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 July 31, 2000
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.)
901 Market Street - Suite 475
Wilmington, Delaware 19801
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (302) 777-1608
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 July 31, 2000:
Common Stock ($.01 par value) 31,986,528 shares
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)
<CAPTION>
4/30/00 7/31/00
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,036 $ 13,151
Short-term investments 19,821 18,739
Accounts receivable, less allowance
for doubtful accounts of $2,486
and $2,431 at April 30, 2000, and
July 31, 2000, respectively 20,176 11,825
Contract receivables 1,089 1,306
Prepaid expenses 2,727 2,470
Income taxes receivable 646 428
Other current assets 698 632
------ ------
Total current assets 57,193 48,551
------ ------
Non-current assets:
Property and equipment, net 6,595 6,283
Deferred income taxes 15,520 15,381
Goodwill and other intangible assets 8,359 7,956
Other non-current assets 1,265 1,038
------ ------
Total non-current assets 31,739 30,658
------ ------
Total assets $ 88,932 $ 79,209
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Current portion of notes payable 303 162
Accounts payable 2,031 1,448
Accrued expenses and other
current liabilities 7,978 7,643
Accrued payroll and employee benefits 5,702 4,339
Deferred revenue 8,529 4,752
------ ------
Total current liabilities 24,543 18,344
------ ------
Long-term liabilities:
Accrued pension liability 2,930 2,975
------ ------
Total long-term liabilities 2,930 2,975
------ ------
Total liabilities 27,473 21,319
------ ------
Stockholders' equity:
Common Stock; voting, $.01 par value;
62,500,000 shares authorized;
31,839,229 and 31,986,528 shares
issued and outstanding at
April 30, 2000 and July 31,
2000, respectively 318 320
Additional paid-in capital 124,310 124,624
Accumulated deficit (52,771) (56,251)
Accumulated other comprehensive loss (4,476) (4,921)
Notes receivable from stockholders (5,922) (5,882)
------- -------
Total stockholders' equity 61,459 57,890
------- -------
Total liabilities and stockholders' equity $ 88,932 $ 79,209
======= =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED
7/31/99 7/31/00
--------------- ----------------
<S> <C> <C>
Revenues:
Licenses $ 1,645 $ 4,132
Services and maintenance 14,820 12,430
Other 211 431
------- -------
Total revenues 16,676 16,993
------- -------
Cost of revenues:
Licenses 346 318
Services and maintenance 12,154 9,110
Other 58 168
------- -------
Total cost of revenues 12,558 9,596
------- -------
Gross profit 4,118 7,397
------- -------
Operating expenses:
Product development 4,441 4,137
Sales and marketing 5,087 4,422
General and administrative 2,162 2,451
Amortization of goodwill and
other intangible assets 346 376
------- -------
Total operating expenses 12,036 11,386
------- -------
Loss from operations (7,918) (3,989)
------- -------
Other income (expense):
Interest income 632 466
Interest expense (28) (6)
Miscellaneous income (expense), net (33) 49
------- -------
Loss before income taxes (7,347) (3,480)
Benefit for income taxes -- --
------- -------
Net loss (7,347) (3,480)
======= =======
Net loss per share $ (0.23) $ (0.11)
------- -------
Net loss per share
- assuming dilution $ (0.23) $ (0.11)
======= =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<CAPTION>
THREE MONTHS ENDED
7/31/99 7/31/00
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,347) $ (3,480)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,225 1,184
Provision for doubtful accounts 803 (54)
Accrued interest on short-term
investments (55) --
Loss on disposal of property and equipment (3) (83)
Changes in operating assets and liabilities:
Accounts receivable 5,268 8,214
Contract receivables and
prepaid expenses (779) (43)
Income taxes receivable (197) 197
Other assets (215) 299
Accounts payable 451 (551)
Accrued expenses and other
current liabilities (2,454) (287)
Accrued payroll, employee benefits
and deferred revenue (932) (4,971)
Accrued pension liability 45 132
--------- ---------
Net cash provided by (used in)
operating activities (4,190) 557
========= =========
Cash flows from investing activities:
Purchase of short-term investments (29,626) (32,692)
Proceeds from sale of short-term
investments 24,721 33,774
Additions to property and equipment (104) (518)
Payment for Ceratina (145) --
Proceeds from sale of property
and equipment 29 1
Collection of notes receivable -- 40
--------- ---------
Net cash flows provided by (used in)
investing activities (5,125) 605
========= =========
Cash flows from financing activities:
Payments on notes payable -- (141)
Principal payments on capital
lease obligations (170) --
Issuance of Common Stock 217 315
Other 90 (100)
--------- ---------
Net cash flows provided
by financing activities 137 74
========= =========
Translation differences on cash and
cash equivalents 53 (121)
--------- ---------
Net increase (decrease)in cash and cash
equivalents $ (9,125) $ 1,115
========= =========
Cash and cash equivalents at beginning
of period $29,065 $ 12,036
Cash and cash equivalents at end --------- ---------
of period $19,940 $ 13,151
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 21 $ 6
Income taxes $ 770 $ 224
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 recurring adjustments) considered
necessary for a fair presentation of the Company's financial condition at July
31, 2000, and the results of operations and cash flows for the three months
ended July 31, 1999, and 2000. These financial statements, which include a
condensed consolidated balance sheet as of April 30, 2000 (audited), 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, 2000. Results of operations and cash flows for
the period ended July 31, 2000, are not necessarily representative of the
results that may be expected for the fiscal year ending April 30, 2001, or any
other future period.
2. Comprehensive Loss
Total comprehensive loss was $(7,113,000) and $(3,925,000) for the three
months ended July 31, 1999, and 2000, respectively. Total comprehensive loss
includes net loss and currency translation adjustments.
3. Net Loss per Share
Net loss per share has been computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share". For each of the
periods presented, net loss per share was based on the weighted average number
of shares of Common Stock outstanding during the period. Net loss 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.
The computations of net loss per share - assuming dilution for the three month
periods ended July 31, 1999, and 2000, do not assume the exercise of stock
options since the effect would be antidilutive as a result of the losses for
the periods.
For each of the periods presented, income available to common shareholders
(the numerator) used in the computation of net loss per share was the same as
the numerator used in the computation of net loss per share - assuming
dilution. A reconciliation of the denominators used in the computations of net
loss per share and net loss per share - assuming dilution is as follows:
<TABLE>
<CAPTION>
Three months ended
July 31,
-----------------------
1999 2000
--------- ---------
<S> <C> <C>
Weighted average
shares outstanding 31,534,651 31,894,697
Effect of dilutive
stock options - -
--------- ---------
Adjusted weighted
average shares
outstanding assuming
dilution 31,534,651 31,894,697
========== ==========
</TABLE>
4. Accrued Expenses and Other Current Liabilities
<TABLE>
<CAPTION>
April 30, 2000 July 31, 2000
-------------- -------------
(unaudited)
(in thousands)
<S> <C> <C>
Accrued purchases $2,775 $2,034
Project reserves 1,229 937
Accrued consultancy 1,334 1,690
Accrued restructuring costs 257 197
Accrued pension taxes 593 671
Restructuring cost Abalon 61 61
Value-added tax 259 239
Employee withholding taxes 622 598
Income tax payable 156 163
Additional consideration Ceratina 241 --
Accrued severance pay -- 197
Other 451 856
------ ------
$ 7,978 $ 7,643
====== ======
</TABLE>
Project reserves consist of charges to be incurred bringing projects to
implementation, some of which will not be billed and some of which will be
billed at a discount.
5. Accrued Payroll and Employee Benefits
<TABLE>
<CAPTION>
April 30, 2000 July 31, 2000
-------------- -------------
(unaudited)
(in thousands)
<S> <C> <C>
Accrued commissions $ 563 $ 153
Accrued payroll taxes 1,212 997
Accrued vacation pay 1,733 1,182
Accrued salaries and bonus 1,364 1,107
Accrued pension expenses 599 626
Debt for ESPP 219 264
Other 12 10
------ ------
$5,702 $4,339
====== ======
</TABLE>
6. Income Taxes
There was no benefit for income taxes for the three months ended July 31,
2000, as the Company has been applying a full valuation allowance to net
deferred tax assets generated after April 30, 1999. At July 31, 2000, the
Company's deferred tax asset amounted to $28,339,000 and related primarily to
net operating loss carry-forwards incurred in the United States and Sweden.
Net operating loss carry-forwards may be used to offset future income for up
to 15 years in the United States and indefinitely in Sweden. In light of the
fact that future operating results will depend on numerous factors, including
the growth of the supply chain and customer management software market, and
the market acceptance of the Company's products, management determined that
$12,958,000 was an adequate valuation allowance against the deferred tax asset
recorded at July 31, 2000. Realization of the net deferred tax asset (net of
recorded valuation allowance) is dependent upon profitable operations and
future reversals of existing taxable temporary differences. Although
realization is not assured, the Company believes it is more likely than not
that the net recorded benefits will be realized through the reduction of
future taxable income. The amount of the net deferred tax assets considered
realizable, however, could be reduced in the near term if actual future
taxable income is lower than estimated, or if there are differences in the
timing or amount of future reversals of existing taxable temporary
differences.
7. Segment Information
The Company operates in one industry segment, the design, development,
marketing, licensing, and support of client/server application software.
The Company is managed on a geographic basis and the Company's management
evaluates the performance of its segments and allocates resources to them
based upon income (loss) from operations. Income (loss) from operations for
the geographic segments excludes general corporate expenses and product
development costs. The majority of software development occurs in Sweden
although the Company maintains some development facilities in the United
States. Product development costs and general corporate expenses are
reported in the Corporate segment. Assets by reportable segment are not
disclosed since the Company's management does not review segmented balance
sheet information. Segment data includes inter-segment revenues.
The table below presents information about the Company's reportable
segments:
Three Months Ended
July 31,
-------------------
1999 2000
------ ------
(in thousands)
Revenues:
United States ........................ $ 6,110 $ 8,247
Sweden ............................... 7,225 5,939
United Kingdom ....................... 1,667 1,542
Netherlands .......................... 927 1,314
Germany .............................. 79 --
France ............................... -- --
Australia ............................ 604 423
Intercompany.......................... -- (560)
Corporate ............................ 64 88
-------- --------
$ 16,676 $ 16,993
======== ========
Income (loss) from operations:
United States ........................ $ (1,263) $ 1,010
Sweden ............................... 1,054 (500)
United Kingdom ....................... (103) (213)
Netherlands .......................... (357) (9)
Germany .............................. (135) --
France ............................... -- --
Australia ............................ 177 (30)
Canada ............................... (16) (1)
Intercompany ......................... (10) (271)
Corporate ............................ (7,265) (3,975)
-------- --------
$ (7,918) $ (3,989)
======== ========
<PAGE>
8. Restructuring
During the fourth quarter of fiscal 1999, the Company incurred a $3,522,000
one-time restructuring charge in connection with a cost realignment plan.
The following table presents the restructuring activity through July 31,
2000:
<TABLE>
<CAPTION>
Accrual Accrual
as of Utilization as of
April 30, of Currency July 31,
2000 accrual effect 2000
------- --------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Severance benefits $ 247 $ (56) $ (2) $ 189
Lease obligations and terminations 4 -- -- 4
Other 6 (2) -- 4
------- --------- -------- --------
Total $ 257 $ (58) $ (2) $ 197
======= ========= ======== ========
</TABLE>
In connection with the Company's acquisition of Abalon in fiscal 1999,
additional purchase liabilities of $549,000 were recorded for severance and
related costs costs and $433,000 for costs associated with the shut down and
consolidation of certain acquired facilities. As of July 31, 2000, the
remaining liabilities for these costs were $43,000 and $18,000, respectively.
The Company expects to complete the integration during the current fiscal
year.
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 within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, that involve certain risks
and uncertainties. Discussions containing such forward-looking statements
may be found in the material set forth below as well as in this Report
generally. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," and similar expressions are intended to
identify forward-looking statements. The Company's actual results could
differ materially from those anticipated in such forward-looking statements as
a result of certain factors including, but not limited to, uncertainties
regarding continued market acceptance of the Company's products, delays in the
introduction of new product enhancements, the success of the implementation of
the Company's restructuring program, hiring, training, and retaining
employees, and risks associated with managing the Company's operations, as
well as those set forth under "Risk Factors" in the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 2000, which are incorporated
herein by reference. These forward-looking statements are made as of the date
of this Report and the Company assumes no obligation to update such forward-
looking statements or to update the reasons why actual results could differ
materially from those anticipated in such forward-looking statements.
OVERVIEW
The Company develops, markets, and supports client/server application
software that enables manufacturers, distributors, and wholesalers to more
effectively manage the supply chain. The Company was founded in 1967 as a
custom software development and consulting services organization. The Company
developed and delivered its first distribution logistics software in 1974, its
first UNIX-based version in 1984, and its first Oracle-based client/server
version in 1991. In 1993, the Company introduced System ESS(R), which was
designed to meet the needs of multinational manufacturers, distributors, and
wholesalers. In May, 1999, the Company introduced VIVALDI, a suite of open
applications which provide full capabilities for managing and executing the
global fulfillment and customer service process. VIVALDI includes System ESS
components, Customer Relationship Management, Open Warehouse, and other
components. During fiscal year 2000, the Company began marketing
eCRM/eFulfillment, a pre-integrated configuration of VIVALDI components for
web-based businesses.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentages
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.
Three Months Ended
July 31,
1999 2000
------- -------
Revenues:
Licenses 9.8 % 24.3 %
Services and maintenance 88.9 73.2
Other 1.3 2.5
------- -------
Total revenues 100.0 100.0
Cost of revenues:
Licenses 2.1 1.9
Services and maintenance 72.9 53.6
Other 0.3 1.0
------- ------
Total cost of revenue 75.3 56.5
------- ------
Gross profit 24.7 43.5
------- ------
Operating expenses:
Product development 26.6 24.4
Sales and marketing 30.5 26.0
General and administrative 13.0 14.4
Amortization of goodwill 2.1 2.2
------- -------
Total operating
expenses 72.7 67.0
------- -------
Loss from
operations (47.5) (23.5)
------- -------
Other income (expense):
Interest income 3.8 2.7
Interest expense (0.2) (0.0)
Miscellaneous
income (expense),net (0.2) 0.3
------- -------
Loss before
income taxes (44.1) (20.5)
Benefit
for income taxes -- --
------- -------
Net loss (44.1)% (20.5) %
======= =======
REVENUES
The Company's revenues consist of software license revenues, service and
maintenance revenues, and other revenues. Software license revenue is
recognized when persuasive evidence of an arrangement exists and delivery has
occurred, the fee is fixed and determinable, collectibility is probable, and
the arrangement does not require significant customization of the software.
Maintenance and support revenue is deferred and recognized ratably over the
term of the agreement, generally one year. Service revenue is recognized as
the Company performs the services in accordance with the contract. Other
revenues are primarily third-party hardware sales necessary to help certain
customers implement the Company's products. The Company derives substantially
all of its revenues from licenses of its software and related service and
maintenance.
Total revenues increased 1.9% to $17.0 million in the quarter ended July 31,
2000, from $16.7 million in the quarter ended July 31, 1999.
SOFTWARE LICENSE REVENUES. Revenues from software licenses increased
151.2% to $4.1 million in the quarter ended July 31, 2000, from $1.6 million
in the quarter ended July 31, 1999. Management believes the increase in
software license revenue was due to a recovery in general market conditions
after a reluctance of customers to commence implementations near the turn of
the century due to general concerns regarding Year 2000 compliance problems.
SERVICE AND MAINTENANCE REVENUES. Revenues from service and maintenance
decreased 16.1% to $12.4 million in the quarter ended July 31, 2000, from
$14.8 million in the quarter ended July 31, 1999. The decrease in the absolute
dollar amount of service and maintenance revenues was related primarily to a
lower level of software license revenue during the prior fiscal year. Service
and maintenance revenues as a percentage of total revenues decreased to 73.1%
in the quarter ended July 31, 2000, from 88.9% in the quarter ended July 31,
1999. This decrease in service and maintenance revenues as a percentage of
total revenues was due to an increase in software license revenues for the
quarter compared to the prior fiscal year combined with the decline in
absolute dollar revenues for services and maintenance. Generally, increases
and decreases in service and maintenance revenues tend to track fluctuations
in software license revenues in prior periods.
OTHER REVENUES. Other revenues are primarily third-party hardware sales
to the Company's Scandinavian customer base. Other revenues increased 104.3%
to $431,000 in the quarter ended July 31, 2000, from $211,000 in the quarter
ended July 31, 1999. Other revenues as a percentage of total revenues
increased to 2.5% in the quarter ended July 31, 2000, from 1.3% in the quarter
ended July 31, 1999. Other revenues vary over time as a percentage of total
revenues due to the size of specific hardware sales and to fluctuations in
software license revenues.
COST OF REVENUES
COST OF SOFTWARE LICENSE REVENUES. Cost of software license revenues
consists primarily of license fees paid with respect to embedded third-
party software included with the licenses of the Company's software products
and, occasionally, the cost of third-party complementary software that is
licensed together with the Company's software without being embedded. In
addition, cost of software license revenues may include royalty fees paid to
partners that are directly related to license sales. Cost of software license
revenues was $346,000 and $318,000 in the quarters ended July 31, 1999 and
2000, representing 21.0% and 7.7% of software license revenues, respectively.
The decrease of cost of software license revenues as a percentage of software
license revenues in the first quarter of fiscal 2001 compared to the same
period in the prior year was primarily due a lower cost for royalties paid to
third party partners for the licenses sold in the first quarter of fiscal
2001.
COST OF SERVICE AND MAINTENANCE REVENUES. Cost of service and maintenance
revenues consists primarily of costs associated with consulting,
implementation, and training services and 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 includes the cost of
providing software maintenance to customers, such as telephone hotline
support.
Cost of service and maintenance revenues was $12.2 million and $9.1
million in the quarters ended July 31, 1999, and 2000, representing 82.0% and
73.3% of service and maintenance revenues, respectively. The decrease in the
cost of service and maintenance revenues in absolute dollar amounts was
primarily due to a reduction in the number of employed consultants, a
reduction in the use of outside consultants, and a decrease in the amount of
service and maintenance performed. The decrease in the cost of service and
maintenance revenue as a percentage of service and maintenance revenue was
primarily due to more effective utilization of the consultancy workforce.
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 $58,000 and $168,000 in the quarters ended July 31, 1999, and
2000, representing 27.5% and 39.0% of other revenues, respectively.
PRODUCT DEVELOPMENT. Product development expenses were $4.4 million and
$4.1 million in the quarters ended July 31, 1999, and 2000, representing 26.6%
and 24.3% of total revenues, respectively. The decrease in product development
expenses in absolute dollar amount was due to a decrease in the number of
product development personnel.
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,
the Company has not capitalized any software development costs since such
costs have been immaterial.
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 $5.1 million and $4.4
million in the quarters ended July 31, 1999, and 2000, representing 30.5% and
26.0% of total revenues, respectively. The decrease in sales and marketing
expenses in absolute dollar amount and as a percentage of total revenues was
primarily due to fewer sales and marketing activities during the first quarter
of fiscal 2001 compared to the prior year and a reduction in the size of the
sales organization.
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 services.
General and administrative expenses were $2.2 million and $2.4 million in the
quarters ended July 31, 1999, and 2000, representing 13.0% and 14.4% of total
revenues, respectively.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS. Amortization of
goodwill and other intangible assets relates to the fiscal 1998 acquisition of
Ceratina International AB and the fiscal 1999 acquisition of Abalon AB.
Goodwill and other intangible assets are amortized over a 5 to 10 year period.
Amortization of goodwill and other intangible assets was $346,000 and $376,000
in the quarters ended July 31, 1999, and 2000, representing 2.1% and 2.2% of
total revenues, respectively.
OTHER INCOME (EXPENSE)
Other income comprises interest income, interest expenses, and
miscellaneous income and expenses. Interest income was $632,000 and $466,000
in the quarters ended July 31, 1999, and 2000, representing 3.8% and 2.7% of
total revenues, respectively. The decrease was due to a decrease in the levels
of short-term investments and cash held in interest-bearing accounts compared
to the amounts invested in the same period in the prior year as a result of
the Company's net loss. Interest expenses were $28,000 and $6,000 in the
quarters ended July 31, 1999, and 2000, representing 0.2% and 0.0% of total
revenues, respectively. The decrease in the absolute dollar amount is due to a
reduction of a small external credit facility.
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 2000, the Company had $30.2 million of working capital,
including $13.1 million in cash and cash equivalents and $18.7 million in
short-term investments, as compared to $32.7 million of working capital as of
April 30, 2000, including $12.0 million of cash and cash equivalents and $19.8
million in short-term investments. Accounts receivable, net of allowance for
doubtful accounts, decreased to $11.8 million at July 31, 2000, from $20.2
million at April 30, 2000, and the average days' sales outstanding, including
contract receivables, was 70 days for the quarter ended July 31, 2000,
compared to an average of 84 days for fiscal year 2000. The decrease in
average days' sales outstanding was due primarily to the collection of past
due accounts receivable during the first quarter of fiscal 2001. The
allowance for doubtful accounts decreased to $2.4 million at July 31, 2000,
from $2.5 million at April 30, 2000. The decrease in accounts receivable in
total dollars is attributable to timing in the consummation of licensing
transactions. The Company believes that existing cash and cash equivalent
balances, short-term investments, and potential cash flow from operations will
satisfy the Company's working capital and capital expenditure requirements for
at least the next 12 months.
The Company anticipates entering into a hedge transaction with a Bank to
offset potential liability under Swedish tax law upon exercise of stock
options by employees subject to Swedish taxation. The potential arrangement
would involve the issuance by the Bank of a call to the Company settleable in
cash which the Bank may elect to cover in whole or in part by purchasing
shares of the Company's Common Stock. The call would be offset by the Bank's
right to put shares of Company Common Stock to the Company. The Company
presently anticipates that the number of shares of Company Common Stock
subject to the call, which would depend on the number of options outstanding
from time to time, would not exceed 450,000. It is anticipated that the hedge
transaction would be open for several years.
YEAR 2000
The Company devoted a substantial amount of time to validate that the standard
versions of its principal products were Year 2000 compliant and would with
retained functionality store, process, and receive date and time data for
periods before and after the turn of the century if correct date and time data
were inputted. With respect to customized code developed for specific
customers to address specific customer needs and to interface with legacy and
other software applications, the Company developed a toolset to assist such
customers in assessing and renovating Year 2000 issues with respect to such
code. While the Company does not warrant the Year 2000 compliance of any such
customized code, it cannot be sure that it will not have a dispute with a
customer over whether particular code is standard or customized.
The Company did not experience any significant disruption in its operations as
a result of the turn of the century and does not anticipate that any such
subsequent disruptions will have any material adverse effect to its operations
or financial condition. At this time, the Company believes that the most
likely "worst-case" scenario involves potential disruptions in areas in which
the Company's operations must rely on third parties whose systems may not work
properly for all periods after December 31, 1999. While such failures could
affect important operations of the Company, either directly or indirectly, the
Company cannot at present estimate either the likelihood or the potential cost
of such failures.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not believe it is exposed to market risks with respect to any
of its investments; the Company does not utilize market rate sensitive
instruments for trading or other purposes. As of July 31, 2000, the Company
had no long-term investments and its short-term investments consisted of three
Federal Agency securities with maturities of less than one year.
<PAGE>
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 3. Amended Bylaws of the Company
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during the quarter
ended July 31, 2000.
<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/ Karl Asp
---------------------------
Karl Asp
Principal Financial Officer
DATE: September 14, 2000
