Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1999
-------------
or
|_| TRANSITIONAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transitional period from ______ to ______
Commission File Number 00-1033864
----------
DocuCorp International, Inc.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2690838
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5910 North Central Expressway, Suite 800, Dallas, Texas 75206
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 891-6500
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
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 (Section 229.405 of this chapter) 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. |_|
As of October 8, 1999, there were 15,563,026 shares of Common Stock, $.01
par value, of the Registrant outstanding. The aggregate market value on such
date of the voting stock of the Registrant held by non-affiliates was an
estimated $79,533,024 based upon the closing price of $5.94 per share on October
8, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended July 31, 1999 are incorporated by reference in Items 7 and 8
of Part II of this report.
Part III of this Annual Report on Form 10-K incorporates by reference
portions of the Registrant's definitive proxy statement, to be filed with the
Securities and Exchange Commission not later than 120 days after the close of
its fiscal year; provided that if such proxy statement is not filed with the
Commission in such 120-day period, an amendment to this Form 10-K shall be filed
no later than the end of the 120-day period.
DocuCorp International, Inc.
Table of Contents
Form 10-K
July 31, 1999
Part I.
Item 1. Business ...................................................... 2
Item 2. Properties .................................................... 7
Item 3. Legal Proceedings ............................................. 7
Item 4. Submission of Matters to a Vote of Security Holders ........... 7
Part II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ........................................... 8
Item 6. Selected Consolidated Financial Data .......................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 20
Item 8. Financial Statements and Supplementary Data ................... 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........................... 20
Part III.
Item 10. Directors and Executive Officers of the Registrant ........... 21
Item 11. Executive Compensation ....................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management 21
Item 13. Certain Relationships and Related Transactions ............... 21
Part IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K ...................................... 22
Signatures ............................................................. 23
Index to Exhibits ...................................................... 27
Part I
Item 1. Business
General
DocuCorp International, Inc. ("DocuCorp" or the "Company") develops,
markets, and supports a portfolio of print and Internet, enterprise-wide
document automation software products that enable users to create, publish,
manage, and archive complex, high-volume, individualized documents. In addition,
the Company provides document automation consulting, application integration,
training, and document outsourcing through a 200-person service organization.
Document outsourcing is performed using the Company's software to provide
processing, print, mail, archival, and Internet delivery of documents for
customers who outsource this activity.
The Company was organized in connection with the May 15, 1997 acquisition
of FormMaker Software, Inc. ("FormMaker") by Image Sciences, Inc. ("Image
Sciences")(the "Merger"). Pro forma data for fiscal 1997 assumes the Merger
occurred at the beginning of such period.
DocuCorp software products support leading hardware platforms, operating
systems, printers, and imaging systems. These products are designed to create,
publish, and store documents such as insurance policies, utility statements,
telephone bills, bank and mutual fund statements, invoices, direct mail
correspondence, bills of lading, and other customer-oriented documents. The
Company currently has an installed base of approximately 900 customers. The
Company believes it is the leading provider of document automation software and
services for the insurance industry to customers including Prudential Insurance
Company of America, Lumbermans Mutual Casualty Company, and American
International Group (AIG). More than half of the 200 largest insurance companies
in North America use the Company's software products and services, including
seven of the ten largest life and health insurance companies and nine of the ten
largest property and casualty insurance companies. The Company believes it has
also become a leading provider of document automation software and services for
companies in the utilities industry. Key utilities customers include Southern
Company Services, Inc. and Consolidated Edison of New York, Inc. The Company
also has customers in the financial services, higher education,
telecommunications, and transportation industries, including American Express
Services Europe Limited, The University of Texas, Nortel Northern Telecom, Inc.,
and Yellow Technology Services, Inc.
Document Automation Industry
Document automation is critical to corporations as they endeavor to
increase revenue, improve customer service, and reduce costs. Companies can
increase revenue by using document automation to produce high-volume, one-to-one
documents such as customer statements that cross-sell additional products and
services. Document automation enables companies to provide better customer
service by:
o creating more attractive, easier to read documents,
o producing more accurate documents,
o minimizing the time it takes to produce and deliver documents, and
o providing customer service personnel with immediate access to the
electronically archived documents.
At the same time, document automation reduces the cost of personnel, printing,
and storage.
Certain recent trends have accelerated the growth of the document
automation industry. Deregulation of industries such as insurance, utilities,
and financial services has resulted in increased competition and caused
participants in such industries to focus more closely on
2
customer service. This has increased the demand to create one-to-one documents
personalized to each customer with more visual appeal. Rapid technological
advances such as client/server architecture and the Internet, emergence of the
WindowsNT operating system, and evolving standards such as Microsoft's Active-X,
Microsoft's ODBC, and Sun Microsystems' Java have expanded the benefits that
businesses can derive from document automation. Additionally, the emergence of
call centers has increased the demand for access to and automation of customer
communications. As a result, an increasing number of companies are employing
innovative comprehensive document automation processes.
The same advances that have enhanced the benefits of document automation,
however, have rendered the development and implementation of document automation
products increasingly complex. As a consequence, businesses are increasingly
outsourcing some of their document automation requirements to skilled and
experienced providers such as the Company.
The Document Life Cycle
The Company believes that the life cycle of a document is divided into
three general phases (creation, publishing, and archival), linked together by
document management software. The Company believes that its expertise in all
phases of the document life cycle constitutes an important competitive
advantage.
Creation
In this phase of the life cycle, documents are rendered in a digital form.
Documents can be created by using word processing software packages or tools
such as Microsoft Word, Elixir, and Corel that have been designed specifically
to facilitate the composition of commonly used documents such as letters and
forms. Today, documents are created by employees throughout an organization from
the central or home office, in branch offices, or in remote locations.
Alternatively, existing paper documents that were created on a typewriter
or other non-electronic source or that came into the organization from
third-parties can be input into the organization's computer network by means of
scanning devices. Scanning devices convert paper documents into a digitized
format. Scanned documents are generally stored and managed separately from
documents created by word processors or other internal applications, principally
because their formats are different. The Company's products create forms from
both of these sources.
Once a document is in digital form, it is then readily available for
common applications such as transmission over E-mail, storage on local
computers, printing on desktop printers, and distributing via other
communication technologies, including the Internet. Documents vary significantly
in complexity, ranging from simple letters or forms to multi-page forms,
brochures or booklets containing text, charts, and statistical tables requiring
sophisticated pagination. The digitized form can also be used for more complex,
high-volume publishing applications such as insurance policies and billing
statements. The Company's products create or prepare digitized forms that can
accept variable data and output to high-speed printers and other output devices.
Publishing
In this phase of the life cycle, appropriate digital data and forms are
selected from multiple sources and formats. The information is dynamically
assembled into complex documents. Variable data is integrated through software
to produce individualized documents which are then simultaneously printed or
digitally prepared for customer distribution and archived as corporate assets
for future use. The Company focuses its publishing software products and
services exclusively on these individualized and high-volume publishing
activities.
3
While the basic logistical procedures are generally similar in every publishing
activity, in individualized and high-volume publishing activities, software is
required to coordinate large amounts of variable information such as customer
name, transaction history, and dynamically generated graphs. The Company has
developed software logic that allows its products to attain what it believes to
be one of the highest volume capabilities available in the market today.
Archival
In the archival phase of the life cycle, the document is stored in either
a digitized or electronic print format for future use. Documents and information
are presented most efficiently through software to storage devices that range in
their sophistication from local computer disk drives to complex computer storage
equipment having varying capacity and data accessing capabilities. The Company
has developed products that enable an organization to automatically index
documents as they enter storage and place the documents in an archived format to
permit expedient retrieval, viewing, and reprint. Furthermore, the Company's
products accept data in both digital and print stream format, and support
leading imaging systems such as FileNET and IBM's Visual Info. The Company's
products also enable accessing these archives from a browser over the Internet.
Management Software
Underlying all three phases of the document life cycle is the requirement
to manage the way in which documents and data move within the life cycle and the
corporation. This is currently accomplished within organizations through various
E-mail software products like Lotus cc:Mail, groupware like Lotus Notes by IBM,
network software like Novell NetWare, document management software like
Documentum, and workflow products like FileNET. Externally, organizations are
increasingly using the Internet to transmit such correspondence. To date, these
systems are primarily departmental in nature and are an incomplete way to manage
enterprise-wide documents and publications. The Company currently provides
products for document routing, network and host connectivity, and Internet
access. With the purchase of EZPower Systems, Inc. and Maitland Software, Inc.,
the Company has integrated their document management products into its product
line and significantly expanded the Company's usability in developing them for
the next generation.
Growth Strategy
The Company's strategy for growth consists of the following:
Leveraging Existing Customer Relationships
The Company has an installed base of approximately 900 customers.
Increasingly, the Company's customers are expanding or upgrading their document
automation solutions, which provides a market for additional products and
services from the Company. Most of the Company's large insurance customers
originally licensed software, but contracted for few services. Since the Company
has substantially expanded its services capacity, it anticipates that the
existing customer base could be a significant source of future services revenue
for the Company. Recently introduced and planned products and services can also
be provided to the Company's current customers as follow-on sales.
Entering New Vertical Markets
The Company believes it is the leading provider of document automation
software and services for the insurance industry and has become a leader in the
utilities industry. The Company is targeting vertical market expansion in the
financial services, higher education, telecommunications, and transportation
industries, in each of which customers have previously
4
purchased and installed the Company's software. During fiscal 1999, the Company
assembled a direct sales and marketing division dedicated to penetrating the
financial services industry. These industries, like insurance and utilities,
have an increasing need for individualized documents to be produced in very
large volumes in order to communicate effectively with their customers.
Expanding Internationally
Approximately 4% of the Company's revenues came from customers outside of
North America in fiscal 1999. DocuCorp plans to expand its international
customer base primarily by cultivating its international distribution alliance
and through direct sales. The Company also intends to leverage its existing
international customer base, particularly by selling professional services to
customers who previously have licensed software from the Company. During fiscal
1999, the Company significantly increased the number of sales and services
professionals in its London office. The Company expanded its presence in the
European financial services market and was awarded a significant contract from a
major European financial services company. DocuCorp intends to continue
increasing the number of sales and services professionals domiciled
internationally.
Developing and Enhancing New Technologies
The Company's product development efforts are focused on developing new
products as well as enhancing and broadening its current software product
offerings. New DocuCorp products and solutions will continue to emphasize
state-of-the-art object-oriented technologies, WindowsNT platform development,
and intranet/Internet capabilities and enablement. During fiscal 1999, the
Company introduced new software products utilizing object-oriented platform
independent technology, with migration and upgrade paths for users of existing
products. During fiscal year 2000, the Company's product development efforts
will include development of new Internet products and functionality, integration
of existing products with the Internet to provide access to documents through
the Internet, and further development of systems for use in vertical industries
such as utilities and financial services.
Pursuing Acquisitions and Strategic Alliances
The Company intends to pursue acquisitions of other companies or
technologies further expanding the Company's products, services, or market
penetration. In addition, as the Company expands in its targeted vertical
markets, the Company intends to enter into additional strategic alliances for
sales and marketing in such markets. The Company believes that new technical
skills, expanded product functionality, a broader client base, and an expanded
geographic presence may result from these activities.
Expanding Document Outsourcing
The Company is pursuing outsourcing of customers' document automation
operations with on-site Company personnel or through processing of customers'
documents at the Company's Atlanta document processing and print facility.
During 1999, the Company purchased and installed additional mailing and
finishing equipment that more than doubled the capacity of the Atlanta facility.
The Company anticipates that outsourcing of documents, both in print and
delivery over the Internet, will be the fastest growing area of its business.
Products and Services
The Company offers a portfolio of scalable, high-performance document
automation software products. The Company also has one of the largest
professional services organizations
5
in the industry, and the facilities to outsource document production using the
Company's technology and expertise.
6
Document Automation Software
The Company offers document automation software products that enable
customers to produce high-volume, individualized documents. The Company's
software solutions include multi-platform, enterprise-wide processing products
addressing each phase of the life cycle of a document. The Company's philosophy
of open architecture and support of industry standards enables its customers to
select software and hardware from other leading vendors and integrate them with
DocuCorp products.
The Company's product lines have been organized into the following four
primary categories. During fiscal 1999, the Company introduced new software
products utilizing object-oriented platform independent technology, with
migration and upgrade paths for users of existing products.
DocuCorp Creation Solutions
With DocuCorp Creation Solutions, document components (forms, graphs,
charts, text) can be created either entirely with the Company's products or more
typically by using other leading composition or word processing software, such
as Microsoft Word, integrated with DocuCorp Creation Solutions. The Company's
open architecture supports a broad range of document creation solutions.
DocuCorp Creation Solutions run primarily on personal computers under Microsoft
Windows. License revenues from the Company's software products in the Creation
Solutions category accounted for approximately 10%, 9%, and 8% of the Company's
total license revenues in fiscal 1999, 1998, and 1997 (on a pro forma basis),
respectively.
DocuCorp Publishing Solutions
DocuCorp Publishing Solutions are designed to handle production of large
volumes of documents, large numbers of forms, complex document assembly
requirements, individualization of each document, multiple recipients with
unique requirements, and interfacing with existing databases and application
programs. DocuCorp Publishing Solutions have the flexibility to dynamically
compose highly-tailored documents, each based on custom publishing rules such as
unique pagination. Alternatively, the Company's products attain industry leading
throughput by utilizing the Company's proprietary software logic encompassing
print-ready images to be merged with variable data for high-volume complex
documents like complete insurance policies. DocuCorp Publishing Solutions
provide forms fill, data merge, document assembly, dynamic formatting and graph
generation, centralized and decentralized printing on most leading laser
printers, interactive and batch processing and electronic output, and a variety
of other features and functions. DocuCorp Publishing Solutions run on mainframes
primarily under MVS, and on client/server platforms under Microsoft WindowsNT,
Microsoft Windows, and UNIX. License revenues from the Company's software
products in the Publishing Solutions category accounted for approximately 62% of
the Company's total license revenues in both fiscal 1999 and 1998 and 63% in
fiscal 1997 (on a pro forma basis), respectively.
DocuCorp Archival Solutions
DocuCorp Archival Solutions store published documents electronically so
that they can be viewed, used, and reused throughout the organization. Retrieval
features enable immediate access to documents for applications like processing
claims, referencing enterprise-wide legal or regulatory documentation, or
speeding customer service operations at call centers. DocuCorp Archival
Solutions can be implemented as stand-alone systems or integrated with leading
imaging systems such as FileNET. DocuCorp Archival viewing software runs under
Windows, and Archival server software runs on MVS, Microsoft WindowsNT, and
UNIX. License revenues
7
from the Company's software products in the Archival Solutions category
accounted for approximately 19%, 22%, and 21% of the Company's total license
revenues in fiscal 1999, 1998, and 1997 (on a pro forma basis), respectively.
DocuCorp Management Solutions
DocuCorp Management Solutions currently provide Internet document
services, network and host connectivity, document management, and document
routing. As enterprises expand, there is a greater need for control over
documents and the ability to move documents across the enterprise. License
revenues from the Company's software products in the Management Solutions
category accounted for approximately 9%, 7%, and 8% of the Company's total
license revenues in fiscal 1999, 1998, and 1997 (on a pro forma basis),
respectively.
As an additional service to its customers, the Company also provides the
tools and utility programs to interface, maintain, and develop DocuCorp document
automation implementations. The latest object-oriented technologies, including
use of Active-X, Java, ODBC, and Visual Basic, make it easier to implement
installations and interfaces. The Company has not generated, nor does it
anticipate that it will generate, material revenues from these tools and utility
programs.
Professional Services
The Company offers both document automation consulting and applications
integration together with document outsourcing services to its customers. At
July 31, 1999, the Company employed approximately 200 professional service
personnel, which represents one of the largest services organization in the
document automation software industry. The Company's professional services
personnel have experience across many industries and document automation
applications.
Consulting
The Company offers a broad range of consulting services related to
document automation. A majority of the Company's professional services
consulting revenues are derived from implementation and integration of the
Company's software products. The Company also derives professional services
consulting revenues from education as well as training services and electronic
document library development. The Company's professional services group works
with clients to develop and define document automation strategies and to provide
a complete package of software implementation services. Training classes are
available to assist clients with implementing technology and applications.
Training offerings are available in standardized and customized formats. A
substantial majority of the Company's consulting services are related to
DocuCorp Publishing Solutions. Consulting services accounted for approximately
41%, 38%, and 36% of the Company's total revenues in fiscal 1999, 1998, and 1997
(on a pro forma basis), respectively.
Document Outsourcing Services
The Company offers document outsourcing services which utilize the
Company's software to provide processing, print, mail, archival, and Internet
delivery of documents for customers who outsource this activity. The Company
operates a document processing center in Atlanta which, using data received
electronically from customers, employs high-volume printers and mail handling
equipment to produce insurance policies, utility statements and other customer
mailings, and bundles the output for bulk mailings. Document outsourcing
accounted for approximately 12% of the Company's total revenues in fiscal 1999
and 18% in both fiscal 1998 and 1997 (on a pro forma basis), respectively.
8
Product Development
The Company has made and expects to continue to make substantial
investments in research and product development. Product development efforts
increased substantially in fiscal 1998 as a result of the Merger. During fiscal
1999, the Company introduced new software products utilizing object-oriented
technology, with migration and upgrade paths for users of existing products.
During fiscal year 2000, the Company's product development efforts will include
development of new Internet products and functionality, integration of existing
products with the Internet to provide access to documents through the Internet,
and further development of systems for use in vertical industries such as
utilities and financial services.
The Company has committed substantial resources to product development.
Historically, the Company has made new releases of software available
approximately every 12 months. As of July 31, 1999, the Company employed
approximately 100 technical personnel engaged in research and product
development. The product development process is a cooperative effort between
customers and the Company. Early review of functionality specifications,
prototypes, and demonstrations allows for the incorporation of customer
suggestions and comments in parallel with management review of the process
internally. DocuCorp has a formal planning process for new software products as
well as software upgrades and maintenance releases to ensure product quality,
timeliness of releases, and meeting or exceeding customer expectations. In
fiscal 1999 and fiscal 1998, the Company's software development expenditures
were approximately $7.5 million and $6.7 million, respectively.
Sales and Marketing
General
The Company markets its products through various distribution channels,
including direct sales, marketing alliances, and distributors. Its sales
resources are organized based upon vertical industry markets. At July 31, 1999,
the Company employed approximately 30 direct sales and support representatives
who operate from Dallas, Atlanta, and London. Sales representatives are
compensated principally on a commission basis.
The Company markets its products and services primarily through a direct
sales force. Distributor relationships are established in the United States,
Canada, Europe, South Africa, and Asia. The Company's most significant
international distributor relationships are with Continuum (Europe) Limited and
Policy Management Systems Corporation ("PMSC").
The Company intends to increase both its product offerings and vertical
markets served through marketing, sales and distribution, and development
relationships with other companies. Formal and informal marketing and sales
partnerships currently exist with Xerox, Andersen Consulting, Microsoft, ACORD
Organization, PMSC, FileNET Corporation, SCT Utility Systems, and en.able. These
relationships provide sales leads for the Company's products and services and
help extend the Company's sales coverage and networking capabilities.
The Company's customers generally license the Company's software products
for an upfront license fee. Initial license fees typically range from $75,000 to
$250,000. Most customers also enter into maintenance agreements with the
Company, which typically provide for annual maintenance fees ranging from 15% to
30% of current license fees. Customers who enter into maintenance agreements are
entitled to software upgrades, software problem resolutions, and use of the
Company's "Hotline" providing technical assistance to the software user. The
Company generally charges customers for consulting services on a time and
materials basis, although certain service assignments are performed on a fixed
charge basis. Document outsourcing services are charged on a transaction fee
basis.
9
Relationship with Third-Party Distributor
FormMaker, which was acquired by the Company in connection with the
Merger, historically distributed its line of DAP software products to the
insurance industry in North America through an exclusive marketing agreement
with PMSC. A substantial portion of the subsidiary's revenues has historically
been generated pursuant to this agreement. Additionally, the subsidiary granted
PMSC the exclusive right to market the DAP software in the property/casualty and
life insurance industries. Revenues from PMSC under this agreement for the year
ended July 31, 1998 were approximately $5.5 million. In September 1998, both
parties agreed to terminate the exclusive marketing agreement and enter into a
new non-exclusive marketing agreement. The new marketing agreement between
DocuCorp and PMSC allows PMSC to market all of the Company's software products
to insurance and financial services companies worldwide. For the year ended July
31, 1999, the Company generated revenues of approximately $3.7 million through
the PMSC relationship.
Effective May 1998 the PMSC print outsourcing agreement was terminated.
The Company received no print outsourcing revenues from PMSC in fiscal year
1999. Revenues from PMSC under the print outsourcing agreement for the year
ended July 31, 1998 were approximately $4.4 million.
Customers
The Company generally markets to large and mid-size organizations that
have a need for integrated solutions for the high-volume production of
individualized documents. Currently, the majority of the Company's revenues are
generated from the insurance industry. Approximately 71% of the Company's total
revenues for the year ended July 31, 1999 were derived from the insurance
industry. Of these revenues, 10% of total revenues for the year ended July 31,
1999 were derived from one customer, Prudential Insurance Company of America.
Over half of the largest 200 insurance companies in North America use the
Company's products and services, including seven of the ten largest life and
health insurance companies and nine of the ten largest property and casualty
insurance companies. The Company believes it has the largest installed document
automation customer base in the insurance industry. During fiscal 1999, six
utilities companies in North America licensed the Company's products. In
addition to the insurance and utilities industries, the Company is targeting
vertical markets including the financial services, higher education,
telecommunications, and transportation markets, in each of which industry
customers have purchased and installed the Company's software. During fiscal
1999, the Company assembled a direct sales and marketing division dedicated to
penetrating the financial services industry. Unlike many other software vendors,
the Company's principal contact at customer organizations is generally not an
MIS or information technology officer, but rather the customer service or
marketing departments that will use the Company's products. As a result, the
Company does not always compete with other technological priorities being
considered by a customer's MIS department.
Set forth below is a representative list of customers of the Company in the
various industries in which the Company markets its products and services:
Insurance
Prudential Insurance Company of America
American International Group (AIG)
Lumbermans Mutual Casualty Company
10
Utilities
Southern Company Services, Inc.
Consolidated Edison of New York, Inc.
Financial Services
Royal Bank Financial Group
ABN-AMRO Bank N.V.
Higher Education
The University of Texas
San Francisco State University
Telecommunications
Polkomtel S.A.
Nortel Northern Telecom, Inc.
Transportation
Yellow Technology Services, Inc.
Wisconsin Department of Transportation
Competition
The market for document automation products and services is intensely
competitive, subject to rapid change, and significantly affected by new product
introductions and other market activities of industry participants. The Company
faces direct and indirect competition from a broad range of competitors, many of
whom have greater financial, technical, and marketing resources than the
Company. The Company's principal competition currently comes from (i) systems
developed in-house by the internal MIS departments of large organizations and
(ii) direct competition from numerous software vendors, including Cincom
Systems, Inc., Document Sciences Corporation (which is majority owned by Xerox
Corporation ("Xerox")), Group 1 Software, Inc., Mobius Management Systems, Inc.,
and M&I Data Services. The Company believes that the principal competitive
factors in the document automation software market are product performance and
functionality, ease of use, multi-platform offerings, product and company
reputation, quality of customer support and service, and price. The degree of
competition varies significantly with the stage of the document life cycle being
addressed and by vertical market.
The Company may also face competition from new entrants into the document
automation software industry. As the market for document automation software
continues to develop, current or potential competitors with significantly
greater resources than the Company could attempt to enter or increase their
presence in the market either independently or by acquiring or forming strategic
alliances with competitors of the Company or otherwise increase their focus on
the industry. In addition, current and potential competitors have established or
may establish cooperative relationships among themselves or with third-parties
to increase the ability of their products to address the needs of the Company's
current and prospective customers.
Intellectual Property, Trademarks, and Proprietary Rights
The Company relies primarily on a combination of copyright, distribution
software license agreements, trademark and trade secret laws, employee and
third-party nondisclosure agreements, and other methods to safeguard its
software products. Despite these precautions, it
11
may be possible for unauthorized third-parties to copy certain portions of the
Company's products or obtain and use information the Company regards as
proprietary. While the Company's competitive position may be affected by its
ability to protect its proprietary information, the Company believes that
trademark and copyright protections are not material to the Company's success.
The Company's software products are licensed to end-users on a "right to
use" basis pursuant to license agreements. Certain license provisions protecting
against unauthorized use, copying, transfer, and disclosure of the licensed
program may be unenforceable under the laws of certain jurisdictions and foreign
countries. In addition, the laws of some foreign countries do not protect
proprietary rights to the same extent as do the laws of the United States.
As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that
software programs will increasingly become subject to infringement claims. Third
parties may assert infringement claims against the Company in the future with
respect to current or future products, which could require the Company to enter
into royalty arrangements or result in costly litigation.
The Company also relies on certain software that it licenses from
third-parties, including software that is integrated with internally developed
software and used in its products to perform key functions. These third-party
software licenses may not continue to be available to the Company on
commercially reasonable terms and the related software may not continue to be
appropriately supported, maintained or enhanced by the licensors. The loss of
licenses to use, or the inability of licensors to support, maintain, and
enhance, any of such software could result in increased costs, delays or
reductions in product shipments until equivalent software could be developed or
licensed and integrated.
Employees
As of July 31, 1999, the Company had approximately 370 employees, of which
approximately 200 were engaged in professional services, 100 in product
development and customer support, 30 in sales and marketing, and 40 in finance,
administration, human resources, and internal systems support. The Company
believes its future success will depend, in part, on its continued ability to
attract and retain highly qualified personnel in a competitive market for
experienced and talented software engineers and sales and marketing personnel.
None of the Company's employees are represented by a labor union or subject to a
collective bargaining agreement. The Company believes that its employee
relations are good.
Forward-Looking Statements
This Annual Report on Form 10-K may include certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts included in this Form
10-K, are forward-looking statements. Such statements are subject to certain
risks and uncertainties, which include but are not limited to those discussed in
the section entitled "Risk Factors." Should one or more of these risks or
uncertainties, among others as set forth in this Form 10-K, materialize, actual
results may vary materially from those estimated, anticipated, or projected.
Although the Company believes that the expectations reflected by such
forward-looking statements are reasonable based on information currently
available to the Company, no assurance can be given that such expectation will
prove to have been correct. Cautionary statements identifying important factors
that could cause actual results to differ materially from the Company's
expectations are set forth in this Form 10-K, including without limitation in
conjunction with the forward-looking statements included in this Form 10-K that
are referred to above. All forward-looking statements included in this Form 10-K
and all subsequent
12
oral forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by these cautionary
statements.
13
Risk Factors
Significant Revenues from Two Industries
Approximately 71% and 73% of the Company's total revenues for the year
ended July 31, 1999 and 1998, respectively, were derived from the insurance
industry. Of these revenues, 10% and 13% of total revenues in fiscal 1999 and
1998, respectively, were derived from one customer, Prudential Insurance Company
of America. Additionally, approximately 23% and 20% of the Company's total
revenues for the year ended July 31, 1999 and 1998, respectively, were derived
from the utilities industry. The Company's continued financial performance and
its future growth will depend upon its ability to continue to market its
products successfully in the insurance and utilities industries and to enhance
and market technologies for distribution in other markets. This will require the
Company to make substantial product development and distribution channel
investments. There can be no assurance that the Company will be able to continue
marketing its products successfully in the insurance and utilities industries or
will be able to successfully introduce new or existing products in markets other
than the insurance and utilities industries. In addition, there can be no
assurance that the Company will continue to sell products and services to
Prudential Insurance Company of America at historical levels. Any significant
decline in revenues derived from Prudential Insurance Company of America could
have a material adverse effect on the Company's results of operations.
Technological Advances
The document automation industry has experienced and will continue to
experience rapid technological advances, changes in customer requirements, and
frequent new product introductions and enhancements. Development in both
software technology and hardware capability will require the Company to make
substantial product development investments. Any failure by the Company to
anticipate or respond adequately to technological developments and customer
requirements, or any significant delays in product development or introduction,
could have a material adverse effect on the Company's results of operations.
There can be no assurance that the Company's new products or product
enhancements intended to respond to technological change or evolving customer
requirements will achieve acceptance.
Significant Third-Party Distributor Relationship
FormMaker, which was acquired by the Company in connection with the
Merger, historically distributed it line of DAP software products to the
insurance industry in North America through an exclusive marketing agreement
with PMSC. A substantial portion of the subsidiary's revenues have historically
been generated pursuant to this agreement. Revenues from PMSC under this
agreement for the year ended July 31, 1998 were approximately $5.5 million. In
September 1998, both parties agreed to terminate the exclusive marketing
agreement and enter into a new non-exclusive marketing agreement. The new
marketing agreement between DocuCorp and PMSC allows PMSC to market all of the
Company's software products to insurance and financial services companies
worldwide. For the year ended July 31, 1999, the Company generated revenues of
approximately $3.7 million through the PMSC relationship.
Effective May 1998 the PMSC print outsourcing agreement was terminated.
The Company received no print outsourcing revenues from PMSC in fiscal year
1999. Revenues from PMSC under the print outsourcing agreement for the year
ended July 31, 1998 were approximately $4.4 million.
14
Attraction and Retention of Technical Employees
The Company believes that its future success will depend in large part
upon its ability to attract, retain, and motivate highly skilled employees,
particularly technical employees. The employees that are in highest demand are
software programmers, software developers, application integrators, and
information technology consultants. These employees are likely to remain a
limited resource for the foreseeable future. There can be no assurance that the
Company will be able to attract and retain sufficient numbers of highly skilled
technical employees. The loss of a significant number of the Company's technical
employees could have a material adverse effect on the Company.
Year 2000 Compliance
The Company recognizes the need to ensure that its operations will not be
adversely impacted by Year 2000 software failures. Accordingly, the Company has
evaluated the impact of the Year 2000 on its product line and services
offerings, as well as its internal systems and hardware. Relative to its product
line, the Company has identified all previous versions of its products that were
not Year 2000 compliant and has completed the process of testing and upgrading
its product offerings. All current versions of the Company's products are
designed to be Year 2000 compliant. Customers using pre-Year 2000 compliant
versions of the Company's software products are entitled to receive upgraded
Year 2000 compliant software as part of their software support agreements with
the Company, as long as the customer support agreements remain in force. The
Company has completed the process of assessing the extent to which its services
implementations are Year 2000 compliant. To the extent the Company is directly
involved in resolving any non-compliant services implementations, generally the
customer will be responsible for the fees associated with such services.
Accordingly, the Company does not currently believe that the effects of any Year
2000 non-compliance in the Company's installed base of products or services
offerings will result in a material adverse impact on the Company's business or
financial condition. However, the Company is unable to predict the impact, if
any, on the Company's revenues as a result of its customers being distracted
from their document automation needs as their attention is re-directed, or
customer resources are diverted, to becoming Year 2000 compliant. Additionally,
the Company is unable to predict the impact, if any, on the Company's revenues
as a result of customers and prospects not purchasing additional software and
services for the remainder of the calendar year due to customers not wanting to
introduce any new products into their computing environments. No assurance can
be given that the Company will not be exposed to potential claims resulting from
system problems associated with the century change.
As to its own internal software systems and hardware, the Company has
identified substantially all of the major computers, software applications, and
related equipment used in connection with its internal operations that must be
modified, upgraded, or replaced to minimize the possibility of a material
disruption to its business. The Company has generally completed the process of
modifying, upgrading, and replacing major information technology and
non-information technology software systems and hardware which have been
identified as potentially being adversely affected. To date, the Company has
incurred approximately $330,000 related to Year 2000 compliance for its internal
software systems and hardware and expects to incur an additional $225,000 prior
to the end of the calendar year.
15
Competition
The market for the Company's document automation products is intensely
competitive. The Company faces competition from a broad range of competitors,
many of whom have greater financial, technical, and marketing resources than the
Company. The Company's principal competition currently comes from (i) systems
developed in-house by the internal MIS departments of large organizations and
(ii) direct competition from numerous software vendors, including Cincom
Systems, Inc., Document Sciences Corporation, Group 1 Software, Inc., Mobius
Management Systems, Inc., and M&I Data Services. There can be no assurance that
the Company will be able to compete effectively with such entities.
Fluctuations in Operating Results
The Company has experienced, and may in the future continue to experience,
fluctuations in its quarterly operating results due to the fact that sales
cycles, from initial evaluation to purchase, vary substantially from customer to
customer. Delays in the sales cycle frequently occur as a result of competition,
changes in customer personnel, and overall budget and spending priorities. The
Company has typically operated with little backlog for license revenues because
software products generally are shipped soon after orders are received. As a
result, license revenues in any quarter are substantially dependent on orders
booked and shipped in that quarter. The delay of customer orders for a small
number of licenses could adversely affect the license revenues for a given
fiscal quarter. The Company has historically earned a substantial portion of its
license revenues in the last weeks of any particular quarter, and has
historically experienced its highest license revenues in the fourth quarter of
its fiscal year. The failure to achieve such revenues in accordance with such
trends could have a material adverse effect on the Company's financial results
for each such interim period.
Risk of Software Defects
Complex software products such as those offered by the Company can contain
undetected errors or performance problems. Such defects are most frequently
found during the period immediately following introduction of new products or
enhancements to existing products. The Company's products have from time to time
contained software errors that were discovered after commercial introduction.
There can be no assurance that performance problems or errors will not be
discovered in the Company's products in the future. Any future software defects
discovered after shipment of the Company's products, if material, could result
in loss of revenues, delays in customer acceptance, or potential product
liability.
Limited Protection of Intellectual Property Rights
The Company relies on a combination of copyright and trademark laws,
employee and third-party nondisclosure agreements, and other methods to protect
its proprietary rights. Despite these precautions, it may be possible for
unauthorized third-parties to copy certain portions of its products or to obtain
and use information that the Company regards as proprietary. There can be no
assurance that the Company's efforts will provide meaningful protection for its
proprietary technology against others who independently develop or otherwise
acquire substantially equivalent techniques or gain access to, misappropriate,
or disclose the Company's proprietary technology.
Dependence on Single Facility for Certain Services
The Company's print outsourcing operations are performed at its facility
in Atlanta, Georgia. Since the Company only has the capability to perform this
function at a single location, a fire, flood, earthquake, power loss, or other
event affecting the Company's Atlanta processing
16
and print facility could cause a significant interruption in the Company's
operations. There can be no assurance that the Company's contingency plans in
the event of such interruption will prove to be adequate. Any interruption in
the operations at the Company's Atlanta processing and print facility could have
a material adverse effect on the Company's business, financial condition, or
results of operations.
Dependence on Key Management Personnel
The Company believes that its continued success depends to a significant
extent upon the efforts and abilities of its senior management. In particular,
the loss of Michael D. Andereck, the Company's President and Chief Executive
Officer, or any of the Company's other executive officers or senior managers
could have a material adverse effect on the Company.
ITEM 2. PROPERTIES
The Company leases approximately 28,000 square feet of office space in
Dallas, Texas for its corporate headquarters, including administrative, sales,
services, and product development departments. This lease expires April 30,
2005, but may be terminated by the Company on May 31, 2000.
The Company leases approximately 76,000 square feet of office space in
Atlanta, Georgia which is utilized for administrative, sales, marketing,
services, and product development departments. The lease for this space expires
on December 31, 2002.
The Company's document outsourcing facility is also located in Atlanta,
Georgia. This facility occupies approximately 19,000 square feet under a lease
which expires on October 31, 2002, but may be terminated by the Company on
October 31, 2000.
The Company's staff in Maryland is located in Silver Spring, Maryland.
This facility occupies approximately 10,000 square feet under a lease which
expires December 31, 2001. The Company's staff in New Hampshire is located in a
4,500 square foot facility in Bedford, New Hampshire. The lease for this
facility expires on December 31, 1999.
Office space is also leased in London, England for its European sales and
services functions, California for a sales office, and Philadelphia,
Pennsylvania and Portland, Maine for product development activities.
The Company believes that its existing office facilities and additional
space available to it are adequate to meet its requirements, and that in any
event, suitable additional or alternative space adequate to serve the Company's
foreseeable needs will be available on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions incidental to
the normal conduct of its business. The Company does not believe that the
ultimate resolution of these actions will have a material adverse effect on the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of fiscal 1999.
17
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has traded on the Nasdaq National Market under
the symbol "DOCC" since April 6, 1998. At October 8, 1999 there were
approximately 1,000 holders of record of the Company's Common Stock, although
the Company believes that the number of beneficial owners of its Common Stock is
substantially greater. The table below sets forth for the fiscal quarters
indicated the high and low sales prices for the Company's Common Stock:
High Low
---- ---
Fiscal 1999:
Fourth quarter $ 5.75 $ 4.03
Third quarter 9.88 4.25
Second quarter 6.25 3.88
First quarter 6.50 2.25
Fiscal 1998:
Fourth quarter $ 9.94 $ 5.00
Third quarter (from April 6, 1998) 10.75 9.25
The Company intends to retain any future earnings for use in its business
and does not intend to pay cash dividends in the foreseeable future. The payment
of future dividends, if any, will be at the discretion of the Company's Board of
Directors and will depend, among other things, upon future earnings, operations,
capital requirements, restrictions in future financing agreements, general
financial condition of the Company, and general business conditions.
18
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the years ended
July 31, 1999, 1998, 1997, 1996, and 1995 have been derived from the audited
financial statements of the Company. The following data should be read in
conjunction with, and are qualified by, reference to the Company's audited
financial statements and the notes thereto, included elsewhere in this Form
10-K.
Years ended July 31,
------------------------------------------------------
1999 1998 1997* 1996 1995
-------- -------- -------- -------- --------
Statements of Operations Data: (in thousands except per share amounts)
Total revenues $ 51,926 $ 45,247 $ 17,503 $ 11,470 $ 10,814
Operating income (loss) $ 7,231 $ 5,602 $(17,460) $ 3,416 $ 3,158
Net income (loss) before income taxes $ 7,853 $ 5,424 $(17,246) $ 3,656 $ 3,186
Net income (loss) $ 4,513 $ 3,184 $(16,102) $ 2,321 $ 2,003
Cash dividend declared for preferred stock -0- -0- $ 2,808 -0- -0-
Net income (loss) per share:
Basic $ 0.28 $ 0.25 $ (2.18) $ 0.37 $ 0.35
Diluted $ 0.26 $ 0.21 $ (2.18) $ 0.28 $ 0.25
Weighted average number of shares outstanding:
Basic 16,001 12,587 7,377 6,202 5,674
Diluted 17,570 14,865 7,377 8,381 8,165
* After Merger-related charges of $21,378. Without such charges operating
income, net income before income taxes, net income, net income per share
(diluted), and weighted average number of shares of common stock and
common stock equivalents (diluted) would have been $3,918, $4,132, $2,598,
$0.34, and 7,607, respectively.
July 31,
------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Balance Sheet Data: (in thousands)
Working capital $ 15,513 $ 15,988 $ 1,644 $ 5,640 $ 4,049
Total assets $ 52,918 $ 51,921 $ 32,698 $ 14,691 $ 13,145
Total debt, including obligations
under capital lease $ 25 $ 87 $ 9,439 $ 46 $ 1,637
Redeemable Class B common stock $ -0- $ -0- $ 19,119 $ -0- $ -0-
Stockholders' equity (deficit) $ 36,994 $ 38,433 $ (7,520) $ 8,037 $ 5,606
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is set forth in the Company's 1999
Annual Report to Stockholders, which information is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in the Company's 1999
Annual Report to Stockholders, which information is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
Part III
Part III of this Annual Report on Form 10-K incorporates by reference
portions of the Registrant's definitive proxy statement, to be filed with the
Securities and Exchange Commission not later than 120 days after the close of
its fiscal year; provided that if such proxy statement is not filed with the
Commission in such 120-day period, an amendment to this Form 10-K shall be filed
no later than the end of the 120-day period.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company will be set forth in
the forthcoming Proxy Statement under the heading "Directors and Executive
Officers," which information is incorporated herein by reference. Information
required by Item 405 of Regulation S-K will be set forth in the forthcoming
Proxy Statement under the heading "Section 16(a) Beneficial Ownership Reporting
Compliance," which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be set forth in
the Proxy Statement under the heading "Executive Compensation," which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial
owners and management will be set forth in the forthcoming Proxy Statement under
the heading "Beneficial Ownership of Common Stock," which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and transactions will be
set forth in the forthcoming Proxy Statement, which information is incorporated
herein by reference.
21
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following is a list of the consolidated financial statements which are
included in this Form 10-K or which are incorporated herein by reference.
1. Financial Statements (incorporated herein by reference):
Report of Independent Accountants
As of July 31, 1999 and 1998:
o Consolidated Balance Sheets
For the Years Ended July 31, 1999, 1998, and 1997:
o Consolidated Statements of Operations
o Consolidated Statements of Cash Flows
o Consolidated Statements of Changes in Stockholders' Equity
o Notes to Consolidated Financial Statements
2. Financial Statement Schedule:
o Report of Independent Accountants on Financial Statement
Schedule
o Valuation and Qualifying Accounts
3. Exhibits:
See Exhibit Index beginning on page 25 of this Form 10-K.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended July 31, 1999.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas.
DocuCorp International, Inc.
- ---------------------------------------
(Registrant)
/s/ Michael D. Andereck Date 10/29/99
- --------------------------------------- ----------------------------------
Michael D. Andereck
President, Chief Executive Officer and
Director
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of DocuCorp International, Inc.,
hereby severally constitute and appoint Michael D. Andereck, our true and lawful
attorney, with full power to sign for us in our names in the capacities
indicated below, amendments to this report, and generally to do all things in
our names and on our behalf in such capacities to enable DocuCorp International,
Inc. to comply with the provisions of the Securities Exchange Act of 1934, as
amended, and all requirements of the Securities and Exchange Commission.
23
SIGNATURES (cont.)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Michael D. Andereck Date 10/29/99
- -------------------------------------- --------------------------------
Michael D. Andereck
President, Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Milledge A. Hart, III Date 10/29/99
- -------------------------------------- --------------------------------
Milledge A. Hart, III
Chairman of the Board
/s/ Anshoo S. Gupta Date 10/29/99
- -------------------------------------- --------------------------------
Anshoo S. Gupta
Director
/s/ John D. Loewenberg Date 10/29/99
- -------------------------------------- --------------------------------
John D. Loewenberg
Director
/s/ Warren V. Musser Date 10/29/99
- -------------------------------------- --------------------------------
Warren V. Musser
Director
/s/ George F. Raymond Date 10/29/99
- -------------------------------------- --------------------------------
George F. Raymond
Director
/s/ Arthur R. Spector Date 10/29/99
- -------------------------------------- --------------------------------
Arthur R. Spector
Director
24
Report of Independent Accountants on Financial Statement Schedule
To the Board of Directors and Stockholders
of DocuCorp International, Inc.
Our audit of the consolidated financial statements referred to in our
report dated September 9, 1999 appearing in the 1999 Annual Report to
Stockholders of DocuCorp International, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a) 2 of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Dallas, Texas
September 9, 1999
25
Valuation and Qualifying Accounts
Years ended July 31, 1999, 1998, and 1997
Schedule II
Balance at Charged to Balance at
Beginning Costs and Deductions End of
Description of Period Expenses (a) (a)(b)(c)(d) Period
- ------------------------------------------------------------------------------------------------
1999
Allowance for doubtful accounts $ 950,000 $ 446,330 $ (721,330) $ 675,000
Valuation allowance against deferred
tax assets $2,348,784 $ -0- $ (81,397) $2,267,387
1998
Allowance for doubtful accounts $ 525,000 $ 734,550 $ (309,550) $ 950,000
Valuation allowance against deferred
tax assets $1,392,817 $1,848,786 $ (892,819) $2,348,784
1997
Allowance for doubtful accounts $ 350,000 $ 363,556 $ (188,556) $ 525,000
Valuation allowance against deferred
tax assets $ -0- $1,392,817 $ -0- $1,392,817
(a) Such amounts include balances assumed in the acquisition of FormMaker,
EZPower, and Maitland. See Notes to Consolidated Financial Statements for
further discussion.
(b) Such amounts relate to the utilization of the valuation and qualifying
accounts for specific items for which they were established in the
accounts receivable accounts.
(c) Such amounts relate to the tax benefit from utilization of net operating
loss and reduction of the valuation allowance based on management's
assessment of the likelihood of realizability of the loss carryforwards.
(d) Such amounts relate to the expiration of credit carryforwards for which a
valuation allowance was previously established.
26
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation. (filed as exhibit 3.1 to the
Company's Registration Statement on Form S-4 No. 333-22225 and
incorporated herein by reference)
3.2 Bylaws. (filed as exhibit 3.2 to the Company's Registration
Statement on Form S-4 No. 333-22225 and incorporated herein by
reference)
10.2 Employment Agreement between Michael D. Andereck and the
Registrant dated January 15, 1997. (filed as exhibit 10.2 to
the Company's Registration Statement on Form S-4 No. 333-22225
and incorporated herein by reference)
10.3 1997 Equity Compensation Plan. (filed as exhibit 10.3 to the
Company's 1997 Annual Report on Form 10-K and incorporated
herein by reference).
13.1* 1999 Annual Report to Stockholders.
21.1* Subsidiaries of the Registrant.
23.1* Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
27.1* Financial Data Schedule. (for EDGAR filing purposes only)
- ----------
* Filed herewith.
27