licenses of System ESS without being an
integral part of System ESS. Cost of license revenues was $135,000 and
$294,000 in the quarters ended January 31, 1998, and 1997, representing
1.2% and 3.9% of software license revenues, respectively. Cost of software
license revenues was $416,000 and $1.0 million in the first nine months of
fiscal 1998 and 1997, representing 1.5% and 7.2% of software license
revenues, respectively. The decrease in cost of license revenues both in
absolute dollar amounts and as a percentage of license revenues was
primarily due to the decrease in licenses of third-party complementary
software.
Cost of Service and Maintenance Revenues. Cost of service 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 $10.6 million and $5.7
million in the quarters ended January 31, 1998, and 1997, representing
70.3% and 73.1% of service and maintenance revenues, respectively. Cost of
service and maintenance revenues was $27.5 million and $16.5 million in the
first nine months of fiscal 1998 and fiscal 1997, representing 72.7% and
73.6% of service and maintenance revenues, respectively.
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 $308,000 and $245,000 in the quarters ended January 31,
1998 and 1997, representing 64.6% and 74.5% of other revenues, respec-
tively. Cost of other revenues was $482,000 and $745,000 in the first nine
months of fiscal 1998 and fiscal 1997, representing 61.7% and 58.9% of
other revenues, respectively.
Product Development. Product development expenses were $4.0 million
and $2.4 million in the quarters ended January 31, 1998, and January 31,
1997, representing 15.0% and 15.5% of total revenues, respectively. These
same expenses were $9.4 million and $7.0 million in the first nine months
of fiscal 1998 and 1997, representing 14.3% and 18.2% of total revenues,
respectively. The increases in product development expenses in dollar
amount were 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 an extent,
the costs relating to third-party consultant work with development of the
next version of System ESS. 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 $5.7 million
and $4.2 million in the quarters ended January 31, 1998, and January 31,
1997, representing 21.3% and 26.7% of total revenues, respectively. These
same expenses were $14.1 million and $9.5 million in the first nine months
of fiscal 1998 and 1997, representing 21.5% and 24.9% of total revenues,
respectively. The increase in sales and marketing expenses in absolute
dollar amounts 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
significantly its sales and marketing expenses in order to expand its
international sales operations and to enter into new vertical markets.
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 $1.6 million and
$1.1 million in the quarters ended January 31, 1998, and 1997, representing
5.9% and 7.1% of total revenues, respectively. These same expenses were
$5.1 million and $3.2 million in the first nine months of fiscal 1998 and
1997, representing 7.8% and 8.3% 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 1998 and
1997.
Other Income (Expense)
Other income comprises interest income, interest expenses,
and miscellaneous income and expenses. Interest income was $1.3 million
and $223,000 in the quarters ended January 31, 1998, and 1997, representing
4.9% and 1.4% of total revenues, respectively. Interest income was $1.8
million and $324,000 in the first nine months of fiscal 1998 and 1997,
representing 2.7% and 0.8% of total revenues, respectively. The increase
is due to the Company's investment of a portion of the proceeds of its
initial and secondary public offerings in short-term investments and
interest-bearing accounts. Interest expenses were $44,000 and $0 in the
quarters ended January 31, 1998, and January 31, 1997, representing 0.2%
and 0.0% of total revenues, respectively. These same expenses were $79,000
and $230,000 in the first nine months of fiscal 1998 and 1997, representing
0.1% and 0.6% of total revenues, respectively. The decrease in interest
expenses is primarily due to the Company's repayment of its outstanding
loans after its initial public offering.
Liquidity and Capital Resources
As of January 31, 1998, the Company had $119.3 million of working
capital, including $22.9 million in cash and cash equivalents and $89.2
million in short-term investments, as compared to $30.8 million of working
capital as of April 30, 1997, including $9.0 million in cash and cash
equivalents and $10.0 million in short-term investments.
Accounts receivable increased to $24.4 million at January 31, 1998,
from $22.5 million at April 30, 1997, and the average days' sales out-
standing, including contract receivables, was 84 days for the quarter ended
January 31, 1998, as compared to 99 days for the year ended April 30,
1997. The decrease in average days' sales outstanding was primarily due to
the collection of several large trade receivable balances outstanding at
April 30, 1997. Average days' sales outstanding can vary for a variety of
reasons including the billing and payment of specific receivables of large
transactions.
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. It is noted that during November, 1997, the Company
realized net proceeds of $76,884,171 for its secondary offering of Common
Stock.
<PAGE>
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
a. Exhibit
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, 1998.
<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 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE
CONDENSED 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-30-1998 APR-30-1998
<PERIOD-START> NOV-1-1997 MAY-1-1997
<PERIOD-END> JAN-31-1998 JAN-31-1998
<CASH> 22,900,000 22,900,000
<SECURITIES> 89,156,000 89,156,000
<RECEIVABLES> 24,716,000 24,716,000
<ALLOWANCES> 324,000 324,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 139,358,000 139,358,000
<PP&E> 9,181,000 9,181,000
<DEPRECIATION> 4,601,000 4,601,000
<TOTAL-ASSETS> 145,269,000 145,269,000
<CURRENT-LIABILITIES> 20,091,000 20,091,000
<BONDS> 0 0
<COMMON> 325,000 325,000
0 0
0 0
<OTHER-SE> 120,618,000 120,618,000
<TOTAL-LIABILITY-AND-EQUITY> 145,269,000 145,269,000
<SALES> 26,475,000 65,111,000
<TOTAL-REVENUES> 26,952,000 65,892,000
<CGS> 10,748,000 27,963,000
<TOTAL-COSTS> 11,056,000 28,445,000
<OTHER-EXPENSES> 11,372,000 28,700,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 44,000 79,000
<INCOME-PRETAX> 5,767,000 10,363,000
<INCOME-TAX> 1,626,000 2,402,000
<INCOME-CONTINUING> 4,141,000 7,961,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,141,000 7,961,000
<EPS-PRIMARY> 0.13 0.27
<EPS-DILUTED> 0.13 0.26
</TABLE>
