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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2000
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
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INFORMIX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-3011736
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 WASHINGTON STREET, WESTBOROUGH, MA 01581
(Address of principal executive office)
508-366-3888
(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, $0.01
PAR VALUE
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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/A. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 2001 based on the closing sales price of the
Company's Common Stock, as reported on The Nasdaq Stock Market, was
approximately $2,094,982,536. 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 January 31, 2001, Registrant had 280,490,365 shares of Common Stock
issued and outstanding.
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INFORMIX CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
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PART I........................................................................ 1
ITEM 1. BUSINESS.................................................... 1
ITEM 2. PROPERTIES.................................................. 13
ITEM 3. LEGAL PROCEEDINGS........................................... 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 14
PART II....................................................................... 15
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... 15
ITEM 6. SELECTED FINANCIAL DATA..................................... 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK...................................................... 36
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................. 36
PART III...................................................................... 37
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 37
ITEM 11. EXECUTIVE COMPENSATION...................................... 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 37
PART IV....................................................................... 38
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K....................................................... 38
SIGNATURES.................................................................... 44
PART I
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WHICH ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS, INCLUDING THOSE SET FORTH UNDER
"FACTORS THAT MAY AFFECT FUTURE RESULTS" UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN, OR
INCORPORATED BY REFERENCE INTO, THIS REPORT.
ITEM 1. BUSINESS
Informix Corporation, a global provider of information management software,
is made up of two operating businesses, Informix Software and Ascential
Software. Beginning in the third quarter of 2000, we undertook a strategic
realignment of our operations, including:
- The consolidation of five former business units into the two operating
businesses;
- The relocation of our corporate headquarters from Menlo Park, California
to Westborough, Massachusetts; and
- A reduction in operating expenses by certain cost containment measures,
including headcount reductions around the world.
The transition from the five former business units into the two operating
businesses was undertaken during the second half of 2000. By December 31, 2000,
we defined and allocated personnel among the management, selling, marketing,
research & development and service organizations for the two operating
businesses. Informix Software has retained the core of the Informix Corporation
infrastructure functions, such as the operations, finance and administrative
groups. These infrastructure groups will continue to provide services to both
operating businesses during 2001, as Ascential Software continues to build its
own infrastructure. We have not achieved sufficient separation of the employees
and infrastructure to properly measure the results of the operations separately
for the two operating businesses. Accordingly, although we can define and
separate the revenues of the two operating businesses on a historical basis, we
have not presented separate historical expense information for the two
businesses. We currently report the results of our business operations based on
four distinct geographic operating segments. See Note 9 to the Consolidated
Financial Statements. We intend to report the results of our operations based on
the two operating businesses on a prospective basis.
Throughout this report, the terms "the Company" and "Informix" refer to
Informix Corporation. "Informix Software" refers to Informix Software, Inc. and
"Ascential" refers to Ascential Software, Inc., each a wholly-owned subsidiary
of Informix Corporation.
INFORMIX SOFTWARE, THE DATABASE COMPANY
GENERAL
Informix Software, the database company, is a technology leader and a global
provider of database software systems for business information management.
Informix Software designs, develops, manufactures, markets and supports a range
of database management systems and application development tools for building
applications that allow customers to access, retrieve, and manipulate business
data.
Informix Software offers complete database solutions by developing strategic
partnerships with application, hardware, and systems integration providers.
INFORMIX SOFTWARE--PRODUCTS
Informix Software products run on a wide range of hardware and operating
systems, including Hewlett-Packard (HP/UX), SUN (Solaris), IBM (AIX), Linux, and
many others.
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Informix Software's product line includes the following:
INFORMIX INTERNET FOUNDATION is a complete data management platform for the
Internet, which provides the tools and features to publish business-critical
data to the Internet and enable sophisticated Internet applications and
electronic commerce. Informix Internet Foundation is a bundle of the following
products:
- INFORMIX DYNAMIC SERVER ("IDS") is the database server for Informix
Internet Foundation, and is the latest generation of our flagship database
server. Informix Dynamic Server delivers an industry-proven transaction
engine for mission-critical applications, while providing an upgrade path
to the Internet. Capable of supporting thousands of concurrent users,
Informix Dynamic Server delivers extensibility, reliability, availability,
and scalability to power the largest transaction processing systems.
- INFORMIX J/FOUNDATION integrates Java, the programming language of the
Internet, into the database, providing an open, flexible, embedded Java
Virtual Machine ("JVM") environment that enables scalable Java
applications to be executed directly in the server.
- INFORMIX WEB DATABLADE MODULE extends the functionality of both IDS and
Informix Internet Foundation with features that ease the development,
management, and deployment of database applications for the Web.
- INFORMIX EXCALIBUR TEXT DATABLADE MODULE provides full text searching of
documents and text fields directly inside the database engine in virtually
any format that contains ASCII and ISO characters. Fuzzy search
capabilities allow users to find results, regardless of errors in data
entry that would otherwise cause them to be overlooked in standard text
searches. This DataBlade module supports any language, word, or phrase
that can be expressed in an 8-bit, single-byte character set. Formatted
documents such as PDF, Microsoft Word, and HTML can be filtered prior to
indexing.
- INFORMIX OFFICE CONNECT simplifies the task of retrieving data and
visualizing it in Microsoft Excel worksheets, regardless of data type.
Office Connect's architecture provides power and ease of use. This design
utilizes database schema images (model views of the database structure) to
generate optimized SQL commands that populate Excel worksheets and manage
all interactions between the client and the database server.
- INFORMIX DATABLADE DEVELOPERS KIT allows customers to create DataBlade
modules when a DataBlade module does not currently exist to fit the
customer's particular need. This allows the database server to accommodate
new business requirements as they evolve.
- INFORMIX CONNECT ("I-CONNECT") is a runtime connectivity product that
includes the runtime libraries of our application programming interfaces
that comprise Informix Client SDK. These libraries are required by
applications running on client machines to access Informix servers.
I-Connect is needed when finished applications are ready to be deployed.
- INFORMIX SERVER ADMINISTRATOR is a collection of Web browser-based and
cross-platform administrative tools, that provides access to every
Informix database command line function and presents the output in an
easy-to-read format.
INFORMIX DYNAMIC SERVER can also be purchased as a stand-alone product. It
is Informix Software's multithreaded enterprise database server designed for
scalability, manageability, and performance. IDS offers full relational database
management system ("RDBMS") and object-relational database management system
("ORDBMS") functionality. As an open system built to support industry standards,
IDS uses a single architecture for the Windows NT, UNIX, and Linux operating
systems. Informix Software also provides a workgroup version of IDS for
workgroup environments. Based on Informix Software's Dynamic Scalable
Architecture, IDS features parallel data processing capability, replication, and
connectivity options built into its core. IDS supports extensibility, as well as
SQL3 and DataBlade modules. Extensibility includes the ability to add new
objects and data types, such as image, audio, video, and spatial data;
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business-specific procedures and logic; and new indexing search methods to the
server. DataBlade modules encapsulate specific data types and logic for
integration with IDS so that organizations can extend the functionality of the
database to support data types unique to an organization.
DATABLADES. Informix DataBlade modules extend IDS to manage rich, diverse
data. DataBlade modules integrate traditional alphanumeric data types with rich
content, without sacrificing the reliability and scalability of the traditional
RDBMS. We offer DataBlade modules for text, image, video, geodetic, spatial,
time series, and financial data. Additional DataBlade modules are available from
third parties, including DataBlade modules for local languages, advanced search
and retrieval capabilities, digital media, spatial and geodetic applications,
messaging, data warehousing (data cleansing, qualification, and queries), and
security.
RED BRICK DECISION SERVER. Unlike traditional on-line transaction processing
("OLTP") databases, Informix Red Brick Decision Server is a specialized database
technology designed to meet the requirements of data marts and data warehouses
without the complexity and overhead that OLTP technology imposes. Red Brick is a
high performance data warehouse solution that offers sophisticated data querying
and analysis to support demanding business intelligence and decision-making
activities. Renowned for its groundbreaking schema for organizing and managing
data, Red Brick is designed for organizations in need of a fast, easy-to-manage
data warehousing solution with the proven technology to scale to meet their
rapid growth.
EXTENDED PARALLEL SERVER ("XPS") is designed for the largest, most
demanding, and most complex data warehouse applications, and uses a
sophisticated and highly scalable "shared--nothing" architecture. This allows
the XPS product to achieve near-linear scalability, robust business intelligence
capabilities, and support of true transaction processing. Like Red Brick, XPS
offers a world-class data warehousing solution, but also includes the flexible
interactivity of OLTP functionality. XPS is based on "shared-nothing"
architecture, which was pioneered by Informix Software as an efficient and
reliable method for managing and analyzing enormous volumes of data.
METACUBE is Informix Software's on-line analytical processing ("OLAP")
product. MetaCube is a fully extensible business intelligence solution,
optimized for smarter data access, analysis, and reporting. MetaCube delivers a
flexible, and customizable decision-support environment for data warehouses and
data marts.
INFORMIX DATA DIRECTOR FOR WEB is a robust and visually intuitive
development environment that enables developers to quickly prototype, build, and
deploy dynamic Web applications.
INFORMIX 4GL product family includes Informix 4GL Rapid Development System,
Informix 4GL Interactive Debugger, and Informix 4GL Compiler. Together they form
a comprehensive fourth-generation application development and production
environment that provides power and flexibility without the need for
third-generation languages like C or COBOL.
INFORMIX DYNAMIC 4GL is the latest addition to the Informix 4GL product
family and enables transformation of character-based 4GL programs into Windows
and Motif Graphical User Interface database applications, with a simple
recompile. Informix Dynamic 4GL offers customers a choice of deployment options
from character, Windows 3.11, Windows 95, Windows NT, and X11 Window System
(UNIX and Macintosh) clients, to NT and UNIX servers. Informix Dynamic 4GL's
"thin client" three-tier architecture, combined with flexible deployment
options, allows customers to deploy new, Graphical User Interface applications
within existing desktop and network infrastructures.
CLOUDSCAPE. The Cloudscape product family provides a 100% Pure Java SQL
DBMS, as well as synchronization capabilities to address the demands of
e-business. Our Cloudscape product family allows companies to create
synchronized applications that can be deployed outside the firewall to partners,
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customers, and mobile workers. The Cloudscape product family is designed to
support three fundamental needs:
- The creation of sophisticated, cost-effective e-business applications,
typically e-catalogs and deployed portals.
- The local data management needs of Java applications, particularly those
meant for resale, where platform independence is a critical requirement.
- The database-enabling of Java-supported devices of all kinds, including
telecommunication switches, non-traditional computing devices, and future
light-weight devices.
INFORMIX U2 DATABASES AND TOOLS. Informix's UniData and UniVerse (which
together are referred to as "U2") databases offer high-performance, scalable
data management environments for embedding in vertical applications. Their
extended-relational design supports nested tables and allows for rapid business
data modeling, eliminating redundant data, excessive resource usage, and
unnecessary Input/Output through time-consuming joins. U2 Tools provide native
facilities that fully leverage the power of the relational model supported by
UniData and UniVerse. U2 Tools, which range from application renovation to 4GL
development to next-generation e-commerce tools, can also be deployed in legacy
multi-valued environments.
- WINTEGRATE is an application renovation and desktop integration tool that
provides a modern look and feel to existing applications and also provides
terminal emulation.
- SYSTEM BUILDER ("SB+") AND SBCLIENT, the U2 development tools, provide for
rapid development of applications that can be run in either a
server-centric, character-based mode or a fully graphical client/server
mode.
- REDBACK, an object-oriented business rules server, provides the
infrastructure and technology to enable e-commerce applications based on
open interfaces to access relational data and embedded business logic.
INTEGRATION PRODUCTS. Where companies once stored their data on mainframes,
today their applications may be spread across divergent computing platforms,
operating systems, and databases, including proprietary and open, relational and
non-relational. These disparate applications present a major challenge for IS
departments, which need to ensure that end-users have easy access to the data
they need--regardless of where the data is located. To address this challenge,
Informix Software offers a variety of connectivity and gateway products that
make enterprise-wide data access a reality.
CONNECTIVITY PRODUCTS.
- INFORMIX CLIENT SDK offers customers a single package of application
programming interfaces ("APIs") needed to develop applications for
Informix servers. These interfaces allow developers to write applications
in the language they are familiar with, whether it be Java, C++, C, or
SQL.
- INFORMIX MAXCONNECT is Informix's new connection server, which can be used
in Informix server environments for improved performance and user
scalability. It increases system scalability by increasing the number of
users that can be simultaneously connected to the Informix database
server. The product saves on system resources required on the Informix
Server for communications processes, thereby reducing response times and
database server CPU consumption.
GATEWAY PRODUCTS.
- THE INFORMIX ENTERPRISE GATEWAY FAMILY is a complete set of
standards-based gateways allowing access to non-Informix Databases from
the Informix server.
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INFORMIX SOFTWARE--SERVICES
Services revenues are derived from fees collected for technical support,
consulting and education. Informix Software maintains a network of call centers
and local offices responsible for delivering a comprehensive range of technical
support services to our partners and customers. Technical support revenues are
derived primarily from fees for maintenance (which includes providing product
updates) and post-sales support. Consulting services include custom engagements
and pre-packaged programs designed to assist customers with the planning,
design, installation, integration, and implementation of Informix products and
Informix-based technology solutions. Education services provide a full suite of
classroom, computer-based certification, and custom education offerings that
enable our partners and customers to use Informix products and related
technologies effectively.
INFORMIX SOFTWARE--PRODUCT DEVELOPMENT
Major product releases resulting from research and development projects in
2000 included Informix Internet Foundation 9.21; IDS 9.21; XPS 8.31;
Cloudscape 3.5; UniData 5.2; and UniVerse 9.6.
Informix Software's product strategy for the future is to provide customers
the best infrastructure for data management within a single integrated
framework. This strategy, which was announced at the end of 2000, is code-named
"Arrowhead" because Informix is integrating the best of its database technology
into a single data management framework--putting "all of its wood behind one
arrow." The resulting product is intended to meet the market demand for the
infinitely scalable database required for development of next generation
integrated applications.
The Arrowhead data management system provides several key components that
address customer needs:
- SINGLE FRAMEWORK--an integrated framework that meets all the data
management objectives of a customer with scalability, speed and
multi-functionality.
- INTEGRATED SERVER & WAREHOUSE--an integrated application server and data
repository that customers can deploy over multi-tier configurations.
- RELIABILITY AND SPEED--a framework that allows customers to develop
information systems that are fail-safe and scale to meet end user response
needs.
- REDUCED DEMAND FOR IT MANAGEMENT--a tool suite that minimizes the cost of
managing the DBMS infrastructure and decreases the time it takes to solve
a business problem.
- INTEROPERABILITY--a deployment environment that offers easy integration
with other data repositories and applications through gateways, ETL
functions, and the support of interoperability standards such as CRBA,
XML, IIOP, SOAP and COM.
While Arrowhead represents a future option for Informix Software's
customers, it will not supplant our separate existing product offerings.
INFORMIX SOFTWARE--SALES AND MARKETING
Informix Software products are used in many industries, including retail,
telecommunications, financial services, healthcare, pharmaceutical/biochemistry,
manufacturing, and media and publishing.
Informix Software markets its products to end-users on a worldwide basis
directly through its sales force and distributes its products indirectly through
the channels of original equipment manufacturers ("OEMs"), value-added
application vendors and independent software vendors ("ISVs"). Informix Software
has chosen a multiple channel distribution strategy to maintain broad market
coverage and product availability. It 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
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channel with a minimum of channel conflict. For 2000, sales of licenses directly
to end users accounted for 64% of Informix Software's total license revenues and
sales through indirect channels accounted for 36% of total license revenues.
The principal geographic markets for Informix Software's products are North
America, Europe, the Asia/Pacific region, and Latin America. In recent years,
approximately half of our total revenues have been generated outside North
America. Informix Software's customers include businesses ranging from small
corporations to Fortune 1000 companies. Informix Software also markets its
products to state, local and national governments.
INFORMIX SOFTWARE--LICENSING
END-USER LICENSING
Informix Software licenses products to organizations worldwide through our
direct sales force and our telemarketing groups. Informix Software believes that
the common core technology of its database management system products, based on
standard operating systems and the SQL database language, helps it to sell its
products to 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 which offer volume
discounts.
APPLICATION VENDOR AND OEM LICENSING
Since its inception, Informix Software has licensed application vendors to
distribute our products. A typical application vendor develops an application
(e.g., an insurance agency management system) using one of its products. The
application vendor purchases a license for the use of the Informix Software
product to develop the application program. Depending on the application
developed, the vendor may purchase a run-only license, a full version license or
multiple product licenses. In addition, the application vendor may resell
products to end-users for use in conjunction with its own applications.
Application vendors develop applications using a wide array of application
development tools, including products offered by third parties. Applications
developed using our products are generally portable across various brands of
computers and different operating systems.
Informix Software has specialized programs to support the application vendor
distribution channel. Under these programs, it provides to selected application
vendors a combination of marketing development services, consulting and
technical marketing support, and discounts.
Other technology companies also distribute products under OEM licenses as an
embedded part of their products.
DISTRIBUTOR LICENSING
Informix Software has established a network of full service international
distributors who provide local service and support, as well as products, to
their respective national markets. Informix Software uses distributors to
supplement its direct sales force, which enables it to increase our worldwide
market coverage.
INFORMIX SOFTWARE--COMPETITION
The RDBMS software market is extremely competitive and subject to rapid
technological change and frequent new product introductions and enhancements.
Informix Software's competitors in the market include several large vendors that
develop and market databases, applications, development tools or decision
support products including: Computer Associates International, Inc.; IBM;
Microsoft; NCR/ Teradata; Oracle; and Sybase.
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ASCENTIAL SOFTWARE
GENERAL
Ascential Software, Inc. ("Ascential") is a leading supplier of information
asset management software and solutions to enterprises and government
organizations worldwide. Ascential designs, develops, markets and supports
software that allows large organizations to manage complex and varied enterprise
information, focusing on the collection, validation, organization,
administration and delivery of customers' information assets for maximum
business value.
Ascential's information infrastructure solutions integrate and manage a wide
range of data and content sources, including data from mainframe legacy systems,
relational database management systems, enterprise resource planning systems and
applications, web-generated transactions and clickstreams, eXtensible Markup
Language ("XML") data, graphical images, video, audio and maps.
Ascential's solutions support an information infrastructure enabling
customers to identify unrefined data and content through a set of value creating
processes that transform them into managed information assets used and re-used
by employees, partners/suppliers, and customers. The solutions offered by
Ascential provide a singular view of an enterprise's information assets for the
purpose of acting on--and re-purposing them to achieve a greater competitive
position in the market. Its products support:
- PROCESS FLOW SUPPORTING SOLUTIONS FOR STRUCTURED AND UNSTRUCTURED
DATA/CONTENT
Software that supports the collection, organization, and delivery of
business data and media content including components for extraction,
transformation and loading ("ETL"), meta data management, data quality
assurance, digitization, archiving, retrieving and sharing of varied media
content (media asset management), business information directories, and
portal delivery.
- INDIVIDUAL ANALYTIC COMPONENTS
Software components that enhance the above solutions by providing the
structured data to information conversion process, including enterprise
data models and graphical data analysis.
Ascential solves customer's business problems by delivering suites of
products, components and services, and by leveraging strategic partnerships with
systems integrators, hardware vendors, solution and application vendors, and
complementary technology vendors.
Ascential's solutions are used in many industries, including retail,
telecommunications, financial services, healthcare, pharmaceuticals,
manufacturing, transportation, broadcast media, publishing and government
agencies.
PRODUCTS
As described above, Ascential's products and solutions can be divided into
two main categories:
- Process Flow Supporting Solutions for Structured and Unstructured
Data/Content
- Analytic Components.
In addition, Ascential provides a wide range of services, including product
maintenance, consulting, education and customer support.
PROCESS FLOW SUPPORTING SOLUTIONS FOR STRUCTURED AND UNSTRUCTURED
DATA/CONTENT
- DATASTAGE XE. The DataStage XE data integration product family is a
comprehensive set of software components that perform the vital functions
necessary to extract, transform and load data from a wide variety of
source systems to data warehouses, data marts and analytic applications.
DataStage XE also includes meta data management and data quality assurance
capabilities. DataStage XE
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provides support for native integration with mainframe legacy systems, XML
documents, and the leading packaged applications such as SAP. The
DataStage XE Series was introduced to the Ascential product line through
the 1999 acquisition of Ardent Software by Informix Corporation.
- AXIELLE is Ascential's enterprise information portal infrastructure
product, introduced in 2000. Axielle organizes and delivers relevant
business information to users across an enterprise. Axielle categorizes
information and tailors it to reflect a company's business model and
corporate terminology, and personalizes and distributes a wide variety of
data and content sources, including applications, business intelligence
reports, text documents, graphs, maps and other images. Axielle's Java and
XML foundation enable it to deliver information and content in a
device-independent manner supporting both standard as well as wireless
environments.
- MEDIA360 is a complete solution for collecting, organizing and delivering
all types of media assets, specifically for businesses highly reliant on
media content. Media360 loads, digitizes, indexes, archives and retrieves
a wide range of media assets, including video, audio, images, maps, 3-D
images, blueprints, diagrams, digital special effects, and web pages.
- I.REACH is a comprehensive solution that assists teams of content owners
to create, edit, publish, and update corporate information to the
Internet, intranets and extranets, transforming static Web sites into
useful, current, and interactive work environments.
ANALYTIC COMPONENTS
- I.DECIDE WEB SUCCESS, introduced in 2000, is an integrated,
component-based solution which addresses specific, customer-centric
business problems related to the identity, preferences and buying behavior
of website visitors and customers. The solution comprises a foundation of
information infrastructure, analytic models and a graphical, intuitive
user interface: the VISIONARY executive dashboard component.
- INDUSTRY ANALYTIC PACKAGES ("IAP") comprise infrastructure component
building blocks, including DataStage, Visionary, vertical
industry-specific data and complementary services, which in total allow
organizations to quickly implement and customize data warehouses, data
marts and analytic applications. The first of the IAPs, TELCO SUCCESS, was
introduced in 2000. The Telco Success package is designed to help
telecommunications companies understand customer segmentation, retention,
churn rate and profitability.
- VISIONARY is a no-code, enabling technology that offers customers powerful
visual information and exploration capabilities. Users are able to explore
ever-increasing levels of information detail leveraging Visionary's unique
"drill-down" technology. The full product suite includes Visionary Studio,
a no-code authoring environment, and a runtime viewer that can be embedded
as an ActiveX control, providing seamless integration with other
best-of-breed business intelligence and development tools.
E-COMMERCE
In February 2001, Ascential Software discontinued the e-commerce solution
i.Sell, as a result of deciding to focus our core competencies on delivering
leading-edge software infrastructure and solutions for information asset
management. i.Sell was an electronic storefront solution that integrates
Informix Software's database technology with application server technology and
application software to provide a complete, rapidly deployable electronic
commerce solution. We licensed the underlying technology for the i.Sell solution
from Art Technology Group, Inc. ("ATG") and we have now entered into an
agreement with ATG pursuant to which our i.Sell customers and partners will
migrate to ATG's latest product suite. ATG will then assume support and
maintenance obligations for those customers and partners.
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To assist these customers and partners, Ascential and ATG have developed
consulting services and software tools to allow the migration without
significant impact upon functionality or performance. The customers and partners
will have access to the latest version of ATG's complete product suite. In
addition to using ATG's transaction, personalization and merchandizing services,
the customers and partners will also have access to ATG's core web analytic
services.
ASCENTIAL SOFTWARE--SERVICES
Ascential maintains field-based and centralized corporate technical staffs
to provide a comprehensive range of assistance to its customers. These services
include post-sales technical assistance, consulting, product education and
technical support services. Consultants and educators provide services to
customers to assist them in the use of Ascential products and the design and
development of applications that utilize Ascential products.
ASCENTIAL SOFTWARE--MARKETING AND CUSTOMERS
Ascential distributes its products through four main channels: direct
end-user licensing, embedded resellers, value-added resellers, and solutions
vendors addressing specific markets. Ascential has chosen a multiple channel
distribution strategy to maintain broad market coverage and competitiveness.
Discount policies and reseller licensing programs are intended to support each
distribution channel with a minimum of channel conflict. For 2000, sales of
licenses directly to end users accounted for 80% of Ascential's total license
revenues and sales through embedded resellers, value-added resellers and
solutions vendors accounted for 20% of total license revenues.
ASCENTIAL SOFTWARE--LICENSING
Ascential licenses its products to organizations worldwide through our
direct sales force, telesales, distributors, embedded and value-added resellers,
and system integrators.
END-USER LICENSING
Ascential licenses its products to organizations worldwide through a direct
sales force and telesales group. Ascential's infrastructure solutions are sold
to Global 2000 and government organizations looking to convert their volumes of
unrefined data and content into reliable and reusable information assets. A
majority of these organizations enter into standard agreements with us and are
subject to industry-standard discount structures. Certain organizations have
begun to standardize their information asset management solutions
enterprise-wide and are entering into more global agreements with us which can
result in discounts for those organizations.
EMBEDDED RESELLER, VALUE-ADDED RESELLER AND SOLUTION VENDOR LICENSING
Ascential licenses application vendors to distribute its products. A typical
application vendor develops an application (e.g., a risk management analytic
application) using one of our products. The application vendor purchases a
license for the use of our product to develop the application program. Depending
on the application developed, the vendor may purchase a run-only license, a full
version license or multiple product licenses. In addition, the application
vendor may resell Ascential products to end users for use in conjunction with
its own applications.
Ascential has specialized programs to support the application vendor
distribution channel. Under these programs, Ascential has provided to selected
application vendors a combination of marketing development services, consulting
and technical marketing support and discounts.
9
ASCENTIAL SOFTWARE--PRODUCT DEVELOPMENT
Major product releases resulting from research and development projects in
2000 included DataStage XE 2.0 including DataStage XE 390; SAP R/3 Extract Pack
2.0; SAP BW Load Pack 1.0; Media360 1.0; Axielle 1.0; i.Decide Web Success 1.0;
i.Decide Telco Success 1.0; Visionary 2.0; i.Reach 2.2; and i.Sell 2.1.
Ascential's current product development efforts are focused on:
- Enhancing and improving current products with a focus on leveraging
hardware and software architectures for data integration services, support
for industry standard J2EE-compliant application servers, market-specific
analytic components extensions, market-specific media asset management
modules, and continued support of industry-standard platforms.
- Enhancing usability for all of our infrastructure solutions.
- Enhancing the integration of our infrastructure solutions across all major
product lines to enable us to deliver modular yet integrated
infrastructure solution suites.
ASCENTIAL SOFTWARE--COMPETITION
The information asset management software market is extremely competitive
and subject to rapid technological change and frequent new product introductions
and enhancements. Ascential's competitors in the market include vendors that
develop and market data integration, business intelligence and portal software,
and companies that provide media content management solutions. Principal
competitors include Informatica, Hummingbird, Sagent, and Cognos for the data
integration and analytic component market segment, and Bulldog and Artesia for
the media and content management market segment. There are several players who
traverse both segments and compete across the full spectrum of Ascential product
offerings. These include Hummingbird, Oracle, and IBM.
INFORMIX CORPORATION
The following is a discussion of common business elements of both Informix
Software and Ascential Software as components of Informix Corporation.
REVENUES
Revenues derived from and expenses associated with the business operations
of both Informix Software and Ascential are subject to seasonal fluctuations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
INTELLECTUAL PROPERTY
Our success depends on proprietary technology. To protect our proprietary
rights, we rely primarily on a combination of patent, copyright and trademark
laws, trade secrets, confidentiality procedures, contractual provisions
contained in our license agreements and technical measures. We seek to protect
our software, documentation and other written materials under trade secret and
copyright laws, which provide only limited protection. We hold 18 United States
patents and have several pending applications.
Our products are generally licensed to end-users on a "right-to-use" basis
pursuant to a license that restricts the use of the products for the customer's
internal business purposes. We also rely on "shrink wrap" and "click wrap"
licenses, which include a notice informing the end-user that, by opening the
product packaging or, in the case of an online transaction, by downloading the
product, the end-user agrees to be bound by our license agreement printed on the
package or displayed on the customer's computer screen. Despite such
precautions, it may be possible for unauthorized third parties to copy aspects
of our current or future products or to obtain and use information that we
regard as proprietary. In particular, we have licensed the source code of our
products to certain customers for restricted uses under
10
certain circumstances. We have also entered into source code escrow agreements
with a number of our customers that generally require release of source code to
the customer in the event of our bankruptcy, liquidation or otherwise ceasing to
conduct business.
RESEARCH AND DEVELOPMENT
Our research and development expenditures for 2000, 1999 and 1998 were
$166.1 million, $188.1 million and $167.2 million, respectively, representing
approximately 18%, 18% and 20% of net revenues for these periods. In addition,
during 2000, 1999 and 1998, we capitalized product development costs of
$32.8 million, $29.1 million and $21.6 million, respectively. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Costs
and Expenses."
EMPLOYEES
As of December 31, 2000, Informix Corporation and its subsidiaries employed
3,680 regular employees worldwide, of which approximately 1,431 were located
outside North America. None of our employees located in the United States are
represented by a labor union. A small number of employees located outside the
United States are represented by labor unions, and the degree and scope of
representation varies from country to country. We have not experienced any work
stoppages either domestically or internationally.
As of December 31, 2000, the Informix Corporation regular employees were
separated into the two operating businesses as follows:
INFORMIX ASCENTIAL INFORMIX
SOFTWARE SOFTWARE CORPORATION
-------- --------- -----------
Operations...................................... 54 -- 54
Services........................................ 713 234 947
Sales and Marketing............................. 863 477 1,340
Research and Development........................ 604 290 894
Administrative and Finance...................... 399 46 445
----- ----- -----
Total........................................... 2,633 1,047 3,680
===== ===== =====
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning our executive
officers as of December 31, 2000.
NAME AGE POSITION
- ---- -------- ---------------------------------------------------
Peter Gyenes.............................. 55 President, Chief Executive Officer and Chairman of
the Board of Directors
James Arnold, Jr.......................... 44 Vice President and Chief Financial Officer
Gary Lloyd................................ 53 Vice President, Legal, General Counsel and
Secretary
William F. O'Kelly........................ 46 Vice President, Corporate Finance and Treasurer
James Foy................................. 53 Senior Vice President and President, Informix
Software
Peter Fiore............................... 43 Senior Vice President and President, Ascential
Software
PETER GYENES is the President, Chief Executive Officer and Chairman of the
Board of Directors for Informix Corporation. Mr. Gyenes has over 30 years of
experience in sales, marketing and general management positions within the
computer systems and software industry. Prior to Informix Corporation's
acquisition of Ardent Software, Inc. in March 2000, Mr. Gyenes was the
President, Chief Executive Officer
11
and Chairman of the Board of Directors of Ardent, which he joined in 1996. Prior
to joining Ardent, he was the President and Chief Executive Officer of Racal
InterLan, Inc. Previously, Mr. Gyenes served in executive sales, marketing, and
general management positions at Prime Computer Inc., Encore Computer and Data
General Corporation. Earlier in his career, Mr. Gyenes held technical positions
with Xerox Data Systems and IBM. Mr. Gyenes currently serves on the Board of
Directors for Applix Computer Systems (NASDAQ: APLX), Axis Computer Systems,
Cornerstone Internet Solutions (NASDAQ:CNRS), Davox Corp. (NASDAQ: DAVX) and the
Massachusetts Software and Internet Council. Mr. Gyenes received a Bachelor of
Arts degree in Mathematics and a Masters of Business Administration from
Columbia University.
JAMES ROBERT ARNOLD, JR. is the Vice President and Chief Financial Officer
for Informix Corporation and Informix Software, Inc., the database company. He
is responsible for corporate finance and administration. Prior to becoming Chief
Financial Officer in August 2000, Mr. Arnold served in several senior financial
positions at Informix. Prior to joining Informix in 1997, Mr. Arnold served as
corporate controller for Centura Software a data management solutions company
based in Redwood Shores, California. He also served as senior manager at Price
Waterhouse LLP. Mr. Arnold is a certified public accountant and holds a Masters
in Business Administration from Loyola University, New Orleans and a Bachelor of
Business Administration from Delta State University, Cleveland MS.
GARY LLOYD has served as Vice President, Legal and General Counsel since
January 1998 and as Secretary since February 1998. From November 1997 until
January 1998, Mr. Lloyd served as interim General Counsel. From March 1994 until
October 1997, Mr. Lloyd was with the law firm of Farella Braun & Martel L.L.P.
From 1984 until February 1994, Mr. Lloyd served in a variety of positions at the
Securities and Exchange Commission, most recently as its Assistant Director,
Division of Enforcement. Mr. Lloyd holds a B.A. in political science and English
from Kent State University and a J.D. from Case Western Reserve University.
WILLIAM F. O'KELLY joined Informix Corporation in August 1999 as Vice
President, Corporate Finance and Treasurer. Mr. O'Kelly also served as a
financial consultant to the Company from May 1998 until August 1999. Previously,
Mr. O'Kelly was Chief Financial Officer at Chemical Supplier Technology Inc. and
Corporate Controller at Air Liquide America Corporation, an industrial and
medical gases company, from August 1993 until December 1995. Mr. O'Kelly holds
at B.S. in accounting from the University of Florida.
JAMES D. FOY is a Senior Vice President of Informix Corporation and the
President of Informix Software, Inc. Previously, Mr. Foy was head of the
Informix TransAct business unit. Prior to Informix's acquisition of Ardent
Software, Inc. in March 2000, Mr. Foy served as Ardent's executive vice
president of engineering after joining the company in 1994. In addition, he was
the founder, president and Chief Executive Officer of Constellation
Software, Inc., which was acquired by Vmark Software (the predecessor company to
Ardent). Prior to founding Constellation Software, Inc., Mr. Foy was employed at
Prime Computer, Inc., holding positions as a senior executive in Prime's Unix
Development Business Unit, as well as the company's senior executive responsible
for international research and development. Additionally, Mr. Foy also served on
the Board of Directors of X/Open and Unix International during his tenure at
Prime.
PETER FIORE is a Senior Vice President of Informix Corporation and the
President of Ascential Software, Inc. Prior to Informix's acquisition of Ardent
Software, Inc. in March 2000, Mr. Fiore was the Executive Vice President and
General Manager, Marketing Operations and Business Development for Ardent.
Mr. Fiore joined Ardent in 1994 as Vice President of worldwide marketing and was
appointed Vice President and General Manager of Ardent's data warehouse business
unit in June 1996. Mr. Fiore has twenty years of sales, marketing, engineering
and business development experience in the high-technology industry. Prior to
joining Ardent, Mr. Fiore was Senior Director of Channel Marketing at CrossComm
12
Corp. and held various sales and marketing management positions at Stratus
Computer, Inc. Mr. Fiore received a Bachelor of Arts degree in Engineering and
Applied Sciences from Harvard College.
ITEM 2. PROPERTIES
Until the third quarter of 2000, our headquarters and principal marketing,
finance, sales, administration and a portion of our customer service and
research and development operations were located in seven buildings throughout a
corporate office park in Menlo Park, California. During the third quarter of
2000, we moved our corporate headquarters to a 93,000 square foot facility in
Westborough, Massachusetts that was formerly occupied by Ardent Software, Inc.
The lease for the Westborough facility expires on December 31, 2008. The
majority of the other lease obligations for facilities assumed from Ardent have
been disposed of via a termination or sublease arrangement. In addition, we
established the headquarters of Ascential Software in the same facility. The
headquarters and principal marketing, finance, sales, administration and a
portion of our customer service and research and development operations for the
Informix Software business operations remain in the Menlo Park facilities. We
currently lease approximately 234,000 square feet of office space in these
buildings. The lease agreements for two of the buildings, totaling approximately
83,000 square feet, expire in October 2001. The lease agreements for the
remaining five buildings expire on various dates in 2003.
We also occupy approximately 135,000 square feet in Lenexa, Kansas, which is
located approximately 12 miles southwest of Kansas City, Missouri. This facility
incorporates a portion of the research and development, customer service and
telemarketing organizations and serves as the principal domestic manufacturing
facility. There are two separate buildings, one totaling approximately 44,000
square feet and the other totaling approximately 91,000 square feet, that are
adjacent to each other and are each under a separate lease agreement. The lease
agreement for each building is scheduled to expire in April 2003, subject to our
rights to renew each agreement for an additional 5 years.
Some of the research and development operations for our products as well as
a portion of our customer service and sales training operations are located in
Oakland, California. We lease approximately 130,000 square feet at this site,
and this lease is scheduled to expire in May 2003. We also lease approximately
59,000 square feet on five separate floors in the Informix Center in downtown
Portland, Oregon, which is primarily utilized for research and development. This
facility was occupied in early 2000, and the current lease is scheduled to
expire in June 2005.
We also lease office space, principally for sales and support offices, in a
number of facilities in the United States, Canada and outside North America. As
of December 31, 2000, we controlled approximately 1,600,000 square feet of
office and/or manufacturing space. Approximately 86% of the total portfolio is
actively being utilized, while the balance has been either vacated or sublet. Of
the entire portfolio, approximately 70% is located in the Americas region
(United States, Canada and Latin America), 22% is located in EMEA (Europe,
Middle East and Africa) and the remaining 8% is located in the Asia Pacific
region. The significant sites in EMEA are in London (Bedfont Lakes Business
Park), Dublin and Munich where we control approximately 45,000 square feet,
42,000 square feet and 68,000 square feet, respectively. In the Asia Pacific
region, the largest three sites are Seoul, Sydney and Tokyo where we lease
approximately 27,000 square feet, 17,000 square feet and 15,000 square feet,
respectively.
We believe that our existing facilities are adequate to meet our business
needs through the next twelve months.
ITEM 3. LEGAL PROCEEDINGS
On May 26, 1999, we entered into a memorandum of understanding regarding the
settlement of pending private securities and related litigation against us,
including a federal class action, a derivative action, and a state class action.
In November 1999, the settlement was approved by the applicable Federal and
state courts. The settlement resolves all material litigation arising out of the
restatement of our
13
financial statements that was publicly announced in November 1997. In accordance
with the terms of the memorandum of understanding, we paid approximately
$3.2 million in cash during the second quarter of 1999 and an additional amount
of approximately $13.8 million of insurance proceeds was contributed directly by
certain of our insurance carriers on behalf of certain of our current and former
officers and directors. We will also issue a minimum of nine million shares of
our common stock, which will have a guaranteed value of $91 million for a
maximum term of one year from the date of final approval of the settlement by
the courts. Our former independent auditors, Ernst & Young LLP, have paid
$34 million in cash. The total amount of the settlement will be $142 million. As
of December 31, 2000, we had issued 2.9 million of the minimum amount of
9 million shares issuable pursuant to the memorandum of understanding.
In July 1997, the Securities and Exchange Commission ("SEC") issued a formal
order of private investigation of us and certain unidentified other entities and
persons with respect to non-specified accounting matters, public disclosures and
trading activity in our securities. During the course of the investigation, we
learned that the investigation concerned the events leading to the restatement
of our financial statements, including fiscal years 1994, 1995 and 1996, that
was publicly announced in November 1997. We have entered into a settlement with
the SEC regarding the investigation against us. Pursuant to the settlement, we
consented to the entry by the SEC of an Order Instituting Public Administrative
Proceedings Pursuant to Section 8A of the Securities Act of 1933 ("Securities
Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"),
Making Findings, and Imposing a Cease and Desist Order (the "Order"). The Order
was issued by the SEC on January 11, 2000. Pursuant to the Order, we neither
admitted nor denied the findings, except as to jurisdiction, contained in the
Order. The Order directs us to cease and desist from committing or causing any
violation, and any future violation, of Section 17(a) of the Securities Act and
Sections 10(b), 13(a) and 13(b) of the Exchange Act and Rules 10b-5, 12b-20,
13a-1, 13a-13 and 13b2-1 under the Exchange Act. Pursuant to the Order, we are
also required to cooperate in the SEC's continuing investigation of other
entities and persons. As a consequence of the issuance of the Order, we are
statutorily disqualified, pursuant to Section 27A(G)(1)(A)(ii) of the Securities
Act and Section 21E(b)(1)(A)(ii) of the Exchange Act, for a period of three
years from the date of the issuance of the Order, from relying on the
protections of the "safe harbor" for forward-looking statements set forth in
Section 27(A)(c) of the Securities Act and Section 21(E)(c) of the Exchange Act.
On February 3, 2000, International Business Machines Corporation ("IBM")
filed an action against us in the United States District Court for the District
of Delaware alleging infringement of six United States patents owned by IBM. In
the complaints, IBM seeks against us, and we seek against IBM, permanent
injunctions against further alleged infringement, unspecified compensatory
damages, unspecified treble damages, and interest, costs and attorney's fees. On
March 28, 2000, we filed an answer and counterclaims in the United States
District Court for the District of Delaware against IBM denying IBM's
allegations of patent infringement and alleging infringement by IBM of four
United States patents owned by us. In addition, on March 28, 2000, we filed a
separate action against IBM in the United States District Court for the Northern
District of California alleging infringement of four other United States patents
owned by us. On June 22, 2000, that action was transferred to the United States
District Court for the District of Delaware. We strongly believe that the
allegations in IBM's complaint are without merit and intend to defend the action
and prosecute our claims vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We did not submit any matters to a vote of security holders during the
fourth quarter of 2000.
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Our Common Stock is traded on the National Market of The Nasdaq Stock Market
under the symbol "IFMX." The following table lists the high and low sales prices
of our Common Stock for the periods indicated.
HIGH LOW
-------- --------
FISCAL YEAR ENDING DECEMBER 31, 2000:
Fourth Quarter............................................ $ 4.75 $2.63
Third Quarter............................................. 6.81 3.69
Second Quarter............................................ 21.25 6.19
First Quarter............................................. 20.97 7.88
FISCAL YEAR ENDING DECEMBER 31, 1999:
Fourth Quarter............................................ $13.31 $6.38
Third Quarter............................................. 9.75 6.75
Second Quarter............................................ 9.81 6.03
First Quarter............................................. 14.00 7.00
At December 31, 2000, there were approximately 4,450 stockholders of record
of our Common Stock, as shown in the records of our transfer agent.
DIVIDEND POLICY
We have never declared or paid cash dividends on our Common Stock. We expect
to retain future earnings, if any, for use in the operation of our business and
do not anticipate paying any cash dividends on our Common Stock in the
foreseeable future.
15
ITEM 6. SELECTED FINANCIAL DATA
FINANCIAL OVERVIEW
FIVE-YEAR SUMMARY
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2000(1) 1999(2) 1998(3) 1997(4) 1996
-------- ---------- --------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net revenues........................... $929,319 $1,039,111 $ 854,520 $ 766,620 $845,039
Net income (loss)...................... (98,315) (2,988) 52,452 (369,309) (84,012)
Preferred stock dividend............... (191) (995) (3,478) (301) --
Value assigned to warrants............. -- -- (1,982) (1,601) --
Net income (loss) applicable to common
stockholders......................... (98,506) (3,983) 46,992 (371,211) (84,012)
Net income (loss) per common share:
Basic................................ (0.34) (0.02) 0.21 (1.85) (0.43)
Diluted.............................. (0.34) (0.02) 0.19 (1.85) (0.43)
Total assets........................... 655,881 793,337 695,802 653,342 971,112
Long-term obligations.................. 787 1,420 3,759 27,734 24,098
Retained earnings (accumulated
deficit)............................. (359,132) (260,817) (259,849) (312,301) 57,556
- ------------------------------
(1) In 2000, we recorded merger, realignment and other charges of
$126.8 million.
(2) In 1999, we recorded restructuring-related adjustments that increased
operating income by $0.6 million and, in connection with our acquisition of
Cloudscape, Inc. in October 1999, recorded a charge of $2.8 million for
merger related expenses. In addition, we recorded a charge of $97.0 million
related to the settlement of private securities and related litigation
against us. Also in connection with Ardent Software, Inc.'s acquisition of
Prism Solutions, Inc., we recorded a charge of $9.9 million for merger and
restructuring charges as well as a $5.1 million charge for in-process
research and development which had not yet reached technological feasibility
and had no alternative future uses.
(3) In 1998, we recorded restructuring-related adjustments that increased
operating income by $10.3 million and, in connection with our acquisition of
Red Brick Systems, Inc. in December 1998, recorded a charge of $2.6 million
for in-process research and development which had not yet reached
technological feasibility and had no alternative future uses. In addition,
we recorded a charge of $14.9 million for merger and restructuring charges
related to Ardent's merger with Unidata.
(4) In 1997, we recorded a restructuring charge of $108.2 million, a write-down
of certain assets in Japan of $30.5 million and a charge to operations of
$7.0 million for in-process research and development which had not yet
reached technological feasibility and had no alternative future uses in
connection with our acquisition of CenterView. We also recorded a charge of
$3.0 million in connection with Ardent's acquisition of O2 Technologies for
in-process research and development which had not yet reached technological
feasibility and had no alternative future uses.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE
EVENTS OR THE COMPANY'S FUTURE FINANCIAL PERFORMANCE, WHICH INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING
THOSE SET FORTH UNDER "FACTORS THAT MAY AFFECT FUTURE RESULTS," AND ELSEWHERE IN
THIS ANNUAL REPORT ON FORM 10-K.
OVERVIEW
Informix Corporation is a global provider of information management software
through its two operating businesses, Informix Software and Ascential Software.
Informix Software, the database company, develops, markets and supports
object-relational and relational database management systems for data
warehousing, transaction processing and e-business applications. Ascential
Software is a supplier of information asset management software and solutions to
enterprises and government organizations worldwide.
During the second half of 2000, Informix Corporation undertook a strategic
realignment to transition from five former business units into the two operating
businesses. By December 31, 2000, we defined and allocated personnel among the
management, selling, marketing, research and development and service
organizations for the two operating businesses. However, the core infrastructure
groups of Informix Corporation (operations, finance and administration) have
been retained by Informix Software and these groups will continue to provide
services to both operating businesses through much of 2001. Our intent continues
to be to create two separate publicly traded companies when market conditions
permit.
We have not achieved sufficient separation of the employees and
infrastructure of the two operating businesses to properly measure the results
of the operations on a stand-alone basis. Accordingly, although we present the
separate revenue information for the two operating businesses on a historical
basis, we do not present separate historical operating income information. We
intend to disclose the results of operations based on the two operating
businesses on a prospective basis.
On March 1, 2000, we acquired Ardent Software, Inc. ("Ardent"), a leading
provider of data integration infrastructure software for data warehouse,
business intelligence, and e-business applications. In the acquisition, the
former shareholders of Ardent received 3.5 shares of our common stock in
exchange for each outstanding Ardent share and we assumed all outstanding Ardent
options and warrants. The transaction has been accounted for as a pooling of
interests and, therefore, all historical financial information has been restated
to include Ardent.
As more fully described in Note 13 to the Consolidated Financial Statements,
we recorded merger, realignment and other charges of $126.8 million, during 2000
of which $43.8 million related to non-cash charges. As of December 31, 2000, we
had made cash payments of $58.2 million related to the $126.8 million charge and
expect to make additional cash payments of approximately $24.8 million during
the first half of 2001. In addition to the $126.8 million charge, we expect to
incur further realignment charges during the first half of 2001 of approximately
$6.0 million for primarily employee compensation related costs.
We expect to realize total quarterly expense reduction of approximately
$19.7 million as a result of this realignment and approximately 86% of this
expected amount represents cash savings with the balance attributable to
reductions in non-cash depreciation and amortization. The expected quarterly
expense reduction began during the quarter ended December 31, 2000 but the full
effect will not be realized until the quarter ended June 30, 2001. The expected
quarterly expense reduction is estimated to reduce specific quarterly expense
components as follows: cost of software distribution, $2.0 million; cost of
services, $2.2 million; sales and marketing, $7.2 million; research and
development, $5.0 million; general and administrative, $3.3 million.
17
These realignment and other charges are subject to continuing review and
adjustment as we implement the realignment.
RESULTS OF OPERATIONS
The following table and discussion compares the results of operations for
the years ended December 31, 2000, 1999 and 1998.
YEARS ENDED
DECEMBER 31,
------------------------------------
2000 1999 1998
-------- -------- --------
PERCENT OF NET
REVENUES
Net revenues:
Licenses.................................................. 44% 52% 53%
Services.................................................. 56 48 47
Total net revenues...................................... 100 100 100
Cost and expenses:
Cost of software distribution............................. 5 5 5
Cost of services.......................................... 20 20 21
Sales and marketing....................................... 43 36 37
Research and development.................................. 18 18 20
General and administrative................................ 11 9 10
Write-off of acquired research and development............ -- -- --
Merger and restructuring charges.......................... 14 1 --
Total expenses.......................................... 111 89 93
Operating income (loss)..................................... (11) 11 7
Net income (loss)........................................... (11)% --% 6%
REVENUES
We derive revenues from licensing software and providing post-license
technical product support and updates to customers and from consulting and
education services. Our revenue recognition policy is described in Note 1 to our
Consolidated Financial Statements.
LICENSE REVENUES. License revenues may involve the shipment of product by
us or the granting of a license to a customer to manufacture products. Our
products are sold directly to end-user customers or through resellers, including
OEMs, distributors and value added resellers ("VARs"). Revenue from license
agreements with resellers is recognized as earned by us, generally, when the
licenses are resold or utilized by the reseller and all of our related
obligations have been satisfied. Accordingly, amounts received from customers in
advance of revenue being recognized are recorded as a liability in "advances
from customers" in our financial statements. Advances in the amount of
$10.5 million and $34.3 million had not been recognized as earned revenue as of
December 31, 2000 and December 31, 1999, respectively. During the year ended
December 31, 2000, we received $10.7 million in customer advances and recognized
revenue from resellers with previously recorded customer advances of
$34.5 million. Included in the $34.5 million recognized were $21.4 million of
licenses that were resold or utilized by the reseller, $11.1 million related to
contractual reductions in customer advances and $2.0 million related to
previously deferred revenue for solution sales, which has now been recognized as
services have been completed. During 1999 and 1998, we recognized revenue of
$11.4 million and $4.4 million, respectively, as a result of contractual
reductions in customer advances. Contractual reductions result from settlements
between us and resellers in which the customer advance contractually expires or
a settlement is structured wherein the rights to resell our products terminate
without sell through or deployment of the software.
Our license transactions can be relatively large in size and difficult to
forecast both in timing and dollar value. As a result, license transactions have
caused fluctuations in net revenues and net income
18
(loss) because of the relatively high gross margin on such revenues. As is
common in the industry, a disproportionate amount of our license revenue is
derived from transactions that close in the last weeks or last few days of a
quarter. The timing of closing large license agreements also increases the risk
of quarter-to-quarter fluctuations. We expect that these types of transactions
and the resulting fluctuations in revenue will continue.
SERVICE REVENUES. Service revenues are comprised of maintenance, consulting
and education revenues. Maintenance contracts generally call for us to provide
technical support and software updates to customers.
The following table and discussion compares the revenues for the businesses
of Informix Software and Ascential Software for the years ended December 31,
2000, 1999 and 1998 (in millions):
2000 1999 1998
-------- -------- --------
INFORMIX SOFTWARE
License revenues.......................................... $337.7 $ 481.9 $439.6
Service revenues
Maintenance revenues.................................... 392.4 361.3 285.7
Consulting and education revenues....................... 77.5 111.8 111.7
------ -------- ------
Total service revenues.................................. 469.9 473.1 397.4
------ -------- ------
Total revenues--Informix Software......................... $807.6 $ 955.0 $837.0
====== ======== ======
License revenues as a percent of total revenues........... 42% 50% 53%
Service revenues as a percent of total revenues........... 58% 50% 47%
ASCENTIAL SOFTWARE
License revenues.......................................... $ 66.7 $ 54.0 $ 14.3
Service revenues
Maintenance revenues.................................... 20.1 6.9 0.9
Consulting and education revenues....................... 34.9 23.2 2.3
------ -------- ------
Total service revenues.................................. 55.0 30.1 3.2
------ -------- ------
Total revenues--Ascential Software........................ $121.7 $ 84.1 $ 17.5
====== ======== ======
License revenues as a percent of total revenues........... 55% 64% 82%
Service revenues as a percent of total revenues........... 45% 36% 18%
INFORMIX CORPORATION (COMBINED TOTAL OF INFORMIX SOFTWARE
AND ASCENTIAL SOFTWARE)
License revenues.......................................... $404.4 $ 535.9 $453.9
Service revenues
Maintenance revenues.................................... 412.5 368.2 286.6
Consulting and education revenues....................... 112.4 135.0 114.0
------ -------- ------
Total service revenues.................................. 524.9 503.2 400.6
------ -------- ------
Total revenues--Informix Corporation...................... $929.3 $1,039.1 $854.5
====== ======== ======
License revenues as a percent of total revenues........... 44% 52% 53%
Service revenues as a percent of total revenues........... 56% 48% 47%
INFORMIX SOFTWARE--REVENUES
LICENSE REVENUES. License revenues for 2000 decreased 30% to
$337.7 million from $481.9 million in 1999. The decrease in license revenues was
due in large part to a significant decline in revenues from our
19
traditional client-server and tools products (which we refer to as "Classic"
products) and our Enterprise database servers. We believe that this decline is
attributable to slower market demand for our Classic products in the post-Y2K
environment and the failure of our sales and field marketing organizations to
effectively market and sell our products due to a number of factors, including
attrition and turnover in our sales and marketing organization, the announcement
during the third quarter of our corporate restructuring and reorganization, and
delays encountered in integrating certain of Ardent's operations and products
into our sales, product marketing and general operations. In addition to this
decline in license revenue in absolute dollars, our license revenue is also
declining as a percentage of our total revenue. Although we do not expect this
latter trend to continue, we are unable to predict whether market demand for our
products will rebound in future quarters or whether our license revenues will
continue to decline in absolute dollars. License revenues for 1999 increased 10%
to $481.9 million from $439.6 million in 1998. This increase was primary a
result of increased license revenues from our Enterprise database servers. This
was driven by the introduction of several new products in the second half of
1999, including the first release of Informix Internet Foundation and a next
generation release of Informix Dynamic Server.
SERVICE REVENUES. Service revenues decreased 1% to $469.9 million in 2000
and increased 19% to $473.1 million in 1999 from $397.4 million in 1998. Service
revenues accounted for 58%, 50%, and 47% of total revenues in 2000, 1999 and
1998, respectively. Maintenance revenues increased 9% to $392.4 million in 2000
and increased 26% to $361.3 million in 1999 from $285.7 million in 1998. The
increase in maintenance revenues, was attributable primarily to the renewal of
maintenance contracts and our growing installed customer base. During 2000,
consulting and education revenues decreased 31% to $77.5 million primarily due
to the 30% decline in license revenues experienced in 2000 as consulting and
education revenues are typically driven by engagements and projects associated
with new license revenues. During 1999, consulting and education revenues
remained flat at $111.8 million versus $111.7 million in 1998.
ASCENTIAL SOFTWARE--REVENUES
LICENSE REVENUES. License revenues increased 24% to $66.7 million in 2000
and increased 278% to $54.0 million in 1999 from $14.3 million in 1998. The
increase in 2000 was due principally to increased sales of Ascential's content
management product offerings; Media360 and i.Reach, as well as increased sales
of i.Sell, all of which experienced growth as part of their early life stage.
The increase during 1999 was driven primarily by increased sales of Ascential's
Datastage product as well as the acquisition of Prism Solutions, Inc. ("Prism")
by Ardent.
SERVICE REVENUES. Service revenues increased 83% to $55.0 million in 2000
and increased 841% to $30.1 million in 1999 from $3.2 million in 1998. Service
revenues accounted for 45%, 36%, and 18% of total revenues in 2000, 1999 and
1998, respectively. Maintenance revenues increased 191% to $20.1 million in 2000
and increased 667% to $6.9 million in 1999 from $0.9 million in 1998.
Maintenance revenues are increasing for Ascential Software as it continues to
build its installed customer base. Consulting and education revenues increased
50% to $34.9 million in 2000 and increased 909% to $23.2 million in 1999 from
$2.3 million in 1998. Consulting and education revenues are typically driven by
engagements and projects associated with new license revenues.
COSTS AND EXPENSES
AS DISCUSSED ABOVE, OUR DISCUSSION AND ANALYSIS OF COSTS AND EXPENSES IS
PRESENTED ON A COMBINED BASIS FOR THE TWO OPERATING BUSINESSES.
COST OF SOFTWARE DISTRIBUTION. Cost of software distribution consists
primarily of: (1) manufacturing personnel costs, (2) third-party royalties, and
(3) amortization of previously capitalized software development costs and any
write-offs of previously capitalized software (except during the quarter ended
September 30, 2000, when we wrote-off approximately $15.2 million of capitalized
software to merger, realignment and other charges--for more information see
Note 13 to the Consolidated Financial Statements). Cost of software distribution
increased slightly to $50.4 million in 2000 from $50.2 million in 1999
20
even though license revenues decreased 25% during 2000. This increase was
primarily due to an increase in third party royalties associated with increased
license revenue from certain Ascential Software product offerings. This increase
was partially offset by a decrease in capitalized software amortization as
certain database products became fully amortized during 2000 and a decrease in
manufacturing costs as we realized efficiencies due to the consolidation of our
manufacturing operations. Cost of software distribution increased 19% during
1999 when compared to 1998, which is in line with the 18% increase in license
revenues experienced during the same period, due to an increase in royalties and
the write-off of capitalized software costs. During the third quarter of 1999,
approximately $2.4 million of previously capitalized software costs were written
down to the estimated net realizable value after it was determined that the
projected sales of certain tools products and system management programs were
not sufficient to realize the capitalized product development costs.
COST OF SERVICES. Cost of services consists primarily of maintenance,
consulting and training personnel expenses. Cost of services decreased 11% to
$184.6 million in 2000 from $208.0 million in 1999 and service margins increased
to 65% in 2000 from 59% in 1999. The decrease in cost of services in absolute
dollars and as a percentage of net service revenues is primarily due to cost
containment actions that included headcount reductions as a result of the
realignment and synergies realized from the Ardent acquisition. The increase in
service margins experienced during 2000 was also due to the mix of service
offerings, as there was a lower proportion of consulting and training revenue in
2000, which generate significantly lower margins than maintenance. Cost of
services increased 17% to $208.0 in 1999 from $178.5 million in 1998 due
primarily to increased headcount related costs incurred to support the 26%
increase in service revenues achieved during the period. Part of the increase in
headcount resulted from the addition of Prism's and Red Brick Systems, Inc.'s
("Red Brick") consulting teams subsequent to the completion of the acquisitions
in April 1999 and December 1998, respectively.
SALES AND MARKETING EXPENSES. Sales and marketing expenses consist
primarily of salaries, commissions, marketing and communications programs and
related overhead costs. Sales and marketing expenses increased 9% to
$402.6 million in 2000 and 18% to $370.7 million in 1999 from $313.6 million in
1998. The increase in 2000 was due primarily to increased marketing costs for
advertising and marketing programs focused on promoting our Internet-based
electronic commerce and business intelligence products and solutions. The
increase in sales and marketing expenses in 1999 as compared to 1998 was
primarily the result of increased advertising and marketing efforts in
connection with the introduction of new products and our new corporate identity
in order to increase brand awareness. The increase in sales and marketing
expenses experienced during 1999 was in line with the increase in revenues over
the same period.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist primarily of salaries, project consulting and related overhead costs for
product development. Research and development expenses decreased 12% to
$166.1 million in 2000 from $188.1 million in 1999 but as a percentage of net
revenues remained consistent at 18% for both 2000 and 1999 due to the
realization of cost containment efforts employed during 2000, which included
headcount reductions resulting from the realignment. During 1999, research and
development expenses increased 13% due to increased headcount related costs as a
result of the acquisitions of Prism and Red Brick in April 1999 and
December 1998, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of finance, legal, information systems, human resources, bad
debt expense and related overhead costs. During 2000, general and administrative
expenses increased $10.6 million to $100.0 million from $89.4 million in 1999
and $88.2 million in 1998. As a percentage of net revenues, general and
administrative expenses remained fairly consistent at 11%, 9% and 10% in 2000,
1999 and 1998 respectively. The increase in general and administrative expenses
experienced during 2000 was caused by increased bad debt and legal expenses
offset by a decrease in employee-related costs. Bad debt expense increased
approximately $7.1 million as a result of increased reserves against defaults by
technology start-up companies, write-offs of certain receivables acquired in the
merger with Ardent and reserves related to several Eastern European government
entities where recent political changes make collection no longer probable. The
21
increase in legal expenses was related primarily to a $4.3 million reserve with
respect to the Unidata lawsuit and $3.0 million paid to Cincom Systems, Inc. See
Note 12 to the Consolidated Financial Statements.
WRITE-OFF OF ACQUIRED RESEARCH AND DEVELOPMENT. In-process research and
development represents the estimated fair value of incomplete technologies
acquired by us for our own development efforts. In connection with Ardent's
acquisition of Prism in April 1999, Ardent recorded a charge of approximately
$5.1 million, or 6.9% of the $74.2 million in total consideration and
liabilities assumed, for in-process research and development expense that had
not yet reached technological feasibility and had no alternative future uses. In
connection with our acquisition of Red Brick in December 1998, we recorded a
charge of $2.6 million, or 4.7% of the $55.8 million in total consideration and
liabilities assumed, for in-process research and development expense that had
not yet reached technological feasibility and had no alternative future uses.
Actual results to date have been consistent, in all material respects, with the
assumptions used at the time of the Prism and Red Brick acquisitions. The
assumptions primarily consisted of an expected completion date for the
in-process projects, estimated costs to complete the projects, and revenue and
expense projections once the products had entered the market.
MERGER, REALIGNMENT AND OTHER CHARGES. During the second half of 2000, we
recorded a charge of $76.8 million mostly to account for the actions taken to
realign our operational structure into two separate companies and to refine our
product strategy. Included in this charge was $40.9 million for severance and
employment related costs, $32.0 million for the write-off of goodwill and
intangible assets, $7.5 million for the closure of facilities and equipment
costs, $4.0 million for costs to exit various commitments and programs,
$2.5 million of miscellaneous other charges and a credit of approximately
$10.1 million for adjustments recorded in order to reduce previously accrued
merger and restructuring charges primarily for a decrease in estimated facility
costs related to the merger with Ardent. See Note 13 to the Consolidated
Financial Statements.
During the quarter ended March 31, 2000, we recorded a charge of
$50.0 million associated with the merger with Ardent. Of this amount,
approximately $10.1 million related to integration and transition costs incurred
during the quarter ended March 31, 2000. Also included in the $50.0 million was
approximately $39.9 million of accrued merger and restructuring costs which
consisted of the following components: $14.5 million for financial advisor,
legal and accounting fees related to the merger; $13.0 million for severance and
employment related costs; $8.9 million for the closure of facilities and
equipment costs and $3.5 million for the write-off of redundant technology and
other duplicate costs.
During the quarter ended December 31, 1999, we recorded a charge of
$2.8 million associated with the merger with Cloudscape. This amount included
$1.2 million for financial advisor, legal and accounting fees related to the
merger and $1.6 million for costs associated with combining the operations of
the two companies; including expenditures of $0.7 million for severance and
related costs, $0.4 million for closure of facilities and $0.5 million for the
write-off of redundant assets.
During the quarter ended June 30, 1999, Ardent adopted a formal plan to exit
the operations of O2 Technologies, Inc., which had been acquired by Ardent in
December 1997, and recorded a charge of $9.9 million for accrued restructuring
charges. The charge was comprised of $5.9 million for asset impairment,
$3.6 million for severance and related costs and $0.4 million for facility
closings and other obligations.
During the quarter ended March 31, 1998, Ardent recorded a charge of
$14.9 million associated with the merger with Unidata. The charge included
$3.9 million for financial advisor, legal and accounting fees, $6.2 million for
severance and related costs, $2.2 million for closure of facilities, and
$2.6 million for the write-off of redundant assets.
During 1999 and 1998, adjustments of $0.6 million and $10.3 million,
respectively, were recorded to the results of operations which appear as a
credit to merger, realignment and other charges in our Consolidated Statement of
Operations for the years ended December 31, 1999 and 1998, to adjust the
22
estimated severance and facility components of the 1997 restructuring charge to
actual costs incurred. See Note 13 to our Consolidated Financial Statements.
OTHER INCOME (EXPENSE)
INTEREST INCOME. Interest income for 2000 increased $1.9 million or 15% to
$14.3 million from $12.4 million for both 1999 and 1998. This increase was due
in part to the increase in interest rates experienced during 2000 as well as an
increase in the average interest-bearing cash and short-term investment balances
held during 2000 when compared to the same periods in 1999 and 1998. During the
first nine months of 2000, we maintained higher short-term investment balances
than in previous years as a result of increased operating cash flows.
INTEREST EXPENSE. Interest expense decreased to $0.5 million for 2000 from
$4.5 million and $6.9 million for 1999 and 1998, respectively. Interest expense
of $0.5 million incurred during 2000 related primarily to interest charges on
capital lease payments. The decrease experienced during 2000 was due primarily
to a decline in the interest charges related to the line of credit which was
terminated effective December 31, 1999. The decrease during 1999 when compared
to 1998 was due to a decrease in the financing of customer accounts receivable
and a decrease in interest charges related to payments on capital leases. We did
not enter into any accounts receivable financing transactions during 2000, and
interest charges related to payments on capital leases have been declining each
year as we have not been entering into new capital lease arrangements.
LITIGATION SETTLEMENT EXPENSE. During 1999, we incurred a charge of
$97.0 million in connection with our entering into a memorandum of understanding
regarding the settlement of the private securities and related litigation
against us. The charge consisted of $3.2 million in cash and $91.0 million in
common stock for settlement expenses plus approximately $2.8 million in legal
fees required to obtain and complete the settlement. The charge excludes
approximately $13.8 million of insurance proceeds which, according to the terms
of the memorandum of understanding, were contributed directly by our insurance
carriers.
OTHER INCOME (EXPENSE), NET. Other income (expense), net, increased
$2.4 million to $5.0 million in 2000 from $2.6 million in 1999. For 2000, other
income included approximately $2.9 million of net realized gains on the sale of
long-term investments and approximately $1.3 million of VAT refunds received in
China. Other income (expense), net, increased to $2.6 million for 1999 from a
net other expense of $4.0 million for 1998. For 1999, other income included
approximately $3.7 million of net realized gains on the sale of long-term
investments, offset by a downward adjustment of $0.5 million to the carrying
value of certain investments and approximately $0.3 million of net foreign
currency transaction losses. During 1998, other income (expense) included
$4.8 million of foreign currency transaction losses.
INCOME TAXES
Income tax expense of $16.0 million, $32.0 million and $6.9 million for
2000, 1999 and 1998, respectively, resulted primarily from foreign withholding
taxes and taxable earnings in certain foreign jurisdictions.
23
QUARTERLY OPERATING RESULTS
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended December 31, 2000
Net revenues........................... $250,884 $240,494 $211,105 $226,836
Gross profit........................... 189,567 178,964 151,616 174,169
Net income (loss)...................... (22,983) 5,018 (80,627) 277
Preferred stock dividend............... (87) (89) (15) --
-------- -------- -------- --------
Net income (loss) applicable to common
stockholders......................... $(23,070) $ 4,929 $(80,642) $ 277
======== ======== ======== ========
Net income (loss) per common share:
Basic................................ $ (0.08) $ 0.02 $ (0.28) $ 0.00
======== ======== ======== ========
Diluted.............................. $ (0.08) $ 0.02 $ (0.28) $ 0.00
======== ======== ======== ========
Year ended December 31, 1999
Net revenues........................... $227,531 $250,623 $261,124 $299,833
Gross profit........................... 165,425 186,844 194,917 233,789
Net income (loss)...................... 8,779 (89,142) 27,480 49,895
Preferred stock dividend............... (303) (279) (247) (166)
-------- -------- -------- --------
Net income (loss) applicable to common
stockholders......................... $ 8,476 $(89,421) $ 27,233 $ 49,729
======== ======== ======== ========
Net income (loss) per common share:
Basic................................ $ 0.03 $ (0.35) $ 0.10 $ 0.18
======== ======== ======== ========
Diluted.............................. $ 0.03 $ (0.35) $ 0.09 $ 0.17
======== ======== ======== ========
LIQUIDITY AND CAPITAL RESOURCES
Our cash, cash equivalents and short-term investments totaled
$217.0 million at December 31, 2000. The decrease of $55.6 million from
$272.6 million at December 31, 1999, was primarily caused by the repurchase of
6.4 million shares of our common stock for approximately $33.7 million and the
payment of approximately $58.2 million of costs in connection with merger,
realignment and other charges, including the $126.8 million of charges recorded
during 2000. Aside from these items, we continue to generate cash from
operations.
We will continue to invest in research and development activities as well as
sales and marketing and product support. Our investment in property and
equipment will continue as we purchase computer systems for research and
development, sales and marketing, support and administrative staff. During 2000,
capital expenditures totaled $44.6 million.
As of December 31, 2000, we did not have any significant long-term debt or
significant commitments for capital expenditures. We believe that our current
cash, cash equivalents and short-term investments balances and cash generated
from operations will be sufficient to meet our working capital requirements for
at least the next 12 months.
24
DISCLOSURES ABOUT MARKET RATE RISK
MARKET RATE RISK. The following discussion about our market rate risk
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates, foreign currency exchange rates and equity
security price risk. We do not use derivative financial instruments for
speculative or trading purposes.
INTEREST RATE RISK. Our exposure to market rate risk for changes in
interest rates relates primarily to our investment portfolio. We maintain a
short-term investment portfolio consisting mainly of debt securities with an
average maturity of less than two years. We do not use derivative financial
instruments in our investment portfolio and we place our investments with high
quality issuers and, by policy, limit the amount of credit exposure to any one
issuer. We are averse to principal loss and ensure the safety and preservation
of our invested funds by limiting default, market and reinvestment risk. These
available-for-sale securities are subject to interest rate risk and will fall in
value if market interest rates increase. If market interest rates were to
increase immediately and uniformly by 10 percent from levels at December 31,
2000 and 1999, the fair value of the portfolio would decline by an immaterial
amount. We have the ability to hold our fixed income investments until maturity
and believe that the effect, if any, of reasonably possible near-term changes in
interest rates on our financial position, results of operations and cash flows
would not be material.
EQUITY SECURITY PRICE RISK. We hold a small portfolio of marketable-equity
traded securities that are subject to market price volatility. Equity price
fluctuations of plus or minus 10% would have had a $0.4 million and
$1.2 million impact on the value of these securities in 2000 and 1999,
respectively.
FOREIGN CURRENCY EXCHANGE RATE RISK. We enter into foreign currency forward
exchange contracts to reduce our exposure to foreign currency risk due to
fluctuations in exchange rates underlying the value of intercompany accounts
receivable and payable denominated in foreign currencies (primarily European and
Asian currencies) until such receivables are collected and payables are
disbursed. A foreign currency forward exchange contract obligates us to exchange
predetermined amounts of specified foreign currencies at specified exchange
rates on specified dates or to make an equivalent U.S. dollar payment equal to
the value of such exchange. These foreign currency forward exchange contracts
are denominated in the same currency in which the underlying foreign currency
receivables or payables are denominated and bear a contract value and maturity
date which approximate the value and expected settlement date of the underlying
transactions. As these contracts are not designated and effective as hedges,
discounts or premiums (the difference between the spot exchange rate and the
forward exchange rate at inception of the contract) are recorded in earnings to
other income (expense), net at the time of purchase, and changes in market value
of the underlying contract are recorded in earnings as foreign exchange gains or
losses in the period in which they occur. We operate in certain countries in
Latin America, Eastern Europe, and Asia/Pacific where there are limited forward
foreign currency exchange markets and thus we have unhedged exposures in these
currencies.
Most of our international revenue and expenses are denominated in local
currencies. Due to the substantial volatility of currency exchange rates, among
other factors, we cannot predict the effect of exchange rate fluctuations on our
future operating results. Although we take into account changes in exchange
rates over time in our pricing strategy, we do so only on an annual basis,
resulting in substantial pricing exposure as a result of foreign exchange
volatility during the period between annual pricing reviews. In addition, the
sales cycle for our products is relatively long, depending on a number of
factors including the level of competition and the size of the transaction.
Notwithstanding our efforts to manage foreign exchange risk, there can be no
assurances that our hedging activities will adequately protect us against the
risks associated with foreign currency fluctuations.
25
The table below provides information about our foreign currency forward
exchange contracts. The information is provided in U.S. dollar equivalents and
presents the notional amount (contract amount), the weighted average contractual
foreign currency exchange rates and fair value. Fair value represents the
difference in value of the contracts at the spot rate at December 31, 2000 and
the forward rate. All contracts mature within twelve months.
FORWARD CONTRACTS
WEIGHTED AVERAGE
AT DECEMBER 31, 2000 CONTRACT AMOUNT CONTRACT RATE FAIR VALUE
- -------------------- --------------- ---------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
Forward currency to be sold under contract:
Euro............................................ $25,666 1.07 $ 49
Japanese Yen.................................... 8,491 112.67 95
Australian Dollar............................... 7,546 1.79 25
Taiwan Dollar................................... 4,319 34.50 (162)
Korean Won...................................... 3,937 1,270.10 (32)
Swiss Franc..................................... 2,797 1.63 10
German Deutschmark.............................. 2,490 2.09 7
Singapore Dollar................................ 2,382 1.72 16
South African Rand.............................. 2,815 7.62 (33)
French Franc.................................... 2,151 7.03 5
Thailand Bhat................................... 2,285 42.75 0
Czech Koruna.................................... 1,887 37.40 7
Other (individually less than $1 million)....... 1,549 * (2)
------- -----
Total............................................. $68,315 $ (15)
======= =====
Forward currency to be purchased under contract:
British Pound................................... $10,843 0.67 $ (18)
Other (individually less than $1 million)....... 530 * (2)
------- -----
Total............................................. $11,373 $ (20)
======= =====
Grand Total....................................... $79,688 $ (35)
======= =====
- ------------------------------
* Not meaningful
EUROPEAN MONETARY CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European
Economic Community entered into a three-year transition phase during which a
common currency, the "Euro," was introduced. Between January 1, 1999 and
January 1, 2002, governments, companies and individuals may conduct business in
these countries in both the Euro and existing national currencies. On
January 1, 2002, the Euro will become the sole currency in these countries.
During the transition phase, we will continue to evaluate the impact of
conversion to the Euro on our business. In particular, we are reviewing:
- Whether our internal software systems can process transactions denominated
either in current national currencies or in the Euro, including converting
currencies using computation methods specified by the European Economic
Community,
- The cost to us if we must modify or replace any of our internal software
systems, and
- Whether we will have to change the terms of any financial instruments in
connection with our hedging activities
26
Based on current information and our evaluation to date, we do not expect
the cost of any necessary corrective action to have a material adverse effect on
our business. We have reviewed the effect of the conversion to the Euro on the
prices of our products in the affected countries. As a result, we have made some
adjustments to our prices to attempt to eliminate differentials that were
identified. However, we will continue to evaluate the impact of these and other
possible effects of the conversion to the Euro on our business. We cannot
guarantee that the costs associated with conversion to the Euro or price
adjustments will not in the future have a material adverse effect on our
business.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," which establishes standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. We adopted SFAS 133 in the
first quarter of 2001. The initial adoption of SFAS 133 did not have a material
effect on our operations or financial position.
FACTORS THAT MAY AFFECT FUTURE RESULTS
CURRENT AND POTENTIAL STOCKHOLDERS SHOULD CONSIDER CAREFULLY EACH OF THE
FOLLOWING FACTORS IN MAKING THEIR INVESTMENT DECISIONS. THESE FACTORS SHOULD BE
CONSIDERED TOGETHER WITH THE OTHER INFORMATION INCLUDED OR INCORPORATED BY
REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K.
RISK FACTORS
RECENT ORGANIZATIONAL CHANGES COULD DISRUPT OUR BUSINESS OPERATIONS, ADVERSELY
AFFECT OUR ABILITY TO DEVELOP AND SELL OUR PRODUCTS AND MATERIALLY ADVERSELY
AFFECT OUR FINANCIAL RESULTS.
Beginning in August 2000, we began a comprehensive reorganization and
restructuring of our company and business operations, including, among other
things, consolidating our five operating business groups into two wholly owned
operating subsidiaries. In addition, during the quarter ended September 30,
2000, we moved our corporate headquarters from Menlo Park, California to
Westborough, Massachusetts and we formalized plans to reduce total headcount to
approximately 3,400 and to consolidate certain physical locations in California
and elsewhere.
We may not achieve the anticipated benefits of the reorganization and
restructuring. Moreover, it has and may in the future cause significant
disruptions of our daily business operations, including the loss of key
personnel and other employees necessary for us to effectively operate at all
levels. Disruptions or operational difficulties could result in delays in
product development cycles and sales of our products. In addition, we may not be
able to create two separate, publicly-traded companies as a result of financial
market conditions, a decrease in demand for our product offerings and other
conditions beyond our control. The occurrence of one or more of these factors
could distract our management team and materially adversely affect our business
and financial results.
WE MAY NOT BE ABLE TO RETAIN OUR KEY PERSONNEL DURING OUR ONGOING REORGANIZATION
AND RESTRUCTURING AND ATTRACT AND RETAIN THE NEW PERSONNEL NECESSARY TO GROW THE
TWO NEW OPERATING COMPANIES, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR ABILITY
TO DEVELOP AND SELL OUR PRODUCTS, SUPPORT OUR BUSINESS OPERATIONS AND GROW OUR
BUSINESSES.
Our future success depends on retaining the services of key personnel in all
functional areas of our company, including engineering, sales, marketing,
consulting and corporate services. For instance, we may be unable to continue to
develop and support technologically advanced products and services if we fail to
27
retain and attract highly qualified engineers, and to market and sell those
products and services if we fail to retain and attract well-qualified marketing
and sales professionals. We may be unable to retain key individuals in all of
these areas during our reorganization and restructuring and we may not succeed
in attracting new employees to one or both of the new operating companies after
the completion of the restructuring.
The competition for experienced, well-qualified personnel in the software
industry is intense, especially in the San Francisco and Boston metropolitan
areas. Our ongoing reorganization and restructuring may make it difficult for us
to compete effectively for the services of these individuals. If we fail to
retain, attract and motivate key employees, we may be unable to complete the
reorganization and restructuring, develop, market and sell new products, support
the operations of the two new operating companies and sustain and grow the two
businesses in the future, the occurrence of any of which could materially
adversely affect our operating and financial results.
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS CAUSED BY MANY
FACTORS, WHICH COULD RESULT IN OUR FAILING TO ACHIEVE REVENUE OR PROFITABILITY
EXPECTATIONS.
Our quarterly and annual results of operations have varied significantly in
the past and are likely to continue to vary in the future due to a number of
factors described below and elsewhere in this "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" section, many of
which are beyond our control. Any one or more of the factors listed below or
other factors could cause us to fail to achieve our revenue or profitability
expectations. In particular, the failure to meet market expectations could cause
a sharp drop in our stock price. These factors include:
- Changes in demand for our products and services, including changes in
growth rates in the industry as a whole and in the traditional database
market and the relatively new business intelligence and electronic
commerce markets in particular,
- The size, timing and contractual terms of large orders for our software
products,
- Adjustments of delivery schedules to accommodate customer or regulatory
requirements,
- The budgeting cycles of our customers and potential customers,
- The reaction of our customers and potential customers to our ongoing
reorganization and restructuring,
- Any downturn in our customers' businesses, in the domestic economy or in
international economies where our customers do substantial business,
- Changes in our pricing policies resulting from competitive pressures, such
as aggressive price discounting by our competitors or other factors,
- Our ability to develop and introduce on a timely basis new or enhanced
versions of our products and solutions,
- Changes in the mix of revenues attributable to domestic and international
sales, and
- Seasonal buying patterns which tend to peak in the fourth quarter.
OUR COMMON STOCK HAS BEEN AND LIKELY WILL CONTINUE TO BE SUBJECT TO SUBSTANTIAL
PRICE AND VOLUME FLUCTUATIONS WHICH MAY PREVENT STOCKHOLDERS FROM RESELLING
THEIR SHARES AT OR ABOVE THE PRICE AT WHICH THEY PURCHASED THEIR SHARES.
Fluctuations in the price and trading volume of our common stock may prevent
stockholders from reselling their shares above the price at which they purchased
their shares. Stock prices and trading volumes for many software companies
fluctuate widely for a number of reasons, including some reasons
28
which may be unrelated to their businesses or results of operations. This market
volatility, as well as general domestic or international economic, market and
political conditions could materially adversely affect the market price of our
common stock without regard to our operating performance. In addition, as
occurred in the quarter ended September 30, 2000, our operating results may be
below the expectations of public market analysts and investors. If this were to
occur again, the market price of our common stock would likely decrease
significantly again. The market price of our common stock has fluctuated
significantly in the past and may continue to fluctuate significantly because
of:
- Market uncertainty about the company's business prospects as a result of
our ongoing reorganization and restructuring,
- Market uncertainty about the company's business prospects or the prospects
for the relational database management systems ("RDBMS") and
object-relational database management systems ("ORDBMS") markets, the
business intelligence software market and the electronic commerce software
solutions market,
- Revenues or results of operations that do not meet or exceed analysts'
expectations,
- The introduction of new products or product enhancements by us or our
competitors, and
- General business conditions in the software industry.
FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN CURRENCY
TRANSACTION LOSSES.
Despite efforts to manage foreign exchange risk, our hedging activities may
not adequately protect us against the risks associated with foreign currency
fluctuations. As a consequence, we may incur losses in connection with
fluctuations in foreign currency exchange rates. Most of our international
revenue and expenses are denominated in local currencies. Due to the substantial
volatility of currency exchange rates, among other factors, it is not possible
to predict the effect of exchange rate fluctuations on our future operating
results. Although we take into account changes in exchange rates over time in
our pricing strategy, we do so only on an annual basis, resulting in substantial
pricing exposure as a result of foreign exchange volatility during the period
between annual pricing reviews. In addition, as noted previously, the sales
cycles for our products is relatively long. Foreign currency fluctuations could,
therefore, result in substantial changes in the financial impact of a specific
transaction between the time of initial customer contact and revenue
recognition. We have implemented a foreign exchange hedging program consisting
principally of the purchase of forward foreign exchange contracts in the primary
European and Asian currencies. This program is intended to hedge the value of
intercompany accounts receivable or intercompany accounts payable denominated in
foreign currencies against fluctuations in exchange rates until such receivables
are collected or payables are disbursed. Additionally, uncertainties related to
the Euro conversion could adversely affect our hedging activities.
IF THE RDBMS AND THE ORDBMS MARKETS DECLINE OR DO NOT GROW, WE MAY SELL FEWER
DATABASE PRODUCTS AND OUR SEPARATE DATABASE OPERATING BUSINESS MAY BE UNABLE TO
SUSTAIN ITS CURRENT LEVEL OF OPERATIONS.
If the growth rates for RDBMS or ORDBMS, respectively, decline for any
reason, there will be less demand for Informix Software products, which would
have a negative impact on our business and financial results. In particular, we
cannot predict whether the sharp decline in revenue derived from licenses of
these products during the year ended December 31, 2000 will continue. If it
does, our financial results will be materially adversely affected. Declining
demand for such products could threaten Informix Software's ability to sustain
its present level of operations or to meet our expectations for future growth.
Delays in market acceptance of our ORDBMS products could also result in
fewer product sales. In recent years, the types and quantities of data required
to be stored and managed has grown increasingly complex and includes, in
addition to conventional character data, audio, video, text and
three-dimensional
29
graphics in a high-performance scaleable environment. We have invested
substantial resources in developing our ORDBMS product line. The market for
ORDBMS products is new and evolving, and its growth depends upon a growing need
to store and manage complex data and upon broader market acceptance of our
products as a solution for this need. Organizations may not choose to make the
transition from conventional RDBMS products to ORDBMS products.
IF THE BUSINESS INTELLIGENCE AND DATA WAREHOUSE MARKETS DO NOT CONTINUE TO GROW,
OR IF OUR PRODUCT OFFERINGS IN THESE MARKETS ARE NOT ACCEPTED, WE MAY NOT BE
ABLE TO SELL OUR PRODUCTS OR GROW OUR OPERATING BUSINESSES.
The business intelligence and data warehouse markets may not continue to
grow, or may not grow rapidly, and our customers may not expand their use of
data warehouse and business intelligence products. In addition, we may not be
able to market and sell our products in these markets or otherwise compete
effectively and generate significant revenue. Although demand for data warehouse
and business intelligence software has grown in recent years, the markets are
still emerging. Our future financial performance in this area and the success of
both of our operating businesses will depend to a large extent on:
- Continued growth in the number of organizations adopting data warehouses,
- Our success in developing partnering arrangements with developers of
software tools and applications for the data warehouse and business
intelligence markets,
- Existing customers expanding their use of data warehouses, and
- The success of Ascential Software in developing and selling solutions for
the business intelligence market.
INTENSE COMPETITION COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND
SOLUTIONS OR GROW OUR TWO OPERATING BUSINESSES.
We may not be able to compete successfully against current and/or future
competitors and such inability could impair our ability to sell our products.
The market for our products and solutions is highly competitive, diverse and is
subject to rapid change. In particular, we expect that the technology underlying
database solutions and products for the Internet and business intelligence needs
will continue to change rapidly. For example, as customers embrace the Internet,
Ascential Software will need to develop and enhance software solutions to
support Internet applications. It is possible that our products and solutions
will be rendered obsolete by technological advances. In addition, it is possible
that demand for our traditional database products may decline sharply as
customers demand more comprehensive software solutions, thereby jeopardizing our
ability to grow the business of Informix Software.
We currently face competition from a number of sources, including several
large vendors that develop and market databases, applications, development
tools, decision support products, consulting services and/ or complete
database-driven solutions for the Internet. Our principal competitors for
Informix Software include Computer Associates, IBM, Microsoft, NCR/Teradata,
Oracle and Sybase. Our principal competitors for Ascential Software include IBM,
Informatica, Bulldog, Hummingbird, Sagent, Cognos and Artesia and small,
highly-focused companies offering single products or services that we include as
part of an overall solution. A number of our competitors have significantly
greater financial, technical, marketing and other resources than we have. As a
result, these competitors may be able to respond more quickly to new or emerging
technologies, evolving markets and changes in customer requirements or to devote
greater resources to the development, promotion and sale of their products than
we can.
30
IF THE INTERNET DOES NOT DEVELOP AS A MARKET FOR OUR SOLUTIONS OFFERINGS, WE MAY
NOT BE ABLE TO GROW ASCENTIAL SOFTWARE INTO A VIABLE INDEPENDENT OPERATING
BUSINESS.
The Internet is a rapidly evolving market. We are unable to predict whether
and to what extent Internet computing and electronic commerce will be embraced
by consumers and traditional businesses. Our successful introduction of
database-driven products and solutions for the Internet market will depend in
large measure on:
- The commitment by hardware and software vendors to manufacture, promote
and distribute Internet access appliances,
- The lower cost of ownership of Internet computing relative to
client/server architecture, and
- The ease of use and administration of the Internet relative to
client/server architecture.
In addition, if a sufficient number of vendors do not undertake a commitment
to the internet, the market may not accept Internet computing or Internet
computing may not generate significant revenues for our business. Also,
standards for network protocols, as well as other industry-adopted and de facto
standards for the Internet, are evolving rapidly. There can be no assurance that
standards we have chosen will position our products to compete effectively for
business opportunities as they arise on the Internet. The widespread acceptance
and adoption of the Internet by traditional businesses for conducting business
and exchanging information is likely only if the Internet provides these
businesses with greater efficiencies and improvements. The failure of the
Internet to continue to develop as a commercial or business medium could
materially adversely affect our business.
Even if the Internet and electronic commerce are widely accepted and adopted
by consumers and businesses, our database-driven solutions for the Internet may
not succeed. This market is new to our product development, marketing and sales
organizations. We may not be able to market and sell products and solutions in
this market successfully. In addition, our database-driven solutions for the
Internet may not compete effectively with our competitors' products and
solutions. Further, we may not generate significant revenue and/or margin in
this market. Any of these events could materially, adversely affect our
business, operating results and financial condition and our ability to create a
separate, viable operating company.
COMPETITION MAY AFFECT THE PRICING OF OUR PRODUCTS OR SERVICES, AND CHANGES IN
PRODUCT MIX MAY OCCUR, EITHER OF WHICH MAY REDUCE OUR MARGINS.
Existing and future competition or changes in our product or service pricing
structure or product or service offerings could result in an immediate reduction
in the prices of our products or services. Also, a significant change in the mix
of software products and services that we sell, including the mix between higher
margin software and maintenance products and lower margin consulting and
training, could materially adversely affect our operating results for future
quarters. In addition, the pricing strategies of competitors in the software
database industry have historically been characterized by aggressive price
discounting to encourage volume purchasing by customers. We may not be able to
compete effectively against competitors who continue to aggressively discount
the prices of their products.
IF WE DO NOT RESPOND ADEQUATELY TO OUR INDUSTRY'S EVOLVING TECHNOLOGY STANDARDS
OR DO NOT CONTINUE TO MEET THE SOPHISTICATED NEEDS OF OUR CUSTOMERS, SALES OF
OUR SOLUTIONS OR PRODUCTS MAY DECLINE.
Our future success will depend on our ability to address the increasingly
sophisticated needs of our customers by supporting existing and emerging
hardware, software, database and networking platforms. We will have to develop
and introduce commercially viable enhancements to our existing products and
solutions on a timely basis to keep pace with technological developments,
evolving industry standards and changing customer requirements. If we do not
enhance our products to meet these evolving needs, we will not sell as many
products and solutions and our position in existing, emerging or potential
markets could
31
be eroded rapidly by product advances. In addition, commercial acceptance of our
products and solutions could also be adversely affected by critical or negative
statements or reports by brokerage firms, industry and financial analysts and
industry periodicals about us, our products or business, or by the advertising
or marketing efforts of competitors, or by other factors that could adversely
affect consumer perception.
Our product development efforts will continue to require substantial
financial and operational investment. We may not have sufficient resources to
make the necessary investment or to attract and retain qualified software
development engineers. In addition, we may not be able to internally develop new
products or solutions quickly enough to respond to market forces. As a result,
we may have to acquire technology or access to products or solutions through
mergers and acquisitions, investments and partnering arrangements. We may not
have sufficient cash, access to funding, or available equity to engage in such
transactions. Moreover, we may not be able to forge partnering arrangements or
strategic alliances on satisfactory terms, or at all, with the companies of our
choice.
IF A LARGE NUMBER OF THE ORDERS THAT ARE TYPICALLY BOOKED AT THE END OF A
QUARTER ARE NOT BOOKED, OUR NET INCOME FOR THAT QUARTER COULD BE SUBSTANTIALLY
REDUCED.
Our software license revenue in any quarter often depends on orders booked
and shipped in the last month, weeks or days of that quarter. At the end of each
quarter, we typically have either minimal or no backlog of orders for the
subsequent quarter. If a large number of orders or several large orders do not
occur or are deferred, revenue in that quarter could be substantially reduced.
SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS COULD ADVERSELY AFFECT OUR
QUARTERLY OPERATING RESULTS AND LENGTHY SALES CYCLES FOR PRODUCTS MAKES REVENUES
SUSCEPTIBLE TO FLUCTUATIONS.
Our sales of software products have been affected by seasonal purchasing
trends that materially affect our quarter-to-quarter operating results. We
expect these seasonal trends to continue in the future. Revenue and operating
results in our quarter ending December 31 are typically higher relative to other
quarters because many customers make purchase decisions based on their calendar
year-end budgeting requirements and because we measure our sales incentive plans
for sales personnel on a calendar year basis. As a result, we have historically
experienced a substantial decline in revenue in the first quarter of each fiscal
year relative to the preceding quarter.
Our sales cycles typically take many months to complete and vary depending
on the product, service or solution that is being sold. The length of the sales
cycle may vary depending on a number of factors over which we have little or no
control, including the size of a potential transaction and the level of
competition that we encounter in our selling activities. The sales cycle can be
further extended for sales made through third party distributors.
OUR FUTURE REVENUE AND OUR ABILITY TO MAKE INVESTMENTS IN DEVELOPING OUR
PRODUCTS IS SUBSTANTIALLY DEPENDENT UPON OUR INSTALLED CUSTOMER BASE CONTINUING
TO LICENSE OUR PRODUCTS AND RENEW OUR SERVICE AGREEMENTS.
We depend on our installed customer base for future revenue from services
and licenses of additional products. If our customers fail to renew their
maintenance agreements, our revenue will be harmed. The maintenance agreements
are generally renewable annually at the option of the customers and there are no
minimum payment obligations or obligations to license additional software.
Therefore, current customers may not necessarily generate significant
maintenance revenue in future periods. In addition, customers may not
necessarily purchase additional products or services. Our services revenue and
maintenance revenue also depend upon the continued use of these services by our
installed customer base. Any downturn in software license revenue could result
in lower services revenue in future quarters. Moreover, if either license
revenue or revenue from services declines, we may not have sufficient cash to
finance investments or acquire technology.
32
THE SUCCESS OF OUR INTERNATIONAL OPERATIONS IS DEPENDENT UPON MANY FACTORS WHICH
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS INTERNATIONALLY AND
COULD AFFECT OUR PROFITABILITY.
International sales represented approximately 50% of our total revenue
during the year ended December 31, 2000. The international operations are, and
any expanded international operations will be, subject to a variety of risks
associated with conducting business internationally that could adversely affect
our ability to sell our products internationally, and therefore, our
profitability, including the following:
- Difficulties in staffing and managing international operations,
- Problems in collecting accounts receivable,
- Longer payment cycles,
- Fluctuations in currency exchange rates,
- Seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world,
- Uncertainties relative to regional, political and economic circumstances,
- Recessionary environments in foreign economies, and
- Increases in tariffs, duties, price controls or other restrictions on
foreign currencies or trade barriers imposed by foreign countries.
IF WE FAIL TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, COMPETITORS MAY BE ABLE
TO USE OUR TECHNOLOGY OR TRADEMARKS AND THIS WOULD WEAKEN OUR COMPETITIVE
POSITION, REDUCE OUR REVENUE AND INCREASE COSTS.
Our success will continue to be heavily dependent upon proprietary
technology. We rely primarily on a combination of patent, copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect our proprietary rights. These means of protecting
proprietary rights may not be adequate, and the inability to protect
intellectual property rights may adversely affect our business and/or financial
condition. We currently hold 18 United States patents and several pending
applications. There can be no assurance that any other patents covering our
inventions will be issued or that any patent, if issued, will provide
sufficiently broad protection or will prove enforceable in actions against
alleged infringes. Our ability to sell our products and prevent competitors from
misappropriating our proprietary technology and trade names is dependent upon
protecting our intellectual property. Our products are generally licensed to
end-users on a "right-to-use" basis under a license that restricts the use of
the products for the customer's internal business purposes. We also rely on
"shrink-wrap" and "click-wrap" licenses, which include a notice informing the
end-user that by opening the product packaging, or in the case of a click-on
license by clicking on an acceptance icon and downloading the product, the
end-user agrees to be bound by the license agreement. Despite such precautions,
it may be possible for unauthorized third parties to copy aspects of our current
or future products or to obtain and use information that is regarded as
proprietary. In addition, we have licensed the source code of our products to
certain customers under certain circumstances and for restricted uses. In
addition, we have also entered into source code escrow agreements with a number
of our customers that generally require release of source code to the customer
in the event the company enters bankruptcy or liquidation proceedings or
otherwise ceases to conduct business. We may also be unable to protect our
technology because:
- Competitors may independently develop similar or superior technology,
- Policing unauthorized use of software is difficult,
- The laws of some foreign countries do not protect proprietary rights in
software to the same extent as do the laws of the United States,
33
- "Shrink-wrap" and/or "click-wrap" licenses may be wholly or partially
unenforceable under the laws of certain jurisdictions, and
- Litigation to enforce intellectual property rights, to protect trade
secrets, or to determine the validity and scope of the proprietary rights
of others could result in substantial costs and diversion of resources.
IN THE FUTURE, THIRD PARTIES COULD, FOR COMPETITIVE OR OTHER REASONS, ASSERT
THAT OUR PRODUCTS INFRINGE THEIR INTELLECTUAL PROPERTY RIGHTS.
As discussed in "Notes to the Consolidated Financial Statements--Note
12--Litigation," in February 2000, IBM filed a lawsuit against us claiming that
some of our products infringe certain of IBM's patents ("IBM claim"). Although
we dispute IBM's claims and intend to vigorously defend against them, other
third parties may claim that our current or future products infringe their
proprietary rights. The IBM claim and these other claims, with or without merit,
could harm our business by increasing costs and by adversely affecting our
ability to sell our products. Any such claim, including the IBM claim, with or
without merit, could be time consuming to defend, result in costly litigation,
cause product shipment delays or require us to enter into royalty or licensing
agreements. Royalty or license agreements may not be available on acceptable
terms or at all. It is expected that software product developers will
increasingly be subject to infringement claims as the number of products and
competitors in the software industry segment grows and the functionality of
products in different industry segments overlaps.
OUR INABILITY TO RELY ON THE STATUTORY "SAFE HARBOR" AS A RESULT OF THE
SETTLEMENT OF THE SEC INVESTIGATION COULD HARM OUR BUSINESS.
In July 1997, the SEC issued a formal order of private investigation against
us and certain unidentified other entities and persons with respect to
accounting matters, public disclosures and trading activity in our securities
that were not described in the formal order. During the course of the
investigation, we learned that the investigation concerned the events leading to
the restatement of its financial statements, including fiscal years 1994, 1995
and 1996, that was publicly announced in November 1997.
Effective January 11, 2000, the SEC and we entered into a settlement of the
investigation against us. Pursuant to the settlement, we consented to the entry
by the SEC of an Order Instituting Public Administrative Proceedings Pursuant to
Section 8A of the Securities Act of 1933 and Section 21C of the Securities
Exchange Act of 1934, Making Findings, and Imposing a Cease and Desist Order.
Pursuant to the order, we neither admitted nor denied the findings, except as to
jurisdiction, contained in the order.
The order prohibits us from violating and causing any violation of the
anti-fraud provisions of the federal securities laws, for example by making
materially false and misleading statements concerning its financial performance.
The order also prohibits us from violating or causing any violation of the
provisions of the federal securities laws requiring us to: (1) file accurate
quarterly and annual reports with the SEC; (2) maintain accurate accounting
books and records; and (3) maintain adequate internal accounting controls.
Pursuant to the order, we are also required to cooperate in the SEC's continuing
investigation of other entities and persons. In the event that we violate the
order, we could be subject to substantial monetary penalties.
As a consequence of the issuance of the January 2000 order, we will not, for
a period of three years from the date of the issuance of the order, be able to
rely on the "safe harbor" for forward-looking statements contained in the
federal securities laws. The "safe harbor," among other things, limits potential
legal actions against us in the event a forward-looking statement concerning our
anticipated performance turns out to be inaccurate, unless it can be proved
that, at the time the statement was made, we actually knew that the statement
was false. If we become a defendant in any private securities litigation brought
under the federal securities laws, our legal position in the litigation could be
materially adversely affected by our inability to rely on the "safe harbor"
provisions for forward-looking statements.
34
OTHER PROVISIONS IN OUR CHARTER DOCUMENTS MAY DISCOURAGE POTENTIAL ACQUISITION
BIDS AND PREVENT CHANGES IN OUR MANAGEMENT THAT OUR STOCKHOLDERS MAY FAVOR.
Other provisions in our charter documents could discourage potential
acquisition proposals and could delay or prevent a change in control transaction
that our stockholders may favor. The provisions include:
- Elimination of the right of stockholders to act without holding a meeting,
- Certain procedures for nominating directors and submitting proposals for
consideration at stockholder meetings, and
- A board of directors divided into three classes, with each class standing
for election once every three years.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board of directors and in the policies
formulated by the board of directors and to discourage certain types of
transactions involving an actual or threatened change of control. These
provisions are designed to reduce our vulnerability to an unsolicited
acquisition proposal and, accordingly, could discourage potential acquisition
proposals and could delay or prevent a change in control. Such provisions are
also intended to discourage certain tactics that may be used in proxy fights but
could, however, have the effect of discouraging others from making tender offers
for shares of our common stock, and consequently, may also inhibit fluctuations
in the market price of our common stock that could result from actual or rumored
takeover attempts. These provisions may also have the effect of preventing
changes in our management.
In addition, we have adopted a rights agreement, commonly referred to as a
"poison pill," that grants holders of our common stock preferential rights in
the event of an unsolicited takeover attempt. These rights are denied to any
stockholder involved in the takeover attempt and this has the effect of
requiring cooperation with our board of directors. This may also prevent an
increase in the market price of our common stock resulting from actual or
rumored takeover attempts. The rights agreement could also discourage potential
acquirers from making unsolicited acquisition bids.
DELAWARE LAW MAY INHIBIT POTENTIAL ACQUISITION BIDS, WHICH MAY ADVERSELY AFFECT
THE MARKET PRICE FOR OUR COMMON STOCK AND PREVENT CHANGES IN ITS MANAGEMENT THAT
OUR STOCKHOLDERS MAY FAVOR.
We are incorporated in Delaware and are subject to the anti-takeover
provisions of the Delaware General Corporation Law, which regulates corporate
acquisitions. Delaware law prevents certain Delaware corporations, including
those corporations, such as Informix, whose securities are listed for trading on
the Nasdaq National Market, from engaging, under certain circumstances, in a
"business combination" with any "interested stockholder" for three years
following the date that the stockholder became an interested stockholder. For
purposes of Delaware law, a "business combination" would include, among other
things, a merger or consolidation involving Informix and an interested
stockholder and the sale of more than 10% of our assets. In general, Delaware
law defines an "interested stockholder" as any entity or person beneficially
owning 15% or more of the outstanding voting stock of a corporation and any
entity or person affiliated with or controlling or controlled by such entity or
person. Under Delaware law, a Delaware corporation may "opt out" of the
anti-takeover provisions. We do not intend to "opt out" of these anti-takeover
provisions of Delaware law.
PROVISIONS IN OUR CHARTER DOCUMENTS WITH RESPECT TO UNDESIGNATED PREFERRED STOCK
MAY DISCOURAGE POTENTIAL ACQUISITION BIDS FOR INFORMIX.
Our board of directors is authorized to issue up to approximately 4,000,000
shares of undesignated preferred stock in one or more series. Our board of
directors can fix the price, rights, preferences, privileges and restrictions of
such preferred stock without any further vote or action by its stockholders.
However, the issuance of shares of preferred stock may delay or prevent a change
in control transaction without further action by our stockholders. As a result,
the market price of our common stock and the
35
voting and other rights of the holders of our common stock may be adversely
affected. The issuance of preferred stock with voting and conversion rights may
adversely affect the voting power of the holders of our common stock, including
the loss of voting control to others.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is set forth in the section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations Captioned "Disclosures about Market Rate Risk."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in our Financial
Statements and Notes thereto beginning at page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
36
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors and executive officers required by Item
10 is incorporated by reference from our definitive proxy statement for our
annual stockholders' meeting to be held on June 4, 2001.
The information regarding executive officers required by Item 10 is provided
in Item 1--Business.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from our
definitive proxy statement for our annual stockholders' meeting to be held on
June 4, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from our
definitive proxy statement for our annual stockholders' meeting to be held on
June 4, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from our
definitive proxy statement for our annual stockholders' meeting to be held on
June 4, 2001.
37
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following are filed as a part of this Annual Report and included in Item
8:
(A) 1. FINANCIAL STATEMENTS
PAGE
--------
Report of Independent Auditors--KPMG LLP.................... F-2
Report of Independent Auditors--Deloitte & Touche LLP....... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Operations....................... F-5
Consolidated Statements of Cash Flows....................... F-6
Consolidated Statements of Stockholders' Equity............. F-7
Notes to Consolidated Financial Statements.................. F-9
(A) 2. FINANCIAL STATEMENT SCHEDULE
Schedule II--Valuation and Qualifying Accounts.............. F-43
(A) 3. EXHIBITS
EXHIBIT NO. EXHIBIT TITLE
- ----------- ------------------------------------------------------------
3.1 (3) Certificate of Incorporation of the Registrant, as amended
3.2 (a)(3) Bylaws of the Registrant, as amended
3.2 (b)(25) Amendment to Bylaws, dated April 24, 1998
3.2 (c)(2) Amendment to Bylaws, dated June 19, 1998
3.2 (d)(2) Amendment to Bylaws, dated July 15, 1998
3.2 (e)(27) Amendment to Bylaws, dated April 30, 1999
3.2 (f)(28) Amendment to Bylaws, dated August 16, 1999
3.2 (g)(29) Amendment to Bylaws, dated November 15, 1999
3.2 (h)(31) Amendment to Bylaws, dated March 16, 2000
3.2 (i)(32) Amendment to Bylaws, dated June 13, 2000
3.2 (j)(33) Amendment to Bylaws, dated September 18, 2000
3.2 (k)(1) Amendment to Bylaws, dated December 12, 2000
3.3 (5) Certificate of Designation of Series B Convertible Preferred
Stock
4.1 (6) First Amended and Restated Rights Agreement, dated as of
August 12, 1997, between the Registrant and BankBoston N.A.,
including the form of Rights Certificate attached thereto as
Exhibit A
4.2 (7) Amendment, dated as of November 17, 1997, to the First
Amended and Restated Rights Agreement between the Registrant
and BankBoston, N.A.
10.1 (2) Form of Change of Control Agreement
10.2 (9) Form of Amended Indemnity Agreement
10.3 (10) 1989 Outside Directors Stock Option Plan
10.4 (25) Amendment to the 1989 Outside Directors Stock Option Plan
10.5 (2) Form of Nonqualified Stock Option Agreement under the
Registrant's 1989 Outside Director's Stock Option Plan
38
EXHIBIT NO. EXHIBIT TITLE
- ----------- ------------------------------------------------------------
10.6 (12) 1986 Stock Option Plan, as amended
10.7 (13) 1994 Stock Option and Award Plan
10.8 (25) Form of Stock Option Agreement and Performance Award
Agreement under the Registrant's 1994 Stock Option and Award
Plan
10.9 (13) Form of Nonqualified Stock Option Agreement under the
Registrant's 1994 Stock Option Plan
10.10(14) 1997 Employee Stock Purchase Plan
10.11(2) Enrollment/Change Form under the Registrant's 1997 Employee
Stock Purchase Plan
10.12(15) Employment Agreement, dated July 18, 1997, between the
Registrant and Robert J. Finocchio, Jr.
10.14(15) Offer of Employment Letter, dated September 24, 1997, from
the Registrant to Jean-Yves Dexmier
10.23(5) Securities Purchase Agreement, dated as of November 17,
1997, between the Company and the purchasers listed therein
10.24(5) Registration Rights Agreement, dated as of November 17,
1997, between the Company and the purchasers listed therein
10.25(8) Menlo Oaks Corporate Center Standard Business Lease, dated
May 16, 1985, between the Registrant and Amarok Bredero
Partners for office space at 4100 Bohannon Drive, Menlo
Park, California
10.26(8) Lease Amendment #1, dated July 2, 1986, between the
Registrant and Amarok Bredero Partners for office space at
4100 Bohannon Drive, Menlo Park, California
10.27(18) Second Amendment to Lease, dated November 7, 1986 between
the Registrant and Amarok Bredero Partners for office space
at 4100 Bohannon Drive, Menlo Park, California
10.28(19) Third Amendment to Lease, dated June 18, 1991, between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4100 Bohannon Drive, Menlo Park, California
10.29(2) Fourth Amendment to Lease, dated June 30, 1997, between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4100 Bohannon Drive, Menlo Park, California
10.30(9) Menlo Oaks Corporate Center Standard Business Lease, dated
September 4, 1987 between the Registrant and Menlo Oaks
Partners, L.P. for office space at 4300/4400 Bohannon Drive,
Menlo Park, California
10.31(2) Side Letter Agreement, dated August 31, 1987, between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4300/4400 Bohannon Drive, Menlo Park, California
10.32(2) Side Letter Agreement, dated October 27, 1987, between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4300/4400 Bohannon Drive, Menlo Park, California
10.33(19) First Amendment to Lease, dated June 18, 1991, between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4300/4400 Bohannon Drive, Menlo Park, California
10.34(20) Second Amendment to Lease, dated July 17, 1992, between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4300/4400 Bohannon Drive, Menlo Park, California
10.35(2) Third Amendment to Lease, dated June 8, 1993 between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4300/4400 Bohannon Drive, Menlo Park, California
39
EXHIBIT NO. EXHIBIT TITLE
- ----------- ------------------------------------------------------------
10.36(21) Fourth Amendment to Lease, dated February 10, 1994, between
the Registrant and Menlo Oaks Partners, L.P. for office
space at 4300/4400 Bohannon Drive, Menlo Park, California
10.37(2) Fifth Amendment to Lease, dated June 30, 1997 between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4300/4400 Bohannon Drive, Menlo Park, California
10.38(21) Menlo Oaks Corporate Center Standard Business Lease, dated
February 10, 1994 between the Registrant and Menlo Oaks
Partners, L.P. for office space at 4600/4700 Bohannon Drive,
Menlo Park, California
10.39(21) First Amendment to Lease, dated March 17, 1994, between the
Registrant and Menlo Oaks Partners, L.P. for office space at
4600/4700 Bohannon Drive, Menlo Park, California
10.40(2) Second Amendment to Lease, dated September 22, 1994, between
the Registrant and Menlo Oaks Partners, L.P. for office
space at 4600/4700 Bohannon Drive, Menlo Park, California
10.41(2) Third Amendment to Lease, dated December 28, 1994, between
the Registrant and Menlo Oaks Partners, L.P. for office
space at 4600/4700 Bohannon Drive, Menlo Park, California
10.42(9) Office Lease, dated August 15, 1987, between the Registrant
and Southlake Partners #1 for office space at 15961 College
Blvd. and 11170 Lakeview Avenue, Lenexa, Kansas
10.43(2) First Amendment to Office Lease, dated April 15, 1988,
between the Registrant and Southlake Partners #1 for office
space at 15901 College Blvd., Lenexa, Kansas
10.44(2) Amendment to Office Lease, dated October 20, 1997, between
the Registrant and Southlake Partners #1 for office space at
15901 College Blvd. (now 16011 College Blvd) Lenexa, Kansas
10.45(2) Office Lease, dated October 20, 1997, between the Registrant
and Southlake Partners #1 for office space at 11170 Lakeview
Avenue, Lenexa, Kansas
10.46(2) Senior Secured Credit Agreement, dated December 31, 1997,
among Informix Software, Inc., certain banks and other
financial institutions that either now or in the future are
parties to the agreement, BankBoston, N.A. and Canadian
Imperial Bank of Commerce
10.47(2) Pledge Agreement, dated December 31, 1997, by and between
the Registrant and BankBoston, N.A.
10.48(2) Pledge and Security Agreement, dated as of December 31,
1997, between Informix Software, Inc. and BankBoston, N.A.
10.49(2) Continuing Guaranty, dated as of December 31, 1997, by the
Registrant
10.50(25) 1997 Non-Statutory Stock Option Plan and form of Stock
Option Agreement thereunder
10.52(25) Offer of Employment Letter, dated January 19, 1998, from the
Registrant to Gary Lloyd
10.54(26) Offer of Employment Letter, dated December 16, 1998, from
the Registrant to Howard A. Bain, III
10.55(25) Office Lease, dated November 10, 1994, between WVP Income
Plus III and Siebel Systems, L.P. (assigned to Informix
Corporation) for office space at 4005 Bohannon Drive,
including addenda and amendments thereto.
10.56(25) Office Lease, dated April 10, 1995, between the Registrant
and 3905 Bohannon Partners for office space at 3905 Bohannon
Drive, including addenda thereto.
10.57(1) 1998 Non-Statutory Stock Option Plan, as amended
40
EXHIBIT NO. EXHIBIT TITLE
- ----------- ------------------------------------------------------------
10.58(30) Informix Corporation Change of Control and Severance
Agreement, dated December 17, 1999, between the Registrant
and F. Steven Weick
10.59(30) Informix Corporation Change of Control and Severance
Agreement, dated December 15, 1999, between the Registrant
and Wayne E. Page
10.60(30) Informix Corporation Change of Control and Severance
Agreement, dated December 16, 1999, between the Registrant
and Jean-Yves F. Dexmier
10.61(30) Informix Corporation Change of Control and Severance
Agreement, dated December 15, 1999, between the Registrant
and Gary Lloyd
10.62(30) Informix Corporation Change of Control and Severance
Agreement, dated December 12, 1999, between the Registrant
and James F. Hendrickson
10.63(30) Informix Corporation Change of Control and Severance
Agreement, dated December 15, 1999, between the Registrant
and Charles W. Chang
10.64(30) Informix Corporation/Robert J. Finocchio, Jr. Employment
Transition Agreement, dated July 16, 1999, between the
Registrant and Robert J. Finocchio, Jr.
10.65(30) Separation Agreement and Release of Claims, dated
November 23, 1999, between the Registrant and Stephanie P.
Schwartz
10.66(30) Separation Agreement and Release of Claims, dated
December 23, 1999, between the Registrant and Diane L.
Fraiman
10.67(31) Employment Agreement, dated February 3, 2000, between the
Registrant and James Foy
10.68(31) Part-Time Employment and Transition Agreement between the
Registrant and Peter Gyenes
10.69(31) Separation Agreement, dated March 20, 2000, between the
Registrant and Howard A. Bain III
10.70(31) Offer of Employment Letter, dated March 9, 2000, from the
Registrant to Laurent Mayer
10.71(32) Offer of Employment Letter, dated May 22, 2000, from the
Registrant to Yon Yoon Jorden
10.72(33) Offer of Employment Letter, dated July 31, 2000, between the
Registrant and Peter Gyenes
10.73(33) Informix Corporation Change of Control and Severance
Agreement, effective August 28, 2000, between the Registrant
and Peter Gyenes
10.74(33) Informix Corporation Change of Control and Severance
Agreement, effective October 3, 2000, between the Registrant
and Jamie Arnold
10.75(33) Indemnity Agreement, dated September 14, 2000, between the
Registrant and Peter Gyenes
10.76(33) Indemnity Agreement, dated October 3, 2000, between the
Registrant and Jamie Arnold
10.77(33) Settlement Agreement and General Release, effective
July 12, 2000, between the Registrant and Jean Yves Dexmier
10.78(33) Separation Agreement, effective September 30, 2000, between
the Registrant and F. Steven Weick
10.79(1) Separation Agreement, effective December 19, 2000, between
the Registrant and Wayne E. Page
10.80(34) Settlement Agreement, effective January 11, 2000, between
the Registrant and the Securities and Exchange Commission
41
EXHIBIT NO. EXHIBIT TITLE
- ----------- ------------------------------------------------------------
10.81(1) Fourth Addendum to Industrial Real Estate Lease, dated
December 15, 2000, between Registrant and 3905 Bohannon
Partners for office space at 3905 Bohannon Drive, Menlo
Park, California
21.1 (1) Subsidiaries of the Registrant
23.1 (1) Consent of KPMG LLP, Independent Auditors
23.2 (1) Consent of Deloitte & Touche LLP, Independent Auditors
24.1 (2) Power of Attorney (set forth on signature page)
- ------------------------------
(1) Filed herewith
(2) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1 (333-43991)
(3) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended July 2, 1995
(4) Incorporated by reference to exhibits filed with the Registrant's report on
Form 8-K filed with the Commission on August 25, 1997
(5) Incorporated by reference to exhibits filed with the Registrant's report on
Form 8-K filed with the Commission on December 4, 1997
(6) Incorporated by reference to exhibits filed with the amendment to the
Registrant's Registration Statement on Form 8-A/A (File No. 000-15325)
filed with the Commission on September 3, 1997
(7) Incorporated by reference to exhibits filed with the amendment to the
Registrant's Registration Statement on Form 8-A/A (File No. 000-15325)
filed with the Commission on December 3, 1997
(8) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1 (File No. 33-8006)
(9) Incorporated by reference to exhibit filed with the Registrant's annual
report on Form 10-K for the fiscal year ended December 31, 1988
(10) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8 (File No. 33-31116)
(11) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8 (File No. 33-50608)
(12) Incorporated by reference to exhibits filed with Registrant's Registration
Statements on Form S-8 (File Nos: 33-22862, 33-31117 and 33-506-10)
(13) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-31369) filed with the
Commission on July 16, 1997
(14) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-31371) filed with the
Commission on July 16, 1997
(15) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended September 28, 1997
(16) Incorporated by reference to exhibits filed with Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1989
(17) Incorporated by reference to exhibits filed with Registrant's report on
Form 8-K filed with the Commission on December 2, 1997
(18) Incorporated by reference to exhibits filed with Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1986
(19) Incorporated by reference to exhibits filed with Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1991
(20) Incorporated by reference to exhibits filed with Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1992
(21) Incorporated by reference to exhibits filed with Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1993
42
(22) Incorporated by reference to exhibits filed with the Registrant's amendment
to its annual report on Form 10-K/A for the fiscal year ended December 31,
1996 filed with the Commission on November 18, 1997
(23) Incorporated by reference to exhibits filed with the Registrant's annual
report on Form 10-K for the fiscal year ended December 31, 1996
(24) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8 (File no. 333-61843) filed with the
Commission on August 19, 1998
(25) Incorporated by reference to exhibits filed with the Registrant's annual
report on Form 10-K for the fiscal year ended December 31, 1997
(26) Incorporated by reference to exhibits filed with the Registrant's annual
report on Form 10-K for the fiscal year ended December 31, 1998
(27) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended May 17, 1999
(28) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended August 16, 1999
(29) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended November 15, 1999
(30) Incorporated by reference to exhibits filed with the Registrant's annual
report on Form 10-K for fiscal year ended December 31, 1999
(31) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended March 31, 2000
(32) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended June 20, 2000
(33) Incorporated by reference to exhibits filed with the Registrant's quarterly
report on Form 10-Q for the fiscal quarter ended September 30, 2000
(34) Incorporated by reference to exhibits filed with the Registrant's report on
Form 8-K filed with the Commission on January 19, 2000
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable.
(b) Reports on Form 8-K
None
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Menlo Park, State of California, on the 23rd day of
March, 2001.
INFORMIX CORPORATION
By: /s/ PETER GYENES
--------------------------------------------
Peter Gyenes
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS PETER GYENES AND GARY LLOYD AND EACH ONE
OF THEM, ACTING INDIVIDUALLY AND WITHOUT THE OTHER, AS HIS ATTORNEY-IN-FACT,
EACH WITH FULL POWER OF SUBSTITUTION, FOR HIM IN ANY AND ALL CAPACITIES, TO SIGN
ANY AND ALL 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 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 ON FORM 10-K HAS BEEN SIGNED ON BEHALF OF THE REGISTRANT BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ PETER GYENES
------------------------------------ President, Chief Executive Officer and March 23, 2001
(Peter Gyenes) Chairman of the Board of Directors
/s/ JAMES ROBERT ARNOLD, JR.
------------------------------------ Vice President and Chief Financial March 23, 2001
(James Robert Arnold, Jr.) Officer (Principal Financial Officer)
/s/ LESLIE G. DENEND
------------------------------------ Director March 23, 2001
(Leslie G. Denend)
/s/ JAMES L. KOCH
------------------------------------ Director March 23, 2001
(James L. Koch)
/s/ THOMAS A. MCDONNELL
------------------------------------ Director March 23, 2001
(Thomas A. McDonnell)
/s/ ROBERT M. MORRILL
------------------------------------ Director March 23, 2001
(Robert M. Morrill)
44
INFORMIX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------
Report of Independent Auditors--KPMG LLP.................... F-2
Report of Independent Auditors--Deloitte & Touche LLP....... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Operations....................... F-5
Consolidated Statements of Cash Flows....................... F-6
Consolidated Statements of Stockholders' Equity............. F-7
Notes to Consolidated Financial Statements.................. F-9
F-1
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders--
Informix Corporation
We have audited the accompanying consolidated balance sheets of Informix
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 2000. The
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements based on our audits. We did not audit the financial
statements of Ardent Software, Inc., a company acquired by Informix Corporation
in a business combination accounted for as a pooling-of-interests as described
in Note 11 to the consolidated financial statements, which statements reflect
total revenues constituting 16% and 14% in fiscal 1999 and 1998, respectively,
of the consolidated totals. Those financial statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Ardent Software, Inc., is based solely on
the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 and the report of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Informix Corporation and
subsidiaries as of December 31, 2000 and 1999 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Mountain View, California
January 24, 2001
F-2
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INFORMIX CORPORATION:
We have audited the consolidated balance sheets of Ardent Software, Inc. and
its subsidiaries as of December 31, 1999 (not included separately herein), and
the related consolidated statements of operations, stockholders' equity,
comprehensive income (loss), and cash flows for each of the two years in the
period ended December 31, 1999 (not included separately herein). These financial
statements 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 auditing standards generally
accepted in the United States of America. 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, based on our audits, such consolidated financial statements
present fairly, in all material respects, the financial position of the Company
and its subsidiaries at December 31, 1999, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States of America.
As discussed in Note 1 to those financial statements, on March 1, 2000,
Ardent Software, Inc. and its subsidiaries merged into Informix Corporation. The
consolidated financial statements do not include any adjustments that might
result from such event.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 28, 2000 (March 1, 2000 as to Note 1,
"Merger with Informix Corporation")
F-3
INFORMIX CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31,
---------------------
2000 1999
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 128,420 $ 170,118
Short-term investments.................................... 88,541 102,469
Accounts receivable, net.................................. 235,429 247,196
Deferred taxes............................................ -- 5,544
Other current assets...................................... 17,330 38,056
--------- ---------
Total current assets........................................ 469,720 563,383
--------- ---------
PROPERTY AND EQUIPMENT, net................................. 67,617 68,581
SOFTWARE COSTS, net......................................... 41,444 45,722
LONG-TERM INVESTMENTS....................................... 11,185 17,272
INTANGIBLE ASSETS, net...................................... 48,258 81,843
OTHER ASSETS................................................ 17,657 16,536
--------- ---------
Total Assets................................................ $ 655,881 $ 793,337
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 27,881 $ 30,694
Accrued expenses.......................................... 38,922 48,353
Accrued employee compensation............................. 66,167 70,875
Income taxes payable...................................... 23,139 21,803
Deferred revenue.......................................... 141,735 147,118
Advances from customers................................... 10,492 34,302
Accrued merger, realignment and other charges............. 28,210 8,675
Other current liabilities................................. 427 3,878
--------- ---------
Total current liabilities................................... 336,973 365,698
--------- ---------
OTHER NON-CURRENT LIABILITIES............................... 787 1,420
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share--5,000,000
shares authorized....................................... -- --
Series A-1 convertible preferred stock, 300,000 shares
issued; none outstanding in 2000 and 1999............. -- --
Series B convertible preferred stock--50,000 shares
issued; none outstanding in 2000 and 7,000 outstanding
in 1999............................................... -- --
Common stock, par value $.01 per share--500,000,000 shares
authorized; 280,363,000 and 275,594,000 shares issued
and outstanding in 2000 and 1999, respectively.......... 2,804 2,756
Shares to be issued for litigation settlement............. 61,228 61,228
Additional paid-in capital................................ 632,866 632,536
Treasury stock............................................ -- (2,956)
Accumulated deficit....................................... (359,132) (260,817)
Accumulated other comprehensive loss...................... (19,645) (6,528)
--------- ---------
Total stockholders' equity.................................. 318,121 426,219
--------- ---------
Total Liabilities and Stockholders' Equity.................. $ 655,881 $ 793,337
========= =========
See Notes to Consolidated Financial Statements.
F-4
INFORMIX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31,
----------------------------------
2000 1999 1998
---------- ---------- --------
NET REVENUES
Licenses................................................. $ 404,421 $ 535,879 $453,943
Services................................................. 524,898 503,232 400,577
---------- ---------- --------
929,319 1,039,111 854,520
COSTS AND EXPENSES
Cost of software distribution............................ 50,422 50,157 41,996
Cost of services......................................... 184,581 207,979 178,458
Sales and marketing...................................... 402,569 370,701 313,642
Research and development................................. 166,076 188,105 167,167
General and administrative............................... 100,027 89,445 88,153
Write-off of acquired research and development........... -- 5,052 2,600
Merger, realignment and other charges.................... 126,828 12,093 4,640
---------- ---------- --------
1,030,503 923,532 796,656
---------- ---------- --------
Operating income (loss).................................... (101,184) 115,579 57,864
OTHER INCOME (EXPENSE)
Interest income.......................................... 14,339 12,362 12,424
Interest expense......................................... (454) (4,504) (6,934)
Litigation settlement expense............................ -- (97,016) --
Other, net............................................... 5,002 2,574 (4,002)
---------- ---------- --------
INCOME (LOSS) BEFORE INCOME TAXES.......................... (82,297) 28,995 59,352
Income taxes............................................. 16,018 31,983 6,900
---------- ---------- --------
NET INCOME (LOSS).......................................... (98,315) (2,988) 52,452
Preferred stock dividend................................. (191) (995) (3,478)
Value assigned to warrants............................... -- -- (1,982)
---------- ---------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS........ $ (98,506) $ (3,983) $ 46,992
========== ========== ========
NET INCOME (LOSS) PER COMMON SHARE
Basic.................................................... $ (0.34) $ (0.02) $ 0.21
========== ========== ========
Diluted.................................................. $ (0.34) $ (0.02) $ 0.19
========== ========== ========
SHARES USED IN PER SHARE CALCULATIONS
Basic.................................................... 286,138 262,645 221,344
========== ========== ========
Diluted.................................................. 286,138 262,645 241,187
========== ========== ========
See Notes to Consolidated Financial Statements.
F-5
INFORMIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
--------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $ (98,315) $ (2,988) $ 52,452
Adjustments to reconcile net income (loss) to cash and cash
equivalents provided by (used in) operating activities:
License fees received in advance.......................... (34,506) (81,984) (66,069)
Depreciation and amortization............................. 54,471 59,687 54,013
Amortization of capitalized software...................... 21,692 21,346 21,924
Write-off of capitalized software......................... -- 2,371 771
Write-off of long term assets............................. -- 5,894 --
Write-off of acquired research and development............ -- 5,052 2,600
Litigation settlement..................................... -- 91,000 --
Foreign currency transaction losses (gains)............... 1,012 (1,900) 2,641
(Gain) loss on sales of equity securities................. (2,895) (2,953) 500
(Gain) loss on disposal of property and equipment......... 4,848 (66) 2,201
Deferred tax expense...................................... 8,257 9,653 2,976
Provisions for losses on accounts receivable.............. 8,338 1,269 651
Merger, realignment and other charges..................... 126,828 12,093 4,640
Stock-based employee compensation......................... 531 209 943
Changes in operating assets and liabilities:
Accounts receivable..................................... 9,339 (60,110) (43,885)
Other current assets.................................... 14,293 (8,397) 53,913
Accounts payable, accrued expenses and other
liabilities............................................ (88,541) (12,105) (79,662)
Deferred maintenance revenue............................ (10,873) 2,642 29,622
--------- -------- --------
Net cash and cash equivalents provided by operating
activities................................................ 14,479 40,713 40,231
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments of excess cash:
Purchases of available-for-sale securities................ (125,841) (124,304) (53,054)
Maturities of available-for-sale securities............... 87,145 38,484 9,725
Sales of available-for-sale securities.................... 53,363 31,930 24,300
Purchases of non-marketable equity securities............... (5,500) -- (7,009)
Proceeds from sales of equity securities.................... 5,130 5,792 1,500
Purchases of property and equipment......................... (44,616) (29,759) (23,538)
Proceeds from disposal of property and equipment............ 166 1,248 864
Additions to software costs................................. (32,782) (29,083) (21,644)
Business combinations, net of cash acquired................. -- (3,248) 1,834
Other....................................................... 668 (1,522) (1,143)
--------- -------- --------
Net cash and cash equivalents used in investing
activities................................................ (62,267) (110,462) (68,165)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from customers..................................... 10,733 6,539 11,402
Proceeds from issuance of common stock, net................. 37,204 35,635 25,145
Acquisition of common stock................................. (33,722) -- --
Proceeds from issuance of preferred stock, net.............. -- -- 42,919
Payments for structured settlements with resellers.......... (152) (4,135) --
Principal payments on capital leases........................ (1,853) (4,810) (16,840)
Net borrowings under line of credit......................... -- 935 (6,932)
--------- -------- --------
Net cash and cash equivalents provided by financing
activities................................................ 12,210 34,164 55,694
--------- -------- --------
ADJUSTMENT TO CONFORM FISCAL YEAR OF POOLED COMPANY......... -- (733) --
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... (6,120) (3,190) 16,152
--------- -------- --------
Increase (decrease) in cash and cash equivalents............ (41,698) (39,508) 43,912
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 170,118 209,626 165,714
--------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 128,420 $170,118 $209,626
========= ======== ========
See Notes to Consolidated Financial Statements.
F-6
INFORMIX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PREFERRED STOCK
-----------------------------------------
SERIES A-1 SERIES B CLOUDSCAPE
------------------- ------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(In thousands) -------- -------- -------- -------- -------- --------
Balance at December 31, 1997................................ 160 $ 2 50 $ 1 3,535 $ 35
---- --- --- --- ------ ----
Comprehensive income
Net income................................................
Other comprehensive income
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1).......................
Foreign currency translation adjustments................
Other comprehensive income................................
Comprehensive income........................................
Issuance of preferred stock of Cloudscape................... 2,808 28
Tax benefit arising from early disposition of stock
options...................................................
Common stock issued under employee stock purchase and option
plans.....................................................
Issuance of common stock for services.......................
Stock-based compensation expense resulting from stock
options...................................................
Exercise of Series A-1 convertible preferred stock warrants,
net....................................................... 140 1
Conversion of Series A-1 to common stock.................... (300) (3)
Conversion of Series B to common stock...................... (27) (1)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock...............................
Additional Series B dividend................................
Acquisition of Red Brick....................................
---- --- --- --- ------ ----
Balance at December 31, 1998................................ -- $-- 23 $-- 6,343 $ 63
---- --- --- --- ------ ----
Comprehensive income
Net income................................................
Other comprehensive income................................
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1).......................
Foreign currency translation adjustments................
Other comprehensive income................................
Comprehensive income........................................
Acquisition of Prism Solutions, Inc.........................
Conversion of Cloudscape Preferred to common stock.......... (6,343) (63)
Tax benefit arising from early disposition of stock
options...................................................
Common stock issued under employee stock purchase and option
plans.....................................................
Repurchase and retirement of unvested Cloudscape options and
founder's stock...........................................
Stock-based compensation expense resulting from stock
options...................................................
Conversion of Series B to common stock...................... (16)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock...............................
Repayment of Cloudscape shareholder loans...................
Value of stock to be issued in Litigation Settlement........
Shares issued in Litigation Settlement......................
Adjustment to conform fiscal year of pooled company.........
---- --- --- --- ------ ----
Balances at December 31, 1999............................... -- $-- 7 $-- -- $ --
---- --- --- --- ------ ----
SHARES TO BE
ISSUED FOR
LITIGATION
COMMON STOCK SETTLEMENT ADDITIONAL TREASURY
------------------- -------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL AMOUNT
(In thousands) -------- -------- --------- -------- ---------- --------
Balance at December 31, 1997................................ 203,871 $2,039 -- $ -- $411,416 $(2,956)
------- ------ --------- ------- -------- -------
Comprehensive income
Net income................................................
Other comprehensive income
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1).......................
Foreign currency translation adjustments................
Other comprehensive income................................
Comprehensive income........................................
Issuance of preferred stock of Cloudscape................... 9,991
Tax benefit arising from early disposition of stock
options................................................... 1,244
Common stock issued under employee stock purchase and option
plans..................................................... 10,069 100 25,052
Issuance of common stock for services....................... 46 1 14
Stock-based compensation expense resulting from stock
options................................................... 943
Exercise of Series A-1 convertible preferred stock warrants,
net....................................................... 32,899
Conversion of Series A-1 to common stock.................... 17,413 174 (171)
Conversion of Series B to common stock...................... 6,471 65 (65)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (2,178)
Additional Series B dividend................................ (1,300)
Acquisition of Red Brick.................................... 7,591 76 35,838
------- ------ --------- ------- -------- -------
Balance at December 31, 1998................................ 245,461 $2,455 -- $ -- $513,683 $(2,956)
------- ------ --------- ------- -------- -------
Comprehensive income
Net income................................................
Other comprehensive income................................
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1).......................
Foreign currency translation adjustments................
Other comprehensive income................................
Comprehensive income........................................
Acquisition of Prism Solutions, Inc......................... 8,720 86 48,098
Conversion of Cloudscape Preferred to common stock.......... 6,343 63
Tax benefit arising from early disposition of stock
options................................................... 6,784
Common stock issued under employee stock purchase and option
plans..................................................... 10,061 101 34,960
Repurchase and retirement of unvested Cloudscape options and
founder's stock........................................... (157) (28)
Stock-based compensation expense resulting from stock
options................................................... 209
Conversion of Series B to common stock...................... 2,223 22 (22)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (995)
Repayment of Cloudscape shareholder loans................... 104
Value of stock to be issued in Litigation Settlement........ 91,000
Shares issued in Litigation Settlement...................... 2,943 29 (29,772) 29,743
Adjustment to conform fiscal year of pooled company.........
------- ------ --------- ------- -------- -------
Balances at December 31, 1999............................... 275,594 $2,756 -- $61,228 $632,536 $(2,956)
------- ------ --------- ------- -------- -------
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE COMPREHENSIVE
DEFICIT INCOME (LOSS) INCOME (LOSS) TOTALS
(In thousands) ------------ -------------- -------------- --------
Balance at December 31, 1997................................ $(312,301) $(12,055) $ 86,181
--------- -------- --------
Comprehensive income
Net income................................................ 52,452 52,452 52,452
Other comprehensive income
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1)....................... 5,202 5,202
Foreign currency translation adjustments................ 3,259 3,259
--------
Other comprehensive income................................ 8,461 8,461
--------
Comprehensive income........................................ 60,913
========
Issuance of preferred stock of Cloudscape................... 10,019
Tax benefit arising from early disposition of stock
options................................................... 1,244
Common stock issued under employee stock purchase and option
plans..................................................... 25,152
Issuance of common stock for services....................... 15
Stock-based compensation expense resulting from stock
options................................................... 943
Exercise of Series A-1 convertible preferred stock warrants,
net....................................................... 32,900
Conversion of Series A-1 to common stock.................... --
Conversion of Series B to common stock...................... (1)
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (2,178)
Additional Series B dividend................................ (1,300)
Acquisition of Red Brick.................................... 35,914
--------- -------- --------
Balance at December 31, 1998................................ $(259,849) $ (3,594) $249,802
--------- -------- --------
Comprehensive income
Net income................................................ (2,988) (2,988) (2,988)
Other comprehensive income................................
Unrealized gain on available-for-sale securities, net of
reclassification adjustments(1)....................... 69 69
Foreign currency translation adjustments................ (3,003) (3,003)
--------
Other comprehensive income................................ (2,934) (2,934)
--------
Comprehensive income........................................ (5,922)
========
Acquisition of Prism Solutions, Inc......................... 48,184
Conversion of Cloudscape Preferred to common stock.......... --
Tax benefit arising from early disposition of stock
options................................................... 6,784
Common stock issued under employee stock purchase and option
plans..................................................... 35,061
Repurchase and retirement of unvested Cloudscape options and
founder's stock........................................... (28)
Stock-based compensation expense resulting from stock
options................................................... 209
Conversion of Series B to common stock...................... --
Accrual of 5% cumulative preferred dividends on Series B
convertible preferred stock............................... (995)
Repayment of Cloudscape shareholder loans................... 104
Value of stock to be issued in Litigation Settlement........ 91,000
Shares issued in Litigation Settlement...................... --
Adjustment to conform fiscal year of pooled company......... 2,020 2,020
--------- -------- --------
Balances at December 31, 1999............................... $(260,817) $ (6,528) $426,219
--------- -------- --------
See Notes to Consolidated Financial Statements.
F-7
INFORMIX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
PREFERRED STOCK
-----------------------------------------
SERIES A-1 SERIES B CLOUDSCAPE
------------------- ------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(In thousands) -------- -------- -------- -------- -------- --------
Balances at December 31, 1999............................... -- $-- 7 $-- -- $ --
---- --- --- --- ------ ----
Comprehensive income
Net loss..................................................
Other comprehensive income................................
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1).......................
Foreign currency translation adjustments................
Other comprehensive income................................
Comprehensive income........................................
Retirement of Ardent treasury stock.........................
Exercise of stock options...................................
Common stock issued under employee stock purchase plans.....
Reversal of tax benefit arising from early disposition of
stock options.............................................
Exercise of warrants to purchase common stock...............
Stock-based compensation expense resulting from stock
options...................................................
Repurchase and retirement of common stock...................
Repurchase and retirement of unvested Cloudscape options and
founder's stock...........................................
Repayment of Cloudscape shareholder loans...................
Conversion of Series B to common stock...................... (7) --
Accrual of 5% cumulative preferred dividends on Series B....
---- --- --- --- ------ ----
Balance at December 31, 2000................................ -- $-- -- $-- -- $ --
==== === === === ====== ====
SHARES TO BE
ISSUED FOR
LITIGATION
COMMON STOCK SETTLEMENT ADDITIONAL TREASURY
------------------- -------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL AMOUNT
(In thousands) -------- -------- --------- -------- ---------- --------
Balances at December 31, 1999............................... 275,594 $2,756 -- $61,228 $632,536 $(2,956)
------- ------ --------- ------- -------- -------
Comprehensive income
Net loss..................................................
Other comprehensive income................................
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1).......................
Foreign currency translation adjustments................
Other comprehensive income................................
Comprehensive income........................................
Retirement of Ardent treasury stock......................... (2,956) 2,956
Exercise of stock options................................... 7,222 72 26,265
Common stock issued under employee stock purchase plans..... 2,043 21 9,692
Reversal of tax benefit arising from early disposition of
stock options............................................. (488)
Exercise of warrants to purchase common stock............... 412 4 1,068
Stock-based compensation expense resulting from stock
options................................................... 531
Repurchase and retirement of common stock................... (6,400) (64) (33,658)
Repurchase and retirement of unvested Cloudscape options and
founder's stock........................................... (139) (1) (37)
Repayment of Cloudscape shareholder loans................... 120
Conversion of Series B to common stock...................... 1,631 16 (16)
Accrual of 5% cumulative preferred dividends on Series B.... (191)
------- ------ --------- ------- -------- -------
Balance at December 31, 2000................................ 280,363 $2,804 -- $61,228 $632,866 $ --
======= ====== ========= ======= ======== =======
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE COMPREHENSIVE
DEFICIT INCOME (LOSS) INCOME (LOSS) TOTALS
(In thousands) ------------ -------------- -------------- --------
Balances at December 31, 1999............................... $(260,817) $ (6,528) $426,219
--------- -------- --------
Comprehensive income
Net loss.................................................. (98,315) (98,315) (98,315)
Other comprehensive income................................
Unrealized loss on available-for-sale securities, net of
reclassification adjustments(1)....................... (7,332) (7,332)
Foreign currency translation adjustments................ (5,785) (5,785)
--------
Other comprehensive income................................ (13,117) (13,117)
--------
Comprehensive income........................................ (111,432)
========
Retirement of Ardent treasury stock......................... --
Exercise of stock options................................... 26,337
Common stock issued under employee stock purchase plans..... 9,713
Reversal of tax benefit arising from early disposition of
stock options............................................. (488)
Exercise of warrants to purchase common stock............... 1,072
Stock-based compensation expense resulting from stock
options................................................... 531
Repurchase and retirement of common stock................... (33,722)
Repurchase and retirement of unvested Cloudscape options and
founder's stock........................................... (38)
Repayment of Cloudscape shareholder loans................... 120
Conversion of Series B to common stock...................... --
Accrual of 5% cumulative preferred dividends on Series B.... (191)
--------- -------- --------
Balance at December 31, 2000................................ $(359,132) $(19,645) $318,121
========= ======== ========
- ----------------------------------
(1) Disclosure of reclassification amount for the years ended:
2000 1999 1998
-------- -------- --------
Net unrealized gain (loss) on available-for-sale securities
arising during period..................................... $(7,648) $ 5,189 $7,059
Tax (expense) or benefit on unrealized gain (loss) arising
during period............................................. 3,211 (1,439) (1,857)
Less: reclassification adjustment for net gains included in
net income (loss)......................................... (2,895) (3,681) --
------- ------- ------
Net unrealized gain (loss) on available-for-sale
securities................................................ $(7,332) $ 69 $5,202
======= ======= ======
See Notes to Consolidated Financial Statements.
F-8
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS. The Company is a leading multinational
supplier of information management software and solutions to governments and
enterprises worldwide. The Company designs, develops, manufactures, markets and
supports relational and object-relational database management systems,
connectivity interfaces and gateways and graphical and character-based
application development tools for building database applications that allow
customers to access, retrieve and manipulate business data. The Company also
offers complete solutions, which include its database management software, its
own and third party software and consulting services to help customers design
and rapidly deploy data warehousing (decision support), web-based enterprise
repository and electronic commerce applications.
The principal geographic markets for the Company's products are North
America, Europe, Asia/ Pacific, and Latin America. Customers include businesses
ranging from small corporations to Fortune 1000 companies, principally in the
manufacturing, financial services, telecommunications, media, retail/wholesale,
hospitality, and government services sectors.
BASIS OF PRESENTATION. The consolidated financial statements have been
prepared to give retroactive effect to the merger with Cloudscape, Inc.
("Cloudscape") on October 8, 1999 and the merger with Ardent Software Inc.
("Ardent") on March 1, 2000. The consolidated financial statements also reflect
Ardent's merger with Unidata, Inc. ("Unidata") in February 1998. The mergers
were accounted for as poolings of interests and, accordingly, the consolidated
financial statements have been restated for all periods presented as if
Cloudscape, Ardent, Unidata and the Company had always been combined.
Prior to the Cloudscape merger, Cloudscape's fiscal year ended March 31. In
recording the pooling-of-interests combination, Informix's statement of
operations for the year ended December 31, 1998 has been combined with the
Cloudscape statement of operations for the year ended March 31, 1999. As a
consequence, the results of Cloudscape for the three-month period ended
March 31, 1999 are included in the results of operations for both the year ended
December 31, 1998 and the year ended December 31, 1999. Cloudscape revenues and
net loss for the three-month period ended March 31, 1999 were $347,000 and
$2,020,000, respectively. The consolidated balance sheet of Informix at
December 31, 1998 has been combined with the balance sheet of Cloudscape as of
March 31, 1999.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Informix Corporation and its wholly owned subsidiaries. All
material intercompany balances and transactions 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 operations are translated at the
exchange rates during the year. Exchange gains or losses arising from
translation of such foreign entity financial statements are included as a
component of other comprehensive income (loss).
For foreign operations with the U.S. dollar as the functional currency,
monetary assets and liabilities are remeasured at the year-end exchange rates as
appropriate and non-monetary assets and liabilities are remeasured at historical
exchange rates. Statements of operations are remeasured at the exchange rates
during the year. Foreign currency transaction gains and losses are included in
other income (expense), net.
F-9
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company recorded net foreign currency transaction losses of $0.3 million,
$0.3 million and $4.8 million for the years ended December 31, 2000, 1999 and
1998, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS. The Company enters into foreign currency
forward exchange contracts to reduce its exposure to foreign currency risk due
to fluctuations in exchange rates underlying the value of intercompany accounts
receivable and payable denominated in foreign currencies (primarily European and
Asian currencies) until such receivables are collected and payables are
disbursed. A foreign currency forward exchange contract obligates the Company to
exchange predetermined amounts of specified foreign currencies at specified
exchange rates on specified dates or to make an equivalent U.S. dollar payment
equal to the value of such exchange. These foreign currency forward exchange
contracts are denominated in the same currency in which the underlying foreign
currency receivables or payables are denominated and bear a contract value and
maturity date which approximate the value and expected settlement date of the
underlying transactions. As the Company's contracts are not designated and
effective as hedges for financial reporting, discounts or premiums (the
difference between the spot exchange rate and the forward exchange rate at
inception of the contract) are recorded in earnings to other income (expense),
net and changes in market value of the underlying contract are recorded in
earnings as foreign exchange gains or losses. The Company operates in certain
countries in Latin America, Eastern Europe, and Asia/Pacific where there are
limited forward currency exchange markets and thus the Company has unhedged
exposures in these currencies.
Most of the Company's international revenue and expenses are denominated in
local currencies. Due to the substantial volatility of currency exchange rates,
among other factors, the Company cannot predict the effect of exchange rate
fluctuations on the Company's future operating results. Although the Company
takes into account changes in exchange rates over time in its pricing strategy,
it does so only on an annual basis, resulting in substantial pricing exposure as
a result of foreign exchange volatility during the period between annual pricing
reviews. In addition, the sales cycles for the Company's products is relatively
long, depending on a number of factors including the level of competition and
the size of the transaction. Notwithstanding the Company's efforts to manage
foreign exchange risk, there can be no assurances that the Company's hedging
activities will adequately protect the Company against the risks associated with
foreign currency fluctuations.
REVENUE RECOGNITION. Revenue consists principally of fees for licenses of
the Company's software products, maintenance, consulting, and training. The
Company recognizes revenue using the residual method in accordance with
Statement of Position 97-2 (SOP 97-2), "Software Revenue Recognition," as
amended by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition
with Respect to Certain Transactions." Under the residual method, revenue is
recognized in a multiple element arrangement in which Company-specific objective
evidence of fair value exists for all of the undelivered elements in the
arrangement, but does not exist for one or more of the delivered elements in the
arrangement. Company-specific objective evidence of fair value of maintenance
and other services is based on the Company's customary pricing for such
maintenance and/or services when sold separately. At the outset of the
arrangement with the customer, the Company defers revenue for the fair value of
its undelivered elements (e.g., maintenance, consulting, and training) and
recognizes revenue for the remainder of the arrangement fee attributable to the
elements initially delivered in the arrangement (i.e., software product) when
the basic criteria in SOP 97-2 have been met. If such evidence of fair value for
each element of the arrangement does not exist, all revenue from the arrangement
is deferred until such time that evidence of fair value does exist or until all
elements of the arrangement are delivered.
F-10
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Under SOP 97-2, revenue attributable to an element in a customer arrangement
is recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, collectibility is probable, and the
arrangement does not require services that are essential to the functionality of
the software. If at the outset of the customer arrangement, the Company
determines that the arrangement fee is not fixed or determinable or that
collectibility is not probable, revenue is recognized when the arrangement fee
becomes due and payable.
The Company's specific policies for recognition of license revenues and
services revenues are as follows:
LICENSE REVENUE. The Company recognizes revenue from sales of software
licenses to end users upon persuasive evidence of an arrangement, delivery of
the software to a customer, determination that collection of a fixed or
determinable license fee is considered probable, and determination that no
undelivered services are essential to the functionality of the software.
If consulting services are essential to the functionality of the licensed
software, then both the license revenue and the consulting service revenue are
recognized under the completed contract method of contract accounting. The
Company's arrangements generally do not include services that are essential to
the functionality of the software.
Revenue for transactions with application vendors, OEMs, and distributors is
generally recognized as earned when the licenses are resold or utilized by the
reseller and all related obligations of the Company have been satisfied. The
Company provides for sales allowances on an estimated basis. The Company accrues
royalty revenue through the end of the reporting period based on reseller
royalty reports or other forms of customer-specific historical information. In
the absence of customer-specific historical information, royalty revenue is
recognized when the customer-specific objective information becomes available.
Any subsequent changes to previously recognized royalty revenues are reflected
in the period when the updated information is received from the reseller.
SERVICE REVENUE. Maintenance contracts generally call for the Company to
provide technical support and software updates and upgrades to customers.
Maintenance revenue is recognized ratably over the term of the maintenance
contract, generally on a straight-line basis where all revenue recognition
requirements are met. Other service revenue, primarily training and consulting,
is generally recognized at the time the service is performed and it is
determined that the Company has fulfilled its obligations resulting from the
services contract.
During the fourth quarter of 2000, the Company adopted Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements," ("SAB
No. 101"). The adoption of SAB No. 101 did not have a material effect on the
Company's consolidated statement of financial position or results of operation.
ADVANCES FROM CUSTOMERS. Amounts received in advance of revenue being
recognized are recorded as a liability on the accompanying financial statements.
The Company's license arrangements with some of its customers provide
contractually for a non-refundable fee payable by the customer in single or
multiple installment(s) at the initiation or over the term of the license
arrangement. If the Company fails to comply with certain contractual terms of a
specific license agreement, the Company could be required to refund the
amount(s) received to the customer.
F-11
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECEIVABLES FINANCING ARRANGEMENTS. Prior to 2000, the Company periodically
sold certain accounts receivable to financial institutions. Such factoring
arrangements are treated as sales, since the Company relinquishes control and
all rights over the accounts that are transferred to the financial institution.
Receivables sold under these arrangements totaled approximately $10.8 million in
1999 and $13.2 million in 1998. These sales were typically done on a limited
recourse basis, and any potential losses were evaluated at the time the asset
was sold. To date, no losses on factored receivables have been incurred and the
fee charged to the Company by the factor has been recorded as interest expense.
SOFTWARE COSTS. 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 uses a
detail program design approach in determining technological feasibility.
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, or on the basis of each product's projected revenues,
whichever results in greater amortization, over the remaining estimated economic
life of the product, which is generally estimated to be three years. The Company
recorded amortization of $21.7 million, $21.3 million and $21.9 million of
software costs in 2000, 1999 and 1998, respectively, in cost of software
distribution.
The Company accounts for the costs of computer software developed or
obtained for internal use in accordance with Statement of Position 98-1
(SOP 98-1), "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use," which was effective for fiscal years beginning after
December 15, 1998. This statement requires that certain costs incurred during a
software development project be capitalized. During the years ended
December 31, 2000 and 1999, the Company capitalized approximately $3.3 million
and $2.8 million under SOP 98-1, which will be amortized over the estimated
useful life of the software developed, which is generally three years. During
2000, $2.4 million of software costs previously capitalized under SOP 98-1 were
written off to sales and marketing expense when the Company determined that it
was no longer probable that the development of a project would be completed.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost less
accumulated depreciation and amortization which is calculated using the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives of 36 to 48 months are used on computer equipment, and an estimated
useful life of seven years is used for furniture and fixtures. Depreciation and
amortization of leasehold improvements is computed using the shorter of the
remaining lease term or seven years. The Company reviews property and equipment
for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Recoverability of
property and equipment to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Property and equipment to be disposed of
are reported at the lower of the carrying amount or fair value less costs to
sell.
BUSINESSES ACQUIRED. The purchase price of businesses acquired, accounted
for as purchase business combinations, is allocated to the tangible and
identifiable intangible assets acquired based on their estimated fair values
with any amount in excess of such allocations being designated as goodwill.
Intangible
F-12
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assets are amortized on a straight-line basis over their estimated useful lives,
which to date range from three to ten years. As of December 31, 2000, and 1999,
the Company had $86.1 million and $115.0 million of intangible assets, with
accumulated amortization of $37.8 million and $33.2 million, respectively, as a
result of these acquisitions. Management periodically reviews intangible assets
for impairment indicators. At the time management determines the existence of
such indicators, the Company uses undiscounted cash flows of the acquired
business over the remaining amortization period to initially determine whether
impairment should be recognized. The Company then performs a subsequent
calculation to measure the amount of the impairment loss based on the excess of
the carrying value over the fair value of the impaired assets. If quoted market
prices for the assets are not available, the fair value is calculated using the
present value of estimated expected future cash flows. The cash flow calculation
would be based on management's best estimates, using appropriate assumptions and
projections at the time. The carrying-value of identifiable intangible assets
are reviewed in a manner consistent with the policy for reviewing impairment of
property and equipment, as described above.
STOCK-BASED COMPENSATION. The Company accounts for stock-based awards to
employees in accordance with Accounting Principles Board Opinion No. 25 (APB
25), "Accounting for Stock Issued to Employees". Under APB 25, the Company
generally recognizes no compensation expense with respect to such awards.
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. No single customer accounted for 10% or more of the consolidated
net revenues of the Company in 2000, 1999 or 1998.
CASH, CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, AND LONG-TERM
INVESTMENTS. The Company considers liquid investments purchased with an
original remaining maturity of three months or less to be cash equivalents.
Investments with an original remaining maturity of more than three months and
which represent cash available for current operations are considered to be
short-term investments. All other investments are considered long-term
investments. Short-term and long-term investments are classified as
available-for-sale and are carried at fair value, with the unrealized gains and
losses, net of tax, reported as a component of other comprehensive income
(loss). 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 income (expense), net. The cost of securities
sold is based on the specific identification method. Interest on securities
classified as available-for-sale is included in interest income. The Company
realized gross gains of approximately $2.9 million and $3.7 million on the sale
of available-for-sale marketable securities during 2000 and 1999, respectively.
Realized losses during 2000 and 1999 were not significant and during 1998
realized gains and losses were not significant.
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 A-1/P-1, and other specific money market
instruments of similar liquidity and credit quality. The Company has not
experienced any significant losses related to these investments.
F-13
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company invests in equity instruments of privately-held, information
technology companies for business and strategic purposes. These investments are
included in long-term investments and are accounted for under the cost method
when ownership is less than 20% and the Company does not otherwise have
significant influence over the investee. For these non-quoted investments, the
Company's policy is to regularly review the assumptions underlying the operating
performance and cash flow forecasts in assessing the carrying values. When the
Company determines that a decline in fair value below the cost basis is other
than temporary, the related investment is written down to fair value.
FAIR VALUE OF FINANCIAL INSTRUMENTS. Fair values of cash, cash equivalents,
short and long term investments and foreign currency forward contracts are based
on quoted market prices.
RECLASSIFICATIONS. Certain prior period amounts have been reclassified to
conform to the current period presentation.
SUPPLEMENTAL CASH FLOW DATA. The Company paid income taxes in the net
amount of $4.3 million and $10.3 million during 2000 and 1999, respectively, and
received a refund in the net amount of $31.0 million during 1998.
NEW ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board issued Statement No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities," which establishes standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company adopted
SFAS 133 in the first quarter of 2001, and such adoption did not have a material
effect on the Company's results of operations or financial position.
NOTE 2--BALANCE SHEET COMPONENTS
DECEMBER 31,
---------------------
2000 1999
--------- ---------
(IN THOUSANDS)
Accounts receivable, net:
Receivables............................................... $ 249,663 $ 264,077
Less: allowance for doubtful accounts..................... (14,234) (16,881)
--------- ---------
$ 235,429 $ 247,196
========= =========
Property and equipment, net:
Computer equipment........................................ $ 164,666 $ 200,651
Furniture and fixtures.................................... 33,323 47,601
Leasehold improvements.................................... 30,356 30,500
Buildings and other....................................... 2,772 2,837
--------- ---------
231,117 281,589
Less: accumulated depreciation and amortization........... (163,500) (213,008)
--------- ---------
$ 67,617 $ 68,581
========= =========
Software costs, net:
Capitalized software development costs.................... $ 67,949 $ 75,230
Less: accumulated amortization............................ (26,505) (29,508)
--------- ---------
$ 41,444 $ 45,722
========= =========
Long-term investments:
Marketable equity securities (Note 3)..................... $ 3,874 $ 12,466
Investments in privately-held companies................... 7,311 4,806
--------- ---------
$ 11,185 $ 17,272
========= =========
F-14
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--FINANCIAL INSTRUMENTS
The following is a summary of available-for-sale debt and marketable equity
securities:
AVAILABLE-FOR-SALE
SECURITIES
-----------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 2000 COST GAINS LOSSES FAIR VALUE
- ----------------- -------- ---------- ---------- ----------
(IN THOUSANDS)
U.S. treasury securities............................ $ 24,532 $ 69 $ (23) $ 24,578
Commercial paper, corporate bonds and medium-term
notes............................................. 69,855 539 (76) 70,318
Municipal bonds..................................... 16,352 6 -- 16,358
-------- ------ ------- --------
Total debt securities............................. 110,739 614 (99) 111,254
Marketable equity securities........................ 7,217 1,487 (4,830) 3,874
-------- ------ ------- --------
$117,956 $2,101 $(4,929) $115,128
======== ====== ======= ========
Amounts included in cash and cash equivalents....... $ 22,666 $ 48 $ (1) $ 22,713
Amounts included in short-term investments.......... 88,073 566 (98) 88,541
Amounts included in long-term investments........... 7,217 1,487 (4,830) 3,874
-------- ------ ------- --------
$117,956 $2,101 $(4,929) $115,128
======== ====== ======= ========
DECEMBER 31, 1999
U.S. treasury securities............................ $ 30,118 $ 4 $ (179) $ 29,943
Commercial paper, corporate bonds and medium-term
notes............................................. 104,229 336 (444) 104,121
Municipal bonds..................................... 11,733 -- (20) 11,713
-------- ------ ------- --------
Total debt securities............................. 146,080 340 (643) 145,777
Marketable equity securities........................ 4,448 8,018 -- 12,466
-------- ------ ------- --------
$150,528 $8,358 $ (643) $158,243
======== ====== ======= ========
Amounts included in cash and cash equivalents....... $ 43,275 $ 33 $ -- $ 43,308
Amounts included in short-term investments.......... 102,805 307 (643) 102,469
Amounts included in long-term investments........... 4,448 8,018 -- 12,466
-------- ------ ------- --------
$150,528 $8,358 $ (643) $158,243
======== ====== ======= ========
Maturities of debt securities at market value at December 31, 2000 are as
follows (in thousands):
Mature in one year or less.................................. $ 60,280
Mature after one year through five years.................... 50,974
--------
$111,254
========
F-15
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into foreign currency forward exchange contracts
primarily to hedge the value of intercompany accounts receivable or accounts
payable denominated in foreign currencies against fluctuations in exchange rates
until such receivables are collected or payables are disbursed. 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.
The table below summarizes by currency the contractual amounts of the
Company's foreign currency forward exchange contracts at December 31, 2000 and
December 31, 1999. The information is provided in U.S. dollar equivalents and
presents the notional amount (contract amount) and the related fair value. As
the Company's foreign currency forward contracts are not accounted for as
hedges, they are carried at fair value. Fair value represents the prevailing
financial market information as of December 31, 2000 and 1999. All contracts
mature within twelve months.
FORWARD CONTRACTS
AT DECEMBER 31, 2000 CONTRACT AMOUNT FAIR VALUE
- -------------------- --------------- ----------
(IN THOUSANDS)
Forward currency to be sold under contract:
Euro...................................................... $25,666 $ 49
Japanese Yen.............................................. 8,491 95
Australian Dollar......................................... 7,546 25
Taiwan Dollar............................................. 4,319 (162)
Korean Won................................................ 3,937 (32)
Swiss Franc............................................... 2,797 10
German Deutschmark........................................ 2,490 7
Singapore Dollar.......................................... 2,382 16
South African Rand........................................ 2,815 (33)
French Franc.............................................. 2,151 5
Thailand Bhat............................................. 2,285 --
Czech Koruna.............................................. 1,887 7
Other (individually less than $1 million)................. 1,549 (2)
------- -----
Total....................................................... $68,315 $ (15)
======= =====
Forward currency to be purchased under contract:
British Pound............................................. $10,843 $ (18)
Other (individually less than $1 million)................. 530 (2)
------- -----
Total....................................................... $11,373 $ (20)
======= =====
Grand Total................................................. $79,688 $ (35)
======= =====
F-16
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
AT DECEMBER 31, 1999 CONTRACT AMOUNT FAIR VALUE
- -------------------- --------------- ----------
(IN THOUSANDS)
Forward currency to be sold under contract:
Euro...................................................... $33,352 $ 198
Korean Won................................................ 5,314 (23)
Australian Dollar......................................... 3,116 (7)
Czech Koruna.............................................. 2,620 1
German Mark............................................... 2,013 122
Thai Bhat................................................. 1,852 (12)
Singapore Dollar.......................................... 1,814 13
French Franc.............................................. 1,749 104
Other (individually less than $1 million)................. 3,687 (35)
------- -----
Total....................................................... $55,517 $ 361
======= =====
Forward currency to be purchased under contract:
British Pound............................................. $34,445 $ (52)
Japanese Yen.............................................. 2,484 (36)
Other (individually less than $1 million)................. 2,480 (57)
------- -----
Total....................................................... $39,409 $(145)
======= =====
Grand Total................................................. $94,926 $ 216
======= =====
While the contract amounts provide one measure of the volume of these
transactions, they do not represent the amount of the Company's exposure to
credit risk. The amount of the Company's credit risk exposure (arising from the
possible inabilities of counterparties to meet the terms of their contracts) is
generally limited to the amounts, if any, by which the counterparties'
obligations exceed the obligations of the Company as these contracts can be
settled on a net basis at the option of the Company. The Company controls credit
risk through credit approvals, limits and monitoring procedures.
As of December 31, 2000 and 1999, other than foreign currency forward
exchange contracts discussed immediately above, the Company does not currently
invest in or hold any other derivative financial instruments.
NOTE 5--PREFERRED STOCK
In connection with the conversion of the Company's Series A Convertible
Preferred Stock ("Series A Preferred") to Series A-1 Convertible Stock
("Series A-1 Preferred") in 1997, a warrant for 140,000 shares of Series A
Preferred became a warrant for 140,000 shares of Series A-1 Preferred Stock. The
aggregate purchase price is up to $35.0 million. The Series A-1 Preferred shares
are generally not entitled to vote on corporate matters.
The Series A-1 Preferred shares are convertible into common shares at any
time, at the holder's option, at a per share price equal to 101% of the average
price of the Company's common stock for the 30 days ending five trading days
prior to conversion, but not greater than the lesser of (i) 105% of the common
stock's average price of the first five trading days of such thirty day period,
or (ii) $12 per share. If not converted prior, the Series A-1 Preferred will
automatically convert into common shares eighteen months after their issuance,
subject to extension of the automatic conversion date in certain defined
circumstances of default. However, if at the time of conversion, the aggregate
number of shares of common stock already issued and to be issued as a result of
the conversion of the shares of the Series A-1
F-17
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--PREFERRED STOCK (CONTINUED)
Convertible Preferred Stock were to exceed 19.9% of the total number of shares
of then outstanding common stock, then such excess does not convert unless or
until stockholder approval is obtained.
In 1998, the holders of the Series A-1 Preferred Stock exercised warrants to
purchase 140,000 additional shares of Series A-1 Preferred at $250 per share,
resulting in net proceeds to the Company of $32.9 million. In addition, the
Series A-1 Preferred stockholders converted 300,000 shares of Series A-1
Preferred into 17,412,433 shares of the Company's Common Stock. As a result of
these conversions, no Series A-1 Preferred Stock or Series A-1 Preferred
Warrants were outstanding at December 31, 1998 or thereafter.
In November 1997, the Company sold 50,000 shares of newly authorized
Series B Convertible Preferred Stock ("Series B Preferred"), face value $1,000
per share, for aggregate proceeds of $50.0 million. Such shares are generally
not entitled to vote on corporate matters. In connection with this original
offering, the Company also agreed to issue a warrant upon conversion of such
Series B Preferred to purchase 20% of the shares of Common Stock into which the
Series B Preferred is convertible, but no less than 1,500,000 shares at a per
share exercise price which is presently indeterminable and will depend on the
trading price of the Common Stock of the Company in the period prior to the
conversion of the Series B Preferred. The Company also agreed to issue
additional warrants to purchase up to an aggregate of 200,000 shares at a per
share exercise price which is presently indeterminable and will depend on the
trading price of the Common Stock of the Company in the period prior to the
conversion of the Series B Preferred. The Series B Preferred is convertible at
the election of the holder into shares of Common Stock beginning six months
after issuance, and upon the occurrence of certain events, including a merger.
The Series B Preferred will automatically convert into Common Stock three years
following the date of its issuance. Each Series B Preferred share is convertible
into the number of shares of Common Stock at a per share price equal to the
lowest of (i) the average of the closing prices for the Common Stock for the
22 days immediately prior to the 180th day following the initial issuance date,
(ii) 101% of the average closing price for the 22 trading days prior to the date
of actual conversions, or (iii) 101% of the lowest closing price for the Common
Stock during the five trading days immediately prior to the date of actual
conversion. The conversion price of the Series B Preferred is subject to
modification and adjustment upon the occurrence of certain events. The Company
reserved 22.8 million shares of Common Stock for issuance upon conversion of the
Series B Preferred and upon the exercise of the Series B Warrants. The Series B
Preferred accrues cumulative dividends at an annual rate of 5% of per share face
value. The dividend is generally payable upon the conversion or redemption of
the Series B Preferred, and may be paid in cash or, at the holder's election, in
shares of Common Stock.
During 1998, holders of the Series B Preferred Stock converted a total of
26,700 shares of Series B Preferred into 6,471,647 shares of the Company's
Common Stock. In connection with such conversions, the Company also issued such
Series B Preferred Stockholders warrants to purchase up to 1,494,319 shares of
Common Stock at a purchase price of $7.84 per share and paid cash dividends in
the amount of $1,170,068 to such stockholders. Also during 1998, the Company
issued a warrant pursuant to the provisions of the Series B Preferred to
purchase up to an additional 50,000 shares of Common Stock at a purchase price
of $7.84 per share to a financial advisor of the Company in connection with
services provided by such financial advisor related to the sale of shares of the
Series B Preferred in November 1997.
During 1999, holders of the Series B Preferred Stock converted a total of
16,300 shares of Series B Preferred into 2,223,156 shares of the Company's
Common Stock. In connection with such conversions, the Company also issued such
Series B Preferred Stockholders warrants to purchase up to 444,628 shares of
F-18
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--PREFERRED STOCK (CONTINUED)
Common Stock at a purchase price of $7.84 per share and paid cash dividends in
the amount of $1,528,699 to such stockholders.
During 2000, the sole remaining holder of the Company's Series B Preferred
Stock converted all 7,000 shares of the Company's remaining Series B Preferred
Stock into 1,630,751 shares of the Company's Common Stock. In connection with
this conversion, the Company also issued this Series B Preferred Stockholder a
warrant to purchase up to 326,150 shares of Common Stock at a purchase price of
$7.84 per share and paid cash dividends, which were previously accrued, in the
amount of $932,055 to this stockholder. As of December 31, 2000, no Series B
Convertible Preferred Stock was outstanding and approximately 2,303,000
Series B Warrants were outstanding and exercisable through November 2002 at a
per share exercise price of $7.84.
The fair value of the warrants issued in connection with the Series A-1
Preferred and Series B Preferred was deemed to be a discount to the conversion
price of the respective equity instruments available to the preferred
stockholders. The discounts were recognized as a return to the preferred
stockholders (similar to a dividend) over the minimum period during which the
preferred stockholders could realize this return, immediate for the Series A-1
Preferred and six months for the Series B Preferred. The discount has been
accreted to additional paid in capital (accumulated deficit) in the Company's
balance sheet and has been disclosed as a decrease in the amount available to
common stockholders on the face of the Company's statements of operations and
for purposes of computing net income (loss) per share. The fair value assigned
to the warrants is based on an independent appraisal performed by a nationally
recognized investment banking firm.
On June 9, 1998, the Company filed a Post-Effective Amendment to its
Registration Statement on Form S-1 pertaining to the Company's sale of its
Series B Preferred. The Securities and Exchange Commission ("SEC") reviewed the
Post-Effective Amendment and declared it effective on August 13, 1998. The
Series B Preferred stockholders claimed that during August 1998 they were
prevented from selling shares of Series B Preferred stock until the SEC
completed its review of the Post-Effective Amendment and, as a result, the
Company had failed to comply with certain terms of a Registration Rights
Agreement between the Series B Preferred stockholders and the Company. As a
result, the Company recorded a $1.3 million dividend as of December 31, 1998,
which was paid in cash to the Series B Preferred stockholders in the first
quarter of 1999.
F-19
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
income (loss) per common share:
2000 1999 1998
---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
Net income (loss)......................................... $(98,315) $ (2,988) $ 52,452
Preferred stock dividends................................. (191) (995) (3,478)
Value assigned to warrants................................ -- -- (1,982)
-------- -------- ---------
Numerator for basic and diluted net income (loss) per
common share............................................ $(98,506) $ (3,983) $ 46,992
Denominator:
Denominator for basic net income (loss) per common share--
Weighted-average shares outstanding..................... 280,082 257,220 221,344
Weighted-average shares to be issued for litigation
settlement............................................ 6,056 5,425 --
-------- -------- ---------
286,138 262,645 221,344
-------- -------- ---------
Effect of dilutive securities:
Employee stock options and restricted common stock...... -- -- 11,047
Series A-1 convertible preferred stock and warrants..... -- -- 2,748
Cloudscape convertible preferred stock.................. -- -- 5,794
Ardent warrants......................................... -- -- 254
-------- -------- ---------
Denominator for diluted net income (loss) per common
share--adjusted weighted-average shares and assumed
conversions............................................. 286,138 262,645 241,187
======== ======== =========
Basic net income (loss) per common share.................... $ (0.34) $ (0.02) $ 0.21
======== ======== =========
Diluted net income (loss) per common share.................. $ (0.34) $ (0.02) $ 0.19
======== ======== =========
The Company excluded potentially dilutive securities for each period
presented from its diluted EPS computation because either the exercise price of
the securities exceeded the average fair value of the Company's common stock or
the Company had net losses, and, therefore, these securities were
F-20
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--NET INCOME (LOSS) PER COMMON SHARE (CONTINUED)
anti-dilutive. A summary of the excluded potentially dilutive securities and the
related exercise/conversion features follows:
DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Potentially dilutive securities:
Stock options............................................... 47,121 40,109 12,187
Contingently issuable shares for litigation settlement...... 12,730 -- --
Common Stock Warrants
Series B.................................................. 2,303 2,168 1,750
Ardent Warrants........................................... -- 400 --
Series B Convertible Preferred Stock
Preferred Shares.......................................... -- 7 23
Equivalent common shares upon assumed conversion.......... 887 2,568 7,901
Cloudscape Restricted Common Stock.......................... 36 212 --
The stock options have per share exercise prices ranging from $0.05 to
$28.10, $0.05 to $33.25, and $6.75 to $42.09, at December 31, 2000, 1999 and
1998, respectively.
As part of the Company's settlement of various private securities and
related litigation arising out of the restatement of its financial statements,
the Company agreed to issue a minimum of nine million shares ("settlement
shares") of the Company's Common Stock at a guaranteed value of $91 million
("stock price guarantee"). The stock price guarantee is satisfied with respect
to any distribution of settlement shares if the closing price of the Company's
Common Stock averages at least $10.11 per share for ten consecutive trading days
during the six-month period subsequent to the distribution. The first
distribution of settlement shares occurred in November and December 1999 when
the Company issued approximately 2.9 million settlement shares to the
plaintiff's counsel. The stock price guarantee was satisfied with respect to the
first distribution of settlement shares. The Company will issue the remainder of
the settlement shares after the claims administrator notifies the Company that
it has processed all of the claims submitted by class members. Based on the
average closing price of the Company's Common Stock for the twenty consecutive
trading days prior to December 31, 2000, it is estimated that the Company would
have been obligated to issue an additional 12.7 million shares to satisfy the
stock price guarantee ("contingently issuable shares").
The warrants to purchase shares of Common Stock of the Company (the
"Series B Warrants") were issued in connection with the conversion of certain
shares of the Company's Series B Preferred into shares of Common Stock of the
Company. Upon conversion of the Series B Preferred, the holders are eligible to
receive Series B Warrants to purchase that number of shares of the Company's
Common Stock equal to 20% of the shares of the Company's Common Stock into which
the Series B Preferred is convertible. As of December 31, 2000, approximately
2,303,000 Series B Warrants were outstanding and exercisable through
November 2002 at a per share exercise price of $7.84. As of December 31, 2000,
there was no Series B Convertible Preferred Stock outstanding as all remaining
shares were converted into shares of common stock in July 2000.
During 1996, Ardent issued warrants to existing stockholders to acquire
approximately 400,000 shares of its common stock at an exercise price of $2.45.
In February 2000, prior to the merger, all warrants were exercised.
F-21
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--NET INCOME (LOSS) PER COMMON SHARE (CONTINUED)
Certain of the outstanding shares issued in exchange for Cloudscape common
stock and held by employees are subject to repurchase upon termination of
employment. The number of shares subject to this repurchase right decreases as
the shares vest over time, generally for four years. As of December 31, 2000,
1999 and 1998, 36,000, 212,000, and 1,407,000, shares, respectively, were
subject to repurchase at a weighted-average exercise price of $0.23, $0.24, and
$0.13, respectively.
NOTE 7--EMPLOYEE BENEFIT PLANS
OPTION PLANS
In February 1989, the Company adopted the 1989 Outside Directors Stock
Option Plan, whereby non-employee directors are automatically granted 15,000
non-qualified stock options upon election or re-election to the Board of
Directors. One-third of the options vest and become exercisable in each full
year of the Outside Director's continuous service as a director of the Company.
A total of 1,600,000 shares have been authorized for issuance under the
1989 Plan, of which 515,000 shares are reserved for future issuance as of
December 31, 2000.
In April 1994, the Company adopted the 1994 Stock Option and Award Plan (the
"1994 Plan"). Incentive Stock Options, Nonqualified Stock Options, Performance
Shares, or a combination thereof, can be granted to employees, at not less than
the fair market value on the date of grant and generally vest in annual
installments over two to four years. The Compensation Committee may grant
awards, provided that during any fiscal year of the Company, no participant
shall receive stock options covering more than 250,000 shares or Performance
Shares covering more than 100,000 shares. However, the committee may grant up to
500,000 shares during any fiscal year of the Company in which the individual
first becomes an employee and/or is promoted from a position as a non-executive
officer employee to a position as an executive officer. In April 2000, the
Company's Board of Directors approved an amendment to this Plan whereby the
options are generally not exercisable until one year from the date of grant. A
total of 24,000,000 shares have been authorized for issuance under the
1998 Plan, of which 1,770,000 shares are reserved for future issuance as of
December 31, 2000.
In July 1997, the Company adopted the 1997 Non-Statutory Stock Option Plan
("the 1997 Stock Plan"), authorizing the grant of non-statutory stock options to
employees and consultants. Terms of each option are determined by the Board or
committee delegated such duties by the Board. A total of 1,015,000 shares have
been authorized for issuance under the 1997 Stock Plan, none of which are
reserved for future issuance as of December 31, 2000.
In December 1997, the Company's Board of Directors authorized the repricing
of outstanding options to purchase Common Stock under the Company's stock option
plans. Employees were eligible to participate only if they remained actively
employed at the effective date of the repricing and were only permitted to
exchange options granted and outstanding prior to May 1, 1997. The
repricing/option exchange was effective January 9, 1998 (the "Repricing
Effective Date"). The repricing program offered eligible employees the
opportunity to exchange eligible outstanding options with exercise prices in
excess of the closing sales price of the Company's Common Stock on the Repricing
Effective Date for a new option with an exercise price equal to such price.
Other than the exercise price, each new option issued upon exchange has terms
substantially equivalent to the surrendered option, including the number of
shares, vesting terms and expiration except that options issued in connection
with the exchange may not be exercised for a period of one year from the
Repricing Effective Date. In addition, Officers and Directors of
F-22
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--EMPLOYEE BENEFIT PLANS (CONTINUED)
the Company were not eligible to have their shares repriced. The exercise price
for repriced options was $5.0938, the closing sales price of the Company's
Common Stock on the Repricing Effective Date.
In July 1998, the Company adopted the 1998 Non-Statutory Stock Option Plan
("the 1998 Stock Option Plan"). Options can be granted to employees and
consultants with terms which are determined by the Board or committee delegated
such duties by the Board. A total of 15,500,000 shares have been authorized for
issuance under the 1998 Stock Plan, of which 1,617,000 shares are reserved for
future issuance as of December 31, 2000.
As a result of its acquisition of Red Brick Systems, Inc. ("Red Brick") in
December 1998, the Company assumed all outstanding Red Brick stock options. Each
Red Brick stock option so assumed is subject to the same terms and conditions as
the original grant and generally vests over four years and expires ten years
from the date of grant. Each option was adjusted at a ratio of 0.6 shares of
Informix Common Stock for each one share of Red Brick Common Stock, and the
exercise price was adjusted by dividing the exercise price by 0.6.
As a result of its acquisition of Ardent in March 2000, the Company assumed
all outstanding Ardent stock options. Each Ardent stock option so assumed is
subject to the same terms and conditions as the original grant and generally
vests over four years and expires ten years from the date of grant. Each option
was adjusted at a ratio of 3.5 shares of Informix Common Stock for each one
share of Ardent Common Stock, and the exercise price was adjusted by dividing
the exercise price by 3.5.
As a result of its acquisition of Cloudscape, Inc. ("Cloudscape") in
October 1999, the Company assumed all outstanding Cloudscape stock options. Each
Cloudscape stock option so assumed is subject to the same terms and conditions
as the original grant and generally vests over four years and expires ten years
from the date of grant. Each option was adjusted at a ratio of approximately
0.56 shares of Informix Common Stock for each one share of Cloudscape Common
Stock, and the exercise price was adjusted by dividing the exercise price by
approximately 0.56.
F-23
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--EMPLOYEE BENEFIT PLANS (CONTINUED)
Following is a summary of activity for all stock option plans for the three
years ended December 31, 2000:
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
----------- ----------------
Outstanding at December 31, 1997............................ 33,922,370 $5.30
Options granted............................................. 21,900,385 4.45
Options assumed............................................. 2,466,727 5.40
Options exercised........................................... (7,927,561) 2.06
Options canceled............................................ (10,008,877) 8.41
----------- -----
Outstanding at December 31, 1998............................ 40,353,044 4.71
Options granted............................................. 13,102,052 8.14
Options assumed............................................. 2,212,781 3.76
Options exercised........................................... (8,441,804) 3.04
Options canceled............................................ (7,117,793) 6.55
----------- -----
Outstanding at December 31, 1999............................ 40,108,280 5.77
Options granted............................................. 24,801,805 6.71
Options exercised........................................... (7,222,002) 3.64
Options canceled............................................ (10,567,200) 7.50
----------- -----
Outstanding at December 31, 2000............................ 47,120,883 $6.20
=========== =====
The following table summarizes information about options outstanding at
December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AS OF REMAINING AVERAGE AS OF AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 2000 LIFE PRICE 2000 PRICE
- ------------------------ ------------- ----------- -------- ------------- --------
$0.050 to $2.858....................... 5,858,459 6.49 $ 2.287 5,119,198 $ 2.260
$2.929 to $4.590....................... 4,355,193 7.95 3.760 1,461,486 3.698
$4.750 to $4.938....................... 13,693,685 9.52 4.937 814,011 4.932
$5.063 to $6.750....................... 7,299,159 7.48 5.467 4,473,613 5.459
$6.781 to $9.031....................... 8,448,520 8.13 7.719 3,035,893 7.937
$9.126 to $12.500...................... 5,404,861 8.20 10.425 1,967,501 10.627
$14.063 to $28.100..................... 2,061,007 9.00 16.174 97,602 21.357
---------- ----------
$0.050 to $28.100...................... 47,120,884 8.26 6.201 16,969,304 5.451
========== ==========
At December 31, 1999 and 1998, respectively, 14,331,842 and 13,242,144
options were exercisable in connection with all stock option plans.
EMPLOYEE STOCK PURCHASE PLAN
In May 1997, the Company's stockholders approved the 1997 Employee Stock
Purchase Plan (the "1997 ESPP"). The Company has reserved 4,000,000 shares of
Common Stock for issuance under the 1997
F-24
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--EMPLOYEE BENEFIT PLANS (CONTINUED)
ESPP. The 1997 ESPP permits participants to purchase Common Stock through
payroll deductions of up to 15 percent of an employee's compensation, including
commissions, overtime, bonuses and other incentive compensation. The price of
Common Stock purchased under the 1997 ESPP is equal to 85 percent of the lower
of the fair market value of the Common Stock at the beginning or at the end of
each calendar quarter in which an eligible employee participates. The Plan
qualifies as an employee stock purchase plan under Section 423 of the Internal
Revenue Code of 1986, as amended. During 2000, 1999 and 1998, the Company issued
approximately 2,043,000 shares, 1,187,000 shares and 1,613,000 shares,
respectively, under the 1997 ESPP.
Ardent's Employee Stock Purchase Plan ("the Purchase Plan") provided for the
purchase of common stock at six-month intervals at 85% of the lower of the fair
market value on the first day or the last day of each six-month period. Ardent
issued 432,000 and 528,000 shares in 1999 and 1998, respectively, under the
Purchase Plan. This plan was terminated in April, 2000.
STOCK-BASED COMPENSATION
Pro forma information regarding the net income (loss) and net income (loss)
per share is required by Statement of Financial Accounting Standards No. 123
(SFAS 123), "Accounting for Stock-Based Compensation," as if the Company had
accounted for its stock based awards to employees under the fair value method of
SFAS 123. The fair value of the Company's stock-based awards to employees was
estimated using a Black-Scholes option pricing model.
The fair value of the Company's stock-based awards was estimated assuming no
expected dividends and the following weighted-average assumptions:
OPTIONS ESPP
-------------------------------- --------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------
Expected life (years)................... 4.5 4.5 4.5 .25 .25 .25
Expected volatility..................... 90% 70-73% 64-73% 90% 70-73% 56-95%
Risk-free interest rate................. 5.8% 5.7% 4.7% 5.9% 4.6-5.1% 4.7-5.3%
For pro forma purposes, the estimated fair value of the Company's
stock-based awards is amortized over the award's vesting period (for options)
and the three month purchase period (for stock purchases under the ESPP). The
Company's pro forma information follows:
2000 1999 1998
---------- --------- ---------
(IN THOUSANDS EXCEPT FOR PER SHARE
INFORMATION)
Net income (loss) applicable to common
stockholders................................... As reported $ (98,506) $ (3,983) $46,992
Pro forma (140,654) (45,289) 7,050
Net income (loss) per common share:
Basic.......................................... As reported $ (0.34) $ (0.02) $ 0.21
Pro forma (0.49) (0.17) 0.03
Diluted........................................ As reported (0.34) (0.02) 0.19
Pro forma (0.49) (0.17) 0.03
F-25
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--EMPLOYEE BENEFIT PLANS (CONTINUED)
The weighted-average fair value of the options granted during 2000, 1999 and
1998 was $4.70, $5.24 and $3.58 per share, respectively. The weighted-average
fair value of employee stock purchase rights granted under the ESPP during 2000,
1999 and 1998 were $1.97, $2.27 and $1.72 per share, respectively.
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 limits. The Company matches 50 percent of each employee's
contribution up to a maximum of $2,500. The Company's matching contributions to
this 401(k) plan for 2000, 1999 and 1998 were $4.9 million, $4.2 million and
$3.5 million, respectively.
NOTE 8--COMMITMENTS AND CONTINGENCIES
In the past, the Company has leased certain computer and office equipment
under capital leases having terms of three-to-five years. During 2000, the
Company did not enter into any new capital lease arrangements and during 1999
and 1998, did not finance a significant amount of equipment purchases under
capital lease arrangements. Amounts capitalized for such leases are included on
the consolidated balance sheets as property and equipment and at December 31,
2000 the amount was not significant. As of December 31, 1999, computer and
office equipment under capital leases included in property and equipment was
$8.8 million and accumulated amortization was $7.1 million. Amortization of the
cost of leased equipment is included in depreciation expense.
The Company leases certain of its office facilities and equipment under
non-cancelable operating leases and total rent expense was $44.0 million,
$42.4 million and $34.7 million in 2000, 1999 and 1998, respectively.
The Company had a twenty-year capital lease on one of its operating
facilities, which commenced in November 1994. In March 1998, the Company
renegotiated this lease. As part of the renegotiation, the term of the lease was
modified and reduced from 20 years to 14 years. As a result, the lease no longer
qualified as a capital lease and had been reclassified as an operating lease. In
connection with this reclassification, the Company removed the asset and
liability from the balance sheet and recorded a net gain of approximately
$0.6 million as a component of other income (expense) in 1998.
In November 1996, the Company leased approximately 200,000 square feet of
office space in Santa Clara, California. The lease term extends through
March 2013 and the remaining minimum lease payments amount to approximately
$68.6 million. In the fourth quarter of 1997, the Company assigned the lease to
an unrelated third party. The Company remains contingently liable for minimum
lease payments under this assignment.
F-26
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum payments, by year and in the aggregate, under the capital and
non-cancelable operating leases (excluding the assigned lease mentioned above)
as of December 31, 2000, are as follows:
NON-CANCELABLE
YEAR ENDING DECEMBER 31 CAPITAL LEASES OPERATING LEASES
- ----------------------- -------------- ----------------
(IN THOUSANDS)
2001........................................................ $51 $ 36,312
2002........................................................ 2 26,880
2003........................................................ -- 15,318
2004........................................................ -- 6,091
2005........................................................ -- 3,778
Thereafter.................................................. -- 8,309
--- --------
Total payments.............................................. 53 $ 96,688
========
Less: amount representing interest.......................... 2
---
Present value of minimum lease payments..................... 51
Less current portion........................................ 49
---
$ 2
===
The Company has several active software development and service provider
contracts with third-party technology providers. These agreements contain
financial commitments by the Company of $8.3 million and $4.7 million in fiscal
2001 and 2002, respectively. In addition, the Company makes annual payments of
approximately $1.8 million to third-party technology providers, and will
continue to do so for such period as the Company utilizes the related technology
in its products.
NOTE 9--BUSINESS SEGMENTS
In recent years, the Company has operated under four reportable operating
segments which report to the Company's president and chief executive officer,
(the "Chief Operating Decision Maker"). These reportable operating segments,
North America, Europe, Asia/Pacific and Latin America, are organized, managed
and analyzed geographically and operate in one industry segment: the development
and marketing of information management software and related services. The
Company has evaluated operating segment performance based primarily on net
revenues and certain operating expenses. The Company's products are marketed
internationally through the Company's subsidiaries and through application
resellers, OEMs and distributors.
F-27
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--BUSINESS SEGMENTS (CONTINUED)
Financial information for the Company's North America, Europe, Asia/Pacific
and Latin America operating segments is summarized below by year:
NORTH LATIN
AMERICA EUROPE ASIA/PACIFIC AMERICA OTHER(3) TOTAL
--------- -------- ------------ -------- --------- ----------
(IN THOUSANDS)
2000:
Net revenues from unaffiliated customers.... $ 481,973 $278,534 $ 99,429 $ 69,383 $ -- $ 929,319
Transfers between segments(1)............... (25,191) 9,808 8,866 6,517 -- --
Total net revenues.......................... 456,782 288,342 108,295 75,900 -- 929,319
Operating income (loss)(2).................. (149,647) 53,936 (7,219) 1,628 118 (101,184)
Identifiable assets at December 31.......... 653,565 177,003 32,018 13,348 (220,053) 655,881
Depreciation and amortization expense....... 42,945 7,332 2,853 1,341 -- 54,471
Capital expenditures........................ 32,258 9,246 1,995 1,117 -- 44,616
1999:
Net revenues from unaffiliated customers.... $ 551,051 $320,040 $106,011 $ 62,009 $ -- $1,039,111
Transfers between segments(1)............... (34,259) 19,738 7,776 6,745 -- --
Total net revenues.......................... 516,792 339,778 113,787 68,754 -- 1,039,111
Operating income(2)......................... 58,142 19,764 32,908 3,700 1,065 115,579
Identifiable assets at December 31.......... 839,686 67,424 16,954 15,167 (145,894) 793,337
Depreciation and amortization expense....... 47,023 7,556 3,584 1,524 -- 59,687
Capital expenditures........................ 22,221 5,088 1,403 1,047 -- 29,759
1998:
Net revenues from unaffiliated customers.... $ 438,539 $278,249 $ 87,754 $ 49,978 $ -- $ 854,520
Transfers between segments(1)............... (11,256) (52) 4,093 7,215 -- --
Total net revenues.......................... 427,283 278,197 91,847 57,193 -- 854,520
Operating income (loss)(2).................. 1,573 61,116 1,645 (7,173) 703 57,864
Identifiable assets at December 31.......... 747,074 156,949 79,754 40,328 (328,303) 695,802
Depreciation and amortization expense....... 37,702 10,779 4,047 1,485 -- 54,013
Capital expenditures........................ 16,611 5,047 1,086 794 -- 23,538
- ------------------------------
(1) The Company makes allocations of revenue to operating segments depending on
the location of the country where the order is placed, the location of the
country where the license is installed or service is delivered, the type of
revenue (license or service) and whether the sale was through a reseller or
to an end user.
The accounting policies of the segments are the same as those described in
Note 1--Summary of Significant Accounting Policies.
(2) Operating income/(loss) excludes the effect of transfers between segments.
(3) Represents consolidating adjustments such as elimination of intercompany
balances.
F-28
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--BUSINESS SEGMENTS (CONTINUED)
The reconciliation of the operating income (loss) of the Company's
reportable operating segments to the Company's income (loss) before income taxes
is as follows:
2000 1999 1998
--------- -------- --------
(IN THOUSANDS)
Operating income (loss) of reportable operating segments.... $(101,302) $114,514 $57,161
Consolidating adjustments................................... 118 1,065 703
Other income (expense)...................................... 18,887 (86,584) 1,488
--------- -------- -------
Income (loss) before income taxes........................... $ (82,297) $ 28,995 $59,352
========= ======== =======
On September 19, 2000, the Company announced organizational changes as part
of its strategic realignment, which include the establishment of two operating
businesses. The first, Informix Software, will focus on providing database
management systems for data warehousing, transaction processing, and e-Business
applications. The second, Ascential Software, is a newly established information
asset management company being launched to provide content management, data
integration infrastructure and enterprise portal software solutions to
organizations worldwide. This follows the Company's announcement on August 9,
2000, of several strategic initiatives, amongst which was the consolidation of
five business groups into two operations, Database Business Operations and
Solutions Business Operations, which more effectively capture the Company's
current operations and form the foundation for the two new operating companies,
Informix Software and Ascential Software. Revenues from external customers for
each group of similar products and services are summarized below by year (in
millions):
2000 1999 1998
-------- -------- --------
INFORMIX SOFTWARE
License revenues.......................................... $337.7 $ 481.9 $439.6
Service revenues
Maintenance revenues.................................... 392.4 361.3 285.7
Consulting and education revenues....................... 77.5 111.8 111.7
------ -------- ------
Total service revenues.................................. 469.9 473.1 397.4
------ -------- ------
Total revenues--Informix Software......................... $807.6 $ 955.0 $837.0
====== ======== ======
ASCENTIAL SOFTWARE
License revenues.......................................... $ 66.7 $ 54.0 $ 14.3
Service revenues
Maintenance revenues.................................... 20.1 6.9 0.9
Consulting and education revenues....................... 34.9 23.2 2.3
------ -------- ------
Total service revenues.................................. 55.0 30.1 3.2
------ -------- ------
Total revenues--Ascential Software........................ $121.7 $ 84.1 $ 17.5
====== ======== ======
INFORMIX CORPORATION (COMBINED TOTAL OF INFORMIX SOFTWARE
AND ASCENTIAL SOFTWARE)
License revenues.......................................... $404.4 $ 535.9 $453.9
Service revenues
Maintenance revenues.................................... 412.5 368.2 286.6
Consulting and education revenues....................... 112.4 135.0 114.0
------ -------- ------
Total service revenues.................................. 524.9 503.2 400.6
------ -------- ------
Total revenues--Informix Corporation...................... $929.3 $1,039.1 $854.5
====== ======== ======
F-29
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--BUSINESS SEGMENTS (CONTINUED)
Information as to the Company's operations in different geographical areas
is as follows:
2000 1999 1998
-------- -------- --------
(IN MILLIONS)
Revenues, net of transfers between segments:
United States............................................. $456.8 $ 516.8 $427.3
------ -------- ------
Total North America....................................... 456.8 516.8 427.3
------ -------- ------
United Kingdom............................................ 79.4 104.7 86.8
Germany................................................... 65.4 75.1 69.9
France.................................................... 31.0 47.1 29.1
Italy..................................................... 16.4 13.6 10.9
Spain..................................................... 13.9 14.5 10.8
Other countries........................................... 82.2 84.8 70.7
------ -------- ------
Total Europe.............................................. 288.3 339.8 278.2
------ -------- ------
Japan..................................................... 27.5 32.3 26.2
Australia................................................. 19.0 24.3 17.1
China..................................................... 13.4 15.7 9.7
Korea..................................................... 13.1 8.6 5.6
Other countries........................................... 35.3 32.9 33.2
------ -------- ------
Total Asia/Pacific........................................ 108.3 113.8 91.8
------ -------- ------
Mexico.................................................... 34.8 31.4 21.6
Brazil.................................................... 12.6 9.6 11.3
Argentina................................................. 8.9 9.0 7.5
Other countries........................................... 19.6 18.7 16.8
------ -------- ------
Total Latin America....................................... 75.9 68.7 57.2
------ -------- ------
$929.3 $1,039.1 $854.5
====== ======== ======
F-30
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--BUSINESS SEGMENTS (CONTINUED)
2000 1999
-------- --------
(IN MILLIONS)
Property and equipment, net
United States............................................. $51.8 $52.7
Other..................................................... 0.6 0.2
----- -----
Total North America....................................... 52.4 52.9
----- -----
United Kingdom............................................ 2.7 2.7
Ireland................................................... 2.2 1.7
Germany................................................... 1.4 1.8
France.................................................... 1.1 1.4
Other countries........................................... 2.5 2.5
----- -----
Total Europe.............................................. 9.9 10.1
----- -----
Asia/Pacific.............................................. 2.8 3.0
Latin America............................................. 2.5 2.6
----- -----
Total Asia/Pacific and Latin America...................... 5.3 5.6
----- -----
$67.6 $68.6
===== =====
NOTE 10--INCOME TAXES
The provision for income taxes applicable to income (loss) before income
taxes consists of the following:
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Currently payable:
Federal................................................... $ 0 $ 5,929 $ 889
State..................................................... 50 754 195
Foreign................................................... 7,711 15,647 2,840
------- ------- --------
7,761 22,330 3,924
Deferred:
Federal................................................... 3,211 187 (3,459)
State..................................................... -- (958) (1,389)
Foreign................................................... 5,046 10,424 7,824
------- ------- --------
8,257 9,653 2,976
------- ------- --------
$16,018 $31,983 $ 6,900
======= ======= ========
F-31
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES (CONTINUED)
Income (loss) before income taxes consists of the following:
2000 1999 1998
--------- -------- --------
(IN THOUSANDS)
Domestic.................................................... $(152,876) $(20,705) $ 5,278
Foreign..................................................... 70,579 49,700 54,074
--------- -------- -------
$ (82,297) $ 28,995 $59,352
========= ======== =======
The provision for income taxes differs from the amount computed by applying
the federal statutory income tax rate to income (loss) before income taxes. The
sources and tax effects of the differences are as follows:
2000 1999 1998
-------------------- ------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- -------- -------- -------- -------- --------
(IN THOUSANDS)
Computed tax (benefit) at federal
statutory rate....................... $ (28,804) 35.0% $ 10,148 35.0% $ 20,773 35.0%
Valuation allowance.................... 46,854 (56.9) (11,940) (41.2) (11,396) (19.2)
State income taxes, net of federal tax
benefit.............................. 50 (0.1) 644 2.2 (1,229) (2.1)
Foreign withholding taxes not currently
creditable........................... 3,672 (4.5) 8,957 30.9 2,690 4.5
Foreign taxes, net..................... (20,078) 24.4 18,686 64.5 (4,729) (7.9)
Non-deductible charges................. 15,750 (19.1) 3,515 12.1 1,272 2.1
Other, net............................. (1,426) 1.7 1,973 6.8 (481) (0.8)
--------- ----- -------- ------ -------- -----
$ 16,018 (19.5)% $ 31,983 110.3% $ 6,900 11.6%
========= ===== ======== ====== ======== =====
F-32
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES (CONTINUED)
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, 2000 and
1999 are as follows:
2000 1999
--------- ---------
(IN THOUSANDS)
Deferred Tax Assets:
Reserves and accrued expenses............................... $ 8,156 $ 11,373
Deferred revenue............................................ 4,039 3,098
Foreign net operating loss carryforwards.................... 23,114 21,025
Domestic net operating loss carryforwards................... 128,464 97,862
Lawsuit settlement.......................................... 23,085 23,085
Foreign taxes credit........................................ 14,257 10,077
R&D and AMT credit carryforwards............................ 31,038 28,474
Acquisition and restructuring reserve....................... 11,014 --
Other....................................................... 17,743 7,701
--------- ---------
Total deferred tax assets................................... 260,910 202,695
Valuation allowance for deferred tax assets................. (250,549) (176,830)
--------- ---------
Deferred tax assets, net of valuation allowance............. 10,361 25,865
========= =========
Deferred Tax Liabilities:
Capitalized software........................................ 10,361 17,110
Valuation of investment portfolio FAS 115................... -- 3,211
--------- ---------
Total deferred tax liabilities.............................. 10,361 20,321
--------- ---------
Net deferred tax assets..................................... $ -- $ 5,544
========= =========
At December 31, 2000, the Company had approximately $73.1 million and
$321.2 million of foreign and federal net operating loss carryforwards,
respectively. The foreign net operating loss carryforwards expire at various
dates beginning in 2001. The federal net operating loss carryforwards expire at
various dates beginning in 2004. At December 31, 2000, the Company had
approximately $45.3 million of various federal tax credit carryforwards that
will expire at various dates beginning in 2001.
The valuation allowance was increased by $73.7 million in 2000 and was
decreased by $0.7 million in 1999. At December 31, 2000 the Company has provided
a valuation allowance against deferred tax assets in all jurisdictions as future
income in each jurisdiction is uncertain. At December 31, 1999 the net deferred
tax asset of $5.5 million represented the tax effect of net operating loss
carryforwards existing in certain foreign jurisdictions that the Company
believed were more likely than not to be realized, based on earnings in those
jurisdictions.
F-33
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES (CONTINUED)
Subsequently recognizable tax benefits relating to the valuation allowance
for deferred tax assets at December 31, 2000 will be as follows:
Income tax benefit from continuing operations............... $194,985
Goodwill and other noncurrent intangible assets............. 28,410
Additional paid-in capital.................................. 27,154
--------
Total....................................................... $250,549
========
NOTE 11--BUSINESS COMBINATIONS
POOLING-OF-INTERESTS COMBINATIONS
On March 1, 2000, the Company completed its acquisition of Ardent, a
provider of data integration infrastructure software for data warehouse,
business intelligence, and e-business applications. In the acquisition, the
former shareholders of Ardent received 3.5 shares of the Company's common stock
in exchange for each outstanding Ardent share (the "Ardent Merger"). An
aggregate of 70,437,000 shares of Informix common stock were issued pursuant to
the Ardent Merger, and an aggregate of 17,174,000 options to purchase Ardent
common stock were assumed by Informix. The Ardent Merger was accounted for as a
pooling-of-interests combination and, accordingly, the consolidated financial
statements for periods prior to the combination have been restated to include
the accounts and results of operations of Ardent and all intercompany
transactions have been eliminated.
On October 8, 1999, the Company completed its acquisition of Cloudscape, a
privately-held provider of synchronized database solutions for the remote and
occasionally connected workforce. In the acquisition, the former shareholders of
Cloudscape received 0.56 shares of the Company's common stock in exchange for
each outstanding Cloudscape share (the "Cloudscape Merger"). An aggregate of
9,583,000 shares of Informix common stock were issued pursuant to the Cloudscape
Merger, and an aggregate of 417,000 options and warrants to purchase Cloudscape
common stock were assumed by Informix. The acquisition of Cloudscape was
accounted for as a pooling-of-interests combination and, accordingly, the
consolidated financial statements for the periods prior to the combination have
been restated to include the accounts and results of operations of Cloudscape.
In February 1998, Ardent merged with Unidata, Inc. ("Unidata") and issued
5,750,000 shares of Ardent common stock to Unidata shareholders for all their
interest in Unidata. All outstanding Unidata options were assumed by Ardent. The
merger was accounted for as a pooling-of-interests and, accordingly, the
consolidated financial statements include the accounts and results of operations
of Unidata for all periods prior to the merger.
F-34
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--BUSINESS COMBINATIONS (CONTINUED)
The results of operations previously reported by the separate pooled
enterprises and the combined amounts presented in the accompanying consolidated
financial statements are summarized below (in thousands):
YEARS ENDED DECEMBER 31,
-------------------------
1999 1998
---------- --------
Net revenues:
Informix.................................................. $ 868,708 $734,737
Ardent.................................................... 169,186 119,260
Cloudscape(1)............................................. 1,217 523
---------- --------
Combined.................................................. $1,039,111 $854,520
========== ========
Net income (loss):
Informix.................................................. $ (5,256) $ 58,349
Ardent.................................................... 8,597 1,637
Cloudscape(1)............................................. (6,329) (7,534)
---------- --------
Combined.................................................. $ (2,988) $ 52,452
========== ========
No adjustments were necessary to conform accounting policies of the combined
entities.
- ------------------------
(1) The amounts reported for Cloudscape for 1999 are for the nine months ended
September 30, 1999 as the merger was completed on October 8, 1999.
PURCHASE COMBINATIONS
On April 26, 1999, Ardent acquired Prism Solutions, Inc. ("Prism"), a
provider of data warehouse management software that assists customers in
developing, managing and maintaining data warehouses. Under terms of the
acquisition, Ardent issued 2,492,000 shares of its common stock in exchange for
all outstanding shares of Prism common stock. In addition, Ardent issued options
to purchase 632,000 shares of Ardent's common stock in exchange for outstanding
options to purchase Prism common stock. The acquisition was accounted for using
the purchase method of accounting, and a summary of the purchase price for the
acquisition is as follows (in thousands):
Stock and stock options, net of issuance costs.............. $48,184
Liabilities assumed......................................... 16,332
Accrued merger and integration costs........................ 9,724
-------
Total....................................................... $74,240
=======
F-35
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--BUSINESS COMBINATIONS (CONTINUED)
The purchase price was allocated as follows:
Tangible assets acquired.................................... $ 9,388
Intangible assets:
Existing technology....................................... 10,296
Workforce................................................. 4,274
Customer list............................................. 1,645
Goodwill.................................................. 43,585
-------
Total intangible assets..................................... 59,800
In-process research and development......................... 5,052
-------
Total....................................................... $74,240
=======
Ardent determined the amount of the purchase price to be allocated to
in-process research and development based on an independent appraisal of Prism,
which indicated that approximately $5,052,000 of the acquired intangibles
consisted of in-process research and development that had not yet reached
technological feasibility and had no alternative future uses. Accordingly,
Ardent expensed this amount to operations upon closing of the acquisition. The
remaining identified intangible assets acquired were assigned fair values based
upon an independent appraisal and amounted to $11.9 million. The excess of the
purchase price over the identified tangible and intangible assets was recorded
as goodwill and amounted to approximately $38.7 million. Total intangible assets
acquired of approximately $50.6 million were included in "Intangible Assets" in
the accompanying consolidated balance sheets, and are being amortized over three
to ten years.
On December 31, 1998, the Company acquired Red Brick Systems, Inc. ("Red
Brick"), a provider of scalable decision support solutions for data warehousing,
data marts, OLAP and data mining. Under terms of the acquisition, the Company
issued approximately 7,600,000 shares of its common stock in exchange for all
outstanding shares of Red Brick common stock. In addition, the Company issued
options to purchase approximately 2.5 million shares of the Company's common
stock in exchange for outstanding unvested options to purchase Red Brick common
stock. The acquisition was accounted for using the purchase method of
accounting, and a summary of the purchase price for the acquisition is as
follows (in thousands):
Stock and stock options, net of issuance costs.............. $35,914
Direct acquisition costs.................................... 1,042
Other liabilities assumed................................... 5,892
Accrued merger and integration costs........................ 7,850
Deferred revenue............................................ 5,149
-------
Total....................................................... $55,847
=======
F-36
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--BUSINESS COMBINATIONS (CONTINUED)
The purchase price was allocated as follows:
Cash and short-term investments acquired.................... $ 7,763
Other tangible assets acquired.............................. 10,281
Intangible assets
Capitalized software...................................... 7,400
Workforce................................................. 4,700
Goodwill.................................................. 23,103
-------
35,203
In-process research and development......................... 2,600
-------
Total....................................................... $55,847
=======
In-process research and development represents the fair value of
technologies acquired for use in the Company's own development efforts. The
Company determined the amount of the purchase price to be allocated to
in-process research and development based on an independent appraisal of certain
intangible assets which indicated that approximately $2.6 million of the
acquired intangible assets consisted of in-process research and development that
had not yet reached technological feasibility and had no alternative future
uses. Accordingly, the Company recorded a charge to operations of $2.6 million
in the fourth quarter of fiscal 1998. The remaining intangible assets acquired,
with an assigned value of approximately $35.2 million, were included in
"Intangible Assets" in the accompanying consolidated balance sheets, and are
being amortized over three to five years.
The following pro forma financial information presents the combined results
of operations of Informix, Prism and Red Brick as if the acquisitions had
occurred as of the beginning of 1999 and 1998, after giving effect to certain
adjustments, including amortization of goodwill and excluding the write-off of
acquired in-process research and development. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had these three companies constituted a single entity during such
periods.
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998
------------ ----------
(IN THOUSANDS, EXCEPT FOR PER
SHARE DATA)
Net revenues................................................ $1,048,373 $935,934
Net income (loss)........................................... (23,711) 986
Net income (loss) per share................................. $ (0.09) $ (0.02)
NOTE 12--LITIGATION
Commencing in April 1997, a series of class action lawsuits purportedly by
or on behalf of stockholders and a separate but related stockholder action were
filed in the United States District Court for the Northern District of
California. These actions name as defendants the Company, certain of its present
directors and former officers and directors and, in some cases, its former
independent auditors. The complaints alleged various violations of the federal
securities laws and sought unspecified but potentially significant damages.
Similar actions were also filed in California state court and in Newfoundland,
Canada.
F-37
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--LITIGATION (CONTINUED)
Stockholder derivative actions, purportedly on behalf of the Company and
naming virtually the same individual defendants and the Company's former
independent auditors, were also filed, commencing in August 1997, in California
state court. While these actions allege various violations of state law, any
monetary judgments in these derivative actions would accrue to the benefit of
the Company.
Pursuant to Delaware law and certain indemnification agreements between the
Company and each of its current and former officers and directors, the Company
is obligated to indemnify its current and former officers and directors for
certain liabilities arising from their employment with or service to the
Company. This includes the costs of defending against the claims asserted in the
above-referenced actions and any amounts paid in settlement or other disposition
of such actions on behalf of these individuals. The Company's obligations do not
permit or require it to provide such indemnification to any such individual who
is adjudicated to be liable for fraudulent or criminal conduct. Although the
Company has purchased directors' and officers' liability insurance to reimburse
it for the costs of indemnification for its directors and officers, the coverage
under its policies is limited. Moreover, although the directors' and officers'
insurance coverage presumes that 100 percent of the costs incurred in defending
claims asserted jointly against the Company and its current and former directors
and officers are allocable to the individuals' defense, the Company does not
have insurance to cover the costs of its own defense or to cover any liability
for any claims asserted against it. The Company has not set aside any financial
reserves relating to any of the above-referenced actions.
In October and November, 1999, state and federal courts granted final
approval of a settlement agreed to by the Company and the other parties to the
various private securities and related litigation against the Company (the
"Settlement"). The Settlement resolved all material litigation arising out of
the restatement of the Company's financial statements that was publicly
announced in November 1997. In accordance with the terms of the Settlement, the
Company paid approximately $3.2 million in cash during the second quarter of
1999 and an additional amount of approximately $13.8 million of insurance
proceeds was contributed directly by certain insurance carriers on behalf of
certain of the Company's current and former officers and directors. The Company
will also contribute a minimum of 9.0 million shares of the Company's common
stock, which will have a guaranteed value of $91.0 million for a maximum term of
one year from the date of the final approval of the settlement by the courts.
The first distribution of shares of the Company's common stock occurred in
November and December 1999 when the Company issued approximately 2.9 million
shares to the plaintiff's counsel. The Company will issue the remainder of the
shares to be issued under the Settlement after the claims administrator notifies
the Company that it has processed all of the claims submitted by class members.
The Company's former independent auditors, Ernst & Young LLP, paid
$34.0 million in cash. The total amount of the Settlement will be
$142.0 million.
EXPO 2000 filed an action against Informix Software GmbH (the Company's
German subsidiary) in the Hanover (Germany) district court in September 1998
seeking recovery of approximately $6.0 million, plus interest, for breach of a
sponsorship contract signed in 1997. Informix Software GmbH filed a counterclaim
for breach of contract and seeks recovery of approximately $3.1 million. In
August 1999, the court entered a judgment against Informix Software GmbH in the
amount of approximately $6.0 million, although approximately $2.1 million of
judgment is conditioned upon the return by EXPO 2000 of certain software. The
Company has reserved $3.1 million for the expected outcome of the appeal. The
next court date is scheduled for March 27, 2001.
On February 3, 2000, International Business Machines Corporation ("IBM")
filed an action against the Company in the United States District Court for the
District of Delaware alleging infringement of six
F-38
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--LITIGATION (CONTINUED)
United States patents owned by IBM. In the complaints, IBM seeks against the
Company, and the Company seeks against IBM, permanent injunctions against
further alleged infringement, unspecified compensatory damages, unspecified
treble damages, and interest, costs and attorney's fees. On March 28, 2000, the
Company filed an answer and counterclaims in the United States District Court
for the District of Delaware against IBM denying IBM's allegations of patent
infringement and alleging infringement by IBM of four United States patents
owned by the Company. In addition, on March 28, 2000, the Company filed a
separate action against IBM in the United States District Court for the Northern
District of California alleging infringement of four other United States patents
owned by the Company. On June 22, 2000, that action was transferred to the
United States District Court for the District of Delaware. The Company strongly
believes that the allegations in IBM's complaint are without merit and intends
to defend the action and prosecute the Company's claims vigorously.
Ardent is a defendant in actions filed against Unidata prior to its merger
with Ardent, one in May 1996 in the U.S. District Court for the Western District
of Washington, and one in September 1996 in the U.S. District Court for the
District of Colorado. The plaintiff, a company controlled by a former
stockholder of Unidata and a distributor of its products in certain parts of
Asia, alleges in both actions the improper distribution of certain Unidata
products in the plaintiff's exclusive territory and asserts damages of
approximately $30.0 million under claims for fraud, breach of contract, unfair
competition, racketeering and corruption, and a trademark and copyright
infringement, among other relief. Unidata denied the allegations against it in
its answers to the complaints. In the Colorado action, Unidata moved that the
matter be resolved by arbitration in accordance with its distribution agreement
with the plaintiff. In May 1999, the U.S. District Court for the District of
Colorado issued an order compelling arbitration and in September 2000, the
arbitrator issued an award against Ardent for $3.5 million plus attorneys' fees
and expenses estimated to be approximately $0.8 million. The Company is seeking
reconsideration of the award but, in the meantime, has reserved $4.3 million.
Discovery has not commenced in the Washington action, pending the outcome of the
Colorado arbitration. Ardent, as successor-in-interest to Unidata, has been
joined as a party in an action in China filed by the same plaintiff in the U.S.
actions and a related company against Unidata, its former distributor and a
customer arising out of the same facts at issue in the U.S. actions. The
plaintiffs have asserted claims against Ardent in the total amount of
$26.0 million, and against the customer in the approximate amount of
$4.0 million (in addition to the assertion that the customer is jointly liable
for the $26.0 million). The customer is expected to assert indemnity claims
against Ardent for any liability in the action in China, and also is expected to
seek recovery of its fees from Ardent, which the customer has alleged are
approximately $3.0 million. The Company believes that Ardent has defenses to the
claims and intends to defend the action in China vigorously.
In July 2000, the Company agreed to pay Cincom Systems, Inc ("Cincom")
$3.0 million to reimburse Cincom for operating expenses of CinMark, a joint
venture entered into by Ardent and Cincom in 1996 to develop the Object Studio
product, and $4.0 million as a fee to license the Object Studio technology. This
agreement resolves all claims and counterclaims asserted by both Cincom and
Ardent. During the period ended September 30, 2000, the Company discontinued use
of the licensed technology as a result of the realignment and expensed the
$4.0 million in the merger, realignment and other charge.
From time to time, in the ordinary course of business, the Company is
involved in various legal proceedings and claims. The Company does not believe
that any of these proceedings and claims will have a material adverse effect on
the Company's business or financial condition.
F-39
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--ACCRUED MERGER, REALIGNMENT AND OTHER CHARGES
During the year ended December 31, 2000, the Company approved plans to
realign its operations by establishing two operating businesses. The strategic
realignment included a refinement of the Company's product strategy,
consolidation of facilities and operations to improve efficiency and a reduction
in worldwide headcount of approximately 280 sales and marketing employees, 180
general and administrative employees, 200 research and development employees and
100 professional services and manufacturing employees. The Company recorded
realignment and other charges of $86.9 million during the year ended
December 31, 2000. The following analysis sets forth the significant components
of this charge:
ACCRUAL
REALIGNMENT BALANCE AT
AND OTHER PAYMENTS/ DECEMBER 31,
CHARGES CHARGES 2000
----------- --------- ------------
Write-off of goodwill and other intangible
assets................................... $32.0 $(32.0) $ --
Severance and employment related costs..... 40.9 (18.1) 22.8
Facility and equipment costs............... 7.5 (3.9) 3.6
Costs to exit various commitments and
programs................................. 4.0 (1.7) 2.3
Other charges.............................. 2.5 (2.5) --
----- ------ -----
$86.9 $(58.2) $28.7
===== ======
Amount included in accrued employee compensation.................... (5.0)
-----
Amount included in accrued merger, realignment and other charges.... $23.7
=====
The $32.0 million write-off of goodwill and other intangible assets
consisted primarily of $12.0 million of goodwill, $4.8 million of purchased
technology and $15.2 million of capitalized software. The $12.0 million
write-off of goodwill resulted from the carrying amount of certain long-lived
assets exceeding the estimated future undiscounted cash flows due to the
decision to curtail development of certain database products over the next few
years. The $4.8 million reduction of purchased technology is due to the carrying
amount of certain purchased technology exceeding the estimated future
undiscounted cash flows as a result of an abandonment of certain technology in
the Company's solutions business. $15.2 million of capitalized software was
written off because the carrying amount of certain capitalized costs exceeded
net realizable value. Of the $15.2 million write-off, $9.0 million was for the
abandonment of certain database development costs in conjunction with the
decision to move to a single database-management system, $4.0 million related to
the decision to discontinue use of licensed software, and $2.2 million was for
abandonment of other developed tools and products.
Severance and employment related costs of $40.9 million included
$24.1 million of termination compensation and related benefits, $11.5 million of
retention and incentive bonuses for employees who management believes are
critical to the successful outcome of the realignment and $5.3 million for
payments to qualified employees related to the Company's decision to terminate
its sabbatical plan. The sabbatical plan provided employees a one-month
sabbatical after every five years of continuous service. As a direct result of
the plan termination, the Company paid cash bonuses to employees based upon
their progress toward earning a sabbatical. As of December 31, 2000,
approximately $10.7 million of termination compensation and related benefits had
been paid to terminate approximately 430 employees and $7.4 million of retention
and incentive bonuses had been paid. The remaining accrual balance of
$22.8 million will be paid on various dates extending through June 2001.
F-40
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--ACCRUED MERGER, REALIGNMENT AND OTHER CHARGES (CONTINUED)
Included in the $7.5 million charge for facility and equipment costs was
$3.2 million for the write-off of obsolete and abandoned computer and office
equipment, as these assets are no longer being used, and $4.3 million for lease
obligations for redundant facilities. The remaining accrual balance at
December 31, 2000 of $3.6 million is for lease obligations that extend through
2004 for redundant facilities.
Included in the $4.0 million charge for costs to exit various commitments
and programs was $2.0 million for the termination of contracted service
commitments and $2.0 million to cancel various marketing programs. The remaining
accrual of $2.3 million should be paid by July 2001. Also, included in the
$2.5 million of other charges is $1.3 million in receivables that have been
deemed uncollectable as a direct result of merger, realignment and restructuring
decisions.
The impairment charge for long-lived assets related to identifiable assets
previously classified within primarily the North America business segment.
In connection with the merger with Ardent, the Company recorded a charge of
$50.0 million for merger, integration and restructuring costs, of which
$39.9 million was for accrued merger and restructuring costs and the remaining
$10.1 million was for integration and transition costs incurred during the
quarter ended March 31, 2000. This amount included $14.5 million for financial
advisor, legal and accounting fees related to the merger, $13.0 million for
severance and employment related costs associated with the termination of
approximately 206 employees from various organizations throughout the Company
who held overlapping positions, $8.9 million for the closure of facilities and
equipment costs associated with combining the operations of the two companies
and $3.5 million for the write-off of redundant technology and other duplicate
costs. Subsequent to the quarter ended March 31, 2000, the Company recorded
adjustments of $8.9 million to the merger and restructuring charge. The major
components of the adjustments were a $4.7 million adjustment to accrued facility
and equipment costs and a $2.6 million adjustment to accrued severance and
employment costs. The adjustment to the accrued facility and equipment costs
resulted from the Company's ability to exit or sub-lease certain facility leases
in advance of original estimates, and the adjustment to accrued severance costs
was because certain former Ardent executives will remain with the Company as a
result of the realignment and therefore will not receive severance. The
following analysis sets forth the significant components of the restructuring
charge:
ACCRUAL
MERGER AND BALANCE AT
RESTRUCTURING PAYMENTS/ DECEMBER 31,
CHARGE ADJUSTMENTS CHARGES 2000
------------- ----------- --------- ------------
Financial advisor and other
fees......................... $14.5 $ 0.1 $(13.5) $1.1
Severance and employment
costs........................ 13.0 (3.5) (8.5) 1.0
Facility and equipment costs... 8.9 (4.7) (3.0) 1.2
Write-off of redundant
technology................... 3.5 (0.8) (2.7) --
----- ----- ------ ----
$39.9 $(8.9) $(27.7) $3.3
===== ===== ====== ====
It is anticipated that the remaining $1.1 million for professional services
related to the merger will be paid in 2001. As of December 31, 2000, essentially
all 206 of the positions originally identified for termination had been
eliminated and the remaining payments of $1.0 million for severance and
employment costs are expected to be made through December 2001 as certain
employees have elected to receive their severance payments over an extended
period of time. The remaining facility costs of $1.2 million
F-41
INFORMIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--ACCRUED MERGER, REALIGNMENT AND OTHER CHARGES (CONTINUED)
extend through 2003. The impairment charge for long-lived assets related to
identifiable assets previously classified within primarily the North America
business segment.
As part of the Company's acquisition of Cloudscape, the Company recorded a
charge of $2.8 million during the quarter ended December 31, 1999, for accrued
merger and restructuring costs. This amount included $1.2 million for financial
advisor, legal and accounting fees related to the merger and $1.6 million for
costs associated with combining the operations of the two companies including
expenditures of $0.7 million for severance and related costs, $0.4 million for
closure of facilities and $0.5 million for the write-off of redundant assets and
other costs. As of December 31, 2000, all obligations related to the Cloudscape
merger had been paid.
On April 26, 1999, Ardent acquired Prism Solutions, Inc. ("Prism"), a
provider of data warehouse management software that assists customers in
developing, managing and maintaining data warehouses. In connection with the
merger with Prism, Ardent recorded a charge of $9.7 million for accrued merger
and restructuring costs. The accrual included approximately $2.9 million for
professional fees and other acquisition-related costs, $3.5 million for
severance and related benefits to terminate 52 employees who held overlapping
positions and $3.3 million for costs associated with the shutdown and
consolidation of Prism facilities. As of December 31, 2000, approximately
$0.3 million remained unpaid and comprised principally of future rental
obligations on idle facilities which run through 2004.
In May 1999, Ardent adopted a formal plan to exit the operations of O2
Technologies, Inc. ("O2"), which had been acquired by Ardent in December 1997,
and recorded a charge of $9.9 million for accrued restructuring charges. The
charge was comprised of $5.9 million for asset impairment, $3.6 million for
severance and related costs and $0.4 million for facility closings and other
obligations. As of December 31, 2000, all obligations related to the O2
restructuring had been paid.
On December 31, 1998, the Company acquired Red Brick Systems, Inc. ("Red
Brick"). Accrued merger and restructuring costs recorded in connection with the
acquisition of Red Brick included approximately $1.6 million for severance and
other acquisition-related costs, $4.7 million for costs associated with the
shutdown and consolidation of the Red Brick facilities and $1.6 million for
costs associated with settling acquired royalty commitments for abandoned
technology. As of December 31, 2000, approximately $0.4 million remained unpaid
and related to future rental obligations on idle facilities that extend through
2002.
In February 1998, Ardent acquired Unidata and recorded a charge of
$14.9 million for merger and restructuring costs related to the merger. The
charge included $3.9 million for financial advisor, legal and accounting fees,
$6.2 million for severance and benefit costs related to the termination of 139
Unidata employees who held overlapping positions, $2.2 million for the closure
of facilities and $2.6 million for the write-off of redundant assets. As of
December 31, 1999, all obligations related to the Unidata merger had been paid.
During 1997, the Company approved plans to restructure its operations and
recorded a charge of $108.2 million in order to bring expenses in line with
forecasted revenues by substantially reducing worldwide headcount and
consolidating facilities and operations to improve efficiency. As of
December 31, 2000, approximately $0.5 million remained unpaid and related to
rental obligations on idle facilities that expire at various dates through 2002.
F-42
INFORMIX CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
-----------------------
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND CHARGED TO BALANCE AT
PERIOD EXPENSES REVENUES DEDUCTIONS(1) OTHER(2) END OF YEAR
------------ ---------- ---------- ------------- -------- -----------
(IN THOUSANDS)
Allowance for Doubtful Accounts
Year ended December 31, 2000...... $16,881 $ 8,338 $ 6,640 $17,625 $ -- $14,234
Year ended December 31, 1999...... 18,440 1,269 4,868 9,898 2,202 16,881
Year ended December 31, 1998...... 33,233 651 (4,529) 12,392 1,477 18,440
- ------------------------
(1) Uncollectible accounts written off, net of recoveries
(2) Allowance for doubtful accounts acquired from Prism in 1999 and Red Brick in
1998
F-43