<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended June 30, 1997
[ ] 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 0-19395
SYBASE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 94-2951005
-------- ----------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
6475 Christie Avenue, Emeryville, CA 94608
------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:
(510) 922-3500
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 [ ]
On July 31, 1997, 78,878,060 shares of the Registrant's Common Stock, $.001 par
value, were outstanding.
<PAGE> 2
AMENDED FILING OF FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1997
RESTATEMENT OF FINANCIAL STATEMENTS AND CHANGES TO CERTAIN INFORMATION
In January 1998, the Company discovered that certain accounting practices in its
Japanese subsidiary were not in accordance with U.S. generally accepted
accounting principles and Company policies. As a result of these irregularities,
the Company has restated revenues and the results of operations in its interim
financial statements for the three and six months ended June 30, 1997 (see Note
1 to the Unaudited Condensed Consolidated Financial Statements).
Net loss per share for the three and six months ended June 30, 1997 and 1996
have also been restated to reflect the application of Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
Unless otherwise stated, information in the originally filed Form 10-Q is
presented as of the original filing date, and has not been updated in this
amended filing.
Quarterly financial statement information and related disclosures included in
this amended filing reflect, where appropriate, changes as a result of the
restatements.
2
<PAGE> 3
SYBASE, INC.
FORM 10-Q/A
QUARTER ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I: Financial Information (Unaudited and Restated - see Note 1)
Item 1: Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1997 4
and December 31, 1996.
Condensed Consolidated Statements of Operations for the 5
three months and six months ended June 30, 1997 and
June 30, 1996.
Condensed Consolidated Statements of Cash Flows 6
for the six months ended June 30, 1997 and
June 30, 1996.
Notes to Condensed Consolidated Financial Statements. 7
Item 2: Management's Discussion and Analysis of 9
Financial Condition and Results of Operations.
Part II: Other Information
Item 4: Submission of Matters to a Vote of 22
Security Holders.
Item 6: Exhibits and Reports on Form 8-K. 22
Signatures 23
</TABLE>
3
<PAGE> 4
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SYBASE, INC.
--------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands, except share data) 1997 1996
--------- ---------
(Restated)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 183,671 $ 156,796
Short-term cash investments 15,011 17,726
--------- ---------
Total cash and short-term cash investments 198,682 174,522
Accounts receivable, net 211,851 239,466
Deferred income taxes 13,727 13,729
Other current assets 23,221 17,551
--------- ---------
Total current assets 447,481 445,268
Property, equipment and improvements, net 172,544 191,328
Deferred income taxes 27,406 27,406
Capitalized software, net 38,136 19,974
Other assets 65,350 67,915
--------- ---------
TOTAL ASSETS $ 750,917 $ 751,891
========= =========
Current liabilities:
Accounts payable $ 16,049 $ 21,563
Accrued compensation and related expenses 41,417 47,829
Accrued income taxes 26,297 26,952
Other accrued liabilities 78,812 89,386
Deferred revenue 162,705 166,482
Other current liabilities 31,704 --
--------- ---------
Total current liabilities 356,984 352,212
Other liabilities 3,350 2,871
Stockholders' equity:
Preferred stock, $0.001 par value, 8,000,000
shares authorized; none issued or outstanding -- --
Common stock, $0.001 par value, 200,000,000
shares authorized; 78,774,902 shares issued
and outstanding (1996-72,608,794 shares) 79 77
Additional paid-in capital 383,051 359,161
Retained earnings 22,129 46,081
Accumulated translation adjustments (14,676) (8,511)
--------- ---------
Total stockholders' equity 390,583 396,808
--------- ---------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 750,917 $ 751,891
========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
SYBASE, INC.
--------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
(In thousands, except per share data) 1997 1996 1997 1996
--------- --------- --------- ---------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues:
License fees $ 110,591 $ 150,454 $ 237,983 $ 298,399
Services 104,890 99,433 209,699 195,152
--------- --------- --------- ---------
Total revenues 215,481 249,887 447,682 493,551
Costs and expenses:
Cost of license fees 6,148 7,585 14,206 14,702
Cost of services 61,673 62,846 123,551 118,985
Sales and marketing 116,674 137,197 231,271 267,490
Product development and engineering 33,707 46,085 69,007 89,176
General and administrative 14,443 19,735 31,806 38,461
--------- --------- --------- ---------
Total costs and expenses 232,645 273,448 469,841 528,814
--------- --------- --------- ---------
Operating loss (17,164) (23,561) (22,159) (35,263)
Other income and expense, net 1,729 2,197 2,735 4,691
--------- --------- --------- ---------
Loss before income taxes (15,435) (21,364) (19,424) (30,572)
Provision for income taxes 2,357 3,200 4,528 898
--------- --------- --------- ---------
Net loss $ (17,792) $ (24,564) $ (23,952) $ (31,470)
========= ========= ========= =========
Net loss per share - basic and diluted $ (0.23) $ (0.33) $ (0.31) $ (0.42)
========= ========= ========= =========
Shares used in calculation of per
share amounts 78,659 74,927 78,030 74,243
========= ========= ========= =========
</TABLE>
See accompanying notes.
5
<PAGE> 6
SYBASE, INC.
--------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Six Months Ended June 30,
--------------------------
1997 1996
--------- ---------
(Restated)
<S> <C> <C>
Cash and cash equivalents, beginning of period $ 156,796 $ 180,877
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (23,952) $ (31,470)
Adjustments to reconcile net loss to net cash provided (used) by operating
activities:
Depreciation and amortization 52,984 47,493
Changes in assets and liabilities:
Accounts receivable 27,015 (21,286)
Other current assets (5,574) (169)
Accounts payable (5,514) (5,865)
Accrued compensation and related expenses (6,412) 3,532
Other accrued liabilities (11,248) (10,015)
Deferred revenues (4,739) 15,137
Accrued income taxes (655) 1,305
Other 1,108 1,057
--------- ---------
Net cash provided (used) by operating activities 23,013 (281)
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of available-for-sale cash investments (16,517) (48,280)
Maturities of available-for-sale cash investments 11,054 52,725
Sales of available-for-sale cash investments 8,200 2,495
Business combinations, net of cash acquired (3,097) (873)
Purchases of property, equipment and improvements (23,125) (45,023)
Capitalized software development costs (9,674) (8,100)
Increase in other assets (151) (3,654)
--------- ---------
Net cash used for investing activities (33,310) (50,710)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Increase in other current liabilities 31,704 --
Net proceeds from issuance of common stock 11,892 21,861
--------- ---------
Net cash provided by financing activities 43,596 21,861
Effect of exchange rate changes on cash (6,424) (2,363)
--------- ---------
Net increase (decrease) in cash and cash equivalents 26,875 (31,493)
--------- ---------
Cash and cash equivalents, end of period 183,671 149,384
Cash investments, end of period 15,011 35,904
--------- ---------
Total cash, cash equivalents, and cash investments, end of period $ 198,682 $ 185,288
========= =========
Supplemental disclosures:
Interest paid $ 419 $ 0
========= =========
Income taxes paid $ 5,554 $ 6,439
========= =========
</TABLE>
See accompanying notes.
6
<PAGE> 7
SYBASE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Subsequent to the filing of its Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 with the Securities and Exchange Commission,
the Company discovered that certain accounting practices in its Japanese
subsidiary were not in accordance with U.S. generally accepted
accounting principles and Company policies. These irregularities were
primarily the result of a lack of compliance with, or circumvention of,
the Company's established procedures and controls, and were committed by
a small group of individuals. Additionally, the Company became aware of
certain undisclosed agreements with a number of resellers. As a result
of these undisclosed agreements, which were entered into in 1997,
significant concessions or allowances have, or could reduce revenue that
was previously reported as earned. In addition, the Company has
discovered a number of transactions that were not recorded in the
Japanese subsidiary's financial statements. In January 1998 the Company
performed certain procedures to determine the extent of the policy
violations, undisclosed agreements and unrecorded transactions. The
results of these procedures, as well as other relevant information now
known or disclosed, has enabled the Company to conclude that certain
transactions were improperly reported as revenue for all interim periods
in the year ended December 31, 1997.
As a result of the foregoing, consolidated revenues and the results of
operations for the three and six months ended June 30, 1997 have been
restated as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1997 Six Months Ended June 30, 1997
(As reported) (Restated) (As reported) (Restated)
<S> <C> <C> <C> <C>
Net revenues
License fees $ 128,870 $ 110,591 $ 264,043 $ 237,983
Services 108,768 104,890 215,497 209,699
Total revenues 237,638 215,481 479,540 447,682
Operating income (loss) 4,993 (17,164) 9,699 (22,159)
Net income (loss) 4,376 (17,792) 7,917 (23,952)
Net income (loss) per share $ 0.06 $ (0.23) $ 0.10 $ (0.31)
June 30, 1997
Retained earnings $ 53,998 $ 22,129
Other current liabilities 0 31,704
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Other current liabilities in the condensed consolidated balance sheet at
June 30, 1997 represent amounts accrued related to actual and potential
liabilities to Japanese financial institutions resulting from the
irregularities discussed above.
2. The accompanying unaudited condensed consolidated financial statements
include the accounts of Sybase and its subsidiaries, and, in the opinion
of management, reflect all adjustments (consisting only of normal
recurring adjustments) necessary to fairly state the Company's
7
<PAGE> 8
consolidated financial position, results of operations and cash flows
for the periods presented. The condensed consolidated balance sheet as
of December 31, 1996 has been prepared from the audited consolidated
financial statements of the Company.
This report on Form 10-Q/A should be read in conjunction with the
Company's audited consolidated financial statements for the year ended
December 31, 1996 and notes included therein. The results of operations
for the three and six months ended June 30, 1997 are not necessarily
indicative of results for the entire fiscal year ending December 31,
1997.
3. On February 21, 1997 the Company acquired Purchase Net Inc., a developer
of application development software. The Company issued 750,000 shares
of its common stock with a fair market value of approximately
$12,000,000 for all of the outstanding shares of common stock of
Purchase Net Inc. The total purchase cost was $12,763,000, including
direct cost and expenses related to the acquisition, of this amount
$12,693,000 was allocated to purchased software and included in
capitalized software in the condensed consolidated balance sheet. The
transaction was accounted for as a purchase. The results of operations
of Purchase Net Inc., which have not been material in relation to those
of the Company, have been included in the consolidated results of
operations for periods subsequent to the acquisition date.
4. In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (Statement 128). Statement 128
replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share
is very similar to the previously reported fully diluted earnings per
share and includes the dilutive effect of the assumed exercise of stock
options using the treasury stock method. Shares used in computing basic
and diluted net loss per share are based on the weighted average shares
outstanding in each period. The effect of outstanding stock options is
excluded from the calculation of diluted loss per share as their
inclusion would be antidilutive. Net loss per share amounts for all
periods have been presented and, where appropriate, restated to conform
to the Statement 128 requirements.
8
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In January 1998, the Company discovered that certain accounting practices in its
Japanese subsidiary were not in accordance with U.S. generally accepted
accounting principles and Company policies. As a result of these irregularities,
the Company has restated its interim financial statements for the three and six
months ended June 30, 1997. Accordingly, certain information included herein
reflects changes as a result of restating the financial statements.
- ------------------------
RESULTS OF OPERATIONS
- ------------------------
REVENUES
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Percent Ended Ended Percent
6/30/97 6/30/96 Change 6/30/97 6/30/96 Change
------- ------- ------ ------- ------- ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
License fees $ 110.6 $ 150.5 -26% $ 238.0 $ 298.4 -20%
Percentage of 51% 60% 53% 60%
total revenues
Services $ 104.9 $ 99.4 5% $ 209.7 $ 195.2 7%
Percentage of 49% 40% 47% 40%
total revenues
Total revenues $ 215.5 $ 249.9 -14% $ 447.7 $ 493.6 -9%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Total revenues for the three months ended June 30, 1997 decreased 14 percent to
$215.5 million from the $249.9 million achieved in the same period in1996. For
the six months ended June 30, 1997 total revenues decreased 9% to $447.7 million
from $493.6 million recorded for the same period in 1996. Of this decrease $22.2
million and $31.9 million is attributable to the restatement of revenues in the
Company's Japanese subsidiary, for the three and six months ended June 30, 1997,
respectively.
License fees were $110.6 million and $238.0 million for the three and six months
ended June 30, 1997, respectively, and were $150.5 million and $298.4 million,
respectively, for the same periods in 1996. This represents a 26 percent and 20
percent decrease for the three and six month periods, respectivley, compared
year over year. Of this decrease in license revenue $18.3 million and $26.1
million for the three and six month periods ended June 30, 1997, respectively,
can be attributed to the restatement discussed above. The remaining decrease is
attributable several factors including a decline in North American license
revenue of $17.7 million and $27.1 million for the three and six month periods
ended June 30, 1997, respectively, and a more modest decline in European license
revenue of $3.8 million and $8.6 million for the three and six month periods
ended June 30, 1997, respectively. The decline in overall license revenue is
offset somewhat by an increase in Intercontinental region's license revenue
(exclusive of Japanese revenue) of $1.9 million and $4.0 million for the three
and six months ended June 30, 1997, respectively. The Company believes the
decrease in license revenues is due to lower productivity and the lack of new
products coming to market in the first six months of 1997 and was most
pronounced in the Company's Enterprise and Tools Business Groups.
Services revenues consist primarily of support and maintenance service fees and
consulting, education and other services related to the development and
deployment of applications using the Company's software products.
Services revenues as a percentage of total revenues increased to 49 percent and
47 percent for the three and six months ended June 30, 1997, respectively, as
compared to 40 percent of total revenue for both comparable periods in 1996.
Services revenues grew 5 percent to $104.9
9
<PAGE> 10
million for the three months ended June 30, 1997, up from $99.4 million
recorded in the year earlier period. Services revenues increased 7 percent to
$209.7 million for the six months ended June 30, 1997 from $195.2 million in the
same period of 1996. For the three and six months ended June 30, 1997 services
revenues increased $4.5 million and $11.2 million, respectively, in North
America, $2.2 million and $3.1 million, respectively, in Europe, as well as $1.5
million and $3.5 million, respectively, in the Intercontinental region
(exclusive of Japanese revenue). Service revenues in the Japanese subsidiary was
reduced by $3.9 million and $5.8 million in the three and six months ended June
30, 1997, respectively, as a result of the restatement discussed above. After
this restatement, services revenues for the Japanese subsidiary decreased by
$2.7 million and $3.3 million for the three and six months ended June 30, 1997,
respectively, compared to the same periods in 1996.
The increase in services revenues resulted, in part, from the increase in
support and maintenance service fees related to the Company's growing installed
base and the renewal of maintenance contracts. The increase in services revenues
also resulted from increased demand for the Company's consulting and other
services.
Services revenues in any given period are significantly affected by the amount
of license fee revenues generated in the same and immediately preceding periods.
The quarterly rate of service revenue growth from the first quarter of 1997 to
the second quarter of 1997 compared to the same period of 1996 declined due to
the decrease in license revenues for the first half in 1997 and the restatement
of revenues discussed above. The Company expects services revenues to continue
to increase modestly each quarter in absolute dollars in 1997, due partially to
a larger installed base of customers. However, as this is a forward-looking
statement, future actual results may differ materially. See "Future Operating
Results."
The impact of price changes on revenues during the three and six months ended
June 30, 1997 was not significant.
- --------------------------
GEOGRAPHICAL REVENUES
- --------------------------
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Percent Ended Ended Percent
6/30/97 6/30/96 Change 6/30/97 6/30/96 Change
------- ------- ------ ------- ------- ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
North American $ 137.2 $ 151.4 -9% $ 286.8 $ 302.2 -5%
Percentage of 64% 61% 64% 61%
total revenues
International
European $ 55.5 $ 57.0 -3% $ 110.8 $ 116.3 -5%
Percentage of 26% 23% 25% 24%
total
Intercontinental $ 22.8 $ 41.5 -45% $ 50.1 $ 75.1 -33%
Percentage of 10% 17% 11% 15%
total
Total international $ 78.3 $ 98.5 -21% $ 160.9 $ 191.4 -16%
Percentage of 36% 39% 36% 39%
total
Total revenues $ 215.5 $ 249.9 -14% $ 447.7 $ 493.6 -9%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
North American revenues (United States, Canada and Mexico) decreased 9 percent
during the three months ended June 30, 1997 to $137.2 million from $151.4
million for the same period in 1996. North American revenues were down 5 percent
for the six months ended June 30, 1997 to $286.8 million from $302.2 million in
the same period in 1996. International revenues decreased 21 percent and 16
percent for the three and six months ended June 30, 1997, respectively, to $78.3
million and $160.9 million, respectively, from $98.5 million and $191.4
10
<PAGE> 11
million, respectively, in the year earlier periods. European revenues declined 3
percent and 5 percent for the three and six months ended June 30, 1997,
respectively, and Intercontinental revenues (principally Asia, Australia, and
Latin America) decreased 45 percent and 33 percent, respectively. The decline in
Intercontinental revenue is the result of the restatement discussed above. The
Company believes the remaining decline in license revenue is due to lower
productivity, and the lack of new product coming to market in the first half of
1997.
International revenues comprised 36 percent of total revenues in both the three
months and six months ended June 30, 1997, whereas international revenues
represented 39 percent of total revenues in both comparable periods in 1996. The
reason for the decline in the international component of total revenue is
attributable to the restatement discussed above.
The Company takes into account changes in exchange rates over time in its
pricing and strategy, the Company's business and results of operations could be
materially and adversely affected by fluctuations in foreign currency exchange
rates. See "Future Operating Results."
11
<PAGE> 12
- ---------------------------------
COSTS AND EXPENSES
- ---------------------------------
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Percent Ended Ended Percent
6/30/97 6/30/96 Change 6/30/97 6/30/96 Change
------- ------- ------ ------- ------- ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
Cost of license fees $ 6.1 $ 7.6 -20% $ 14.2 $ 14.7 -3%
Percentage of 6% 5% 6% 5%
license fees
Cost of services $ 61.7 $ 62.8 -2% $ 123.6 $ 119.0 4%
Percentage of 59% 63% 59% 61%
services revenues
Sales and marketing $ 116.7 $ 137.2 -15% $ 231.3 $ 267.5 -14%
Percentage of 54% 55% 52% 54%
total revenues
Product development
and engineering $ 33.7 $ 46.1 -27% $ 69.0 $ 89.2 -23%
Percentage of 16% 18% 15% 18%
total revenues
General and
administrative $ 14.4 $ 19.7 -27% $ 31.8 $ 38.5 -17%
Percentage of 7% 8% 7% 8%
total revenues
- ----------------------------------------------------------------------------------------------------
</TABLE>
Cost of license fees. Cost of license fees, consisting primarily of product
costs (media and documentation), third-party royalty costs, and amortization of
both capitalized software development costs and cost of acquired technologies,
decreased 20 percent in the second quarter of 1997 as compared to the second
quarter of 1996, and represented 6 percent and 5 percent of license fees in each
of the second quarters of 1997 and 1996, respectively. Cost of license fees
decreased 3 percent to $14.2 million in the first six months of 1997 compared to
$14.7 million in same period of 1996, and represented 6 percent and 5 percent of
license fees in each of the first six months of 1997 and 1996, respectively.
This decrease in cost of license fees is due, in part, to a decrease in license
fees and an increase in productivity in order fulfillment, both in the second
quarter and first half of 1997, as compared to the same periods in 1996.
Amortization of capitalized software costs included in cost of license fees was
$2.2 million in the second quarter of 1997, compared to $2.0 in the second
quarter of last year, and $4.2 million in the first half of 1997, compared to
$3.8 million for the same period in 1996.
Cost of services. Cost of services, consisting primarily of maintenance,
consulting and education expenses and, to a lesser degree, services-related
product costs (media and documentation), decreased as a percentage of services
revenues to 59 percent in the second quarter of 1997 from 63 percent in the
second quarter of 1996, and to 59 percent from 61 percent for the first six
months of 1997 compared to the same period in 1996. The decrease in cost of
services as a percentage of services revenues for both periods is primarily due
to an aggressive program of cost containment implemented in the third quarter of
1996 to control expenses and the Company's continuing emphasis on improving
productivity in its services organization.
12
<PAGE> 13
Sales and marketing. Sales and marketing expenses decreased as a percentage of
total revenues to 54 percent in the second quarter of 1997, from 55 percent in
the second quarter of 1996, and also decreased in absolute dollars. Sales and
marketing expenses decreased as a percentage of total revenues to 52 percent in
the first half of 1997, from 54 percent in the first half of 1996 and also
decreased in absolute dollars. The decrease in sales and marketing expenses for
both periods as a percentage of total revenues is primarily the result of the
Company's aggressive cost containment program implemented in the third quarter
of 1996 combined with lower sales commissions paid on the lower than expected
license revenues realized in the second quarter and first half of 1997.
Product development and engineering. Product development and engineering
expenses (net of capitalized software development costs) declined as a percent
of revenues to 16 percent and 15 percent in the first quarter and for the first
six months of 1997, respectively, compared to 18 percent in the same periods in
1996. The decrease in product development and engineering expenses as a percent
of total revenues in the second quarter of 1997 is the result of the Company's
third quarter 1996 restructuring costs which reduced levels of recurring
expenses, combined with improved productivity in product development and
engineering. In absolute dollars, product development and engineering expenses
in the second quarter of 1997 decreased 27 percent compared to the second
quarter of 1996. Much of the reduction in expenses between 1997 and 1996
resulted from discontinuation of certain product lines in 1996. These product
lines included interactive television, wireless messaging and multimedia
authoring tools. Expenditures in the first half of 1997 were made to further
develop the System 11(TM) suite of products, including enhancements to Adaptive
Server(TM) 11.5 Enterprise, SQL Anywhere(TM), and Replication Server(R) products
and certain other existing database products; the Company's interoperability
products, including EnterpriseConnect(TM) and Powersoft(R) Jaguar CTS products;
and application development tools, including PowerBuilder(R), Powersoft
PowerJ(TM), PowerDesigner(TM) and Power++(TM). The Company capitalized
approximately $5.6 million and $9.7 million of software development costs in the
second quarter and first half of 1997, respectively, compared to $3.4 million
and $8.1 million for the same periods in 1996. The capitalization of software
development costs represents 14% and 12% of gross product development and
engineering expenditures for the second quarter and first half of 1997,
respectively. By comparison, capitalization of software development costs for
the same periods in 1996 represented 7% and 8% of such expenditures,
respectively. This capitalization of product development costs in the first half
of 1997 reflects major development programs such as Powersoft PowerJ, Powersoft
Jaguar CTS, Adaptive Server 11.5 Enterprise and several EnterpriseConnect
interoperability products, all of which achieved technological feasibility for
purposes of capitalization. In the first quarter of 1997, the Company also
recorded capitalized software costs of $12.7 million in connection with the
Purchase Net acquisition. (See Note 3 of Notes to Condensed Consolidated
Financial Statements.) The Company believes that product development and
engineering expenditures are essential to technology and product leadership.
General and administrative. General and administrative expenses decreased to 7
percent of total revenues in the second quarter of 1997 compared to 8 percent in
the same period of 1996 and to 7 percent from 8 percent for the first six months
of 1997 compared to the same period in 1996. The absolute dollar amount of
expenses decreased to $14.4 million in the second quarter of 1997 from $19.7
million in the first quarter of 1996. The decrease in general and administrative
expenses, in absolute dollars, resulted partially from the Company's third
quarter 1996 restructuring costs which reduced levels of recurring expenses and
the Company's continuing emphasis on improving productivity. The Company plans
to continue tightly managing general and administrative expenses and limit
infrastructure growth in the near term.
13
<PAGE> 14
- ------------------------
OPERATING LOSS
- ------------------------
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Percent Ended Ended Percent
6/30/97 6/30/96 Change 6/30/97 6/30/96 Change
------- ------- ------ ------- ------- ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
Operating loss $ (17.2) $ (23.6) -27% $ (22.2) $ (35.3) -37%
Percentage of 8% 9% 5% 7%
total revenues
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The impact on operating loss resulting from the restatement associated with
actions by the Company's Japanese subsidiary was $22.2 million and $31.9 million
for the three and six months ended June 30, 1997, respectively. The resultant
operating losses (on a restated basis) for the first three and six months ended
June 30, 1997 were $17.2 million and $22.2 million, respectively, compared to
operating losses of $23.6 million and $35.3 million for the same periods in
1996, and were the results of the operating factors described above.
- ---------------------
OTHER INCOME AND
EXPENSE, NET
- ---------------------
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Percent Ended Ended Percent
6/30/97 6/30/96 Change 6/30/97 6/30/96 Change
------ ------ -- ------ ------ --
<S> <C> <C> <C> <C> <C> <C>
Other income/expense, net $ 1.7 $ 2.2 -21% $ 2.7 $ 4.7 -42%
Percentage of 1% 1% 1% 1%
total revenues
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Other income/expense, net consists primarily of interest earned on cash
investments, interest expense from capital lease obligations incurred in prior
years, bank fees and expenses, net gains and losses resulting from the Company's
foreign currency exposures and hedging activities and the related cost of
foreign exchange hedging. Other income/expense, net in absolute dollars, was
$1.7 million in the second quarter of 1997 compared to $2.2 million in the
second quarter of 1996. Other income/expense, net in absolute dollars, was $2.7
million in the first half of 1997 compared to $4.7 million in the first half of
1996. The decrease is largely due to lower effective returns resulting from a
shift in cash balances and investments from countries with higher yields to
countries with lower yields. Overall, net foreign exchange gains and losses
resulting from the Company's hedging activities were immaterial for all periods
covered.
14
<PAGE> 15
- ----------------------------
PROVISION FOR INCOME TAXES
- ----------------------------
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Percent Ended Ended Percent
6/30/97 6/30/96 Change 6/30/97 6/30/96 Change
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Provision for
income taxes $ 2.4 $ 3.2 -26% $ 4.5 $ 0.9 404%
- -----------------------------------------------------------------------------------------------
</TABLE>
The Company recorded an income tax provision of $2.4 million in the second
quarter of 1997 compared to $3.2 million in second quarter of 1996. The Company
recorded an income tax provision of $4.5 million in the first half of 1997
compared to $0.9 million in first half of 1996. The tax provision for the first
half of 1997 is primarily due to the generation of taxable income in certain
foreign jurisdictions.
Realization of the Company's net deferred tax assets, which total $41.1 million
at June 30, 1997, is dependent upon the Company generating sufficient taxable
income in future years in appropriate tax jurisdictions to obtain benefit from
the reversal of temporary differences and from tax credit carryforwards. The
amount of deferred tax assets considered realizable is subject to adjustment in
future periods if estimates of future taxable income are reduced and any such
adjustments could have an impact on the Company's effective tax rate in future
periods. See "Future Operating Results."
- -------------------------
NET LOSS AND NET LOSS
PER SHARE
- -------------------------
(in Millions, except
per share amounts)
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Percent Ended Ended Percent
6/30/97 6/30/96 Change 6/30/97 6/30/96 Change
------- ------- ------ ------- ------- ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
Net loss $ (17.8) $ (24.6) -28% $ (24.0) $(31.5) -24%
Percentage of 8% 10% 5% 6%
total revenues
Net loss per share --
basic and diluted $ (0.23) $ (0.33) -30% $ (0.31) $(0.42) -26%
Shares used in calculation
of per share amounts 78.7 74.9 5% 78.0 74.2 5%
</TABLE>
- ----------
As a result of the restatement of the Company's financial statements for the
three and six months ended June 30, 1997 the Company realized a net loss of
$17.8 million, or $0.23 per share, for the three months ended June 30, 1997,
compared to a net loss of $24.6 million, or $0.33 per share, for the same period
in 1996. For the six months ended June 30, 1997 the Company realized a net loss
of $24.0 million, or $0.31 per share, compared to a net loss of $31.5 million,
or $0.42 per share, for the same period in 1996. Shares used in the calculation
of per share amounts increased 5 percent for both the three and six months ended
June 30, 1997 from the same periods in 1996 as a result of shares issued under
employee stock option and stock purchase plans and in connection with business
combinations.
15
<PAGE> 16
- -------------------
FINANCIAL
CONDITION
- -------------------
(Dollars in millions)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended Percent
6/30/97 6/30/96 Change
------- ------- ------
(Restated)
<S> <C> <C> <C>
Working capital $ 90.5 $ 120.0 -25%
Cash, cash equivalents and $ 198.7 $ 185.3 7%
cash investments
Net cash provided (used) $ 23.0 $ (0.3) *
by operating activities
Net cash used by
investing activities $ 33.3 $ 50.7 -34%
Net cash provided by
financing activities $ 43.6 $ 21.9 99%
</TABLE>
- ------------------
* Not meaningful
Net cash provided by operating activities was $23.0 million in the six months
ended June 30, 1997 compared to net cash used by operating activities of $0.3
million in the same period of 1996. Net cash provided by operating activities
during the first half of 1997 reflects a net loss of $24.0 million versus a loss
of $31.5 million in the year ago period. Additionally, increased net cash from
operating activities reflects a decrease of accounts receivable of $27.0 million
in the first half of 1997 compared to an accounts receivable increase of $21.3
million in the same period of 1996. Accounts payable and other accrued
liabilities decreased during the first half of 1997, resulting in a total cash
decline of $16.8 million over this period, compared to an decrease totaling
$15.9 million over the same period in 1996. Cash flows from operating activities
also decreased as a result of a decrease in the deferred revenue balance of $4.7
million in the first six months of 1997 compared to an increase of $15.1 million
in the same period of 1996. In the first half of 1997, a reduction in accrued
income taxes totaled $0.7 million compared to a increase in accrued income taxes
of $1.3 million in the same period of 1996.
Net cash used for investing activities decreased to $33.3 million for the six
months ended June 30, 1997 compared to $50.7 million for the same period of
1996. Investing activities included capital expenditures of $23.1 million in the
first half of 1997 compared to $45.0 million in the first half of 1996, which
reflects a decrease in expenditures required to support the Company's employee
base around the world. During the first six months of 1997, there was a net
decrease of cash investments in the amount of $2.7 million compared to a net
decrease of $6.9 million in the first half of 1996.
Net cash provided by financing activities for the six months ended June 30, 1997
was $43.6 million compared to $21.9 million for the same period in 1996.
Financing activities in both periods consisted of the issuance of common stock
upon the exercise of employee stock options and the issuance of shares through
employee stock purchase plans, as well as an increase in other current
liabilities of $31.7 million due to the restatement discussed above.
Cash, cash equivalents, and cash investments totaled $198.7 million at June 30,
1997, compared to $185.3 million at June 30, 1996.
16
<PAGE> 17
The Company engages in business operations around the world and is therefore
exposed to foreign currency fluctuations. As of June 30 1997, the Company had
identifiable assets totaling $136 million associated with its European
operations and $118 million associated with its Intercontinental operations. The
Company experiences foreign exchange transaction exposures from short-term
intercompany payables and receivables denominated in different currencies. The
Company hedges certain of these short-term exposures under a plan approved by
the Sybase, Inc. Board of Directors (see Note 2 of Notes to Consolidated
Financial Statements of 1996 Sybase Annual Report). The Company also experiences
foreign exchange translation exposure on its net assets denominated in different
currencies. As these net assets are considered by Sybase, Inc. the U.S. parent
company, to be a permanent investment in each subsidiary, the foreign currency
translation gains and losses are reflected in stockholders' equity accumulated
foreign currency translation adjustments.
The Company believes that it has the financial resources needed to meet its
presently anticipated business requirements, including capital expenditure and
strategic operating programs for the foreseeable future.
17
<PAGE> 18
FUTURE OPERATING RESULTS
The Company's future operating results may vary substantially from period to
period. The price of the Company's common stock will fluctuate in the future,
and an investment in the Company's common stock is subject to a variety of
risks, including but not limited to the specific risks identified below. The
results of operations for the quarter ended June 30, 1997 are not necessarily
indicative of results for the fiscal year ending December 31, 1997 or any other
future period. Expectations, forecasts, and projections by the Company or others
are by nature forward-looking statements, and future results cannot be
guaranteed. Forward-looking statements that were true at the time made may
ultimately prove to be incorrect or false. Inevitably, some investors in the
Company's securities will experience gains while others will experience losses
depending on the prices at which they purchase and sell securities. Prospective
and existing investors are strongly urged to carefully consider the various
cautionary statements and risks set forth in this report.
The timing and amount of the Company's license fee revenues are subject to a
number of factors that make estimation of revenues and operating results prior
to the end of a quarter extremely uncertain. Sybase has experienced a seasonal
pattern of license fee decline between the fourth quarter and the succeeding
first quarter contributing to lower total revenues and operating earnings in the
first quarter compared to the prior fourth quarter. For example, revenues and
earnings in the first quarter of 1997 were lower than in the fourth quarter of
1996 (although revenues for the first quarter of 1997 were lower than expected
due to the accounting irregularities in the Company's Japanese subsidiary). The
Company has operated historically with little or no backlog and, as a result,
license fees in any quarter are dependent on orders booked and shipped in that
quarter. In addition, the timing of closing of large license agreements
increases the risk of quarter-to-quarter fluctuations and the uncertainty of
estimating quarterly operating results. The Company has experienced a pattern of
recording 50 percent to 70 percent of its quarterly revenues in the third month
of the quarter, with a concentration of such revenues in the last two weeks of
such third month. The Company's operating expenses are based on projected annual
and quarterly revenue levels and are incurred approximately ratably throughout
each quarter. Because the Company's operating expenses are relatively fixed in
the short term, if projected revenues are not realized in the expected period,
the Company's operating results for that period would be adversely affected and
could result in an operating loss, as occurred in the first and second quarters
of 1996. Failure to achieve revenue, earnings, and other operating and financial
results as forecast or anticipated by brokerage firm and industry analysts could
result in an immediate and adverse effect on the market price of the Company's
stock. The Company's rate of year-over-year growth slowed significantly over the
past two years. The Company may not achieve, in the future, the relatively high
rates of growth experienced by the Company in 1991 through 1994 or the rates of
growth projected for the software markets in which Sybase competes.
Throughout 1996, the Company implemented a variety of changes to the sales
organization, including a new sales model, changes to sales compensation
programs, and an increased focus on sales through indirect channels. Although
such changes are intended to enhance overall revenues, such changes could, in
the short-run, materially and adversely affect the sales process and revenues.
For example, the Company believes that these changes may have contributed in
part to the lower than expected revenues in the first two quarters of 1996. In
the second quarter of 1996, the Company announced several management and
organizational changes, including changes in the senior management of the sales
and marketing organizations. In the third quarter of 1997, John Chen will become
the Company's President and Chief Operating Officer, and Chief Executive Officer
Mitchell Kertzman will succeed Mark Hoffman as the Company's Chairman of the
Board. The Company may make other management and organization changes in the
future. Organizational and management changes are intended to enhance
productivity and competitiveness. However, such changes may not produce the
desired results and could materially adversely affect productivity, expenses,
and revenues.
The market for the Company's stock is highly volatile. The trading price of the
Company's common stock fluctuated widely in 1995 and 1996 and may in the future
continue to be subject to wide fluctuations in response to quarterly variations
in operating and financial results, announcements of technological innovations,
new products, or customer contracts won by the Company or its competitors.
Changes in prices of the Company's or its competitors' products
18
<PAGE> 19
and services, changes in product mix, changes in the Company's revenue and
revenue growth rates for the Company as a whole or for individual geographic
areas, business units, products or product categories, as well as other events
or factors could also affect the Company's stock prices. Statements or changes
in opinions, ratings, or earnings estimates made by brokerage firms and industry
analysts relating to the market in which the Company does business, the
Company's competitors, or the Company or its products specifically, have
resulted, and could in the future result, in an immediate and adverse effect on
the market price of the Company's common stock. In particular, due to a variety
of factors, the Company's stock price declined significantly during the third
quarter of 1994, the second quarter of 1995, and the first quarter of 1996. In
addition, the stock market has from time to time experienced extreme price and
volume fluctuations that have particularly affected the market price for many
high-technology companies and which often have been unrelated to the operating
performance of these companies.
An increased portion of the Company's revenues in recent quarters has been
derived from its international operations. Several of the Company's
international subsidiaries have been only recently acquired or formed. For
example, the Company has recently acquired operations in Chile, Argentina and
Peru. In addition there have been several management and organizational changes
within the international operations. International revenues, in absolute dollars
and as a percentage of total revenues, may fluctuate in part due to the growth
and, in some cases, the relative immaturity of international organizations. The
Company's operations and financial results could be significantly affected by
factors associated with international operations such as changes in foreign
currency exchange rates and uncertainties relative to regional economic
circumstances, political instability in emerging markets, and difficulties in
staffing and managing foreign operations, as well as by other risks associated
with international activities. From the first quarter of 1997 the Company was
required to restate revenues due to accounting irregularities in the Company's
Japanese subsidiary.
The market for the Company's software products and services is extremely
competitive and characterized by dynamic customer demands, rapid technological
and marketplace changes, and frequent product enhancements and new product
introductions. The Company competes with a number of companies, including Oracle
Corporation, Informix Corporation, Microsoft Corporation, IBM Corporation, and
Computer Associates, Inc. Many of the Company's competitors and potential
competitors have significantly greater financial, technical, sales, and
marketing resources, and a larger installed base than the Company. Each of
Informix, IBM, Microsoft, and Oracle has announced the development of enhanced
versions of their principal database products that are intended to improve the
performance or expand the capabilities of their existing products. New or
enhanced products introduced by existing or future competitors could increase
the competition faced by the Company's products and result in greater price
pressure on certain of the Company's database products, especially to the extent
that market acceptance for personal computer oriented technologies increases. A
failure by the Company to compete successfully with its existing competitors or
with new competitors could have a material adverse effect on the Company's
business and results of operations and on the market price of the Company's
common stock.
Existing and future competition or changes by the Company in its product
offerings or product pricing structure could result in an immediate reduction in
the prices of the Company's products. The Company introduced changes in its
pricing and licensing structure in the first quarter of 1996 that increased the
prices for certain products or configurations and reduced the prices for others.
The Company will introduce price and licensing changes from time to time in the
future. If recently implemented or future changes in the Company's products,
pricing structure, or existing or future competition, for example from
Microsoft, were to result in significant revenue declines, the Company's
business and financial results would be adversely affected.
The Company's future results will depend in part on its ability to enhance its
existing products and to introduce new products, on a timely and cost-effective
basis, that meet dynamic customer requirements. Customer requirements for
products can rapidly change as a result of innovations or changes within the
computer hardware and software industries. For example, the widespread use of
the Internet is rapidly giving rise to new customer requirements as well as new
methods and practices of selling, marketing, and distributing products and
services. Sybase's future results will depend in part on its success in
developing new products, making generally available
19
<PAGE> 20
products that have been previously announced, enhancing its existing products
and adapting its existing products to changing customer requirements, and
ultimately gaining market acceptance for such new or enhanced products. The
Company has announced the development and anticipated availability dates of
several products -- for example, PowerBuilder(R) 6.0, a component-based
application development tool which was released in beta during the second
quarter, and Adaptive Server(TM), a new version of the Company's flagship
relational database management system. The Company currently plans to commence
commercial shipment of these products in the last half of 1997. The Company has
experienced delays in introducing some new products in the past. For example,
the commercial shipment of Sybase IQ(TM), which became commercially available in
February 1996, was previously planned for the second half of 1995. Unanticipated
delays in product availability schedules could result from various factors
including development or testing difficulties, feature changes, software errors,
shortages in appropriately skilled software engineers, and project management
problems. Delays in the scheduled availability of these or other products, a
lack of or decrease in market acceptance of new or enhanced products,
particularly the Company's new Adaptive Component Architecture(TM) which was
announced in April 1997, or the Company's failure to accurately anticipate
customer demand or to meet customer performance requirements or to anticipate
competitive products and developments could have a material adverse effect on
the Company's business and financial results. New products or new versions of
existing products may, despite testing, contain undetected errors or bugs that
could delay the introduction or adversely affect commercial acceptance of such
products or give rise to warranty or other customer claims, which could, in
turn, adversely affect the Company's financial results.
Sybase's results will also depend increasingly on the ability of its products to
interoperate and perform well with existing and future leading,
industry-standard application software products intended to be used in
connection with relational database management systems. Failure to meet existing
or future interoperability and performance requirements of certain independent
vendors marketing such applications in a timely manner has in the past and could
in the future adversely affect the market for Sybase's products. Certain leading
applications will not be interoperable with Sybase relational database
management systems ("RDBMSs") until certain features are added to the Company's
RDBMS, and others may never be available on Sybase's RDBMS. In addition, the
Company's application development tools, database design tools, and certain
connectivity products are designed for use with RDBMSs offered by the Company's
competitors. Vendors of non-Sybase RDBMSs and related products may become less
willing in the future to provide the Company with access to products, technical
information, and marketing and sales support. If existing and potential
customers of the Company who use non-Sybase RDBMSs refrain from purchasing such
products due to concerns that the development, quality, and support of products
for non-Sybase RDBMSs will diminish over time, the Company's business, results
of operations, and financial condition could be materially and adversely
affected.
Commercial acceptance of the Company's products and services could be adversely
affected by critical or negative statements or reports by brokerage firms,
industry and financial analysts, and industry periodicals concerning the Company
and its products, business, or competitors, or by the advertising or marketing
efforts of competitors or other factors that could affect customer perception,
such as the criticism of the scalability of the Company's SQL Server(TM) 10
database product experienced in 1995. In addition, customer perception of Sybase
and its products could be adversely affected by financial results, particularly
revenues and profitability, reported for the 1996 fiscal year or other future
periods, by the market share of the Company's products and by press reports
related to the foregoing.
As the number of software products in the industry and the number of software
patents increase, the Company believes that software developers may become
increasingly subject to infringement claims. Third parties have in the past
asserted, and may in the future assert, that their patents or other proprietary
rights are violated by products offered or in development by the Company. Any
such claims, with or without merit, can be time consuming and expensive to
defend or settle, and could have an adverse effect on the Company's business and
results of operations.
The Company's ability to achieve its future revenues and earnings will depend in
part on the ability of its officers and key personnel to manage growth, costs,
and expenses successfully through the implementation of appropriate management
systems and controls. Failure to effectively implement or maintain such systems
and controls could adversely affect the
20
<PAGE> 21
Company's business and results of operations. The success of the Company also
depends in part on its ability to attract and retain qualified technical,
managerial, sales, and marketing personnel. The competition for such personnel
is intense in the software industry and, Sybase believes, has increased
substantially in recent years. In particular, there have been several changes in
1996 and 1997 to the Company's executive management team. For example, David
Litwack, Executive Vice President Products, left the Company in May 1997. In the
third quarter of 1997, John Chen will become the Company's President and Chief
Operating Officer, and Chief Executive Officer Mitchell Kertzman will become
Chairman of the Board. Changes in management, the Company's recent financial
performance, and a reduction in the overall number of Sybase employees made in
the third quarter of 1996 could cause an increase in the amount of employee
turnover. The failure to effectively recruit, train, and retain qualified
personnel or high rates of employee turnover, particularly among engineering or
sales staff, could adversely affect the Company's product development efforts,
product sales, and other aspects of the Company's operations and results. During
1996, the software industry generally, and Sybase specifically, experienced
higher than historical rates of employee turnover.
Sybase currently enters most of its North American customer orders in its
Burlington, Massachusetts, operations center and ships all of its products in
North America (other than its Powersoft(R) products) from its Emeryville,
California, distribution facility. Because of the pattern of recording a high
percentage of quarterly revenues within the last week or two weeks of the
quarter, the closure or inoperability of one or both of these facilities during
such weeks due to natural calamity or due to a systems or power failure could
have a material adverse effect on the Company's ability to record revenues for
such quarter.
The Company has acquired a number of companies in the past, most recently a
small software technology company and three distributors in Latin America in the
first half of 1997. The Company will likely acquire other distributors,
companies, products, or technologies in the future. The achievement of the
desired benefits of these and future acquisitions will depend in part upon
whether the integration of the acquired businesses is achieved in an efficient
and effective manner. The successful combination of businesses will require,
among other things, integration of the companies' related product offerings and
coordination of their sales, marketing, and research and development efforts.
The difficulties of such coordination may be increased by the geographic
distance between separate organizations. The Company may be unable to integrate
effectively these or future acquired businesses and may not obtain the
anticipated or desired benefits of such acquisitions. Such acquisitions may
result in costs, liabilities, or additional expenses that could adversely affect
the Company's results of operations and financial condition. In addition,
acquisitions or changes in business or market conditions may cause the Company
to revise its plans, which could result in unplanned expenses or a loss of
anticipated benefits from past investments.
During the third quarter of 1996, the Company incurred a restructuring charge of
approximately $49.2 million. The Company will continue to evaluate its business,
products, and results of operations, and accordingly, the Company may incur
restructuring charges sometime in the future.
As previously announced, the Company's restatement of its interim financial
statements for 1997 reflects significant reductions in reported earned income
and resulted in net losses for each of the previously reported quarters. In
addition, the restatement negatively impacted working capital throughout 1997.
The Company's public announcement of the pending restatement of its interim
financial statements and the related uncertainty regarding the Company's
financial condition may adversely affect the Company's ability to market its
products. The Company is unable to estimate the amount of any additional
financial exposure from possible claims that might be asserted as a result of
the restatement of its interim financial statements for 1997. These factors may
have a material adverse effect on the Company's business, including its
financial condition and results of operations.
21
<PAGE> 22
PART II: OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Registrant was held on May 20, 1997.
At the Annual Meeting, the following matters were submitted to a vote of
stockholders and were approved, with the votes cast on each matter indicated:
1. Election of three Class II directors, each to serve a three-year term
expiring upon the 2000 Annual Meeting of Stockholders or until a
successor is duly elected and qualified. Richard C. Alberding, Robert S.
Epstein and Mitchell E. Kertzman were the only nominees and each was
elected (57,506,582 votes were cast for election of Mr. Alberding and
1,800,506 were cast withholding authority to vote for his election;
67,207,171 votes were cast for election of Mr. Epstein and 2,099,917
were cast withholding authority to vote for his election; 67,361,700
votes were cast for election of Mr. Kertzman and 1,945,388 were cast
withholding authority to vote for his election. There were no
abstentions or non-votes.) In addition to these directors, the Company's
incumbent directors (Mark Hoffman (who resigned as a director during the
third quarter of 1997), L. William Krause, David E. Liddle, Robert P.
Wayman, Jeffrey T. Webber and Alan B. Salisbury) had terms that
continued after the 1997 Annual Meeting.
2. Approval of an amendment to the 1996 Stock Plan increasing the total
number of shares of Common Stock reserved for issuance thereunder by
2,450,000 shares (46,517,749 for, 22,579,373 votes against, 209,966
abstentions, and no non-votes.)
3. Approval of an amendment to the Amended and Restated 1991 Employee Stock
Purchase Plan and the Amended and Restated 1991 Foreign Subsidiary
Employee Stock Purchase Plan increasing the total number of shares of
Common Stock reserved for issuance thereunder by 1,300,000 shares
(64,171,489 for, 4,911,431 against, 224,168 abstentions, and no
non-votes.)
4. Ratification of the appointment of Ernst & Young, LLP as independent
auditors for the Company for the year ending December 31, 1997
(68,934,607 for, 170,303 against, 202,178 abstentions, and no
non-votes.)
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits
11.1 Supplemental Computations of Net Loss Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
22
<PAGE> 23
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.
March 24, 1998 SYBASE, INC.
By /s/ JACK L. ACOSTA
------------------------------------
Jack L. Acosta
Senior Vice President, Finance
and Chief Financial Officer
(Principal Financial Officer)
By /s/ PIETER VAN DER VORST
------------------------------------
Pieter Van der Vorst
Vice President, and
Corporate Controller
(Principal Accounting Officer)
23
<PAGE> 24
EXHIBIT INDEX TO SYBASE, INC.
QUARTERLY REPORT ON FORM 10-Q/A
Exhibit Number Description
- -------------- -----------
11.1 Supplemental Computations of Net Loss Per Share
27 Financial Data Schedule
24
<PAGE> 1
EXHIBIT 11.1
SUPPLEMENTAL COMPUTATIONS OF NET LOSS PER SHARE
-----------------
SYBASE, INC.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
1997 1996 1997 1996
---------- --------- ----------- --------
(Restated) (Restated) (Restated) (Restated)
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding for the period 78,659 74,927 78,030 74,243
========== ========= =========== ========
Net loss $ (17,792) $ (24,564) $ (23,952) $(31,470)
========== ========= =========== ========
Net loss per share - basic and diluted $ (0.23) $ (0.33) $ (0.31) $ (0.42)
========== ========= =========== ========
</TABLE>
The effect of employee stock options has not been included in the calculation of
net loss per share as their inclusion would be anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RESTATED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SYBASE INC. AS OF JUNE
30, 1997 AND 1996 AND FOR THE SIX MONTH PERIODS THEN ENDED.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 183,671 149,384
<SECURITIES> 15,011 35,904
<RECEIVABLES> 238,837 235,846
<ALLOWANCES> 26,986 21,633
<INVENTORY> 0 0
<CURRENT-ASSETS> 447,481 442,498
<PP&E> 426,745 379,261
<DEPRECIATION> (254,201) (175,328)
<TOTAL-ASSETS> 750,917 761,745
<CURRENT-LIABILITIES> 356,984 322,517
<BONDS> 0 0
0 0
0 0
<COMMON> 79 75
<OTHER-SE> 390,504 433,664
<TOTAL-LIABILITY-AND-EQUITY> 750,917 761,745
<SALES> 237,983 289,399
<TOTAL-REVENUES> 447,682 493,551
<CGS> 14,206 14,702
<TOTAL-COSTS> 369,028 401,177
<OTHER-EXPENSES> 100,813 127,637
<LOSS-PROVISION> 308 3,506
<INTEREST-EXPENSE> 419 239
<INCOME-PRETAX> (19,424) (30,572)
<INCOME-TAX> 4,528 898
<INCOME-CONTINUING> (23,952) (31,470)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (23,952) (31,470)
<EPS-PRIMARY> (.31) (.42)<F1>
<EPS-DILUTED> (.31) (.42)
<FN>
<F1>REFLECTS BASIC EPS ACCORDING TO SFAS 128, EARNINGS PER SHARE
</FN>
</TABLE>
