Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 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 0-15325
INFORMIX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
94-3011736
(I.R.S. Employer Identification No.)
4100 Bohannon Drive, Menlo Park, CA 94025
(Address of principal executive office)
415-926-6300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .01 par value
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of the 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes
[ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of February 28, 1995 was approximately $2,484,000,000.
Shares of Common Stock held by each officer and director have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive
determination for other purposes.
As of February 28, 1995, Registrant had outstanding 65,939,803 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE (to be deemed filed only to the
extent specifically incorporated herein by reference and not otherwise
excluded by law):
Parts of the Proxy Statement to be used in conjunction with
Registrant's Annual Stockholders Meeting to be held May 18, 1995:
PART III
________________________________________________________________________
INFORMIX CORPORATION
1994 FORM 10-K ANNUAL REPORT
Table of Contents
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
Signatures
PART I
ITEM 1. BUSINESS
INTRODUCTORY STATEMENT
The Company designs, develops, manufactures, markets and supports
distributed relational database management systems, object-oriented,
graphical- and character-based application development tools and
graphical data-access tools for delivering information to most
significant desktop platforms. In addition to software products, the
Company offers training, consulting and maintenance to its customers.
The Company was initially incorporated in California in 1980 and was
reincorporated in August 1986 in Delaware. In February 1988, Informix
Software, Inc., the Company's principal operating subsidiary, was merged
with and into Innovative Software, Inc., a Delaware corporation, causing
Innovative Software, Inc. to become a wholly owned subsidiary of the
Company. Following the merger Innovative Software, Inc. changed its
name to Informix Software, Inc. Unless the context requires otherwise,
the terms "Company" and "Informix" refer to Informix Corporation and its
subsidiaries.
The Company maintains its executive offices at 4100 Bohannon Drive,
Menlo Park, California 94025. Its telephone number is (415) 926-6300.
BACKGROUND
The Company designs, develops, manufactures, markets and supports
database management systems, connectivity interfaces and gateways and
application development tools for graphical- and character-based
software applications all as part of relational database management
systems (RDBMS). All of the Company's database products developed since
1983 support Structured Query Language ("SQL"), an industry standard
created by IBM. The Company believes that its INFORMIX(R)-4GL Product,
introduced in 1986, was the first fourth-generation applications
development language consolidating SQL with syntax for menu creation,
formatted screen generation and report writing. The combination of
these features significantly increases programmer productivity and
flexibility in developing applications software. The Company's core
database management software runs on the UNIX(R), Windows(TM)
and Windows/NT(TM) operating systems, and certain networks
composed of computers running these operating systems.
The Company's customers consist primarily of end-users, application
resellers, computer original equipment manufacturers (OEMs) and
distributors. The Company markets its products directly to end-users
through its sales force and indirectly to end-users through application
resellers, OEMs and distributors.
The Company has three internal sales organizations which sell its
products: North America; Europe, Middle East and Africa; and the
Intercontinental Group, which includes Japan and the Asia/Pacific and
Latin America regions. The North America sales organization,
headquartered in Menlo Park, California, has sales offices located in
major cities throughout the United States and Canada. The Europe,
Middle East and Africa sales organization, headquartered in the United
Kingdom, has sales offices in 17 European countries and uses independent
distributors to sell products throughout the rest of Europe, the Middle
East and Africa. The Company also has a European development,
production and distribution center located in Ireland. The
Intercontinental Group sales organization, headquartered in Menlo Park,
California, has sales offices in 17 countries and also uses independent
distributors to sell products. As of the date of this report, the
Company has operating subsidiaries in 30 foreign countries.
PRODUCTS
Database Engines
The Company offers the following relational database SQL engines, which
share a common set of development tools:
INFORMIX-OnLine Dynamic Server(TM), Informix's second generation on-line
transaction processing (OLTP) engine. This server is based on the
Company's Dynamic Scalable Architecture(TM) and features parallel data
processing capability, replication and connectivity options built into
the core database server, offering users significant enhancements
without adding additional cost. Version 7.1 of this product is
available on 11 symmetric multiprocessing platforms.
INFORMIX-OnLine, Informix's first generation OLTP database server with
stored procedures, triggers, referential integrity, high availability,
document imaging support and fast response times in heavy transaction
environments.
INFORMIX-SE, designed for smaller organizations with limited MIS
staffing or minimal database expertise because it is easy to install and
maintain. This product provides the power of SQL without the complex
database administration requirements.
Database Tools
Informix offers a variety of database application development tools
designed to allow users to build applications quickly and maintain them
easily. The Informix database tools are:
INFORMIX-NewEra(TM), a graphical, object-oriented development
environment designed for creating enterprise-wide client/server database
applications. This product began shipping in July 1994. INFORMIX
NewEra features a fourth-generation object-oriented programming
language, reusable class libraries and flexible application deployment,
and supports open connectivity to Informix and non-Informix databases.
INFORMIX-NewEra enables customers to easily create new graphical
applications using existing character-based programs built with
INFORMIX-4GL. INFORMIX-NewEra is currently available for Microsoft(R)
Windows(TM) and OSF Motif(TM).
INFORMIX-4GL, a character-based development environment, which includes
a fourth-generation programming language with full screen-building,
report entry and SQL database input/output capabilities. The INFORMIX
4GL product family is comprised of three core products: INFORMIX-4GL
Compiled, INFORMIX-4GL Rapid Development System and INFORMIX-4GL
Interactive Debugger.
INFORMIX-SQL, a package of five interactive tools for creating
character-based applications. INFORMIX-SQL consists of a forms package,
a report writer, an interactive SQL editor, a menu builder and an
interactive schema editor.
C-ISAM(R), a library of C functions that manage indexed sequential
access method files. C-ISAM bypasses the overhead of an entire database
management system and allows direct access to an application's records.
INFORMIX-NewEra ViewPoint(TM), a graphical database access and
analytical tool specifically designed to give non-technical computer
users point and click access to information contained in corporate or
departmental databases and to run their own customized forms and
reports.
INFORMIX-NewEra ViewPoint Pro, a graphical database administration tool,
includes all of the features of INFORMIX-NewEra ViewPoint, as well as a
database schema builder, an SQL editor and a SuperView(TM) builder, for
creating highly specialized views to the database that simplify access,
retrieval and analysis of data.
In February 1995, the Company entered into an agreement with Investment
Intelligence Systems Limited ("IISL") which gave IISL exclusive
rights to develop, distribute, sell and support the INFORMIX-Wingz(R)
spreadsheet and the INFORMIX-HyperScript(R) Tools graphical development
environment to new and existing customers. IISL will assume full
responsibility for both products effective June 30, 1995. The agreement
is world-wide, with the exception of Japan, where ASCII Corporation will
retain the exclusive rights to market and distribute the Kanji version
of INFORMIX-Wingz.
Connectivity Products
INFORMIX-Gateway(TM) with DRDA, a UNIX-based connectivity tool allowing
interoperability to IBM databases such as DB2, DB2/VM and DB2/400 from
Windows and UNIX clients. INFORMIX-Gateway with DRDA allows
applications built with Informix application development tools to
transparently access and modify information in Distributed Relational
Database Architecture(TM)-compliant database management systems.
INFORMIX-Enterprise Gateway(TM), a UNIX-based connectivity tool, which
incorporates the Enterprise Data Access SQL suite of products from
Information Builders, Inc. This product was released in December 1994
and provides transparent access through SQL statements and remote
procedure calls to over 60 relational and non-relational data sources on
35 different hardware platforms and operating systems.
INFORMIX-STAR, provides the ability to access databases stored on
multiple servers in the same transaction. INFORMIX-STAR allows the
joining and viewing of multiple databases at different locations as if
they were one common database. The functionality of this product is
included in INFORMIX-OnLine Dynamic Server.
INFORMIX-NET, allows the off-loading of application processing from the
server to a client workstation. The functionality of this product is
included in INFORMIX-OnLine Dynamic Server and all of the Company's
UNIX-based tools. INFORMIX-NET PC for DOS permits the same off-loading
between a PC workstation and an Informix database server.
INFORMIX DCE/NET, a connectivity product based on the Open Software
Foundation Distributed Computing Environment specification. This
Product was released in December 1994 and allows customers transparent
access to Informix and other relational databases and takes advantage of
DCE security and directory services.
INFORMIX-TP/XA, links INFORMIX-OnLine to a transaction manager to
support transactions involving multiple databases and multiple computer
systems. INFORMIX-TP/XA is a library of C functions that establishes
the connection between INFORMIX-OnLine and the transaction manager.
INFORMIX-ESQL for C and COBOL, embedded SQL products which permit
developers to take advantage of SQL technology while building
applications in C or COBOL.
Maintenance, Consulting and Services
The Company maintains field-based and centralized corporate technical
staffs to provide a comprehensive range of assistance to its customers.
These services include pre- and post- sales technical assistance,
consulting, product and sales training and technical support services.
Consultants and trainers provide services to customers to assist them in
the use of the Company's products and the design and development of
applications that utilize the Company's products.
The Company provides maintenance to its RDBMS customers on an optional
basis for fees ranging from 10% to 18% of the license fees paid by the
customer which generally includes product updates. In fiscal 1994, 1993
and 1992 service revenue, which includes maintenance, consulting and
training fees, represented 22%, 19% and 16% of total revenues,
respectively.
MARKETING AND CUSTOMERS
In the United States, the Company distributes its products through the
channels of direct end-user licensing, OEMs, application resellers
addressing specific markets and distributors. The Company licenses
its products to large companies and government entities through its
direct sales force, and to certain of these companies, as well as
smaller end-users, through its telemarketing sales force.
In Europe and Latin America, the Company uses distribution channels
similar in type to those used by the Company in the United States. In
other foreign regions, the Company licenses its products to end-users
primarily through application resellers, distributors and OEMs.
The Company has chosen a multiple channel distribution strategy to
maintain broad market coverage and product availability. The Company,
therefore, has generally avoided exclusive relationships with its
licensees and other resellers of its products. Discount policies and
reseller licensing programs are intended to support each distribution
channel with a minimum of channel conflict.
The Company's direct sales and support staff is organized geographically
with three separate domestic and international sales organizations:
North America; Europe, Middle East and Africa; and the Intercontinental
Group, which includes Japan and the Asia/Pacific and Latin America
regions. At December 31, 1994, the Company's sales, marketing and
support staff totaled 730 regular employees in the North America region;
467 regular employees in the Europe, Middle East and Africa region; and
161 regular employees in the Intercontinental Group region.
In January 1995, the Company acquired a 90 percent interest in the
database division of ASCII Corporation, a distributor of its products in
Japan, and will acquire the remaining 10 percent in January 1996. This
acquisition will be recorded as a purchase. The purchase cost of this
business is approximately $46,000,000, of which $34,800,000 is allocated
to intangible assets acquired.
No single customer accounted for ten percent or more of the Company's
revenues in fiscal 1994, 1993 or 1992. The Company estimates that the
revenues from licensing of database server and connectivity products
were approximately 68% of total license revenues in 1994 and revenues
from licensing of application development and desktop productivity tools
were approximately 32% of total license revenues in 1994. Service
revenues, consisting of maintenance, training and consulting, were 22%
of revenues in 1994.
The Company provides a financing option to customers in connection with
the license of software in the United States through its wholly-owned
subsidiary, Informix Credit Company. Similar financing is offered in
Europe.
LICENSING
End-User Licensing
The Company's products are licensed directly to end-users through the
Company's sales force as well as indirectly to end-users through
application resellers, OEMs and distributors. The Company believes that
the common core technology of its RDBMS software products, based on
standard operating systems and the SQL database language places it in a
strong position to sell into major corporations and government agencies
that wish to standardize their diverse computing environments. As a
result, certain of these end-user organizations have entered into
general purchasing agreements with the Company which offer volume
discounts.
Application Reseller Licensing
Since its inception, the Company has licensed application resellers to
distribute its products. A typical application reseller develops an
application product (e.g., an insurance agency management system) using
one of the Company's products and then licenses the resultant
application software to its customers in the target market. The
application reseller customer purchases a license for use of the
Company's product to develop an applications program. Depending on the
application program developed, it may include a run-only license, a full
version license or even multiple product licenses.
Application resellers develop applications using a wide array of
application development tools, including products from the Company,
such as INFORMIX-NewEra, INFORMIX-4GL and INFORMIX-SQL, as well as
products offered by third parties. Applications developed using the
Company's products are generally portable across various brands of
computers and different operating systems. The Company believes that
this feature is significant to this distribution channel.
The Company has specialized programs to support the application reseller
distribution channel. Under these programs, the Company provides to
selected application resellers a combination of marketing development
services, consulting and technical marketing support and discounts.
OEM Licensing
The Company's products are also marketed with the assistance of the
sales forces of its OEM customers. Many OEMs have concluded that
"solution selling" of a combination of software and hardware to their
respective customers enhances the sales of their computer equipment.
The Company believes that the compatibility and range of applications
for its products is significant to this distribution channel.
Distributor Licensing
The Company has established a network of full service international
distributors who provide local service and support, as well as the
Company's products, to their respective national markets. The Company's
products have been translated by the Company or the Company's
distributors into a number of foreign languages, including Japanese
(Kanji), Chinese (Simplified and Traditional), Czech, Danish, French,
German, Hebrew, Hungarian, Korean (Hangul), Italian, Polish, Russian,
Slovak, Spanish, Swedish and Thai.
Revenues from foreign customers (all channels) accounted for
approximately 55%, 58% and 53% of total revenues for fiscal years 1994,
1993 and 1992, respectively. For export and geographic segment data,
see Note 7 to the 1994 Consolidated Financial Statements.
PRODUCT DEVELOPMENT
The computer software industry is highly competitive and rapidly
changing. Consequently, the Company dedicates considerable resources to
research and development efforts to enhance its existing product line
and to develop new products to meet new market opportunities. Major
research and development projects in 1994 included INFORMIX-NewEra and
INFORMIX-OnLine Dynamic Server.
Most of the Company's current software products and accompanying
documentation have been developed internally; however, the Company has
acquired certain software products from others and plans to do so again
in the future.
Current product development is focused toward:
* Development of the next major release of INFORMIX-OnLine Dynamic
Server for use on uniprocessor, symmetric multi-processor and loosely
coupled (both massively parallel processor and clustered) computer
systems.
* Improvement and enhancement of current products and new products,
with particular emphasis on parallel computer architecture, graphical
desk top, system administration, application partitioning and video,
multimedia and mobile capabilities.
* Improvements to Informix products to provide greater speed and
support for larger numbers of concurrent users.
* Adaptation of new products to the broad range of computer brands and
operating systems Informix currently supports and adaptation of
current products to new brands of computers and operating systems
which represent attractive market opportunities for Informix
products.
There can be no assurance that the Company's product development efforts
will be successful or that any new products will achieve significant
market acceptance.
As of December 31, 1994, the Company had 459 regular employees engaged
in research and development.
During fiscal 1994, 1993 and 1992 the Company expended $60,417,000,
$43,619,000 and $28,807,000, respectively, on research and development,
representing approximately 13%, 12% and 10% of revenues for such
periods. Also during fiscal 1994, 1993 and 1992 the Company capitalized
costs in accordance with Statement of Financial Accounting Standards No.
86 of $13,633,000, $8,556,000 and $5,031,000, respectively. See
Management's Discussion and Analysis of Financial Condition and Results
of Operations - Costs and Expenses - Research and Development Expenses.
COMPETITION
Companies in the RDBMS markets compete primarily on the basis of
price/performance characteristics, name recognition, support and
training services, and the reliability, features and functions of their
products. The Company believes that the technical advantages of its
products, its approach to sales and marketing, its relations with
dealers, distributors and OEMs, and its customer service and support
contribute to its ability to compete in this market.
The Company also competes with other companies in the micro-computer
software market for distributors, dealers, Application resellers and
other channels of product distribution. The principal considerations
for distributors and dealers in determining which products to offer
include product features, customer acceptance, profit margins, product
support, service and credit terms.
Informix faces intense competition in the market for RDBMS products
running on mid-range computers from a limited number of principal
competitors and from a number of emerging companies. Informix believes
it has the largest installed base of RDBMS software for computers
running the UNIX operating system. It also offers RDBMS software
products for high-end personal computers running the Windows and
Windows/NT operating systems, which it supplies primarily to corporate
end-users and application resellers under volume purchase arrangements.
Informix believes that there is a large market potential for RDBMS
software running on mid-range computers which might attract additional
competitors, including companies which currently market RDBMS software
for computers either smaller or larger than computers in the mid-range
market.
The chief competition faced by Informix is currently provided by Oracle
Corporation, Sybase Corporation, CA Ingres (a subsidiary of Computer
Associates), IBM, Microsoft and Progress Software and suppliers of third
party tools such as Powersoft Corporation, Gupta Technologies, Uniface
Corporation and Unify Corporation. Some of Informix's current
competitors and many potential competitors have greater financial,
technical and marketing resources than Informix.
Informix believes that for all of its RDBMS software products, the
principal competitive factors include:
* Applications development productivity (the speed with which
applications can be built).
* Flexibility of applications development tools to build applications
according to specifications.
* Database performance (the speed at which database storage and
retrieval functions are executed).
* Availability of products across various brands and sizes of
computers.
* The distribution of RDBMS software applications and data across
networks of computers from multiple suppliers.
While discounts are typically granted from the suggested retail price
for most micro-and mini-computer software, price competition has not
been a major factor to date in the high performance end of the business,
scientific and government software markets in which the Company
competes. In contrast, intense competition currently exists in the low
performance sector of that market. The Company believes that price
competition, with its attendant reduced profit margins, may emerge as a
significant consideration in the high performance area over time.
PRODUCT PROTECTION
The Company relies on a combination of trade secret, copyright and
trademark laws, license agreements and technical measures to protect its
rights in its software products. Like many software companies, the
Company has no patents to date, although it has applied for one software
patent for core technology present in Informix products which include
the Informix SuperView(TM) element, a front-end database management
tool, and is proceeding with applications for several other software
patents. The Company maintains trademark and service mark registrations
in the United States and numerous other foreign jurisdictions.
The Company's products are generally licensed to end-users on a "right-
to-use" basis pursuant to a license that restricts the use of the
products to the customer's internal business purposes either on a single
computer at a single site or to a specific number of users at a single
site or enterprise wide. The Company also relies on "shrink-wrap"
licenses. The Company's "shrink-wrap" license includes a prominently
displayed notice informing the end-user that, by opening the product
packaging, the end-user agrees to be bound by the Company's license
agreement printed on the package. Copyright and trade secret protection
for source code and other software products may be unavailable in
certain foreign countries. In addition, "shrink-wrap" licenses may be
unenforceable under the laws of certain jurisdictions.
The Company protects the human readable, source code version of its
products as a trade secret and as an unpublished copyrighted work. The
Company has licensed the source code of its products to certain
customers under certain circumstances, and for restricted uses. In
addition, the Company has entered into source code escrow agreements
with a number of its customers that generally require release of source
code to the customer in the event there is a bankruptcy proceeding by or
against the Company, the Company ceases to do business or the Company
ceases to support the product. In the event of a release of the source
code to a customer, the customer is required to maintain its
confidentiality and, in general, to use the source code solely for
internal business purposes or for the purpose of providing maintenance
and support to its customers, and, in certain circumstances, to
embedding it in customer products.
The Company believes that, because of the rapid pace of technological
change in the computer software industry, patent, trade secret and
copyright protection are less significant than factors such as the
knowledge, ability and experience of the Company's personnel, new
product introduction, frequent product enhancement, name recognition and
ongoing product maintenance.
EMPLOYEES
As of December 31, 1994, the Company and its subsidiaries had 2,212
regular employees worldwide, including 1,358 in sales, marketing and
support; 459 in product development; 104 in operations and 291 in
administration and finance.
Competition in recruiting personnel in the computer software industry is
intense. The Company believes that its future success will depend in
part on its continued ability to recruit and retain highly skilled
management, marketing and technical personnel.
None of the Company's U.S. employees are represented by a labor union.
A small number of employees located outside of the United States are
represented by labor unions. The degree of this representation varies
from country to country. The Company has experienced no work stoppages
and believes that its employee relations are excellent.
EXECUTIVE OFFICERS
Set forth below are biographical summaries of the current executive
officers of the Company.
Frank J. Bergandi, 44, joined the Company in February 1992 as Vice
President, North American Sales and became Vice President, North America
in April 1994. From April 1990 to February 1992, Mr. Bergandi was
President of the Soma Group, a software and service brokerage which he
co-founded. From August 1984 to April 1990, Mr. Bergandi held a number
of positions at Cullinet Software, the most recent being Vice President
and Regional Manager.
Richard C. Blass, 40, joined the Company in February 1985 as Controller
and became Vice President, Corporate Controller in February 1988.
Margaret R. Brauns, 40, became Vice President and Treasurer of the
Company in November 1992. Ms. Brauns joined Informix as Treasurer in
May 1990. From February 1988 to May 1990, she served as Treasurer at
Wyse Technology Incorporated.
D. Kenneth Coulter, 50, joined the Company in February 1988 as Managing
Director, UK. He became Senior Vice President, Europe, Middle East and
Africa, in April 1992. From January 1990 to April 1992, Mr. Coulter was
Vice President, Europe of the Company.
Ira H. Dorf, 54, joined the Company as Vice President, Human Resources
in October 1989.
Howard H. Graham, 47, joined the Company in February 1990 as Vice
President, Finance and Chief Financial Officer and became Senior Vice
President, Finance and Chief Financial Officer in March 1991.
James F. Hendrickson, Jr., 55, joined the Company as Vice President,
Customer Services in July 1992. In February 1995, Mr. Hendrickson
assumed the additional responsibility of Lenexa Site Manager. Prior to
joining Informix, Mr. Hendrickson was Senior Vice President of Marketing
at Image Business Systems from 1991. From 1988 to 1990, Mr. Hendrickson
worked as Executive Vice President of Development at International
Customer Solutions, Inc.
Stephen E. Hill, 36, became Vice President, Strategic Planning and
Corporate Development in July 1991. Since joining the Company in
December 1985, Mr. Hill has served the Company in a variety of strategic
planning, development and marketing positions.
Mike Saranga, 57, joined the Company as Senior Vice President, Product
Management and Development in May 1993. Prior to joining the Company,
Mr. Saranga was employed by IBM for 30 years, most recently as Assistant
General Manager of Programming Systems, where Mr. Saranga developed
IBM's technical and business strategies for key technologies including
client/server, distributed systems and multimedia.
Steven R. Sommer, 40, joined the Company as Vice President, Marketing in
May 1993. Mr. Sommer was employed by Cognos, Inc., an application
development tools software company, from February 1990 to March 1993.
At Cognos, Inc., Mr. Sommer had responsibility for world-wide marketing
as Vice President of Corporate Marketing and Vice President of Marketing
Operations.
David H. Stanley, 48, joined the Company as Vice President, Legal,
General Counsel and Assistant Secretary in July 1988. In August 1990,
Mr. Stanley was elected to the additional office of Secretary.
Phillip E. White, 52, has been the Company's Chief Executive Officer
since January 1989. He has held the additional office of President
since August 1990 and of Chairman since December 1992. Mr. White
also serves as a director of Adaptec, Inc., a computer input/output
technology company.
Edwin C. Winder, 46, joined the Company in February 1990. Since joining
the Company, Mr. Winder has held a variety of executive positions in
sales, marketing and customer service. He is currently the Company's
Senior Vice President, Intercontinental Group.
______________
Distributed Relational Database Architecture, Microsoft, Motif, UNIX,
Windows and Windows/NT are trademarks of their respective owners. All
other names indicated by (R) or (TM) are registered trademarks of the
Company.
ITEM 2. PROPERTIES
The Company's headquarters and its marketing, finance, North American
and Intercontinental Group sales, administration, customer service and
research and development operations are located in five modern buildings
in a seven building office park in Menlo Park, California, approximately
30 miles south of San Francisco. Informix leases approximately 200,000
square feet of space in these buildings. The leases for spaces in three
of the buildings expire in April 1998. The remaining leases expire in
September 2001. The annual base rent payment (not including operating
expenses, insurance, property taxes and assessments) is approximately
$3,116,000, and is subject to adjustments at set rates between five and
seven percent per year. Informix must also pay an allocated portion of
operating expenses, insurance, property taxes and assessments which
aggregated approximately $828,000 in 1994. Informix has an option to
renew each lease for another five-year term at 95% of the then fair
rental value.
Some of the research and development for the Company's tools products,
a portion of the Company's customer service organization, the Company's
principal manufacturing facility and the Company's telemarketing
organization are located in two modern buildings aggregating
approximately 135,000 square feet in Lenexa, Kansas, a suburb of Kansas
City. The buildings are owned by a partnership, of which Informix
Software, Inc. is a 50% partner, and leased by the partnership to
Informix Software, Inc. under a lease with an initial ten-year term that
expires in March 1998. There are two five-year renewal options. Annual
rental and operating expenses aggregated approximately $1,380,000 in
1994. Rental under this lease remains fixed through 1998, and then
adjusts to prevailing rates for the renewal terms.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings, other than
ordinary routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders
during the fourth quarter of the fiscal year ended December 31, 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Market Information
The Company's Common Stock has been traded on the over-the-counter
market under the NASDAQ symbol IFMX since the Company's initial public
offering on September 24, 1986. The following table sets forth for the
Company's Common Stock the range of high and low closing prices on the
NASDAQ National Market System.
1993 High Low
1st quarter $20.25 $13.94
2nd quarter 27.00 13.88
3rd quarter 26.25 18.50
4th quarter 23.00 16.63
1994
1st quarter $24.13 $16.00
2nd quarter 22.13 14.50
3rd quarter 27.75 15.88
4th quarter 32.13 23.75
Common Stockholders of Record and Dividends
At February 28, 1995, there were approximately 1,594 stockholders of
record of the Company's Common Stock, as shown in the records of the
Company's transfer agent. The Company has never paid dividends on its
Common Stock and its present policy is to retain its earnings to finance
anticipated future growth.
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary
(in thousands, except per share data) 1994 1993 1992* 1991 1990
Net Revenues $468,697 $352,915 $283,594 $179,811 $146,107
Net Income (Loss) 66,196 56,115 47,782 12,610 (23,123)
Net Income (Loss) Per Share 0.98 0.83 0.75 0.21 (0.46)
Total Assets 444,410 326,633 231,459 132,924 109,534
Long-Term Obligations 522 451 1,797 25,383 30,062
* In 1991, the Company was selected to provide the database component of
a decision-support system for the Army National Guard and Army Reserves.
In 1992, the Company received $26.8 million in 1992 for license fees and
support as part of this Reserve Component Automation System (RCAS)
contract and recorded $21.8 million as license revenue and incurred $3.2
million in operating expenses in 1992. The remaining $5.0 million of
service revenue is being recognized over the support period.
The Company has not paid and does not anticipate paying cash dividends
on its common stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Selected elements of the Company's financial statements are shown below
for the last three years as a percentage of revenue and as a percentage
change from year to year.
In 1991, the Company was selected to provide the database component of a
decision-support system for the Army National Guard and Army Reserves.
In 1992, the Company received $26.8 million as part of this Reserve
Component Automation System (RCAS) contract and recorded $21.8 million
as license revenue and incurred $3.2 million in related operating
expenses. The remaining $5.0 million of service revenue is being
recognized over the support period. In 1992, the Company also recorded a
$10.5 million charge due to a settlement of a securities class action
lawsuit (see Litigation Settlement). In providing comparative
information, corresponding tables are presented with Table 1 showing
1992 amounts as reported and Table 2 showing 1992 pro forma amounts
excluding the RCAS license revenue and related expenses and the
litigation settlement charge. The Company believes that year-to-year
comparisons of financial results are not necessarily indicative of
future results.
Table 1 (as reported)
% Increase (Decrease)
% of Net Revenues 1994 1993
Years Ended December 31, Compared Compared
1994 1993 1992 to 1993 to 1992
Net revenues 100% 100% 100% 33% 24%
COSTS AND EXPENSES:
Cost of software distribution 5 6 8 23 (7)
Cost of services 10 9 9 40 23
Sales and marketing 43 39 36 46 37
Research and development 13 12 10 39 51
General and administrative 7 10 11 4 3
Total costs and expenses 78 76 74 37 28
Operating income 22 24 26 20 16
Net income 14 16 17 18 17
Table 2 (pro forma)
% Increase (Decrease)
% of Net Revenues 1994 1993
Years Ended December 31, Compared Compared
1994 1993 1992 to 1993 to 1992
Net revenues 100% 100% 100% 33% 35%
COSTS AND EXPENSES:
Cost of software distribution 5 6 8 23 (6)
Cost of services 10 9 10 40 23
Sales and marketing 43 39 38 46 41
Research and development 13 12 11 39 53
General and administrative 7 10 12 4 4
Total costs and expenses 78 76 79 37 30
Operating income 22 24 21 20 54
Net income 14 16 16 18 31
The Company's operating income in 1994 was 22 percent of net revenues
compared to 24 percent in 1993 and 26 percent in 1992. Excluding the
revenue from the RCAS contract and associated expenses, 1992 operating
income was 21 percent. The decrease in operating margin in 1994 compared
to 1993 was primarily due to extensive investment in customer services,
marketing and research and development expenditures and personnel
additions to the Company's sales force worldwide. In 1995, the Company
expects this trend to continue, which may adversely affect the Company's
operating margin if there are no offsetting increases in revenue or
reductions in other operating expenses.
Internally, the Company generally has a goal to achieve an annual
20 percent operating margin. Although the Company achieved these
operating margin targets in 1994, 1993 and 1992 through revenue growth
and expense controls, the Company's expenses are relatively fixed in the
near term and unexpected variances in planned revenues, which are
difficult to forecast, can result in variations in operating margins and
cost ratios. The Company's revenues have been increasingly derived from
sales contracts directly with end users and less from the distributor or
OEM sales channels. These end-user sales contracts can be relatively
large in size and are difficult to forecast both in timing and dollar
value. In addition, the Company's quarterly operating margins generally
follow a seasonal pattern, with second half revenues and operating
margins being higher than those of the preceding first half.
The Company's stock price may be subject to significant volatility,
particularly on a quarterly basis. Any shortfall in revenue or earnings
from levels expected by securities analysts or others could have an
immediate and significant adverse effect on the trading price of the
Company's common stock in any given period. Additionally, the Company
may not learn of, or be able to confirm, revenue or earnings shortfalls
until the end of each quarter, which could result in an even more
immediate and adverse effect on the trading price of the Company's
common stock. Finally, the Company participates in a highly dynamic
industry, which often results in significant volatility of the Company's
common stock price.
The effect of inflation on the Company's financial position has
not been significant.
Revenues
The Company derives revenues principally from licensing its software.
Such revenues may involve the shipment of product by the Company or the
granting of a license to manufacture products. From time to time the
Company has recognized substantial net revenue from large software
license agreements. These transactions, which are difficult to predict,
have caused fluctuations in net revenues and net income because of the
relatively high gross margin on such revenues. The Company expects that
this sort of transaction and the resulting fluctuations may continue.
Additionally, as is common in the industry, a disproportionate amount of
the Company's license revenue is derived from transactions that close in
the last few weeks of a quarter which makes quarterly revenues difficult
to forecast.
Although the Company expects revenues to continue to grow in 1995, there
can be no assurance that such growth will be achieved or that growth
rates in the future will be comparable to those of 1994.
Table 3 (as reported)
(dollars in millions) 1994 Change 1993 Change 1992
License fees $363.8 28% $284.3 20% $237.4
Percentage of net revenues 78% 81% 84%
Services $104.9 53% $ 68.6 48% $ 46.2
Percentage of net revenues 22% 19% 16%
Net revenues $468.7 33% $352.9 24% $283.6
Table 4 (pro forma)*
(dollars in millions) 1994 Change 1993 Change 1992
License fees $363.8 28% $284.3 32% $215.6
Percentage of net revenues 78% 81% 82%
Services $104.9 53% $ 68.6 48% $ 46.2
Percentage of net revenues 22% 19% 18%
Net revenues $468.7 33% $352.9 35% $261.8
* Excludes RCAS license revenue in 1992.
Service revenue, consisting of customer support, training, and
consulting, increased in each of the years presented. These increases
were primarily attributable to the continued growth of the installed
customer base and the renewal of maintenance contracts. The Company
continues to emphasize support services as a source of revenue.
The revenue growth in 1994 primarily reflects continued strong worldwide
acceptance for the Company's new and existing technology. The growth in
1993 reflects the Company's continued emphasis on increasing license
volume for its database servers and connectivity products. The Company's
revenues, along with those of the relational database management system
(RDBMS) industry as a whole, have shown substantial growth over the last
several years. The industry has benefited from trends to downsize from
large, proprietary computer systems and market acceptance of UNIX and
other open operating environments.
The Company has focused on the UNIX market since 1980 and has broadened
its open environments by releasing a Windows and Windows NT version of
an Informix database server in 1994. The Company has also
developed and released connectivity products that provide access to
other relational databases, both proprietary and open, and access to
data through various protocols such as IBM's DRDA and X/Open's XA. The
industry movement to new, open operating systems like Windows NT and
access to database information through low-end, desktop machines may
cause downward pressure on prices of database and related products. If
such downward pressure on prices were to occur, margins would be
adversely affected.
In 1993, the Company offered database server products in multiple
versions, including a "secure" product, and released several new server
and connectivity products, including the first of its Dynamic Scalable
Architecture product line, INFORMIX-OnLine Dynamic Server 6.0. The
Company also released several other products in 1993 to provide market-
specific extensions and enhancements to the Informix suite of 4GL
application development tools.
The license revenue growth in 1994 reflects continued strong demand
particularly for the Company's new generation of database servers and
connectivity products. In 1994, the Company released INFORMIX-OnLine
Dynamic Server 7.1 on eleven symmetric multiprocessing platforms. The
Company also introduced INFORMIX-NewEra in 1994, a second-generation
client/server application development tool, and anticipates tools
revenue to increase in absolute dollars in 1995. However, there is
significant competition in the tools market from other companies and
their product offerings: graphical, character-based, and object-
oriented. Many of these tools products are "open," meaning they will
access data stored on virtually any relational database, including
Informix.
The Company's ability to sustain growth depends in part on the timely
release of successful new and updated products, and the success of new
and updated products from its competitors. The Company has experienced
product introduction delays in the past and may have delays in the
future.
Over half of the Company's net revenues are derived from its
international operations (see Note 7 of Notes to Consolidated Financial
Statements). In Europe, most revenues and expenses are denominated in
local currencies. In 1994 and 1992, the U.S. dollar weakened against the
major European currencies, which resulted in higher revenue and expenses
recorded when translated into U.S. dollars and compared with the
corresponding prior years. In 1993, the U.S. dollar strengthened
significantly against the major European currencies, which resulted in
lower revenue and expenses recorded when translated into U.S. dollars
and compared with the prior year. Through 1994, most revenues from
Asia/Pacific, Canada, and Latin America were denominated in U.S.
dollars. The translations of the revenues for these regions were less
influenced by fluctuations in foreign exchange rates. The Company has
increased its direct sales presence in Asia/Pacific by opening offices
and acquiring its primary software distributors in Malaysia in 1994, and
Japan and Korea in early 1995. This will increase the proportion of
direct sales in local currency in these regions. The Company has also
increased its direct presence in Latin America, although a significant
percentage of the revenue is still denominated in U.S. dollars. The
Company incurred approximately $0.4 million in foreign exchange loss in
Mexico in the fourth quarter of 1994 due to the instability of the
economic climate in this country. In the future, the Company expects
these currency fluctuations in Mexico, and to a lesser extent, other
Latin America countries to continue. The Company's operating and pricing
strategies take into account changes in exchange rates over time,
however, the Company's results of operations may be significantly
affected in the short term by fluctuations in foreign currency exchange
rates.
Approximately 55 percent, 58 percent, and 53 percent of the Company's
net revenues were derived from sales to foreign customers for 1994,
1993, and 1992, respectively. The increase in foreign revenues in
absolute dollars is primarily attributable to the establishment of new
subsidiaries and sales offices in Europe, Asia/Pacific, and Latin
America, and continued international acceptance for the Company's new
and existing technology. Excluding the RCAS contract, foreign revenue
represented 58 percent of net revenues in 1992. The Company expects that
foreign revenues will continue to provide a significant portion of total
revenues. However, changes in foreign currency exchange rates, the
strength of local economies, and the general volatility of software
markets may result in a higher or lower proportion of foreign revenues
in the future.
The Company has a hedging program in place to minimize foreign
exchange gains or losses, where possible, from recorded foreign
denominated transactions resulting from fluctuations in exchange rates.
This program involves the use of forward foreign exchange contracts in
the primary European and Asian currencies. The Company has limited
unhedged transaction exposures in certain secondary currencies in Latin
America and Eastern Europe because there are limited forward currency
exchange markets in these currencies. The Company does not attempt to
hedge translation to U.S. dollars of foreign denominated revenues and
expenses not yet incurred.
The Company's distribution markets were reorganized into three general
markets at the beginning of the second quarter of 1994: North America;
Europe, Middle East, and Africa; and the Intercontinental Group,
consisting of Latin America, Japan, and the Asia/Pacific region. These
organizations contributed 46 percent, 38 percent, and 16 percent of the
Company's net revenues, respectively, in 1994, compared to 43 percent,
41 percent and 16 percent, respectively, in 1993, and 43 percent, 42
percent and 15 percent, respectively, in 1992 (excluding the RCAS
revenue in North America).
Cost of Software Distribution
(dollars in millions) 1994 Change 1993 Change 1992
Manufactured cost of software distribution $16.9 13% $14.9 (6%) $15.8
Percentage of license revenue 5% 5% 7%
Amortization of capitalized software $ 7.8 50% $ 5.2 (8%) $ 5.7
Percentage of license revenue 2% 2% 2%
Cost of software distribution $24.7 23% $20.1 (7%) $21.5
Percentage of license revenue 7% 7% 9%
Software distribution costs consist primarily of: 1) manufacturing and
related costs such as media, documentation, product assembly and
purchasing costs, freight, customs, and third-party royalties; and 2)
amortization of previously capitalized software development costs and
any write-offs of previously capitalized software.
Excluding amortization of previously capitalized software development
costs, costs of software distribution as a percentage of license revenue
declined to 5 percent in 1994 and in 1993 from 7 percent in 1992. The
decreases as a percentage of license revenue are the result of the
recording of several large contracts which have low associated costs of
software distribution since these customers generally manufacture the
software themselves, as well as cost reduction programs implemented by
the Company in 1992 and 1993. In 1995, the cost of software distribution
as a percentage of license revenue will vary depending upon whether the
product is reproduced by the Company or by customers.
The increase in amortization of capitalized software in 1994 resulted
from the release of several products in the second half of 1994. The
decrease of amortization of capitalized software in absolute dollars in
1993 was due to several projects being fully amortized in early 1992.
Cost of Services
(dollars in millions) 1994 Change 1993 Change 1992
Cost of services $46.0 40% $32.9 23% $26.8
Percentage of service revenue 44% 48% 58%
Cost of services consists primarily of customer support, consulting, and
training expenses. The decreases in cost of services as a percentage of
service revenue in both 1994 and 1993, compared to their corresponding
prior year periods, are primarily due to higher growth in maintenance
revenues, derived from product update rights and technical support, than
maintenance expenses, primarily related to technical customer support.
Sales and Marketing Expenses
(dollars in millions) 1994 Change 1993 Change 1992
Sales and marketing $200.5 46% $137.7 37% $100.4
Percentage of net revenue 43% 39% 36%
The increase in sales and marketing expenses, in absolute dollars and as
a percentage of net revenues, in 1994 and 1993 compared to their
corresponding prior year periods, was a result of increased sales
personnel worldwide as the Company expanded its investment in the
worldwide direct sales organizations, opening of new subsidiaries,
acquisition of several foreign distributors, higher commission expense
associated with the increase in revenues and increased marketing
programs associated with new product launches. Excluding RCAS revenue
and associated expenses in 1992, sales and marketing expenses were 37
percent of net revenues.
With the continuing expansion throughout 1995 of worldwide operations,
as well as increased sales and marketing expenditures aimed at
positioning the Company and its new and existing products in the
marketplace, the Company expects that sales and marketing expenses will
increase in absolute terms in 1995.
Research and Development Expenses
The Company accounts for its software development expenses in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed." This statement requires that, once technological feasibility
of a developing product has been established, all subsequent costs
incurred in developing that product to a commercially acceptable level
be capitalized and amortized ratably over the revenue life of the
product. The Company's research and development expenses exclude
capitalized software costs of $13.6 million in 1994, $8.6 million in
1993, and $5.0 million in 1992, and exclude amortization costs of
previously capitalized software (see Note 1 of Notes to Consolidated
Financial Statements). The following table summarizes research and
development costs for the prior three years:
(dollars in millions) 1994 Change 1993 Change 1992*
Incurred product development costs $74.0 42% $52.2 54% $33.5
Expenditures capitalized 13.6 58% 8.6 70% 5.0
Research and development expenses $60.4 39% 43.6 51% $28.5
Percentage of net revenues 13% 12% 11%
Expenditures capitalized as a % of incurred 18% n/a 17% n/a 15%
Amortization $7.8 50% $ 5.2 (8%) $ 5.7
* Excludes RCAS license revenue in 1992
The increase in research and development expenditures in absolute
dollars and as a percentage of net revenues from year to year was
attributed to increased personnel and consultants working on new
products and product extensions.
The proportion of capitalized expenditures as a percentage of total
incurred expenses increased from year to year as several major projects
in development had reached technological feasibility. The Company
expects the proportion of work on capitalized projects in 1995 as a
percentage of net revenues to remain relatively stable compared to 1994
as other major new products reach technological feasibility in 1995, and
capitalization of the related software development costs begins.
Major new programs under development in 1995 include OnLine Dynamic
Server 8.0 servers and connectivity products and new upgrades of
INFORMIX-NewEra tools products. The Company believes that research and
development expenditures are essential to maintaining its competitive
position in its primary markets and expects the expenditure levels in
1995 to increase in absolute dollars.
General and Administrative Expenses
(dollars in millions) 1994 Change 1993 Change 1992
General and administrative expenses $34.5 4% $33.2 3% $32.2
Percentage of net revenues 7% 10% 11%
General and administrative expenses in 1994 remained relatively flat
with 1993 and 1992 in absolute dollars. Excluding the RCAS contract,
general and administrative expenses were 12 percent of net revenues in
1992. The slight increase in absolute dollars from year to year was
primarily due to an increase in the costs of supporting the Company's
international operations as new subsidiaries and branch offices were
established and existing subsidiaries were expanded. The Company expects
that 1995 general and administrative expenses as a percentage of net
revenues will remain similar to 1994.
Litigation Settlement
In 1992, a charge of $10.5 million was taken for the settlement of the
securities class action lawsuit filed against the Company and certain of
its officers and directors in 1988. The settlement, which was completed
in May 1993, does not constitute an admission of liability or wrongdoing
on the part of the Company or on the part of any of its current or
former officers and directors. The settlement represents a decision by
the Company's Board of Directors that a settlement at the time was in
the best interest of the Company and its stockholders.
Interest Income
(dollars in millions) 1994 Change 1993 Change 1992
Interest income $3.8 (2%) $3.9 95% $2.0
Percentage of net revenues 1% 1% 1%
Interest income in 1994 remained flat compared with 1993 despite higher
cash and investments as the Company invested a large percentage of its
cash and investments in tax-exempt securities. The increase in absolute
dollars from 1992 to 1993 resulted from higher balances of cash and cash
equivalents and short-term investments.
Interest Expense
(dollars in millions) 1994 Change 1993 Change 1992
Interest expense $0.4 2% $0.4 (84%) $2.3
Percentage of net revenues 0% 0% 1%
Interest expense in 1994 and 1993 consists principally of interest
expense on capital leases of certain computer and office equipment.
Interest expense in 1992 consists primarily of interest expense on
convertible debentures and capital leases of certain computer and office
equipment. The decrease from 1992 to 1993 resulted primarily from the
call for redemption of the convertible debentures in the fourth quarter
of 1992.
Other Expense, net
The Company recognized net other expense of $2.6 million, $1.3 million,
and $1.4 million in 1994, 1993, and 1992, respectively. In 1994, net
other expense primarily consisted of foreign exchange losses, net, and
expenses related to the Company's financing programs for accounts
receivable. In 1993, net other expense primarily consisted of foreign
exchange losses, net, partially offset by a reversal of a liability
which was determined to be no longer necessary, related to a real estate
partnership. In 1992, net other expense consisted of foreign exchange
losses, net, partially offset by a gain on a sale of an investment.
Provision for Income Taxes
(dollars in millions) 1994 Change 1993 Change 1992
Provision for income taxes $37.2 18% $31.6 127% $13.9
Effective tax rate 36.0% 36.0% 22.6%
The Company's effective tax rate increased to 36.0 percent of pretax
income in 1994 and 1993 from 22.6 percent in 1992. This increase
resulted from net operating loss and tax credit carryovers which were
substantially utilized in 1992 and the 1.0 percent increase in the U.S.
federal income tax rate in 1993. The Company's effective tax rate for
fiscal years 1994 and 1993 is less than the combined federal and state
statutory rate primarily due to the federal research and development
credit and the permanent re-investment offshore of a portion of the
earnings of the Company's lower-taxed Irish operations. The amount
considered permanently invested in the Irish operations may vary from
year to year and may affect the Company's effective tax rate.
The Company anticipates its fiscal 1995 effective tax rate to
remain approximately the same as 1994; however, this rate could change
based on a change in the geographic mix of the Company's earnings, the
amount of permanent reinvestment offshore of a portion of the 1995
earnings of the Company's lower-taxed Irish operations and the
scheduled termination of the federal research and development credit.
Liquidity and Capital Resources
(dollars in millions) 1994 1993 1992
Cash, cash equivalents, and investments $196.0 $143.5 $119.4
Working capital $194.5 $156.0 $ 98.7
Cash provided by operations $114.5 $ 64.8 $ 90.5
Cash used in investing activities, excluding
investments of excess cash $ 51.4 $ 36.7 $ 14.7
Cash provided by (used in) financing activities $(10.8) $ (3.5) $ 1.7
Cash generated by operations provided sufficient resources to fund the
Company's personnel growth and capital asset needs in all years
presented.
The increase in cash provided by operations in 1994 compared with 1993
was due mainly to higher income before depreciation and amortization
charges, increased accounts payable and accrued expenses and the
litigation settlement payment in 1993, partially offset by an increase
in accounts receivable. The decrease in cash generated by operations in
1993 compared with 1992 was primarily attributable to an increase in
accounts receivable and the litigation settlement payment, offset in
part by increased net income.
Accounts receivable increased by $23.2 million in 1994 and by $45.4
million in 1993, principally as a result of increased sales. Days sales
outstanding decreased to 79 days in the fourth quarter of 1994 from
approximately 97 days in the fourth quarter of 1993, but increased from
63 days in the fourth quarter of 1992. Excluding RCAS, the days sales
outstanding in the fourth quarter of 1992 was 77 days. Commencing in
late 1993, the Company instituted programs to have third party financial
institutions provide financing for extended credit terms instead of such
terms being provided by the Company. The Company believes these
financing programs are primarily responsible for the decrease in days
sales outstanding during 1994. The days sales outstanding ratio is
dependent on many factors, including the mix of contract-based revenue
with significant OEMs and large corporate and government end users
versus revenue recognized on shipments to application vendors and
distributors and the success of the Company's financing programs.
Although a large portion of the Company's revenues are derived from
resellers, the Company's revenues since 1993, particularly in Europe,
have shifted substantially from distributors to direct end-users. These
end-user sales contracts frequently bear extended payment terms which
result in an increase in days sales outstanding ratios, unless the
contracts are financed. The shift in distributor channels is likely to
continue as products and markets mature. The Company is utilizing a
variety of means to reduce the days sales outstanding ratio. In the
future, the Company expects this ratio to vary within the range which
prevailed in the last several quarters.
Excluding investments of excess cash, net cash and cash equivalents used
in investing activities increased in 1994, compared with 1993 and 1992
levels. In 1994, 1993, and 1992, the Company acquired $25.2 million,
$22.1 million, and $9.7 million, respectively, of capital equipment
consisting primarily of computer equipment, computer software, and
office equipment. The increase of capital equipment purchases in 1994
and 1993 resulted from the Company's growing employee headcount,
the replacement of older equipment, and investment in new technology.
In the future, the Company anticipates the actual level of capital
spending will be dependent on a variety of factors, including the
Company's business requirements and general economic conditions. In 1994
and 1993, the Company made equity investments of $1.6 million and $3.5
million, respectively, in companies of strategic interest to the
Company.
The Company's investments in software costs were previously discussed
under "Results of Operations" and Note 1 of Notes to Consolidated
Financial Statements.
In the third quarter of 1994, the Company acquired two of its
distributors, one in Germany and the other in Malaysia. The
transactions were accounted for as purchases. The operating results
of the distributors subsequent to the acquisition dates, which were
not significant in relation to those of Informix, were included in
the consolidated results of operations since the third quarter of
1994. The aggregate purchase price of these two distributors
was approximately $12.5 million, of which $8.8 million has been paid in
1994 with the remaining balance to be paid in 1995.
In January 1995, the Company acquired a 90 percent interest in the
database division of ASCII Corporation, a distributor of its products in
Japan. The Company will acquire the remaining 10 percent interest in
January 1996. The Company will account for the acquisition as a
purchase. The purchase price of ASCII's database division is
approximately $46.0 million, of which approximately $34.8 million is
allocated to intangible assets acquired.
In February 1995, the Company entered into an agreement to acquire in
April 1995 an 80 percent interest in the database division of Daou
Corporation, a distributor of its products in Korea. The Company will
acquire the remaining 20 percent interest by January 1997. The purchase
price of Daou's database division is approximately $4.3 million.
The Board of Directors has authorized the purchase of up to 4 million
shares of the Company's common stock in the open market to satisfy
requirements under Stock Option and Stock Purchase Plans. Through
December 1994, 1,790,000 shares with an aggregate cost of approximately
$32.1 million had been repurchased on the open market. During 1994 and
1993, all repurchased shares were re-issued to partially satisfy
requirements under Stock Option and Stock Purchase Plans.
Net cash and cash equivalents provided by, or used in, financing
activities in 1994 and 1993 included payments on capital leases and the
repurchase of the Company's common stock offset by proceeds from the
sale of the Company's common stock to employees.
Net cash and cash equivalents provided by, or used in, financing
activities was not significant in 1992 as proceeds from the sale of the
Company's common stock to employees was partially offset by the payments
on capital leases.
The Company expects current balances of cash, cash equivalents, and
short-term investments, along with the cash generated by operations,
will be sufficient to fund anticipated levels of operations at least
through 1995, to purchase the Japanese and Korean distributors and may
be used for investments and additional acquisitions to supplement
internal revenue growth and for other corporate purposes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
(in thousands, except share and per share amounts) 1994 1993
Assets
Current Assets:
Cash and cash equivalents $131,882 $ 67,329
Short-term investments 59,644 76,198
Accounts receivable, less allowances for doubtful
accounts of $6,036 in 1994 and $3,181 in 1993 131,548 109,005
Deferred taxes 9,978 5,884
Other current assets 14,964 11,001
Total current assets 348,016 269,417
Property and Equipment, at cost
Computer equipment 68,240 48,095
Office equipment and leasehold improvements 28,069 24,283
96,309 72,378
Less accumulated depreciation and amortization (52,188) (39,597)
44,121 32,781
Software Costs, less accumulated amortization
of $7,973 in 1994 and $7,989 in 1993 24,681 17,680
Deferred taxes 7,651 1,378
Long-term investments 4,477 _
Intangibles and other assets 15,464 5,377
Total Assets $444,410 $326,633
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 18,737 $ 14,926
Accrued expenses 27,784 18,388
Accrued employee compensation 33,777 26,823
Income tax payable 17,725 12,705
Deferred taxes 1,612 818
Deferred revenue 48,580 36,309
Current portion of capital lease obligations 391 1,081
Other current liabilities 4,946 2,354
Total current liabilities 153,552 113,404
Capital lease obligations, less current portion 343 451
Other noncurrent liabilities 179 _
Deferred taxes 14,692 5,373
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $.01 per share- _ _
5,000,000 shares authorized, none issued
Common stock, par value $.01 per share-
150,000,000 shares authorized, issued 65,473,889
and 64,869,162 in 1994 and 1993, respectively 655 649
Additional paid-in capital 139,897 125,230
Treasury stock, at cost (133,389 shares in 1993) _ (2,431)
Retained earnings 136,025 86,484
Unrealized gain on available-for-sale securities,
net of tax 665 _
Foreign currency translation adjustment (1,598) (2,527)
Total stockholders' equity 275,644 207,405
Total Liabilities and Stockholders' Equity $444,410 $326,633
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
(in thousands, except per share data) 1994 1993 1992
Net Revenues
Licenses $363,756 $284,338 $237,407
Services 104,941 68,577 46,187
468,697 352,915 283,594
Costs and Expenses
Cost of software distribution 24,669 20,077 21,483
Cost of services 45,986 32,944 26,777
Sales and marketing 200,538 137,698 100,418
Research and development 60,417 43,619 28,807
General and administrative 34,526 33,188 32,214
366,136 267,526 209,699
Operating income 102,561 85,389 73,895
Litigation settlement _ _ (10,500)
Interest income 3,847 3,943 2,018
Interest expense (380) (371) (2,253)
Other expense, net (2,598) (1,282) (1,448)
Income before income taxes 103,430 87,679 61,712
Income Taxes 37,234 31,564 13,930
Net Income $66,196 $56,115 $47,782
Net Income Per Common Share $ 0.98 $ 0.83 $ 0.75
Weighted Average Number of Common and
Common Equivalent Shares Outstanding: 67,305 67,601 63,662
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
(in thousands) 1994 1993 1992
Operating Activities
Net income $66,196 $56,115 $47,782
Adjustments to reconcile net income to cash and cash
equivalents provided by operating activities:
Depreciation and amortization 16,206 11,414 9,931
Amortization of capitalized software 7,848 5,220 5,662
Deferred tax expense (624) 7,164 635
Provisions for losses on accounts receivable 3,824 1,578 2,017
Foreign currency transaction loss (gain) (1,323) 1,444 370
Changes in operating assets and liabilities:
Accounts receivable (23,167) (45,389) (26,288)
Other current assets (1,518) (2,666) (1,445)
Accounts payable and accrued expenses 35,557 29,672 28,463
Accrued litigation settlement _ (9,720) 9,720
Deferred revenue 11,467 9,942 13,683
Net cash and cash equivalents provided by operating activities 114,466 64,774 90,530
Investing Activities
Investments of excess cash:
Purchases of held-to-maturity securities (124,102) (42,117) (40,956)
Purchases of available-for-sale securities (108,846) (94,790) (51,314)
Maturities of held-to-maturity securities 106,513 36,929 26,829
Sales of available-for-sale securities 138,423 70,437 18,784
Increase in strategic investments (1,623) (3,487) _
Purchase of property and equipment (25,247) (22,071) (9,681)
Additions to software costs (15,048) (9,576) (6,064)
Business combinations, net of cash acquired (8,799) _ _
Other (699) (1,585) 1,085
Net cash and cash equivalents used in investing activities (39,428) (66,260) (61,317)
Financing Activities
Proceeds from issuances of common stock 4,611 6,044 6,878
Principal payments on capital leases, net (1,179) (2,458) (5,157)
Acquisition of common stock (22,139) (9,999) _
Reissuance of treasury stock 7,915 2,957 _
Net cash and cash equivalents provided by
(used in) financing activities (10,792) (3,456) 1,721
Effect of exchange rate changes on cash and cash equivalents 307 (526) 9
Increase (decrease) in cash and cash equivalents 64,553 (5,468) 30,943
Cash and cash equivalents at beginning of period 67,329 72,797 41,854
Cash and cash equivalents at end of year $131,882 $67,329 $72,797
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unrealized Foreign
Additional Retained Gain On Currency
Common Stock Paid-In Treasury Stock Earnings Available For Translation
(in thousands) Shares Amount Capital Shares Amount (Deficit) Sale Securities Adjustment Totals
Balances at December 31, 1991 56,166 $140 $ 66,101 --- $--- $(12,802) $--- $ 740 $ 54,179
Stock split effected in the form
of a stock dividend 140 (140)
Exercise of stock options 3,574 18 5,012 5,030
Sale of stock to employees under
employee stock purchase plan 332 2 1,846 1,848
Tax benefits related to stock options 3,803 3,803
Foreign currency translation adjustment (2,403) (2,403)
Conversion of convertible debentures 2,764 14 22,399 22,413
Net income 47,782 47,782
Balances at December 31, 1992 62,836 $314 $ 99,021 --- $--- $ 34,980 $--- $(1,663) $132,652
Stock split effected in the form
of a stock dividend 314 (314) ---
Exercise of stock options 1,967 20 5,039 5,059
Sale of stock to employees under
employee stock purchase plan 66 1 984 985
Tax benefits related to stock options 20,500 20,500
Foreign currency translation adjustment (864) (864)
Acquisition of treasury stock (490) (9,999) (9,999)
Reissuance of treasury stock 357 7,568 (4,611) 2,957
Net income 56,115 56,115
Balances at December 31, 1993 64,869 $649 $125,230 (133) $(2,431) $86,484 $--- $(2,527) $207,405
Exercise of stock options 560 5 3,553 3,558
Sale of stock to employees under
employee stock purchase plan 45 1 1,052 1,053
Tax benefits related to stock options 10,062 10,062
Foreign currency translation adjustment 929 929
Acquisition of treasury stock (1,300) (22,139) (22,139)
Reissuance of treasury stock 1,433 24,570 (16,655) 7,915
Unrealized gain on available-for-sale
securities, net of tax 665 665
Net income 66,196 66,196
Balances at December 31, 1994 65,474 $655 $139,897 --- $--- $136,025 $665 $(1,598) $275,644
See Notes to Consolidated Financial Statements.
Note 1 - Summary of Significant Accounting Policies.
Operations. Informix Corporation, a Delaware corporation, through its wholly
owned subsidiary Informix Software, Inc. and its foreign subsidiaries
(collectively "the Company"), designs, develops, manufactures, markets, and
supports distributed relational database management systems (RDBMS), and
object-oriented, graphical-, and character-based application development
tools, and graphical data access tools for delivering information to most
significant desktop platforms. In addition to software products, the
Company offers training, consulting and maintenance to its customers.
Principles of Consolidation. The consolidated financial statements
include the accounts of Informix Corporation and its wholly owned
subsidiaries. All material intercompany accounts, transactions, and
profits have been eliminated in consolidation.
Foreign Currency Translation. For foreign operations with the local
currency as the functional currency, assets and liabilities are
translated at year-end exchange rates, and statements of income are
translated at the average exchange rates during the year. Exchange gains
or losses arising from translation of foreign currency denominated
assets and liabilities are included as a component of stockholders'
equity.
For foreign operations with the U.S. dollar as the functional currency,
assets and liabilities are translated at the year-end exchange rates.
Statements of income are translated at the average exchange rates during
the year. Gains and losses resulting from foreign currency translation
are included in other expense, net.
The Company hedges, where possible, certain portions of its foreign
exchange transaction exposures to foreign currency fluctuations
primarily through the use of forward foreign exchange contracts in
European and Asian foreign currencies. The Company has limited unhedged
transaction exposures in certain secondary currencies in Latin America
and Eastern Europe because there are limited forward currency exchange
markets in these currencies. Gains and losses associated with exchange
rate fluctuations on forward foreign exchange contracts are recorded
currently as income or loss as they offset corresponding gains and
losses on the foreign currency denominated assets and liabilities being
hedged. The costs of the forward foreign exchange contracts are
recorded as other expense, net. See Note 3 of Notes to Consolidated
Financial Statements.
Revenue Recognition. The Company generally recognizes license revenue
from sales of software licenses upon delivery of the software product to
a customer. However, for certain computer hardware manufacturers and
end-user licensees with amounts payable within twelve months, the
Company will recognize revenue at the time the customer makes a
contractual commitment for a minimum non-refundable license fee, if such
computer hardware manufacturers and end-user licensees meet certain
criteria established by the Company. License revenue from resellers
(such as distributors and application vendors) and from other computer
hardware manufacturers and end-users may be recognized at the earlier of
either payment of the license fee or the shipment of the software media
on a per-unit basis. However, in no case is revenue recognized unless a
master or first copy is delivered to the customer.
Maintenance contracts generally call for the Company to provide
technical support and software updates to customers. Maintenance
contract revenue is recognized ratably over the term of the maintenance
contract, generally on a straight-line basis. Where maintenance revenue
is not separately invoiced, it is unbundled from license fees and
deferred for revenue recognition purposes. Other service revenue,
primarily training and consulting, is generally recognized at the time]
the service is performed.
The Company's revenue recognition policy is in compliance with the
provisions of the American Institute of Certified Public Accountants'
Statement of Position 91-1, "Software Revenue Recognition."
No single customer accounted for 10 percent or more of consolidated
revenues in 1994, 1993, or 1992.
Income Taxes. The Company accounts for income taxes in accordance with
the provisions of the Financial Accounting Standards Board Statement No.
109 (FAS 109) "Accounting for Income Taxes." Under FAS 109, the
liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and income tax bases of
assets and liabilities, and are measured by applying enacted tax rates
and laws to the taxable years in which such differences are expected to
reverse.
Inventories. Inventories, which consist primarily of software product
components, finished software products, and marketing and promotional
materials, are carried at the lower of cost (first in, first out) or
market value, and are included in other current assets.
Software Costs. The Company capitalizes software development costs
incurred in developing a product once technological feasibility of the
product has been determined. Software costs also include amounts paid
for purchased software and outside development on products which have
reached technological feasibility. All software costs are amortized as a
cost of software distribution either on a straight-line basis over the
remaining estimated economic life of the product or on the basis of each
product's projected revenues, whichever is greater. The Company recorded
amortization of $7.8 million, $5.2 million, and $5.7 million of software
costs in 1994, 1993, and 1992, respectively, in cost of software
distribution.
Property and Equipment. Depreciation of property and equipment is
calculated using the straight-line method over the estimated useful
life, generally the shorter of the lease term or three to seven years
for financial reporting purposes, and by accelerated methods for tax
purposes.
Businesses acquired. The purchase price of businesses acquired is
allocated to the tangible and specifically identifiable intangible
assets acquired based on their fair values with any amount in excess of
such allocations being designated as goodwill. Intangible assets are
amortized over their estimated useful lives, which to date have been
five to seven years. The Company periodically monitors the
recoverability of such intangible assets.
Net Income Per Common Share. Net income per common share is based on the
weighted average number of common and dilutive common equivalent shares
outstanding during each year. All stock options and convertible
debentures are considered common stock equivalents and are included in
the weighted average computations when the effect is dilutive.
Concentration of Credit Risk. The Company designs, develops,
manufactures, markets, and supports computer software systems to
customers in diversified industries and in diversified geographic
locations. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral.
Cash, Cash Equivalents, Short-Term Investments and Long-Term
Investments. The Company considers liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The
Company considers investments with an original maturity of more than
three months but less than one year to be short-term investments.
Investments with an original maturity of more than one year are
considered long-term investments. Short-term and long-term investments
are carried at either amortized cost or fair value, depending on their
classification as held-to-maturity or available-for-sale, respectively.
Cash equivalents are carried at amortized cost.
The Company invests its excess cash in accordance with its short-term
and long-term investments policy which is approved by the Board of
Directors. The policy authorizes the investment of excess cash in
government securities, municipal bonds, time deposits, certificates of
deposit with approved financial institutions, commercial paper rated
A1/P-1 (a small portion of the portfolio may consist of commercial paper
rated A-2/P-2), and other specific money market instruments of similar
liquidity and credit quality. The Company has not experienced any
significant losses related to these investments.
Securities held-to-maturity and available-for-sale. Management
determines the appropriate classification of debt securities at the time
of purchase and re-evaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the
Company has the positive intent and the ability to hold the securities
until maturity. Held-to-maturity securities are stated at amortized
cost, adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization, as well as any interest on the
securities, is included in interest income.
Marketable equity securities and debt securities not classified as held-
to-maturity are classified as available-for-sale. Available-for sale
securities are carried at fair value, with the unrealized gains and
losses, net of tax, reported in a separate component of stockholders'
equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in interest income. Realized
gains and losses and declines in value judged to be other-than-temporary
on available-for-sale securities are included in other expense, net.
The cost of securities sold is based on the specific identification
method. Interest on securities classified as available-for-sale are
included in interest income.
Note 2 - Fair Values of Financial Instruments
Effective January 1, 1994, the Company adopted Financial Accounting
Standards Board Statement No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (FAS 115).
Due to insignificant differences at the date of adoption of FAS 115
between the cost and fair value of the Company's investments, when
considering both gross unrealized gains and gross unrealized losses, the
adoption of FAS 115 had no effect on the Company's financial statements.
Consequently, in accordance with FAS 115, prior period financial
statements have not been restated.
The fair values for marketable debt and equity securities are based
on quoted market prices.
The following is a summary of available-for-sale securities and
held-to-maturity securities:
Held-to-maturity securities
December 31, 1994
(Dollars in thousands) Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury Securities $ 4,863 4 $ 4,867
Municipal Bonds 31,020 2 119 30,903
Commercial Paper 39,602 4 39,606
$75,485 10 119 $75,376
Amounts included in cash and cash equivalents $38,604 3 $38,607
Amounts included in short-term investments 32,404 5 119 32,290
Amounts included in long-term investments 4,477 2 4,479
$75,485 10 119 $75,376
Available-for-sale securities
December 31, 1994
(Dollars in thousands) Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury Securities $ 356 $ 356
Commercial Paper 223 223
Municipal Bonds 6,079 62 6,017
Auctioned Preferred Stock 21,000 21,000
Total Debt Securities 27,658 62 27,596
U.S. Equity Securities 3,000 1,124 4,124
$30,658 1,124 62 $31,720
Amounts included in cash and cash equivalents $ 356 356
Amounts included in short-term investments 27,302 62 27,240
Amounts included in intangibles and other assets 3,000 1,124 4,124
$30,658 1,124 62 $31,720
Note 3 - Derivative Financial Instruments
Effective January 1, 1994, the Company adopted the provisions of
Financial Accounting Standards Board Statement No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments" (FAS 119).
The Company enters into forward foreign exchange contracts to hedge the
value of recorded foreign currency denominated transactions against
fluctuations in exchange rates. The purpose of the Company's foreign
exchange exposure management policy and practices is to attempt to
minimize the impact of exchange rate fluctuations on the value of the
foreign currency denominated assets and liabilities being hedged.
Substantially all forward foreign exchange contracts entered into by the
Company have maturities of 360 days or less. At December 31, 1994 and
1993, the Company had approximately $94.3 million and $29.3 million of
forward foreign exchange contracts outstanding, respectively. The table
below summarizes by currency the contractual amounts of the Company's
forward foreign exchange contracts at December 31, 1994 and December 31,
1993.
At December 31, 1994 Forward Contracts
(Dollars in thousands) at cost Unrealized Gain/(Loss)
Forward Currency Contracts Sold:
Deutsche Mark $23,000 $( 394)
French Franc 6,922 ( 104)
Japanese Yen 4,182 14
British Pound 3,696 ( 46)
Spanish Peseta 3,147 ( 68)
Italian Lira 2,999 ( 4)
Singapore Dollar 2,144 ( 13)
Other 6,176 ( 92)
52,266 ( 707)
Forward Currency Contracts Purchased:
Japanese Yen 42,009 ( 485)
Total $94,275 $(1,192)
At December 31, 1993 Forward Contracts
(Dollars in thousands) at cost Unrealized Gain/(Loss)
Forward Currency Contracts Sold:
Deutsche Mark $ 8,239 $177
Italian Lira 5,884 106
British Pound 4,255 36
Spanish Peseta 3,898 77
French Franc 3,635 36
Other 3,384 31
Total $29,295 $463
Other than the use of forward foreign exchange contracts as discussed
immediately above, the Company does not currently invest in or hold any
other financial instruments defined as derivative financial instruments
by FAS 119.
Note 4 - Employee Stock Option and Purchase Plans
Under the Company's 1986 Employee Stock Option Plan, options are granted
at fair market value on the date of the grant. Options are generally
exercisable in cumulative annual installments over three to five years.
Payment for shares purchased upon exercise of options may be by cash or,
with Board approval, by full recourse promissory note or by exchange of
shares of the Company's common stock at fair market value on the
exercise date. Options expire 10 years after the date of grant. At
December 31, 1994, 20,400,000 shares were authorized for issuance under
the Plan.
Additionally, 800,000 shares were authorized for issuance under the 1989
Outside Directors Stock Option Plan, whereby non-employee directors are
automatically granted non-qualified stock options upon election or re-
election to the Board of Directors.
Following is a summary of activity for both stock option plans for
the three years ended December 31, 1994:
Number Options
of Shares Price per Share
Outstanding at December 31, 1991 9,126,680 $ 0.25 to $ 3.82
Options granted 3,430,372 4.97 to 16.13
Options exercised (3,574,508) 0.42 to 3.82
Options canceled (657,170) 0.85 to 7.82
Outstanding at December 31, 1992 8,325,374 $ 0.25 to $16.13
Options granted 2,283,900 14.25 to 26.25
Options exercised (2,193,167) 0.34 to 14.63
Options canceled (702,820) 0.84 to 17.25
Outstanding at December 31, 1993 7,713,287 $ 0.25 to $26.25
Options granted 1,347,950 14.75 to 28.88
Options exercised (1,789,773) 0.78 to 25.50
Options canceled (470,375) 0.78 to 23.75
Outstanding at December 31, 1994 6,801,089 $ 0.25 to $28.88
Available for grant at December 31, 1994 656,711
In April 1994, the Company adopted the 1994 Stock Option and Award Plan.
Options can be granted to employees on terms substantially equivalent to
those described above. The 1994 Stock Option and Award Plan also allows
the Company to award performance shares of the Company's common stock to
be paid to recipients on the achievement of certain performance goals
set with respect to each recipient. At December 31, 1994, 4,000,000
shares were authorized for issuance, but no options have been granted to
date under this plan.
In connection with all stock option plans, 11,457,800 shares of common
stock were reserved for issuance as of December 31, 1994. At December
31, 1994 and 1993, options exercisable were 2,342,362 and 1,540,037,
respectively.
The Company also has a qualified Employee Stock Purchase Plan under
which 3,800,000 shares of common stock in the aggregate have been
authorized for issuance. Under the terms of the Plan, employees may
contribute via payroll deductions up to 10 percent of their base pay and
purchase up to 500 shares per quarter (with the limitation of purchases
of $25,000 annually in fair market value of the shares). Employees may
elect to withdraw from the Plan during any quarter and have their
contributions for the period returned to them. Also, employees may elect
to reduce the rate of contribution one time in each quarter. The price
at which employees may purchase shares is 85 percent of the lower of the
fair market value of the stock at the beginning or end of the quarter.
The Plan is qualified under Section 423 of the Internal Revenue Code of
1986, as amended. During 1994, 1993, and 1992 the Company issued 242,378
shares, 197,551 shares, and 332,966 shares, respectively, under this
Plan. In connection with the Employee Stock Purchase Plan, 807,229
shares were reserved for issuance as of December 31, 1994.
The Board of Directors has authorized the purchase of up to 4 million
shares of the Company's common stock in the open market to satisfy
requirements under Stock Option and Stock Purchase Plans. Such shares
are recorded using the cost method and are reissued using the first-in,
first-out (FIFO) method. During 1994 and 1993, approximately 1,300,000
shares and 490,000 shares with an aggregate cost of approximately $22.1
million and $10.0 million, respectively, had been repurchased on the
open market. All such shares have been reissued as of December 31,
1994.
Note 5 - 401(k) Plan
The Company has a 401(k) plan covering substantially all of its U.S.
employees. Under this plan, participating employees may defer up to 15
percent of their pre-tax earnings, subject to the Internal Revenue
Service annual contribution limit ($9,240 for 1994). In 1994, the
Company matched 50 percent of each employee's contribution up to a
maximum of $1,500. The Company's matching contributions to this 401(k)
plan for 1994, 1993, and 1992 were $1.4 million, $0.8 million, and $0.3
million, respectively.
Note 6 - Leases
The Company leases certain computer and office equipment under capital
leases having terms of three to five years. Amounts capitalized for such
leases are included on the consolidated balance sheets as follows:
December 31, December 31,
(in thousands) 1994 1993
Computer equipment (at cost) $7,701 $ 9,788
Office equipment 1,438 1,313
9,139 11,101
Less: accumulated amortization 8,450 8,702
$ 689 $ 2,399
Amortization with respect to leased equipment is included in
depreciation expense.
During 1994 and 1993, the Company financed approximately $381,000 and
$373,000, respectively, of equipment purchases under capital lease
arrangements.
The Company leases certain of its office facilities and equipment under
non-cancelable operating leases.
Future minimum payments, by year and in the aggregate, under the capital
and non-cancelable operating leases as of December 31, 1994, are as
follows:
Year Ending
December 31 Capital Non-Cancelable
(in thousands) Leases Operating Leases
1995 $423 $18,337
1996 265 16,156
1997 98 9,775
1998 6 5,021
1999 _ 2,921
Thereafter _ 3,634
Total payments 792 $55,844
Less: amount representing interest 58
Present value of minimum lease payments 734
Less current portion 391
$343
Total rent expense aggregated $17.1 million, $14.4 million, and
$13.8 million in 1994, 1993, and 1992, respectively.
In 1994, 1993, and 1992, the Company made interest payments on notes
payable to banks, convertible subordinated debentures, and other
obligations aggregating $0.4 million, $0.4 million and $2.4 million,
respectively.
The Company's Lenexa, Kansas office and warehouse facilities are leased
under an initial 10-year operating lease term (with two five-year
renewal options) from a partnership in which Informix Software, Inc. is
a 50 percent partner. Rental payments are approximately $1.4 million
annually through 1997, exclusive of maintenance costs for common areas.
This related commitment is included in the above schedule of non-
cancelable operating lease payments.
Note 7 - Geographic Information
Net revenues, operating income (loss), and identifiable assets for the
Company's U.S., European, and other foreign operations are summarized
below by year:
(in thousands) United States European Other Eliminations Total
1994:
Net revenues $303,611 $172,947 $35,854 $(43,715) $468,697
Operating income (loss) 78,620 39,013 (12,771) (2,301) 102,561
Identifiable assets 382,650 109,939 36,053 (84,232) 444,410
1993:
Net revenues $257,439 $137,404 $11,403 $(53,331) $352,915
Operating income (loss) 92,987 11,192 (10,657) (8,133) 85,389
Identifiable assets 287,538 74,004 13,355 (48,264) 326,633
1992:
Net revenues $217,934 $107,034 $12,276 $(53,650) $283,594
Operating income (loss) 74,553 3,592 (5,167) 917 73,895
Identifiable assets 226,361 49,406 13,032 (57,340) 231,459
Sales and transfers between geographic areas are accounted for at prices
which the Company believes are arm's length prices, which in general are
in accordance with the rules and regulations of the respective governing
tax authorities.
Export revenues consisting of sales from the Company's U.S. operating
subsidiary to non-affiliated customers were as follows:
1994 1993 1992
Asia/Pacific $32,820 $35,598 $25,489
Other 15,256 19,703 12,436
Total $48,076 $55,301 $37,925
Note 8 - Income Taxes
The provision for income taxes applicable to income before income taxes
consists of the following:
(in thousands) 1994 1993 1992
Currently Payable:
Federal $27,150 $14,949 $ 6,980
State 4,548 3,349 3,070
Foreign 6,160 6,102 3,245
37,858 24,400 13,295
Deferred:
Federal 2,855 5,704 (1,039)
State 675 2,098 _
Foreign (4,154) (638) 1,674
(624) 7,164 635
$37,234 $31,564 $13,930
In 1994 and 1993, the Company recognized tax benefits related to stock
option plans of $10.1 million and $20.5 million, respectively. Such
benefits were recorded as an increase to additional paid-in capital.
Income before income taxes consists of the following:
(in thousands) 1994 1993 1992
Domestic $ 92,661 $69,155 $54,329
Foreign 10,769 18,524 7,383
$103,430 $87,679 $61,712
The provision for income taxes differs from the amount computed by
applying the federal statutory income tax rate to income before income
taxes. The sources and tax effects of the differences are as follows:
1994 1993 1992
(in thousands) Amount Percent Amount Percent Amount Percent
Computed tax at federal statutory rate $36,200 35.0% $30,688 35.0% $20,982 34.0%
Losses which resulted in no current tax benefit 908 0.9 _ _ 1,116 1.8
Research and development credits (976) (1.0) (1,273) (1.4) (2,050) (3.3)
Effect of foreign income and related taxes _ _ _ _ (1,730) (2.8)
State income taxes, net of federal tax benefit 3,395 3.3 3,540 4.0 2,026 3.3
Benefit from net earnings of foreign
subsidiaries considered to be permanently
reinvested in non-U.S. operations (2,000) (1.9) (850) (1.0) _ _
Benefit of tax net operating loss _ _ _ _ (6,466) (10.5)
Other, net (293) (0.3) (541) (0.6) 52 0.1
$37,234 36.0% $31,564 36.0% $13,930 22.6%
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial statement purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
and liabilities as of December 31, 1994 and 1993 are as follows:
(in thousands) 1994 1993
Deferred Tax Assets:
Reserves and accrued expenses $ 5,645 $ 4,848
Deferred revenue 4,016 2,590
Foreign net operating loss carryforwards 2,823 1,378
Tax credit carryforwards _ 1,144
Foreign taxes on unremitted earnings, net of related U.S tax liability 257 _
Other 513 59
Total deferred tax assets 13,254 10,019
Valuation allowance for deferred tax assets (908) _
Net deferred tax assets 12,346 10,019
Deferred Tax Liabilities:
Capitalized software 9,038 6,124
Revenue recognition 1,612 818
Undistributed earnings of profitable foreign subsidiaries _ 1,608
Valuation of investment portfolio 371 _
Other _ 398
Total deferred tax liabilities 11,021 8,948
Net deferred tax assets $ 1,325 $ 1,071
Cumulative undistributed earnings of the Company's Irish subsidiary for
which no income taxes have been provided aggregated approximately $11.4
million at December 31, 1994. These earnings are considered to be
permanently reinvested in non-U.S. operations. Additional taxes of
approximately $2.9 million would have to be provided if these earnings
were repatriated to the U.S.
At December 31, 1994 the Company had approximately $8.0 million of
foreign net operating loss carryforwards which expire at various dates
beginning in 1999. Income taxes paid amounted to $22.5 million, $7.8
million and $3.1 million in 1994, 1993 and 1992, respectively.
The deferred tax asset valuation allowance increased by $0.9 million in
1994 and decreased $9.9 million and $5.0 million in 1993 and 1992,
respectively. Approximately $8.9 million of the 1993 valuation allowance
decrease of $9.9 million was related to tax carryforwards attributable
to stock option deductions which was credited to paid-in capital.
Note 9 - Litigation
On May 10, 1993, the Company settled the securities class action lawsuit
filed against the Company and certain of its officers and directors in
1988. The Company provided a charge of $10.5 million in the fourth
quarter of 1992 for such settlement and related costs.
The settlement does not constitute an admission of liability or
wrongdoing on the part of the Company or on the part of any of its
current or former officers and directors. The settlement does represent
a decision by the Company's Board of Directors that a settlement at the
time was in the best interest of the Company and its stockholders.
In the ordinary course of business, various lawsuits and claims are
filed against the Company. It is the Company's opinion that the
resolution of such litigation will not have a material effect on the
Company's financial position, results of operations, or cash flows.
Note 10 - Business Combinations
In July 1994, the Company acquired the business of a division of a
distributor of its products in Germany. This acquisition has been
recorded as a purchase. The purchase cost of this business was
approximately $10.6 million, of which $4.8 million was allocated to
intangible assets acquired.
In August 1994, the Company acquired the business of a distributor of
its products in Malaysia. This acquisition has also been recorded as a
purchase. The purchase cost of this business was approximately $1.9
million, of which $1.8 million was allocated to intangible assets
acquired. An additional $1.0 million consideration may be payable by
the Company contingent upon the achievement of certain financial
objectives by the business.
The operating results of these businesses have not been material in
relation to those of the Company and are included in the Company's
consolidated results of operations from the date of acquisition.
Note 11 - Selected Quarterly Financial Data (Unaudited)
First Second Third Fourth
(in thousands, except per share data) Quarter Quarter Quarter Quarter
1994:
Net revenues $96,100 $105,686 $116,843 $150,068
Gross profit 81,375 89,349 98,046 129,272
Net income 12,520 13,250 16,590 23,836
Net income per share 0.19 0.20 0.25 0.35
1993:
Net revenues $77,094 $ 84,333 $ 90,074 $101,414
Gross profit 64,228 71,704 76,711 87,251
Net income 11,510 12,031 14,520 18,054
Net income per share 0.17 0.18 0.21 0.27
Note 12 - Subsequent Events
In January 1995, the Company acquired a 90 percent interest in the
database division of ASCII Corporation, a distributor of its products in
Japan, and will acquire the remaining 10 percent in January 1996. This
acquisition will be recorded as a purchase. The purchase cost of this
business is approximately $46.0 million, of which $34.8 million is
allocated to intangible assets acquired.
In February 1995, the Company entered into an agreement to acquire in
April 1995 an 80 percent interest of the database division of Daou
Corporation, a distributor of its products in Korea. The Company will
acquire the remaining 20 percent by January 1997. The purchase price
of this business is approximately $4.3 million.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER DEDUCTIONS END OF
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES ACCOUNTS DESCRIBE PERIOD
YEAR ENDED DECEMBER 31, 1994 $3,181 $1,924 $1,900(1) $ 969(2) $6,036
YEAR ENDED DECEMBER 31, 1993 $3,021 $1,578 $ 0 $1,418(2) $3,181
YEAR ENDED DECEMBER 31, 1992 $2,704 $2,017 $ 0 $1,700(2) $3,021
(1) CHARGED TO NET REVENUES
(2) UNCOLLECTIBLE ACCOUNTS WRITTEN OFF, NET OF RECOVERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors - Informix Corporation
We have audited the accompanying consolidated balance sheets of Informix
Corporation as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedules listed in the
Index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Informix Corporation at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to
the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/S/ ERNST & YOUNG LLP
San Jose, California
February 6, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is incorporated herein by reference from
the section entitled "Election of Directors" of the Company's proxy
statement to be filed pursuant to Regulation 14A for its Annual
Stockholders Meeting to be held on May 18, 1995. For information
regarding executive officers of the Company, see the information
appearing under the caption "Executive Officers" in Part I, Item 1 of
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by
reference from the section entitled "Executive Compensation" of the
Company's proxy statement to be filed pursuant to Regulation 14A for its
Annual Stockholders Meeting to be held on May 18, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information regarding security ownership is incorporated herein by
reference from the section entitled "Stock Ownership of Certain
Beneficial Owners and Management" of the Company's proxy statement to be
filed pursuant to Regulation 14A for its Annual Stockholders Meeting to
be held on May 18, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference from the sections entitled "Stock
Ownership of Certain Beneficial Owners and Management", "Executive
Compensation" and "Transactions with Management" of the Company's proxy
statement to be filed pursuant to Regulation 14A for its Annual
Stockholders Meeting to be held on May 18, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a)1. Financial Statements
The following financial statements are filed as a part of this Annual
Report:
Financial Statements Covered by Report of Independent Auditors:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Financial Statements:
Balance Sheets at December 31, 1994 and 1993
Statements of Income for each of the
three years in the period ended December 31, 1994
Statements of Stockholders' Equity for each of the three
years in the period ended December 31, 1994
Statements of Cash Flows for each of the
three years in the period ended December 31, 1994
Notes to Consolidated Financial Statements (except Note 11)
Supplementary Financial Data Not Covered By Report of Independent
Auditors:
Note 11 of Notes to Consolidated Financial Statements
(a)2. Financial Statements Schedules
The following financial statement schedules are filed as a part of this
Annual Report:
Financial Statement Schedules Covered By Report of Independent Auditors:
Schedules as of and for the three years in the period ended December 31,
1994, as applicable:
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
omitted because they are not required under the related instructions or
are inapplicable.
(a)3. Exhibits
3.1 (1) Restated Certificate of Incorporation, as amended.
3.2 (1) By-Laws, as amended.
4.1 (2) Amended and Restated Preferred Share Rights Agreement.
10.1 (3) Form of Indemnity Agreement.
10.2 (4) Form of Amended Indemnity Agreement.
10.3 (5) 1989 Directors Stock Option Plan.
10.4 (6) Amendment to the 1989 Directors Stock Option Plan
10.5 (7) Subcontract Agreement dated January 22, 1992 between the
Company and The Boeing Company.
11 Statement re Computation of Per Share Earnings.
18 (8) Letter dated March 8, 1991 from Ernst & Young regarding the
Company's change to its revenue recognition policy
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Power of Attorney (set forth on signature page).
27 Financial Data Schedules.
_______________
(1) Incorporated by reference to exhibits to the Form 10-K of
Informix Corporation for the fiscal year ended December 31,
1993.
(2) Incorporated by reference to exhibits to the Form 8-A
Registration Statement filed on September 19, 1991.
(3) Incorporated by reference to exhibits to the Form S-1
Registration Statement No. 33-8006.
(4) Incorporated by reference to exhibits to the Form 10-K of
Informix Corporation for the fiscal year ended December 31,
1988.
(5) Incorporated by reference to exhibits to the Form S-8
Registration Statement No. 33-31116.
(6) Incorporated by reference to exhibits to the Form S-8
Registration Statement No. 33-50608.
(7) Incorporated by reference to exhibits to the Form 10-K of
Informix Corporation for the Fiscal year ended December 31,
1991.
(8) Incorporated by reference to exhibits to the Form 10-K of
Informix Corporation for the Fiscal year ended December 31,
1990.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the fourth quarter of
the fiscal year ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Informix Corporation, has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 20, 1995.
INFORMIX CORPORATION
By: /S/ PHILLIP E. WHITE
Phillip E. White, Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David H. Stanley, Howard H.
Graham and Richard C. Blass, jointly and severally, his or her
attorneys-in-fact, each with the power of substitution, for him or her
in any and all capacities, to sign any amendments to this Report on Form
10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact,
or his or her substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Phillip E. White Chairman, President, March 20, 1995
(Phillip E. White) Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Howard H. Graham Sr. Vice President, Finance and March 20, 1995
(Howard H. Graham) Chief Financial Officer
(Principal Financial Officer)
/s/ Albert F. Knorp, Jr. Director March 20, 1995
(Albert F. Knorp, Jr.)
/s/ James L. Koch Director March 20, 1995
(James L. Koch)
/s/ Thomas A. McDonnell Director March 20, 1995
(Thomas A. McDonnell)
/s/ Cyril J. Yansouni Director March 20, 1995
(Cyril J. Yansouni)
/s/ Richard C. Blass Vice President, Corporate March 20, 1995
(Richard C. Blass) Controller
(Principal Accounting Officer)