<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 31, 1995 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities Act of
1934
COMMISSION FILE NO. 0-17754
CONSILIUM, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2523965
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
485 CLYDE AVENUE, MOUNTAIN VIEW, CA 94043
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (415) 691-6100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [_].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on January 18,
1996 as reported on the NASDAQ National Market System, was approximately
$43,454,999. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of January 18, 1996, Registrant had 7,710,812 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
This report contains 21 pages. The Exhibit Index is located on page 14.
<PAGE>
CONSILIUM, INC.
1995 FORM 10-K/A ANNUAL REPORT
Table of Contents
PART II
Item 8. Financial Statements and Supplementary Data 1
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports
on Form 8-K 14
Signatures 18
Exhibits 19
<PAGE>
Registrant hereby amends Part II, Item 8, FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA, to read in full as follows:
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Report of Independent Accountants
Board of Directors and Stockholders
Consilium, Inc.
We have audited the accompanying consolidated balance sheets of
Consilium, Inc. and subsidiaries as of October 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended October 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Consilium, Inc.
and subsidiaries as of October 31, 1995 and 1994, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended October 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 1 of the notes to the financial statements, the Company's
1995 financial statements have been restated.
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
San Jose, California
December 6, 1995, except for Note 10,
for which the date is December 15, 1995,
Note 8, for which the date is May 6, 1996, and
Note 1, for which the date is June 11, 1996.
1
<PAGE>
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended October 31,
-----------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
(Restated)
Revenues
Product $16,115 $10,588 $ 9,927
Services 15,979 14,589 15,655
Development 1,031 2,767 2,893
------- ------- -------
Total revenues 33,125 27,944 28,475
------- ------- -------
Costs and Expenses
Product 3,022 2,763 2,410
Services 4,734 4,497 5,363
Research and development 10,880 10,860 10,206
Selling and marketing 11,812 11,519 12,701
General and administrative 2,802 2,828 3,113
Restructuring charge (211) 1,407 ---
------- ------- -------
Total operating expenses 33,039 33,874 33,793
------- ------- -------
Income (loss) from operations 86 (5,930) (5,318)
------- ------- -------
Interest income 588 442 404
Interest expense (10) (35) (59)
------- ------- -------
Income (loss) before income
tax provision 664 (5,523) (4,973)
------- ------- -------
Provision for income taxes 523 725 310
------- ------- -------
Net income (loss) $ 141 $(6,248) $(5,283)
======= ======= =======
Income (loss) per share $ 0.02 $(0.85) $ (0.75)
======= ======= =======
Shares used in
per share calculations 7,912 7,362 7,025
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
October 31,
------------------
1995 1994
------- -------
<S> <C> <C>
(Restated)
Assets
Current Assets:
Cash and cash equivalents $10,686 $ 8,682
Short-term investments 1,478 3,500
Accounts receivable, net of allowance
for doubtful accounts of $650 and
$625 in 1995 and 1994, respectively 7,578 5,181
Other current assets 1,055 1,055
------- -------
Total current assets 20,797 18,418
Property & equipment, net 2,425 2,351
Software production costs, net 5,121 5,524
Other assets 325 705
------- -------
Total assets $28,668 $26,998
======= =======
Liabilities
Current liabilities:
Accounts payable $ 1,800 $ 1,209
Other current liabilities and accrued expenses 4,364 4,589
Deferred revenue 5,621 4,962
Capital lease obligation --- 313
------- -------
Total current liabilities 11,785 11,073
Deferred revenue 1,325 1,846
Deferred income taxes 158 348
Accrued lease obligation 17 85
------- -------
Total liabilities 13,285 13,352
------- -------
Commitments and contingencies (Notes 3, 8 and 10)
Stockholders' Equity
Preferred stock, $.01 par value
Authorized: 4,000,000 shares
Issued and outstanding: no shares in 1995 and 1994 --- ---
Common stock, $.01 par value
Authorized: 25,000,000 shares:
Issued and outstanding: 7,695,655
in 1995 and 7,428,651 in 1994 77 74
Additional paid-in capital 23,337 21,744
Accumulated deficit (8,031) (8,172)
------- -------
Total stockholders' equity 15,383 13,646
------- -------
Total liabilities and
stockholders' equity $28,668 $26,998
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Retained
Earnings /
Common Stock Additional (Accumulated
(In thousands) Shares Amount Paid-in Capital Deficit) Total
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
BALANCES, NOVEMBER 1, 1992 6,958 $ 70 $19,763 $ 3,359 $23,192
- -----------------------------------------------------------------------------------------------------------------------
Issuance of stock pursuant to employee
stock purchase plan 121 1 749 --- 750
Exercise of common stock options for cash 141 1 176 --- 177
Net loss --- --- --- (5,283) (5,283)
- -----------------------------------------------------------------------------------------------------------------------
BALANCES, OCTOBER 31, 1993 7,220 72 20,688 (1,924) 18,836
- -----------------------------------------------------------------------------------------------------------------------
Issuance of stock pursuant to employee
stock purchase plan 142 1 738 --- 739
Exercise of common stock options for cash 67 1 318 --- 319
Net loss --- --- --- (6,248) (6,248)
- -----------------------------------------------------------------------------------------------------------------------
BALANCES, OCTOBER 31, 1994 7,429 74 21,744 (8,172) 13,646
- -----------------------------------------------------------------------------------------------------------------------
Issuance of stock pursuant to employee
stock purchase plan 136 1 708 --- 709
Exercise of common stock options for cash 131 2 885 --- 887
Net income --- --- --- 141 141
- -----------------------------------------------------------------------------------------------------------------------
BALANCES, OCTOBER 31, 1995 (Restated) 7,696 $ 77 $23,337 $(8,031) $15,383
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended October 31,
1995 1994 1993
------- ------- -------
(In thousands) (Restated)
- ----------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 141 $(6,248) $(5,283)
------- ------- -------
Adjustments to reconcile net income(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,332 3,162 3,053
Provision for doubtful accounts receivable 324 188 699
Change in assets and liabilities:
Accounts receivable (2,721) 1,085 (210)
Other assets 190 (654) 1,043
Accounts payable 591 (321) (306)
Deferred revenue 138 714 1,574
Other liabilities and accrued expenses (293) 1,550 310
------- ------- -------
Total adjustments 1,561 5,724 6,163
------- ------- -------
Net cash provided by (used in) operating activities 1,702 (524) 880
------- ------- -------
Cash flows from investing activities:
Capital expenditures (1,543) (663) (722)
Capitalized software production costs (1,460) (1,662) (1,842)
Purchases of short-term investments (1,708) (3,502) (9,469)
Sales of short-term investments 3,730 7,204 15,010
------- ------- -------
Net cash (used for) provided by investing activities (981) 1,377 2,977
------- ------- -------
Cash flows from financing activities:
Issuance of common stock and other 1,596 1,058 927
Principal payments on capital leases (313) (382) (362)
------- ------- -------
Net cash provided by financing activities 1,283 676 565
------- ------- -------
Net increase in cash and cash equivalents 2,004 1,529 4,422
------- ------- -------
Cash and cash equivalents at beginning of period 8,682 7,153 2,731
------- ------- -------
Cash and cash equivalents at end of period $10,686 $ 8,682 $ 7,153
------- ------- -------
Supplemental cash flow information:
Cash paid for:
Interest $ 10 $ 35 $ 59
Income taxes paid (refunded) $ 13 $ 12 $ (340)
Equipment acquired under capital leases $ --- $ --- $ 235
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
Notes to Consolidated Financial Statements
- ------------------------------------------
Note 1: Summary of Significant Accounting Policies:
------------------------------------------
Consilium, Inc. was incorporated in October 1978 and designs and licenses
integrated manufacturing execution systems (MES) software for the manufacturing
plant floor. The Company also markets consulting, implementation and training
services for its software products.
Principles of Consolidation: The consolidated financial statements include the
- ---------------------------
accounts of Consilium, Inc. and its wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated.
Cash and Cash Equivalents: The Company considers all highly liquid investments
- -------------------------
purchased with a maturity of three months or less to be cash equivalents. At
October 31, 1995, the Company maintained substantially all of its cash and cash
equivalents with three financial institutions.
Short-Term Investments: On November 1, 1994, the Company adopted the provisions
- ----------------------
of Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." In accordance with the Statement,
prior period consolidated financial statements have not been restated to reflect
the change in accounting principle. The impact of adopting Statement No. 115
did not have a material effect on the consolidated financial statements.
Short-term investments consist of debt securities with a remaining
maturity of more than three months when purchased. The Company has determined
that all of its debt securities should be classified as available for sale. The
difference between the cost basis and the market value of the Company's
investments was not material at October 31, 1995. All of the Company's
investments at October 31, 1995 consist of commercial paper with remaining
maturities of less than one year.
Depreciation and Amortization: Property and equipment are stated at cost and
- -----------------------------
depreciated on a straight-line basis over estimated useful lives of five years.
Leasehold improvements are amortized over their estimated useful lives or the
remaining term of the related lease, if shorter.
Software Production Costs: Costs incurred prior to establishment of
- -------------------------
technological feasibility are charged to research and development expense.
Thereafter, the Company capitalizes certain costs, consisting of salaries,
related benefits and an allocation of indirect costs, incurred internally in
creating computer software. Software production costs are capitalized until the
software is available for general release. Amortization is provided on the
basis of license revenues recognized during the year to total anticipated
license revenues; however, the annual amortization expense, at a minimum, will
not be less than 20% of the capitalized costs. Research and development costs
incurred to improve and enhance existing software are charged to expense as
incurred.
Revenue Recognition: The Company licenses standard application software
- -------------------
programs and offers annual maintenance contracts that provide for technical
support and updates to software modules. Product license revenue is generally
recognized upon receipt of a customer purchase order, execution of a software
license agreement and shipment of a product to the customer. However, with
respect to sales made through foreign distributors or systems integrators,
revenue is recognized either upon resale by the distributor to the end user or
upon installation of the software at the end user's facility. Revenue from
development and porting contracts is generally recognized using the percentage
of completion method of accounting. Revenue from customer maintenance contracts
is recognized ratably over the period of the contract. Payments for maintenance
contracts are generally made for the upcoming year and are non-refundable.
Service revenue is recognized as work is performed.
6
<PAGE>
Advertising Costs: Advertising costs are charged to operations as incurred.
- -----------------
Advertising costs were $470,000, $503,000 and $453,000 in fiscal years 1995,
1994 and 1993.
Income Taxes: Effective November 1, 1993, the Company adopted Financial
- ------------
Accounting Standards Statement No. 109, "Accounting for Income Taxes." Under
Statement 109, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized. Prior to the adoption of Statement 109, income tax expense was
determined using the deferred method in accordance with Accounting Principles
Board Opinion No. 11.
Foreign Currencies: The functional currency of the Company's wholly owned
- ------------------
subsidiaries is the U.S. dollar. Translation gains and losses are included in
the statement of operations.
Concentrations of Credit Risk: A significant portion of the Company's sales and
- -----------------------------
receivables are from customers in the semiconductor, electronics, pharmaceutical
and chemical industries. The Company maintains allowances for doubtful accounts
receivable and does not require collateral. Short term investments are
comprised primarily of taxable notes and municipal bonds with maturities not
exceeding six months. The Company has investment policies and performs ongoing
credit evaluations to minimize credit risk.
Computation of Income/Loss per Share: Net income per common share is computed
- ------------------------------------
using the weighted average number of common and dilutive common equivalent
shares outstanding during the period. Dilutive common equivalent shares consist
of the dilutive effect of stock options as computed using the treasury stock
method. Net loss per share is based on the weighted average number of common
shares outstanding during the period. Stock options have not been included in
the calculation of common equivalent shares for loss per share as their
inclusion would be antidilutive.
Recent Accounting Pronouncements: During March 1995, the Financial Accounting
- --------------------------------
Standards Board issued Statement No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." This
standard is effective for the Company's 1997 fiscal year and its adoption is not
expected to have a material effect on the financial statements of the Company.
During October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation." This
standard, which established a fair value based method of accounting for stock-
based compensation plans, also permits an election to continue following
the requirements of APB Opinion No. 25, "Accounting for Stock Issued to
Employees" with disclosures of pro forma net income and earnings per share under
the new method. The Company is reviewing the implications of SFAS No. 123 and
evaluating the effect, if any, on the financial condition and results of
operations of the Company. SFAS No. 123 will be effective for the Company's
fiscal year 1997.
Reclassifications: Certain reclassifications were made to prior year amounts to
- -----------------
conform to the 1995 presentation. These reclassifications did not change the
previously reported net income (loss), total assets or total cash flows of the
Company for those years.
Restatement: During April 1996, the Company discovered that one of its sale
- -----------
representatives had falsified certain sales documents related to sales
transactions that had been recorded as revenue during the fourth quarter of
fiscal 1995. The Company has reduced revenues for the erroneously recorded
transactions and has reduced bonuses payable to certain officers of the Company
to the extent the
7
<PAGE>
bonuses had been overpaid to such officers of the Company as a result of the
error in the consolidated financial statements.
Accordingly, the Company has restated its financial statements for the
year ended October 31, 1995. The restatement has resulted in a reduction of
previously reported consolidated net sales by $732,000 in fiscal 1995 and a
reduction in previously recorded net income of $486,000. A comparison of
certain amounts as previously reported and as restated is presented below.
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
- ----------------------------------------
Year ended October 31, 1995
As Reported As Restated
----------- -----------
<S> <C> <C>
Total revenues $33,857 $33,125
Income (loss) before taxes 1,150 664
Provision (benefit) for income taxes 523 523
Net income (loss) 627 141
Income (loss) per share 0.08 0.02
Shares used in per share calculations 7,912 7,912
Working capital 9,498 9,012
Total assets 29,437 28,668
Long-term debt, less current portion 0 0
Stockholders' equity 15,869 15,383
</TABLE>
Note 2: Balance Sheet Detail:
--------------------
<TABLE>
<CAPTION>
Property and Equipment:
- ----------------------
October 31,
(In thousands) 1995 1994
- -------------- -------------------
<S> <C> <C>
Computer equipment $ 8,136 $ 6,934
Office equipment 2,040 2,043
Purchased software 1,965 1,733
Leasehold improvements 736 723
-------- -------
12,877 11,433
======== =======
Less accumulated depreciation and amortization (10,452) (9,082)
--------- --------
$ 2,425 $ 2,351
========= ========
</TABLE>
Property and equipment at October 31, 1995 and 1994 includes computer
equipment acquired under capital leases of $1,131,000 (accumulated amortization
of $1,131,000 and $819,000, respectively).
<TABLE>
<CAPTION>
Software Production Costs:
- --------------------------
October 31,
(In thousands) 1995 1994
- -------------- ------------------------
<S> <C> <C>
Software production costs $ 16,325 $14,865
Less accumulated amortization (11,204) (9,341)
-------- -------
$ 5,121 $ 5,524
======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 1995 1994 1993
- -------------- --------------------------------
<S> <C> <C> <C>
Software production costs
capitalized $1,460 $1,662 $1,842
Annual amortization of software
production costs $1,863 $1,809 $1,578
</TABLE>
Other Current Liabilities and Accrued Expenses:
- ----------------------------------------------
<TABLE>
<CAPTION>
October 31,
(In thousands) 1995 1994
- -------------- ------ ------
<S> <C> <C>
Accrued compensation $2,023 $1,105
Employee stock purchase plan withholdings 326 302
Other 1,009 2,161
Accrued taxes 1,006 1,021
------ ------
$4,364 $4,589
====== ======
</TABLE>
Note 3: Commitments:
-----------
Operating Leases: The Company leases its headquarters, research and development
- ----------------
facility, sales offices and certain equipment under noncancelable operating
leases for periods of up to twenty-five years. Certain facility leases provide
for monthly rentals of approximately $66,000, subject to increases in the
Consumer Price Index, or 5% annual increases, and continue through January 1996.
Under these agreements, the Company is responsible for property taxes, insurance
and maintenance. During August 1995, the Company entered into a lease for a new
headquarters facility with monthly rental payments beginning February 1996 of
approximately $55,000, subject to increases in the Consumer Price Index, to a
maximum of 5% annual increase.
Future minimum lease payments under operating leases at October 31,
1995, are as follows:
<TABLE>
<CAPTION>
Year Ending October 31,
- -----------------------
<S> <C>
(in thousands)
- --------------
1996 $1,075
1997 934
1998 891
1999 901
2000 798
Thereafter 2,638
------
Total minimum lease payments $7,237
======
</TABLE>
Rental expense was approximately $1,245,000, $1,577,000, and
$1,349,000 for the years ended October 31, 1995, 1994, and 1993, respectively.
Note 4: Capital Stock:
-------------
Employee Stock Purchase Plan: On March 15, 1989, the Board of Directors adopted
- ----------------------------
an employee stock purchase plan (the "Purchase Plan") and initially reserved a
total of 250,000 shares of Common Stock of the Company. In March 1993, the
number of shares reserved for issuance
9
<PAGE>
under the Plan was increased by 250,000. The Company again increased the number
of shares reserved for issuance under the Plan from 500,000 to 680,000 shares in
March 1994. Under the Plan, employees may purchase common stock through payroll
deductions at 85% of the lesser of the fair market value on the first or last
day of six month offering periods. At October 31, 1995, a total of 111,351
shares remained available for purchase under the plan.
Employee Stock Option Plans: The Company increased the number of shares
- ---------------------------
reserved for issuance under its 1983 stock option plan from 2,000,000 to
2,320,000 in March 1994. 418,056 shares were available for future grants as of
October 31, 1995. In March 1993, the Company adopted its 1993 stock option plan
under which options for a total of 500,000 shares of Common Stock may be granted
to employees other than executive officers of the Company. 1,974 shares were
available for future grants as of October 31, 1995. Under the 1983 and 1993
plans, both qualified and non-qualified options may be granted to employees to
purchase Common Stock at prices not less than fair market value at date of
grant. The exercise period is determined by the Board of Directors at the date
of grant. All options granted under the Plan are exercisable immediately and
generally expire five years from date of grant. Options generally vest over
four years and, if exercised prior to vesting, are subject to repurchase at the
original purchase price. At October 31, 1995, a total of 401,380 options were
vested.
On September 21, 1993, the Board of Directors approved the repricing
of all employee stock options previously granted with exercise prices greater
than $6.125 per share. A total of 631,124 shares were repriced at $6.125 per
share. The Board of Directors agreed to the repricing with the condition that
all grants would begin re-vesting on September 21, 1993.
Activity under the 1983 and 1993 Employee Stock Option Plans is as
follows:
<TABLE>
<CAPTION>
(In thousands)
- --------------
Number Price Aggregate
of Shares per Share Price
--------------------------------------
<S> <C> <C> <C>
Balance at November 1, 1992 701 $ .75-$18.75 $ 6,375
Granted 791 $6.125-$10.00 9,633
Exercised (141) $ .75-$7.25 (172)
Canceled (185) $4.875-$17.25 (7,945)
- -----------------------------------------------------------------------
Balance at October 31, 1993 1,166 $ .75-$18.75 $ 7,891
Granted 319 $ 4.50-$8.75 2,221
Exercised (67) $ .75-$7.25 (316)
Canceled (320) $6.125-$18.75 (2,459)
- -----------------------------------------------------------------------
Balance at October 31, 1994 1,098 $ 4.50-$15.00 $ 7,337
Granted 438 $6.375-$12.14 3,521
Exercised (131) $ 4.50-$8.75 (887)
Canceled (215) $ 4.50-$12.50 (1,635)
- -----------------------------------------------------------------------
Balance at October 31, 1995 1,190 $ 4.50-$12.50 $ 8,336
</TABLE>
Outside Director Stock Option Plan: In 1990, the Company adopted a stock
- ----------------------------------
option plan under which options for a total of up to 100,000 shares of Common
Stock may be granted to non-executive directors of the Company. The plan
provides for the granting of nonqualified stock options at prices not less than
fair market value on the date of grant. Options expire 10 years after the date
of grant. At October 31, 1995, a total of 32,500 options had been granted at
exercise prices ranging between $6.125 and $8.50 per share, of which none were
exercised. In addition, the Company has separate option agreements with non-
executive directors which totaled 27,500 shares at an exercise price of $6.25
per share as of October 31, 1995.
10
<PAGE>
Note 5: Income Taxes:
------------
As discussed in Note 1, the Company adopted Statement of Financial Accounting
Standards No. 109 as of November 1, 1993. The cumulative effect of adoption of
Statement 109 was not material to the Company's results of operations or
financial position for the year ended October 31, 1994. Prior periods were not
restated.
The provision for income taxes consists of foreign withholding taxes.
The reconciliation between the provision for taxes calculated at the
effective tax rate and at the statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
Years Ended October 31,
1995 1994 1993
--------------------------
<S> <C> <C> <C>
Federal income tax statutory rate 34.0% (34.0%) (34.0%)
Foreign taxes 45.5% 13.1% 6.2%
Operating losses (34.0%) 34.0% 34.0%
----- ----- -----
Effective tax rate 45.5% 13.1% 6.2%
===== ===== =====
</TABLE>
The following table shows the major components of the deferred tax
assets and liabilities as of October 31, 1995 and 1994:
<TABLE>
<CAPTION>
(In thousands)
- --------------
Current deferred tax assets: 1995 1994
----- -------
<S> <C> <C>
Accounts receivable, inventory
and other reserves $ 221 $ 513
Accrued expenses 184 689
Deferred revenue 282 580
Valuation allowance (529) (1,434)
----- -------
Net current deferred tax assets $ 158 $ 348
===== =======
Non current deferred tax assets (liabilities):
Net operating losses $ 5,124 $4,605
Tax credit carryforwards 4,515 3,440
Depreciation (357) (180)
Amortization (2,089) (2,185)
Other 222 444
Valuation allowance (7,573) (6,472)
------ -------
Net non-current liability ($ 158) ($348)
====== ======
</TABLE>
Deferred income taxes included in other current assets at
October 31, 1995 and 1994 were $158,000 and $348,000, respectively. The Company
has recorded a valuation allowance against its net deferred tax assets due to
the uncertainty surrounding the realization of such assets. Management
evaluates on a quarterly basis the recoverability of the deferred tax assets and
the level of the valuation allowance. At such time as it is determined that it
is more likely than not that the deferred tax assets are realizable, the
valuation allowance will be reduced.
11
<PAGE>
At October 31, 1995, the Company has federal net operating loss
carryforwards of approximately $14,075,000 and state net operating loss
carryforwards of approximately $5,500,000. In addition, the Company has
approximately $4,160,000 and $350,000 in general business credit carryforwards
for federal tax and state tax reporting purposes, respectively.
These carryforwards and credits expire between 1996 and 2010 for both
federal and state purposes, if not used before such time to offset future
taxable income or taxes payable.
Note 6: Geographic and Significant Customer Information:
-----------------------------------------------
The Company designs and licenses integrated manufacturing execution systems
(MES) software for batch process and discrete manufacturers and operates
primarily in one segment. The Company markets and services its products in the
United States and foreign countries through its direct sales organization and
through distributors.
The Company's foreign operations primarily consist of product sales
and services. Geographic net revenue information is as follows:
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 1995 1994 1993
- -------------- ---------------------------
<S> <C> <C> <C>
North America $21,919 $19,168 $20,893
Asia/Pacific Rim 25,147 3,834 2,387
Europe 6,059 4,942 5,195
------ ------- -------
Total net revenue $33,125 $27,944 $28,475
======= ======= =======
</TABLE>
No customer accounted for more than 10% of total revenue for fiscal
1995. Two customers accounted for 11% and 10%, respectively, of total revenue
in fiscal 1994. One other customer accounted for 11% of total revenue in fiscal
1993.
Note 7: Employee Benefit Plan:
---------------------
The Company has a 401(k) plan for eligible employees. The Board of Directors
may elect to make a discretionary contribution to the plan. There were no such
contributions in fiscal 1995, 1994, or 1993.
Note 8: Litigation:
----------
In a one paragraph letter dated May 6, 1996, Honeywell Inc. ("Honeywell")
informed the Company that, although it remains willing to resolve matters
amicably, Honeywell believes it has claims against the Company for
misrepresentation, breach of contract and fraud, and that Honeywell will be left
with no alternative but litigation unless satisfactory progress is made toward
resolution. The contract involved was entered into in April of 1993, and is a
distribution and license agreement under which Honeywell paid the Company
$4,000,000 as a non-refundable pre-paid license fee in the Company's 1993 fiscal
year. The Company believes these assertions are utterly without merit and that
the Company has performed in keeping with both the letter and spirit of its
contract with Honeywell. The Company has informed Honeywell to that effect. At
present, the Company is evaluating Honeywell's claims with counsel along with
possible claims it may have against Honeywell. The Company hopes that the
matter can, as the Honeywell letter suggests, be resolved amicably.
12
<PAGE>
In the ordinary course of business, other various legal actions and claims
pending have been filed against the Company. In the opinion of management, the
ultimate liability, if any, with respect to these matters, will not materially
affect the results of operations or financial position of the Company.
Note 9: Restructuring Charge:
--------------------
During the third quarter of fiscal 1994, the Company announced a worldwide
consolidation of its operations and recorded a restructuring charge of
$1,407,000. The consolidation primarily affected several field offices. Major
cost components associated with the restructuring were severance pay amounts for
terminated employees, lease and rental costs associated with the consolidation
of sales offices and the consolidation of operations at the Company's
headquarters facilities. The balance was comprised of fixed asset write-offs in
the offices affected, as well as travel and legal fees. The consolidation was
designed to improve efficiencies and bring operational expenses in line with
revenues.
Between the third quarter of 1994 and the second quarter of 1995, the
Company utilized $1,196,000 for various restructuring activities. During the
third quarter of fiscal 1995, the Company reevaluated the status of its
restructuring activities in light of results of operations that had improved
substantially since the commencement of the restructuring. As a result of that
reevaluation, the Company decided to discontinue subsequent restructuring
activities and reversed the remaining restructuring reserve of $211,000. No
reserve amount remains at October 31, 1995.
Note 10: Subsequent Event:
----------------
On December 15, 1995, the Company entered into an agreement with Electronic Data
Systems Corporation to out-source the Company's computer data center and
telecommunication services. The contract has a 10-year term beginning December
1995. In the event the Company decides to terminate the contract before the
expiration of the term, the Company will be required to pay a termination fee
depending on the termination date, as stated in the agreement.
The table below sets out the obligations under this contract:
<TABLE>
<CAPTION>
Service Termination
Fiscal Year Obligation Fee
- ----------- ---------- -----------
<S> <C> <C>
1996 $ 1,396,000 $900,000
1997 2,747,000 800,000
1998 2,874,000 600,000
1999 2,950,000 500,000
2000 3,028,000 300,000
Thereafter 16,581,000 150,000
-----------
Total Service Obligations $29,576,000
===========
</TABLE>
13
<PAGE>
PART IV
The Registrant hereby amends Part IV, Item 14, EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K, to read in full as follows:
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) The following documents are filed as part of this Report:
1. Financial Statements.
---------------------
Report of Independent Accountants dated December 6, 1995, December 15,
1995, May 6, 1996 and June 11, 1996.
Consolidated Statements of Operations -- Years Ended October 31, 1995,
1994 and 1993.
Consolidated Balance Sheets -- October 31, 1995 and 1994.
Consolidated Statements of Stockholders' Equity -- Years Ended October 31,
1995, 1994, and 1993.
Consolidated Statements of Cash Flows -- Years Ended October 31, 1995,
1994 and 1993.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedule. The following financial statement schedule
----------------------------
of Consilium, Inc. is filed as part of this Report and should be read in
conjunction with the Consolidated Financial Statements of Consilium, Inc.
Report of Independent Accountants on Financial
Statement Schedule Page S-1
Schedule II -- Valuation and Qualifying Accounts Page S-2
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
Consolidated Financial Statements or notes thereto.
3. Exhibits (a)
------------
Exhibit
Number Exhibit Title
------- -------------
3.1 Certificate of Incorporation of the Company. /3/
3.2 By-Laws of the Company. /3/
14
<PAGE>
10.1 Lease agreement dated November 28, 1988, among the
Company and John Arrillaga, Trustee of the John Arrillaga
Separate Trust and Richard T. Peery, Trustee of the Richard
T. Peery Separate Property Trust. /1/
10.2 Master Lease Agreement, dated December 2, 1988, between
the Company and General Electric Capital Corporation, with
schedules. /1/
10.3 Letter Agreement, dated July 22, 1987, with respect to the
employment of Thomas Tomasetti. /1,6/
10.4 Lease agreement paperwork for the 630 Clyde Court facility,
dated March 6, 1990, among the Company and Santa Clara
Property Associates. /2/
10.5 Agreement between the Company and Honeywell, Inc.,
Industrial Automation and Control, dated April 1, 1993. /3,5/
10.6 Form of Director and Officer Indemnity Agreement. /4,6/
10.7 Amended and Restated 1983 Stock Option Plan. /6,#/
10.8 Forms of Stock Option Agreement used in conjunction with
the 1983 Stock Option Plan. /6,#/
10.9 1990 Outside Director's Stock Option Plan. /6,#/
10.10 Forms of Outside Directors Stock Option Agreement used in
conjunction with the 1990 Outside Director's Stock Option
Plan. /6,#/
10.11 Lease agreement for the Company's principal facility,
dated August 2, 1995, among the Company and The Prudential
Insurance Company of America. /#/
10.12 Letter Agreement, dated August 5, 1994, with respect to
the employment of Edward Norton. /6,#/
10.13 Letter Agreement, dated September 28, 1994, with respect
to the employment of Richard Van Hoesen. /6,#/
11.1 Statement re Computation of Income (Loss) per Share. /#/
21.1 Schedule of Subsidiaries. /#/
23.1 Consent of Independent Accountants.
24.1 Power of Attorney. /#/
27 Financial Data Schedule (available in EDGAR format only).
/1/ Incorporated by reference from exhibits of the same number
in Registrant's Registration Statement on Form S-1 (File No. 33-27947),
effective May 9, 1989.
15
<PAGE>
/2/ Incorporated by reference from exhibit 10.3 to Registrant's
Annual Report on Form 10-K filed for the Year ended October 31, 1990.
/3/ Incorporated by reference from exhibits 3.1, 3.2 or 10.19 to
Registrant's Quarterly Report on Form 10-Q filed for the Quarter ended
April 30, 1993.
/4/ Incorporated by reference from exhibit 10.6 to Registrant's Quarterly
Report on Form 10-Q for the Quarter ended July 31, 1994.
/5/ The Securities and Exchange Commission has granted confidential treatment
for portions of this document.
/6/ Compensatory or employment arrangement.
/#/ Previously filed with Registrant's Annual Report on Form 10-K for the
Year ended October 31, 1995.
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the last quarter
of the fiscal year ended October 31, 1995.
16
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Consilium, Inc., on Form S-8 (File Nos. 33-30381, 33-30382, 33-35363, 33-41312,
33-63346, 33-63512, 33-79474 and 33-79458) of our reports dated December 6,
1995, except for Note 10, for which the date is December 15, 1995, Note 8, for
which the date is May 6, 1996, and Note 1, for which the date is June 11, 1996,
on our audits of the consolidated financial statements and financial statement
schedule of Consilium, Inc., as of October 31, 1995 and 1994 and for each of the
three years in the period ended October 31, 1995, which reports are included in
this Form 10-K.
s/s Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
San Jose, California
July 11, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<CASH> 10,686
<SECURITIES> 0
<RECEIVABLES> 8,228
<ALLOWANCES> 650
<INVENTORY> 0
<CURRENT-ASSETS> 20,797
<PP&E> 2,425
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,668
<CURRENT-LIABILITIES> 11,785
<BONDS> 0
0
0
<COMMON> 15,383
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,668
<SALES> 33,125
<TOTAL-REVENUES> 33,125
<CGS> 7,756
<TOTAL-COSTS> 7,756
<OTHER-EXPENSES> 25,283
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10)
<INCOME-PRETAX> 664
<INCOME-TAX> 523
<INCOME-CONTINUING> 86
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0
</TABLE>
