<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 September 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 October 31, 1997, 79,874,857 shares of the Registrant's Common Stock, $.001
par value, were outstanding.
<PAGE> 2
AMENDED FILING OF FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 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 nine months ended September 30, 1997 (see
Note 1 to the Unaudited Condensed Consolidated Financial Statements).
Net loss per share for the three and nine months ended September 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 SEPTEMBER 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 September 30, 1997 3
and December 31, 1996
Condensed Consolidated Statements of Operations for the 4
three months and nine months ended September 30, 1997 and
September 30, 1996
Condensed Consolidated Statements of Cash Flows 5
for the nine months ended September 30, 1997 and
September 30, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Part II: Other Information
Item 6: Exhibits and Reports on Form 8-K 21
Signatures 22
</TABLE>
3
<PAGE> 4
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SYBASE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands, except share data) 1997 1996
--------- ---------
(Restated)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 180,512 $ 156,796
Short-term cash investments 49,443 17,726
--------- ---------
Total cash and short-term cash investments 229,955 174,522
Accounts receivable, net 200,835 239,466
Deferred income taxes 13,724 13,729
Other current assets 21,029 17,551
--------- ---------
Total current assets 465,543 445,268
Property, equipment and improvements, net 162,362 191,328
Deferred income taxes 27,406 27,406
Capitalized software, net 43,062 19,974
Other assets 78,826 67,915
--------- ---------
TOTAL ASSETS $ 777,199 $ 751,891
========= =========
Current liabilities:
Accounts payable 16,720 21,563
Accrued compensation and related expenses 42,669 47,829
Accrued income taxes 22,879 26,952
Other accrued liabilities 93,084 89,386
Deferred revenue 160,374 166,482
Other current liabilities 40,720 --
--------- ---------
Total current liabilities 376,446 352,212
Other liabilities 2,382 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; 79,802,922 shares issued
and outstanding (1996-76,608,794 shares) 80 77
Additional paid-in capital 395,777 359,161
Retained earnings 16,178 46,081
Accumulated translation adjustments (13,664) (8,511)
--------- ---------
Total stockholders' equity 398,371 396,808
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 777,199 $ 751,891
========= =========
</TABLE>
See accompanying notes
4
<PAGE> 5
SYBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
(In thousands, except per share data) 1997 1996 1997 1996
--------- --------- --------- ---------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues:
License fees $ 122,550 $ 147,219 $ 360,533 $ 445,618
Services 110,473 102,994 320,172 298,146
--------- --------- --------- ---------
Total revenues 233,023 250,213 680,705 743,764
Costs and expenses:
Cost of license fees 6,563 6,963 20,769 21,665
Cost of services 63,435 62,906 186,986 181,891
Sales and marketing 118,015 123,373 349,286 390,863
Product development and 33,871 39,217 102,878 128,393
engineering
General and administrative 15,410 17,163 47,216 55,625
Cost of restructure 0 49,232 0 49,232
--------- --------- --------- ---------
Total costs and expenses 237,294 298,854 707,135 827,669
--------- --------- --------- ---------
Operating loss (4,271) (48,641) (26,430) (83,905)
Other income and expense, net 1,516 1,112 4,250 5,791
--------- --------- --------- ---------
Loss before income taxes (2,755) (47,529) (22,180) (78,114)
Provision for income taxes 3,195 5,100 7,723 5,998
--------- --------- --------- ---------
Net loss $ (5,950) $ (52,629) $ (29,903) $ (84,112)
========= ========= ========= =========
Net loss per share -
basic and diluted $ (0.08) $ (0.69) $ (0.38) $ (1.13)
========= ========= ========= =========
Shares used in calculation
of per share amounts 79,282 75,748 78,456 74,755
========= ========= ========= =========
</TABLE>
See accompanying notes
5
<PAGE> 6
SYBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Nine Months Ended
September 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 (29,903) (84,112)
Adjustments to reconcile net income (loss)
to net cash provided by (used) by operating activities:
Depreciation and amortization 78,722 76,521
Net loss on retirement of property,
equipment and improvements 0 10,137
Deferred income taxes 5 981
Changes in assets and liabilities:
Accounts receivable 32,443 (25,214)
Other current assets (3,344) 1,233
Accounts payable (4,843) (11,734)
Accrued compensation and related expenses (5,160) (2,498)
Other accrued liabilities (1,083) 6,906
Deferred revenues (7,578) 10,981
Accrued income taxes (4,073) 2,876
Other (2,126) (310)
--------- ---------
Net cash provided (used) by operating activities 53,060 (14,233)
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of available-for-sale investments (56,893) (58,511)
Maturities of available-for-sale investments 16,998 59,025
Sales of available-for-sale cash investments 8,200 10,950
Business combinations, net of cash acquired (3,104) (1,136)
Purchases of property, equipment and (31,123) (69,520)
improvements
Capitalized software development costs (16,875) (11,624)
Decrease (Increase) in other assets (6,436) (1,892)
--------- ---------
Net cash used for investing activities (89,233) (72,708)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Increase in other current liabilities 40,720
Net proceeds from issuance of common stock 24,619 32,886
--------- ---------
Net cash provided by financing activities 65,339 32,886
Effect of exchange rate changes on cash (5,450) (2,585)
--------- ---------
Net increase (decrease) in cash and cash 23,716 (56,640)
equivalents --------- ---------
Cash and cash equivalents, end of period 180,512 124,237
Cash investments, end of period 49,443 31,385
--------- ---------
Total cash, cash equivalents, and cash
investments, end of period $ 229,955 $ 155,622
========= =========
Supplemental disclosures:
Interest paid $ 799 $ 0
========= =========
Income taxes paid $ 10,682 $ 10,269
========= =========
</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 September 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 nine months ended September 30, 1997 have
been restated as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
------------------------- -------------------------
(As Reported) (Restated) (As Reported) (Restated)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues
License fees $ 131,614 $ 122,550 $ 395,657 $ 360,533
Services 112,585 110,473 328,082 320,172
Total revenues 244,199 233,023 723,739 680,705
Operating income (loss) 6,905 (4,271) 16,604 (26,430)
Net income (loss) $ 5,216 $ (5,950) $ 13,133 $ (29,903)
Net income (loss) per share $ 0.07 $ ( 0.08) $ 0.17 $ (0.38)
September 30, 1997
-------------------------
<C> <C>
Retained Earnings $ 59,214 $ 16,178
Other current liabilities - 40,720
</TABLE>
Other current liabilities in the condensed consolidated balance sheet
at September 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 statements include the accounts of
Sybase, Inc. 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 consolidated
financial
7
<PAGE> 8
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 months and nine months ended September 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 transaction was accounted for as a
purchase. 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
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.
5. In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying
comprehensive income and its components in a full set of
general-purpose financial statements, and is required to be adopted by
the Company beginning in fiscal 1998. Additionally, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which establishes standards for the way the
public business enterprises report information in annual statements and
interim financial reports operating segments, products and services,
geographic areas and major customers. SFAS 131 will first be reflected
in the Company's 1998 Annual Report and will apply to subsequent annual
and interim financial reporting. Sybase management is currently
evaluating the implication of these statements on operations.
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 nine
months ended September 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 Nine Nine
Months Months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
------ ------ ------ ------ ------ -------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
License fees $122.6 $147.2 -17% $360.5 $445.6 -19%
Percentage of
total revenues 53% 59% 53% 60%
Services $110.5 $103.0 7% $320.2 $298.2 7%
Percentage of
total revenues 47% 41% 47% 40%
Total revenues $233.0 $250.2 -7% $680.7 $743.8 -8%
</TABLE>
Total revenues for the three months ended September 30, 1997 decreased 7 percent
to $233.0 million from the $250.2 million achieved for the same period in 1996.
Total revenues for the nine months ended September 30, 1997 decreased 8 percent
to $680.7 million from the $743.8 million achieved for the same period in 1996.
Of this decrease $11.2 million and $43.0 million is attributable to the
restatement of revenues in the Company's Japanese subsidiary for the three and
nine month periods ended September 30, 1997, respectively.
License fees were $122.6 million and $360.5 million for the three and nine
months ended September 30, 1997, respectively, and were $147.2 million and
$445.6 million, respectively, for the same periods in 1996. This represents a 17
percent and 19 percent decrease for the three and nine month periods,
respectively, compared year over year. Of this decrease in license revenue, $9.1
million and $35.1 million for the three and nine month periods ended September
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 $12.8 million and $39.9 million for the three
and nine month periods ended September 30, 1997, respectively, and a decline in
European license revenue of $5.1 million and $13.8 million for the three and
nine month periods ended September 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 $2.2 million and
$6.2 million for the three and nine months ended September 30, 1997,
respectively. The Company believes the decrease in license revenues year over
year is mainly due to lower tools products revenues which the Company believes
is attributable to softness in the development tools market generally.
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.
9
<PAGE> 10
Services revenues as a percentage of total revenues increased to 47 percent for
both the three and nine months ended September 30, 1997, as compared to 41
percent and 40 percent for the comparable periods in 1996. Services revenues
grew 7 percent for each of the three and nine month periods ended September 30,
1997 to $110.5 million and $320.2 million, respectively. Service revenues for
the comparable periods in 1996 were $103.0 million and $298.2 million,
respectively. For the three and nine months ended September 30, 1997 services
revenues increased $4.7 million and $15.9 million, respectively, in North
America, $2.3 million and $5.4 million, respectively, in Europe, as well as $1.6
million and $5.1 million, respectively, in the Intercontinental region
(exclusive of Japanese revenue). Service revenues in the Japanese subsidiary was
reduced by $2.1 million and $7.9 million in the three and nine months ended
September 30, 1997, respectively, as a result of the restatement discussed
above. After this restatement, services revenues for the Japanese subsidiary
decreased by $1.1 million and $4.4 million for the three and nine months ended
September 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 installed base and
the renewal of maintenance contracts. The increase in service 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 Company expects services revenues to continue to increase modestly in the
fourth quarter of 1997 in absolute dollars 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 third quarter and the first
nine months of 1997 was not significant.
10
<PAGE> 11
GEOGRAPHICAL REVENUES
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
------ ------ --------- ------ ------ ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
North American $143.5 $151.6 -5% $430.3 $453.8 -5%
Percentage of
total revenues 62% 61% 63% 61%
International
European $ 53.9 $ 56.8 -5% $164.7 $173.1 -5%
Percentage of
total revenues 23% 23% 24% 23%
Intercontinental $ 35.6 $ 41.8 -15% $ 85.7 $116.9 -27%
Percentage of
total revenues 15% 17% 13% 16%
Total international $ 89.5 $ 98.6 -9% $250.4 $290.0 -14%
Percentage of
total revenues 38% 39% 37% 39%
Total revenues $233.0 $250.2 -7% $680.7 $743.8 -8%
</TABLE>
North American revenues (United States, Canada and Mexico) decreased 5 percent
in the third quarter of 1997 to $143.5 million from $151.6 million in the third
quarter of 1996. North American revenues were down 5 percent in the first nine
months of 1997 to $430.3 million from $453.8 million in the same period in 1996.
International revenues decreased 9 percent in the third quarter of 1997 to $89.5
million from $98.6 million in the year earlier period, with European revenues
declining 5 percent and Intercontinental revenues (principally Asia, Australia,
and Latin America) decreasing 15 percent. Over the first nine months of 1997,
International revenues decreased 14 percent to $250.4 million from $290.0
million in the year earlier period, with European revenues declining 5 percent
and Intercontinental revenues decreasing 27 percent from the year earlier
period. The Company believes the decline in total revenue is due in part to
lower tools products revenues which the Company believes is attributable to
softness in the development tools market generally. Additionally, the decline in
Intercontinental revenues is due to the restatement of revenue in the Company's
Japanese subsidiary discussed above. The Company also attributes the decline, in
part, to the impact of foreign exchange on total International revenues year
over year.
International revenues declined to 38 percent and 37 percent of total revenues
for the three and nine months ended September 30, 1997, respectively, as
compared to 39 percent for both of the same periods in 1996. The reason for the
decline in the international component of total revenue is attributable to the
restatement discussed above.
11
<PAGE> 12
COSTS AND EXPENSES
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
------ ------ ------- ------ ------ ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
Cost of license fees $ 6.6 $ 7.0 -6% $ 20.8 $ 21.7 -4%
Percentage of
license fees 5% 5% 6% 5%
Cost of services $ 63.4 $ 62.9 1% $187.0 $181.9 3%
Percentage of
services revenues 57% 61% 58% 61%
Sales and marketing $118.0 $123.4 -4% $349.3 $390.9 -11%
Percentage of
total revenues 51% 49% 51% 53%
Product development
and engineering $ 33.9 $ 39.2 -14% $102.9 $128.4 -20%
Percentage of
total revenues 15% 16% 15% 17%
General and
Administrative $ 15.4 $ 17.2 -10% $ 47.2 $ 55.6 -15%
Percentage of
total revenues 7% 7% 7% 7%
Cost of restructure -- $ 49.2 -- -- $ 49.2 --
Percentage of
total revenues -- 20% -- 7%
</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, including the cost of acquired
technologies, decreased 6 percent in the third quarter of 1997 as compared to
the third quarter of 1996, and represented 5 percent of license fees in the
third quarter of 1997 and 5 percent in the same period in 1996. Cost of license
fees decreased 4 percent to $20.8 million in the first nine months of 1997
compared to $21.7 million in same period in 1996, and represented 6 percent of
license fees in the first nine months of 1997 and 5 percent in the first nine
months of 1996. The decrease in the cost of license fees is due, in part, to a
decrease in license revenue and an increase in productivity in order
fulfillment, both in the third quarter and first nine months of 1997, as
compared to the same periods in 1996. Amortization of capitalized software costs
included in cost of license fees was $2.3 million in the third quarter of 1997,
compared to $1.9 in the third quarter of 1996, and $6.0 million in the first
nine months of 1997, compared to $5.7 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 57 percent in the third quarter of 1997 from 61 percent in the third
quarter of 1996, and to 58 percent from 61 percent for the first nine 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
and the Company's continuing emphasis on improving productivity in its services
organization.
12
<PAGE> 13
Sales and marketing. Sales and marketing expenses increased as a percentage of
total revenues to 51 percent in the third quarter of 1997, from 49 percent in
the third quarter of 1996, however it decreased in absolute dollars. Sales and
marketing expenses decreased as a percentage of total revenues to 51 percent in
the first nine months of 1997, from 53 percent in the first nine months of 1996
and also decreased in absolute dollars. The decrease in sales and marketing
expenses for both periods in absolute dollars, is primarily the result of the
Company's continuing emphasis on controlling costs in 1997.
Product development and engineering. Product development and engineering
expenses (net of capitalized software development costs) declined as a percent
of revenues to 15 percent in the third quarter and for the first nine months of
1997, compared to 16 percent and 17 percent, respectively, in the same periods
in 1996. The decrease in such expenses as a percentage of total revenues in the
third quarter of 1997 is the result of the Company's improved productivity in
product development and engineering, and capitalization of product development
costs for products achieving technological feasibility in the second and third
quarters of 1997. This capitalization of product development costs in the first
nine months of 1997 reflects major development programs such as PowerJ(TM),
Jaguar CTS(TM), Adaptive Server(TM) 11.5 Enterprise and several
EnterpriseConnect(TM) interoperability products, all of which achieved
technological feasibility for purposes of capitalization. In absolute dollars,
product development and engineering expenses in the third quarter of 1997
decreased 14 percent compared to the third 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 11.5 Enterprise, which
became generally available in the third quarter of 1997, SQL Anywhere(TM),
Replication Server(R) products and certain other existing database products; the
Company's interoperability products, including EnterpriseConnect and Jaguar CTS
products; and application development tools, including PowerBuilder(R), PowerJ,
PowerDesigner(TM) and Power++(TM). The Company capitalized approximately $6.0
million and $16.9 million of software development costs in the third quarter and
first nine months of 1997, respectively, compared to $3.5 million and $8.1
million for the same periods in 1996. The Company believes that product
development and engineering expenditures are essential to technology and product
leadership.
The capitalization of software development costs represents 15 percent and 13
percent of gross product development and engineering expenditures for the third
quarter and first nine months of 1997, respectively. By comparison,
capitalization of software development costs for the same periods in 1996
represented 8 percent and 6 percent of such expenditures, respectively.
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.)
General and administrative. General and administrative expenses as a percent of
total revenues remained consistent at 7 percent for each of the three and nine
months ended September 30, 1997 and 1996. The absolute dollar amount of expenses
decreased to $15.4 million in the third quarter of 1997 from $17.2 million in
the third quarter of 1996. The decrease in general and administrative expenses,
in absolute dollars, resulted primarily from the Company's third quarter 1996
restructuring activities and the Company's continuing emphasis on improving
productivity. The Company plans to continue to tightly manage general and
administrative expenses.
13
<PAGE> 14
OPERATING LOSS
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
------- ------- -------- ------- -------- -------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
Operating loss $(4.3) $(48.6) -91% $(26.4) $(83.9) -69%
Percentage of
total revenues 2% 19% 4% 11%
</TABLE>
The impact on operating loss resulting from the restatement associated with
actions by the Company's Japanese subsidiary was $11.2 million and $43.0 million
for the three and nine months ended September 30, 1997, respectively. The
resultant operating losses (on a restated basis) for the first three and nine
months ended September 30, 1997 were $4.3 million and $26.4 million,
respectively, compared to operating losses of $48.6 million and $83.9 million
for the same periods in 1996, and were the result of the operating factors
described above.
OTHER INCOME AND EXPENSE, NET
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Other income/expense, net $1.5 $1.1 36% $4.3 $5.8 -27%
Percentage of
total revenues 1% * 1% 1%
</TABLE>
*Not meaningful
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 was $1.5 million in the
third quarter of 1997 compared to $1.1 million in the third quarter of 1996.
Other income/ expense, net was $4.3 million in the first nine months of 1997
compared to $5.8 million in the first nine months of 1996. The increase in other
income/expense, net in the third quarter of 1997 is partly due to higher
effective returns resulting from the shift in investments from countries with
lower yields to countries with higher yields. The increase in other
income/expense, net in the third quarter of 1997 was also due to an increase in
average cash balances for the third quarter of 1997. The decrease in other
income/expense, net for the nine months ended September 30, 1997, is largely due
to lower effective returns in the first two quarters of 1997 and increased
volatility in currencies not hedged within the Intercontinental region in the
third quarter of 1997. The Company elected not to hedge in certain
Intercontinental countries due to the prohibitive cost of hedging in those
currencies.
14
<PAGE> 15
PROVISION FOR INCOME TAXES
(Dollars in millions)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
------- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Provision for
income taxes $3.2 $5.1 -37% $7.7 $6.0 -28%
</TABLE>
The Company recorded an income tax provision of $3.2 million in the third
quarter of 1997 compared to $5.1 million in third quarter in 1996. The Company
recorded an income tax provision of $7.7 million in the first nine months of
1997 compared to $6.0 million in first nine months in 1996.
Realization of the Company's net deferred tax assets, which totaled $41.1
million at September 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 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, or if such income is not earned in the appropriate geographic
regions, the Company's effective tax rate for the year could be adversely
impacted. See "Future Operating Results."
NET LOSS AND NET LOSS PER SHARE
(in Millions, except per share amounts)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
----- ------ ------- ------ ------ ------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C> <C>
Net loss $(6.0) $(52.6) -89% $(29.9) $(84.1) -64%
Percentage of
total revenues 3% 21% 4% 11%
Net loss per share -
basic and diluted $(0.08) $(0.69) -88% $(0.38) $(1.13) -66%
Shares used in calculation
of per share amounts 79.3 75.7 78.5 74.8
</TABLE>
As a result of the restatement of the Company's financial statements for the
three and nine months ended September 30, 1997, the Company reported a net loss
of $6.0 million for the three months ended September 30, 1997, or $0.08 per
share, compared to a net loss of $52.6 million after a $49.2 million
restructuring charge, or $0.69 per share, for the same period in 1996. The
Company reported a net loss of $29.9 million for the nine months ended September
30, 1997, or $0.38 per share, compared to a net loss of $84.1 million (after the
restructuring charge), or $1.13 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 nine months ended September 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>
Nine Nine
Months Months
Ended Ended Percent
9/30/97 9/30/96 Change
------ ------- ------
(Restated)
<S> <C> <C> <C>
Working capital $ 89.1 $ 91.0 2%
Cash, cash equivalents and
cash investments $ 230.0 $ 155.6 48%
Net cash provided (used)
by operating activities $ 53.1 $ (14.2) *
Net cash used by
investing activities $ (89.2) $(72.7) 23%
Net cash provided by
financing activities $ 65.3 $ 32.9 98%
</TABLE>
*Not meaningful
Net cash provided by operating activities was $53.1 million for the nine months
ended September 30, 1997 compared to net cash used by operating activities of
$14.2 million for the same period in 1996. Net cash provided by operating
activities during the first nine months of 1997 reflects a net loss of $29.9
million versus a loss of $84.1 million in the year ago period. Additionally,
increased net cash from operating activities reflects a decrease of accounts
receivable of $32.4 million in the first nine months of 1997 compared to an
accounts receivable increase of $25.2 million in the same period of 1996.
Accounts payable and other accrued liabilities decreased during the first nine
months of 1997, resulting in a total cash decline of $5.9 million over this
period, compared to an decrease totaling $4.8 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 $7.6 million in the first nine
months of 1997 compared to cash provided by an increase of $11.0 million in the
same period in 1996. In the first nine months of 1997, a reduction in accrued
income taxes totaled $4.1 million compared to an increase in accrued income
taxes of $2.9 million in the same period in 1996.
Net cash used for investing activities increased to $89.2 million for the nine
months ended September 30, 1997 compared to $72.7 million used for the same
period in 1996. Investing activities included capital expenditures of $31.1
million in the first nine months of 1997 compared to $69.5 million in the first
nine months of 1996, which reflects a decrease in expenditures required to
support the Company's employee base around the world. During the first nine
months of 1997, there was a net increase of cash investments in the amount of
$31.7 million compared to a net decrease of $11.5 million in the first half of
1996.
Net cash provided by financing activities for the first nine months of 1997 was
$65.3 million compared to $32.9 million in the first nine months of 1996.
Financing activities in both periods consisted of the issuance of common stock
related to 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 $40.7 million due to the restatement discussed above.
Cash, cash equivalents, and cash investments totaled $229.9 million at September
30, 1997, compared to $155.6 million at September 30, 1996.
16
<PAGE> 17
The Company engages in business operations around the world and is therefore
exposed to foreign currency fluctuations. As of September 30, 1997, the Company
had identifiable assets totaling $122 million associated with its European
operations and $110 million associated with its Intercontinental operations. The
Company has 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.
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 September 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 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.
17
<PAGE> 18
Through 1997, the Company will continue to fine-tune changes which were
initiated in the sales organization in 1996, including changes to the sales
model and 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. In the third quarter of 1997, John Chen became
the Company's President and Chief Operating Officer, and Mitchell Kertzman,
Chief Executive Officer, succeeded 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 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 recently acquired operations in Chile, Argentina, Norway
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. New or
enhanced products, many of which have been announced and many of which are
continually introduced by existing or future competitors in the software
industry, could increase the competition faced by the Company's products from
time to time and result in greater price pressure on certain of the
18
<PAGE> 19
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. For example, changes to the Company's
pricing and licensing structure in the first quarter of 1996 increased prices
for certain products, and reduced prices for others. The Company will introduce
price and licensing changes from time to time in the future. If such changes or
changes in the Company's products, or existing or future competition were to
result in significant revenue declines, the Company's business and financial
results could 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 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, including
PowerBuilder 6.0, a component-based application development tool and
PowerSite(TM), a comprehensive Web application development tool, both of which
are scheduled to become generally available in the fourth quarter 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, had been 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, 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 ("RDBMSs"). 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 RDBMSs until
certain features are added to the Company's RDBMS, and others may never be
available on Sybase's RDBMSs. 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
19
<PAGE> 20
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 that could affect customer perception. 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 future periods, by the market share of the Company's
products and by related press reports.
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 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 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 became the
Company's President and Chief Operating Officer, and Mitchell Kertzman, Chief
Executive Officer, became 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.
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
distributor in Norway at the end of the third quarter of 1997, and a small
software technology company and three distributors in Latin America in the first
half of the year. 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
20
<PAGE> 21
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
further restructuring charges 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 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.23(1) Employment Agreement between Sybase, Inc. and John
Chen dated as of July 11, 1997
11.1 Supplemental Computations of Net Loss Per Share
27 Financial Data Schedule
(1) Incorporated by reference to exhibits filed in response to Item 6(a),
"Exhibits and Reports on Form 8-K" on Form 10-Q for the quarter ended September
30, 1997.
(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
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.23(1) Employment Agreement between Sybase, Inc. and John Chen dated as of
July 11, 1997
11.1 Supplemental Computations of Net Loss Per Share
27 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to exhibits filed in response to Item 6(a),
"Exhibits and Reports on Form 8-K" on Form 10-Q for the quarter ended September
30, 1997.
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 Nine Months Ended
Ended September 30, September 30,
------------------------------ -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- --------
(Restated) (Restated) (Restated) (Restated)
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding for the period 79,282 75,748 78,456 74,755
========== ========== ========== ========
Net loss $ (5,950) $ (52,629) $ (29,903) $(84,112)
========== ========== ========== ========
Net loss per share -
basic and diluted $ (0.08) $ (0.69) $ (0.38) $ (1.13)
========== ========== ========== ========
</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 (A) THE
RESTATED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SYBASE INC. AS OF
SEPTEMBER 30, 1997 AND 1996 AND FOR THE NINE MONTH PERIODS THEN ENDED.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 180,512 124,237
<SECURITIES> 49,443 31,385
<RECEIVABLES> 200,835 239,009
<ALLOWANCES> 30,781 20,406
<INVENTORY> 0 0
<CURRENT-ASSETS> 465,543 415,887
<PP&E> 434,069 393,563
<DEPRECIATION> (271,707) (194,695)
<TOTAL-ASSETS> 777,199 721,878
<CURRENT-LIABILITIES> 376,446 324,893
<BONDS> 0 0
0 0
0 0
<COMMON> 80 76
<OTHER-SE> 398,371 391,695
<TOTAL-LIABILITY-AND-EQUITY> 777,199 721,878
<SALES> 360,533 445,618
<TOTAL-REVENUES> 680,705 743,764
<CGS> 20,769 21,665
<TOTAL-COSTS> 557,041 594,419
<OTHER-EXPENSES> 150,094 233,250
<LOSS-PROVISION> 1,136 11,209
<INTEREST-EXPENSE> 799 285
<INCOME-PRETAX> (22,180) (78,114)
<INCOME-TAX> 7,723 5,998
<INCOME-CONTINUING> (29,903) (84,112)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (29,903) (84,112)
<EPS-PRIMARY> (0.38)<F1> (1.13)
<EPS-DILUTED> (0.38) (1.13)
<FN>
<F1>REFLECTS BASIC EPS ACCORDING TO SFAS 128, EARNINGS PER SHARE
</FN>
</TABLE>
