Although depreciation and amortization of property, equipment and capitalized software costs decreased slightly from 1995 to 1996, amortization of internally developed software costs increased $3.7 million (18.8%), principally due to amortization associated with the March 1996 release of the latest version of CyberLife client/server life insurance software and the 1996 release of the Company's property and casualty insurance Series III client/server software systems. Depreciation expense decreased by $4.7 million as a result of the 1995 restructuring of the Company's U.S. Data Center and subsequent lease of computer equipment.
Depreciation and amortization expense increased $2.2 million (4.8%) for 1995 when compared to 1994. Amortization of internally developed software costs increased $4.9 million (33.2%), due principally to amortization associated with a new release of the Company's property and casualty insurance Series III client/server software system and the initial release of its life insurance CyberLife client/server software system, both of which became generally available during the first quarter of 1995. These increases were offset by lower amortization charges resulting principally from the impairment of certain identifiable intangible assets, goodwill and software products relating to the Company's property and casualty information services business (see Note 12 of Notes to Consolidated Financial Statements) and lower depreciation charges due to certain retirements of data processing equipment.
First Second Third Fourth Quarter Quarter Quarter Quarter Total (Dollars In Millions) 1996 $10.4 $12.0 $10.1 $19.4 $ 51.9 Initial license revenues 20.1% 23.1% 19.4% 37.4% 100.0% Total revenues 7.8% 8.8% 6.9% 11.8% 8.9%
On December 31, 1994, the Company acquired all of the outstanding capital stock of Creative Group Holdings, Limited ("Creative"). Creative, headquartered in the United Kingdom, is a British holding company whose wholly-owned subsidiaries provide software consulting, development, licensing and financing services to medium-sized general insurance companies. Creative has offices in England, Australia and Southeast Asia. The acquisition of Creative was recorded using the purchase method of accounting. Accordingly, the Consolidated Statement of Operations of the Company for the year ended December 31, 1994, does not include the results of operations of Creative for the period. The Consolidated Balance Sheet as of December 31, 1994, includes the assets and liabilities as of that date. In connection with the acquisition, the company recorded an estimated liability of $2.0 million at December 31, 1994, to provide for the costs of terminating the Company's existing lease obligations in the United Kingdom ($1.8 million) and relocation and severance costs of consolidating its existing operations in the United Kingdom with Creative ($.2 million). These costs are included in Impairment and restructuring charges, net, in the accompanying Consolidated Statements of Operations for the year ended December 31, 1994. At December 31, 1994, the Company also recorded a charge of $2.6 million representing purchased research and development for which technological feasibility had not yet been established and for which there is no alternative future use.
Realized gains and losses are included in net income and the cost of securities sold is based on the specific identification method. There were no sales of marketable securities during the years ended December 31, 1996 and 1995. For the year ended December 31, 1994, the Company received $145.9 million in proceeds from sales of available-for-sale securities, and recognized $1.9 million in gross realized losses, based on the specific identification method. There were no sales or transfers of debt securities out of the held-to-maturity category during the year ended December 31, 1995.
During December 1995, as part of the restructuring of its data processing facilities (see Note 4), the Company entered into two and four year renewable lease and maintenance agreements to lease certain data processing equipment for use in its worldwide data center operations. Minimum lease payments over the initial term of the agreements aggregate $6.0 million payable in specified monthly installments. At the end of the term of each agreement, the Company has the option to purchase the leased equipment at fair market value, upgrade the equipment with the latest technology, or discontinue each lease. The Company has the guaranteed option to renew the two year lease for two more years with then current technology at not-to-exceed cost.
Year ended December 31, 1996 1995 1994 (In Thousands) Current domestic taxes $ 2,494 $ (1,858) $(6,558) Current foreign taxes 4,835 3,309 951 Total current taxes 7,329 1,451 (5,607) Deferred income taxes relating to temporary differences: Depreciation and amortization of property, equipment and intangibles 664 (1,748) (7,808) Capitalized software development costs 10,511 8,876 6,555 Impairment and restructuring of operations 3,120 1,312 2,145 Internal Revenue Service settlement - - (6,000) Revaluation of deferred state income tax liability - (497) (999) Litigation settlement and expenses, net 4,184 (3,445) (1,489) Other 243 (1,007) 4,372 18,722 3,491 (3,224) Total income tax provision (benefit) $ 26,051 $ 4,942 $(8,831)
The following table summarizes information about fixed options outstanding at December 31, 1996:
During 1996, the Company repurchased 759,512 shares of its commons stock from General Atlantic Investors and 645,500 shares of its common stock on the open market. There were no shares repurchased during the twelve months ended December 31, 1995. As of December 31, 1994, the Company had repurchased, on the open market, 995,500 shares of its common stock for a total of $35.3 million.
On June 30, 1995, the Company sold its Health Insurance Systems Division for a total consideration of $9.3 million in cash. After selling expenses of $.5 million, the net book value of assets sold of $.5 million, liabilities resulting from the sale, including severance liabilities for certain employees and other reserves of $1.5 million, and the present value of a sublease executed by the purchaser for certain office space of $1.3 million, the Company recorded a pre-tax gain of $8.1 million, for the year ended December 31, 1995.
The Company announced on April 27, 1994, that it had agreed with IBM to repurchase 2,278,537 of the 3,797,561 shares of the Company's common stock held by IBM and that the remainder of the Company's shares owned by IBM would be purchased by General Atlantic Investors. The Company completed the repurchase of these shares on May 16, 1994, at a share price of $24.71, which approximated an aggregate cash expenditure of $56.6 million. The shares repurchased by the Company represented 10% of its total shares outstanding prior to the repurchase.
Our report on the consolidated financial statements of Policy Management Systems Corporation, is included on page 21 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page 20 of this Form 10-K.