SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period ended October 1, 1995
or
[ ] 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 0-15325
INFORMIX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3011736
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4100 Bohannon Drive, Menlo Park, CA 94025
415-926-6300
(Address of Principal Executive Offices, including zip code:
registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No .
At October 27, 1995, 134,566,906 shares of the Registrant's Common Stock
were outstanding.
Total number of pages 17.
PART I. FINANCIAL INFORMATION
<TABLE>
INDEX
<CAPTION>
Item Page
<S> <C>
(1) Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the three
and nine month periods ended October 1, 1995 and October 2, 1994 3
Condensed Consolidated Balance Sheets as of October 1, 1995 and
December 31, 1994 4
Condensed Consolidated Statements of Cash Flows for the nine month
periods ended October 1, 1995 and October 2, 1994 5
Notes to Condensed Consolidated Financial Statements 6
(2) Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
</TABLE>
<TABLE>
INFORMIX CORPORATION and Subsidiaries
Condensed Consolidated Statements of Income
<CAPTION>
(in thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
October 1, October 2, October 1, October 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net revenues:
Licenses $135,572 $ 88,230 $369,120 $245,996
Services 44,951 28,613 122,795 72,633
180,523 116,843 491,915 318,629
Costs and expenses:
Cost of software distribution 8,958 6,287 24,975 16,741
Cost of services 22,855 12,510 61,996 33,118
Sales and marketing 76,670 48,587 210,824 134,807
Research and development 21,206 15,907 57,717 43,897
General and administrative 11,940 8,139 34,975 24,847
141,629 91,430 390,487 253,410
Operating income 38,894 25,413 101,428 65,219
Interest income 2,226 1,031 5,563 2,720
Interest expense (319) (44) (538) (213)
Other income/(expense), net (352) (478) (56) (1,539)
Income before income taxes 40,449 25,922 106,397 66,187
Income taxes 15,168 9,332 39,898 23,827
Net income $ 25,281 $ 16,590 $ 66,499 $ 42,360
Net income per share:** $ 0.18 $ 0.12 $ 0.48 $ 0.32
Weighted average number of common and common
equivalent shares outstanding:** 140,038 133,918 139,000 134,188
</TABLE>
** Share and per-share amounts applicable to the prior periods have been
restated to reflect the two-for-one stock split (effected in the form of
a stock dividend) which was effective June 26, 1995.
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
INFORMIX CORPORATION and Subsidiaries
Condensed Consolidated Balance Sheets
<CAPTION>
(in thousands)
October 1, December 31,
1995 1994
(Unaudited)
(Note)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $123,291 $131,882
Short-term investments 87,848 59,644
Accounts receivable, net 171,807 131,548
Deferred taxes 9,978 9,978
Other current assets 20,933 14,964
Total current assets 413,857 348,016
Property and equipment, net 67,189 44,121
Software costs 34,815 24,681
Deferred taxes 7,651 7,651
Long-term investments 9,702 4,477
Intangible assets 42,317 6,089
Other assets 18,615 9,375
Total assets $594,146 $444,410
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,187 $ 18,737
Accrued expenses 30,416 27,784
Accrued employee compensation 41,830 33,777
Income taxes payable 47,275 17,725
Deferred taxes 1,612 1,612
Deferred revenue 61,568 48,580
Other liabilities 10,946 5,337
Total current liabilities 217,834 153,552
Deferred taxes 14,595 14,692
Other liabilities 1,330 522
Stockholders' equity:
Common stock 1,345 655
Additional paid-in capital 156,603 139,897
Retained earnings 202,524 136,025
Unrealized gain on available-for-sale
securities, net of tax 4,636 665
Foreign currency translation adjustment (4,721) (1,598)
Total stockholders' equity 360,387 275,644
Total liabilities and stockholders' equity $594,146 $444,410
</TABLE>
(Note) Derived from audited financial statements
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
INFORMIX CORPORATION and Subsidiaries
Condensed Consolidated Statements of Cash Flows
<CAPTION>
(in thousands)
(Unaudited)
Three months ended Nine months ended
October 1, October 2,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 66,499 $42,360
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Depreciation and amortization 20,294 11,375
Amortization of capitalized software 8,465 5,467
Deferred tax expense 0 450
Provisions for losses on accounts receivable 4,742 1,707
Foreign currency transaction gain (3,688) (2,359)
Changes in operating assets and liabilities:
Accounts receivable (46,066) 45
Other current assets (8,004) (4,811)
Accounts payable and accrued expenses 48,238 13,014
Deferred revenue 12,993 5,124
Net cash and cash equivalents provided by
operating activities 103,473 72,372
INVESTING ACTIVITIES
Purchases of held-to-maturity securities (124,204) (87,554)
Purchases of available-for-sale securities (189) (104,901)
Maturities of held-to-maturity securities 64,273 134,783
Sales of available-for-sale securities 26,690 68,465
Purchase of property and equipment (35,952) (19,698)
Additions to software costs (18,599) (10,249)
Business combinations, net of cash acquired (41,709) 0
Other (3,071) (8,919)
Net cash and cash equivalents used in investing
activities (132,761) (28,073)
FINANCING ACTIVITIES
Proceeds from issuance of stock 17,396 469
Principal payments on capital leases, net (1,063) (876)
Acquisition of common stock 0 (22,139)
Proceeds from reissuance of treasury stock 0 6,871
Net cash and cash equivalents provided by (used in)
financing activities 16,333 (15,675)
Effect of exchange rate changes on cash and cash
equivalents 4,364 1,170
Increase (decrease) in cash and cash equivalents (8,591) 29,794
Cash and cash equivalents at beginning of period 131,882 67,329
Cash and cash equivalents at end of period $123,291 $97,123
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
INFORMIX CORPORATION and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 1, 1995
(Unaudited)
Note A - Presentation of Interim Financial Statements
All significant adjustments, in the opinion of management, which are
normal, recurring in nature and necessary for a fair presentation of
the financial position and results of the operations of the Company and
its subsidiaries, have been consistently recorded. The operating
results for the interim periods presented are not necessarily indicative
of expected performance for the entire year.
Note B - Net Income Per Share
Net income per share is based on the weighted average number of common
and dilutive common equivalent shares outstanding during each period.
All stock options are considered common stock equivalents and are
included in the weighted average computations when the effect is
dilutive.
<TABLE>
Note C - Stockholders' Equity
<CAPTION>
Reconciliation of outstanding shares:
<S> <C>
Shares outstanding at July 2, 1995 133,640,097
Shares issued upon exercises of stock options 824,697
Shares sold under terms of the Employee Stock Purchase Plan 55,386
Shares outstanding at October 1, 1995 134,520,180
All share and per-share amounts applicable to the prior periods have
been restated to reflect the two-for-one stock split, effected in the
form of a stock dividend, which was effective June 26, 1995.
</TABLE>
Note D - Business Combinations
In January 1995, the Company acquired a 90 percent interest in the
database division of ASCII Corporation, a distributor of its products in
Japan. The Company will acquire the remaining 10 percent in January
1996. This acquisition has been accounted for as a purchase. The
purchase price of this business was approximately $46.0 million, of
which $34.8 million has been allocated to intangible assets acquired
which are being amortized over a weighted average life of seven years.
The operating results of this business have not been material in
relation to those of the Company and are included in the Company's
consolidated results of operations from the date of acquisition.
In April 1995, the Company acquired an 80 percent interest in the
database division of Daou Corporation, a distributor of its products in
Korea. The Company will acquire the remaining 20 percent by January
1997. This acquisition has been accounted for as a purchase. The
purchase price of this business was approximately $4.6 million, of which
$4.0 million has been allocated to intangible assets acquired which are
being amortized over a weighted average life of seven years. The
operating results of this business have not been material in relation to
those of the Company and are included in the Company's consolidated
results of operations from the date of acquisition.
Note E - Subsequent Event
In October 1995, the Company acquired Stanford Technology Group (STG), a
U.S.-based company that provides on-line analytical processing
technology, for approximately 570,000 shares of its common stock. The
transaction will be accounted for as a pooling of interests. Since the
operating results of STG are insignificant to the Company, prior period
annual and quarterly financial statements of the Company will not be
restated for this transaction. The Company's results of operations for
the year ended December 31, 1995 will include the results of operations
of STG for such year, all of which will be recorded in the fourth
quarter.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The following table sets forth operating results as a percentage of net
revenues for the three and nine month periods ended October 1, 1995 and
October 2, 1994, respectively.
<TABLE>
<CAPTION>
Percent of Net Revenues
Three months ended Nine months ended
October 1, October 2, October 1, October 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET REVENUES:
Licenses 75% 76% 75% 77%
Services 25% 24% 25% 23%
Total net revenues 100% 100% 100% 100%
COSTS AND EXPENSES:
Cost of software distribution 5% 5% 5% 5%
Cost of services 12% 11% 12% 11%
Sales and marketing 42% 41% 43% 42%
Research and development 12% 14% 12% 14%
General and administrative 7% 7% 7% 8%
Total operating expenses 78% 78% 79% 80%
OPERATING INCOME 22% 22% 21% 20%
INTEREST INCOME 1% 1% 1% 1%
INTEREST EXPENSE 0% 0% 0% 0%
OTHER EXPENSE, NET (0%) (1%) (0%) (0%)
INCOME BEFORE INCOME TAXES 23% 22% 22% 21%
INCOME TAXES 9% 8% 8% 8%
NET INCOME 14% 14% 14% 13%
</TABLE>
The following table sets forth the percent change in the operating
results for the three and nine month periods ended October 1, 1995
compared to the respective three and nine month periods ended October 2,
1994.
<TABLE>
<CAPTION>
Period-to-Period Percent Increase (Decrease)
Three months ended Nine months ended
October 1, 1995 vs October 1, 1995 vs
October 2, 1994 October 2, 1994
<S> <C> <C>
NET REVENUES:
Licenses 54% 50%
Services 57% 69%
Total net revenues 55% 54%
COSTS AND EXPENSES:
Cost of software distribution 42% 49%
Cost of services 83% 87%
Sales and marketing 58% 56%
Research and development 33% 31%
General and administrative 47% 41%
Total operating expenses 55% 54%
OPERATING INCOME 53% 56%
INTEREST INCOME 116% 105%
INTEREST EXPENSE 625% 153%
OTHER EXPENSE, NET (26%) (96%)
INCOME BEFORE INCOME TAXES 56% 61%
INCOME TAXES 63% 67%
NET INCOME 52% 57%
</TABLE>
The Company's operating income in the third quarter and the first nine
months of 1995 was 22 percent and 21 percent of net revenues,
respectively, compared to 22 percent and 20 percent in the corresponding
periods in 1994.
Although the Company's operating margins have exceeded or equaled 20
percent over the last several quarters, the Company's expenses are
relatively fixed in the near term and unexpected variances in planned
revenues, which are difficult to forecast, can result in variations in
operating margins and cost ratios. The Company's quarterly operating
margins have generally followed a seasonal pattern, with second half
revenues and operating margins generally being higher than those of the
preceding first half; however, there is no assurance that this seasonal
pattern will be repeated.
The Company derives revenues principally from licensing its software and
providing technical product support and updates to customers. License
revenues may involve the shipment of product by the Company or the
granting of a license to manufacture products. The Company's products
are sold directly to end user customers or through resellers: original
equipment manufacturers (OEM's), system integrators, distributors, or
application vendors. The Company's revenues have been increasingly
derived from sales contracts directly with end-users and less from the
distributor or OEM sales channels. These end-user sales contracts can be
relatively large in size and are difficult to forecast both in timing
and dollar value. In addition, these revenue contracts have relatively
lower associated software distribution and selling costs. From time to
time the Company has recognized substantial net revenue from these large
software license agreements. These transactions, which are difficult to
predict, have caused fluctuations in net revenues and net income because
of the relatively high gross margin on such revenues. The
Company expects that these sorts of transactions and the resulting
fluctuations will continue.
Throughout the remainder of 1995, the Company will continue to invest
more in customer services, marketing and research and development, and
make personnel additions to the Company's sales force worldwide. These
additional expenses may adversely affect the Company's operating margin
in 1995 if there are no offsetting increases in revenues or reductions
in other operating expenses.
As the number of software products and software patents in the industry
increases, the Company believes that software developers may become
increasingly subject to infringement claims. There can be no assurance
that a third party will not assert that its patents or other proprietary
rights are violated by products offered by the Company. Any such
claims, with or without merit, can be time-consuming and expensive to
defend and could have an adverse effect on the Company's business,
results of operations, financial position and cash flows.
The Company's stock price may be subject to significant volatility,
particularly on a quarterly basis. Any shortfall in revenue or earnings
from levels expected by securities analysts or others could have an
immediate and significant adverse effect on the trading price of the
Company's common stock in any given period. Additionally, as is common
in the industry, a disproportionate amount of the Company's license
revenue is derived from transactions that close in the last few weeks of
a quarter that make quarterly revenues difficult to forecast. The
Company may not learn of, or be able to confirm, revenue or earnings
shortfalls until the end of each quarter, which could result in an even
more immediate and adverse effect on the trading price of the Company's
common stock. Finally, the Company participates in a highly dynamic
industry, which often results in significant volatility of the Company's
common stock price.
Net Revenues
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Quarter ended Nine months ended
October 1, October 2, Change October 1, October 2, Change
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
License fees $135.6 $ 88.2 54% $369.1 $246.0 50%
Percentage of net revenues 75% 76% 75% 77%
Services $ 44.9 $ 28.6 57% $122.8 $ 72.6 69%
Percentage of net revenues 25% 24% 25% 23%
Net revenues $180.5 $116.8 55% $491.9 $318.6 54%
</TABLE>
The increase in service revenue, which consists of customer support,
training and consulting, was primarily attributable to the continued
growth of the installed customer base, the renewal of maintenance
contracts and increased consulting revenue. The Company continues to
emphasize support services as a source of revenue.
The revenue growth in the third quarter and the first nine months of
1995 primarily reflects continued strong worldwide acceptance for the
Company's new and existing technology and products. Although the Company
expects revenues to grow in the remainder of 1995, there can be no
assurance that such growth will be achieved or that growth rates in the
future will be comparable to those in the first nine months of 1995.
The Company's revenues, along with those of the relational database
management system (RDBMS) industry as a whole, have shown substantial
growth over the last several years. The industry has benefited from
trends to downsize from large proprietary computer systems and
market acceptance of UNIX and other open operating environments.
The Company has focused on the UNIX, open operating system market since
1980 and has broadened its open environments by releasing a Windows and
Windows NT version of an Informix database server in 1994. The Company
has also developed and released connectivity products to allow access to
other relational databases, both proprietary and open, and access to
this data through various protocols such as IBM's DRDA and X/Open's XA.
The industry movement to new open operating systems like Windows NT and
access through low-end, desktop machines may cause downward pressure on
prices of database and related products. If such downward pressure on
prices were to occur, margins would be adversely affected.
The license revenue growth in the third quarter and the first nine
months of 1995 reflects continued strong demand for the Company's
products, particularly for the Company's new generation of database
servers, INFORMIX-OnLine Dynamic Server (TM) . The Company has also
started to see revenue growth in the tools area with the introduction of
INFORMIX-NewEra (TM), a third-generation client/server application
development tool which became available in the second half of 1994.
During the third quarter of 1995, the Company introduced, on a limited
basis, INFORMIX-OnLine Extended Parallel Server (XPS), a new high-
performance, scalable database server based on the Company's
Dynamic Scalable Architecture (TM) (DSA) and also introduced INFORMIX-
NewEra (TM) 2.0 on the Windows platform.
The Company's ability to sustain growth depends in part on the timely
release of successful new and updated products, and the success of new
and updated products from its competitors. The Company has experienced
product delays in the past and may have delays in the future.
A key factor in determining the success of the Company will continue to
be the ability of the Company's products to interoperate and perform
well with existing and future leading, industry-standard application
software products intended to be used in connection with relational
database management systems. Failure to meet existing or future
interoperability and performance requirements of certain independent
vendors marketing such applications in a timely manner could adversely
affect the market for the Company's products.
Over half of the Company's net revenues are derived from its
international operations. In Europe and Asia/Pacific, most revenues and
expenses are now denominated in local currencies. The U.S. dollar
weakened in the first nine months of 1995 against the major European and
Asia/Pacific currencies, which resulted in higher revenue and expenses
recorded when translated into U.S. dollars and compared with the prior
year periods. Through 1994, most revenues from Asia/Pacific, Canada, and
Latin America were denominated in U.S. dollars. Accordingly, the
translation of the revenues for these regions was less impacted by
fluctuations in foreign exchange rates. The Company has increased
its direct sales presence in Asia/Pacific by opening offices and
acquiring its primary software distributors in Malaysia in 1994, and
Japan and Korea in early 1995. This increased the proportion of direct
sales denominated in local currency in these regions. The Company has
also increased its direct presence in Latin America, although a
significant percentage of the revenue is still denominated in U.S.
dollars. In the future, the Company expects currency fluctuations in
Mexico, and to a lesser extent, other Latin American countries to
continue. The Company's operating and pricing strategies take
into account changes in exchange rates over time; however, the Company's
results of operations may be significantly affected in the short term by
fluctuations in foreign currency exchange rates.
The Company has a hedging program in place to minimize foreign exchange
gains or losses, where possible, from recorded foreign denominated
transactions resulting from fluctuations in exchange rates. This
program involves the use of forward foreign exchange contracts in the
primary European and Asian currencies. The Company has limited unhedged
transaction exposures in certain secondary currencies in Latin America,
Eastern Europe, and Asia Pacific because there are limited forward
currency exchange markets in these currencies. The Company does not
attempt to hedge the translation to U.S. dollars of foreign denominated
revenues and expenses not yet incurred.
The Company's distribution markets are organized into three general
markets: North America; Europe, the Middle East, and Africa; and
Intercontinental, consisting of Latin America and the Asia-Pacific
region. In the third quarter of 1995, these organizations contributed 45
percent, 35 percent, and 21 percent of the Company's net revenues
compared to 48 percent, 37 percent, and 15 percent for the same period
in 1994. During the first nine months of 1995, these organizations
contributed 42 percent, 38 percent, and 20 percent of the Company's net
revenues compared to 44 percent, 40 percent, and 16 percent for
the same period in 1994.
Cost of Software Distribution
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Quarter ended Nine months ended
October 1, October 2, Change October 1, October 2, Change
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Manufactured cost of
software distribution $6.0 $4.3 40% $16.5 $11.3 46%
Percentage of license
revenue 5% 5% 5% 5%
Amortization of capitalized
software $2.9 $2.0 48% $ 8.5 $5.4 56%
Percentage of license
revenue 2% 2% 2% 2%
Cost of software
distribution $8.9 $6.3 42% $25.0 $16.7 49%
Percentage of license
revenue 7% 7% 7% 7%
</TABLE>
Software distribution costs consist primarily of: 1) manufacturing and
related costs such as media, documentation, product assembly and
purchasing costs, freight and third party royalties; and 2) amortization
of previously capitalized software development costs.
The increase in amortization of capitalized software in absolute dollars
in the third quarter and the first nine months of 1995 compared to the
same periods in 1994 was due to the release of several products in the
latter half of 1994 and the first half of 1995. The Company expects
that amortization of capitalized software in absolute dollars will
continue to increase in the future as new products are released.
Manufactured cost of software distribution in the third quarter and the
first nine months of 1995, as a percentage of license revenues, remained
flat compared to the same periods in 1994. The cost of software
distribution as a percentage of license revenue may vary depending upon
whether the product is reproduced by the Company or by its customers.
Cost of Services
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Quarter ended Nine months ended
October 1, October 2, Change October 1, October 2, Change
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Cost of Services $22.9 $12.5 83% $62.0 $33.1 87%
Percentage of service
revenue 51% 44% 51% 46%
</TABLE>
Cost of services consists primarily of maintenance, consulting and
training expenses. The increase in cost of services in the third
quarter and the first nine months of 1995 in absolute dollars and as a
percentage of net revenues compared to the corresponding prior year
periods is primarily due to the Company's increased expenditures in
developing consulting and support services. In the future, the Company
expects that cost of services as a percentage of net revenues will
approximate the rate in the first nine months of 1995.
Sales and Marketing Expenses
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Quarter ended Nine months ended
October 1, October 2, Change October 1, October 2, Change
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing
expenses $76.7 $48.6 58% $210.8 $134.8 56%
Percentage of net revenue 42% 41% 43% 42%
</TABLE>
The increase in sales and marketing expenses in the third quarter and
the first nine months of 1995 in absolute dollars compared to the same
periods in 1994 was a result of increased sales headcount worldwide and
increased marketing programs associated with new product introductions.
With the continuing expansion throughout 1995 of worldwide operations,
as well as increased sales and marketing expenditures in 1995 aimed at
positioning the Company and its new and existing products in the
marketplace, the Company expects that sales and marketing expenses for
the remainder of 1995, as a percentage of net revenues, will be similar
to those of the first nine months of 1995.
Research and Development Expenses
The Company accounts for its product development costs in accordance
with Statement of Financial Accounting Standards No. 86. This statement
requires that once technological feasibility of a developing product has
been established, all subsequent costs incurred in developing that
product to a commercially acceptable level be capitalized and amortized
ratably over the revenue life of the product. The Company's research and
development expenses exclude capitalized software costs of $4.8 million
and $3.7 million in the third quarters of 1995 and 1994, respectively,
and $12.7 million and $9.7 million in the first nine months of 1995 and
1994, respectively, and exclude amortization costs of previously
capitalized software. The following table summarizes research and
product development costs for the periods ended October 1, 1995 and
October 2, 1994:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Quarter ended Nine months ended
October 1, October 2, October 1, October 2,
1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Incurred product development
costs $26.0 $19.6 33% $70.4 $53.6 31%
Expenditures capitalized 4.8 3.7 30% 12.7 9.7 31%
Research and development
expenses $21.2 $15.9 33% $57.7 $43.9 31%
Expenditures capitalized as
a % of incurred 18% 19% n/a 18% 18% n/a
Amortization 2.9 2.0 40% 8.5 5.4 56%
</TABLE>
The increase in research and development expenditures in absolute
dollars in the third quarter and the first nine months of 1995 compared
to the corresponding periods in 1994 was resulted from an increase in
staff working on new products and product extensions.
The higher capitalization in absolute dollars of product development
expenditures in the third quarter and the first nine months of 1995
compared to the same periods in 1994 resulted from an increase in the
work involved in projects reaching technological feasibility as they
neared their release dates. The Company expects the proportion of work
on capitalized projects to remain relatively stable throughout the
remainder of 1995.
Major new programs currently under development include the expansion of
the DSA family of servers and connectivity products and subsequent
versions of the Company's graphical, object-oriented tool, INFORMIX-
NewEra (TM). The Company believes that research and development
expenditures are essential to maintaining its competitive position in
its primary markets and expects the expenditure levels to increase in
absolute dollars.
General and Administrative Expenses
General and administrative expenses for the third quarter and first nine
months of 1995 remained relatively flat as a percentage of net revenues
compared to the corresponding periods in 1994. The Company expects
general and administrative expenses as a percentage of net revenues for
the remainder of 1995 will be consistent with those of the first nine
months of 1995.
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Quarter ended Nine months ended
October 1, October 2, Change October 1, October 2, Change
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
General and administrative
expenses $11.9 $8.1 47% $35.0 $24.8 41%
Percentage of net revenue 7% 7% 7% 8%
</TABLE>
Provision for Income Taxes
The Company's effective tax rate increased to 37.5 percent of pretax
income in the third quarter and the first nine months of 1995 from 36.0
percent in the same periods in 1994. The higher effective tax rate for
the third quarter and the first nine months of 1995 was primarily due to
the expiration of the U.S. federal research and development tax credit
in 1995.
The Company anticipates its fiscal 1995 effective tax rate to be
approximately 37.5 percent; however, this rate could change based on a
change in the geographic mix of the Company's earnings and the amount of
permanent reinvestment offshore of a portion of the 1995 earnings of the
Company's lower-taxed Irish operations and the potential reinstatement
of the U.S. federal research and development tax credit.
Impact of Inflation
The effect of inflation on the Company's financial position has not been
significant.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
(IN MILLIONS OF DOLLARS)
Quarter ended Nine months ended
October 1, October 2,
1995 1994
<S> <C> <C>
Cash, cash equivalents, and investments $220.8 $162.5
Working capital 196.0 160.3
Cash provided by operations 103.5 72.4
Cash used in investment activities, excluding
investments of excess cash 99.3 38.9
Cash provided by (used in) financing activities 16.3 (15.7)
</TABLE>
Cash generated by operations provided sufficient resources to fund the
Company's headcount growth and capital asset needs in all periods
presented. The increase in net cash and cash equivalents provided by
operations in the first nine months of 1995 compared with the same
period in 1994 was primarily attributable to higher income before
depreciation and amortization charges.
Net accounts receivable increased by $40.3 million in the third quarter
of 1995 as compared to the fourth quarter of 1994, principally as a
result of higher sales, partially offset by strong collections and the
use of third party financing programs. Days sales outstanding was 86 in
the third quarter of 1995 compared with 79 in the fourth quarter of
1994. Commencing in late 1993, the Company instituted programs to have
third-party financial institutions provide financing for extended credit
terms instead of such terms being provided by the Company. The days
sales outstanding ratio is dependent on many factors, including the mix
of contract-based revenue with significant OEMs and large corporate and
government end-users versus revenue recognized on shipments to
application vendors and distributors and the success of the Company's
financing programs. Although a large portion of the Company's
revenues are derived from resellers, the Company's revenues since 1993
have shifted substantially from distributors to direct end-users. These
end-user sales contracts frequently bear extended payment terms which
result in an increase in days sales outstanding ratios unless the
contracts are financed. The aforementioned shift in distributor
channels is likely to continue as products and markets mature. The
Company is using a variety of activities to reduce the days sales
outstanding ratio. In the future, the Company expects this ratio to
vary within the range which prevailed in the last several quarters;
however, there is no assurance that it will do so.
Excluding investments of excess cash, net cash and cash equivalents used
in investing activities increased in the first nine months of 1995
compared with the same period in 1994. In the first nine months of 1995
and 1994, the Company acquired $36.0 million and $19.7 million,
respectively, of capital equipment consisting primarily of computer
equipment, computer software and office equipment. The increase of
capital equipment purchases in the first nine months of 1995 resulted
from the Company's growing employee headcount, the replacement of
obsolete equipment and investment in new technology. In the future, the
Company anticipates the actual level of capital spending will be
dependent on a variety of factors, including the Company's business
requirements and general economic conditions.
The Company's investments in software costs were previously discussed
under "Results of Operations."
In January 1995, the Company acquired a 90 percent interest in the
database division of ASCII Corporation, a distributor of its products in
Japan. The Company will acquire the remaining 10 percent interest in
January 1996. The Company accounted for the acquisition as a purchase.
The purchase price of ASCII's database division was approximately $46.0
million, of which approximately $34.8 million has been allocated to
intangible assets acquired.
In April 1995, the Company acquired an 80 percent interest in the
database division of Daou Corporation, a distributor of its products in
Korea. The Company will acquire the remaining 20 percent by January
1997. The acquisition was recorded as a purchase. The purchase price
of this business was approximately $4.6 million, of which approximately
$4.0 million has been allocated to intangible assets acquired.
In October 1995, the Company acquired Stanford Technology Group (STG), a
U.S.-based company that provides on-line analytical processing
technology, for approximately 570,000 shares of its common
stock. The transaction will be accounted for as a pooling of interests.
Net cash and cash equivalents provided by financing activities in the
first nine months of 1995 consisted primarily of proceeds from the sale
of the Company's common stock to employees, partially offset by payments
on capital leases. Net cash and cash equivalents used in financing
activities in the first nine months of 1994 included repurchases of the
Company's common stock and payments on capital leases, partially offset
by proceeds from the sale of the Company's common stock to employees.
In 1993 and 1994, the Board of Directors authorized the repurchase of up
to 8 million (adjusted to reflect two-for-one stock splits, effected in
the form of stock dividends, which were effective June 14, 1993 and June
26, 1995) shares of the Company's common stock in the open market.
Through the third quarter of 1995, the Company had repurchased 3,580,000
shares with an aggregate cost of approximately $32.1 million on the open
market.
The Company expects current balances of cash, cash equivalents, and
short-term investments will be sufficient to fund anticipated levels of
operations at least through the third quarter of 1996 and may be used
for investments and acquisitions to supplement internal revenue growth
and for other corporate purposes.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibits
Exhibit 11.1 - Statement Regarding Computation of Earnings Per Share.
Exhibit 27 - Financial Data Schedule.
B) Reports on Form 8-K. No reports on Form 8-K were filed during the
three months ended October 1, 1995.
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.
INFORMIX CORPORATION
Dated: November 14, 1995 /s/ HOWARD H. GRAHAM
Howard H. Graham
Senior Vice President, Finance
and Chief Financial Officer
Dated: November 14, 1995 /s/ RICHARD C. BLASS
Richard C. Blass
Vice President, Corporate Controller
and Chief Accounting Officer
<TABLE>
EXHIBIT 11.1
INFORMIX CORPORATION
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 1, OCTOBER 2, OCTOBER 1, OCTOBER 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net income $ 25,281 $ 16,590 $ 66,499 $ 42,360
Weighted average outstanding shares 134,050 128,990 132,662 129,318
Net effect of outstanding options 5,988 4,928 5,576 4,870
Weighted average common and common
equivalent shares outstanding 140,038 133,918 138,238 134,188
Net income per share $0.18 $0.12 $0.48 $0.32
</TABLE>
Fully diluted computation not presented since such amounts differ by
less than 3 percent of the net income per share amounts shown above.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the
financial statements contained in the Company's Form 10Q for the period
ending October 1, 1995 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> OCT-01-1995
<CASH> 123,291
<SECURITIES> 97,550
<RECEIVABLES> 171,807
<ALLOWANCES> 8,901
<INVENTORY> 2,977
<CURRENT-ASSETS> 413,857
<PP&E> 132,379
<DEPRECIATION> 65,190
<TOTAL-ASSETS> 594,146
<CURRENT-LIABILITIES> 217,834
<BONDS> 0
0
0
<COMMON> 1,345
<OTHER-SE> 359,042
<TOTAL-LIABILITY-AND-EQUITY> 594,146
<SALES> 369,120
<TOTAL-REVENUES> 491,915
<CGS> 24,975
<TOTAL-COSTS> 390,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,742
<INTEREST-EXPENSE> 538
<INCOME-PRETAX> 106,397
<INCOME-TAX> 39,898
<INCOME-CONTINUING> 66,499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,499
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
