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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, 2004
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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 00-23829
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DOCUCORP INTERNATIONAL, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2690838
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5910 NORTH CENTRAL EXPRESSWAY, SUITE 800, DALLAS, TEXAS 75206
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (214) 891-6500
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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. [_]
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT). YES [X] NO [_]
AS OF OCTOBER 11, 2004, THERE WERE 10,678,847 SHARES OF COMMON STOCK, $.01
PAR VALUE, OF THE REGISTRANT OUTSTANDING. THE AGGREGATE MARKET VALUE OF THE
VOTING STOCK OF THE REGISTRANT HELD BY NON-AFFILIATES AS OF THE LAST BUSINESS
DAY OF THE SECOND QUARTER OF FISCAL 2004 APPROXIMATED $137,519,000.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE
FISCAL YEAR ENDED JULY 31, 2004 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.
DOCUCORP INTERNATIONAL, INC.
TABLE OF CONTENTS
FORM 10-K
July 31, 2004
PART I.
Item 1. Business.................................................................................................2
Item 2. Properties..............................................................................................14
Item 3. Legal Proceedings.......................................................................................14
Item 4. Submission of Matters to a Vote of Security Holders.....................................................14
PART II.
Item 5. Market for Our Common Equity and Related Stockholder Matters............................................15
Item 6. Selected Consolidated 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.............................................17
Item 8. Financial Statements and Supplementary Data.............................................................17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................18
Item 9A. Controls and Procedures.................................................................................18
Item 9B. Other information.......................................................................................18
PART III.
Item 10. Directors and Executive Officers of the Registrant.....................................................19
Item 11. Executive Compensation.................................................................................19
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matter..........19
Item 13. Certain Relationships and Related Transactions.........................................................19
Item 14. Principal Accounting Fees and Services.................................................................19
PART IV.
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................20
Signatures 21
Index to Exhibits................................................................................................25
PART I
ITEM 1. BUSINESS
GENERAL
Docucorp International, Inc. ("Docucorp") develops, markets and supports a
portfolio of proprietary information software, application service provider
("ASP") hosting and professional services that enables companies to create,
publish, manage and archive complex, high-volume, individualized information. We
support the entire information lifecycle - from acquisition of the first raw
data point to final delivery of personalized information to the customer.
We were created on January 13, 1997 in connection with the acquisition of
FormMaker Software, Inc. by Image Sciences, Inc.
Today, leveraging new Internet-based technology, we are a leading authority in
providing dynamic solutions for acquiring, managing, personalizing and
presenting information of all kinds. Servicing the entire enterprise information
lifecycle, our comprehensive offering supports a wide range of in-house and
outsourced enterprise applications, including customer statements and billings,
electronic bill presentment and payment ("EBPP"), insurance policy production,
content management, correspondence automation and call center fulfillment. Our
software solutions support leading hardware platforms, operating systems,
printers and imaging systems.
Our ASP hosting service allows customers to outsource their information
management to our ASP centers, where our software and facilities are used to
provide processing, print, mail, archival and Internet delivery of documents.
Our ASP offerings include customer statement and bill generation, EBPP,
insurance policy production, disaster recovery and electronic document archival.
Additionally, we provide professional services related to our software
solutions. Our professional services offerings include implementation,
integration, training and consulting services.
Operating primarily in three key markets - insurance, utilities and financial
services - we now help more than 1,200 customers worldwide maximize the value of
their enterprise information, reducing costs, increasing productivity, improving
customer service, building customer loyalty and facilitating new revenue
opportunities.
We believe we are the leading provider of enterprise information solutions for
the insurance industry. Our insurance customer base includes more than half of
the 200 largest United States insurance companies, including nine of the top 10
life and health insurance companies, nine of the top 10 property and casualty
insurance companies and more than 500 managing general agents (MGAs). Many of
the largest North American utility companies and major international financial
services institutions use our products and services.
INDUSTRY BACKGROUND
Certain trends have accelerated the need for automating the process of
acquiring, managing, personalizing and presenting enterprise-wide information.
Increased competition in industries such as insurance, utilities and financial
services has caused companies to focus more closely on enhancing customer
relationships while reducing associated operating costs.
The current difficult economic environment has prompted customers and prospects
to focus on Return On Investment ("ROI") when making purchasing decisions. In
fact, few companies are buying software or services unless ROI can be proven. We
have succeeded in this difficult economy because we have been able to
successfully demonstrate ROI for our solutions. With our solutions, customers
can turn resource-draining
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manual processes into electronic workflows that enable personalized customer
communications to be automatically created, stored and accessed, significantly
impacting their company's performance.
Additionally, rapid technological advances in tiered client/server architecture
and the Internet, adoption of Microsoft's WindowsXP and .NET, emergence of Sun
Microsystems' Java and J2EE, and the acceptance of evolving XML standards have
expanded the benefits that businesses can derive from document automation.
Process automation and Web-based access and delivery of information enable our
customers to save substantial amounts of time and money.
With our solutions, companies are also able to:
o Reduce time, errors and labor costs associated with manual processes and
input;
o Eliminate hard copy storage costs with electronic archiving;
o Shorten document preparation time and reduce duplicate data entry by
reusing electronically captured and stored data;
o Reduce delays and processing time by automating routing and workflow; and
o Speed customer service response time by electronically accessing file
information.
The same advances that have enhanced the benefits of such process automation,
however, have rendered the development and implementation of solutions
increasingly complex. Consequently, businesses are increasingly outsourcing some
of their needs to skilled and experienced companies like ours that provide ASP
hosting services.
Information is critical to corporations as they endeavor to increase revenue,
improve customer service and reduce costs. The emergence of call centers has
also increased the demand for access to and automation of customer
communications. Companies can increase revenue by leveraging information through
personalizing and producing high-volume, one-to-one documents such as customer
statements that cross-sell additional products and services. Personalization and
presentation of information enables companies to provide better customer service
by:
o Presenting information in print and over the Internet in more attractive,
easier-to-read formats;
o Minimizing the time it takes to produce and deliver information; and
o Providing customer service personnel with immediate access to
electronically archived information.
Our customers are finding that personalization of customer communications can be
a powerful tool for increasing customer satisfaction. As a result, an increasing
number of companies are employing innovative comprehensive information
presentment processes.
GROWTH STRATEGY
Our strategy for growth consists of the following:
LEVERAGING EXISTING CUSTOMER RELATIONSHIPS
We have an installed base of more than 1,200 customers. Existing customers
expanding or upgrading their information solutions provide us with a market for
additional software solutions and services. The majority of our revenues are
generated from existing customers.
EXPANSION IN VERTICAL MARKETS
It is our belief that we are a leading provider of information management
solutions for the insurance and utilities industries. During fiscal year 2004,
we continued our expansion efforts in the financial services industry. Revenues
from the financial services industry represented 11% of our total revenues in
fiscal year
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2004. The financial services industry, like insurance and utilities, has an
increasing need for reducing operating costs, as well as communicating more
effectively with their customers.
EXPANDING INTERNATIONALLY
In fiscal 2004, 7% of our revenues came from customers outside of North America.
We plan to expand our Europe, Middle East and Africa ("EMEA") customer base
primarily through direct sales and by cultivating and expanding our European
distribution alliances. During fiscal 2004, we opened two offices in the
Belgium, Netherlands and Luxembourg ("Benelux") region. The offices are located
in Eindhoven, Netherlands and Brussels, Belgium and will serve the insurance and
financial services markets. We also entered into a partnership agreement with
the Information Systems Group ("IFG") of Hitachi Europe Limited. IFG will
utilize Docucorp's full suite of advanced publishing, management, archival and
presentment software solutions in-house to develop new solutions and product
offerings. We intend to continue our efforts in promoting Docucorp solutions
internationally through direct sales and further strategic alliances.
DEVELOPING AND ENHANCING NEW TECHNOLOGIES
Our product development efforts are focused on developing new solutions as well
as enhancing and broadening our current software solutions. New solutions will
continue to emphasize state-of-the-art technologies for Internet-enablement and
information exchange including XML, SOAP, LINUX, Java and Microsoft.Net. During
fiscal 2005, our product development efforts will include development of new
functionality, integration of existing solutions to provide information exchange
through the Internet and further development and packaging of applications for
use in vertical industries such as insurance, utilities and financial services.
PURSUING ACQUISITIONS AND STRATEGIC ALLIANCES
We have successfully completed four acquisitions since 1997, including our
recent acquisition of Newbridge Corporation in September 2004. We will continue
to evaluate potential acquisitions of other companies or technologies to further
expand our solutions, services or market penetration. In addition, as we expand
in our targeted vertical markets, we intend to enter into additional sales and
marketing strategic alliances in such markets. In fiscal 2004, we entered into
alliances with Hitachi Europe Limited, SynTel(TM) LLC, Art Plus Technology,
Inc., Lynx Wealth Management Systems and Epic Solutions, Inc. We believe that
new technical skills, expanded software functionality, a broader client base and
an expanded geographic presence may result from these activities.
EXPANDING ASP HOSTING BUSINESS
In fiscal 2000, we adopted an ASP business model, which provides hosted software
applications on a per transaction basis. Our ASP offering allows customers to
off-load applications and free up resources to concentrate on their core
competencies and strategic projects. The ASP business model provides us with a
growing source of recurring revenues. ASP revenues increased 2% in fiscal 2004
as compared to fiscal 2003. We have two ASP hosting centers in the United States
to meet customer demands as well as offer off-site backup and disaster recovery
capabilities to our customers.
DOCUCORP SOLUTIONS
We focus on providing enterprise-wide solutions that acquire, manage,
personalize and present information. Customers can purchase these solutions by
either licensing our software for in-house installation or by utilizing the
solutions through our ASP centers on a per transaction basis. We market
solutions primarily to three vertical markets: insurance, financial services and
utilities. Set forth below is a list of representative solutions that we provide
to each of these vertical markets:
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INSURANCE SOLUTIONS
INSURANCE POLICY PRODUCTION - Enables companies to create, publish, distribute
and archive high volumes of personalized insurance policies, quotes,
endorsements, cancellations and renewals.
CORRESPONDENCE - Allows insurance representatives to electronically access
policies and other critical data to verify coverage, automate and personalize
subsequent document packages and correspondence.
POLICY XPRESS(TM) - Provides insurance companies with a complete library of
fully implemented Insurance Service Office (ISO) industry standard forms for the
property and casualty (P&C) marketplace.
LIBRARY XPRESS(TM) - Provides insurance companies with customized electronic
libraries of ISO industry standard forms for the P&C marketplace.
CONTENT MANAGEMENT - Provides insurance companies with a single, centralized
repository for storing, accessing, annotating, printing and electronically
routing all content, including customer data, electronic documents, video/audio
clips and scanned copies of printed material.
IMAGE RESOURCE(TM) - Provides an affordable content management and workflow
solution for the managing general agent (MGA) market.
ELECTRONIC BILL PRESENTMENT & PAYMENT - Provides policyholders with the ability
to view premium notices and pay premiums online.
FINANCIAL SERVICES SOLUTIONS
WEALTH MANAGEMENT - Enables financial advisors and customers to electronically
access client data from multiple accounts for review and analysis, while
automating and personalizing subsequent consolidated customer statements and
correspondence.
E-FORMS - Enables financial services companies to establish electronic workflows
for form creation, form fill, routing and distribution for both internal and
customer-facing forms.
INVESTMENT SHOWCASE - Enables financial advisors to electronically acquire and
aggregate customer information from multiple systems across disparate lines of
business to create personalized investment presentations.
FINANCIAL STATEMENTS - Enables financial services and retail finance companies
to produce dynamic, personalized statements, which reflect customer preferences
for content and format, from numerous data sources for multi-channel
distribution, including print, PDF, fax and e-mail.
FINANCIAL CORRESPONDENCE - Enables financial services companies to access data
electronically to automate personalized financial correspondence.
CONTENT MANAGEMENT - Provides financial services companies with a single,
centralized repository for storing, accessing, annotating, printing and
electronically routing all content, including customer data, electronic
documents, video/audio clips and scanned copies of printed material.
UTILITIES SOLUTIONS
BILL PRINT - Allows utility companies to cross-market and consolidate billing
statements for multiple services such as gas, electricity, cable TV, security
and Internet.
ELECTRONIC BILL PRESENTMENT & PAYMENT - Enables companies to give their
customers the ability to view and pay their bills online.
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DOCUCORP SOFTWARE PRODUCTS
We offer our enterprise-wide information solutions through a portfolio of
scalable, high-performance software applications that address each phase of the
enterprise-wide information process of acquiring, managing, personalizing and
presenting information. Our philosophy of open architecture and support of
industry standards enables our customers to select software and hardware from
other leading vendors and integrate them with Docucorp solutions. Software
licenses accounted for 14%, 11% and 17% of our total revenues in fiscal 2004,
2003 and 2002, respectively. Revenues related to maintenance and support
agreements accounted for 28%, 27% and 26% of our total revenues in fiscal 2004,
2003 and 2002, respectively. Our software solutions have been organized into the
following four primary categories.
ACQUIRING INFORMATION
DOCUCREATE products create forms that can be used repeatedly in high-volume
environments. These software products include editors that create forms and
insert fields for run-time variable data insertion. They also produce
device-independent data streams that can be printed, archived and distributed
over intranets and the Internet. Specific products include:
DOCUCREATE WORKSTATION - A Microsoft Windows-based product that includes a
WYSIWYG forms editor, field editors and print drivers necessary to create
and edit both static and dynamic forms that can be output in Xerox
Metacode, IBM AFP and other print data streams.
DOCUCREATE SC (KOFAX) - A Microsoft Windows-based server product that
enables document capture by a Kofax Ascent scanner.
DOCUCREATE IC - A server product available for Microsoft NT, AIX, LINUX and
IBM MVS platforms, which enables graphic images created by a personal
computer or captured by scanner or fax to be incorporated within documents
for print on high-speed Xerox and IBM printers, or to be published in
digital formats over intranets and the Internet.
MANAGING INFORMATION
DOCUMANAGE software delivers full document management and archival to
information-intensive companies. Specific products include:
DOCUMANAGE WORKSTATION - A Microsoft Windows-based viewer that retrieves
indexed documents from the Documanage Server and other repositories for
viewing, annotating and routing with viewer support of more than 200 images
and print stream formats.
DOCUMANAGE SERVER - Automatically indexes and stores various print data
streams and imaging system formats and performs document management,
including check-in/check-out, automated version control, multi-tier
security and annotations. This product runs under Microsoft NT, LINUX and
AIX, and accepts hundreds of image formats, as well as IBM AFP, Xerox
Metacode, Docucorp DCD and line printer data streams.
PERSONALIZING INFORMATION
DOCUMAKER, DOCUMAKER FP AND DOCUFLEX are powerful, high-volume production
publishers for personalizing and presenting information. The publishing products
perform data merging, content assembly and business rules creation to automate
enterprise-wide production of applications such as insurance policies and
customer statements. These device-independent software products enable
individualized printing, archiving and delivery via networks and the Web.
Specific products include:
DOCUMAKER WORKSTATION - A Microsoft Windows-based application that enables
device-independent document production, including automated and dynamic
forms fill, data editing and WYSIWYG viewing of documents.
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DOCUMAKER SERVER - A server-based product for customized, business
rule-intensive publishing applications that require unique documents, such
as insurance policies, customer correspondence, flexible bills and
statements. Documaker runs under Microsoft NT, LINUX, AIX and mainframe
MVS.
DOCUMAKER FP - A server-based product that personalizes and presents
information repeatedly using the same forms in various combinations, such
as insurance policies. Documaker FP runs under Microsoft NT, AIX and
mainframe MVS.
DOCUFLEX - An easy-to-use, powerful publishing engine for dynamically
composing highly personalized booklets, catalogs, contracts and statements.
Docuflex runs under Microsoft NT, LINUX, AIX and mainframe MVS.
PPS - A Microsoft Windows-based insurance policy software product targeted
for insurance agents.
PRESENTING INFORMATION
We can help companies speed business applications to the Internet, Web-enabling
anything from forms fill and publishing to managing and viewing documents.
Solutions are platform-independent and fully scalable. Specific products
include:
DOCUPRESENTMENT - A software product that bridges the gap between Internet
browsers and legacy systems by enabling the viewing of documents in a
variety of Internet formats, including PDF, HTML and XML.
ELECTRONIC BILL PRESENTMENT & PAYMENT - A software product that allows
companies to deliver and present bills to their customers and collect
payments over the Internet.
iENTRY - A software product that allows users to select and complete forms
online, creating personalized documents.
iPPS - A software product that enables insurance companies and their agents
to assemble policies and view information via the Internet.
PROFESSIONAL SERVICES
We offer a broad range of professional services related to our software
solutions. As of July 31, 2004, we employed approximately 125 professional
service personnel, who represent one of the largest services organizations in
our industry. Our professional services personnel have experience across many
vertical industries and types of information solutions.
A majority of our professional services consulting revenue is derived from
implementation and integration of our software solutions. We also derive
professional services revenue from consulting and training. Our professional
services group works with clients to develop and define enterprise information
strategies to meet specific business needs. Training classes are available to
assist clients with implementing and using our applications and are available in
standardized and customized formats. A majority of our consulting services are
related to Docucorp solutions that personalize information. Professional
services accounted for 27%, 31% and 29% of our total revenues in fiscal years
2004, 2003 and 2002, respectively.
ASP HOSTING
We offer ASP hosting services that utilize our software to provide processing,
print, mail, archival and Internet delivery of documents for customers who
outsource these activities. We operate two ASP hosting centers located in
Atlanta and Dallas. Using data received electronically from customers, the ASP
centers employ high-volume printers and mail handling equipment to produce
insurance policies, utility statements and other customer mailings, bundle the
output for bulk mailings and host Internet bill presentation and
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payment. ASP hosting services accounted for 31% of our total revenues in fiscal
years 2004 and 2003 and 28% in fiscal 2002.
PRODUCT DEVELOPMENT
We have made and expect to continue to make substantial investments in research
and product development. During the fiscal year, our product development efforts
focused on the development of new Internet functionality, enhancing multi-user
development, integration of Web capabilities into existing solutions and further
development of new applications for the insurance, utilities and financial
services markets.
In December 2003, we announced the availability of Policy Xpress for the
insurance industry. Policy Xpress provides insurers with a complete library of
fully implemented ISO industry standard forms for the P&C marketplace.
Docucorp's Policy Xpress offering includes: a standard data dictionary, which
includes field definitions for all known P&C data elements (used for tagging
forms); standard XML schema; ISO forms; pre-defined data mappings for all forms;
pre-defined forms triggering; and default systems configuration.
Additionally, in December 2003, we introduced a content management solution for
the insurance and financial services industries. Docucorp's content management
solution provides companies with a single, centralized repository for storing,
accessing, annotating, printing and electronically routing all content,
including customer data, electronic documents, video/audio clips and scanned
copies of printed material.
In February 2004, we announced a solution for mortgage providers that addresses
the new documentation requirements outlined in the UK Financial Services
Authority's (FSA) Consultation Paper 186 (CP186).
Also in February 2004, we introduced Image Resource, an affordable content
management and workflow solution for the managing general agent (MGA) market.
The following month we announced the availability of Library Xpress for the
insurance industry. Library Xpress provides insurers with customized electronic
libraries of ISO industry standard forms for the P&C marketplace.
We have committed substantial resources to product development. As of July 31,
2004, we employed approximately 105 technical personnel engaged in research,
product development and customer support activities. The product development
process is a cooperative effort between our customers and us. Early review of
functionality specifications and product demonstrations allows for the
incorporation of customer suggestions and comments in parallel with management
review of the process internally. We have a formal planning process for new
software solutions, as well as software upgrades and maintenance releases, to
maximize software quality, ensure timeliness of releases and meet or exceed our
customers' expectations. In fiscal years 2004, 2003 and 2002, our product
development expenditures were $13.5 million, $12.0 million and $11.1 million,
respectively.
SALES AND MARKETING
We market our software and services primarily through a direct sales force. We
also market our solutions through marketing alliances and distributors. Our
sales resources are organized by the vertical industry markets we serve. As of
July 31, 2004, we employed approximately 45 direct sales and marketing
representatives, who operate primarily from Dallas, Atlanta and London. Sales
representatives are compensated principally on a commission basis. Distributor
relationships are established in the United States, Canada, Europe, South Africa
and Asia.
We intend to increase our distribution channels through marketing, sales and
distribution and development relationships with other companies. Formal and
informal marketing and development partnerships currently exist with Adaptik,
Applied Systems, Art Plus Technology, Inc., AscendantOne, ePolicy Solutions,
Sanchez e-Profile, Epic Solutions, Inc., Firstlogic, Hitachi Europe Limited,
Lynx Wealth Management Systems, ISO, Kofax, Oce, Rackley Systems, SAP, Xerox,
Microsoft, CSC, The Weiland Financial Group, SynTel, LLC,
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CheckFree and BillMatrix. These relationships provide sales leads for our
solutions or provide access to certain technological information and resources.
Our software solutions are generally licensed on a perpetual basis. A large
portion of our software license revenue is generated from a small number of
relatively large agreements, which typically range from $100,000 to $400,000.
Most customers also enter into maintenance agreements, which typically provide
for annual maintenance fees ranging from 15% to 25% of current license fees
depending upon the vertical market, size of the customer and license fee.
Customers who enter into maintenance agreements are entitled to software
upgrades, software problem resolutions and use of our "Hotline" support, which
provides technical assistance to the software user. We generally charge
customers for professional services on a time and materials basis, although
certain service assignments are performed on a fixed charge basis. ASP hosting
services are charged primarily on a transaction fee basis.
CUSTOMERS
We generally market to large and mid-size organizations that have a need for
integrated solutions for the high-volume production of individualized
information. Currently, the majority of our revenues are generated from the
insurance industry. In fiscal 2004, 64% of our total revenues were derived from
the insurance industry. We believe that we have the largest installed customer
base for insurance policy production in the insurance industry, with more than
half of the 200 largest United States insurance companies using our software and
services, including nine of the 10 largest life and health insurance companies
and nine of the 10 largest property and casualty insurance companies. For the
year ended July 31, 2004, 22% of our total revenues were derived from the
utilities industry and 11% of our total revenues were derived from the financial
services industry. We also have an installed base of customers in the higher
education, telecommunications, transportation and government markets.
COMPETITION
The market for enterprise information solutions is intensely competitive,
subject to rapid change and significantly affected by new product introductions
and other market activities of industry participants. We face direct and
indirect competition from a broad range of competitors, many of whom have
greater financial, technical and marketing resources than we do. Our principal
competition currently comes from (i) systems developed in-house by the internal
MIS departments of large organizations, (ii) direct competition from numerous
software vendors, including Document Sciences Corporation, Group 1 Software,
Inc., ISIS Information Systems, InSystems Technologies, Inc., Metavante, Mobius
Management Systems, Inc. and Exstream Software and (iii) direct competition from
numerous outsourcing and ASP vendors, including Xerox XBS, KPT, Inc., DST Output
and Regulus Group. We believe that the principal competitive factors in the
information solutions software market are technology performance and
functionality, ease of use, multi-platform offerings, reputation, quality of
customer support and service and price. The degree of competition varies
significantly by the solution being offered and the vertical market being
served.
We may also face competition from new entrants into the industry. As the market
for information solutions continues to develop, current or potential competitors
who have access to significantly greater resources could attempt to enter or
increase their presence in the market either independently or by acquiring or
forming strategic alliances with our competitors 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
our current and prospective customers.
INTELLECTUAL PROPERTY, TRADEMARKS AND PROPRIETARY RIGHTS
We rely 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 our software solutions.
Despite these precautions, it may be possible for unauthorized third parties to
copy certain portions of our solutions or obtain and use information we regard
as proprietary. While our
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competitive position may be affected by our ability to protect our proprietary
information, we believe that trademark and copyright protections are not
material to our success.
Our software solutions 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 that the laws of the United States. Generally, we
distribute our software in object format only and do not provide access to the
underlying source code.
As the number of software solutions in the industry increases and the
functionality of these solutions further overlap, we believe that software
programs will increasingly become subject to infringement claims. Third parties
may assert infringement claims against us in the future with respect to current
or future solutions, and in this event could require us to enter into royalty
arrangements or result in costly litigation.
We also rely on certain software that we license from third parties, including
software that is integrated with internally developed software and used in our
solutions to perform key functions. These third-party software licenses may not
continue to be available to us 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 software shipments until equivalent software
could be developed or licensed and integrated.
EMPLOYEES
As of July 31, 2004, we had approximately 400 employees, of which approximately
125 were engaged in professional services, 105 in product development and
customer support, 80 in ASP hosting, 45 in sales and marketing and 45 in
finance, administration, human resources and internal computer systems support.
We believe our future success will depend, in part, on our 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 our employees are represented by a labor union or are subject to a
collective bargaining agreement. We believe that our employee relations are
strong.
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 we believe that the expectations reflected by such forward-looking
statements are reasonable based on information currently available to us, 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 our 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 oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary statements.
RISK FACTORS
SOCIAL, POLITICAL AND ECONOMIC RISKS COULD ADVERSELY AFFECT OUR BUSINESS.
Acts of terrorism have caused major instability in the United States and other
financial markets. Armed hostilities or further acts of terrorism would cause
further instability in financial markets and could directly
10
impact our financial condition and the results of our operations. Our business
is subject to general economic conditions and fluctuation in corporate spending.
Any adverse effect on the economy, depending on the magnitude, could have a
material adverse effect on our operating results. There can be no assurance as
to the future effect of changes in social, political and economic conditions on
our business or financial condition.
WE MAY FACE DIFFICULTIES IN EXPANDING OUR OPERATIONS IN INTERNATIONAL MARKETS.
The expansion of our existing international operations and entry into additional
international markets requires significant management attention and financial
resources and will place additional burdens on our management, administrative,
operational and financial infrastructure. We have only limited experience in
establishing and managing international operations, and our Europe, Middle East
and Africa ("EMEA") operations have not been profitable to date. We cannot be
certain that our operations in countries outside of North America will produce
desired levels of revenues or profitability. International expansion may
negatively effect our operating results because of numerous factors, including
difficulties in staffing and managing foreign operations; potential losses from
foreign currency fluctuations; seasonal reductions in business activity in
Europe; increased financial accounting and reporting burdens; potential adverse
tax consequences; compliance with a wide variety of complex foreign laws and
treaties; reduced protection for intellectual property rights in some countries
and potential language-specific requirements for software.
OUR RESULTS OF OPERATIONS ARE DEPENDENT ON SIGNIFICANT REVENUES FROM TWO
INDUSTRIES.
For the year ended July 31, 2004 and 2003, 64% and 68% of our total revenues,
respectively were derived from the insurance industry and 22% and 20% of our
total revenues respectively, were derived from the utilities industry. Our
financial performance and future growth will depend upon our ability to continue
to market our solutions successfully in the insurance and utilities industries
and to enhance and market technologies for distribution in other markets. We
entered the financial services industry during the fiscal year 2000 and plan to
expand into additional vertical markets in the future. This will require us to
make substantial software development and distribution channel investments.
There can be no assurance that we will be able to continue marketing our
solutions successfully in the insurance and utilities industries or will be able
to successfully introduce new or existing solutions into the financial services
industry or other vertical markets.
FUTURE BUSINESS ACQUISITIONS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
On September 24, 2004, we acquired the business of Newbridge Information
Services, and we may make additional acquisitions in the future. Acquisitions
may be difficult to integrate into our business and would consume significant
management and financial resources. There is no assurance that any acquisition
will be successful or generate a satisfactory return on investment. Future
acquisitions may also involve large one-time write offs, amortization expenses
related to intangible assets and impairment expenses related to goodwill.
WE ARE DEPENDENT ON MEETING THE CHALLENGES OF TECHNOLOGICAL ADVANCES IN THE
INFORMATION SOLUTIONS INDUSTRY.
The information solutions 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 us to make substantial
investments in the development of our solutions. Any failure to anticipate or
respond adequately to technological developments and customer requirements, or
any significant delays in the development or introduction of our solutions,
could have a material adverse effect on our operating results. There can be no
assurance that our new solutions or enhancements, which are intended to respond
to technological change or evolving customer requirements, will achieve
acceptance.
11
WE MAY FACE DIFFICULTIES IN ATTRACTING AND RETAINING QUALIFIED TECHNICAL
EMPLOYEES.
We believe that our future success will depend in large part upon our 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. There can be no assurance that we will be able to attract and
retain sufficient numbers of highly skilled technical employees. The loss of a
significant number of our technical employees could have a material adverse
effect our business.
WE MAY NOT BE ABLE TO COMPETE FAVORABLY IN THE COMPETITIVE INFORMATION SOLUTIONS
INDUSTRY.
The market for our information solutions is intensely competitive. We face
competition from a broad range of competitors, many of whom have greater
financial, technical and marketing resources than we do. There can be no
assurance that we will be able to compete effectively with such entities.
OUR BUSINESS IS SUBJECT TO FLUCTUATIONS IN OPERATING RESULTS.
We have experienced, and may in the future continue to experience, fluctuations
in our 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, overall budget and spending priorities and the economy.
We have typically operated with little backlog for license revenues because our
software solutions are generally 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 and profitability
for a given fiscal quarter. We have historically earned a substantial portion of
our license revenues in the last weeks of any particular quarter. The failure to
achieve such revenues in accordance with such trends could have a material
adverse effect on our financial results for each such interim period.
OUR SOLUTIONS ARE SUBJECT TO THE RISK OF SOFTWARE DEFECTS.
Complex software solutions such as ours can contain undetected errors or
performance problems. Such defects are most frequently found during the period
immediately following introduction of new solutions or enhancements to existing
solutions. Our solutions 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 our solutions in the
future. Any future software defects discovered after shipment of our solutions,
if material, could result in loss of revenues, delays in customer acceptance or
potential product liability.
OUR INTELLECTUAL PROPERTY RIGHTS MAY NOT BE ADEQUATELY PROTECTED.
We rely on a combination of copyright and trademark laws, employee and
third-party nondisclosure agreements and other methods to protect our
proprietary rights. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of our solutions or to
obtain and use information that we regard as proprietary. There can be no
assurance that our efforts will provide meaningful protection for our
proprietary technology against others who independently develop or otherwise
acquire substantially equivalent techniques or gain access to, misappropriate or
disclose our proprietary technology.
OUR OPERATIONS ARE DEPENDENT UPON KEY MANAGEMENT PERSONNEL.
We believe that our continued success depends to a significant extent upon the
efforts and abilities of our senior management. In particular, the loss of
Michael D. Andereck, our President and Chief Executive Officer, or any of our
other executive officers or senior managers, could have a material adverse
effect on our business.
12
AVAILABLE INFORMATION
We electronically files our annual report on Form 10-K, quarterly reports on
Form 10-Q, and current reports on Form 8-K with the Securities and Exchange
Commission ("SEC"). Copies of our filings with the SEC may be obtained from our
website at HTTP://WWW.DOCUCORP.COM or at the SEC's website at
HTTP://WWW.SEC.GOV. Access to these filings is free of charge.
13
ITEM 2. PROPERTIES
We lease approximately 31,500 square feet of office space in Dallas, Texas for
our corporate headquarters, including administrative, sales, marketing,
professional services, and product development departments. This lease expires
April 30, 2005.
We lease approximately 80,000 square feet of office space in Atlanta, Georgia,
which is utilized for administrative, sales, professional services, and product
development departments. The lease for this space expires on December 31, 2013.
We lease space for our ASP hosting facility located in Atlanta, Georgia. This
facility occupies approximately 24,500 square feet under a lease, which expires
on March 31, 2008.
We lease space for our ASP hosting facility located in Dallas, Texas. This
facility occupies approximately 28,700 square feet under a lease, which expires
on March 31, 2010, but we may terminate on March 31, 2007.
Our staff in Maryland is located in Silver Spring, Maryland. This facility is
principally used for product development activities and occupies approximately
10,000 square feet under a lease, which expires December 31, 2006.
Our staff in New Hampshire is located in a 5,700 square foot facility in
Bedford, New Hampshire. The lease for this facility expires on December 31, 2004
and is staffed primarily by professional services personnel.
We lease space for our European sales and services staff near London, England.
This facility occupies approximately 8,200 square feet under a lease, which
expires on September 27, 2013, but we have the right to terminate on October 1,
2005.
We believe the existing office facilities and additional space available are
adequate to meet our requirements, and that in any event, suitable additional or
alternative space adequate to serve our foreseeable needs will be available on
commercially reasonable terms.
On September 24, 2004, in connection with the acquisition of Newbridge
Corporation, we assumed two leases for properties in Dallas, Texas. The lease
related to Newbridge's print and binding facility is for approximately 23,000
square feet and expires on June 30, 2007. The lease for Newbridge's corporate
office, including administrative, sales and information services, is for
approximately 11,700 square feet and expires on March 31, 2007.
ITEM 3. LEGAL PROCEEDINGS
We are occasionally involved in legal proceedings and other claims arising out
of our operations in the normal course of business. No such current claims are
expected, individually or in the aggregate, to have a material adverse effect on
our consolidated financial statements.
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 2004.
14
PART II
ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock has traded on the Nasdaq National Market under the symbol
"DOCC" since April 6, 1998. At October 11, 2004 there were approximately 500
holders of record of our Common Stock, although we believe that the number of
beneficial owners of our Common Stock is substantially greater. The table below
sets forth for the fiscal quarters indicated the high and low sales prices for
our Common Stock:
HIGH LOW
---------------- ----------------
FISCAL 2004:
Fourth quarter $ 10.83 $ 6.92
Third quarter 14.50 10.84
Second quarter 13.70 8.06
First quarter 8.80 5.35
FISCAL 2003:
Fourth quarter $ 7.19 $ 3.59
Third quarter 5.76 3.06
Second quarter 8.84 5.31
First quarter 16.39 6.53
We intend to retain any future earnings for use in our business and do not
intend to pay cash dividends in the foreseeable future. The payment of future
dividends, if any, will be at the discretion of our Board of Directors and will
depend, among other things, upon future earnings, operations, capital
requirements, restrictions in future financing agreements, our general financial
condition and general business conditions.
15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the years ended July 31,
2004, 2003, 2002, 2001, and 2000 has been derived from our audited financial
statements. The following data should be read in conjunction with, and are
qualified by, reference to our audited financial statements and the notes
thereto, included elsewhere in this Form 10-K.
Years ended July 31,
-----------------------------------------------------------------------
2004 2003 2002** 2001* 2000
----------- ----------- ----------- ----------- -----------
STATEMENTS OF OPERATIONS DATA: (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Total revenues $ 75,670 $ 74,941 $ 72,620 $ 63,203 $ 50,977
Operating income $ 9,426 $ 7,256 $ 9,084 $ 6,797 $ 2,802
Income before income taxes and
cumulative effect of accounting change $ 9,191 $ 7,229 $ 9,865 $ 7,057 $ 3,414
Income before cumulative effect of
accounting change $ 5,366 $ 3,945 $ 5,929 $ 3,472 $ 1,529
Net income $ 5,366 $ 3,945 $ 5,929 $ 2,482 $ 1,529
Income before cumulative effect of
accounting change per share:
Basic $ 0.53 $ 0.31 $ 0.44 $ 0.24 $ 0.10
Diluted $ 0.47 $ 0.28 $ 0.40 $ 0.23 $ 0.09
Net income per share:
Basic $ 0.53 $ 0.31 $ 0.44 $ 0.17 $ 0.10
Diluted $ 0.47 $ 0.28 $ 0.40 $ 0.17 $ 0.09
Weighted average number of
shares outstanding:
Basic 10,154 12,780 13,458 14,293 15,317
Diluted 11,360 13,878 14,883 15,028 16,872
* We implemented Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"), in the fourth quarter of fiscal 2001.
The one-time cumulative effect of applying SAB 101 for all years prior to
fiscal 2001 resulted in a reduction of net income of approximately $990,000
for the year ended July 31, 2001, or $0.06 per diluted share.
** We adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"), effective August 1, 2001. SFAS
142 discontinues amortization of goodwill and indefinite-lived intangible
assets.
16
July 31,
-----------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA: (IN THOUSANDS)
Working capital $ 10,746 $ 3,686 $ 13,150 $ 11,291 $ 13,029
Total assets $ 59,239 $ 53,440 $ 55,750 $ 51,784 $ 49,010
Total debt, including obligations
under capital lease $ 12,696 $ 16,828 $ -0- $ -0- $ -0-
Stockholders' equity $ 22,799 $ 13,732 $ 33,064 $ 31,067 $ 33,705
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is set forth in Docucorp's 2004 Annual
Report to Stockholders, which information is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have no derivative financial instruments. We invest our cash and cash
equivalents in investment-grade, highly liquid investments, consisting of money
market instruments and commercial paper. We have a fixed rate debt instrument of
$10.4 million as of July 31, 2004. For further discussion see Note 4 to the
consolidated financial statements.
We are exposed to market risk arising from changes in foreign currency exchange
rates as a result of selling our products and services outside the U.S.
(principally Europe). A portion of our sales generated from our non-U.S.
operations are denominated in currencies other than the U.S. dollar, principally
British pounds. Consequently, the translated U.S. dollar value of our non-U.S.
sales and operating results are subject to currency exchange rate fluctuations
which may favorably or unfavorably impact reported earnings and may affect
comparability of period-to-period operating results.
For the year ended July 31, 2004 and 2003, 7% and 5%, respectively, of our
revenues were denominated in British pounds. For the years ended July 31, 2004
and 2003, 14% of our operating expenses were denominated in British pounds.
Historically, the effect of fluctuations in currency exchange rates has not had
a material impact on our operations; however, there can be no guarantees that it
will not have a material impact in the future. The exposure to fluctuations in
currency exchange rates will increase as we expand operations outside the U.S.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in Docucorp's 2004 Annual
Report to Stockholders, which information is incorporated herein by reference.
17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Our management, with participation of our President and Chief Executive Officer
and Senior Vice President, Finance and Administration ("Principal Financial
Officer") evaluated the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this report. Based upon that evaluation,
the President and Chief Executive Officer and the Principal Financial Officer
concluded that our disclosure controls and procedures, as of July 31, 2004, were
designed and are functioning effectively to provide reasonable assurance that
the information required to be disclosed by Docucorp in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.
There has been no significant change in our internal controls over financial
reporting or in other factors that could significantly affect these controls
that occurred during the period covered by this report.
ITEM 9B. OTHER INFORMATION
None
18
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 Docucorp is set forth in the Proxy
Statement (to be filed on or before October 29, 2004) under the heading
"Directors and Executive Officers," which information is incorporated herein by
reference. Information required by Item 405 of Regulation S-K is set forth in
the Proxy Statement under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance," which information is incorporated herein by reference.
We have adopted a code of ethics that applies to all members of Board of
Directors and employees of Docucorp, including, our Chief Executive Officer,
Principal Financial Officer, Corporate Controller, and/or other persons
performing similar functions. Our code of ethics may be viewed at and obtained,
free of charge, from our Internet website: http://www.docucorp.com.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth in the Proxy
Statement (to be filed on or before October 29, 2004) under the heading
"Executive Compensation," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTER
Information with respect to security ownership of certain beneficial owners and
management and related stockholder matter is set forth in the Proxy Statement
(to be filed on or before October 29, 2004) 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 related transactions is
set forth in the Proxy Statement (to be filed on or before October 29, 2004)
under the heading "Certain Relationships and Related Transactions," which
information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information with respect to principal accounting fees and services is set forth
in the Proxy Statement (to be filed on or before October 29, 2004) under the
heading "Fees Paid to, and Independence of, Auditors," which information is
incorporated herein by reference.
19
PART IV
ITEM 15. 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.
1. Financial Statements:
Report of Independent Registered Public Accounting Firm
As of July 31, 2004 and 2003:
o Consolidated Balance Sheets
For the Years Ended July 31, 2004, 2003 and 2002:
o Consolidated Statements of Operations and Comprehensive Income
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 Registered Public Accounting Firm on
Financial Statement Schedule
o Schedule II - Valuation and Qualifying Accounts
3. Exhibits:
See Index to Exhibits on page 25 of this Form 10-K.
(b) Reports on Form 8-K.
On May 20, 2004, we filed a Current Report on Form 8-K announcing our
results of operations for the quarter ended April 30, 2004.
20
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 October 14, 2004
- ------------------------------------------ -----------------------------
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.
21
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 October 14, 2004
- --------------------------------------- -----------------------------
Michael D. Andereck
President, Chief Executive Officer and
Director
(Principal Executive Officer)
/s/ John H. Gray Date October 14, 2004
- --------------------------------------- -----------------------------
John H. Gray
Senior Vice President, Finance and
Administration
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Milledge A. Hart, III Date October 14, 2004
- --------------------------------------- -----------------------------
Milledge A. Hart, III
Chairman of the Board
/s/ Anshoo S. Gupta Date October 14, 2004
- --------------------------------------- -----------------------------
Anshoo S. Gupta
Director
/s/ John D. Loewenberg Date October 14, 2004
- --------------------------------------- -----------------------------
John D. Loewenberg
Director
/s/ George F. Raymond Date October 14, 2004
- --------------------------------------- -----------------------------
George F. Raymond
Director
/s/ Arthur R. Spector Date October 14, 2004
- --------------------------------------- -----------------------------
Arthur R. Spector
Director
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders
of Docucorp International, Inc:
Our audits of the consolidated financial statements referred to in our report
dated October 1, 2004 appearing in the 2004 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 15(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
October 1, 2004
23
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JULY 31, 2004, 2003 AND 2002
SCHEDULE II
Balance at Charged to
Beginning Costs and Deductions Balance at End
Description of Period Expenses (a) of Period
- ---------------------------------------------------------------------------------------------------
2004
Allowance for doubtful accounts $ 562,159 $ 145,139 $ (332,298) $ 375,000
Amortization of intangibles $ 4,948,625 $ 4,356 $ -0- $ 4,952,981
Valuation allowance against
deferred tax assets $ 2,432,566 $ 359,539 $ -0- $ 2,792,105
2003
Allowance for doubtful accounts $ 670,000 $ 305,306 $ (413,147) $ 562,159
Amortization of intangibles $ 4,945,442 $ 3,183 $ -0- $ 4,948,625
Valuation allowance against
deferred tax assets $ 1,940,041 $ 492,525 $ -0- $ 2,432,566
2002
Allowance for doubtful accounts $ 600,000 $ 702,000 $ (632,000) $ 670,000
Amortization of intangibles $ 4,942,234 $ 3,208 $ -0- $ 4,945,442
Valuation allowance against
deferred tax assets $ 1,725,650 $ 214,391 $ -0- $ 1,940,041
(a) Deductions from the allowance for doubtful accounts relate to the
utilization of the valuation and qualifying accounts for specific items for
which they were established in the accounts receivable account.
24
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)
10.4* Asset Purchase Agreement dated as of September 24, 2004 between
Newbridge Corporation and Docucorp International, Inc.
13.1* 2004 Annual Report to Stockholders
21.1* Subsidiaries of the Registrant.
23.1* Consent of PricewaterhouseCoopers LLP, Independent Accountants.
31.1* Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
31.2* Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
32.1* Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
32.2* Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
- --------------
* Filed herewith.
25