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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934 for the quarterly period ended June 30,
1996 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: 0-20710
PEOPLESOFT, INC.
(Exact name of registrant as specified in its charter)
Delaware 68-0137069
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4440 Rosewood Drive, Pleasanton, CA 94588-3031
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code:
510/225-3000
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at June 30, 1996
----- ----------------------------
Common Stock, $.01 par value 50,474,726
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PEOPLESOFT, INC.
TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of December 31, 1995 and
June 30, 1996 3
Condensed Consolidated Statements of Income for the Three Months and
Six Months Ended June 30, 1995 and June 30, 1996 4
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1995 and June 30, 1996 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II OTHER INFORMATION
ITEM 1 - Legal Proceedings 18
ITEM 2 - Change in Securities 18
ITEM 3 - Defaults upon Senior Securities 18
ITEM 4 - Submission of Matters to a Vote of Security Holder 18
ITEM 5 - Other Information 19
ITEM 6 - Exhibits and Reports on Form 8 - K 19
SIGNATURES 20
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PEOPLESOFT, INC.
--------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
-------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 88,052 $ 121,595
Short-term investments 37,687 30,638
Accounts receivable, net 97,773 131,317
Other current assets 5,908 7,542
Deferred tax assets 14,170 18,243
--------- ---------
Total current assets 243,590 309,335
Property and equipment, at cost 81,383 106,156
less accumulated depreciation and amortization (18,164) (28,625)
--------- ---------
63,219 77,531
Capitalized software, less accumulated amortization 7,342 7,382
--------- ---------
$ 314,151 $ 394,248
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 25,730 $ 31,037
Accrued compensation and related expenses 24,290 29,771
Income taxes payable 10,600 16,179
Deferred revenue 96,830 126,139
--------- ---------
Total current liabilities 157,450 203,126
Stockholders' equity:
Common stock and paid-in capital 99,160 111,962
Foreign currency translation adjustment (264) (212)
Retained earnings 57,805 79,372
--------- ---------
156,701 191,122
--------- ---------
$ 314,151 $ 394,248
========= =========
</TABLE>
See notes to condensed consolidated financial statements
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PEOPLESOFT, INC.
-- -- -- -- -- -- -- -- -- -- -- -- --
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1995 1996 1995 1996
------------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues:
License fees $ 29,199 $ 55,778 $ 51,167 $ 97,949
Services 22,131 44,851 40,289 82,965
-------- -------- -------- --------
Total revenues 51,330 100,629 91,456 180,914
Costs and expenses:
Cost of license fees 1,901 3,010 3,858 5,537
Cost of services 11,998 25,879 22,124 46,699
Sales and marketing 16,047 31,614 28,094 56,330
Product development 8,380 15,970 14,437 28,895
General and administrative 3,820 5,588 6,756 10,556
-------- -------- -------- --------
Total costs and expenses 42,146 82,061 75,269 148,017
-------- -------- -------- --------
Operating income 9,184 18,568 16,187 32,897
Other income, principally interest 944 1,455 1,719 3,048
-------- -------- -------- --------
Income before taxes 10,128 20,023 17,906 35,945
Provision for income taxes 4,051 8,009 7,163 14,378
-------- -------- -------- --------
Net income $ 6,077 $ 12,014 $ 10,743 $ 21,567
======== ======== ======== ========
Net income per share $ 0.11 $ 0.21 $ 0.20 $ 0.38
======== ======== ======== ========
Shares used in per share computation 54,402 57,093 53,926 56,646
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements
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PEOPLESOFT, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1995 1996
------------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10,743 $ 21,567
Adjustments:
Depreciation and amortization 5,989 11,426
Provision for doubtful accounts 720 972
Provision for deferred tax assets 583 (4,073)
Changes in operating assets and liabilities:
Accounts receivable (18,218) (34,516)
Other current assets (2,793) (1,634)
Accounts payable and accrued liabilities 5,352 5,307
Accrued compensation and related expenses 2,400 5,481
Deferred revenue 12,650 29,309
Income taxes payable (1,667) 5,579
Tax benefits of employee stock transactions 2,292 4,011
--------- ---------
Net cash provided by operating activities 18,051 43,429
INVESTING ACTIVITIES
Purchase of short-term investments (19,566) (6,942)
Sale of short-term investments 24,395 13,991
Purchase of property and equipment (14,272) (24,773)
Additions to capitalized software, net (869) (1,005)
--------- ---------
Net cash used in investing activities (10,312) (18,729)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 2,743 8,791
--------- ---------
Net cash provided by financing activities 2,743 8,791
Effect of foreign exchange rate changes on cash 164 52
--------- ---------
Net increase (decrease) in cash and cash equivalents 10,646 33,543
Cash and cash equivalents at beginning of period 61,241 88,052
--------- ---------
Cash and cash equivalents at end of period $ 71,887 $ 121,595
========= =========
</TABLE>
See notes to condensed consolidated financial statements
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PEOPLESOFT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The information at June 30, 1995 and 1996 and for the three and six month
periods then ended is unaudited, but includes all adjustments (consisting only
of normal, recurring adjustments) which the Company's management believes to be
necessary for the fair presentation of the financial position, results of
operations, and changes in cash flow for the periods presented. The preparation
of financial statements in conformity with generally accepted accounting
principals requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. While management makes its best effort to achieve its estimates and
assumptions, actual results may differ. Certain prior year financial statement
items in the Condensed Consolidated Balance Sheet have been reclassified to
conform to the current year's format.
The accompanying interim financial statements should be read in conjunction
with the financial statements and related notes included in the Company's Annual
Report to Shareholders (Form 10-K) for the year ended December 31, 1995. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission rules and regulations. Interim results of operations for the three
and six month periods ended June 30, 1996 are not necessarily indicative of
operating results to be expected for the full fiscal year.
2. EARNINGS PER SHARE
Net income per share is computed on the basis of the weighted average
number of shares outstanding plus the common stock equivalents, consisting of
outstanding dilutive stock options and warrants (using the treasury stock
method). Fully diluted per share amounts are not presented, as the effect is not
material. In November 1995, the Company's Common Stock was split two-for-one.
All shares, common stock equivalents, and per share amounts applicable to prior
periods have been restated to reflect the stock split. The computation of the
weighted average number of shares outstanding for the three and six month
periods ended June 30, 1995 and 1996 follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares:
Common stock 48,756 50,262 48,428 49,908
Common stock equivalents 5,646 6,831 5,498 6,738
------ ------ ------ ------
54,402 57,093 53,926 56,646
====== ====== ====== ======
</TABLE>
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3. ACCOUNTS RECEIVABLE
Accounts receivable is comprised of billed receivables arising from
recognized and deferred revenues, and unbilled receivables, which include
accrued license fees, accrued services, and deferred services. The principle
components of accounts receivable at December 31, 1995 and June 30, 1996 were as
follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, June 30,
1995 1996
-------- ---------
<S> <C> <C>
Billed receivables $ 49,372 $ 74,624
Unbilled receivables 53,166 62,430
--------- ---------
102,538 137,054
Allowance for doubtful accounts (4,765) (5,737)
--------- ---------
$ 97,773 $ 131,317
========= =========
</TABLE>
4. DEFERRED REVENUE
Deferred revenue is comprised of deferrals for license fees, maintenance,
training, and other services. The principle components of deferred revenue at
December 31, 1995 and June 30, 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, June 30,
1995 1996
-------- --------
<S> <C> <C>
License fees $ 20,775 $ 24,735
Maintenance 49,984 67,776
Training 17,264 20,454
Other services 8,807 13,174
-------- --------
$ 96,830 $126,139
======== ========
</TABLE>
5. CAPITALIZED SOFTWARE
The Company capitalizes certain software acquired from third parties and
certain costs incurred internally in developing its software products. As
discussed in Note 1 of the Notes to the Consolidated Financial Statements in the
Company's Annual Report to Shareholders (Form 10-K) for the year ended December
31, 1995, if actual software license sales of PeopleSoft Manufacturing and other
PeopleSoft software products utilizing acquired and internally developed
software are below management's estimates and cannot be licensed or resold at
terms favorable to the Company, then a reduction to the carrying value of such
software will be required. Certain acquired software rights have been
re-classified to other current assets, in accordance with their expiration
dates. Amortization charges related to capitalized software amounted to
$1,342,000 and $965,000 for the six months ended June 30, 1995 and 1996,
respectively. Capitalized software costs and accumulated amortization at
December 31, 1995 and June 30, 1996 were as follows (in thousands) :
<TABLE>
<CAPTION>
Dec. 31, June 30,
1995 1996
-------- --------
<S> <C> <C>
Capitalized software:
Internal development costs $ 7,016 $ 8,021
Purchased from third parties 5,137 4,300
-------- --------
12,153 12,321
Accumulated amortization (4,811) (4,939)
-------- --------
$ 7,342 $ 7,382
======== ========
</TABLE>
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Discussion and Analysis of Financial Condition and Results of
Operations contains descriptions of the Company's expectations regarding future
trends affecting its business. These forward-looking statements and other
forward-looking statements made elsewhere in this document are made in reliance
upon safe harbor provisions of the Securities Litigation Reform Act of 1995.
The following discussion sets forth certain factors the Company believes could
cause actual results to differ materially than those contemplated by the forward
looking statements. Forward-looking statements are identified with footnote # 1.
The Company undertakes no obligation to update the information contained in Item
2.
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RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenues and the percentage of period over period growth represented by
certain line items in the Company's statements of operations:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
- ------------------------------------------------------------------
PERCENTAGE OF PERCENTAGE OF
TOTAL REVENUES DOLLAR INCREASE
1995 1996 YEAR OVER YEAR
---- ---- ---------------
<S> <C> <C> <C>
Revenues:
57 % 55 % License fees 91 %
43 45 Services 103
- ----- ----- -----
100 100 Total revenues 96
Costs and expenses:
4 3 Cost of license fees 58
24 26 Cost of services 116
31 31 Sales and marketing 97
16 16 Product development 91
7 6 General and administrative 46
- ----- ----- ------
82 82 Total costs and expenses 95
- ----- ----- ------
18 18 Operating income 102
2 2 Other income 54
- ----- ----- ------
20 20 Income before taxes 98
8 8 Provision for income taxes 98
- ----- ----- ------
12 % 12 % Net income 98 %
===== ===== ======
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
- -----------------------------------------------------------------
PERCENTAGE OF PERCENTAGE OF
TOTAL REVENUES DOLLAR INCREASE
1995 1996 YEAR OVER YEAR
---- ---- ---------------
Revenues:
56 % 54 % License fees 91 %
44 46 Services 106
- --- ---- ----
100 100 Total revenues 98
Costs and expenses:
4 3 Cost of license fees 43
24 26 Cost of services 111
31 31 Sales and marketing 100
16 16 Product development 100
7 6 General and administrative 56
- --- ---- -----
82 82 Total costs and expenses 97
- --- ---- -----
18 18 Operating income 103
2 2 Other income 77
- --- ---- -----
20 20 Income before taxes 101
8 8 Provision for income taxes 101
- --- ---- -----
12 12 % Net income 101 %
=== ==== =====
</TABLE>
REVENUES
The Company recognizes revenue in accordance with the Statement of Position
on Software Revenue Recognition ("SOP 91-1"), issued by the American Institute
of Certified Public Accountants. In accordance with SOP 91-1, the Company
allocates the total value of each customer license agreement between software
license fees and services, consisting of maintenance, training, consulting and
support services. For customer license agreements which have
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payments due within one year, the portion allocated to software license fees
will generally be recognized in the current period, while the portion allocated
to services is recognized as the services are performed. The Company defers
recognition of revenues associated with payments which are not due within one
year from the date of the license agreement. When the Company enters into a
license agreement with a customer requiring significant customization of the
software products, the Company recognizes revenue related to the license
agreement using the percentage-of completion method of contract accounting. The
total dollar amount of customer license agreements ("contracting activity")
signed for software license fees and services increased from $40.0 million in
the quarter ended June 30, 1995 to $83.9 million for the same period in 1996.
The aggregate value of customer license agreements related to PeopleSoft Human
Resources ("HRMS") signed during the second quarter of 1995 was $25.6 million
and was $46.9 million in the same period in 1996. The aggregate value of
customer license agreements related to PeopleSoft Financials during the second
quarter was $14.4 million in 1995 and was $32.8 million in the same period in
1996.
Total revenues increased from $51.3 million in the second quarter of 1995
to $100.6 million in the same period of 1996, representing an increase of 96%.
In the first six months of 1996, total revenues increased 98%, from $ 91.5
million in 1995 to $180.9 million for the same period in 1996. During the second
quarters of 1995 and 1996 the Company's international revenues, principally from
customers located in Canada, were approximately 13% and 15% of total revenues,
respectively. International revenues were 13% and 16% of total revenues for the
first six months of 1995 and 1996, respectively.
Revenues from licensing fees increased 91% from $29.2 million in the three
month period ended June 30, 1995 to $55.8 million in three month period ended
June 30, 1996. Revenues from licensing fees for the first six months of 1996
increased 91% from $51.2 million in 1995 to $97.9 million for the same period in
1996. The increase in license fee revenues was attributable to increased market
acceptance of, and breadth of, the Company's software product offerings and the
increased capacity created by the growth in the Company's sales, marketing and
customer service organizations. In addition, the Company recently made available
a general release version of its financial and HRMS products on the Sybase
System 11 RDBMS platform. By completing delivery of these products to customers
during the second quarter of 1996, the Company recognized $4.3 million of
license fee revenues which had been deferred from license agreements signed
during the past several years.
Revenues from services increased by 103% from $22.1 million in the second
quarter of 1995 to $44.9 million in the second quarter of 1996. In the first six
months of 1996, service revenues increased 106%, from $40.3 million in 1995 to
$83.0 million for the same period in 1996. The Company's customer license
agreements provide for initial maintenance, training, consulting and
support services for specified periods or amounts such that increases in
customer licensing agreements have resulted in increases in revenues from these
services. Service revenues as a percentage of total revenues were 43% and 45%
for the quarters ended June 30, 1995 and 1996, and were 44% and 46% of total
revenues for the six months ended June 30, 1995 and 1996, respectively. The
increase in the relative percentage of service revenues to total revenues in the
three month and six months periods ended June 30, 1996 was attributable to two
primary factors: increases in the installed base of customers receiving ongoing
maintenance, training and other support services and a significant investment in
the Company's professional services staff, which grew substantially over 1995
periods as a result of demand in the market place for PeopleSoft's assistance
during enterprise implementation projects.
COSTS AND EXPENSES
Cost of license fees consists principally of royalties, technology
access fees to certain software vendors and amortization of capitalized software
costs. Cost of license fees increased from $1.9 million in the second quarter of
1995 to $3.0 million in the second quarter of 1996, representing 4% and 3% of
total revenues and 7% and 5% of license fee revenues in those periods,
respectively. License fee costs increased from $3.9 million in the first six
months of 1995 to $5.6 million in the comparable period of 1996, comprising 4%
and 3% of total revenues and 8% and 6% of license fee revenues in those periods,
respectively. The Company's system solutions are based on a combination of
internally developed technology and application products, as well as bundled
third party products and technology. During 1996, the Company entered into three
additional third party marketing and sublicensing agreements which required
either initial payments and/or ongoing payments during the term of the
agreements. The absolute increase in cost of license fees in the 1996 periods
was partially attributable to costs associated with these agreements, as well as
royalties for the Company's Order Management module, which was developed by
PeopleSoft Manufacturing, L.P. under a joint business arrangement with
PeopleSoft (See Note 7 of the Notes to Consolidated Financial Statements in the
Company's Annual Report to Shareholders (Form 10-K) for the year ended December
31, 1995). The decline in cost of license fees as a
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percentage of license fees revenues in the 1996 periods was attributable to a
relative decrease in software amortization charges, the mix of royalty bearing
software products, reduction in documentation costs due to the move to the
compact disk version of documentation and other reductions in royalty expenses
primarily associated with certain fixed price aggregate royalty payment
arrangements. Cost of license fees as a percentage of license fee revenues may
fluctuate from period to period due principally to the mix of sales of royalty
bearing software products in each period and the seasonal fluctuations in
revenues contrasted with certain fixed expenses such as the amortization of
capitalized software. Royalties associated with certain software products
currently under development by joint business arrangement, and charges
associated with software products and technologies acquired during 1996 from
various third party vendors, may cause the cost of license fees as a percentage
of license fee revenues to increase in future periods.
Cost of services consist principally of account management support,
training, consulting and product support. These costs increased from $12.0
million in the three month period ended June 30, 1995 to $25.9 million in the
three month period ended June 30, 1996, representing 24% and 26% of total
revenues in such periods and 54% and 58% of service revenues in the three month
periods ending June 30, 1995 and 1996, respectively. Cost of services increased
from $22.1 million in the first six months of 1995 to $46.7 million in the
comparable period of 1996, comprising 24% and 26% of total revenues,
respectively, and 55% and 56% of service revenues in the six month periods
ending June 30, 1995 and 1996, respectively. These increases are due to the
significant expansion of the Company's customer service resources across all
categories, including consulting, telephone support, and account management
staff. The Company anticipates these expenditures will increase in dollar
amount, and may increase as a percentage of total revenues, in future periods.
Sales and marketing expenses increased from $16.0 million in the second
quarter of 1995 to $31.6 million in the comparable period in 1996, representing
31% of total revenues in each such period. In the first six months of 1996,
sales and marketing expenses increased 100%, from $28.1 million in 1995 to $56.3
million in 1996, comprising 31% of total revenues in each of the six month
periods ending June 30, 1995 and 1996. The increase in sales and marketing
expenses was attributable to the Company's expansion of its direct sales force,
related equipment and facility expenditures, investment in building an
international direct sales force and increased marketing expenses for the
Company's expanded software product line. The Company is in the process of
significantly increasing its direct sales and marketing expenditures to address
certain international and vertical markets, establish an enterprise sales force
structure, and fund sales organization expansion for financial, distribution and
manufacturing products. Consequently, such expenses may increase as a percentage
of total revenues in future periods.
Software product development expenses increased from $8.4 million in the
second quarter of 1995 to $16.0 million in the second quarter of 1996,
representing 16% of total revenues in each such period. These costs increased
from $14.4 million in the first six months of 1995 to $28.9 million in the
comparable 1996 period, representing 16% of total revenues in each six month
period. The Company capitalized internal software development costs of $0.6
million and $1.0 million in the six month periods ended June 30, 1995 and 1996,
respectively. The increase in software product development and engineering
expenditures was due to increased staffing and associated support costs of
software engineers and consultants required to expand, test and enhance the
Company's product line. In addition, the Company has incurred significant
expenditures to enhance its platform development, certification and product
testing capabilities. Furthermore, the Company has additional financial,
distribution and human resources modules under development and non-recurring
expenditures associated with the integration of purchased technology into
PeopleSoft applications. The Company anticipates software product development
and integration expenditures in future periods will increase in dollars, while
remaining relatively flat as a percentage of total revenues.(1)
General and administrative expenses increased from $3.8 million in the
three month period ended June 30, 1995 to $5.6 million in the three month period
ended June 30, 1996, representing 7% and 6% of total revenues in the periods,
respectively. These same expenses increased from $6.8 million in the first six
months of 1995 to $10.6 million in the comparable 1996 period, representing 7%
and 6% of total revenues in such periods, respectively. The dollar increase in
general and administrative expenses resulted primarily from increases in
staffing to support the Company's growth and increases in expenses associated
with the operation of foreign subsidiaries.
Other income, consisting primarily of interest, increased from $0.9 million
in the second quarter of 1995 to $1.5 million in the same period of 1996.
Interest income, totaling $1.0 million in the quarter ended June 30, 1995 and
$1.3 million in the quarter ended June 30, 1996, was earned on the Company's
investments of excess cash. In the first six months of 1995, other income was
$1.7 million compared to $3.0 million in the same 1996 period. Interest income,
- ---------------
(1) Forward looking statement
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totaling $1.8 million in the first six months of 1995 and $2.4 million in the
first six months of 1996, was earned on the Company's investments of excess
cash.
PROVISION FOR INCOME TAXES
The Company's effective tax rate was 40% for each of the three month and
six months periods ended June 30, 1995 and 1996. There has been no significant
change in the components of the effective tax rate. The provision for income
taxes for the three month and six months periods ended June 30, 1996 is based
upon the Company's estimate of the effective tax rate for fiscal 1996. As
permitted by the Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," the Company has recorded $18.2 million in net
deferred tax assets at June 30, 1996. The Company has concluded that no
valuation allowance is required based on its assessment that current levels of
taxable income will be sufficient to realize the tax benefit.(1)
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations primarily through cash flows from
operations. In addition, under the Company's secured bank line of credit, up to
$30.0 million is available for working capital advances, based on the level of
eligible accounts receivable. Within this amount, $15.0 million may be used for
issuance of letters of credit. This facility has been renewed for a one year
period under substantially the same terms as the prior year.
No borrowings were outstanding under this line at June 30, 1996.
The Company's operating activities provided cash of $18.1 million during
the six month period ended June 30, 1995, compared to $43.4 million in the six
month period ended June 30, 1996. Operating cash flows have increased primarily
due to increases in income before non-cash items including depreciation and
amortization, and increases in deferred revenue, both of which were partially
offset by increases in accounts receivable. From December 31, 1995 to June 30,
1996, accounts receivable increased from $97.8 million to $131.3 million and
deferred revenues increased from $96.8 million to $126.1 million. The increase
in accounts receivable and deferred revenues resulted from the growth in
licensing activity and associated deferrals of revenues related to services. The
Company calculates accounts receivable days sales outstanding ("DSO") as the
ratio of quarter-end accounts receivable to the sum of quarterly revenues and
the net change in deferred revenues, multiplied by 90. The Company believes this
calculation is appropriate because license fees are typically billable
regardless of whether revenue has been recognized or deferred. Under this
method, accounts receivable days outstanding was 106 days as of June 30, 1995 as
compared to 91 days as of June 30, 1996. The improvement in DSO is the result of
increased focus on improving the collection process. Since billing terms of the
Company's agreements typically are spread out over a sequence of events
(including contract execution through acceptance) or dates that generally span
four to six months, and revenue generation is concentrated at the end of each
quarter, the Company anticipates that its DSO will continue to be substantial in
future periods.
During the first six months of 1995 and 1996, the Company's principal use
of cash for investing activities was the purchase of property and equipment. The
increase in property and equipment was primarily attributable to purchases of
computer and networking equipment to accommodate employee and facility
expansions and to support the Company's growing training capacity requirements.
As of June 30, 1996, the Company had $106.2 million in working capital,
including $121.6 million in cash and cash equivalents and $30.6 million in
short-term investments, consisting primarily of high quality municipal bonds and
tax-advantaged money market instruments. The Company believes that existing cash
and short-term investment balances, credit facilities, and potential cash flow
from operations will be sufficient to meet its operating cash requirements at
least through 1996.(1)
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company operates in a dynamic and rapidly changing environment that
involves numerous risks and uncertainties. The following section lists some, but
not all, of these risks and uncertainties which may potentially cause a
significant impact on the Company's future results of operations. This section
should be read in conjunction with the unaudited Condensed Consolidated
Financial Statements and Notes thereto included in Part I -- Item 1 of this
Quarterly Report, the audited Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations for the year ended December 31, 1995 contained in the
Company's 1995 Annual Report to Stockholders (Form 10-K).
The Company has identified certain forward-looking statements in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations by a footnote # 1. The Company may also make oral forward-looking
- ---------------
(1) Forward looking statement
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statements from time to time. Actual results may differ materially from those
projected in any such forward-looking statements due to a number of factors,
including those set forth below.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's revenues and operating results can vary substantially from
quarter to quarter. License revenues in any quarter are substantially dependent
on the execution of license agreements (contracting activity) governing the use
of the Company's software products booked and shipped in that quarter.
Contracting activity is difficult to forecast for a variety of reasons
including: (i) a significant portion of the Company's license agreements are
completed within the last few weeks of each quarter; (ii) the duration of the
Company's sales cycle is relatively long and increasingly variable because the
Company has broadened its marketing emphasis to encompass software products
solutions for the customer's overall enterprise, thereby increasing the
financial value of individual transactions and the complexity of the customer
selection, negotiation and approval process; (iii) the size of license
transactions can vary significantly; (iv) system replacement projects and new
system evaluations may be postponed or canceled at any time due to changes in a
customer's project, company management, budgetary constraints, or strategic
priorities; (v) customer evaluations and procurement processes vary
significantly from company to company, and a customer's internal approval and
expenditure authorization process can be arduous, even subsequent to actual
vendor selection; (vi) the number, timing and significance of software product
enhancements and new software product announcements by the Company and its
competitors; and (vii) changes in economic, political and market conditions can
adversely impact business opportunities without reasonable notice. In addition,
certain license agreements executed during a quarter may not meet the Company's
revenue recognition criteria. Consequently, a situation could occur in which the
Company meets or exceeds its forecast of aggregate contracting activity, but is
not able to meet its forecast for license revenues.
In addition to factors impacting contracting activity, license revenues are
difficult to forecast because: (i) the timing of new software product
availability to fulfill delivery obligations under both new and existing license
agreements is difficult to predict because of the increasing complexity of the
Company's software product solutions and underlying technology; (ii) changes in
the Company's sales incentive plans have had and may continue to have an adverse
impact on seasonal business patterns; and (iii) enterprise transactions often
involve both software products that are then currently deliverable, as well as
software products that are still under development. To the extent the Company
enters into a license agreement for the provision of certain software products
that are then available and certain software products that are then still under
development, the license agreement and supporting schedules to the license
agreement must contain very precise contractual provisions and terminology under
generally accepted accounting principals to permit any revenue recognition under
the license agreement. In addition, changes in levels of consulting activity and
the related satisfaction of significant license agreement milestones, and
seasonality in training revenues which tend to lag license revenues by
approximately one quarter, have resulted in variability of service revenues from
quarter to quarter.
OPERATING LEVERAGE
Consistent with many companies in the software industry, the Company's
business model is characterized by a very high degree of operating leverage. The
Company's expense levels are based, in significant part, on the Company's
expectations as to future revenues and are, therefore, relatively fixed in the
short term. If revenue levels fall below expectations, net income is likely to
be disproportionately adversely effected. There can be no assurance that the
Company will be able to increase or even maintain its current level of
profitability on a quarterly or annual basis in the future. Due to the
foregoing, it is likely that in one or more future quarters the Company's
operating results will be below the expectations of public securities market
analysts. In such event, the price of the Company's Common Stock would likely be
materially adversely effected.
UNEVEN PATTERNS OF QUARTERLY OPERATING RESULTS
Although the Company's 1996 operating budget is based on a material
increase in total revenues over the corresponding actual results for 1995, the
Company does not believe that the percentage increases in revenues achieved in
prior periods should be anticipated in future periods. The operating results of
many software companies reflect seasonal trends, and the Company has been, and
expects to continue to be, effected by such trends in the future. Seasonal
patterns of revenue achievement can be caused by a variety of factors, including
sales incentives, customer demand based on available capital budgets and release
of new technologies. Third quarter contracting activity is difficult to forecast
and has been generally skewed toward the end of the quarter because July and
August are historically very slow months, resulting in a disproportionate
dependence on September contracting activity. Historically, PeopleSoft has
experienced sequential growth in its contracting activity levels between the
quarter ended June 30 and the quarter ended September
13
<PAGE> 14
30. Accordingly and based on historical patterns, the Company believes that the
quarter ended September 30, 1996, will have higher levels of contracting
activity and related license revenue than the quarter ended June 30, 1996.(1)
FUTURE OPERATING RESULTS UNCERTAIN
Segments of the software industry have experienced significant economic
downturns characterized by decreased product demand, price erosion,
technological shifts, work slowdowns and layoffs. The Company's operations may,
in the future, experience substantial fluctuations from period to period as a
consequence of such industry patterns, general economic conditions effecting the
timing of orders from customers and other factors effecting capital spending.
There can be no assurance that such factors will not have a materially adverse
effect on the Company's business, operating results or financial condition. The
Company's continued success is dependent on its continued ability to introduce,
develop and market new and enhanced versions of its software products, although
there can be no assurance that such ability can be maintained. In addition, the
Company continues to evaluate opportunities to enhance and expand its technology
and product offerings through potential partnerships, licenses or acquisitions
which may, in the short term, negatively impact costs and expenses and operating
margin.
INTERNATIONAL OPERATIONS
The Company has, and will continue to utilize substantial resources and
funding to build its international service and support infrastructure. Operating
costs in many countries, including some of those in which the Company operates,
are often higher than in the United States. In order to increase international
sales in 1996 and subsequent periods, the Company must continue to expand
existing as well as establish additional foreign operations, hire additional
personnel, identify suitable locations for sales and service operations, and
recruit international distributors and resellers in selected territories. In the
event international expansion is not successful, it is likely to have a negative
impact on the Company's operating results. Effective July 1, 1996, the Company
acquired the net assets and operations of InfoSoft S.A. in Madrid, Spain and
established PeopleSoft Iberica, S.L. PeopleSoft Iberica will provide direct
sales and support activities in the Mediterranean region. The acquisition will
be accounted for under the purchase method. The Company does not believe this
acquisition will have a material impact on the Company's results of operations.
The Company's sales through its foreign operations are generally
denominated in each respective subsidiary's functional currency. Unexpected
changes in the exchange rates for these foreign currencies could result in
significant fluctuation in the foreign currency transaction and translation
gains and losses in future periods. In the future, the Company expects to have
an increased amount of non-U.S. dollar denominated license agreements and
intends to implement hedging programs designed to mitigate the potential adverse
impact of exchange rate fluctuations.
COMPETITION
The market for business application software is intensely competitive. The
Company faces competition from a variety of software vendors including
enterprise application software vendors, financial management system,
manufacturing management system and HRMS application software vendors, and
software tools vendors. In the enterprise application software market, the chief
competitive factors include the breadth and completeness of the enterprise
solution offered by each vendor, the extent of product integration across the
enterprise solution, and the availability of localized software products and
technical support in key markets outside the United States. Several competitors
have significant worldwide presence, larger installed bases, longer operating
and product development histories and greater financial, technical and marketing
resources than PeopleSoft. PeopleSoft also faces competition from niche
providers of HRMS software products, financial management system software
products and distribution software products. In addition, two large software
providers have sublicensed PeopleSoft products in competition with PeopleSoft's
marketing efforts in selected markets. Recent trends in the software industry
toward cooperative agreements between competitors and the potential for
consolidation in the industry also pose a potential source of competition.
Intense competition could potentially lead to price reductions in the
market and by the Company, reduced gross margins and loss of market share by the
Company, which could materially adversely affect the Company's business,
operating results and financial condition. Therefore, there can be no assurance
that the Company will continue to compete successfully with its existing
competitors or will be able to compete successfully with new competitors.
RELIANCE ON PROPRIETARY SOFTWARE DEVELOPMENT TOOLS
The Company's software products include a suite of proprietary software
development tools known as "PeopleTools," which are fundamental to the effective
use of the Company's software products. While no industry standard exists for
software development tools, several companies are focused specifically on
providing software
- ---------------
(1) Forward-looking statement
14
<PAGE> 15
development tools and are attempting to establish their software development
tools as accepted industry standards. In the event that a software product other
than the Company's PeopleTools software product becomes the clearly established
and widely accepted industry standard, the Company may need to abandon or modify
PeopleTools in favor of such an established standard, may be forced to redesign
its software products to operate with such third party's software development
tools, or may be faced with the potential sales obstacle of marketing a
proprietary software product against other vendors' software products
incorporating a standardized software development toolset. Accordingly, in any
of these cases, the Company's results of operations could be materially
adversely affected.
RELIANCE ON THIRD PARTIES
A key aspect of the Company's sales and marketing strategy is to build and
maintain strong working relationships with businesses the Company believes play
an important role in the successful marketing of its software products. The
Company's customers and potential customers often rely on third party system
integrators to develop, deploy and manage client/server applications. These
include: (i) RDBMS software vendors; (ii) hardware vendors which offer both
hardware platforms and, in the case of IBM, proprietary RDBMS products on which
the Company's software products run; (iii) technology consulting firms and
systems integrators, some of which are active in the selection and
implementation of large information systems for the information-intensive
organizations that comprise the Company's principal customer base; and (iv)
benefits consulting firms that are active in the implementation of human
resource management systems. The Company believes that its marketing and sales
efforts are enhanced by the worldwide presence of these companies. However,
there can be no assurance that these companies, most of which have significantly
greater financial and marketing resources than PeopleSoft, will not start, or in
some cases increase, the marketing of business application software in
competition with PeopleSoft, or will not otherwise discontinue their
relationships with or support of PeopleSoft. If the Company or its partners are
unable to adequately train a sufficient number of consulting personnel to
support the implementation of the Company's software products, demand for these
software products could subsequently be adversely effected. In addition,
PeopleSoft's software application architecture, including PeopleTools, may
facilitate reduced implementation efforts for customers compared to the
competitive alternatives. Consequently, PeopleSoft's software products may be a
less desirable recommendation alternative for integrators who both provide
selection advice and generate consulting fees from customers by providing
implementation services. Due to the foregoing factors, it is reasonably possible
that in a future quarter or quarters the Company's operating results could fall
short of the published expectations of certain public market financial analysts.
COMPLEXITY OF SOFTWARE PRODUCTS AND PRODUCT DEVELOPMENT
PeopleSoft's software products can be licensed for use with the following
RDBMSs and run on the following operating systems: Centura Software
Corporation's ("Centura", formerly Gupta Corporation) SQLBase (OS/2 and NT),
IBM's DB2 for MVS/ESA (MVS, using connectivity products from Centura and Sybase,
Inc. ("Sybase")), IBM's DB2 for AIX, Informix Corporation's INFORMIX-OnLine
Dynamic Server (AIX, Dynix, Solaris, MP RAS, Digital Unix, Unisys Unix, DG/UX,
SINIX, IRIX and HP-UX), Microsoft Corporation's ("Microsoft") SQL Server, (NT
for HRMS products only), Oracle Corporation's ORACLE (VMS, Open VMS, NT and over
10 versions of Unix), and Sybase's System 11 (HP-UX, AIX and Solaris). In
addition, the Company is in the process of porting its software products to
IBM's DB2 for OS/400, and certain products to Microsoft's SQL Server 6 (NT) and
its PeopleTools to Apple Computer Inc.'s ("Apple") native Macintosh family of
computers and peripherals. No assurance can be given concerning the successful
development of PeopleSoft software products on these additional platforms, the
specific timing of the releases of any future modules, the performance
characteristics of PeopleSoft applications on these platforms or their
acceptance in the marketplace. In addition, there may be future or existing
RDBMS platforms which achieve popularity within the business application
marketplace and which PeopleSoft may desire to offer its applications thereon.
Such future or existing RDBMS products may or may not be architecturally
compatible with PeopleSoft's software product design. No assurance can be given
concerning the successful porting to new platforms, the specific timing of
completion of any such ports or their acceptance in the marketplace.
Software programs as complex as those offered by the Company are likely to
contain a number of undetected errors or "bugs" when they are first introduced
or as new versions are thereafter released. Despite testing by the Company and
by third-parties, errors or system performance issues may arise with the
possible result of reduced acceptance of the Company's software products in the
marketplace. Due to the increasing number of possible combinations of vendor
hardware platforms, operating systems and updated versions, PeopleSoft
application modules, third party, and updated versions, and RDBMS platforms and
updated versions, the effort and expense of developing, testing and maintaining
these software product lines in an increasing number of combinations will
increase, and the ability to develop consistent
15
<PAGE> 16
product performance characteristics across all of these combinations could place
a significant strain on the Company's development resources and deliverable
schedules.
RELIANCE ON SINGLE CLIENT INTERFACE
At the present time, the Company supports client (workstation) platforms
exclusively utilizing Microsoft's Windows software products, including Windows
3.1, Windows NT and Windows 95. If Microsoft were to fundamentally change the
architecture of its software product such that users of PeopleSoft's software
applications experienced significant performance degradation or were rendered
incompatible with future versions of Microsoft's Windows Operating System, the
Company's results of operations could be adversely effected. If a new user
interface software product, such as an Internet browser, were to gain broad
acceptance in the marketplace, there can be no assurance PeopleSoft's
architecture would be compatible with such an interface. In addition, as the
Company expands its software product offerings into new vertical markets, the
dependency on Microsoft's Windows technology may adversely impact the Company's
ability to successfully compete in those markets. For example, failure to
support Apple's Macintosh platform could adversely effect PeopleSoft's ability
to compete in the higher education market. No assurance can be given concerning
the Company's successful development of, and support for new client platforms,
the specific timing of their availability or their acceptance in the
marketplace.
RELIANCE ON JOINT BUSINESS ARRANGEMENTS
PeopleSoft has entered into two separate development arrangements
("Development Arrangements"), one for the purpose of developing a line of
manufacturing software applications and the other for the purpose of developing
a line of student administration software applications (See Note 7 of the Notes
to Consolidated Financial Statements in the Company's Annual Report to
Shareholders (Form 10-K) for the year ended December 31, 1995). Under these
Development Arrangements, PeopleSoft is the exclusive remarketer of the
developed software products and pays a royalty to the development entities based
on license fees received from end user licenses of these software products.
While the intent of each Development Arrangement is to develop business
applications which are integrated with PeopleSoft's software products, there can
be no assurance that such software products will in fact be integrated or that
an integrated enterprise solution will be accepted by the market. In addition,
should the Development Arrangements require additional funds to complete
development or enhance the software product, there can be no assurance that
funds will be available on terms acceptable to the existing or other potential
third partY funding source(s). Should PeopleSoft acquire title to the software
products or technology from the third party entity, such acquisition would be
accounted for using the purchase method which is likely to result in the
creation of significant intangible assets by virtue of the allocation of a
substantial portion of the purchase price to the acquired technology or other
intangible assets. Such intangible assets would be amortized in future periods
as a cost of operations.
APPLICATION SECURITY ARCHITECTURE
The Company's application software products incorporate extensive security
features designed to protect certain sensitive data managed by these
applications from unauthorized retrieval or modification. To date, the Company
is not aware of any violations of its application security architecture within
its installed base. The Company has developed a security architecture utilizing
the capabilities of its own applications, the client operating system software,
some of the security features contained in the RDBMS platforms on which the
applications run, as well as certain third party security products. Although
these security features are subject to constant review and enhancement, no
assurances can be given concerning the successful implementation of these
security features and their effectiveness within a particular customer's
operating environment. Should a breach of security or a suspected breach of
security occur, the accompanying publicity or any subsequent claims against the
Company could have an adverse impact on the demand for the Company's software
products and/or cause a decline in the market price of the Company's stock.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company regards certain features of its internal operations, software
and documentation as proprietary, and relies on a combination of contract,
patent, copyright, trademark and trade secret laws and other measures to protect
its proprietary information. The Company received its first patent in 1995, its
second patent in the first quarter of 1996 and has one additional patent
application pending. Existing copyright laws afford only limited protection. The
Company believes that, because of the rapid pace of technological change in the
computer software industry, trade secret and copyright protection are less
significant than factors such as the knowledge, ability and experience of the
Company's employees, frequent product enhancements and the timeliness and
quality of support services. There can be no assurance that these protections
will be adequate or that PeopleSoft's competitors will not independently develop
technologies that
16
<PAGE> 17
are substantially equivalent or superior to the Company's technology. Many
customers are beneficiaries of a source code escrow arrangement to enable the
customer to acquire a future limited right to use PeopleTools source code solely
for their internal provision of maintenance services. This possible access to
PeopleTools source code may increase the likelihood of misappropriation or other
misuse of the Company's intellectual property. In addition, the laws of certain
countries in which the Company's software products are or may be licensed do not
protect the Company's software products and intellectual property rights to the
same extent as the laws of the United States.
The Company does not believe that its software products, third party
software products the Company offers under sublicense agreements, Company
trademarks or other Company proprietary rights infringe the property rights of
third parties. However, there can be no assurance that third parties will not
assert infringement claims against the Company in the future with respect to
current or future software products or that any such assertion may not require
the Company to enter into royalty arrangements or result in costly litigation.
PRODUCT LIABILITY
The Company's license agreements with its customers contain provisions
designed to limit the Company's exposure to potential product liability claims.
It is possible, however, that the limitation of liability provisions contained
in the Company's license agreements may not be valid as a result of federal,
state, local laws or ordinances or unfavorable judicial decisions. Although the
Company has not experienced any product liability claims to date, the license
and support of its software for use in mission critical applications create a
potential adverse risk in the event such a claim was successfully pursued
against the Company. Damage or injunctive relief resulting under such a
successful claim could cause a materially adverse impact on the Company's
business, operating results and financial condition.
GROWTH IN OPERATIONS
The Company has experienced an extended period of significant revenue
growth, growth in the Company's customer base, expansion of its software product
lines and supported platforms, a significant expansion in the number of its
employees, increased pressure on the viability and scope of its operating and
financial systems and expansion in the geographic scope of its operations. This
growth has resulted in new and increased responsibilities for management
personnel and has placed a significant strain upon the Company's management,
operating and financial controls and resources, including its services and
development organizations. To accommodate recent growth, compete effectively and
manage potential future growth, the Company must continue to implement and
improve the speed and quality of its information decision systems, management
decisions, reporting systems, procedures and controls and further expand, train
and motivate its workforce. There can be no assurance that the Company's
personnel, procedures, systems and controls will be adequate to support the
Company's future operations.
KEY PERSONNEL
PeopleSoft believes that its continued success will depend in large part
upon its ability to attract and retain highly-skilled technical, managerial and
marketing personnel. The loss of services of one or more of the Company's key
employees could have a materially adverse effect on the Company's business,
operating results and financial condition. The Company intends to hire a
significant number of additional sales, service and technical personnel in 1996.
Competition for the hiring of such personnel in the software industry is
intense, and the Company from time to time experiences difficulty in locating
candidates with appropriate qualifications, particularly within various desired
geographic locations. There can be no assurance that the Company will be
successful in attracting and retaining the personnel it requires to develop,
market and support new or existing software.
EXPANSION OF FACILITIES
The Company has expanded and plans to continue to significantly expand the
number of employees at its Corporate headquarters location in Pleasanton,
California.(1) While the Company is making every effort to obtain sufficient
office space to house these employees in a productive environment, the
commercial real estate market in the Tri-Valley area is constrained by the
decrease of new commercial real estate development over the past several years
which makes obtaining additional quality office space increasingly difficult.
The Company has acquired a building for the purpose of addressing office space
needs, however, the space is largely occupied by existing tenants. Thus,
alternative office space is required to address planned expansion. The Company
is in the process of attempting to locate and contract for adequate space,
however, no assurance can be made that sufficient office space will become
available to meet the Company's near term needs. In the event economic office
space does not become available, hiring plans may be slowed
(1) Forward-looking statement
17
<PAGE> 18
or a distant location may be selected which could possibly decrease employee
productivity. There can be no assurance that local facilities will be obtained
or obtained on reasonable terms, and such failure to obtain local facilities may
result in lower employee productivity, constrained hiring plans or increased
facility charges which could adversely impact the Company's business and
operating results.
INVESTMENTS AND LIQUIDITY
The Company's short-term investments consist primarily of high quality municipal
bonds and tax-advantaged money market instruments. Despite favorable credit
ratings on these investments there can be no assurance the issuing agencies will
not default on their obligations which may result in losses of principal and
accrued interest by PeopleSoft. While operating activities may provide cash in
certain periods, to the extent the Company experiences growth in the future,
operating and investing activities may use cash, and, consequently, such growth
may require the Company to obtain additional sources of financing. In addition,
material acquisitions of complementary businesses, products or technologies, and
capital expenditures may require additional sources of financing.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not party to any legal proceeding which would have a
material impact on the Company, its operations or financial results.
Item 2. Change in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its annual meeting of stockholders on May 21,
1996.
(b) Pursuant to the election of the three directors listed under Item
4(c)(i), Mr. Albert W. Duffield, Mr. A. George "Skip" Battle, and
Mr. Cyril J. Yansouni were each elected for a two year term. Mr.
David A. Duffield, Dr. Edgar F. Codd and Mr. George J. Still, Jr.
Still continue as directors and were elected at the prior year's
annual meeting for a term of two years.
(c) The Company's stock holders voted the following matters:
(i) Election of three directors. All directors proposed by
management were elected.
<TABLE>
<CAPTION>
Name of Number of # of Votes # of Votes Number of # of Broker
Nominee Votes For Against Withheld Abstentions Non Votes
------- --------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Albert W. Duffield 44,099,227 - 189,126 25,550 -
A. George Battle 44,122,779 - 165,574 25,550 -
Cyril J. Yansouni 44,124,777 - 163,576 25,550 -
</TABLE>
(ii) Approval of an amendment to the Restated Certificate of
Incorporation to increase the authorized number of Common Stock of
the Company to 160,000,000. 39,576,183 votes were cast in favor of
the amendment, 4,586,763 votes were cast against, zero votes were
withheld, there were 95,237 abstentions, and 39,170 broker non
votes.
(iii) Approval of an amendment to the 1989 Stock Option Plan to
increase the number of shares of Common Stock issuable under the
1989 Stock Option Plan by 2,500,000. 31,686,726 votes were cast in
favor of the amendment, 11,230,349 votes were cast against, zero
votes were withheld, there were 107,224 abstentions, and 1,264,054
broker non votes.
(iv) Approval of an amendment of changes to the 1992 Employee
Stock Purchase Plan to increase the number of shares of Common
Stock issuable under the 1992 Employee Stock Purchase Plan by
300,000. 42,559,682 votes were cast in favor of the amendment,
474,851 votes were cast against, zero votes were withheld, there
were 112,258 abstentions, and 1,141,562 broker non votes.
18
<PAGE> 19
(v) Ratification of independent public auditors. The Stockholders
ratified the appointment of Ernst & Young as the Company's
independent public auditors for the fiscal year ended December 31,
1996. 44,164,385 votes were cast in favor of the appointment,
31,495 votes were cast against, zero votes were withheld, there
were 92,473 abstentions, and zero broker non votes.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8 - K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8 - K
No reports on Form 8 - K were filed during the quarter ended June
30, 1996.
19
<PAGE> 20
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.
Dated: August 13, 1996
PEOPLESOFT, INC.
By: /s/ RONALD E. F. CODD
------------------------------
Ronald E. F. Codd
Senior Vice President of Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
20
<PAGE> 21
PEOPLESOFT, INC.
INDEX OF EXHIBITS
EXHIBIT # EXHIBIT TITLE PAGE
27 Financial Data Schedule 22
21
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000875570
<NAME> PEOPLESOFT INC.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 121595
<SECURITIES> 30638
<RECEIVABLES> 137054
<ALLOWANCES> 5737
<INVENTORY> 0
<CURRENT-ASSETS> 309335
<PP&E> 106156
<DEPRECIATION> 28625
<TOTAL-ASSETS> 394248
<CURRENT-LIABILITIES> 203125
<BONDS> 0
0
0
<COMMON> 111962
<OTHER-SE> 79160
<TOTAL-LIABILITY-AND-EQUITY> 394248
<SALES> 0
<TOTAL-REVENUES> 180914
<CGS> 0
<TOTAL-COSTS> 52236
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 972
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35945
<INCOME-TAX> 14378
<INCOME-CONTINUING> 21567
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21567
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
