<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2000
COMMISSION FILE NUMBER: 000-30027
------------------------
MOLDFLOW CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE
(State or other jurisdiction 04-3406763)
of (I.R.S. Employer
incorporation or organization) Identification Number
</TABLE>
430 BOSTON POST ROAD, WAYLAND, MA 01778
(Address of principal executive offices, including zip code)
(508) 358-5848
(Registrant's telephone number, including area code)
91 HARTWELL AVENUE
LEXINGTON, MA 02401
(Former address if changed since last report)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ No / /
There were 9,295,533 shares of our common stock, par value $0.01,
outstanding on October 31, 2000.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
MOLDFLOW CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
------------
<S> <C> <C>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of September 30 and
June 30, 2000.............................................. 3
Condensed Consolidated Statement of Income for the three
months ended September 30, 2000 and October 2, 1999........ 4
Condensed Consolidated Statement of Cash Flows for the three
months ended September 30, 2000 and October 2, 1999........ 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk....................................................... 19
Part II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 20
Item 2. Changes in Securities and Use of Proceeds................... 20
Item 4. Submission of Matters to a Vote of Securities Holders....... 20
Item 6. Exhibits and Reports on Form 8-K............................ 20
Signatures............................................................ 21
Exhibit Index......................................................... 22
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOLDFLOW CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
2000 2000
------------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $19,909 $27,259
Marketable securities............................... 13,846 8,452
Accounts receivable, net............................ 5,695 5,972
Prepaid expenses and other current assets........... 1,980 1,946
------- -------
Total current assets.............................. 41,430 43,629
Fixed assets, net..................................... 5,270 4,864
Intangible assets, net................................ 1,870 1,994
Goodwill, net......................................... 6,662 6,628
Other assets.......................................... 276 208
------- -------
Total assets...................................... $55,508 $57,323
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt obligations............................ $ 65 $ 68
Accounts payable.................................... 1,710 1,203
Accrued expenses.................................... 5,289 6,264
Deferred revenue.................................... 4,558 5,103
------- -------
Total current liabilities......................... 11,622 12,638
Long-term debt, net of current portion................ 840 852
Other long-term liabilities........................... 39 55
------- -------
Total liabilities................................. 12,501 13,545
------- -------
Stockholders' equity:
Common stock........................................ 93 93
Additional paid-in capital.......................... 49,502 49,482
Deferred stock compensation......................... (43) (47)
Notes receivable from stockholders.................. (213) (210)
Accumulated deficit................................. (7,726) (8,260)
Accumulated other comprehensive income.............. 1,394 2,720
------- -------
Total stockholders' equity........................ 43,007 43,778
------- -------
Total liabilities and stockholders' equity........ $55,508 $57,323
======= =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
MOLDFLOW CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
<S> <C> <C>
Revenue:
Software licenses................................... $5,222 $2,823
Services............................................ 3,602 2,358
------ ------
Total revenue..................................... 8,824 5,181
------ ------
Costs and expenses:
Cost of software licenses revenue................... 341 169
Cost of services revenue............................ 343 236
Research and development............................ 1,587 835
Selling and marketing............................... 4,291 2,698
General and administrative.......................... 1,385 1,076
Litigation.......................................... -- 280
Amortization of goodwill and other intangible
assets............................................ 367 --
------ ------
Total operating expenses.......................... 8,314 5,294
------ ------
Income (loss) from operations......................... 510 (113)
Interest income (expense), net........................ 371 (1)
Other income (loss), net.............................. 35 (34)
------ ------
Income (loss) before income taxes................. 916 (148)
Provision (benefit) for income taxes.................. 382 (217)
------ ------
Net income........................................ $ 534 $ 69
====== ======
Net income per common share:
Basic............................................. $ 0.06 $ 0.20
Diluted........................................... $ 0.06 $ 0.01
Shares used in computing net income per common share:
Basic............................................. 9,186 353
Diluted........................................... 9,698 6,292
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
MOLDFLOW CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 534 $ 69
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Loss on disposal of fixed assets........................ 7 8
Depreciation and amortization........................... 618 211
Provisions for doubtful accounts........................ 9 2
Foreign exchange losses (gains)......................... (16) 27
Changes in assets and liabilities:
Accounts receivable................................... 276 249
Prepaid expenses and other current assets............. 112 16
Other assets.......................................... (68) (135)
Accounts payable...................................... 507 (91)
Accrued expenses...................................... (484) (444)
Deferred revenue...................................... (546) (305)
------- ------
Net cash provided by (used in) operating
activities........................................ 949 (393)
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets................................. (965) (204)
Investment in marketable securities....................... (6,898) --
Additional C-Mold acquisition costs....................... (278) --
Proceeds from fixed asset disposals....................... -- 4
------- ------
Net cash used in investing activities............... (8,141) (200)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on bank notes payable.......................... 5 800
Payments on bank notes payable............................ (13) (112)
Payments on capital lease obligations..................... (3) (39)
Proceeds from issuance of common stock.................... 20 1
------- ------
Net cash provided by financing activities........... 9 650
------- ------
Effect of exchange rate changes on cash and cash
equivalents............................................... (167) 164
------- ------
Net increase (decrease) in cash and cash equivalents........ (7,350) 221
Cash and cash equivalents, beginning of period.............. 27,259 1,240
------- ------
Cash and cash equivalents, end of period.................... $19,909 $1,461
======= ======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS
Moldflow Corporation ("Moldflow" or the "Company") was incorporated in
Delaware, USA in January 1997 as the successor corporation to Moldflow
International Pty. Ltd., an Australian corporation. The Company was formed to
design, develop, manufacture and market computer software applications for the
design, engineering and manufacture of injection molded plastic parts and, as
such, revenues are derived from the plastic design and manufacturing industry.
The Company sells its products primarily to customers in the United States,
Europe, Asia and Australia.
The accompanying unaudited condensed consolidated financial statements
include the accounts of Moldflow Corporation and its wholly owned subsidiaries.
The condensed consolidated financial statements have been prepared by the
Company in accordance with the rules and regulations of the Securities and
Exchange Commission ("SEC") regarding interim financial reporting. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements and should be
read in conjunction with the audited consolidated financial statements and notes
thereto for the year ended June 30, 2000 included in the Company's Annual Report
on Form 10-K. The June 30, 2000 condensed consolidated balance sheet was derived
from the Company's audited consolidated financial statements. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments, consisting only of those of a normal recurring nature,
necessary for a fair presentation of results for the interim periods presented.
The results of operations for the three-month period ended September 30, 2000
are not necessarily indicative of the results to be expected for any future
period or the full fiscal year.
The Company's fiscal year end is June 30. During the fiscal year, the
Company follows a schedule in which each interim quarterly period ends on the
Saturday of the thirteenth full week of the reporting period.
2. NET INCOME PER COMMON SHARE
The Company computes net income per common share in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provisions of SFAS 128 and SAB 98, basic earnings per common share is computed
by dividing net income available to common stockholders by the weighted-average
number of common shares outstanding. Diluted earnings per common share is
computed by dividing net income by the weighted-average number of common shares
outstanding and, when dilutive, all potential common equivalent shares
outstanding including convertible preferred stock, restricted stock, options and
warrants. The dilutive effect of options and warrants to purchase common stock
is determined
6
<PAGE>
under the treasury stock method using the average fair value of common stock for
the period. The following table presents the calculation for both basic and
diluted net income per common share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net income............................................ $ 534 $ 69
====== ======
Weighted average shares used in computing net income
per common share--basic............................. 9,186 353
------ ------
Effect of dilutive securities:
Restricted stock.................................... 98 201
Stock options and warrants.......................... 414 249
Convertible preferred stock......................... -- 5,489
------ ------
Dilutive potential common shares.................. 512 5,939
------ ------
Weighted average shares used in computing net income
per common share--diluted........................... 9,698 6,292
====== ======
Net income per common share--basic.................... $ 0.06 $ 0.20
Net income per common share--diluted.................. $ 0.06 $ 0.01
</TABLE>
3. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
During the first quarter of fiscal 2001, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). SFAS No. 133 requires that all derivative financial
instruments are recorded on the balance sheet at their fair value. Changes in
the fair value of these derivatives are recorded each period in current earnings
or other comprehensive income, depending on whether the instrument is designated
as part of a hedge transaction and, if it is, the type of hedge transaction.
During the first quarter of fiscal 2001, the Company began to hedge a
portion of its forecasted foreign currency denominated intercompany sales over a
period of up to twelve months using currency options. These derivatives have
been designated as cash-flow hedges and, as such, the effective portion of the
change in their fair value is recorded as a component of accumulated other
comprehensive income until the underlying forecasted transaction occurs. Once
the underlying forecasted transaction is realized, the appropriate gain or loss
from the derivative is reclassified from other accumulated comprehensive income
to current earnings as a component of other income and expenses.
At the inception of the hedge transaction and on a quarterly basis, the
Company assesses whether the derivatives that are used in hedging transactions
are highly effective in offsetting the changes in cash flows of the hedged
items. The Company assesses the hedge effectiveness of its currency options
based on changes in the instruments' intrinsic value, which is the value of the
option attributable to the difference between the spot exchange rate and the
option strike exchange rate. Management expects that at the hedge's inception
and through the date of the forecasted sales, the hedge will be effective since
the critical terms of the option contracts match those of the anticipated sales.
Changes to the time value of the option, which is defined as the total fair
value of the option as determined through dealer quotes less the intrinsic
value, is deemed to be an ineffective portion of the hedge and is recorded to
current earnings as a component of other income and expenses. If the Company
determines that a cash flow hedge is no longer probable of occurring or that the
hedged instrument is no longer effective, the Company discontinues hedge
accounting for the affected portion of the
7
<PAGE>
forecasted transaction, and any unrealized gain or loss on the contract is
recognized in current earnings as a component of other income and expenses.
At September 30, 2000, currency options designated as hedging instruments
with notional amounts of $4,268,000 and $2,041,000 to exchange Euros and Yen for
U.S. dollars, respectively, were outstanding. The fair value of the outstanding
options as of September 30, 2000 was $236,000, which has been included in other
current assets. Unrealized gains were $107,000 at September 30, 2000, which the
Company expects to affect earnings over the next twelve months. During the three
months ended September 30, 2000, a net loss of $83,000 related to these hedges
was recorded as a component of other income and expenses. The charge represented
recognition of the ineffective portion of the Company's outstanding options of
$116,000, net of gains of $33,000 on options that settled during the period.
4. ACQUISITION OF C-MOLD
On April 13, 2000, the Company acquired Advanced CAE Technology, Inc., which
had been conducting business as C-Mold, for $11.3 million in cash. The
acquisition was accounted for using the purchase method of accounting, and the
results of C-Mold have been included in the Company's consolidated financial
statements since the date of acquisition. During the three months ended
September 30, 2000, certain preacquisition contingencies were resolved that
resulted in a $278,000 increase in the consideration paid for C-Mold, which was
recorded as additional goodwill. As of September 30, 2000, the carrying value of
goodwill was $6.7 million, net of accumulated amortization of $450,000.
5. EXIT COSTS
In June 2000, the Company recorded a charge of $70,000 related to exit costs
incurred in the relocation of its corporate headquarters to Wayland,
Massachusetts. The amount was recorded as a nonrecurring charge in the Company's
consolidated statement of income for the year ended June 30, 2000, with a
related amount included in accrued expenses as of June 30, 2000. During the
three months ended September 30, 2000, cash paid against this accrual was
$40,000, reducing the remaining accrual to $30,000.
6. COMPREHENSIVE INCOME
Comprehensive income is comprised of net income and other comprehensive
income. Other comprehensive income includes certain changes in equity that are
excluded from net income, such as cumulative foreign currency translation
adjustments. Other comprehensive income for the three-month period ended
September 30, 2000 also includes an unrealized gain on the intrinsic value of
the Company's hedging instruments and an unrealized loss on the Company's
marketable securities, resulting primarily from its minority investment in an
Indian software company. It is management's opinion that the remaining
unrealized gain on this investment is subject to a number of risks, including
the risk that there may not be an active trading market for the remaining
shares, currency fluctuation, foreign exchange controls imposed by foreign
governments, and other potential risks that may cause
8
<PAGE>
this gain to never be fully realized. The following table presents the
calculation of comprehensive income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
-------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Net income............................................ $ 534 $ 69
Other comprehensive income (loss):
Changes in fair value of marketable securities, net
of related tax effect............................. (961) --
Changes in value of financial instruments designated
as hedges......................................... 107 --
Foreign currency translation adjustment............. (472) 72
------- ----
Other comprehensive income (loss)................... (1,326) 72
------- ----
Comprehensive income (loss)........................... $ (792) $141
======= ====
</TABLE>
7. SEGMENT AND GEOGRAPHIC INFORMATION
The following table presents the Company's revenues and net fixed assets by
geographic segment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
(IN THOUSANDS)
<S> <C> <C>
REVENUE FROM UNAFFILIATED CUSTOMERS:
Asia/Australia
Software licenses................................. $1,680 $ 808
Services.......................................... 917 651
------ ------
Total Asia/Australia............................ 2,597 1,459
------ ------
USA
Software licenses................................. 1,291 694
Services.......................................... 1,540 812
------ ------
Total USA....................................... 2,831 1,506
------ ------
Europe
Software licenses................................. 2,251 1,321
Services.......................................... 1,145 895
------ ------
Total Europe.................................... 3,396 2,216
------ ------
Consolidated
Software licenses................................. 5,222 2,823
Services.......................................... 3,602 2,358
------ ------
Total consolidated.............................. $8,824 $5,181
====== ======
FIXED ASSETS, NET (AS OF PERIOD END):
Asia/Australia...................................... $2,580 $2,423
USA................................................. 2,270 282
Europe.............................................. 420 356
------ ------
Total consolidated.............................. $5,270 $3,061
====== ======
</TABLE>
9
<PAGE>
8. SUBSEQUENT EVENTS
In September 2000, the Company signed a Purchase and Sale agreement to sell
its facility located in Louisville, Kentucky. This facility had been acquired as
part of the Company's purchase of C-Mold. The expected closing date of this
transaction is on or about November 9, 2000. In conjunction with the sale, it is
the Company's intention to retire the outstanding mortgage debt on this property
of $604,000. It is management's expectation that the proceeds of the sale will
not vary significantly from the carrying value of the facility, which was
$1.0 million at September 30, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
21E of the Securities Exchange Act of 1934, as amended. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
future expectations, contain projections of our future results of operations or
of our financial condition, or state other "forward-looking" information. We
believe that it is important to communicate our future expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or control and that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those discussed as
a result of various factors, including those factors described in "Important
Factors That May Affect Future Results" beginning on page 14. Readers should not
place undue reliance on our forward-looking statements.
BUSINESS OVERVIEW
Our primary business is the development, sale and support of software
applications for the design and manufacture of plastic injection molded parts.
Our products allow a product designer or engineer to simulate the manufacture of
a plastic part to determine and maintain the optimal part design and
manufacturing conditions throughout the manufacturing process.
We develop software products internally and through cooperative research
relationships with a number of public and private educational and research
organizations around the world. Prior to June 1997, our products consisted
solely of our Moldflow Plastics Insight (MPI) series for in-depth mold design.
Since then, we have introduced two new product lines. Our Moldflow Plastics
Adviser (MPA) Series for part design and high-level mold design was introduced
in fiscal 1997 and our Moldflow Plastics Xpert (MPX) Series for production
set-up and production monitoring was introduced in fiscal 1999. We have also
introduced additional modules of our MPI product series since June 1997. Earlier
this year we introduced plasticzone.com, a business and productivity website for
professionals working with injection molded plastics. The plasticzone.com site
currently offers four primary services, including one which provides our
customers with access to our iMPA product, the application service provider
(ASP) version of MPA. In addition, we recently introduced iMPX, a browser-based
production monitoring system that enables MPX customers to view production data
remotely over corporate intranets.
We sell our products and services internationally through our direct sales
operations in fourteen countries. We also sell through a network of distributors
and value-added resellers, and through distribution arrangements with developers
of other design software products.
In April 2000, we acquired Advanced CAE Technologies, Inc. which had been
conducting business as "C-Mold." The acquisition was accounted for as a
purchase. Accordingly, the operating results of C-Mold have been included in our
results of operations from the date of acquisition.
We generate revenue from two principal sources:
- license fees for our packaged software products, and
- services revenue derived from maintenance and support services related to
our software products, consulting, training and materials testing.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth statement of operations data for the periods
indicated as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
<S> <C> <C>
Revenue:
Software licenses......................................... 59.2% 54.5%
Services.................................................. 40.8 45.5
----- -----
Total revenue......................................... 100.0% 100.0%
===== =====
Costs and expenses:
Cost of software licenses revenue......................... 3.9% 3.3%
Cost of services revenue.................................. 3.9 4.6
Research and development.................................. 18.0 16.1
Selling and marketing..................................... 48.6 52.1
General and administrative................................ 15.7 20.8
Litigation................................................ -- 5.4
Amortization of goodwill and other intangible assets...... 4.2 --
----- -----
Total operating expenses.............................. 94.3 102.3
----- -----
Income (loss) from operations............................... 5.7 (2.3)
Interest income (expense), net.............................. 4.2 --
Other income (loss), net.................................... 0.5 (0.7)
----- -----
Income (loss) before income taxes..................... 10.4 (3.0)
Provision (benefit) for income taxes........................ 4.3 (4.2)
----- -----
Net income............................................ 6.1% 1.2%
===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED OCTOBER 2,
1999
REVENUE. Total revenue increased by 70%, or $3.6 million, to $8.8 million
for the three months ended September 30, 2000, from $5.2 million for the three
months ended October 2, 1999. In the same period, software licenses revenue
increased by 85%, or $2.4 million, to $5.2 million. The increase in software
licenses revenue was primarily attributable to an increase in our direct sales
force and increased sales, particularly in Japan and North America. To a lesser
extent, the increase was attributable to our acquisition of C-Mold. Revenue from
software licenses accounted for 59% of total revenue during the three-month
period ended September 30, 2000 compared to 55% during the three-month period
ended October 2, 1999. Services revenue increased by 53%, or $1.2 million, to
$3.6 million for the three months ended September 30, 2000 from $2.4 million for
the three-month period ended October 2, 1999. This increase was due primarily to
an increase in the amount of revenue derived from maintenance and support
contracts resulting from the growth in our software licenses revenue and our
installed-user base in fiscal year 2000, in part resulting from our acquisition
of C-Mold. No customer accounted for more than 10% of the total revenue during
the three-month periods ended September 30, 2000 and October 2, 1999.
COST OF REVENUE. The cost of software licenses revenue increased 102%, or
$172,000, to $341,000 for the three months ended September 30, 2000 from
$169,000 for the three months ended October 2, 1999. This increase was primarily
attributable to increased personnel costs and distribution costs associated with
new product rollouts as well as an increased percentage of our revenue
attributable to our MPX products which have a higher cost than our other
products. The cost of services revenue
11
<PAGE>
increased 45%, or $107,000, from $236,000 for the three months ended October 2,
1999 to $343,000 for the three months ended September 30, 2000. This increase
resulted from increased personnel costs, primarily related to our acquisition of
C-Mold.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 90%,
or $752,000, to $1.6 million for the three months ended September 30, 2000 from
$835,000 for the three months ended October 2, 1999. This increase was
attributable to increased personnel costs, primarily related to the addition of
research and development personnel in connection with our acquisition of C-Mold.
SELLING AND MARKETING. Selling and marketing expenses increased 59%, or
$1.6 million, to $4.3 million for the three months ended September 30, 2000 from
$2.7 million for the three months ended October 2, 1999. This increase was due
principally to the increase in the direct sales force, an increase in sales
commission expense and additional spending for promotional activities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
29%, or $309,000, to $1.4 million for the three months ended September 30, 2000
from $1.1 million for the three months ended October 2, 1999. This resulted from
additional personnel costs and an increase in professional fees.
LITIGATION. The litigation expenses incurred for the three months ended
October 2, 1999 amounted to $280,000 and consisted of legal costs to pursue our
claims against C-Mold regarding theft of our trade secrets and to defend against
counterclaims. The litigation was suspended during the third quarter of fiscal
2000, and upon the closing of our acquisition of C-Mold, all related claims were
dismissed. There were no litigation expenses incurred in the three months ended
September 30, 2000.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS. These costs represent
the amortization of intangible assets recorded in connection with our
acquisition of C-Mold, including goodwill, developed technology, assembled
workforce and protective covenants. Amortization for the three months ended
September 30, 2000 was $367,000; there was no amortization incurred in the three
months ended October 2, 1999.
INTEREST INCOME (EXPENSE), NET. Interest income (expense), net increased to
income of $371,000 in the three months ended September 30, 2000 from an expense
of $1,000 for the three months ended October 2, 1999. The change was primarily
the result of interest earned on investment of the unused portion of the
proceeds from our initial public offering of common stock in March 2000.
OTHER INCOME (LOSS), NET. Other income (loss), net increased to income of
$35,000 in the three months ended September 30, 2000 from a loss of $34,000 for
the three months ended October 2, 1999. The change was based primarily on
foreign currency movements that result in realized and unrealized exchange gains
and losses on intercompany account balances and the recognized gains and losses
on our foreign exchange hedging instruments.
PROVISION FOR INCOME TAXES. The provision for income taxes increased to
$382,000 in the three months ended September 30, 2000. For the three months
ended October 2, 1999 the income tax provision was impacted by the receipt of a
rebate of tax withholding in Germany of $201,000.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have financed our operations and met our capital
expenditure requirements primarily through sales of our capital stock,
stockholder loans, funds generated from operations and borrowings from lending
institutions. In March 2000, we completed our initial public offering of common
stock. As of September 30, 2000, our primary sources of liquidity consisted of
our total cash and cash equivalents balance of $19.9 million, our marketable
securities balance of $13.8 million and available borrowings of $2.3 million
under our $3.3 million domestic and foreign revolving lines of
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credit, which are secured by substantially all of our assets. Our marketable
securities balance at September 30, 2000 included $2.0 million related to our
minority investment in a publicly traded Indian software company which is
recorded at market value at the end of each reporting period. This value has
been subject to significant fluctuation in the past. As of September 30, 2000,
there were no amounts outstanding on our lines of credit. Borrowings under our
lines of credit are subject to a borrowing base of 80% of eligible domestic
accounts receivable, 30% of eligible foreign accounts receivable, and 90% of a
standby letter of credit issued by an Australian bank. The assets of our
Australian subsidiary secure the standby letter of credit. Interest on these
lines of credit is payable monthly at rates of prime plus 1.25% for the domestic
line and prime plus 1.5% for the foreign line. The standby letter of credit is
subject to a fee of 0.5% per annum. These credit facilities expire on
December 31, 2000. We are currently negotiating with the bank to modify and
extend the terms of these arrangements.
Net cash provided by operating activities was $949,000 for the three months
ended September 30, 2000. During the corresponding period ended October 2, 1999,
net cash of $393,000 was used in operating activities. Cash was provided by
operations in 2000 primarily through increases in net income, non-cash charges
and accrued expenses, and decreases in other current assets and accounts
receivable, offset by a decrease in deferred maintenance and support contracts
and an increase in other assets. Cash was used in operations in 1999 through
reductions in accrued expenses, deferred maintenance and support contracts and
accounts payable, offset by a reduction in accounts receivable.
Net cash used in investing activities was $8.1 million for the three-month
period ended September 30, 2000 and $200,000 for the three-month period
October 2, 1999. Net cash used in investing activities reflected primarily the
transfer of cash into marketable securities and the purchase of fixed assets
during the three months ended September 30, 2000. Net cash used for investing
activities for the corresponding period in 1999 reflected amounts used for
purchases of property and equipment.
Net cash provided by financing activities was $9,000 and $650,000 for the
three-month periods ended September 30, 2000 and October 2, 1999, respectively.
Net cash provided by financing activities in the three months ended
September 30, 2000 reflected primarily receipts for the exercise of employee
stock options, offset by payments on debt obligations. For the three-month
period ended October 2, 1999, net cash provided reflected primarily borrowings
on bank notes payable, offset by payments on debt obligations.
We believe that our current cash, cash equivalents, marketable securities
and available lines of credit will be sufficient to meet our anticipated cash
needs for working capital and capital expenditures for at least the next
twelve months following the date of this Quarterly Report. On a long-term basis
or to complete acquisitions in the short term, we may require additional
external financing through credit facilities, sales of additional equity or
other financing vehicles. There can be no assurance that such financing can be
obtained on favorable terms, if at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN No. 44"), "Accounting for Certain Transactions
involving Stock Compensation--An Interpretation of APB Opinion No. 25." FIN
No. 44 addresses the application of APB Opinion No. 25 and among other issues
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to the
terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN No. 44
became effective July 1, 2000, but certain conclusions in FIN No. 44 cover
specific events that occurred after either December 15, 1998 or January 12,
2000. The Company's adoption of FIN No. 44 did not have a material impact on the
Company's financial position or results of operations.
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In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101") "Revenue Recognition in Financial
Statements." This statement was amended by the issuance of SAB 101B, "Second
Amendment: Revenue Recognition in Financial Statements," which delayed the
implementation date of SAB 101 until the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. SAB 101 summarizes the SEC's views in
applying generally accepted accounting principles to selected revenue
recognition issues in financial statements. The Company does not expect the
adoption of SAB 101 to have a material impact on its financial position and
results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS 133, as amended by SFAS 137, is
effective for all quarters of all years beginning after June 15, 2000. During
the three-month period ended September 30, 2000, the Company began to engage in
hedging activities and as such has adopted the accounting and reporting
requirements of SFAS 133.
EUROPEAN UNION CURRENCY CONVERSION
On January 1, 1999, eleven member nations of the European Economic and
Monetary Union began using a common currency, the Euro. For a three-year
transition period ending June 30, 2002, both the Euro and each of the currencies
for such member countries will remain in circulation. After June 30, 2002, the
Euro will be the sole legal tender for those countries. The adoption of the Euro
will affect many financial systems and business applications as the commerce of
those countries may be transacted both in the Euro and the existing national
currency during the transition period. Significant portions of our revenue have
been historically generated in Europe. Of the eleven countries currently using
the Euro, we have subsidiary operations in France, Germany, Ireland, Italy, the
Netherlands and Spain. We have assessed the potential impact of the Euro
conversion in a number of areas, particularly on our pricing and other marketing
strategies. Although we do not currently expect that the conversion, either
during or after the transition period, will have an adverse effect on our
operations or financial condition, there can be no assurance that it will not
have some unexpected adverse impact.
IMPACT OF INFLATION
We believe that our revenue and results of operations have not been
significantly impacted by inflation during the past three fiscal years.
IMPORTANT FACTORS THAT MAY AFFECT FUTURE RESULTS
IF WE EXPERIENCE DELAYS IN INTRODUCING NEW PRODUCTS OR IF OUR EXISTING OR
NEW PRODUCTS DO NOT ACHIEVE MARKET ACCEPTANCE, WE MAY LOSE REVENUE.
Our industry is characterized by:
- rapid technological advances,
- evolving industry standards,
- changes in end-user requirements,
- intense competition,
- technically complex products,
- frequent new product introductions, and
- evolving offerings by product manufacturers.
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We believe our future success will depend, in part, on our ability to
anticipate or adapt to these factors and to offer on a timely basis products
that meet customer demands. For example, the introduction of new products and
services embodying new technologies and the emergence of new industry standards
can render our existing products obsolete. The development of new or enhanced
products is a complex and uncertain process requiring the anticipation of
technological and market trends. We may experience design, manufacturing,
marketing and other difficulties that could delay or prevent our development,
introduction or marketing of new products and enhancements and result in
unexpected expenses.
Our growth and profitability also will depend upon our ability to expand the
use and market penetration of our existing product lines as well as new products
we introduce. Market acceptance of our products will depend in part on our
ability to demonstrate the cost-effectiveness, ease of use and technological
advantages of our products over competing products.
BECAUSE WE DO NOT HAVE EXTENSIVE EXPERIENCE DEVELOPING INTERNET-ENABLED
PRODUCTS, WE MAY INCUR SIGNIFICANT COSTS DEVELOPING INTERNET-ENABLED PRODUCTS
AND MAY NOT BE ABLE TO DEVELOP THESE PRODUCTS.
Our business strategy includes providing additional Internet-related
functions to our products to exploit the trend toward worldwide collaborative
product development and manufacturing and to explore new pricing and packaging
strategies made possible by the Internet. We have limited experience in
developing and marketing Internet-enabled products. We may incur significant
costs developing Internet-enabled products and may be unable to capitalize on
the rapid transformation of the Internet as a computing platform, communications
vehicle and distribution channel.
WE MAY EXPERIENCE DIFFICULTY ACHIEVING SALES TARGETS, MAKING TIMELY PRODUCT
RELEASES OR OTHERWISE OPERATING OUR BUSINESS IF WE ARE UNABLE TO ATTRACT OR
RETAIN KEY PERSONNEL.
In order to grow our business, we will have to hire additional employees in
various countries. Our future success, therefore, will depend, in part, on
attracting and retaining additional qualified management, marketing and
technical personnel. We do not know whether we will be successful in hiring or
retaining qualified personnel. Competition for personnel throughout the software
industry is intense.
IF WE BECOME SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WE COULD
INCUR SIGNIFICANT EXPENSES AND WE COULD BE PREVENTED FROM OFFERING SPECIFIC
PRODUCTS OR SERVICES.
Our products include proprietary intellectual property. We may become
subject to claims that we infringe on the proprietary rights of others. In the
United States, a significant number of software and business method patents have
been issued over the past decade and the holders of these patents have been
actively seeking out potential infringers. If any element of our products or
services violates third-party proprietary rights, we might not be able to obtain
licenses on commercially reasonable terms to continue offering our products or
services without substantial re-engineering and any effort to undertake such
re-engineering might not be successful. In addition, any claim of infringement
could cause us to incur substantial costs defending against the claim, even if
the claim is invalid, and could distract our management from our business. Any
judgment against us could require us to pay substantial damages and could also
include an injunction or other court order that could prevent us from offering
our products and services.
WE MAY LOSE SALES TO COMPETITORS IF WE ARE UNABLE TO PROTECT IMPORTANT
INTELLECTUAL PROPERTY.
Our ability to compete effectively against other companies in our industry
will depend, in part, on our ability to protect our current and future
proprietary technology through a combination of patent, copyright, trademark,
trade secret and unfair competition laws. We may be unable to maintain the
proprietary nature of our technology. While we have attempted to safeguard and
maintain our
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proprietary rights, we do not know whether we have been or will be completely
successful in doing so. We face the following risks in protecting our
intellectual property:
- we cannot be certain that our pending United States and foreign patent
applications will result in issued patents or that the claims allowed are
or will be sufficiently broad to protect our technology.
- third parties may design around our patented technologies or seek to
challenge or invalidate our patented technologies.
- the contractual provisions that we rely on, in part, to protect our trade
secrets and proprietary knowledge may be breached, and we may not have
adequate remedies for any breach and our trade secrets and proprietary
information may be disclosed to the public.
- our trade secrets may also become known without breach of such agreements
or may be independently developed by competitors, and
- foreign countries, including some of those in which we do business, may
reduce or limit the protection of our intellectual property rights.
OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED
BY INTERNATIONAL BUSINESS RISKS.
The majority of our employees, including sales, support and research and
development personnel, are located outside of the United States. Conducting
business outside of the United States is subject to numerous risks, including:
- decreased liquidity resulting from longer accounts receivable collection
cycles typical of foreign countries,
- decreased revenue on foreign sales resulting from possible foreign
currency exchange and conversion issues,
- lower productivity resulting from difficulties managing our sales, support
and research and development operations across many countries,
- lost revenue resulting from difficulties associated with enforcing
agreements and collecting receivables through foreign legal systems,
- lost revenue resulting from the imposition by foreign governments of trade
protection measures, and
- higher cost of sales resulting from import or export licensing
requirements.
THE ACQUISITION OF C-MOLD AND FUTURE ACQUISITIONS AND STRATEGIC
RELATIONSHIPS MAY RESULT IN LOST REVENUE CAUSED BY BUSINESS DISRUPTIONS AND
MISSED OPPORTUNITIES CAUSED BY THE DISTRACTION OF OUR MANAGEMENT.
If we are unable to effectively integrate C-Mold's products, personnel and
systems, our business and operating results will likely suffer. This integration
is requiring time and focus by our management team. Further, we cannot guarantee
that we will realize any of the benefits or strategic objectives we were seeking
in acquiring C-Mold.
Additionally, we intend to engage in other acquisitions and strategic
relationships in the future. We may not be able to identify suitable acquisition
candidates, and, if we do identify suitable candidates, we may not be able to
make such acquisitions on commercially acceptable terms or at all. If we acquire
another company, we will only receive the anticipated benefits if we
successfully integrate the acquired business into our existing business in a
timely and non-disruptive manner. We may have to devote a significant amount of
time and management and financial resources to do so. Even with this investment
of management and financial resources, an acquisition may not produce the
revenues, earnings or business synergies that we anticipated. If we fail to
integrate the acquired business effectively or if key
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employees of that business leave, the anticipated benefits of the acquisition
would be jeopardized. The time, capital, management and other resources spent on
an acquisition that failed to meet our expectations could cause our business and
financial condition to be materially and adversely affected. In addition,
acquisitions can involve non-recurring charges and amortization of significant
amounts of goodwill and other acquired intangible assets that could adversely
affect our results of operations.
WE HAVE MORE LIMITED FINANCIAL AND OTHER RESOURCES THAN MANY OF OUR
COMPETITORS AND POTENTIAL COMPETITORS AND WE MAY BE UNABLE TO COMPETE
SUCCESSFULLY AGAINST THEM.
We operate in a highly competitive environment and may not be able to
successfully compete. Companies in our industry and entities in similar
industries could decide to focus on the development of software solutions for
the design, analysis and manufacturing of injection molded plastic parts. Many
of these entities have substantially greater financial, research and
development, manufacturing and marketing resources than we do. Increased
competition may result in price reductions, reduced profitability and loss of
market share.
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND
AS A RESULT PERIOD-TO-PERIOD COMPARISONS OF OUR RESULTS OF OPERATIONS ARE NOT
NECESSARILY MEANINGFUL AND SHOULD NOT BE RELIED UPON AS INDICATORS OF FUTURE
PERFORMANCE.
We have experienced significant fluctuations in our results of operations on
a quarterly basis. In particular, we have historically experienced lower or
relatively unchanged revenue in our first fiscal quarter as compared with the
preceding quarter as a result of seasonal factors. We expect to continue to
experience significant fluctuations in our future quarterly results of
operations due to a variety of factors, many of which are outside of our
control, including:
- seasonal slowdowns, in particular, in our first fiscal quarter, in many of
the markets in which we sell our products,
- the timing and magnitude of capital expenditures, including costs relating
to the expansion of our operations and infrastructure,
- introductions of new services or enhancements by us and our competitors,
- changes in our and our competitors' pricing policies,
- currency fluctuations, and
- timing and integration of acquisitions.
WE MAY HAVE DIFFICULTY MANAGING THE EXPANSION OF OUR OPERATIONS, WHICH COULD
RESULT IN DAMAGE TO CUSTOMER RELATIONSHIPS OR DELAYED BILLING OR COLLECTION OF
REVENUE.
The implementation of our business strategy could result in a period of
rapid growth in the number of our employees and the scope of our operations. In
addition, in connection with the acquisition of C-Mold, we have expanded the
number of employees and facilities. Rapid expansion could place a significant
strain on our senior management team and our operational, financial and other
resources as we attempt to expand our operations in multiple locations around
the world. We may have difficulty effectively managing the budgeting,
forecasting, global hiring and other business control issues presented by such a
rapid expansion. This could, among other things, adversely affect our
relationships with our customers and result in delays in billing and collections
of revenue from our customers and increased costs.
IF WE ARE UNABLE TO MAINTAIN AND LEVERAGE OUR STRATEGIC ALLIANCES, WE MAY BE
UNABLE TO GROW AS PLANNED.
We are, and will continue to be, dependent to some extent on distribution
arrangements and strategic partnerships with third-parties because we sell a
portion of our products through these third parties. In addition, we may sell
other products, including our internet products through third-party
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distributors or web platform operators in the future. These third parties may
not fulfill their agreements with us. In particular, third-party distributors or
web platform operators may breach or terminate their distribution agreements
with us or fail to devote sufficient time and resources to successfully
commercialize, or increase sales of, our products. As a result, our revenues
from these arrangements depend, in part, on third parties' sales of our
products.
DISRUPTION OF OPERATIONS AT OUR DEVELOPMENT FACILITIES COULD INTERFERE WITH
OUR PRODUCT DEVELOPMENT AND PRODUCTION CYCLES.
A significant portion of our computer equipment, source code and personnel,
including critical resources dedicated to research and development, is presently
located at operating facilities in Australia, the United States and the United
Kingdom. The occurrence of a natural disaster or other unanticipated catastrophe
at any of these facilities could cause interruptions in our operations and
services. Extensive or multiple interruptions in our operations at any of these
facilities could severely disrupt our product development.
OUR MOLDFLOW PLASTICS XPERT (MPX) PRODUCT LINE MAY LEAD TO PRODUCT LIABILITY
CLAIMS AGAINST US.
We have designed our Moldflow Plastics Xpert (MPX) product line to be
installed directly on our customers' injection molding machines and to
automatically adjust the operation of these machines. As a result, it is
possible that our customers may claim that our product interfered with the
proper operation of their machines and may seek reimbursement for consequential
and other damages from us. Although we expressly disclaim any liability for
consequential or other damages in connection with our sale of the MPX product,
this disclaimer may not protect us from claims for damages from our customers
and these claims may adversely affect our relationships with our customers or
our reputation generally. In addition, our insurance coverage limits may not be
adequate to protect us against any product liability claims that arise. This
insurance is expensive and may not be available on acceptable terms, or at all.
OUR STOCK PRICE IS HIGHLY VOLATILE AND COULD EXPERIENCE SUBSTANTIAL DECLINES
AND OUR MANAGEMENT'S ATTENTION MAY BE DIVERTED FROM MORE PRODUCTIVE TASKS.
The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for our common
stock to decline, perhaps substantially, including:
- a decrease in the demand for our common stock,
- revenues and operating results failing to meet the expectations of
securities analysts or investors in any quarter,
- downward revisions in securities analysts' estimates or changes in general
market conditions,
- technological innovations by competitors or in competing technologies,
- investor perception of our industry or our prospects, and
- general technology or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could harm our business, financial condition and
results of operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We develop our products in research centers in Australia, the United Kingdom
and the United States. We sell our products globally through our direct sales
force and indirect distributor channels. As a result, our financial results are
affected by factors such as changes in foreign currency exchange rates and weak
economic conditions in foreign markets. In the future, we expect to increase our
international operations in our existing markets and in geographic locations
where we do not have any operations now.
We collect amounts representing a substantial portion of our revenues and
pay amounts representing a substantial portion of our operating expenses in
foreign currencies. As a result, changes in currency exchange rates from time to
time may affect our operating results. We have begun to engage in hedging
transactions designed to reduce our exposure to changes in currency exchange
rates. We cannot assure you, however, that any efforts we make to hedge our
exposure to currency exchange rate changes will be successful.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in various claims and legal
proceedings arising in the ordinary course of business. We are not currently a
party to any such claims or proceedings which, if decided adversely to us, would
either individually or in the aggregate have a material adverse effect on our
business, financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the securities issued by the
Company during the reporting period that were not registered under the
Securities Act of 1933, as amended (the "Act"). There was no public offering in
any such transaction based on the private nature of the transactions and we
believe that each transaction was exempt from the registration requirements of
the Act, by reason of Section 4(2) of the Act or Rule 701 promulgated
thereunder.
(i) In July 2000, we issued 1,467 shares of common stock upon the exercise
of previously granted stock options at an aggregate exercise price of
$3,927.
(ii) In August 2000, we issued 6,471 shares of common stock upon the
exercise of previously granted stock options at an aggregate exercise
price of $10,529.
(iii) In September 2000, we issued 4,576 shares of common stock upon the
exercise of previously granted stock options at an aggregate exercise
price of $5,836.
USE OF PROCEEDS FROM REGISTERED SECURITIES
The effective date of the Securities Act registration statement for which
the use of proceeds information is being disclosed was March 27, 2000, and the
Commission file number assigned to the registration statement is 333-95289. The
use of proceeds of our initial public offering has not changed from that
reported in our quarterly report on Form 10-Q for the period ended April 1,
2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fiscal
quarter ended September 30, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<C> <S>
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
MOLDFLOW CORPORATION
By: /s/ MARC J. L. DULUDE
----------------------------------------
Marc J. L. Dulude
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
MOLDFLOW CORPORATION
By: /s/ SUZANNE E. ROGERS
----------------------------------------
Suzanne E. Rogers
Title: VICE PRESIDENT OF FINANCE AND
ADMINISTRATION AND CHIEF FINANCIAL
OFFICER
Date: November 7, 2000 (PRINCIPAL FINANCIAL OFFICER)
</TABLE>
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EXHIBIT INDEX
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<C> <S> <C>
27.1 Financial Data Schedule
</TABLE>
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