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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 March 31, 1994
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 0-19538
IMRS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1326879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 LONG RIDGE ROAD, STAMFORD, CONNECTICUT 06902
(Address of principal executive offices, including zip code)
(203) 321-3500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES __X__ NO ____
As of April 29, 1994, there were 7,104,643 shares of the Registrant's
Common Stock, $.01 par value, outstanding.
__________________________________________________________________________
__________________________________________________________________________
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IMRS Inc. and Subsidiaries
Form 10-Q
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet - March 31, 1994
and June 30, 1993 2
Condensed Consolidated Statement of Operations -
Three Months Ended March 31, 1994 and 1993;
Nine Months Ended March 31, 1994 and 1993 3
Condensed Consolidated Statement of Cash
Flows - Nine Months Ended March 31, 1994 and 1993 4
Notes to Condensed Consolidated Financial
Statements - March 31, 1994 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
Fastar, FinalForm, Financial Intelligence, Hyperion, IMRS, IMRS OnTrack,
and Micro Control are registered trademarks, and Hyperion Connect,
Hyperion Financials, Hyperion SQL, IMRS Forms, and Visual Information
Access are trademarks of IMRS Inc. All other trademarks and company names
mentioned are the property of their respective owners.
For further information, refer to the IMRS Inc. annual report on Form 10-K
for the year ended June 30, 1993.
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<TABLE>
IMRS Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands, except for share data)
<CAPTION>
MARCH 31, JUNE 30,
1994 1993
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $32,697 $22,887
Accounts receivable-net of allowances of
$1,100 and $1,200 16,228 23,205
Prepaid expenses and other current assets 1,513 787
Deferred income taxes 2,694 2,387
TOTAL CURRENT ASSETS 53,132 49,266
Property and equipment-at cost, less accumulated
depreciation and amortization of $6,608 and $4,504 8,590 7,353
Product development costs-at cost, less accumulated
amortization of $1,918 and $1,103 6,115 3,686
Other intangible assets-at cost, less accumulated
amortization of $2,839 and $2,408 789 1,205
Goodwill-at cost, less accumulated amortization
of $439 and $341 2,168 2,270
Deposits and other assets 861 791
Total assets $71,655 $64,571
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,702 $ 6,533
Accrued employee compensation and benefits 3,247 4,952
Income taxes payable 79 781
Deferred revenue 14,121 10,815
TOTAL CURRENT LIABILITIES 23,149 23,081
Deferred income taxes 1,416 971
Stockholders' equity:
Preferred stock-$.01 par value;
authorized-1,000,000 shares; none issued
Common stock-$.01 par value; authorized-15,000,000
shares; issued-9,264,688 and 9,074,384 shares 93 91
Additional paid-in capital 43,167 40,634
Retained earnings 17,456 13,400
Currency translation adjustments (593) (573)
Treasury stock, at cost-2,160,420 shares (13,033) (13,033)
TOTAL STOCKHOLDERS' EQUITY 47,090 40,519
Total liabilities and stockholders'equity $71,655 $64,571
<FN>
Note: The balance sheet at June 30, 1993 has been derived
from the audited financial statements at that date.
See accompanying notes.
</TABLE>
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<TABLE>
IMRS Inc. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
(In thousands, except for per share data)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES
Software licenses $ 8,062 $ 5,535 $25,366 $17,799
License renewals and services 9,976 7,782 27,260 20,714
Total revenues 18,038 13,317 52,626 38,513
COSTS AND EXPENSES
Cost of revenues:
Software licenses 664 405 1,673 1,169
License renewals and services 5,855 4,454 16,037 12,113
Sales and marketing 5,628 3,947 16,303 11,759
Product development 2,464 1,873 6,663 4,766
Purchased research and development 2,600 2,600
General and administrative 1,532 1,494 5,426 4,502
16,143 14,773 46,102 36,909
OPERATING INCOME (LOSS) 1,895 (1,456) 6,524 1,604
Interest income 192 143 529 438
Interest expense (24) (23) (62) (87)
INCOME (LOSS) BEFORE INCOME TAXES 2,063 (1,336) 6,991 1,955
Income tax expense (benefit) 860 (515) 2,935 775
NET INCOME (LOSS) $ 1,203 $ (821) $ 4,056 $ 1,180
EARNINGS (LOSS) PER SHARE
Primary $ .15 $ (.12) $ .53 $ .16
Fully diluted $ .15 $ (.12) $ .52 $ .16
AVERAGE NUMBER OF SHARES OUTSTANDING
Primary 7,821 6,883 7,715 7,265
Fully diluted 7,821 6,883 7,726 7,491
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
IMRS Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1994 1993
(In thousands)
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $15,148 $ 2,260
INVESTING ACTIVITIES
Leasehold improvements and purchases of
furniture, equipment and software (3,341) (3,187)
Product development costs (3,244) (1,288)
Acquisition of business (1,761)
Security deposits and other assets (300)
Cash used by investing activities (6,585) (6,536)
FINANCING ACTIVITIES
Principal payments on capital lease/notes
payable (95) (120)
Exercise of stock options by employees 1,362 1,590
Cash provided by financing activities 1,267 1,470
Effect of exchange rate changes (20) (234)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 9,810 (3,040)
Cash and cash equivalents at beginning of
period 22,887 22,870
CASH AND CASH EQUIVALENTS AT END OF PERIOD $32,697 $19,830
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $2,326 $477
Interest 28 59
<FN>
See accompanying notes.
</TABLE>
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IMRS Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1994
BASIS OF PRESENTATION
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The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting only of normal
recurring accruals, considered necessary for a fair presentation have
been included in the accompanying unaudited financial statements.
Operating results for the three and nine-month periods ended March 31, 1994
are not necessarily indicative of the results that may be expected for
the full year ending June 30, 1994. For further information, refer to
the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended
June 30, 1993.
Earnings per share ("EPS") are calculated by dividing net income by the
weighted average number of common and common equivalent shares
outstanding during the period. For primary EPS, common equivalent
shares are shares which would be issuable upon the exercise of
outstanding stock options, reduced by the number of shares assumed to
be purchased by the Company with the proceeds obtained thereby at
the average market price during the period. For the fully diluted EPS
calculation, shares are assumed to be purchased by the Company at
the higher of the average or period-end market price and, therefore,
this calculation may include additional equivalent shares. Because
their effect would be antidilutive, common equivalent shares were
excluded from the loss per share calculation for the three months
ended March 31, 1993.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands)
OVERVIEW
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IMRS, incorporated in 1981, develops, markets and supports financial
management applications for enterprise client/server environments.
IMRS software addresses the diverse accounting, financial consolidation,
management reporting and information access needs of large corporations
worldwide. The Company designs products specifically for network
implementation, providing fast, multi-user access to centrally
controlled and secure corporate data.
The Company derives revenues from licensing its software products and providing
related product installation, support and training services. Customers are
billed an initial license fee for the software upon delivery and, subsequently,
are billed an annual license renewal fee, entitling them to routine support
and product updates. IMRS licenses its products throughout the world primarily
through a direct sales force. In certain territories outside of North
America, products are licensed through independent distributors, including major
accounting firms. The Company recognizes its net share of revenues generated by
distributors.
The Company operates with a minimal software licensing backlog. Therefore,
quarterly revenues and operating results are quite dependent on the volume
and timing of the signing of license agreements and product deliveries during
the quarter, which are difficult to forecast. The Company's future operating
results may fluctuate due to these and other factors, such as customer buying
patterns, the timing of new product introductions and product upgrade
releases, the Company's hiring plans, the scheduling of sales and marketing
programs, and new product development. The Company generally has realized
lower revenues in its first (September) and third (March) fiscal quarters
than in the immediately preceding quarters. The Company believes that
these revenue fluctuations are caused by customer buying patterns, including
traditionally slow purchase activity in the summer months and low purchase
activity in the financial reporting and consolidation market during the March
quarter, as many potential customers are busy with their year-end closing
and financial reporting. Due to the relatively fixed nature of certain
costs, including personnel and facilities expenses, the decline in revenues in
the first and third fiscal quarters typically results in lower profitability or
may result in losses in these quarters. Total revenues and net income were
$19,236 and $2,043, respectively, for the second quarter of fiscal 1994, and
$15,352 and $810, respectively, for the first quarter of fiscal 1994.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
RESULTS OF OPERATIONS
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REVENUES
Third Quarter Ended Nine Months Ended
March 31, March 31,
1994 CHANGE 1993 1994 CHANGE 1993
- - - - --------------------------------------------------------------------------------
Software licenses $8,062 45.7% $5,535 $25,366 42.5% $17,799
Percentage of total revenues 44.7% 41.6% 48.2% 46.2%
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License renewals and services $9,976 28.2% $7,782 $27,260 31.6% $20,714
Percentage of total revenues 55.3% 58.4% 51.8% 53.8%
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Software license revenues rose primarily as a result of an increase in the
number of licenses sold. Demand for the Company's Microsoft Windows-based
products rose sharply. In the first three quarters of 1994, Windows-based
product licenses comprised 88.3% of the Company's total software license
revenues, up from 39.6% for the corresponding period of fiscal 1993.
While the Company intends to continue enhancing its DOS-based product, Micro
Control, it expects the trend toward the Windows market to continue.
Accordingly, the Company has extended its suite of integrated Windows-based,
client/server products, including IMRS Forms, form building and forms management
software; Hyperion 1.8 ("Hyperion SQL") which allows for the use of Sybase SQL
Server or Microsoft SQL Server for the Hyperion database, providing open
access and scalability of hardware for server processing; and Hyperion
Financials, a line of transaction-based accounting applications scheduled to be
tested extensively by several customers beginning in the fourth quarter of
fiscal 1994. IMRS Forms and Hyperion SQL were delivered in December 1993.
The increase in license renewal and service revenue is mainly attributable to
the year-to-year growth of the Company's installed customer base. However, the
increase was offset slightly due to the timing of the Company's annual user
conference. That is, last year's conference and related revenues occurred in
March, whereas this year's event was held in April.
Revenues generated from markets outside the United States for the first three
quarters of fiscal 1994 and 1993 were $14,204 and $11,804, or 27.0% and 30.6%
of total revenues, respectively.
COST OF REVENUES
Third Quarter Ended Nine Months Ended
March 31, March 31,
1994 CHANGE 1993 1994 CHANGE 1993
- - - - --------------------------------------------------------------------------------
Software licenses $ 664 64.0% $ 405 $ 1,673 43.1% $ 1,169
Gross profit percentage 91.8% 92.7% 93.4% 93.4%
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License renewals and services $5,855 31.5% $4,454 $16,037 32.4% $12,113
Gross profit percentage 41.3% 42.8% 41.2% 41.5%
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
Cost of software license revenues consists primarily of the cost of product
packaging and documentation materials, amortization of capitalized software
costs, amortization of certain intangible assets related to business
acquisitions, and royalty expenses. The increase in the cost of software
license revenues resulted principally from the amortization of capitalized
costs related to new products and product enhancements, which commenced upon
the general release of the software to customers in the second half of fiscal
1993 and the second quarter of this year.
The increase in the cost of license renewal and service revenues was due
primarily to additional staffing expense for both installation and ongoing
support services.
OPERATING EXPENSES
Third Quarter Ended Nine Months Ended
March 31, March 31,
1994 CHANGE 1993 1994 CHANGE 1993
- - - - --------------------------------------------------------------------------------
Sales and marketing $5,628 42.6% $3,947 $16,303 38.6% $11,759
Percentage of total revenues 31.2% 29.6% 31.0% 30.5%
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Product development $2,464 31.6% $1,873 $ 6,663 39.8% $ 4,766
Percentage of total revenues 13.7% 14.1% 12.7% 12.4%
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General and administrative $1,532 2.5% $1,494 $ 5,426 20.5% $ 4,502
Percentage of total revenues 8.5% 11.2% 10.3% 11.7%
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The increase in sales and marketing expenses is primarily due to a net increase
of sales personnel, greater overall marketing initiatives and an increase in
commission costs directly associated with the significant increase in software
license revenues. The increase in product development expenses reflects
additional personnel associated with expanded research and development
activities. In the first three quarters of fiscal 1994 and 1993, the Company
capitalized $3,244 and $1,288 of software development costs, respectively, in
accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed" ("FAS-86"). The amounts capitalized by the Company in 1994 and 1993
primarily relate to the Company's development of Microsoft Windows-
based financial management applications for client/server environments and
represented 32.7% and 21.3%, respectively, of total product development
expenditures. In addition to IMRS Forms, Hyperion SQL and Hyperion Financials,
as mentioned above, various other development and major product enhancement
projects, which costs are required to be capitalized under FAS-86, were in
process during the nine-month period ended March 31, 1994. Capitalized
software costs are amortized over the estimated useful life of the
product, but not more than four years.
Currently, Hyperion Financials represents the Company's largest development
project. It began in February 1993 with the technology acquisition from
MAI Systems Corporation for $2,600. The substance of the transaction
represented the purchase of research and development, and as such, is included
as a one- time charge in the Company's third quarter 1993 operating results.
<PAGE> 10
IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
The charge had the effect of reducing the results of operations for the quarter
and nine months ended March 31, 1993, by approximately $1,600 or $.21 per
share.
The increase in general and administrative expenses resulted from increases
in personnel and professional services costs incurred to support the
growth of the Company's overall operations, as well as an increase in the
provision for doubtful accounts directly associated with the significant
increase in revenues.
INCOME TAXES
The Company's effective income tax rate increased from approximately 40% to 42%,
as a greater portion of the Company's operations arose in certain jurisdictions
where the income tax rates are higher.
NET INCOME
As a result of the above factors, operating results for the three and nine-month
periods ended March 31, 1994 increased to a net income of $1,203 from a net loss
of $(821), and to a net income of $4,056 from $1,180 (243.7%), respectively, for
the corresponding periods of fiscal 1993.
The Company believes that inflation has not had a material effect on its results
of operations. Recently issued Financial Accounting Standards Board Statements
Nos. 106 and 112 regarding accounting for postretirement and postemployment
benefits will not have a material effect on the financial statements, as
the Company generally does not offer its employees such benefits.
LIQUIDITY AND CAPITAL RESOURCES
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To date, the Company has financed its business principally through positive
cash flow from operations, long-term and short-term borrowings and sales of
its Common Stock. For fiscal years 1991, 1992, and 1993, and for the nine
months ended March 31, 1994, the Company generated positive cash flow
from operations of $5,845, $7,890, $7,343 and $15,148, respectively.
Cash used by investing activities amounted to $6,585 for the first three
quarters of fiscal 1994-$3,341 for leasehold improvements and purchases
of equipment and software, and $3,244 for product development costs.
Financing activities in the first three quarters of fiscal 1994, including stock
options exercised by employees and payment of short-term debt, generated cash of
$1,267. In connection with the stock options exercised by certain of its
employees (for a total of 190,304 common shares), the Company recognized
(as a credit to additional paid-in capital) an income tax benefit of $1,173
for the nine months ended March 31, 1994.
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IMRS Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(Dollars in thousands)
As of March 31, 1994, the Company had cash and cash equivalents of $32,697 and
working capital of $29,983, no long-term debt, and its ratio of current assets
to current liabilities was 2.3 to 1. The Company has long-term credit
availability of $10,000 under a revolving credit facility. The Company
anticipates capital expenditures of approximately $8,500 for its 1994 fiscal
year, including $4,000 of capitalized product development costs.
The Company's occupancy requirements have increased, particularly as they relate
to research and development activities. Accordingly, the Company is currently
evaluating various expansion alternatives.
The Company believes that funds generated from operations, existing cash
balances and its available credit facility will be sufficient to finance the
Company's operations for at least the next two years.
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IMRS Inc. and Subsidiaries
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No exhibits are required.
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1994.
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IMRS Inc. and Subsidiaries
Form 10-Q
for the three-month period ended March 31, 1994
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.
IMRS Inc.
S/LUCY RAE RICCIARDI 5/10/94
---------------------------------------------
Lucy Rae Ricciardi Date
Vice President-Finance
(principal financial and accounting officer)
S/JAMES A. PERAKIS 5/11/94
---------------------------------------------
James A. Perakis Date
Chief Executive
(authorized officer)
