UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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: 0-23384
INSO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3216243
(State or other (I.R.S. Employer Identification No.)
jurisdiction of
incorporation or organization)
31 St. James Avenue, Boston, MA 02116
(Address of principal executive offices) (Zip Code)
(617) 753 - 6500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report.)
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 November 8, 1996
Common Stock (par value $.01 per share) 14,285,474
<PAGE>
INSO CORPORATION
FORM 10-Q INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
Consolidated Statements of Income
Three Months Ended September 30, 1996 and 1995
Nine Months Ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<PAGE>
INSO CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and DECEMBER 31, 1995
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
--------- ---------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,726 $ 37,235
Marketable securities 22,414 25,397
Accounts receivable, net 14,812 8,264
Income tax receivable 3,629
Option exercise receivable 1,054
Other current assets 1,175 530
-------- --------
Total current assets 54,810 71,426
Property and equipment, net 5,794 2,257
Royalty advances and other assets, net 3,037 980
Product development costs, net 6,981 3,229
Intangible assets, net 10,099 9,390
Deferred income tax benefit, net 3,910 3,847
-------- -------
TOTAL ASSETS $ 84,631 $ 91,129
-------- -------
-------- -------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities $ 5,147 $ 1,885
Accrued salaries, commissions and bonuses 2,997 2,094
Acquisition related liabilities 16,422
Unearned revenue 2,125 875
Royalties payable 1,848 1,461
Due to Houghton Mifflin Company 341 314
Notes payable and current portion of
long-term debt 34 6,037
Current income taxes payable 3,929 883
Deferred income taxes 839 2,417
-------- -------
Total current liabilities 33,682 15,966
Stockholders' equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized; none
issued
Common stock, $.01 par value;
50,000,000 shares authorized;
13,089,299 shares issued in 1996
(12,965,700 in 1995) 131 130
Capital in excess of par value 66,970 64,096
Retained earnings (15,571) 11,657
-------- -------
51,530 75,883
Unamortized value of restricted shares (524) (669)
Treasury stock, at cost 5,075 shares
in 1996 (4,975 in 1995) (57) (51)
-------- -------
Total stockholders' equity 50,949 75,163
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 84,631 $ 91,129
-------- -------
-------- -------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
INSO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1996 and 1995
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Net revenues $ 19,257 $ 11,255
Cost of revenues 2,319 1,286
-------- -------
Gross profit 16,938 9,969
Operating expenses
Sales and marketing 3,881 1,935
Product development 3,895 2,115
General and administrative 2,820 1,744
Purchased in-process research and
development 34,300
-------- -------
Total operating expenses 44,896 5,794
-------- -------
Operating income (loss) (27,958) 4,175
Net investment income 572 479
Income (loss) before provision for -------- -------
income taxes (27,386) 4,654
Income tax expense 2,564 1,811
-------- -------
Net (loss) income $ (29,950) $ 2,843
-------- -------
-------- -------
Net (loss) income per share $ (2.29) $ 0.22
-------- -------
-------- -------
Weighted average shares outstanding 13,082 13,115
-------- -------
-------- -------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
INSO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996 and 1995
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net revenues $ 46,862 $ 29,180
Cost of revenues 6,162 3,802
-------- --------
Gross profit 40,700 25,378
Operating expenses
Sales and marketing 8,808 4,569
Product development 9,175 5,406
General and administrative 6,771 4,845
Purchased in-process research
and development 38,700 5,500
-------- --------
Total operating expenses 63,454 20,320
-------- --------
Operating income (22,754) 5,058
Net investment income 2,104 816
-------- --------
Income before provision for income taxes (20,650) 5,874
Income tax expense 6,578 4,394
-------- --------
Net (loss) income $ (27,228) $ 1,480
-------- --------
-------- --------
Net (loss) income per share $ (2.09) $ 0.12
-------- --------
-------- --------
Weighted average shares outstanding 13,057 12,566
-------- --------
-------- --------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
INSO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 and 1995
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Cash flows from (used in) operating
activities:
Net income (loss) $ (27,228) $ 1,480
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 4,554 2,451
Purchased in-process research
and development 38,700 5,500
--------- --------
16,026 9,431
Changes in operating assets and
liabilities:
Accounts receivable (5,608) (394)
Royalty advances and other assets (426) 260
Accounts payable and accrued
liabilities 1,758 1,055
Current and deferred income taxes 4,013 729
Royalties payable 395 (86)
Due to Houghton Mifflin Company 27 (596)
Other assets and liabilities (1,188) (559)
--------- -------
Net cash provided by operating activities 14,997 9,840
Cash flows from (used in) investing
activities:
Property and equipment expenditures (2,400) (1,788)
Capitalized product development costs (1,807) (967)
Acquisition of Electronic Book
Technologies, Inc., net of cash acquired (26,184)
Acquisition of Systems Compatibility
Corporation, net of cash acquired
and issuance of promissory notes (4,184)
Acquisition of ImageMark Software Labs,
Inc., net of cash acquired (6,492)
Purchase of rights of Information Please
Almanacs (10) (3,455)
Maturities or sales of marketable securities 38,393
Purchase of marketable securities (35,410) (13,732)
-------- -------
Net cash used in investing activities (33,910) (24,126)
Cash flows from (used in) financing
activities:
Net proceeds from issuance of common stock 657 39,618
Purchases of treasury stock (6) (13)
Proceeds from exercise of stock options 978 773
Repayment of Electronic Book
Technologies, Inc. debt (2,188)
Repayment of promissory notes (6,037) (220)
-------- -------
Net cash provided by (used in) financing
activities (6,596) 40,158
-------- -------
Net decrease in cash and cash equivalents (25,509) 25,872
Cash and cash equivalents at beginning
of period 37,235 13,858
-------- --------
Cash and cash equivalents at end of period $ 11,726 $ 39,730
-------- -------
-------- -------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
INSO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996
Note 1. Basis of Presentation
All normal and recurring adjustments that are, in the opinion of management,
necessary for a fair presentation of the results for the interim periods
have been included.
For further information, refer to the consolidated financial statements and
footnotes thereto included in INSO Corporation's annual report on Form 10-K
filed with the Securities and Exchange Commission for the year ended December
31, 1995.
Note 2. Acquisitions
Electronic Book Technologies, Inc.
On July 16, 1996, the Company acquired all of the outstanding capital stock of
privately held Electronic Book Technologies, Inc. (now INSO Providence
Corporation). The acquisition was in the form of a merger of a subsidiary of
the Company into INSO Providence. In connection with the acquisition, the
Company paid approximately $27,800,000 in July, 1996, from the Company's
available cash, and became obligated to pay an aggregate of $10,600,000, of
which $9,400,000 has been paid to date from available cash, in connection
with the purchase of shares of INSO Providence stock issued upon the exercise
of INSO Providence stock options which survived the closing. The Company is
also obligated to pay an additional $1,500,000 to the former principal
stockholder of INSO Providence in January, 1998. The aggregate
obligation of $12,100,000 has been included in current liabilities on the
accompanying balance sheet. In the event that certain INSO Providence
financial and operating goals are met, contingent payments up to an
additional $5,300,000 will be paid by the Company.
The transaction was accounted for as a purchase and has been included in the
consolidated financial statements since the date of acquisition. The
acquisition included the purchase of certain technology under research and
development, which resulted in a charge to the Company's consolidated earnings
for the quarter ended September 30, 1996, of $34,300,000, or $2.62 per share.
The charge was not deductible for tax purposes. The purchase price has been
allocated on the basis of the estimated fair market value of the assets
acquired and liabilities assumed.
The acquisition also included estimated costs of approximately $2,000,000 for
direct transaction costs and costs relating to the elimination of excess and
duplicative activities as a result of the merger. The estimated costs,
which are included in current liabilities on the accompanying balance sheet,
were based upon management's plan using the best information available at the
time of the acquisition. The actual allocation of the final purchase price may
be different from that reflected in the financial statements. There can be
no assurance that the Company will not incur additional charges in subsequent
quarters to reflect costs associated with the merger or that management will
be successful in its efforts to integrate the operations of the two
companies.
ImageMark Software Labs, Inc.
On January 9, 1996, the Company acquired all of the outstanding capital stock
of privately held ImageMark Software Labs, Inc. (now INSO Kansas City
Corporation) for a purchase price of $5,500,000. The purchase price was
paid from available cash. In August, 1996 INSO Kansas City exceeded the 1996
revenue target set forth in the purchase agreement. As a result, an additional
$950,000, which is reflected in current liabilites on the accompanying balance
sheet, will be paid in early 1997 to the former stockholders of INSO Kansas
City. The Company also caused, at the time of the acquisition,
INSO Kansas City to enter into employment and noncompetition agreements with
two key executives and made aggregate payments of $1,000,000 in cash under
those agreements. The transaction was accounted for as a purchase and has
been included in the consolidated financial statements since the date of
acquisition. The acquisition included the purchase of certain technology
under research and development, which resulted in a charge to the Company's
consolidated results for the quarter ended March 31, 1996 of $4,400,000,
or $0.34 per share. The charge was not deductible for tax purposes. The
purchase price has been allocated on the basis of the estimated fair market
value of the assets acquired and liabilities assumed. Intangible assets
of approximately $351,000 were recorded as part of the acquisition and are
being amortized on a straight-line basis over their estimated useful lives
of seven years. The employment and noncompetition agreements are being
amortized over three years.
Unaudited pro forma net revenues, net (loss) income and net (loss) income
per share shown below for the nine months ended September 30, 1996, and
September 30, 1995, assumes the acquisition of Electronic Book Technologies,
Inc. and ImageMark Software Labs, Inc. described above occurred on
January 1, 1996, and January 1, 1995:
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1996 September 30, 1995
---------------- ------------------
<S> <C> <C>
Net Revenues $54,532,000 $41,177,000
Net (Loss) Income $(29,602,000) $ 710,000
Net (Loss) Income
per share $ (2.27) $ 0.06
</TABLE>
Systems Compatibility Corporation
On April 1, 1995, the Company acquired all of the outstanding capital stock
of privately held Systems Compatibility Corporation (now INSO Chicago
Corporation) for a purchase price of $12,367,500. The purchase was paid in
the form of $6,000,000 in available cash and $6,367,500 in promissory notes
which were repaid on February 1, 1996. The transaction was accounted for as
a purchase and has been included in the consolidated financial statements
since the date of acquisition. The acquisition included the purchase of
certain technology under research and development, which resulted in a
charge to the Company's consolidated results for the quarter ended
June 30, 1995 of $5,500,000, or $0.44 per share. The charge was not
deductible for tax purposes. The purchase price has been allocated on the
basis of the estimated fair market value of the assets acquired and
liabilities assumed. Intangible assets of $3,842,000 were recorded as part
of the acquisition and are being amortized on a straight-line basis over
their estimated useful lives of seven years.
Note 3. Subsequent Events
On November 5, 1996, the Company completed a public offering of 1,200,000
shares of the Company's common stock, which provided the Company with net
proceeds of approximately $56,450,000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 Compared to Three Months
Ended September 30, 1995
Revenues for the quarter ended September 30, 1996 increased $8,002,000, or
71.1%, to $19,257,000 compared to $11,255,000 for the quarter ended
September 30, 1995. Royalty revenues increased 26.5% due primarily to
higher earnings from existing licenses of CorrecText(R) Grammar Correction
System ("GCS"); ImageStream(R) graphics filters; The American Heritage(R)
electronic dictionaries; and Outside In(R) viewing technology. Contributing
to the royalty revenue increase were revenues from the January, 1996 INSO
Kansas City acquisition as well as higher revenues from existing licensees.
The increase in GCS royalty revenue related primarily to a predetermined
usage fee from Microsoft for use of GCS in certain versions of Microsoft Word
and Microsoft Office. Non-refundable royalty revenues nearly doubled over
the same period last year, reflecting new licenses of CorrectEnglish(TM) ESL
writing system; International CorrectSpell(TM) spelling correction system;
IntelliScope(R) search enhancer; and ImageStream(R) graphic filters.
Direct and distribution sales of Quick View Plus(R) file viewing utility; and
InWords(TM) and SciWords(TM) spelling dictionaries; and CyberSpell(TM) spell
checker more than doubled over the same period last year. INSO Providence's
DynaText(R) electronic publishing system also contributed to the overall
increase in direct revenues, resulting in approximately 22% of total
revenues coming from the direct channel.
Gross profit increased $6,969,000, or 69.9%, from $9,969,000 for the three
months ended September 30, 1995, to $16,938,000 for the three months ended
September 30, 1996. Gross profit as a percentage of revenues for the
three months ended September 30, 1996, at 88.0%, approximated that of the
same period last year.
Total operating expenses increased $39,102,000 to $44,896,000 for the three
months ended September 30, 1996, from $5,794,000 for the three months ended
September 30, 1995. Included in total operating expenses for the quarter
ended September 30, 1996, was an acquisition charge of $34,300,000 for
certain purchased technology under research and development by INSO Providence
at the time of the July 16, 1996 acquisition. Sales and marketing expenses
increased $1,946,000 to $3,881,000 for the three months ended September 30,
1996, reflecting additional sales and marketing expenses at INSO Providence
as well as staff additions in sales as the Company establishes its presence
in the corporate sales channel and staff additions in the product
management area to support new product development. Sales and marketing
expenses increased as a percentage of revenues to 20.2% for the three
months ended September 30, 1996, from 17.2% for the three months ended
September 30, 1995, mainly attributable to additional expenses at INSO
Providence. Product development expenses increased $1,780,000 due to
revisions to, and new product development for, the Company's proofing tools,
information products, and information management tools product lines.
The Company's total product development costs, including capitalized costs,
were $4,837,000, or 25.1% of revenues, for the three months ended
September 30, 1996, compared to $2,509,000, or 22.3% of revenues, for the
three months ended September 30, 1995. New products released during the
quarter included the CorrectEnglish(TM) ESL writing system for Chinese; the
print version of the 1997 Information Please(R) Business Almanac and A&E(R)
Entertainment Almanac; and new versions of DynaText(R) electronic publishing
system; IntelliScope(R) search enhancer; and ImageStream(R) graphics filters.
General and administrative expenses increased $1,076,000 to $2,820,000 for
the three months ended September 30, 1996, compared to $1,744,000 for the
three months ended September 30, 1995. The increase was due to goodwill
amortization related to the INSO Kansas City acquisition as well as
increases in personnel and general expenses required to support the growth in
the Company's operations. General and adminstrative expenses declined as a
percentage of revenues to 14.6% for the three months ended September 30, 1996,
from 15.5% for the three months ended September 30, 1995 as a result of
improved efficiencies and economies of scale in the administrative area.
The Company's effective tax rate for the three months ended September 30,
1996, was influenced by the $34,300,000 INSO Providence charge for purchased
technology under research and development at the time of the acquisition. The
charge was not deductible for tax purposes. Exclusive of the charge, the
Company's effective tax rate was 37.1% for the three months ended September
30, 1996, compared to 38.9% for the three months ended September 30, 1995. The
decrease in the effective tax rate reflects tax planning strategies implemented
by the Company in late 1995.
Excluding the $34,300,000 ($2.62 per share) in-process research and
development charge related to the INSO Providence acquisition, net income
and earnings per share for the quarter ended September 30, 1996, would have
been $4,350,000 and $0.32, respectively, compared with net income and
earnings per share for the quarter ended September 30, 1995 of $2,843,000
and $0.22, respectively.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995
Revenues for the nine months ended September 30, 1996, increased $17,682,000,
or 60.6%, to $46,862,000 compared to $29,180,000 for the nine months ended
September 30, 1995. Royalty revenues increased 26.7% due primarily to higher
earnings from existing licenses of GCS; The American Heritage(R)
electronic dictionaries; Outside In(R) viewing technology; ImageStream(R)
graphics filters; IntelliScope(R) search enhancer; the Information Please(TM)
almanacs; and The Columbia Encyclopedia, Fifth Edition. The increase in GCS
royalty revenue related primarily to a predetermined usage fee from Microsoft
for use of GCS in certain versions of Microsoft Word and Microsoft Office.
Contributing to the royalty revenue increase were revenues from the INSO
Kansas City acquisition as well as higher revenues from existing licensees.
Non-refundable royalty revenues more than doubled over the same period last
year, reflecting new licenses of the CorrectEnglish(TM) ESL writing system;
International ProofReader(TM) text proofing software; International
CorrectSpell(TM) spelling correction system; the print and
electronic versions of the Information Please(R) almanacs; ImageStream(R)
graphics filters; and Outside In(R) viewing technology. Direct and retail
sales of Quick View Plus(R) file viewing utility; CyberSpell(TM) spell
checker; InWords(TM) and SciWords(TM) spelling dictionaries; and INSO
Providence's DynaText(R) electronic publishing system also contributed
to the overall increase in total revenues.
Gross profit increased $15,322,000, from $25,378,000 for the nine months ended
September 30, 1995, to $40,700,000 for the nine months ended September 30,
1996. Gross profit as a percentage of revenues for the nine months ended
September 30, 1996 was 86.9%, approximating 87.0% for nine months ended
September 30, 1995.
Total operating expenses increased $43,134,000 to $63,454,000 for the nine
months ended September 30, 1996, from $20,320,000 for the nine months ended
September 30, 1995. Included in total operating expenses for the nine months
ended September 30, 1996, and 1995, were acquisition-related charges of
$38,700,000 and $5,500,000, respectively, for certain purchased technology
under research and development at INSO Providence and INSO Kansas City in 1996,
and INSO Chicago in 1995, at the time of the acquisitions of those companies.
Sales and marketing expenses increased $4,239,000 to $8,808,000 for the nine
months ended September 30, 1996, reflecting additional sales and marketing
expenses at INSO Providence as well as staff additions in sales as the
Company establishes its presence in the corporate sales channel and staff
additions in the product management area to support new product development.
Sales and marketing expenses increased as a percentage of revenues to 18.8%
for the nine months ended September 30, 1996, compared to 15.7% for the nine
months ended September 30, 1995, mainly attributable to additional expenses
at INSO Providence. Product development expenses increased $3,769,000 due
to revisions to, and new product development for, the Company's proofing
tools, information products, and information management tools product lines.
The Company's total product development costs, including capitalized costs,
were $10,982,000, or 23.4% of revenues, for the nine months ended September
30, 1996, compared to $6,373,000, or 21.8% of revenues, for the nine months
ended September 30, 1995. New products released during the first nine months
of 1996 included CyberSpell(TM) spell checker; SciWords(TM) and InWords(TM)
spelling dictionaries; the electronic versions of the 1996 Information
Please(TM) Almanac and the Information Please(TM) Sports Almanac;
IntelliScope(R) search enhancer for Japanese; Inso Search Wizard(TM)
query expander; ImageStream(R) for Microsoft(R) Office graphics filter
utility; Quick View Plus(R) plug-in for Netscape Navigator 2.0;
DynaText(R) electronic publishing system; CorrectEnglish(TM) ESL writing
system for Chinese; and print versions of the 1997 Information Please(R)
Business Almanac and A&E(R) Entertainment Almanac. General and
administrative expenses increased $1,926,000 to $6,771,000 for the nine
months ended September 30, 1996, compared to $4,845,000 for the nine months
ended September 30, 1995. General and administrative expenses declined as a
percentage of revenues to 14.4% for the nine months ended September 30, 1996
from 16.6% for the nine months ended September 30, 1995, as a result of
improved efficiencies and economies of scale in the administrative area.
The Company's effective tax rate for the nine months ended September 30,
1996 was influenced by the $34,300,000 INSO Providence and
$4,400,000 INSO Kansas City charges and the nine months ended September 30,
1995 was influenced by the $5,500,000 INSO Chicago charge for
purchased technology under research and development at the time of the
acquisitions. The charges were not deductible for tax purposes. Excluding
the charges, the Company's effective tax rate for the nine months ended
September 30, 1996 was 36.4% compared to 38.6% for the nine months ended
September 30, 1995. The decrease from 1995 reflects tax planning stategies
implemented by the Company in late 1995.
Excluding the $38,700,000 ($2.96 per share) in-process research and
development charge related to the INSO Providence and INSO Kansas City
acquisitions in the nine months ended September 30, 1996, and the $5,500,000
($0.44 per share) in-process research and development charge related to the
INSO Chicago acquisition in the nine months ended September 30, 1995, net
income and earnings per share would have been $11,472,000 and $0.85,
respectively, for the nine months ended September 30, 1996 compared to
$6,980,000 and $0.56, respectively, for the nine months ended September
30, 1995.
Liquidity and Capital Resources
The Company's operating activities provided cash of $14,997,000 for the nine
months ended September 30, 1996, compared to $9,840,000 for the nine months
ended September 30, 1995. The increased contribution from operating
activities was primarily attributable to increased net income as adjusted for
depreciation, amortization and the acquisition related charge, offset by
the net change in timing of receipts on accounts receivable, royalty advance
payments for new content acquired in 1996, and current and deferred income
taxes resulting from the INSO Providence acquisition.
The Company's investing activities used cash of approximately $33,910,000 for
the nine months ended September 30, 1996, compared to $24,126,000 for the nine
months ended September 30, 1995. The increase primarily reflects the
July 16, 1996, and January 9, 1996, acquisitions of all of the outstanding
capital stock of INSO Providence and INSO Kansas City for a net $26,184,000
and $6,492,000 in cash, respectively, offset by activities in marketable
securities.
The Company's financing activities used cash of approximately $6,596,000 for
the nine months ended September 30, 1996, compared to providing cash of
$40,158,000 for the nine months ended September 30, 1995. On
February 1, 1996, the Company repaid outstanding promissory notes of
$6,037,000 issued in connection with the acquisition of INSO Chicago in
April, 1995. In August, 1996, the Company repaid $2,188,000 of existing
indebtedness of INSO Providence assumed in the acquisition. In August, 1995,
the Company completed a publice offering of 1,200,000 shares of the
Company's common stock, which provided the Company with net proceeds
of approximately $39,300,000.
As of September 30, 1996, the Company had working capital of $21,128,000.
Total cash, cash equivalents, and marketable securities at September 30,
1996 were $34,140,000. On July 16, 1996, the Company acquired all of the
outstanding capital stock of INSO Providence. The purchase price of
$27,800,000 was paid in July, 1996 from available cash. The
Company also became obligated to pay an aggregate of $10,600,000, of which
$9,400,000 has been paid to date, in connection with the purchase of shares of
INSO Providence stock issued upon the exercise of INSO Providence stock
options which survived the closing. The Company is also obligated to pay an
additional $1,500,000 to the former principal stockholder of INSO Providence
in January, 1998. In the event that certain INSO Providence financial and
operating goals are met, contingent payments of up to an
additional $5,300,000 will be paid by the Company. The Company believes that
funds available together with funds expected to be generated from operations,
will be sufficient to finance the Company's operations through the foreseeable
future.
Future Operating Results
This report, and other reports, proxy statements and other communications to
stockholders, as well as oral statements by the Company's officers or its
agents, may contain forward-looking statements with respect to, among other
things, the Company's future revenues, operating income or earnings per share.
Please refer to the Company's Report on Form 10-K for the fiscal year ended
December 31, 1995, for a description of certain factors which may
cause the Company's actual results to vary materially from those forecasted
or projected in any such forward-looking statement.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following are filed as exhibits to this Form 10-Q:
Exhibit 2.1 Merger Agreement dated July 1, 1996, by and
among INSO Corporation, CIP Acquisition Corporation,
and Electronic Book Technologies, Inc., incorporated
by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K reporting the acquisition on July
16, 1996 of Electronic Book Technologies, Inc.
filed with the Securities and Exchange Commission on
July 31, 1996.
Exhibit 27 Financial Data Schedule
(b) Report on Form 8-K
Registrant filed one (1) report on Form 8-K and one (1) report
on Form 8-K/A during the quarter ended September 30, 1996.
(i) Current Report on Form 8-K reporting the acquisition on
July 16, 1996 of Electronic Book Technologies, Inc. filed
with the Securities and Exchange Commission on July
31, 1996.
(ii) Amendment to Form 8-K on Form 8-K/A filed with the
Securities and Exchange Commission on September
17, 1996, containing the financial statements of the
acquired business of Electronic Book Technologies, Inc.
and pro-forma financial information including an unaudited
pro forma combined balance sheet assuming the acquisition
occurred on June 30, 1996, and unaudited pro forma
combined statement of operations assuming the acquisition
occurred on January 1, 1995, and January 1, 1996.
<PAGE>
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.
INSO Corporation
Registrant
Date: November 8, 1996 /s/ Betty J. Savage
-------------------
Betty J. Savage
Vice President and Chief
Financial Officer
Date: November 8, 1996 /s/ Linda J. Barnes
-------------------
Linda J. Barnes
Vice President and Controller
(Chief Accounting Officer)
<PAGE>
Exhibit Index
Exhibit No. Description
2.1 Merger Agreement dated July 1, 1996, by and among INSO
Corporation, CIP Acquisition Corporation and
Electronic Book Technologies, Inc., incorporated by
reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K reporting the acquisition on
July 16, 1996 of Electronic Book Technologies, Inc. filed
with the Securities and Exchange Commission on July 31, 1996.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF INCOME
FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERNCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
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0
0
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