UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-132-58
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BOOLE & BABBAGE, INC.
----------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 94- 1651571
- - - - ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3131 ZANKER ROAD, SAN JOSE, CALIFORNIA 95134-1933
-------------------------------------------------
(Address of principal executive offices)
Registrant's Telephone number, including area code: 408-526-3000
--------------
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
----- -----
7,092,753 shares of common stock of the Registrant were outstanding as of April
30, 1995.
<PAGE>
<TABLE>
BOOLE & BABBAGE, INC.
Consolidated Balance Sheets
(Amounts in thousands except shares)
(March 31, 1995 unaudited)
<CAPTION>
March 31, September 30,
1995 1994
--------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............................................................ $ 41,658 $ 34,019
Accounts receivable, net ............................................................. 22,926 23,180
Installment and other receivables, net ............................................... 19,214 18,251
Deferred tax assets .................................................................. 5,054 4,959
Prepaid expenses and other current assets ............................................ 4,199 3,199
--------- ---------
Total current assets ............................................................ 93,051 83,608
Purchased and internally developed software, net ......................................... 13,273 14,276
Equipment, furniture and leasehold improvements, net ..................................... 8,174 8,506
Long term installment and other receivables .............................................. 25,650 20,011
Long term deferred tax assets ............................................................ 2,301 2,284
Costs in excess of net assets of purchased businesses, net ............................... 700 713
Other assets ............................................................................. 1,671 2,228
--------- ---------
Total assets ................................................................... $ 144,820 $ 131,626
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable .................................................................... $ 5,997 $ 6,762
Accrued payroll expense ............................................................. 6,247 6,603
Other accrued liabilities ........................................................... 18,285 16,835
Notes payable due within one year ................................................... 965 1,171
Capital lease obligations due within one year ....................................... 1,892 2,045
Deferred maintenance revenue ........................................................ 38,219 34,174
--------- ---------
Total current liabilities ....................................................... 71,605 67,590
Notes payable due after one year ......................................................... 906 1,177
Capital lease obligations due after one year ............................................. 1,047 1,903
Deferred maintenance revenue due after one year .......................................... 14,566 12,731
Minority interest ........................................................................ -- 61
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized, $.001 par value, ...................... -- --
Common stock, $.001 par value, authorized--15,000,000 shares;
issued 7,502,495 (7,368,378 at September 30, 1994) .............................. 7 7
Additional paid-in capital .......................................................... 25,152 23,844
Retained earnings ................................................................... 35,592 28,724
Unrealized (loss) gain on marketable securities ..................................... (270) 170
Foreign currency translation adjustment ............................................. 700 (96)
Less treasury stock, 455,550 shares, at cost ........................................ (4,485) (4,485)
--------- ---------
Total stockholders' equity ...................................................... 56,696 48,164
--------- ---------
Total liabilities and stockholders' equity ...................................... $ 144,820 $ 131,626
========= =========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
BOOLE & BABBAGE, INC.
Consolidated Statements of Income
(Amounts in thousands, except net income per share)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------------ -------------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Product licensing ..................................... $19,095 $15,583 $39,485 $30,545
Maintenance fees ...................................... 17,397 15,843 34,606 31,250
Services and other .................................... 761 597 1,735 1,345
------- ------- ------- -------
Total revenue ................................... 37,253 32,023 75,826 63,140
------- ------- ------- -------
Costs and expenses:
Cost of sales ......................................... 5,252 4,257 10,707 8,621
Product development and support ....................... 5,900 6,151 11,567 11,899
Sales and marketing ................................... 18,255 14,827 37,244 28,828
General and administrative ............................ 3,792 3,477 8,083 7,142
------- ------- ------- -------
Total costs and expenses ........................ 33,199 28,712 67,601 56,490
------- ------- ------- -------
Operating income ................................ 4,054 3,311 8,225 6,650
------- ------- ------- -------
Interest and other income, net ............................. 1,116 685 1,747 691
Income before provision for income taxes ................... 5,170 3,996 9,972 7,341
Provision for income taxes ................................. 1,600 1,240 3,090 2,275
------- ------- ------- -------
Net income ................................................. $ 3,570 $ 2,756 $ 6,882 $ 5,066
======= ======= ======= =======
Net income per share ....................................... $ 0.46 $ 0.39 $ 0.90 $ 0.71
======= ======= ======= =======
Shares used in per share calculations ...................... 7,700 7,110 7,615 7,100
======= ======= ======= =======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
BOOLE & BABBAGE, INC.
Consolidated Statements of Cash Flows
(Amounts in thousands) (Unaudited)
<CAPTION>
Six Months Ended
March 31,
-----------------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................... $ 6,882 $ 5,066
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and write-off of capitalized software ..................... 4,804 4,223
Stock issued under compensatory stock plans .......................................... 62 76
Minority interest .................................................................... (61) --
Changes in operating assets and liabilities:
Accounts receivable and installment and other receivables ......................... (5,164) (9,289)
Prepaid expenses and other assets ................................................. (735) 552
Accounts payable and accrued expenses ............................................. (236) 5,212
Deferred maintenance revenue ...................................................... 5,049 (580)
--------- ---------
Net cash provided by operating activities ............................................... 10,601 5,260
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in minority interests ...................................................... (29) (150)
Purchases of equipment, furniture and leasehold improvements ........................... (1,796) (1,148)
Payments for purchased and internally developed software ............................... (1,504) (1,563)
--------- ---------
Net cash used for investing activities .................................................. (3,329) (2,861)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ................................................. 1,246 1,318
Treasury stock purchase ................................................................ -- (705)
Payments on notes payable .............................................................. (491) (964)
Payments on capital leases ............................................................. (1,010) (1,023)
--------- ---------
Net cash used by financing activities ................................................... (255) (1,374)
--------- ---------
Effect of exchange rate changes on cash .................................................... 622 114
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .................................................. 7,639 1,139
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD ............................................ 34,019 23,726
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD .................................................. $ 41,658 $ 24,865
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .............................................................................. $ 588 $ 866
Income taxes, net of refunds .......................................................... $ 1,247 $ 1,226
<FN>
See accompanying notes.
</TABLE>
<PAGE>
BOOLE & BABBAGE, INC.
INDEX
Part I FINANCIAL INFORMATION Page No.
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
March 31, 1995 and September 30, 1994 1
Consolidated Statements of Income
Three and Six Months Ended March 31, 1995 and 1994 2
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1995 and 1994 3
Notes to Consolidated Financial Statements 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Six Months Ended March 31, 1995, and 1994
Three Months Ended March 31, 1995 and 1994 5-11
Part II OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 12
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Signatures 13
<PAGE>
BOOLE & BABBAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
all subsidiaries after the elimination of all significant inter-company
items and transactions.
A summary of the significant accounting policies of the Company is included
in Note 1 of Notes to Consolidated Financial Statements in the Company's
annual report on Form 10-K for the year ended September 30, 1994. These
consolidated financial statements should be read in conjunction with those
notes.
The consolidated financial information at March 31, 1995 and for the three
and six-month periods ended March 31, 1995 and 1994 is unaudited. The
statements in this report include all adjustments of a normal recurring
nature. In the opinion of management, these adjustments are necessary for a
fair statement of the interim results for the periods presented. The
interim results are not necessarily indicative of the results for the full
year.
2. Net Income Per Share
Net income per common share is computed by adding to the weighted average
number of common shares outstanding during the period the number of
dilutive common shares that would be issuable upon the exercise of
outstanding options using the treasury stock method of computation. Fully
diluted net income per share is not disclosed because it is not materially
different from primary net income per share.
(Amounts in thousands, except 3 mos 6 mos
net income per share) ended March 31, ended March 31,
----------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
Primary:
Common shares outstanding ........ 7,025 6,605 7,000 6,560
Employee stock option plans ...... 675 505 615 540
------ ------ ------ ------
7,700 7,110 7,615 7,100
====== ====== ====== ======
Net income ....................... $3,570 $2,756 $6,882 $5,066
====== ====== ====== ======
Net income per share ............. $ .46 $ .39 $ .90 $ .71
====== ====== ====== ======
3. Contingencies
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. Management believes that such litigation and
claims will be resolved without material adverse effect on the Company's
financial position or results of operations.
4
<PAGE>
BOOLE & BABBAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1995
REVENUES:
The Company derives its revenues primarily from the licensing of computer
software programs and the sales of software maintenance services. The Company
also generates revenue from computer services and other sources, although to a
much lesser degree. Total revenue for the six months ended March 31, 1995
increased over the same period in the prior year by 20.1%.
% of Revenues
---------------------- Year-to-Year
1995 1994 % Change
------- ------- --------
Product licensing .................. 52.1% 48.4% 29.3%
Maintenance fees ................... 45.6% 49.5% 10.7%
Services and other ................. 2.3% 2.1% 29.0%
------ ------ -----
Total .......................... 100.0% 100.0% 20.1%
====== ====== =====
PRODUCT LICENSING:
The Company licenses its products to customers for use on their computer
systems. Product licensing accounted for 52.1% or $39,485,000 of total revenue
in 1995, compared to 48.4% or $30,545,000 in 1994 and increased by 29.3% in 1995
compared to 1994. As is common in the industry, more than 50% of the Company's
license revenue is derived from transactions that close in the last month of a
quarter, which can make quarterly revenues difficult to forecast. And, since
operating expenses are relatively fixed, failure to achieve projected revenues
could materially and adversely affect the Company's operating results. This, in
turn, could result in an immediate and adverse effect on the market price of the
Company's stock.
PRODUCTS:
The product area with the highest growth rate in 1995 was the client/server
group which grew by 52% and comprised 10.8% of the total licensing revenue. The
Company anticipates that this group will continue to show high growth rates for
the remainder of fiscal 1995 as new products such as Ensign and Stage3 begin to
produce greater revenue. However, these two new products have taken longer to
rollout than originally planned and the Company competes with certain firms who
have greater resources along with products already in the marketplace. In
addition, the Company is dependent on the client/server market developing at a
rapid rate despite recent reports by industry analysts that implementation of
client/server networks may be more expensive and time-consuming than users had
anticipated, which could potentially slow the growth of the market. Due to these
factors, there can be no assurances that these new products will achieve
significant market acceptance or competitive success and thus contribute to
revenue growth.
5
<PAGE>
BOOLE & BABBAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company currently derives approximately 90% of its licensing revenue from
mainframe-based technology. Plex products, which grew 8% in 1995, enable
customers to handle large groups of computer processors, particularly the new
parallel processing machines recently introduced by IBM. The Company's licensing
growth rates could be materially and adversely impacted if these new parallel
processors do not gain significant market acceptance and customer spending
shifts away from traditional mainframes to technology platforms where the
Company does not have significant product acceptance. Traditional mainframe
products grew 37% principally as a result of built-up demand for mainframes
combined with customer budget years ending in December along with the beginning
of new budget years in January, both of which tended to make funds available for
higher levels of customer purchases, including several larger deals, in the
first half of 1995. Management does not expect the growth rate to be this high
on traditional mainframe products in the future.
MARKETS:
% of Licensing
---------------------- Year-to-Year
1995 1994 % Change
---- ---- --------
Domestic ........................ 31.5% 35.9% 13.6%
International ................... 68.5% 64.1% 38.0%
------ ------ -----
100.0% 100.0% 29.3%
====== ====== =====
Domestic:
Domestic licensing revenues grew 13.6% in 1995, as the field sales force and
telesales group both produced solid growth, particularly from the traditional
mainframe products. For growth to continue in this market, the Company is
dependent on increased productivity from both the field sales force and the
telesales group.
International:
In 1995 the Company's revenues from its international operations, comprised of
foreign subsidiaries and marketing agents, increased 38.0% due to the economic
recovery in Europe and continued growth in the Far East, particularly in Japan.
Without the effect of favorable currency rate changes, international licensing
grew 26.4% in 1995. Since the majority of new license revenue is derived from
international markets, the Company's operations and financial results could be
significantly and adversely affected by international factors such as changes in
currency exchange rates and specific countries' political and economic
circumstances. The Company has implemented an economic hedging program to
attempt to reduce its exposure to currency fluctuations for a portion
6
<PAGE>
BOOLE & BABBAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
of its anticipated intercompany royalty transactions for the next five quarters.
As a result of this strategy, the Company has recognized less benefit from
continued weakness in the U.S. dollar than if no hedging programs were
undertaken.
For growth to continue in both of the above markets, the Company is dependent on
the traditional mainframe products remaining relatively stable with overall
growth resulting from the plex and client/server groups achieving higher growth
rates than shown in the first half of the year. The Company is also dependent on
closing larger-size transactions as have occurred in the first half of this
year.
MAINTENANCE FEES:
Maintenance revenue is generated from services the Company provides including
technical support, product enhancements, system updates and user documentation.
Maintenance revenue also includes the first year of maintenance services which
is included in the initial charge when the Company licenses its software
products under a long-term agreement. Thereafter on each anniversary date of the
license, the customer may elect to renew its maintenance contract with the
Company. Customers may also elect to purchase advance maintenance at the time of
product licensing for maintenance periods beyond the first year.
Maintenance revenue grew 10.7% in 1995 and accounted for 45.6% and 49.5% of
total revenues in 1995 and 1994, respectively, Without the effect of currency
rate changes, maintenance revenue grew 5.8%. This increase is mainly the result
of increased product licensing in the previous year combined with high renewal
rates but reduced by higher discounts granted on multiple-year maintenance
packages purchased by customers.
The Company anticipates that maintenance revenues in fiscal 1995 will continue
to increase due to the higher license revenue growth in 1994, although it will
be negatively impacted by reduced revenue associated with site consolidations,
non-CPU specific pricing and multiple-year maintenance package discounts. In
addition, to produce maintenance revenue increases, the Company must continue to
generate new product licensing revenues and continue to provide high quality
maintenance support and upgrades.
SERVICES AND OTHER:
Revenue derived from computer services, educational services and other comprised
2.3% and 2.1% of total revenues for 1995 and 1994, respectively. The increase of
29.0% is attributable primarily to more international consulting revenue
partially offset by decreased computer service revenue as this service is no
longer actively marketed.
7
<PAGE>
BOOLE & BABBAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COSTS AND EXPENSES:
% of Revenues
------------------ Year-to-Year
1995 1994 % Change
----- ---- --------
Cost of sales ............................. 14.1% 13.7% 24.2%
Product development and support ........... 15.3% 18.8% (2.8%)
Sales and marketing ....................... 49.1% 45.7% 29.2%
General and administrative ................ 10.7% 11.3% 13.2%
----- ----- -----
Total ................................. 89.2% 89.5% 19.7%
===== ===== =====
COST OF SALES:
Cost of sales consists primarily of royalties paid to independent software
authors, amortization of purchased and internally developed software, the cost
of hardware associated with sales of client/server products and costs related to
operating the computer services division. Cost of sales increased by 24.2% in
1995 and represented 14.1% and 13.7% of revenues for 1995 and 1994,
respectively. Without the effect of currency rate changes, the increase would be
17.9%. The increase in 1995 is primarily attributable to increased royalties on
higher third-party revenue in Europe and Japan which was partially offset by
lower royalties owed to one of the third-party vendors. This decrease resulted
from a new contract with that vendor which significantly reduced the royalty
rate on maintenance billings through fiscal 1996. Higher costs related to
increased consulting revenue and software amortization were offset by lower cost
of sales due to decreased hardware sales and computer services revenue. In
general, the relationship of cost of sales to revenue will fluctuate due
primarily to changes in revenue mix, royalty agreements and amortization of
capitalized software.
PRODUCT DEVELOPMENT AND SUPPORT:
Product development and support costs decreased by 2.8% in 1995 and represented
15.3% and 18.8% of revenues for 1995 and 1994, respectively. The decrease in
1995 is primarily attributable to lower personnel costs domestically as certain
replacement headcount positions have not yet been filled and lower outside
consulting costs worldwide which were offset by higher costs related to staff
increases from the Sysnet a.s. acquisition in April 1994. The Company
capitalizes certain development costs in accordance with Statement of Financial
Accounting Standard No. 86 ("FAS 86"). To the extent the Company capitalizes its
product development costs, the effect is to defer such costs to future periods
and match them to the revenue generated by the products. Product development and
support expenses may fluctuate annually depending in part upon the number and
status of internal software development projects.
8
<PAGE>
BOOLE & BABBAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES AND MARKETING:
Sales and marketing expenses increased by 29.2% and represented 49.1% of
revenues in 1995 compared to 45.7% in 1994. Without the effect of currency rate
charges, the increase would be 23.9%. Most of the increase in 1995 is due to
higher personnel and marketing costs and increased commission expense on
increased product licensing. Commission rates were comparable to those in 1994.
North America and Europe had higher personnel costs as sales force headcount was
increased in both channels. 1995 has the additional costs of the Company's
Japanese subsidiary which started sales operations in the third quarter of 1994.
GENERAL AND ADMINISTRATIVE:
General and administrative expenses increased 13.2% in 1995 and represented
10.7% and 11.3% of revenues for 1995 and 1994. Without the effect of currency
rate changes general and administrative expenses would have increased 9.7%. In
1995, increases in personnel related costs and bad debt provision were partially
offset by charges in 1994 related to the transfer of certain client/server
product operations from Mt. Laurel, NJ to San Jose, CA.
INTEREST AND OTHER INCOME, NET:
Interest and other income consists principally of interest income, interest
expense, and currency gain or loss. The increase in 1995 over 1994 is mainly
comprised of additional net interest income as a result of higher average cash
balances, higher market interest rates, increased installment receivables and
$288,000 related to a refund from the Internal Revenue Service received during
the second quarter of 1995.
INCOME TAXES:
The effective tax rate was 31.0% for 1995 and 1994. The Company is currently
evaluating certain tax planning mechanisms that could slightly lower the rate
for the full fiscal year. The Company's effective tax rate differs from the
federal statuary rate due primarily to permanently invested earnings of foreign
subsidiaries being taxed at rates lower than the federal statutory rate.
Management believes future taxable income will be sufficient to realize the tax
benefit of the net deferred tax asset of $7,355,000.
9
<PAGE>
BOOLE & BABBAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The significant sources of cash during 1995 include cash provided by operating
activities of $10,601,000; the exercise of employee stock options of $821,000;
and stock purchases through the Employee Stock Purchase Plan of $425,000. The
significant uses of cash during 1995 include $1,796,000 for purchases of
furniture, equipment and leasehold improvements; $1,504,000 for internally
developed capitalized software; $1,010,000 for payments on capital leases; and
$491,000 for payments on notes payable. Included in cash is a $1,600,000
certificate of deposit pledged as collateral for the lease financing of certain
computer equipment. Management believes cash flows from operations and existing
cash resources will be adequate to meet its working capital requirements for the
foreseeable future.
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 1995
Many of the same explanations and variances from the six month results
discussion also apply to the second quarter results, and therefore, are not
repeated here. A summary is provided as follows:
REVENUES:
Revenue for the three months ended March 31, 1995 increased 16.3% to $37,253,000
compared to $32,023,000 for the same quarter in fiscal 1994.
Revenue mix/growth: % of Revenue
---------------------- Year-to-Year
1995 1994 % Change
------ ------ -----
Product licensing .................. 51.3% 48.7% 22.5%
Maintenance fees ................... 46.7% 49.5% 9.8%
Services and other ................. 2.0% 1.9% 27.5%
------ ------ -----
Total .......................... 100.0% 100.0% 16.3%
====== ====== =====
Licensing mix/growth: % of Licensing
------------------------- Year-to-Year
1995 1994 % Change
------ ------ -----
Domestic ....................... 26.6% 35.3% (7.7%)
International .................. 73.4% 64.7% 39.1%
------ ------ -----
Total ...................... 100.0% 100.0% 22.5%
====== ====== =====
Without the effect of currency rate changes, international licensing growth
would have been 25.2%. The decrease domestically resulted from declines in both
the field and telesales group. The increase internationally resulted from strong
growth in the
10
<PAGE>
BOOLE & BABBAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company's subsidiary operations, particularly Japan, offset slightly by a
decrease in sales through marketing agents. From a product perspective, the
traditional mainframe products grew by 30% while the plex product group declined
11% and the client/server group grew by 55%.
COSTS AND EXPENSES
% of Revenue
----------------- Year-to-Year
1995 1994 % Change
----- ----- -----
Cost of sales ............................. 14.1% 13.3% 23.4%
Product development and support ........... 15.8% 19.2% (4.1)%
Sales and marketing ....................... 49.0% 46.3% 23.1%
General and administrative ................ 10.2% 10.9% 9.1%
----- ----- -----
Total ................................. 89.1% 89.7% 15.6%
===== ===== =====
Cost of sales increase was 23.4% for the quarter compared to 24.2% for six
months primarily due to higher costs of hardware sales more than offset by the
new third party vendor contract effective the second quarter of 1995. This
contract, which covers sales in Europe, results in a lower royalty rate on
maintenance billings for certain third party products. Without the effect of
currency exchange rates, cost of sales would have increased 16.1% for the
quarter.
Product development and support decreased 4.1% for the quarter versus 2.8% for
six months as a result of decreased personnel costs in the United States in the
second quarter. The Company anticpates that costs in this area will increase
during the remainder of fiscal 1995 due to open headcount positions being filled
along with the incremental expenses associated with a new CMOS-based mainframe
added in April 1995.
Sales and marketing increased 23.1% for the quarter and 29.2% for six months and
are a function of increases in product licensing of 22.5% and 29.3% for the
quarter and six months, respectively. Without the effect of currency rate
changes, the increase for the quarter was 17.4%.
General and administrative increased 9.1% for the quarter compared to 13.2% for
six months due to lower increases in personnel cost, bad debt expense and
professional fees in the second quarter.Without the effect of currency rate
changes, the increase for the quarter was 5.3%.
11
<PAGE>
BOOLE & BABBAGE, INC.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Boole & Babbage, Inc. was held on February
16, 1995, for the purpose of electing two people to the Company's Board of
Directors to serve a three-year term expiring on the date of the Company's 1998
annual meeting of stockholders, to approve amendments to the Company's 1986
stock option plans to increase the aggregate number of shares available for
issuance under the plans and to ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the next fiscal year. Proxies for the meeting
were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934
and there was no solicitation in opposition to management's solicitations.
Terry R. McGowan was elected to the board of directors for a three-year term
with 6,088,809 votes "FOR" and 190,476 votes "WITHHELD."
Carl H. Reynolds was elected to the board of directors for a three-year term
with 6,084,438 votes "FOR" and 194,847 "WITHHELD."
The amendments to the Company's 1986 stock option plans to increase the
aggregate number of shares available for issuance under the plans was approved
by the following vote:
Broker
"FOR" "AGAINST" "ABSTAIN" Nonvotes
----- ------- ------- --------
3,719,242 1,457,804 32,417 1,069,822
The selection of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending September 30, 1995 was ratified by the following vote:
"FOR" "AGAINST" "ABSTAIN"
----- --------- ---------
6,262,746 12,691 3,848
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K - None
12
<PAGE>
BOOLE & BABBAGE, INC. 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.
BOOLE & BABBAGE, INC.
May 10, 1995 \Paul E. Newton\
--------------------------
Paul E. Newton
President and Director
(Principal Executive Officer)
May 10, 1995 \Arthur F. Knapp, Jr.\
- - - - ------------ --------------------------
Arthur F. Knapp, Jr.
Senior Vice President
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
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BOOLE & BABBAGE, INC.
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