FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
X Quarterly report pursuant to section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended JUNE 30, 1995.
Transition report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the transition period from to
--------- ---------
Commission file number: 0-14025
SOFTWARE PUBLISHING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2707010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3165 KIFER ROAD
SANTA CLARA, CALIFORNIA 95051
(Address of principal executive offices, including zip code)
(408) 986-8000
(Registrant's telephone number, including area code)
------------------------------------
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
--- ---
As of July 18, 1995 there were 12,523,525 shares of the Registrant's Common
Stock outstanding.
<PAGE>
SOFTWARE PUBLISHING CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page no.
--------
Item 1. Financial Statements:
Consolidated Balance Sheets -
June 30, 1995 and September 30, 1994 3
Consolidated Statements of Operations -
Three and nine months ended June 30, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Nine months ended June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1.
SOFTWARE PUBLISHING CORPORATION
CONSOLIDATED BALANCE SHEETS
(000's omitted, except share data; unaudited)
<CAPTION>
ASSETS June 30, 1995 Sept. 30, 1994
-------------- --------------
<S> <C> <C>
Current assets:
Cash & short term investments, including restricted cash of $4,800
at June 30, 1995 $ 36,847 $ 47,559
Accounts receivable, net of allowance
for doubtful accounts of $788 and $1,009 8,429 12,770
Inventories 1,362 1,286
Prepaid expenses and other current assets 1,354 1,367
--------- ----------
Total current assets 47,992 62,982
Property and equipment, net 2,370 3,796
Other assets 1,417 841
--------- ----------
Total assets $ 51,779 $ 67,619
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 5,730 $ 8,692
Income taxes payable 3,018 2,013
Other accrued liabilities 16,448 15,330
--------- ----------
Total current liabilities 25,196 26,035
Accrued lease obligations -- 11,399
Acquisition related liability 1,418 --
--------- ----------
Total liabilities 26,614 37,434
--------- ----------
Stockholders' equity:
Common stock
Authorized: 30,000,000 shares, $0.001 par value
Issued and outstanding: 12,481,640 and 12,441,042 shares, respectively 13 13
Capital in excess of par value 19,935 19,664
Net unrealized loss on securities (356) --
Retained earnings 5,573 10,508
--------- ----------
Total stockholders' equity 25,165 30,185
--------- ----------
Total liabilities and stockholders' equity $ 51,779 $ 67,619
========= ==========
<FN>
The accompanying notes are an integral part of these financial statement.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
SOFTWARE PUBLISHING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted, except per share data; unaudited)
<CAPTION>
Three months ended June 30, Nine months ended June 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 4,406 $ 9,860 $ 25,812 $ 47,031
Cost of revenues 1,213 2,054 5,654 9,266
-------- -------- -------- --------
Gross profit 3,193 7,806 20,158 37,765
-------- -------- -------- --------
Operating expenses:
Marketing and sales 5,385 6,388 16,840 27,828
Research and development 2,808 4,185 8,462 14,179
General and administrative 1,784 1,627 4,423 5,513
Restructuring and lease obligations (6,000) -- (6,000) 7,843
In process research and development -- -- 4,756 --
-------- -------- -------- --------
Total operating expenses 3,977 12,200 28,481 55,363
-------- -------- -------- --------
Loss from operations (784) (4,394) (8,323) (17,598)
Other income, net of other expenses 450 2,894 1,659 7,703
-------- -------- -------- --------
Loss before income taxes (334) (1,500) (6,664) (9,895)
Income tax provision (benefit) 26 (1,016) (1,729) (1,016)
-------- -------- -------- --------
Net loss (360) (484) (4,935) (8,879)
Dividends on redeemable preferred stock -- -- -- (29)
-------- -------- -------- --------
Net loss available to common stockholders $ (360) $ (484) $ (4,935) $ (8,908)
======== ======== ======== ========
Net loss per common share $ (0.03) $ (0.04) $ (0.40) $ (0.72)
======== ======== ======== ========
Shares used in computing net loss per share 12,482 12,392 12,482 12,372
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
SOFTWARE PUBLISHING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted, unaudited)
<CAPTION>
Nine months ended June 30,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,935) $ (8,879)
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 1,946 4,038
Non-cash restructuring charges (6,000) 1,623
In-process research and development 4,756 --
Net change in operating assets and liabilities:
Accounts receivable 4,341 10,186
Other current assets (63) 925
Trade accounts payable and other accrued liabilities (6,167) (15,800)
Income taxes receivable and payable 1,005 6,703
Accrued restructuring and lease obligations (1,798) (1,564)
Acquisitions payable (2,000) --
-------- --------
Net cash used by operating activities (8,915) (2,768)
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (1,241) (1,000)
Increase in other non-current assets (471) (723)
Decrease in short-term investments 9,144 22,915
-------- --------
Net cash provided by investing activities 7,432 21,192
-------- --------
Cash flows from financing activities:
Issuance of capital stock, net of repurchases 271 509
Redemption of preferred stock and payment of dividends -- (2,700)
-------- --------
Net cash provided (used) by financing activities 271 (2,191)
-------- --------
Net increase (decrease) in cash and cash equivalents (1,212) 16,233
Cash and cash equivalents:
Beginning balance 18,320 2,039
-------- --------
Ending balance $ 17,108 $ 18,272
======== ========
Supplemental disclosure:
Income tax refunds received during the period, net of payments $ (2,799) $ (7,732)
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
5
<PAGE>
SOFTWARE PUBLISHING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary to fairly state the Company's and its
subsidiaries' consolidated financial position, the results of their
operations, and their cash flows for the periods presented. This Quarterly
Report on Form 10-Q should be read in conjunction with the Company's
audited financial statements for the year ended September 30, 1994 included
in the 1994 Annual Report to Stockholders. The consolidated results of
operations for the nine month period ended June 30, 1995 are not
necessarily indicative of results to be expected for the entire fiscal year
ending September 30, 1995.
2. Investment Securities
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (FAS 115). The Company adopted the provisions of FAS
115 effective October 1, 1994. Under the provisions of FAS 115, the Company
has classified its investments in debt securities as "available-for-sale."
Such investments are now recorded at fair value, with unrealized gains and
losses reported as a separate component of shareholders' equity. Interest
income is still recorded using an effective interest rate, with the
associated discount or premium amortized to interest income.
The cost of securities sold is based on the specific identification method.
In accordance with the provisions of FAS 115, prior period financial
statements have not been restated to reflect the change in accounting
principle. The cumulative effect as of December 31, 1994 of adopting FAS
115 was to decrease the opening balance of shareholders' equity by $0.3
million to reflect the net unrealized loss on investments classified as
available-for-sale and previously recorded at cost.
Cash and short term investments comprised (in thousands):
June 30, 1995 Sept. 30, 1994
------------- --------------
Cash and cash equivalents $17,108 $18,320
Short term investments 19,739 29,239
------- -------
$36,847 $47,559
======= =======
As part of the terms of the purchase agreement for Digital Paper, Inc.,
described below, the Company agreed to place $4.8 million in escrow as
security for future payments to the former shareholders which will be paid
out over a two year period beginning in April 1996.
3. Inventories are primarily finished goods and are stated at the lower of
first-in, first-out cost or market.
4. Other accrued liabilities comprised (in thousands):
June 30, 1995 Sept. 30, 1994
------------- --------------
Reserve for returns and exchanges $ 2,095 $ 4,563
Current portion of lease obligations 6,378 3,331
Rebates and channel marketing programs 269 2,029
Accrued compensation and benefits 1,568 1,176
Restructuring accruals 568 860
Current portion of acquisition
related liability -- --
Other accrued liabilities 5,570 3,371
-------- --------
$ 16,448 $ 15,330
======== ========
6
<PAGE>
5. The Company acquired Digital Paper, Inc., a developer of visual
communications software technology, during the second quarter of fiscal
1995. The privately held company was purchased for total consideration of
approximately $5.0 million. The Company may pay up to an additional $1.5
million in cash upon the achievement of certain unit, revenue and technical
milestones over the next three years. The assets acquired consisted
primarily of in-process visual communication software that the Company
intends to incorporate into its products. As a result of this acquisition,
the Company took an one time charge of $4.8 million in the second quarter
of fiscal 1995, for the portion of the transaction related to in-process
research and development. In the third quarter of fiscal 1995, the Company
paid the first $2.0 million installment of the purchase price for Digital
Paper, Inc.
6. In the third quarter of fiscal 1995 the Company executed a memorandum of
understanding to terminate the lease of its headquarters facility in Santa
Clara, California as of December 31, 1995. As a result, the Company
reversed $6.0 million of previously reserved operating expense charges
related to restructuring activities in fiscal 1993 and 1994. The lease
agreement was finalized in the fourth fiscal quarter of 1995 and the
Company paid approximately $3.0 million in previously accrued termination
expenses, fees, and associated costs in connection with the lease
termination.
7. Net income per common share has been computed using the weighted average
number of common and common equivalent shares (when dilutive) outstanding
during each period. The difference between primary and fully diluted net
income per common share is not significant.
7
<PAGE>
SOFTWARE PUBLISHING CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
North America and international net revenues for the periods ended June 30, 1995
and 1994, and the percentage of change of net revenues were as follows:
Three months Nine months
(dollars in millions) ended June 30, ended June 30,
-------------- Percent -------------- Percent
1995 1994 Change 1995 1994 Change
---- ---- ------ ---- ---- ------
North America $ 3.2 $ 6.9 (54)% $16.8 $31.0 (45)%
International 1.2 3.0 (60)% 9.0 16.0 (44)%
----- ----- ----- -----
Total net revenues $ 4.4 $ 9.9 (55)% $25.8 $47.0 (45)%
===== ===== ===== =====
Net revenues in the third quarter of fiscal 1995 decreased by 55% compared
to the third quarter of fiscal 1994 and net revenues for the first nine months
of fiscal 1995 decreased by 45% compared to the first nine months of 1994. The
decline in net revenues in the third quarter and first nine months of fiscal
1995 resulted primarily from decreased sales of Harvard Graphics for Windows and
the continuing decline in the sales of Harvard Graphics DOS. This decrease is
also due to reductions in inventory levels of older version products held by the
Company's distributors in anticipation of fiscal fourth quarter releases of
upgraded versions of Harvard Graphics, Harvard Spotlight, and Harvard ChartXL
and purchasing delays resulting from the anticipated shipment of Microsoft
Windows 95 in the fourth quarter of fiscal 1995.
Harvard Graphics Version 3.0 for Windows, which began shipping in July
1994, was at the peak of its version upgrade life cycle during the fourth
quarter of fiscal 1994 and has experienced declining revenues each quarter of
fiscal 1995. The Company does not expect any significant increase in its Harvard
Graphics net revenues until the Company is able to introduce a Harvard Graphics
version based on Microsoft Windows 95, which is now scheduled for release in the
Company's fourth quarter of fiscal 1995. The continuing significant decline in
sales of DOS products, including Harvard Graphics DOS and Professional Write
DOS, contributed as well to this decline in net revenues, as the Company
continues to experience an overall ongoing decline in the DOS market.
Additionally, the Company's revenue base has been reduced as a result of the
sale of its Superbase product line to Computer Concepts Corporation in June
1994. Also contributing to these declines were the continuing effects of intense
competition worldwide, particularly in the Windows market, and a soft economy in
Europe.
Net revenues in the third quarter of fiscal 1995 included sales from the
Company's four most recently released products: Harvard Spotlight released in
June 1994, Harvard ChartXL released in September 1994, OnFile released in
December 1994, and Harvard Montage released in March 1995. These products
accounted for an aggregate of approximately 3.9% of the net revenues in the
third quarter of fiscal 1995, down from approximately 12% in the second quarter
of fiscal 1995. Year to date at June 30, 1995, these four products contributed
$2.3 million or 8.8% of total revenues for fiscal 1995. Two of these new
products, Harvard Spotlight and Harvard ChartXL, are nearing the end of their
version life cycle and contributed to the decline in new product revenues from
the second to the third quarter of fiscal 1995.
The Harvard Graphics series of presentation graphics products represented
83% of total net revenues in the third quarter of fiscal 1995 compared with 79%
in the third quarter of fiscal 1994, and 82% of total revenues in the first nine
months of fiscal 1995 compared to 85% in the first nine months of 1994. Net
revenues from sales of all products on the Windows platform in the third quarter
of fiscal 1995 accounted for 80% of total net revenues compared to 62% in the
third quarter of fiscal 1994; and 82% of total net revenues in the first nine
months of fiscal 1995 as compared to 69% in the first nine months of fiscal
1994.
Cost of revenues was $1.2 million or 28% of net revenues in the third
quarter of fiscal 1995 as compared to $2.1 million or 21% of net revenues in the
third quarter of fiscal 1994, and $5.7 million or 22% of net revenues in the
first
8
<PAGE>
nine months of fiscal 1995 as compared to $9.3 million or 20% of net revenues in
the first nine months of fiscal 1994. Cost of revenues in the third quarter and
first nine months of fiscal 1995 decreased in absolute dollars compared to the
comparable periods in fiscal 1994 primarily because of reduced sales and lower
manufacturing overhead expenses which were partially offset, in the case of the
nine months periods, by increased charges for obsolete inventory principally in
the international operations and overall lower average selling prices. As a
percentage of sales, the cost of sales in both the three and nine month periods
has increased primarily because fixed overhead costs have decreased at a slower
rate than the decrease in sales revenues. Since April 1994, the Company has
experienced a positive impact of lower overhead and employee-related costs
resulting from a reorganization and reduction in work force, but these savings
have been more than offset by the unfavorable impact of reduced revenues.
The Company's gross margins and operating income may be affected in
particular periods by the timing of product introductions and other promotional
pricing and rebate offers, as well as return privileges and marketing promotions
in connection with new product introductions and upgrades. These promotions may
have a negative influence on average selling prices and gross margins. Gross
margins have been, and will continue to be, adversely affected by competitive
pricing strategies in the industry as a whole, including competitive upgrade
pricing and alternative licensing arrangements.
The Company believes that its revenue and results of operations have been
adversely affected by the delay in the introduction of Microsoft Windows 95
which is now scheduled for release in the Company's fourth quarter of fiscal
1995. This postponement in turn has delayed the upgrade cycle of the Company's
products. Although revenue opportunities have been delayed due to the
postponement of Microsoft Windows 95, the Company has attempted to somewhat
offset this adverse trend with alternative marketing programs in fiscal 1995.
Since the Company's net revenues for the current version of Harvard Graphics for
Windows have declined in the first nine months of fiscal 1995, in the second
quarter of fiscal 1995, the Company introduced alternative marketing programs in
an effort to sustain demand for this product.
The Company believes that end users are continuing to migrate from the DOS
to the Windows platform and expects increased competition, including price
competition, in both the DOS and Windows markets in the future. Some of the
Company's competitors have introduced suites of products which include products
that directly compete with the Company's products which are bundled with other
office software programs by the same or multiple competitors, and are sold at an
all-inclusive price. The Company believes these offerings of product suites have
materially and adversely affected the Company's net revenues, and will continue
to adversely affect the sales of Harvard Graphics products in the future. The
Company does not currently offer a suite of products, but offers products that
complement competitive suite products. In order for the Company to increase its
revenues, it believes it is necessary to introduce new marketing strategies and
continue to develop and introduce new technologies and products through
strategic alliances, acquisitions or internal development. Any delay in these
planned strategies, difficulties encountered in introducing new products or
marketing programs, or failure of the Company's products to compete successfully
with products offered by other vendors could materially and adversely affect net
revenues and profitability.
The Company believes that its revenues and the results of operations for
the current quarter and for fiscal year 1995 have been and will continue to be
adversely affected by delays in the introduction of Microsoft Window 95,
increased price competition, market uncertainties, offerings of product suites
by competitors, and a decline in the DOS market. A substantial portion of the
Company's revenues in each quarter generally results from shipments during the
last month of that quarter, and principally for that reason, the Company's
revenues are subject to significant quarterly fluctuations. In addition, the
Company establishes its targeted expenditure levels based on expected revenues.
If anticipated orders and shipments in any quarter do not occur when expected,
expenditure levels could be disproportionately high and the Company's operating
results for that quarter could be adversely affected. In addition, the Company's
operating results could be materially and adversely affected by other factors,
such as delays in new product introductions, the mix of product sales or
distribution channel sales, and customer choices regarding operating systems.
Total operating expenses in absolute dollars in the third quarter of fiscal
1995 decreased by $8.2 million as compared to the third quarter of fiscal 1994.
Total operating expenses in absolute dollars in the first nine months of fiscal
1995 decreased by $26.9 million as compared to the first nine months of fiscal
1994. Operating expenses in the third quarter of fiscal 1995 included the
reversal of prior period charges for leases and restructuring of $6.0 million,
and operating expenses in the second quarter of fiscal 1995 included a one-time
$4.8 million in-process research and
9
<PAGE>
development charge related to the acquisition of Digital Paper, Inc. as
described below. Operating expenses in the first fiscal quarter of 1995 included
a reversal of $0.9 million which resulted from the resolution of an operational
legal dispute. Operating expenses in the second quarter of fiscal 1994 included
a $7.8 million charge to restructuring. Excluding the above non-recurring items,
operating expenses decreased in the third quarter of fiscal 1995 by $2.2 million
or 18% as compared to the third quarter of fiscal 1994; and, excluding the above
non-recurring items, operating expenses decreased in the first nine months of
fiscal 1995 by $17 million or 36% as compared to the first nine months of fiscal
1994. These decreases were principally attributable to reductions in personnel
and facilities expenses, as well as improved operating expense management. The
Company expects to continue to aggressively manage its overall cost structure in
the future, although there can be no assurance that it will succeed in costs
reduction efforts.
Marketing and sales expenses were $5.4 million or 122% of net revenues in
the third quarter of fiscal 1995 as compared to $6.4 million or 65% of net
revenues in the third quarter of fiscal 1994; and $16.8 million or 65% of net
revenues in the first nine months of fiscal 1995 as compared to $27.8 million or
59% in the first nine months of fiscal 1994. The decrease in absolute dollars is
the result of reduced expenses for advertising and promotions, as well as
reduced employee related expenses because of restructuring and related
reductions in work force which included the closure of several sales offices
both in North America and various international locations.
In the third quarter of fiscal 1995 the Company entered into a joint market
research agreement with the Visual Systems Division of 3M Company. The purpose
of this joint effort is to explore development of software designed to enhance
the process of planning and conducting business meetings and disseminating
information.
Research and development expenses were $2.8 million or 64% of net revenues
in the third quarter of fiscal 1995 as compared to $4.2 million or 42% of net
revenues in the third quarter of fiscal 1994; and $8.5 million or 33% of net
revenues in the first nine months of fiscal 1995 as compared to $14.2 million or
30% in the first nine months of fiscal 1994. The Company believes that it is
necessary to continue to invest in research and development to remain
competitive. However, as a result of the restructuring actions taken by the
Company in the fourth quarter of fiscal 1993 and the second quarter of fiscal
1994, internal research and development expenses are expected to be lower in
absolute dollars in fiscal 1995 than in fiscal 1994. As in the second quarter of
fiscal 1995 with the acquisition of Digital Paper, Inc., the Company intends to
continue to acquire externally developed technology, explore strategic alliances
and other methods of acquiring technology, as well as continuing to invest in
internal development projects. Because of the inherent uncertainties associated
with software development projects, there can be no assurance that the Company's
research and development efforts will result in successful product introductions
or increased revenues.
General and administrative expenses were $1.8 million or 41% of net
revenues in the third quarter of fiscal 1995 as compared to $1.6 million or 17%
of net revenues in the third quarter of fiscal 1994; and $4.4 million or 17% of
net revenues in the first nine months of fiscal 1995 as compared to $5.5 million
or 12% in the first nine months of fiscal 1994. General and administrative
expenses in the first quarter of fiscal 1995 included a $0.9 million reversal of
reserves resulting from the resolution of an operational legal dispute. The
decrease in absolute dollars in the year to date expenses for fiscal 1995 as
compared to fiscal 1994, is attributable to reduced employee-related expenses
because of restructuring and related reductions in work force undertaken in the
second quarter of fiscal 1994.
In the third quarter of fiscal 1995 the Company signed a memorandum of
understanding to terminate the lease of its headquarters facility in Santa
Clara, California as of December 31, 1995. As a result, the Company reversed
$6.0 million of previously reserved operating expense charges related to
restructuring activities in fiscal 1993 and 1994. The lease agreement was
finalized in the fourth fiscal quarter of 1995 and the Company paid
approximately $3.0 million in previously accrued termination expenses, fees, and
associated costs in connection with the lease termination.
In the second quarter of fiscal 1995, the Company acquired Digital Paper,
Inc., a developer of visual communications software technology. The privately
held company was purchased for a total consideration of approximately $5.0
million. The Company may pay up to an additional $1.5 million in cash upon the
achievement of certain unit, revenue and technical milestones over the next
three years. As a result of this acquisition, the Company took an one time
charge of $4.8 million in the second quarter of fiscal 1995 for the portion of
the transaction related to in-process research and development. In the third
quarter of fiscal 1995 the Company paid the first $2.0 million installment of
the purchase price for Digital Paper, Inc..
10
<PAGE>
Other income, net of other expenses, in the third quarter of fiscal 1995
was $0.5 million as compared to $2.9 million in the third quarter of fiscal
1994; and $1.7 million in the first nine months of fiscal 1995 as compared to
$7.7 million in the first nine months of fiscal 1994. Other income in the second
and third quarters of fiscal 1994 included an arbitration award of $2.6 million,
a gain of $3.4 million realized on the sale of an investment, and $0.5 million
due to settlement of legal proceedings. Exclusive of these items, other income
increased slightly in the first nine months of fiscal 1995 as compared to the
first nine months of fiscal 1994 because of lower foreign exchange losses and
higher interest income due to higher interest rates offset by a lower cash
balance.
The Company booked a tax benefit of $1.8 million in the second quarter of
fiscal 1995 due to the tax refund received during that quarter. During the third
quarter of fiscal 1994 the Company made an adjustment to its annual projected
income tax rate to reflect a benefit rate of 10% on a year to date basis, based
on the resolution of certain tax uncertainties. This adjustment resulted in a
benefit to the income statement of $1.0 million.
LIQUIDITY AND CAPITAL RESOURCES
For the first nine months of fiscal 1995, cash and short term investments
decreased $10.8 million from $47.6 million at fiscal 1994 year end to $36.8
million at June 30, 1995. This decrease primarily resulted from: cash used for
operating activities of $8.9 million, which includes a $2.0 million cash payment
towards the purchase price of Digital Paper, Inc., which was more than offset by
a tax refund of $2.8 million; the purchase of capital additions of $1.2 million;
and increases in non-current assets of $.7 million. For the nine month period
ended June 30, 1995, working capital decreased $14.1 million from $36.9 million
at September 30, 1994, to $22.8 million at June 30, 1995. This decrease in
working capital resulted primarily from a decrease in cash and short term
investments of $10.8 million and a decrease in accounts receivable of $4.3
million and a decrease in current liabilities of $0.9 million.
Management believes the existing cash and short term investments, cash
generated from operations and the Company's potential borrowing ability will be
sufficient to meet its currently anticipated liquidity and capital expenditure
requirements at least through fiscal 1996.
In fiscal 1994, the Company invoiced approximately 27% of its total sales
in foreign currencies, and expects this practice to continue at about the same
rate in fiscal 1995. The Company's exposure for foreign currency exchange gains
and losses has been partially mitigated as the Company incurred operating
expenses in most of the currencies in which it invoiced customers and the
Company has hedged certain specific contractual obligations in foreign currency.
The Company's foreign exchange gains and losses will fluctuate from period to
period depending on the movement in exchange rates.
11
<PAGE>
SOFTWARE PUBLISHING CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, Fred Gibbons and Irfan Salim were named as defendants
in two class action lawsuits initially filed in the United States
District Court for the Northern District of California in April and May
1993. As subsequently amended and consolidated, the complaint alleges
securities law violations in connection with disclosures by the
Company. The class period alleged in the amended complaint was October
1, 1992 to April 2, 1993. The Company and the other defendants agreed
to a settlement, which has been approved by court order. Pursuant to
such settlement, the Company and the other defendants have been
released from any further liabilities related to such law suit.
The Company is also a defendant in certain other litigation.
Management is of the opinion that the ultimate outcome of this
litigation will not have a material adverse affect on the future
operations or financial condition of the Company.
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits. The following exhibit is filed as part of or
incorporated by reference into, this report:
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the fiscal quarter
ended June 30, 1995.
12
<PAGE>
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.
Date: August 14, 1995 SOFTWARE PUBLISHING CORPORATION
(Registrant)
/s/ MIRIAM K. FRAZER
-------------------------------
Miriam K. Frazer,
Vice President Finance,
Chief Financial Officer
(Principal Financial and Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> In thousands (except EPS)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 17,108
<SECURITIES> 19,739
<RECEIVABLES> 9,217
<ALLOWANCES> 788
<INVENTORY> 1,362
<CURRENT-ASSETS> 1,354
<PP&E> 2,370
<DEPRECIATION> 0
<TOTAL-ASSETS> 51,779
<CURRENT-LIABILITIES> 25,196
<BONDS> 0
<COMMON> 13
0
0
<OTHER-SE> 25,152
<TOTAL-LIABILITY-AND-EQUITY> 51,779
<SALES> 4,406
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</TABLE>
