SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
_X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year ended April 30, 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: 0-15188
INTERSOLV, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 52-0990382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9420 Key West Ave.
Rockville, Maryland 20850
(Address of principal executive offices)
(301) 838-5200
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of class)
Preferred Stock Purchase Rights
(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 10K.
[X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the average of the high and low price
of the Common Stock on June 30, 1995 as quoted by NASDAQ was
$322,108,474.
The number of shares outstanding of the registrant's Common Stock
$0.01 par value on June 30, 1995 was 16,552,653 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the 1995 Annual
Meeting of Stockholders, which will be filed with the Securities and
Exchange within 120 days after April 30, 1995 (items 10 through 13,
Part III).
_________________________________________________________________
PART I
ITEM 1. BUSINESS
GENERAL
INTERSOLV, Inc. (the "Company" or "INTERSOLV") was incorporated
under the laws of the State of Delaware in 1985, successor to the
business begun in 1982. INTERSOLV develops, markets and supports a
broad line of client/server software tools that facilitate the
development and deployment of business information systems. The
Company strategy is to offer customers a broad family of software
development tools that are independent of rapidly changing hardware,
operating systems and database management technology.
The Company's principal executive offices are located at 9420
Key West Avenue, Rockville, MD 20850, and its telephone number at
that address is (301) 838-5000. The Company's common stock is traded
over the counter on the National Market under the NASDAQ symbol
"ISLI".
COMPANY OVERVIEW
INTERSOLV is a software product company specializing in open,
client/server development tools. The Company's products and services
support a broad range of approaches, ranging from the development of
new client/server systems to the maintenance of traditional systems.
The Company's product strategy emphasizes an open architecture which
permits its products to be used separately, with the Company's other
products and with software development products and approaches
offered by other companies. The Company's objective is to build
products that deliver high productivity on simple projects and are
powerful enough to handle scalability requirements of production-
grade information systems without retooling.
INTERSOLV offers software products and services in the following
solution areas:
Object Oriented ("OO") Development - This product series is
focused on the needs of developers using the C++ language. The
Company's initial product offering is an OO application framework and
tool set. The Company currently has several other tools in
development, which it plans to introduce in the future.
Client/Server Development - INTERSOLV also offers tools for
traditional developers using the COBOL language who want to move into
the client/server architecture. These tools can be used for rapid
application development (or "RAD"), design driven development, or for
maintenance and reuse of legacy applications.
Data Warehousing - INTERSOLV products provide access to
more than 30 database management systems (or "DBMS"). Offerings
include an end user query and reporting tool and tools to deploy
cross-platform Open Database Connectivity ("ODBC")-compliant
applications accessing multiple DBMS.
Software Configuration Management (or "SCM") - INTERSOLV
offers a comprehensive SCM product suite. The Company's SCM
offerings leverage team development on the LAN while supporting multi-
operating systems and multi-tool environments.
The Company markets and distributes its products on a worldwide
basis through multiple channels. Sales are made through Company
owned and operated entities which use a combination of field,
telesales and third party distribution channels. The Company's
direct sales effort is augmented with a network of independent
software vendors, dealers, distributors and value added resellers in
more than 30 countries around the world.
PRODUCTS
INTERSOLV offers a variety of interoperable solutions to address
various aspects of client/server development. These solutions are
delivered in the forms of various suites of products and related
services, collectively known as the INTERSOLV Development Suite
("IDS"). IDS is a family of tools that can be used individually or in
combination to form a complete client/server development environment.
The major products in the IDS, broken down by each major solution
area, are discussed below.
OO Development Solution
C++/Views - INTERSOLV C++/Views is an Object Oriented ("OO")
application framework and tool set for developing cross-platform
applications in C++.
Client/Server Development Solutions
APS for Client/Server- INTERSOLV APS for Client/Server is an
application development system enabling the reduction of development
time and minimizing the cost of building applications software. APS
may be used alone, with Excelerator or with other analysis and design
products. APS can be used to generate new applications or to enhance
existing applications. APS can be used to build simple to complex
production-grade applications for a wide range of DBMS and production
environments.
Excelerator II - INTERSOLV Excelerator II is a flexible toolset
for analysis, design and documentation of business information
systems. Excelerator II automates the process of analyzing and
translating business requirements and functions into a high-level
model of the desired software. Excelerator II accommodates a broad
range of software development methodologies and techniques, including
traditional rapid application development ("RAD") to object oriented
("OO"). Excelerator II interfaces easily with complementary software
and is designed to allow customers to customize the design
environment to meet local requirements.
Maintenance Workbench - INTERSOLV Maintenance Workbench is a
desktop maintenance solution providing interactive and application-
wide research, analysis and documentation capabilities for existing
applications, allowing customers to maintain and update existing
systems more productively. Maintenance Workbench permits existing
applications to be analyzed and translated into a higher level format
which facilitates software changes and documentation. These
capabilities enable existing software to be modified to support new
business goals, to meet new user requirements and to be regenerated
as new applications more quickly and easily.
Data Warehousing Solutions
DataDirect/Explorer - INTERSOLV DataDirect/Explorer is a query
and reporting tool which provides end-user easy, direct access to
data in personal, departmental and enterprise-wide databases without
requiring them to understand the underlying technical details.
DataDirect/ODBC - INTERSOLV DataDirect/ODBC products allow
software developers to build and deploy software for multiple
databases from one application programming interface ("API").
Software Configuration Management Solution
PVCS - INTERSOLV PVCS is a comprehensive family of software
configuration management products which enables software developers
to manage software changes in a team development environment such as
on a local area network ("LAN"). The PVCS family includes tools for
revision management, version management, build management, promotion
management and problem tracking. The PVCS products provide an audit
trail of activity, file revision histories, support for parallel
development, exact image rebuilds and support for quality assurance.
PVCS provides control over the configuration of application software
and documentation, whether developers work alone, in a group, on a
LAN or on multiple operating systems. PVCS can also prevent problems
associated with software developers simultaneously accessing the same
module. PVCS allows users to manage and resolve problems and change
requests which threaten software quality and production schedules.
The PVCS products operate on personal computers with Microsoft
Windows, OS/2 and on a wide variety of LANs and on UNIX operating
systems. The PVCS product supports development in C, C++ and COBOL
code and works with most commonly used development workbenches such
as Borland's Delphi, Sybase/PowerSoft's PowerBuilder, Digitalk's Team
V and Microsoft's Visual Basic.
SERVICES
INTERSOLV offers a wide variety of support services, known as
INTERSOLV ServiceDirect, which are intended to help customers quickly
gain the benefits from the INTERSOLV Development Suite. The range of
services offered is described below.
Maintenance Services
INTERSOLV offers its customers the opportunity to purchase
maintenance services for its products. The services consist
primarily of enhancements and updates to the products as well as
telephone support concerning their operation. Annual fees for
maintenance service typically equal 17 percent of the product's list
price and commence upon expiration of the initial 30 day warranty
period.
Training and Consulting Services
INTERSOLV also offers highly focused fee-paid consulting and
training services, assisting customers in using INTERSOLV products.
Consulting services are focused on helping the customer exploit
INTERSOLV technology through short-term, highly focused projects.
Educational offerings include both on-site training and training at
an INTERSOLV training center and are focused on the use of INTERSOLV
technology.
MARKETING, CUSTOMERS AND SALES
The Company markets its products to end-users, line-of-business
developers, traditional information system departments, project
managers and application development executives within corporations
and independent software vendors worldwide. None of the Company's
customers account for 10% or more of annual revenues. Additionally,
the Company's business does not concentrate on any specific industry.
See further discussion regarding the segment information and
significant customers in Note 4 of Notes to the Consolidated
Financial Statements on page 28 of this Form 10-K.
The Company has a multi-channel approach to sales and
marketing. The products are sold through field sales (face-to-face),
telesales and third-parties as described below.
Field Sales
The Company's field sales personnel are located in Australia,
France, Germany, United Kingdom and several major metropolitan areas
in the U.S., offering local sales and technical support to customers
and prospects. Field sales personnel are responsible for all
channels and products in a defined geographical area and build long-
term relationships with the Company's largest customers and
prospects. Field sales personnel assist prospective and current
customers in evaluating needs and solutions and guide them in the
evaluation and use of INTERSOLV products. Field sales personnel
focus their efforts primarily on large corporate prospects and
customers. Transactions through the field sales organization
generally range from $20,000 to over $200,000, depending on the
number of products licensed and the number of developers authorized
to use the technology.
Telesales
Telesales representatives concentrate on sales at the project
level and to smaller accounts, selling to individual developers and
project managers. Generally telesales representatives concentrate
their efforts on one product line. Orders can range from $100 for a
single license, to over $50,000 for multiple licenses for a fully
configured project team. Telesales are supported by mailings to
lists of prospective customers and advertising in selected trade
magazines. The Company also offers special promotions and incentive
offers from time to time aimed at introducing the Company's products
to new users.
Third Parties
In addition to the Company's own field sales and telesales
organizations, the Company markets its technologies and products
through a global network of other independent software vendors
("ISV"s), value-added resellers ("VAR"s) and dealers and
distributors. Through third party alliances, the Company enables
selected ISVs to embed and sell certain INTERSOLV technologies in
their own products. Alliances with other ISVs include joint
development and marketing arrangements. INTERSOLV also has
arrangements with VARs, dealers and distributors to resell the
Company's products in markets which the Company cannot cost
effectively reach on a direct basis.
COMPETITION
The market for development tools is highly competitive and
characterized by rapid changes in technology and user needs. The
Company expects to encounter competition from established companies
and new companies that are now developing or may develop and market
comparable products. Some of the Company's actual and potential
competitors have substantially greater financial, marketing and
technological resources than the Company. INTERSOLV believes that
the principal competitive factors in the industry are the
compatibility of products with the customer's computer hardware and
software, ease of use, price, quality of documentation, customer
support, training, installation and the ability of a family of
products to work together effectively.
PRODUCT DEVELOPMENT
Due to the rapid technological changes the computer software
industry is subject to, the Company expects to continue to dedicate
significant resources to enhance its current products and develop new
ones. The Company spent $20.3 million, $14.7 million and $17.8
million before capitalization of certain internal software
development costs for the fiscal years ended April 30, 1995, 1994 and
1993, respectively.
The majority of INTERSOLV products and accompanying
documentation have been developed internally. The Company, however,
has in the past and intends to continue to acquire certain software
technology from others and integrate those technologies into its
family of products.
PRODUCT PROTECTION
The Company relies on a combination of trade secret, copyright
and trademark laws, license agreements and technical measures to
protect its rights in its software products. Like many software
companies, the Company has no patents.
INTERSOLV products are generally licensed to end users pursuant
to a license agreement that restricts the use of the products to a
designated number of authorized developers. The Company also relies
on copyright laws and embedded technology to protect the proprietary
rights in its products and to help ensure they are used in accordance
with their license terms. The degree and scope of legal protection
available for the Company's software products may vary in certain
foreign countries. The company licenses the majority of its products
through "shrink wrap" licenses that are included as part of the
product's packaging.
The Company protects the source code version of its products as
a trade secret and as an unpublished copyrighted work. The Company
has made portions of the source code available to its customers only
under very limited circumstances and for restricted uses. The
Company has been and may be required from time to time to enter into
source code escrow agreements with certain customers and
distributors. These agreements require release of source code to the
customer or distributor in the event the Company breaches its support
and maintenance obligations to the customer. If source code is
released to a customer or distributor, the customer or distributor is
required to maintain its confidentiality and, in general, to use the
source code solely for internal maintenance purposes.
Employees
As of April 30, 1995, the Company employed 610 persons including
209 in sales and marketing, 168 in technical support, 153 in product
development and 80 in general and administration. None of the
Company's employees are represented by a labor union. The Company
has experienced no work stoppages and believes that its employee
relations are good.
ITEM 2. PROPERTIES
The company leases all of its office space for its corporate
headquarters, sales, distribution and development offices. Major
facility leases include the following:
Location Purpose Facility Size
Rockville, MD Corporate Headquarters 67,000 sq. ft.
Raleigh, NC Sales/Development 23,000 sq. ft.
Cambridge, MA Sales/Development 48,000 sq. ft.
Beaverton, MA Sales/Development 20,500 sq. ft.
Gaithersburg, MD Distribution Center 13,000 sq. ft.
The aggregate rental payments for all facilities for fiscal 1995 was
approximately $3.8 million, and all leases are subject to renewal
clauses and rent increase provisions, which are typical of similar
leases in the relevant geographic area(s).
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material pending or
threatened legal proceedings except as further described below.
Prior to April, 1986, certain revenues associated with
discontinued operations were generated under cost-plus-fee contracts
with the U.S. government and are subject to adjustments upon audit by
the Defense Contract Audit Agency. Audits through January 31, 1986
have been completed. On December 3, 1990, INTERSOLV received a
notice questioning certain charges aggregating approximately $2.4
million made by the Company's discontinued operations in fiscal 1985
and 1986. The Company filed a response in April, 1991 which provides
additional information regarding the issues raised in the notice.
The amount of the liability, if any, cannot be ascertained.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the NASDAQ National
Market. There have been no dividends paid on INTERSOLV common stock
since the Company's initial public offering in 1986. See the market
price information in Note 12 of Notes to the Consolidated Financial
Statements on page 33 on this Form 10-K. The market price
information represents "last sale" quotations and does not include
markups, markdowns or commissions.
The number of holders of record of the Company's Common Stock was
approximately 206 at June 30, 1995.
ITEM 6. SELECTED FINANCIAL DATA
(amount in thousands, except per share
data)
Fiscal Year Ended April 30
_
1995 1994 1993 1992 1991
Revenues $115,463 $85,393 $80,410 $79,144 $71,846
Income (loss) before
income taxes 19,219 (29,370) (12,023) 8,382 (30,762)
Net income (loss) 13,461 (29,370) (11,895) 5,874 (23,275)
Net income (loss) /share 0.83 (2.42) (1.00) 0.48 (2.11)
Total assets 93,420 77,601 59,385 67,440 68,224
Long-term liabilities
(including current
portion) 2,831 1,196 --- 1,686 96
Preferred stock --- --- --- --- 2,501
Notes:
In April 1994, the Company acquired Q+E Software, Inc. ("Q+E") in a
transaction accounted for using the "purchase" method. Fiscal 1995
results include Q+E's operating results.
Fiscal 1994 operating results include pretax charges totaling $40.7
million (after-tax effect of $3.06 per share) resulting from the
acquisition of Q+E.
Fiscal 1993 operating results include a pre-tax charge of $16.6
million (after-tax effect of $1.27 per share) resulting from a non-
cash adjustment to reduce unamortized capitalized software costs based
on older operating systems to net realizable value and certain other
restructuring costs.
Fiscal 1992 and 1991 operating results include pre-tax charges of
approximately $0.8 million and $26.5 million, respectively (after-tax
effect of $0.05 and $1.82 per share, respectively) attributable to
certain restructuring costs associated with the acquisition of Index
Technology Corporation (the "Index Merger") in fiscal 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following table sets forth, for the periods indicated, the
percentages which selected items in the Consolidated Statements of
Operations are to total Revenues:
Selected Items as a
Percentage of Revenues Year to Year
Percentage
Increase(Decrease)
1995 1994
Year Ended April 30 Compared to Compared to
1995 1994 1993 1994 1993
Revenues:
License fees 65.0% 64.2% 69.8% 37% (2%)
Service fees 35.0 35.8 30.2 31 26
Total 100.0 100.0 100.0 35 6
Cost and expenses:
Cost of products 9.2 8.3 7.0 49 26
Cost of services 14.5 13.1 9.1 50 52
Sales and marketing 41.9 46.8 54.0 21 (8)
Research and dev. 10.5 10.6 13.4 34 (16)
General and admin. 7.9 8.2 10.9 31 (20)
Purchased research and
development --- 40.7 --- N/M N/M
Restructuring charges --- 6.9 20.6 N/M N/M
Total 84.0 134.6 115.0 (16) 24
Operating inc.(loss) 16.0 (34.6) (15.0) N/M N/M
Other income, net 0.7 0.2 0.1 223 298
Income (loss) before income
taxes 16.7 (34.4) (14.9) N/M N/M
Provision (benefit) for income
taxes 5.0 0.0 (0.1) N/M N/M
Net income (loss) 11.7% (34.4%) (14.8%) N/M N/M
N/M - Changes not meaningful
RESULTS OF OPERATIONS
Revenues
The Company's products are generally licensed to end users
pursuant to a license agreement that restricts the use of the product
to a designated number of developers. The Company also offers its
customers a broad range of services, including maintenance, support,
training and consulting. Maintenance services consist primarily of
enhancements and upgrades to products as well as telephone support
concerning the use of the Company's products. Training and consulting
services are focused on assisting customers in using the Company's
products.
The Company's product and service offerings are focused in four
primary solution areas: Object Oriented ("OO") Development,
Client/Server Development, Data Warehousing and Software Configuration
Management ("SCM"). The Data Warehousing solutions were new offerings
in fiscal 1995. The Data Warehousing products were added in the April
1994 acquisition of Q+E Software, Inc. ("Q+E"), in a transaction
accounted for using the "purchase" method. The Company began selling
OO Development solutions subsequent to April 30, 1995.
Total Revenue
Total revenue for fiscal 1995 was $115.5 million, or 35% greater
than fiscal 1994. Higher Software Configuration Management revenue
and the revenue contribution from the new Data Warehousing products,
acquired from Q+E, were the primary reasons for the growth. The
growth in these areas more than offset a decline in the Company's
Client/Server Development tools for traditional developers. Growth in
Software Configuration Management revenue resulted from increased
demand for software products and services in this area coupled with
expansion of our sales effort. The decrease in traditional
development is primarily the result of lower demand for COBOL based
software solutions.
In fiscal 1994, total revenue was $85.4 million, or 6% greater
than the prior year. Increases in all solution areas in North America
were offset somewhat by a decline in the International markets. The
increase in the North American markets was the result of increasing
customer acceptance of the Company's products directed at the
client/server market, expansion of our sales effort and an overall
increased demand for software development products and services.
Lower revenue in the International markets was the result of weakness
in certain major international economies, technology transition issues
and lower foreign currency exchange rates. In particular,
International revenue for the older 16 bit DOS based Excelerator
product, decreased at a rate greater than the customers' increasing
demand for the new 32 bit Excelerator II product.
License Fee Revenue ("LFR")
Fiscal 1995 LFR was $75 million, or 37% greater than the prior
year. Strong LFR growth in Software Configuration Management (PVCS)
coupled with the revenue contribution from new Data Warehousing
products (DataDirect), acquired from Q&E, were the primary reasons for
the increase. LFR growth for the above areas was somewhat offset by a
LFR decline in the Company's traditional development tools area.
LFR for fiscal 1994 was $54.8 million, or basically flat when
compared to fiscal 1993. Growth in Software Configuration Management
LFR was offset by an overall decline in LFR for traditional
development tools.
Service Fee Revenue ("SFR")
Fiscal 1995 SFR was $40.4 million, or 31% more than fiscal 1994.
In fiscal 1994, SFR was $30.6 million or 26% more than fiscal 1993.
Increased demand for consulting and training services, combined with
growth in the installed customer base and renewal of existing
maintenance contracts across all product solution areas led to the
growth during the three year period.
North American Revenue
North American revenue increased 37% in the past year to $83.1
million. Higher Software Configuration Management sales along with
revenue contributions from the new Data Warehousing products were the
reasons for the increase. Revenue from the traditional development
tools area declined in the past fiscal year in North America.
Revenue in North America in fiscal 1994, was $60.9 million, or
26% higher than the previous year. Revenue in all product solution
areas increased in the North American market during fiscal 1994.
International Revenue
International revenue was $32.3 million in fiscal 1995, or 32%
greater than the prior year. Growth in the Software Configuration
Management area and revenue contributions from the new Data
Warehousing area were the primary reasons for the increase. Changes
in currency exchange rates increased this year's reported
International revenue by $1.6 million, when compared to fiscal 1994.
Fiscal 1994 International revenue was $24.5 million, or 24% less
than fiscal 1993. The decrease was primarily the result of weakness
in certain major International economies, technology transition
issues and lower foreign currency exchange rates. In particular,
International revenue for the older 16 bit DOS based Excelerator
product declined at a rate greater than the increase in demand for
the new 32 bit Excelerator II product.
Cost of Products
Cost of products includes costs of software media, freight,
royalties and amortization of capitalized software development costs
and purchased technology costs. Cost of products for fiscal 1995
increased 49% to $10.6 million. Cost of product for fiscal 1994
increased 26% from $5.6 million in fiscal 1993 to $7.1 million. Cost
of products as a percentage of revenues was 9.2%, 8.3% and 7.0% in
fiscal 1995, 1994 and 1993, respectively. The 1995 and 1994
increases in amount and as a percentage of revenues were primarily
the result of higher amortization of software development costs
caused by significant new product releases during the last two years
coupled with a change to a shorter amortization period in fiscal
1993.
Cost of Services
Cost of services includes personnel and related overhead costs
to provide training, consulting and telephone support to customers
who are deploying the Company's products. Cost of services for fiscal
1995 increased 50% to $16.8 million. Cost of services for fiscal
1994 increased 52% from $7.4 million in fiscal 1993 to $11.2 million.
Cost of services as a percentage of SFR was 41.5%, 36.5% and 30.3% in
fiscal 1995, 1994 and 1993, respectively. The increases in amount
and as a percentage of revenues during this three year period was
primarily the result of increased investment in personnel needed to
support the increased demand for training and consulting services.
Personnel was also added to the telephone support functions, to
support the growing customer base.
Sales and Marketing
Sales and marketing expenses for fiscal 1995 were $48.4 million,
which is a 21% increase when compared to fiscal 1994 level of $40
million. Sales and marketing expenses for fiscal 1994 were down 8%
compared to fiscal 1993 levels of $43.4 million. Sales and marketing
expenses as a percentage of revenues were 41.9%, 46.8% and 54% in
fiscal 1995, 1994 and 1993, respectively. The increase in fiscal
1995 is due to higher levels of investment in marketing programs,
telesales and third party sales channels. In fiscal 1994, the
Company also increased its investment in marketing programs,
telesales and third party sales channels. However, these investments
were more than offset by decreases in sales and marketing costs in
our International markets, due in part to reduced third party
commissions resulting from lower revenue in these markets. Sales and
marketing expenses as a percentage of revenue decreased during the
above periods, as the Company began to realize some of the benefits
of the multi-channel sales model, which helped the company grow
revenues at a faster rate than corresponding sales and marketing
costs.
Research and Development
Fiscal 1995 research and development expenses were $12.1
million, or 34% higher than fiscal 1994 levels of $9 million. Fiscal
1994 research and development expenses were 16% lower than fiscal
1993 levels of $10.8 million. As a percentage of revenues, research
and development expenses were 10.5%, 10.6% and 13.4% in fiscal 1995,
1994, and 1993, respectively. Research and development expenses,
before capitalization of certain internal software development costs,
were $20.3 million, $14.7 million and $17.8 million for the fiscal
years ended April 30, 1995, 1994 and 1993, respectively. The
increase in fiscal 1995 is due primarily to the Company's increased
investment in SCM, Data Warehousing and OO Development tools solution
areas. The decrease in fiscal 1994 costs results from a 1993
reduction in development personnel to better align our development
efforts with future anticipated revenue by product line. The
decrease as a percentage of revenue reflects the overall decrease in
expenditures in fiscal 1994 coupled with increases in revenue and
economies of scale achieved because of the Company's broader product
base.
General and Administrative
General and administrative expenses for fiscal 1995 were $9.2
million or 31% higher than fiscal 1994. General and administrative
expenses for fiscal 1994 were $7.0 million, which is 20% lower than
the previous fiscal year. General and administrative expenses as a
percentage of revenues were 7.9%, 8.2% and 10.9% for fiscal years
1995, 1994 and 1993, respectively. The increase in 1995 is due
primarily to higher administrative costs associated with supporting a
larger business, along with additions resulting from the Company's
acquisitions. The decrease in 1994 reflects the reduction of general
and administrative costs resulting from the restructuring actions
taken in the fourth quarter of fiscal 1993.
Restructuring Charges and Purchased Research and Development
In April 1994, the Company incurred $40.7 million of non-
recurring charges related to the acquisition of Q+E. Acquisition
charges included the write-off of $34.8 million of purchased research
and development and $5.9 million in one-time costs for severance,
costs to consolidate certain facilities, write-downs of various
assets and re-negotiation costs related to existing
distributor/dealer contracts.
The Company incurred $16.6 million of non-recurring charges in
fiscal 1993. The restructuring charges consisted primarily of a non-
cash adjustment to reduce capitalized software development costs to
net realizable value, plus severance payments and the cost to close
certain facilities. The write-off of capitalized software
development costs related primarily to products based on older
operating systems which were not part of the Company's growth
strategy. The severance related to the Company's product development
function and international sales force.
Operating Income (Loss)
In fiscal 1995, the Company reported operating income of $18.4
million, or 16% of revenues. Top-line revenue growth, as discussed
above, combined with economies of scale led to the increase in
operating income and improved operating margins.
The Company reported a loss in fiscal 1994 due to the
acquisition charges described above. Fiscal 1994 operating income
prior to the acquisition related charges was $11.1 million, or 13% of
revenues. The improvement in the operating margin before acquisition
charges is due to top-line revenue growth, coupled with an overall
decrease in operating costs as previously discussed.
In fiscal 1993, the Company reported an operating loss of $12.1
million, including the $16.6 million restructuring charge. Fiscal
1993 operating income was $4.5 million prior to the restructuring
charge, or 6% of revenues.
Other Income
Other income for fiscal 1995 was $0.8 million, compared to $0.2
million in fiscal 1994 and $0.05 million in fiscal 1993. Other
income varied during the three year period primarily as a result of
changes in the amount of cash available for investment.
Taxes
The Company's effective tax rates were 30%, 0% and 1% for
fiscal 1995, 1994 and 1993, respectively. In fiscal 1995, the
variance from the statutory rate is due to research and
experimentation tax credits and foreign tax rates that are lower than
U.S. statutory rates. In fiscal 1994, the variance from the
statutory rate is because the Company did not recognize the full
benefit of net operating loss carryforwards. Variances from the
statutory U.S. rate for fiscal 1993 was primarily the result of net
operating loss benefits that were deferred and foreign taxes.
Factors That May Affect Future Results
The Client/Server development tools market is characterized by
rapid changes in technology and user needs. Compatibility of the
Company's products with customers' preferred operating systems and
database management systems are important to future results of the
Company. The current market trend appears to be weighted towards
building client/server and cooperative applications using a changing
mix of operating systems. Revenue from the Company's traditional
development tools area declined 22% this past year. Products in this
area accounted for 35% of fiscal 1995 revenue, and the Company
expects demand for these products to remain flat or continue to
decline. This decline was more than offset by a 70% increase in the
Company's new client/server products. Because of the rapidly
changing market, there is no guarantee that this substantial growth
will continue. Future operating results could be affected by the
market's acceptance of the Company's existing and new products in
this rapidly changing market.
Competition in the software development tools market is very
intense. New and established companies continue to develop and
market competitive products. Principal factors affecting competition
are product performance and functionality, compatability with the
customer's operating environment, ease of use, price and quality of
customer support, documentation and services. The Company
anticipates that it will continue to experience competition from
current vendors and new firms entering the market.
The Company markets and sells its products directly through its
own operations in the United States, United Kingdom, Germany, France
and Australia and through a network of dealer/distributors in 30
other countries. Consequently, the company's results are affected by
changes in the global economies and foreign currency exchange rates.
Although the Company does not believe that its business is
subject to seasonal variations, sales historically tend to be
strongest during the fourth quarter of a fiscal year. As a result,
the Company typically experiences lower revenues for the first
quarter of a fiscal year than in the fourth quarter of the prior
fiscal year. The Company's experience has also been that a major
portion of its revenue is recognized during the last month of a
fiscal quarter and that fluctuations in revenue and earnings may
occur due to the timing of orders. Quarterly results therefore can
vary to the extent that sales for a quarter are delayed, particularly
since a large portion of the Company's expenses do not vary with
revenues.
Inflation has not had a material effect on the past results of
the Company, however, there can be no assurance that the results of
operations will not be affected in the future.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
In fiscal 1995, operating activities generated $13.7 million in
cash, after spending $4.4 million for various restructuring and
acquisition costs. Investing activities used $11.3 million as the
Company invested $8.5 million in software and $2.7 million in fixed
assets. Financing activities in the form of stock option exercises
and purchases under the employee stock purchase plan generated $5.9
million in cash. The Company also spent $4.2 million to reacquire
324,000 shares of its common stock, and $2.2 million to satisfy
installment obligations associated with its acquisition of Q+E
Software, Inc. Overall cash increased $2.2 million in fiscal 1995.
Fiscal 1994 operating activities generated $16.2 million in cash
as the charge for purchased research and development was non-cash in
nature. Investing activities used a net $5.7 million as the Company
invested $5.8 million in software and a net $0.6 million in fixed
assets, which was offset by other investing activities. Financing
activities in the form of stock option exercises and purchases under
the employee stock purchase plan generated $3 million in cash. The
Company's initial cash outlays to acquire Q+E were substantially
offset by Q+E's existing cash balances. Overall cash increased $13.3
million in fiscal 1994.
In fiscal 1993, operating activities generated $13.7 million in
cash as most of the restructuring charges were not cash related.
Investing activities consumed a net $11.9 million, as $2.9 million
was invested in equipment and $9.2 million in software, including
$2.1 million of purchased technology acquisitions. Financing
activities generated $1.6 million, which was received from the
exercise of stock options and the employee stock purchase plan.
Overall cash increased $3.2 million in the year.
Current Financial Position
At April 30, 1995 the Company had cash and cash equivalents of
$24.6 million and no bank debt. The Company's ratio of current
assets to current liabilities, or current ratio, was 1.8 to 1,
compared with 1.3 to 1 at the beginning of the fiscal year. The
Company also has in place a revolving $12 million unsecured credit
facility. As of April 30, 1995, the Company has no borrowings under
this credit facility.
Future Liquidity and Capital Requirements
In fiscal 1996, the Company expects to invest about $6 million
in fixed assets, such as computer equipment. The Company will also
make $1.1 million in installment payments related to the acquisition
of Q+E Software, Inc. and $1.2 million for the acquisition of the C++
Views product line from Liant, Inc. The Company believes that the
existing cash balances, together with cash generated by operating
activities and available borrowings, will be adequate to meet the
Company's liquidity and capital needs for the foreseeable future.
The Company will also continue to evaluate the acquisition of
technologies or product lines which are consistent with our current
strategy. The Company expects to fund these transactions using cash
on-hand and cash provided from operations. If necessary or
desirable, the Company may fund these transactions using debt, equity
or other sources.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Pages
Report of Independent Accountants 16
Financial Statements:
Consolidated Statements of Operations for
the fiscal years ended April 30, 1995,
1994, and 1993 17
Consolidated Balance Sheets as of
April 30, 1995 and 1994 18 - 19
Consolidated Statements of Cash Flows
for the fiscal years ended April 30, 1995,
1994, and 1993 20
Consolidated Statements of Changes in
Stockholders' Equity for the fiscal years
ended April 30, 1995, 1994, and 1993 21
Notes to Consolidated Financial Statements 22 - 33
REPORT OF INDEPENDENT ACCOUNTANTS
To Board of Directors and Shareholders
INTERSOLV, Inc.
We have audited the consolidated financial statements and the
financial statement schedule of INTERSOLV, Inc. and Subsidiaries
listed in Item 14(a) of this Form 10-K. These financial statements
and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and the financial statement schedule 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 INTERSOLV, Inc. and Subsidiaries as of April 30, 1995 and
1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended April 30, 1995
in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred
to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
May 31, 1995
INTERSOLV, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
Fiscal Years Ended April 30,
1995 1994 1993
Revenues:
License fees $ 75,018 $ 54,808 $56,131
Service fees 40,445 30,585 24,279
Total revenues 115,463 85,393 80,410
Costs and expenses:
Cost of products 10,624 7,111 5,632
Cost of services 16,770 11,158 7,357
Sales and marketing 48,356 40,019 43,401
Research and development 12,109 9,023 10,752
General and administrative 9,174 6,999 8,770
Purchased research and development --- 34,761 ---
Restructuring charges --- 5,899 16,573
Total costs and expenses 97,033 114,970 92,485
Operating income (loss) 18,430 (29,577) (12,075)
Other income, net 789 207 52
Income (loss) before income taxes 19,219 (29,370) (12,023)
Provision (benefit) for income taxes 5,758 ---- (128)
Net income (loss) $ 13,461 ($29,370) ($11,895)
Shares used in computing net income (loss)
per share 16,215 12,122 11,861
Net income (loss) per share 0.83 ($2.42) ($1.00)
The accompanying notes are an integral part of the consolidated
financial statements.
INTERSOLV INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
ASSETS
as of April30,
1995 1994
Current assets:
Cash and cash equivalents $24,574 $22,366
Accounts receivable, net of allowance for doubtful
accounts of $1,312 and $998 37,248 25,791
Refundable income taxes 389 411
Prepaid expenses and other current assets 4,071 2,619
Total current assets 66,282 51,187
Software, at cost 35,055 26,731
Accumulated amortization (14,868) (7,733)
Total software, net 20,187 18,998
Property and equipment:
Furniture and equipment 24,761 23,154
Leasehold improvements 2,972 1,932
Accumulated depreciation and amortization (21,989) (19,116)
Total property and equipment, net 5,744 5,970
Notes receivable and other assets 1,207 1,446
Total assets $93,420 $77,601
The accompanying notes are an integral part of the consolidated
financial statements.
INTERSOLV, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
as of April 30,
1995 1994
Current liabilities:
Accounts payable $4,978 $3,976
Accrued compensation and employee benefits 8,228 6,242
Other accrued expenses 7,244 14,898
Deferred revenue 14,365 13,654
Income taxes payable 2,533 1,712
Total current liabilities 37,348 40,482
Long-term liabilities :
Deferred taxes 2,831 ---
Installment payable --- 1,196
Total long-term liabilities 2,831 1,196
Total liabilities 40,179 41,678
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares
authorized; 15,604,000 and 14,753,000 issued
and outstanding 156 148
Paid-in capital 83,711 78,591
Treasury stock, at cost (1,815) ---
Accumulated deficit (28,028) (41,526)
Cumulative currency translation adjustment (783) (1,290)
Total stockholders' equity 53,241 35,923
Total liabilities and stockholders' equity $93,420 $77,601
The accompanying notes are an integral part of the consolidated
financial statements.
INTERSOLV, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Fiscal Years Ended April 30,
1995 1994 1993
Cash inflows (outflows)
Operating activities:
Net income (loss) $13,461 ($29,370) ($11,895)
Non-cash items:
Depreciation and amortization 10,634 7,809 6,694
Deferred income taxes 2,831 (1,715) (1,686)
Write-down of purchased research &
development --- 34,761 ---
Write-down of capitalized software
and property --- --- 13,200
Pmt of Restructuring/Acquisition Charges (4,409) (40) (634)
Changes in assets and liabilities, net of effect of acquisition:
Accounts receivable (11,004) (3,067) (254)
Refundable income taxes 22 257 2,699
Prepaid expense and other current assets(1,451) 404 740
Accounts payable and accrued expenses 2,985 4,600 2,675
Deferred revenue 652 2,521
2,142
Net cash provided by operating activities 13,721 16,160
13,681
Investing activities:
Additions to software (8,547) (5,750)
(9,218)
Acquisition of Q+E, net of cash acquired --- 207
- ---
Additions to property and equipment (2,700) (1,822)
(2,851)
Sale/leaseback of equipment --- 1,252
- ---
Other (51) 443
126
Net cash used in investing activities (11,298) (5,670)
(11,943)
Financing activities:
Purchase of common stock for treasury (4,216) ---
- ---
Proceeds from sale of common stock 5,868 2,985
1,607
Payment of Q+E installment liabilities (2,214) ---
- ---
Net cash (used by) provided by financing activities (562) 2,985
1,607
Effect of exchange rate changes on cash 347
(126) (96)
Net increase in cash and cash equivalents 2,208
13,349 3,249
Cash and cash equivalents, beginning of year 22,366 9,017
5,768
Cash and cash equivalents, end of year $24,574
$22,366 $9,017
Supplemental Data
Cash paid for interest $ 17 $ 43
$ 75
Cash paid for income taxes $ __150 $ 372
$ 288
The accompanying notes are an integral part of the consolidated
financial statements.
INTERSOLV, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(amounts in thousands)
Common Stock
Cumulative
Shares Amount Paid-In Treasury Accumulated
Translation
Capital Stock
Deficit Adjusment Total
Balance, April 30, 1992 11,748 $118 $46,087 --- $
(261) $(752) $45,192
Sale of common stock under stock
option and stock purchase plans 195 2 1,605 ---
- --- --- 1,607
Translation adjustment --- --- --- ---
- --- (264) (264)
Net Loss --- -- --- ---
(11,895) --- (11,895)
Balance, April 30, 1993 11,943 120 47,692 --- (
2,156) (1,016)
Issuance of common to acquire
Q+E Software, Inc. 2,370 24 27,919 ---
- --- --- 27,943
Sale of common stock under stock
option and stock purchase plans 440 4 2,980 ---
- --- --- 2,984
Translation adjustment --- --- --- ---
- --- (274) (274)
Net Loss --- --- --- ---
(29,370) --- (29,370)
Balance April 30, 1994 14,753 148 78,591 ---
(41,526) (1,290) 35,923
Acquisition of The Software Edge,
Inc. 472 5 107 ---
37 --- 149
Sale of common stock under stock
option and stock purchase plans 703 3 5,013 $2,401
- --- --- 7,417
Repurchase of common shares (324) --- --- (4,216)
- --- --- (4,216)
Translation adjustment --- --- --- ---
- --- 507 507
Net Income --- --- --- ---
13,461 --- $13,461
Balance April 30, 1995 15,604 156 $83,711 ($1,815)
($28,028) ($ 783)$53,241
The accompanying notes are an integral part of the consolidated financial
statements
INTERSOLV, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
INTERSOLV, Inc. (the "Company" or "INTERSOLV"), is engaged in
the development, marketing and support of computer software and
services used by software developers to accelerate the development
and maintenance process, improve quality and reduce costs.
Consolidation
The consolidated financial statements include the accounts of
INTERSOLV and its wholly-owned subsidiaries. Intercompany accounts,
transactions and profits have been eliminated in the consolidated
financial statements.
Revenue Recognition
The Company's revenues consist primarily of license and service
fees, which includes fee-paid consulting and training services and
maintenance services. Software license fees are generally recognized
upon initial shipment of the product and acceptance by the customer.
Training and consulting fees are recognized upon delivery of the
services. Revenues and costs related to maintenance services
provided in the initial 30-day warranty period, which are
insignificant, are bundled with the initial license and recognized
concurrently with the license fee. Maintenance fees for support
beyond the warranty period are recorded as deferred revenue and
recognized ratably over the period of the maintenance contract,
typically twelve months.
Cash and Cash Equivalents
Cash and cash equivalents consist of time and demand deposits
and highly liquid investments purchased with a maturity of three
months or less. The Company maintains its time and demand deposits
in bank deposit accounts which, at times, may exceed federally
insured limits. The Company has not experienced any losses in such
accounts.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial
Accounting Standards No. 105, consist primarily of trade accounts
receivable. The Company's customer base is primarily Fortune 1000
companies or branches thereof, with no customer accounting for more
than 10% of the Company's revenues, which minimizes potential
concentrations of credit risk. The Company does not require
collateral upon delivery of its products.
Income Taxes
In fiscal 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). The effect of the change was not material. Deferred tax
assets and liabilities are recognized for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. They are determined annually based on the
differences between financial statement and tax bases using enacted
tax laws and rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. The provision for income taxes is
the tax payable for the year plus the change in the deferred tax
assets and liabilities during the year.
Currency Translation
Assets and liabilities of the Company's foreign operations are
translated into U.S. dollars at the exchange rate in effect at the
balance sheet date and revenues and expenses are translated at
average rates in effect during the period. The unrealized currency
translation adjustment is reflected as a separate component of
stockholders' equity on the balance sheet.
Net Income(Loss) Per Share
Earnings (loss) per share was computed by dividing net income
(loss) by the weighted average number of shares of common stock and
common stock equivalents outstanding during the period when dilutive.
Common stock equivalents consist of common stock issuable on the
exercise of outstanding stock options, less the shares that could
have been purchased with the proceeds from the exercise of the
options (the "Treasury Stock Method").
Statement of Cash Flows
The consolidated statements of cash flows are intended to
reflect only cash receipt and cash payment activity and does not
reflect noncash investing and financing activity. Noncash activity
for each of the three one-year periods ended April 30, 1995 was not
significant except for the acquisition of Q+E Software, Inc. in April
1994 and the Software Edge, Inc. in September 1994, as more fully
discussed in Note 2.
Reclassifications
Certain amounts previously reported have been reclassified to
conform with current year presentation.
Property and Equipment
Property and equipment are stated at cost and depreciated on a
straight-line basis over their estimated useful lives. Furniture and
equipment are generally depreciated over terms of three to five
years, leasehold improvements are amortized over the shorter of the
assets' useful lives or the term of the related lease and computer
software purchased for internal use is amortized over terms not
exceeding five years. Repairs and maintenance are charged to
operations as incurred. Major improvements and betterments are
capitalized.
Research and Development
Research and development expense, before the capitalization of
certain internal software development costs, amounted to $20.3
million, $14.7 million and $17.8 for the fiscal years ended April
30, 1995, 1994 and 1993, respectively.
Capitalized Software
Certain internal software development costs are capitalized
subsequent to the establishment of technological feasibility for the
product as evidenced by a working model. Capitalized internal
software development costs amounted to $8.2 million, $5.7 million and
$7.1 million for the fiscal years ended 1995, 1994, and 1993,
respectively. Capitalization ceases when the product is available
for general release to customers, at which time amortization of the
capitalized costs begins. Capitalized software is amortized on a
straight-line basis over the estimated life of the products,
generally three years. Amortization of capitalized software costs
was $6.6 million, $3.9 million and $2.6 million during fiscal 1995,
1994 and 1993, respectively, and is included in cost of sales.
Purchased software is amortized over useful lives of three to
five years on a straight-line basis. Amortization expense for
purchased software of $0.7 million, $0.5 million and $0.6 million
was recorded during fiscal years 1995, 1994, and 1993, respectively,
and is included in cost of sales.
The Company continually compares the unamortized costs of
capitalized software development costs and purchased software costs
to the expected future revenues for those products. If the
unamortized costs exceed the expected future net realizable value,
the excess amount is written off. In the third quarter of fiscal
1993, the Company took a $12.5 million non-cash charge to reduce
capitalized software development costs and purchased software
technologies. This charge is included in the restructuring charge
line in the Statement of Operations. The write-off related primarily
to products based on older operating system environments which are
not part of the Company's growth strategy. Because of the more rapid
technology changes in computer software, the Company now amortizes
capitalized software development costs for new products over
estimated useful lives of 3 years, compared with 5 year lives used
prior to fiscal 1994.
(2) ACQUISITIONS
The Software Edge, Inc.
In September 1994, INTERSOLV acquired all of the outstanding
stock of the Software Edge, Inc. ("Software Edge") for approximately
$5.7 million consisting of 471,819 shares of INTERSOLV common stock.
Software Edge developed and marketed a software product which
complements the Company's PVCS line of software configuration
management tools. The transaction was accounted for using the
"pooling of interest" method. Software Edge's results of operations
beginning May 1, 1994 have been included in the Company's results.
Results for previous years have not been restated because the impact
is not material.
Q+E Software, Inc.
In April 1994, INTERSOLV acquired all of the outstanding stock
of Q+E Software, Inc. ("Q+E") for approximately $37.4 million,
consisting of $5.3 million in cash and installment payments,
2,370,000 shares of INTERSOLV common stock (valued at approximately
$28 million) and $4.1 million in assumed and other liabilities. Q+E
developed and marketed software products for end-users and software
developers to access information stored in databases resident on
personal computers, mini-computers and mainframes. The acquisition
was accounted for using the purchase method.
The transaction value was allocated among the identifiable
tangible assets and liabilities based on their respective fair market
values. In addition, the transaction value was also allocated to
certain intangible assets, such as existing software products which
had reached technological feasibility, and in-process software
development efforts which had not reached technological feasibility
("purchased research and development"). This resulted in $34.8
million of the transaction value being allocated to purchased
research and development. This amount was charged to operations in
fiscal 1994
The following unaudited pro forma information has been prepared
assuming the acquisition of Q+E had occurred at the beginning of the
fiscal years presented (amounts in thousands, except earnings per
share):
1994 1993
Revenues $100,625 $89,286
Pretax income (loss) 11,895 (12,739)
Net Income (loss) 7,883 (12,609)
Earnings (loss) per share $ 0.54 $ (0.89)
The pro forma financial information is presented for
informational purposes only and is not necessarily indicative of the
operating results that would have occurred had the Q+E acquisition
been consummated as of the above dates, nor are they necessarily
indicative of future operating results. The above pro forma
information includes Q+E revenues of $4.4 million and $3.3 million
for fiscal 1994 and 1993, respectively, related to a recently expired
contract with a major reseller. The pro forma information does not
include the write-off of purchased research and development of $34.8
million or the $5.9 million in restructuring charges incurred as a
result of the acquisition, as more fully discussed in Note 3.
Subsequent Events - Acquisition of PC Strategies and Solutions Inc.
and C++/Views product line.
PC Strategies & Solutions, Inc.
Effective May 1, 1995, INTERSOLV acquired all of the outstanding
common stock of PC Strategies & Solutions, Inc. ("PCS") for 675,000
shares of INTERSOLV common stock (valued at $9.3 million). The
transaction will be accounted for using the "pooling-of-interest"
method and the historical financial statements of INTERSOLV will be
restated to include the financial position and results of operations
of PCS. PCS provides consulting and training services focusing on
the implementation of object-oriented client/server technology.
The following unaudited pro-forma consolidated information has
been prepared assuming the acquisition had occurred at the beginning
of the fiscal years presented (amounts in thousands, except earnings
per share):
1995 1994 1993
Revenues $120,395 $88,518
$81,860
Pretax Income (loss) 19,044 (28,826)
(11,736)
Net Income (loss) 13,286 (29,042)
(11,706)
Earnings (loss) per share $0.79 $(2.27)
$(0.93)
The unaudited pro-forma consolidated results of operations are
not necessarily indicative of the results of operations that would
have occurred if the acquisition had been consummated as of the
beginning of the periods presented nor are they necessarily
indicative of future operating results. Costs of the acquisition,
which will be charged to operations in fiscal 1996, are not included
in the pro-forma consolidated results of operations.
C++/Views Product Line
Effective May 1, 1995, INTERSOLV acquired the rights to the
C++/Views product line owned by Liant Inc. for $1.2 million.
INTERSOLV did not acquire any of the common stock of Liant Inc.
(3) RESTRUCTURING CHARGES
Q+E Merger Charges - Fiscal 1994
Fiscal 1994 results were charged with $5.9 million of
restructuring expenses resulting from the Q+E acquisition. The non-
recurring charge includes, among other items, $1.1 million for
INTERSOLV severance and other costs to reduce the workforce, $1.1
million for costs to close excess facilities, $1.3 million related
to write-off of older computer technology and $1.4 million for re-
negotiation costs related to overlapping dealer/distributor
contracts. Severance costs and related costs cover 28 INTERSOLV
personnel which were in duplicative functions, primarily in the sales
and marketing areas. All INTERSOLV personnel have been notified, and
the majority of severance costs were disbursed by July 31, 1994.
Direct transaction expenses and the cost to settle Q+E severance
and contract obligations were included in the acquisition costs and
allocated to the fair market value of acquired assets, as described
in Note 2.
Capitalized Software Adjustment and Other Charges - Fiscal 1993
In fiscal 1993, operations were charged with $16.6 million for
restructuring. $12.5 million of the charge related to a non-cash
adjustment to reduce capitalized software development costs and
purchased software technologies to their net realizable value, as
more fully described in Note 1. The remainder of the provision, or
$4.1 million, was primarily for the restructuring of the Company's
product development function and its international sales force. In
addition, the Company closed or redeployed certain facilities. The
product development restructuring was done to better deploy the
Company's resources to match future anticipated revenue streams from
each of the Company's product lines. The restructuring in the
international sales force related to the Company's operations in
France, as well as selected distributors. As a result of this
restructuring, the Company incurred certain non-recurring costs
including severance and other costs to reduce the workforce as well
as accruing for the net cost of the facilities changes.
(4) BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company operates in one industry segment, the development and
marketing of computer software programs and related services. The
Company markets its products worldwide and operations can be grouped
into two main geographic areas. Pertinent financial data by major
geographic area is summarized below.
NORTH EUROPE CONSOLIDATED
AMERICA & OTHER
Fiscal 1995:
Revenues:
Customers $83,123 $32,340 $115,463
Intercompany 3,276 (3,276) ---
TOTAL 86,399 29,064 115,463
Income from operations $15,169 $ 3,261 $18,430
Identifiable assets $74,485 $18,935 $93,420
Fiscal 1994:
Revenues:
Customers $60,860 $24,533 $85,393
Intercompany 3,472 (3,472) ----
TOTAL 64,332 21,061 85,393
Loss from operations ($28,339) ($1,238) ($29,577)
Identifiable assets $62,603 $14,998 $77,601
Fiscal 1993:
Revenues:
Customers $48,168 $32,242 $80,410
Intercompany 4,850 (4,850) ----
TOTAL $53,018 $27,392 $80,410
Loss from operations ($10,385) ($ 1,690) ($12,075)
Identifiable assets $45,443 $13,942 $59,385
Intercompany revenues between geographic areas are accounted for
as transfer fees representative of transactions with unaffiliated
third parties. These fees are intended to cover primarily software
development expense and cost of goods. Identifiable assets are those
assets that are identifiable with operations in each geographic area.
General corporate assets in North America include cash and cash
equivalents and capitalized software costs. No customer accounted for
10% or more of total revenue during the fiscal years ended April 30,
1995, 1994 or 1993. Included in Europe and Other revenues is $10.4
million, $10.3 million and $17.3 million of export revenues to
countries where the Company has no foreign owned operations.
Approximately 95% of the North American revenues is to customers based
in the United States and the remainder is to customers in Canada and
Mexico.
(5) LINE OF CREDIT
The Company has an unsecured credit arrangement with two banks
(the "Credit Agreement"). The Credit Agreement provides for
borrowings not to exceed $12 million. The Credit Agreement was
renewed in July 1994 and is due to expire in September 1996.
Interest on borrowings would be at the LIBOR rate plus 1.5% or prime,
at the Company's option. The commitment fee is 3/8% per annum on the
unused portion of the credit line. The Credit Agreement has various
covenants which limit the Company's ability to dispose of assets,
purchase its own stock, pay dividends and purchase other significant
businesses or technologies. The Company is also required to maintain
certain financial ratios. As of and during the year ended April 30,
1995, there were no borrowings outstanding.
(6) COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space and equipment under
noncancelable operating leases expiring through 2017. In addition,
the Company leases office equipment on a month-to-month basis, which
can be terminated at any time at the Company's option. None of the
agreements contain unusual renewal or purchase options. Total rent
expense in fiscal 1995, 1994 and 1993 was $3.8 million, $4.0 million
and $5.4 million, respectively.
Future minimum lease payments under the noncancelable operating
lease agreements as of April 30, 1995, are as follows:
Years Ending April 30,
(in millions)
1996 1997 1998 1999 2000 Thereafter Total
$6.6 $4.8 $3.4 $2.9 $2.8 $18.4 $38.9
Contracting Costs (Discontinued Operations)
Prior to April 1986, certain revenues associated with
discontinued operations were generated under cost-plus-fee contracts
with the U.S. government and are subject to adjustments upon audit by
the Defense Contract Audit Agency (DCAA). Audits through January 31,
1986 have been completed. On December 5, 1990, the Company received
a notice from the DCAA questioning certain charges aggregating
approximately $2.4 million incurred by the Company during fiscal 1985
and 1986. The Company filed a response in April, 1991, which
provided additional information regarding the issues raised in the
notice. The amount of the liability, if any, can not be
ascertained.
Sales and Income Taxes
The Company sells its products in various states through
different distribution channels, including telesales and direct
sales. On certain sales, the Company must collect and remit sales
tax to the respective state. These sales taxes are subject to
adjustment upon audit by the respective state. Liabilities may result
from this process; however, management believes the reserves provided
for these liabilities are sufficient.
The Company's income tax returns are subject to audit by
Federal, state and foreign tax authorities. Adjustments to increase
or decrease taxable income or losses may result from the audits.
Management believes the impact of these adjustments, if any, would
not have a material impact on the Company's financial statements
taken as a whole.
(7) LONG TERM LIABILITIES
In connection with the acquisition of Q+E, INTERSOLV must make
three equal non-interest bearing payments of $1.1 million. The first
two payments were made during the fiscal year ended April 30, 1995.
The third payment is due during the fiscal year ending April 30,
1996.
(8) CAPITAL STOCK
Stock Option Plan
The 1992 Stock Option Plan (the "1992 Plan") provides for the
granting of incentive and nonqualified stock options to purchase up
to 2,000,000 shares of common stock. The option price must be equal
to or greater than fair market value at the date of grant. Options
are granted for terms of up to ten years and most are exercisable in
cumulative annual increments of 25% each year, commencing one year
after the date of grant. This plan expires in 2002. The 1992 Plan
replaced the 1982 Stock Option Plan (the "1982 Plan"), which has
expired. There are still outstanding options under the 1982 Plan.
As of April 30, 1995, options for 1,875,346 shares, at prices
ranging from $4.00 to $17.25 per share were outstanding under both
the 1992 and 1982 Plans. There were 776,564 shares of common stock
available for future grant under the 1992 Plan. At April 30, 1995,
options for 702,004 shares were exercisable from the total
outstanding. During fiscal 1995, 1994 and 1993, there were 406,302,
346,704 and 140,411 options exercised, respectively, at an average
per share exercise prices of $8.30, $6.91 and $7.66, respectively.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan, which is
authorized to grant rights to purchase an aggregate maximum of
340,000 shares of common stock. Employees of the Company with three
months of continuous service are eligible to participate.
Rights are granted twice yearly and are exercisable effective
the succeeding June 30 or December 31. Eligible employees may
purchase shares of common stock through payroll deductions at a
purchase price which is 85% of fair market value at the beginning or
the end of each six-month offering period, whichever is lower.
During fiscal 1995, 1994 and 1993, respectively, 96,454, 92,175 and
42,668 shares of common stock were purchased under this plan.
Shareholder Rights Plan
The Company has a Shareholder Rights Plan (the "Rights Plan"),
which is designed to deter coercive takeover tactics and to prevent
an acquirer from gaining control of the Company without offering a
fair price to all of the Company's shareholders. Under the Rights
Plan, each common stockholder receives one right (a "Right") for each
share of common stock which entitles its holder to buy one one-
hundredth of a share of Series A Junior Participating Preferred Stock
("Series A") at a purchase price of $40.00. The Rights will not be
exercisable or separable from the common stock until a specified
period after a person or group has acquired or has the right to
acquire 20% of the Company's common stock or has commenced a tender
offer resulting in the ownership of 30% or more of the Company's
common stock.
If the Company is acquired in a merger or other business
combination transaction, each Right will entitle the holder to
receive, upon exercise, common stock of either the Company or the
acquiring company having a market value equal to twice the exercise
price of the Right. Each Right is nonvoting and expires on August
31, 1999. The Company may generally redeem the Rights at the
Company's option prior to such Right becoming exercisable at a
redemption price of $.01 per Right.
(9) EMPLOYEE BENEFIT PLAN
401(k) Plan
The Company has a savings and investment plan (the "Plan") which
covers employees of the Company and that qualifies under section
401(k) of the Internal Revenue Code. All full-time employees who are
at least 21 years old and have worked a minimum of three months at
the Company are eligible to participate. Contributions up to 10% of
eligible employees' salaries, as defined, may be made by employees.
The Company may make discretionary contributions. The Company
contributed $178,000 in fiscal 1995, but previously had made no
contributions to the plan.
(10) INCOME TAXES
As discussed in Note 1, the Company adopted FAS 109 effective May
1, 1993. The impact of this adoption was not material; accordingly,
there is no restatement of prior periods or cumulative impact to
report in fiscal 1994. The U.S. and foreign components of income
(loss) before provision for income taxes were as follows:
Year Ended April 30
1995 1994 1993
(in 000's)
United States 15,771 ($31,668) ($12,011)
Foreign 3,448 2,298 (12)
$19,219 ($29,370) ($12,023)
The provision (benefit) for income taxes consist of the following:
Years Ended April 30,
1995 1994 1993
(in 000's)
Current provision:
U.S. federal $2,456 $1,345 $ 931
Foreign 184 123 356
State 289 247 271
2,929 1,715 1,558
Deferred provision (benefit)
U.S. federal 2,829 (1,715) (1,556)
Foreign ---- --- 148
State ---- --- (278)
2,829 (1,715) (1,686)
$5,758 $----- ($ 128)
The provision (benefit) for income taxes result in effective
tax rates which differ from the U.S. Federal statutory income tax rate
as follows:
1995 1994 1993
Statutory U.S. Federal income tax rate 35.0% (34.0%) (34.0%)
State income taxes, net of federal benefit 1.0 0.1 (2.7)
Inncentive stock option deductions --- (1.6) ---
Foreign taxes impact (2.6) --- 3.0
Net operating loss benefit (recognized)
deferred --- (2.7) 31.7
Nondeductible research and development costs -- 40.1 ---
Alternative minimum tax 1.3 --- ---
Research and experimental credits (3.9) ---
Other ( 0.8) (1.9) 1.0
30.0% 0.0% (1.0%)
The tax effects of the components of the deferred tax assets and
liabilities are as follows:
April 30 April 30,
1995 1994
(in $000)
Net operating loss carryforwards $3,435 $9,479
Research and experimental tax credits 1,800 1,106
Foreign tax credits -- 827
Property and equipment 347 ---
Allowance for doubtful accounts 343 275
Other accruals 930 3,298
Valuation allowance (2,264) (7,242)
Total deferred tax assets 4,591 7,743
Deferred tax liabilities:
Capitalized software, net (7,422) (6,856)
Property and equipment --- (887)
Total deferred tax liabilities (7,422) (7,743)
Net deferred tax liabilities $(2,831) ----
Net operating loss carryforwards for U.S. and foreign tax
purposes are $3.2 million and $5.5 million, respectively, which
expire through 2009. Research and experimental tax credit
carryforwards totaling $1.8 million are also available and expire
through 2005.
(11) INVESTMENT AND OTHER INCOME
Investment and other income includes interest income of
$895,000, $386,000 and $52,000 in fiscal 1995, 1994 and 1993,
respectively, and interest expense of $17,000 and $4,000 in fiscal
1995 and 1994, respectively.
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarters First Second Third Fourth
(amounts in 000's, except per share data)
1995
Revenues $23,274 $27,242 $30,084 $34,863
Costs and expenses 21,545 23,691 24,524 27,273
Net income 1,318 2,595 4,013 5,535
Net income per share $0.08 $0.16 $0.25 $0.34
Stock Price:
High $12.50 $18.00 $18.25 $16.50
Low $8.62 $11.12 $13.25 $13.37
1994
Revenues $16,551 $20,507 $23,030 $25,305
Costs and expenses 15,748 18,310 19,494 61,418
Net income (loss) 599 1,532 2,556 (34,057)
Net income (loss) per share $0.05 $0.13 $0.20 ($2.76)
Stock Price:
High $8.50 $10.00 $13.25 $15.50
Low $4.75 $4.75 $7.75 $9.75
The fourth quarter of fiscal 1994 includes non-recurring charges
of $40.7 million related to the acquisition of Q+E, as discussed in
Notes 2 and 3.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except as set forth below in this Item 10, the information
required by this Item 10 is incorporated herein by reference to the
Company's definitive proxy statement to be filed within 120 days
after the end of the Company's fiscal year ended April 30, 1995.
EXECUTIVE OFFICERS
The following table indicates the names, ages and positions of
the Company's executive officers. There is no family relationship
between any of the officers or directors.
Name Age Position
Kevin J. Burns 46 Chairman of the Board
and Chief Executive Officer
Gary G. Greenfield 40 President and
Chief Operating Officer
Kenneth A. Sexton 41 Vice President, Finance &
Administration, Chief
Financial Officer and Secretary
Mr. Burns was elected Chief Executive Officer of the Company in
1986 and Chairman of the Board in 1990. From 1986 to 1995, Mr. Burns
also served as President of the Company. From 1984 to 1986, he was
Executive Vice President and Chief Operating Officer, and from 1982 to
1984, Executive Vice President of the Company. He has also been a
Director of the Company since 1986.
Mr. Greenfield was elected President and Chief Operating Officer
in 1995. From 1992 to 1995, he was Executive Vice President, Chief
Operating Officer. From 1989 to 1992, he was Executive Vice President,
Product Operations. From April 1991, to October 1991 he was also the
Chief Financial Officer of the Company. He served as Senior Vice
President, Product Services and Operations from 1988 to 1989. He
served as Vice President, Marketing from 1987 to 1988.
Mr. Sexton was elected Vice President, Finance & Administration,
Chief Financial Officer, and Secretary of the Company in 1991. From
1984 to 1991, he was Controller and Chief Accounting Officer of Life
Technologies, Inc., a biotechnology company.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated
by reference to the Company's definitive proxy statement to be filed
within 120 days after the end of the Company's fiscal year ended
April 30, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this Item 12 is hereby incorporated
by reference to the Company's definitive proxy statement to be filed
within 120 days after the end of the Company's fiscal year ended
April 30, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is hereby incorporated
by reference to the Company's definitive proxy statement to be filed
within 120 days after the end of the Company's fiscal year ended
April 30, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of this Form 10-K:
1. Financial Statements. The following consolidated
financial statements of INTERSOLV, Inc. and Subsidiaries
and Report of Independent Accountants relating thereto are
filed as Item 8 of this report.
Description
Report of Independent Accountants
Consolidated Balance Sheets as of April 30, 1995 and 1994
Consolidated Statements of Operations for the fiscal years
ended April 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the fiscal years
ended April 30, 1995, 1994 and 1993
Consolidated Statements of Changes in Stockholders' Equity
for the fiscal years ended April 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
The following consolidated financial statement schedule of
INTERSOLV, Inc. and Subsidiaries are filed as a schedule to
this Report:
Schedule II - Valuation and Qualifying Accounts and
Reserves
Report of Independent Accountants on this schedule is
included in the Report of Independent Accountants covering
the consolidated financial statements, which is included
herein.
Schedules omitted are not present because (i) such
schedules are not applicable or required or, (ii) the
information required has been presented in the financial
statements or notes thereto.
3. Exhibits. The following Exhibits (listed according
to the number assigned in the table in Item 601 of
Regulation S-K) are filed with this Report or incorporated
by reference as set forth below:
Exhibit
Number Exhibit Description
Articles of Incorporation and By-laws
3.1 Second Restated Certificate of
Incorporation, as amended, of the Company
(incorporated herein by reference to Exhibit 3(a)
to the Company's Registration Statement on Form S-
4 (Registration No. 33-38937)).
3.2 By-Laws, as amended (incorporated
herein by reference
to Exhibit 3.2 to the Company's Annual Report on Form
10-K
for the fiscal year ended 1991).
Instruments Defining the Rights of Security Holders,
Including Indentures
4.0 Specimen Common Stock Certificate
(incorporated herein by reference to Exhibit 4.0
to the Company's Annual Report on Form 10-K for
the fiscal year ended 1992.)
4.1 Rights Agreement, dated August 29, 1989
between the Company and Sovran Bank, N.A.
(incorporated herein by reference to Exhibits 4.1
to the Company's Current Report on Form 8-K dated
September 21, 1989). First National Bank of
Boston is currently the Company's transfer agent
and has assumed Sovran Bank's obligations under
this agreement.
Certain Management Contracts, Compensation Plans, Contracts
or Arrangements
10.1 The Company's 1982 Stock Option Plan, as
amended (incorporated herein by reference to
Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended April 30,
1990).
10.2 The Company's 1992 Stock Option Plan
(incorporated herein by reference to Exhibit 4(a)
to the Company's Registration Statement on Form S-
8 (Registration No. 33-56220)).
10.3 1984 Stock Option Plan of Index, as
amended (incorporated by reference herein to
Exhibit 10.2 to Index's Annual Report on Form 10-
K for the year ended December 31, 1988).
10.4 Amendment to the Company's 1992 Stock
Option Plan, dated June 16, 1994 (incorporated
herein by reference to Exhibit 10.6 of the
Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1994).
10.5 The Company's 1986 Employee Stock
Purchase Plan (incorporated herein by reference
to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the fiscal year ended April 30,
1988).
10.6 The Company's 1992 Employee Stock
Purchase Plan (incorporated by reference to
Exhibit 4(a) to the Company's Registration
Statement of Form S-8 (Registration No. 33-
56166)).
10.7 Amendment to the Company's 1992 Employee
Stock Purchase Plan, dated June 16, 1993
(incorporated herein by reference to Exhibit 10.9
to the Company's Annual Report on Form 10-K for
the fiscal year ended April 30, 1993).
Material Contracts in Ordinary of Business
10.8 Financing Agreement dated July 27, 1992
between the Company as the borrower and Maryland
National Bank and First National Bank of Boston
as lenders (incorporated by reference to Exhibit
10.25 to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1992).
10.9 Amendment to the Financing Agreement
dated July 19, 1993, between the Company as
borrower and Maryland National Bank and First
National Bank of Boston as lenders (incorporated
herein by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1993).
10.10 Amendment to the Financing Agreement
dated August 11, 1994, between the Company as
borrower and Nations Bank (successor to Maryland
National Bank) and First National Bank of Boston
as lenders (incorporated herein by reference to
Exhibit 10.10 to the Company's Annual Report on
From 10-K for the fiscal year ended April 30,
1994).
Other Contracts
10.11 Agreement of Merger among
INTERSOLV, Inc., Q+E Software, Inc., Solsub, Inc.
and the primary shareholders of Q+E Software Inc.
dated April 20, 1994 (incorporated herein by
reference to the Company's current Report on Form
8-K as filed on May 5, 1995).
10.12 Registration Rights agreement
between INTERSOLV, Inc. and R. Tyler Bennett,
Phyllis Bennett, John DeLonga, Richard Holcomb,
Robert Humphrey, John Rappl, Timothy Sampair,
George Woltman and David Whitehead dated April
20, 1994 (incorporated herein by reference to the
Company's current report on Form 8-K filed on May
5, 1994).
10.13 Form of Indemnification
Agreement between the Company and its directors,
officers and certain employees (incorporated
herein by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1994).
10.14 Stock Exchange Agreement by and among
INTERSOLV, Inc., PC Strategies & Solutions, Inc.
and Michael Goldman dated May 1, 1995
(incorporated herein by reference to the
Company's Current report on Form 8-K as filed on
May 11, 1995).
10.15 Registration Rights Agreement between
INTERSOLV, Inc. and Michael Goldman dated May 1,
1995 (incorporated herein by reference to the
Company's current report on Form 8-K as filed on
May 11, 1995).
Other Exhibits
11.1 Computation of Earnings per Share
21.1 Subsidiaries of the Company.
23.1 Consent of Coopers & Lybrand L.L.P.
(b) Report on Form 8-K:
The Company filed a Form 8-K on May 11, 1995 to report the
acquisition of PC Strategies and Solutions, Inc. on May
1, 1995. This current report was updated by Amendment
No. 1 on July 12, 1995, which included the audited
financial statements of PC Strategies & Solutions, Inc.
for the year ended April 30, 1995 and unaudited pro
forma condensed combined statements of operation of
INTERSOLV, Inc. for the fiscal years ended April 30,
1995, 1994 and 1993 and the unaudited pro forma
condensed combined balance sheet as of April 30, 1995.
(c) Exhibit
The list of exhibits required by Item 601 of Regulation
S-K is included in Item (a)3 above.
(d) Financial Statement Schedules
See Item (a)2 above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: July 28, 1995 INTERSOLV, INC.
By /s/ Kevin J. Burns
Kevin J. Burns
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf
of the Registrant and in the capacities indicated on July 28, 1995.
Signature Title
/s/Kevin J. Burns______________________ Chairman of the Board
Kevin J. Burns and Chief Executive Officer
(Principal Executive Officer)
/s/ Kenneth A. Sexton__________________ Vice President, Finance &
Kenneth A. Sexton Administration, Chief Financial
Officer, and Secretary
(Principal Financial and
Accounting Officer)
/s/ Norman A. Bolz____________________ Director
Norman A. Bolz
____________________________________ Director
Richard A. Carpenter
/s/ Robert N. Goldman _________________ Director
Robert N. Goldman
/s/ Gary S. Greenfield___________________ Director
Gary G. Greenfield
/s/ Russell E. Planitzer__________________ Director
Russell E. Planitzer
/s/ Charoles O. Rossoitti_________________ Director
Charles O. Rossotti
/s/ Frank A. Sola ______________________ Director
Frank A. Sola
INTERSOLV, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DESCRIPTION Bal. at Charged to Charged to balance
Beg. Costs and Other Deducts. End of
of period Expenses Accounts Write-Offs Period
1995
Allowance for
doubtful
accounts $(998,000) ($1,514,000) $--- $1,200,000 1,312,000)
1994
Allowance for
doubtful
accounts ($886,000) ($813,000) ($415,000)$1,116,000 ($998,000)
1993
Allowance for
doubtful
accounts ($846,000) $1,305,000) $--- 1,265,000 ($886,000)
Exhibit 11.1
INTERSOLV, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands)
For the years ended April 30____
1995 1994 1993
PRIMARY
Net income (loss) $13,461 ($29,370) ($11,895)
Weighted average number of
shares outstanding 15,375 12,122 11,861
Additional shares under stock
option plan assumed outstanding
less shares assumed repurchased
under the treasury stock method 807 0 0
Primary shares 16,182 12,122 11,861
Net income (loss) per share $ 0.83 ($2.42) ($ 1.00)
FULLY DILUTED
Net income (loss) $13,461 ($29,370) ($11,895)
Weighted average number of
shares outstanding 15,375 12,122 11,861
Additional shares under
stock option plan assumed
outstanding less shares assumed
repurchased under the treasury
stock method 840 0 0
Fully diluted shares 16,215 12,122 11,861
Net income (loss) per share $0.83 ($2.42) ($ 1.00)
Exhibit 21.1
INTERSOLV, INC. AND SUBSIDIARIES
SUBSIDIARIES
A. Direct Subsidiaries
INTERSOLV-Canada Inc. (incorporated in Ontario, Canada)
INTERSOLV International Holding Corp. (Delaware
corporation)
INTERSOLV Technology Holdings Corp. (Delaware corporation)
INTERSOLV RTP, Inc. (North Carolina Corporation)
B. Indirect Subsidiaries:
Index Technology Securities Corporation (Massachusetts
corporation)
INTERSOLV, Plc. (incorporated in United Kingdom)
INTERSOLV France S.A. (incorporated in France)
INTERSOLV GmbH (incorporated in Germany)
INTERSOLV Pty. Ltd. (incorporated in Australia)
Salgin Pty. Ltd. (incorporated in Australia)
INTERSOLV Foreign Sales Corporation (incorporated in
Barbados)
Q+E Software (UK) Limited (incorporated in United Kingdom)
Q+E Software Benelux, B.V. (incorporated in Netherlands)
Q+E Software (Deutschland) GmbH (incorporated in Germany)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Intersolv, Inc. on Form S-8, Registration Nos. 33-
56220, 33-83794, 33-56166, and 33-86590, and on Form S-3,
Registration No. 33-83796, of our report dated May 31, 1995, on our
audits of the consolidated financial statements and the financial
statement schedule of INTERSOLV, Inc. as of April 30, 1995 and 1994,
and for the years ended April 30, 1995, 1994 and 1993, which report
is included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Washington, D.C.
July 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> APR-30-1995
<CASH> 24574
<SECURITIES> 0
<RECEIVABLES> 38886
<ALLOWANCES> (1312)
<INVENTORY> 0
<CURRENT-ASSETS> 66282
<PP&E> 27733
<DEPRECIATION> (21989)
<TOTAL-ASSETS> 93420
<CURRENT-LIABILITIES> 37348
<BONDS> 0
<COMMON> 156
0
0
<OTHER-SE> 53085
<TOTAL-LIABILITY-AND-EQUITY> 93420
<SALES> 115463
<TOTAL-REVENUES> 115463
<CGS> 27394
<TOTAL-COSTS> 97033
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19219
<INCOME-TAX> 5758
<INCOME-CONTINUING> 13461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13461
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
</TABLE>
