from the Company's data centers, to complete systems management, processing, administration support and automated information services through the Company's nationwide telecommuni- cations network using the Company's database products.
Costs and Expenses Employee compensation and benefits increased $7.1 million (4.3%) for 1994 compared with 1993, and is principally related to an increase of $16.1 million in costs associated with the acquisition of CYBERTEK Corporation in August 1993, the acquisition of a data center, including its workforce, in Bergen, Norway, in December 1993, and the increased use of temporary labor throughout the year. The increase in costs associated with these acquisitions was partially offset by a reduction in compensation and other benefits of $7.8 million resulting from a downsizing in the Company's health insurance services staff from 388 at the end of 1993 to 220 at the end of 1994. These staff reductions are part of the Company's restructuring of its health business (see Note 12 of Notes to Consolidated Financial Statements).
First Second Third Fourth Quarter Quarter Quarter Quarter Total Initial license revenues.... 9.5% 27.4% 37.6% 25.5% 100.0% Total revenues.............. 3.1% 8.4% 11.3% 7.8% 7.7%
As part of the Company's repurchase of 2,278,537 of the 3,797,561 shares of its common stock held by IBM, at a price of $24.71 per share, and the open market repurchase of 995,500 shares of common stock, the Company liquidated a portion of its marketable securities portfolio. The Company incurred a loss on the sale of securities of $1.9 million related directly to this liquidation during 1994 (see Note 11 of Notes to Consolidated Financial Statements).
Interest expense and other charges increased $.4 million for 1994 compared with 1993, primarily as a result of the amortization of discounts associated with long-term restructuring liabilities recorded at June 30, 1993. These liabilities, which are part of restructuring charges established to recognize as a loss the planned future abandonment of certain facilities relating to the restructuring of the Company's health insurance services business, were reduced $1.8 million during 1994 (see Note 12 of Notes to Consolidated Financial Statements).
The Company recorded, at June 30, 1993, impairment charges to reduce the carrying value of certain identifiable intangible assets and goodwill related to its health insurance services business of $54.9 million. In connection with this impairment and write-down, the Company also decided to restructure this business and take a restructuring charge of $25.2 million as of June 30, 1993. Costs to restructure the health business are composed of $5.2 million associated with employee severance and outplacement, and $20.0 million related to an ongoing lease obligation and/or termination for the planned future abandonment of certain leased office facilities (see Note 12 of Notes to Consolidated Financial Statements). Cash outlays with respect to the restructuring charges were $12.2 million for 1994. The Company reduced its liabilities for accrued restructuring charges by $9.5 million ($10.7 million in cash outlays, less $1.2 million in non-cash discount amortization) for lease terminations and $1.5 million in cash outlays for employee severance and outplacement costs. Additionally, the Company adjusted its restructuring liability established for employee severance and outplacement, and lease termination costs downward (for a further discussion, see Costs and Expenses above). Cash outlays for severance, outplacement and lease termination costs are expected to be approximately $6.3 million for 1995.
The Company's future operating results may be affected by a number of factors, including uncertainties relative to economic conditions, industry factors, the Company's ability to develop and sell its products profitably, the Company's ability to successfully increase market share in its core business while expanding its product base into other markets and the Company's ability to effectively manage expense growth relative to revenue growth in anticipation of continued pressure on gross margins. The Company's operating results could be adversely affected should the Company be unable to anticipate customer demand accurately, to introduce new products on a timely basis or to effectively manage the impact on the Company of changes in the insurance marketplace.
Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992... 26
Capitalized Sofware Costs In accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed" (FAS 86), certain costs incurred in the internal development of computer software which is to be licensed to customers and costs of purchased computer software, consisting primarily of software acquired through business acquisitions, are capitalized and amortized at the greater of the amount computed using (i) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues of that product or (ii) the straight-line method over the remaining estimated economic life of the product including the period being reported on. Costs which are capitalized as part of
Net Income (Loss) Per Share Net income (loss) per share is based upon the weighted average number of common shares outstanding. Outstanding stock options are common stock equivalents, and are excluded from the computation of net income (loss) per share since their effect is antidilutive.
December 31, 1994 1993 (In Thousands) Notes payable, due through February 2015, interest at 3.69% to 9.00%............... $ 8,896 $ 12,641 Less: Current portion...................... 4,734 6,986 Long-term debt............................. $ 4,162 $ 5,655
The Company occupies leased facilities under various operating leases expiring through 2014. The leases for certain facilities contain options for renewal and provide for escalation of annual rentals based upon increases in the lessors' operating costs. Rent expense under leases for facilities was $7.4, $7.7 and $8.7 million for the years ended December 31, 1994, 1993 and 1992, respectively. An amount of $1.8 million for lease abandonment charges is included in the impairment and restructuring charges in the accompanying statements of operations for the year ended December 31, 1994. Amounts of $7.8 million for lease termination costs and $12.2 million for lease abandonment charges are included in the impairment and restructuring charges in the accompanying statement of operations for the year ended December 31, 1993 (see Note 12).
Income (loss) before income taxes (benefit) United States............................... $(15,189) International............................... (2,026) Eliminations................................ (1,274) Total income (loss) before income taxes (benefit)........................ $(18,489)