Borland 2002 Revenues Increase 10%; Extends Footprint Across Application Lifecycle.Business Editors/High-Tech Writers SCOTTS VALLEY, Calif.--(BUSINESS WIRE)--Jan. 28, 2003 Borland Software Corporation (company) Borland Software Corporation - A company that sells a variety of PC software development and database systems. Borland was founded in 1983 and initially became famous for their low-cost software, particularly Turbo Pascal, Turbo C, and Turbo Prolog. (Nasdaq:BORL) today announced its financial results for the fourth quarter and year ended December December: see month. 31, 2002. Revenues for 2002 increased 10% to $244.6 million, which included $4.4 million from the company's acquisition of 79% of the outstanding shares of Starbase Corporation in November November: see month. 2002. The remaining 21% was acquired earlier this month. Revenues Rise 14% in 2002 Fourth Quarter Including $4.4 million in revenue attributable to Starbase, revenues for the 2002 fourth quarter increased 14% to $67.1 million from $59.0 million for the fourth quarter of 2001, and license revenues rose 13% to $56.4 million from $50.1 million a year ago. Revenue growth for the quarter reflects Borland's cross-platform (software, hardware) cross-platform - A term that describes a language, software application or hardware device that works on more than one system platform (e.g. Unix, Microsoft Windows, Macintosh). E.g. Netscape Navigator, Java. leadership in software application development and deployment. "As a result of our ongoing commitment to excellence and execution, we are pleased to report that Borland (Borland Software Corporation, Austin, TX, www.borland.com) A software company founded as Borland International in 1983 by Philippe Kahn. The company is noted for its language and development products. It also popularized the desktop accessory for DOS PCs with its Sidekick program. delivered its 12th consecutive quarter of positive cashflow from operations and 11th consecutive quarter of profitability," said Borland President and Chief Executive Officer Dale L. Fuller. Borland Senior Vice President and Chief Financial Officer Kenneth R. Hahn Hahn , Otto 1879-1968. German chemist. He won a 1944 Nobel Prize for his work on atomic fission. Noun 1. Hahn - German chemist who was co-discoverer with Lise Meitner of nuclear fission (1879-1968) Otto Hahn commented, "Despite a cash outflow of approximately $18.8 million for the acquisition of 79% of the outstanding shares of Starbase, at quarter end, we had cash and cash equivalents of $296 million and no long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . Cashflow from operations remained positive, at $5.4 million, reflecting the ongoing cash-generating strength of our core business." Strong Operating Performance Gross margins for the 2002 fourth quarter increased to 86% from 84% in the fourth quarter of 2001. Gross margins improved due to lower license fees to third parties and lower packaging costs. Using Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the fourth quarter was $4.9 million compared with $6.0 million for the fourth quarter of 2001. On a GAAP basis, fourth quarter 2002 net income was $3.1 million, or $0.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on 75.0 million weighted average shares outstanding. This compares with net income of $6.2 million, or $0.08 per diluted share, on 75.6 million weighted average shares outstanding for the 2001 fourth quarter. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma operating income rose 19% year-over-year to $7.4 million, excluding restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , amortization of intangibles, and acquisition-related expenses of $2.5 million in the 2002 fourth quarter. This compares with pro forma operating income of $6.2 million, excluding restructuring, amortization of intangibles, and acquisition-related expenses of $0.2 million in the 2001 fourth quarter. Pro forma non-operating income for the fourth quarter excludes a benefit of $1.6 million for a reversal of accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. established in prior periods that, due to changes in facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , have been determined to be no longer necessary. Additionally, it excludes a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charge of $3.2 million for the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of certain investments and long-term assets Long-Term Assets 1. Reported on the balance sheet, it's the value of a company's property, equipment and other capital assets, less depreciation. 2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time. . The 11.1% pro forma operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: this past quarter represents the company's strongest quarterly operating performance in the last two years. The effective tax rate for the 2002 fourth quarter was 35%, roughly 10 percentage points higher than anticipated. This difference resulted from profitability mix across jurisdictions and negatively impacted quarterly earnings per share by one cent. Excluding restructuring, amortization of intangibles, and acquisition-related expenses, and excluding a non-recurring benefit and loss for the write-down of investments and long-term assets, pro forma net income for the 2002 fourth quarter was $5.8 million, or $0.08 per diluted share, on 75.0 million weighted average shares outstanding. This compares with pro forma net income of $6.4 million, or $0.08 per diluted share, on 75.6 million weighted average shares outstanding for the fourth quarter of 2001. Borland Accelerates Application Lifecycle "We employed the strength of our balance sheet to acquire TogetherSoft and Starbase, which we announced in the fourth quarter and closed earlier this month," stated Mr. Fuller. "Through these acquisitions, we are extending Borland's footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. across the application lifecycle and further accelerating the development process. "Time-to-market pressures continue to compress the development cycle, so businesses must seek software solutions that deliver the speed, flexibility and freedom they need to solve real-world problems," added Mr. Fuller. "When it comes to software, packaged solutions only go so far. The most successful businesses customize their software to gain competitive advantage and differentiation. The faster they can customize software, the greater the business advantage. We help customers gain a competitive advantage by enabling them to create and deploy better software faster." Continued Mr. Fuller, "Competitive market pressures are also driving the trend toward agile development See agile software development. and team development across disciplines, geographies, and network boundaries. With the completion of the acquisitions of TogetherSoft and Starbase, we're we're Contraction of we are. we're we are tightly integrating all phases of the lifecycle process to create a single, cohesive cohesive, n the capability to cohere or stick together to form a mass. application lifecycle solution. Borland's solutions help improve the productivity of the team -- architects, programmers This is a list of programmers notable for their contributions to software, either as original author or architect, or for later additions. See also: Game programmer, List of computer scientists , testers, implementers, business users, and managers -- regardless of platform. As a result, customers continue to be drawn to Borland's platform-neutral, best-in-class See best-of-class. solutions that accelerate time to market and lower the total cost of ownership. "It is clear Borland has reached the next stage in our evolution -- expansion. While remaining disciplined around operational efficiency and effective execution of our business plan, we are highly focused on integrating our sales organizations, product technologies, and core operations. The success of these efforts will improve our competitive positioning and help drive our future revenues and operating profitability," concluded Mr. Fuller. Diversified diversified (di·verˑ·s Product Mix Drives Revenue Growth The business mix in the fourth quarter demonstrates Borland's strength across the major areas of the software application lifecycle -- from requirements management The administration and control of the information needs of users. In order to achieve business objectives within an organization via information systems, user requirements must be defined in a consistent manner, prioritized and monitored. to design, develop, test, and deploy. The Java(TM) business increased 4% over the fourth quarter of 2001 and increased 19% sequentially. Growth in the quarter was fueled in part by the launch of JBuilder A family of Java development tools from Borland. Supporting J2EE and available in personal and enterprise editions, they are used to create all types of Java applications and applets, including support for JavaBeans, Enterprise JavaBeans (EJBs), JSPs and servlets. (R) 8, which is tightly integrated with Borland Optimizeit(TM) Suite 5, widely recognized as one of the best performance assurance solutions for Java. JBuilder is ranked as the number-one development tool for Java, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. leading industry analysts. JBuilder 8 includes new enterprise-level enhancements that simplify and accelerate web and agile development. The Java business continues to be a key component of Borland's revenue growth and represented 38% of both fourth quarter 2002 revenue and 2002 annual revenues. Borland's Java business includes JBuilder, Enterprise Studio for Java, and OptimizeIt. The Enterprise business increased 12% from the 2001 fourth quarter to the 2002 fourth quarter and represented 19% of 2002 annual revenues. The Enterprise business grew 39% sequentially and represented 21% of total 2002 fourth quarter revenues. Growth in the Enterprise business was principally due to large transactions that closed in the quarter, primarily in the defense and government sectors. Revenues from the Enterprise business are generated from Borland VisiBroker An object request broker (ORB) from Borland that fully supports the CORBA standard. VisiBroker for Java is written in Java and can run in any Java environment. VisiBroker for C++ provides ANSI C++ interfaces for maximum source portability. (R) CORBA (Common Object Request Broker Architecture) A software-based interface from the Object Management Group (OMG) that allows software modules (objects) to communicate with each other no matter where they are located on a private network or the global (R) solution, Borland Enterprise Server Borland Enterprise Server, also known as Borland Application Server, was Borland's J2EE Application Server. The product was developed in 1999 within the team of former Visigenic company that was acquired by Borland in 1997. , AppServer See application server. Edition, and Web Edition application servers, and the company's small-footprint databases, Interbase A relational DBMS from Borland that runs under Solaris, Windows and Linux. Available in desktop, server and developer editions, InterBase was designed to handle online complex processing (OLCP) and is used in centralized, small to medium-size businesses. (R) and JDataStore(TM). Borland's Rapid Application Development -- or RAD (1) (Rapid Application Development) Developing systems incrementally and delivering working pieces every three to four months, rather than waiting until the entire project is programmed before implementing it. -- business represented 19% of total 2002 fourth quarter revenues and 24% of 2002 annual revenue. Year-over-year, revenues in the RAD business remained virtually unchanged. Sequentially, fourth quarter revenues declined 31%, as anticipated and consistent with the quarterly performance following a major release of Delphi(TM). Revenues from the RAD business come from sales of Delphi, C++Builder A development environment for Windows from Borland that is based on the Borland C++ compiler. Introduced in 1997, it provides more rapid GUI and database development than Borland C++ and also supports the building of COM and CORBA objects. (TM), Enterprise Studio for Windows, and Kylix(TM). The newly formed Developer Services Platform (DSP (1) (Digital Signal Processor) A special-purpose CPU used for digital signal processing applications (see definition #2 below). It provides ultra-fast instruction sequences, such as shift and add, and multiply and add, which are commonly used in math-intensive ), which includes the former Starbase product lines StarTeam StarTeam is a revision control and SCM software system, originally produced by Starbase Corporation, acquired by Borland in January 2003[1]. The system is backed by a relational database that retains all changes made to a project during its evolution. and CaliberRM, represented 6% of fourth quarter 2002 revenue. Borland's services business grew 19% over the 2001 fourth quarter and 2% sequentially. Services revenues represented 16% of both 2002 fourth quarter and 2002 annual revenues. Overall, growing strength in this area suggests Borland's ongoing ability to penetrate the enterprise with Java and deployment solutions. Geographic Breakout Borland continues to benefit from a global geographic presence and multiple distribution channels. The addition of Starbase revenues caused a higher-than-normal mix of U.S. revenues. International revenues in the fourth quarter were 59% of revenues, which compares with 67% in the 2002 third quarter and 62% in the 2001 fourth quarter. In the fourth quarter of 2002, the Americas A·mer·i·cas , the See America. represented 47% of total revenues, EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. 36%, and Asia/Pacific 17%. This compares with 41% in the Americas, 38% in EMEA, and 21% in Asia/Pacific in the 2002 third quarter. Balance Sheet Remains Strong Despite a cash outflow of approximately $18.8 million for the acquisition of 79% of the outstanding shares of Starbase, at December 31, 2002, Borland had cash, cash equivalents, and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments of $296 million and no long-term debt. Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSOs) for the fourth quarter were 64, within the company's target range of 60-65 days. Excluding Starbase, Borland's DSOs were 60. This compares with DSOs of 59 in the fourth quarter of 2001 and 56 days for the third quarter of 2002. Compared with a year ago, deferred revenues rose 49% from $23.9 million to $35.6 million, of which $6.6 million is attributable to Starbase. On a sequential basis, deferred revenues rose 38% from $25.8 million in the third quarter of 2002. During the quarter, Borland utilized $168,000 to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. approximately 13,000 shares of Borland common stock. Since the $30 million repurchase program was authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: in September September: see month. 2001, the company has used approximately $10.5 million to repurchase a total of approximately 1.2 million shares. The company expects to continue to employ cash to repurchase shares as appropriate and according to its established repurchase guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. . Capital expenditures in the 2002 fourth quarter were $1.1 million, and depreciation and amortization was $2.6 million. Operating cashflow performance for the fourth quarter remained healthy as the company added $5.4 million in cashflow from operations. Earnings before interest, taxes, amortization, and depreciation (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) were $7.5 million compared with $9.4 million in the 2001 fourth quarter. 2002 Annual Revenues Increase 10% For the year ended December 31, 2002, revenues increased 10% to $244.6 million from $221.8 million for the year ended December 31, 2001. License revenues for 2002 rose 9% to $204.5 million from $187.0 million in 2001. Gross margin for 2002 was 85% versus 84% for 2001. On a GAAP basis, 2002 operating income remained flat at $17.8 million. On a GAAP basis, net income for 2002 was $17.4 million, or $0.23 per diluted share, on 74.8 million weighted average shares outstanding. This compares with net income of $23.1 million, or $0.31 per diluted share, on 74.1 million weighted average shares outstanding for 2001. Excluding restructuring, amortization of intangibles, and acquisition-related expenses of $7.0 million, pro forma operating income for 2002 increased 30% to $24.8 million. This compares with pro forma operating income of $19.0 million for 2001, excluding restructuring, amortization of intangibles, and acquisition-related expenses of $1.2 million. Pro forma non-operating income for the year ended December 31, 2002 excludes a benefit of $1.6 million for a reversal of accruals established in prior periods that, due to changes in facts and circumstances, have been determined to be no longer necessary. Additionally, it excludes a one-time charge of $3.2 million for the write-down of certain investments and long-term assets. Pro forma net income for 2002 was $23.8 million, or $0.32 per diluted share, compared with pro forma net income of $24.1 million, or $0.32 per diluted share in 2001. Forward Guidance for 2003 First Quarter and 2003 Full Year Assuming that global economic conditions remain unchanged in the 2003 first quarter, Borland revenues are expected to range from $77-$83 million. Gross margins are expected to range from 84% to 86% in the 2003 first quarter. Because the company closed the acquisitions of TogetherSoft and Starbase in early January instead of December as previously anticipated, Borland expects to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. higher-than-anticipated transition costs. As a result, Borland expects pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per diluted share to range from $0.00 to $0.04 in the first quarter of 2003. Pro forma earnings will exclude restructuring, amortization of intangibles, and acquisition-related expenses. Based on anticipated profitability performance in certain jurisdictions, the company estimates an effective tax rate of 25% for 2003. Depending on Borland's stock price performance, weighted average diluted shares outstanding could range from 83 million to 85 million, as determined by the treasury method. Borland expects that it will experience approximately $100 million of near-term cash outflows related to the recently completed acquisitions, the majority of which relates to purchase price consideration. The exact timing of such cashflows will be dependent upon specific execution of the integration of Starbase Corporation and TogetherSoft Corporation. Borland estimates 2003 year-end revenues to range from approximately $355 million to $370 million, gross margins to range from 84% to 87% range, and earnings per diluted share on a pro forma basis to range from $0.42 to $0.47. Conference Call Information The Borland Software Corporation fourth quarter 2002 teleconference and Webcast is scheduled to begin at 2:30 p.m., Pacific Time, on Tuesday, January 28, 2003. To access the live Webcast, please visit www.companyboardroom.com or Borland's Website at http://www.borland.com/ at least 30 minutes prior to the call to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. any necessary audio or plug-in software. A two-week Webcast replay will be available through February 11, 2003, and a two-week audio replay will be available from 5:30 p.m. Pacific Time through midnight February 11, 2003 by dialing (719) 457-0820, passcode #617566. About Borland Borland Software Corporation (Nasdaq:BORL) is a world leader in platform independent software development and deployment solutions that are designed to accelerate the entire application development lifecycle. By connecting managers, testers, designers, developers, and implementers in real time, Borland enables enterprises worldwide to define and sustain their competitive advantage. Founded in 1983, Borland is headquartered in Scotts Valley, California Scotts Valley is a small city located in eastern Santa Cruz County, California, United States, about ten miles (16 km) south of San Jose and six miles (10 km) north of the beach in the upland slope of the Santa Cruz Mountains. As of the 2000 census, the city population was 11,385. with operations worldwide. To learn more, visit Borland at http://www.borland.com, the Borland Developer Network at http://bdn.borland.com or call Borland at (800) 632-2864. All Borland brand and product names are trademarks or registered trademarks of Borland Software Corporation, in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and other countries. All other marks are the property of their respective owners. Pro Forma Adjustments Borland provides pro forma operating income, pro forma net income, and pro forma net income per share data as an alternative for understanding the company's operating results. These measures are not in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with, or an alternative for, generally accepted accounting principals (GAAP) and may be materially different from pro forma measures used by other companies. Borland computes pro forma net income by adjusting GAAP net income after extraordinary items with the impact of amortization of goodwill and intangibles, acquisition-related expenses, impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , one-time gains and losses, and extraordinary gains and losses, as well as the tax effect of these charges. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " as defined under the Federal Securities Laws, including the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. All statements that are not historical are forward-looking. Forward-looking statements contained in this release may relate to, but are not limited to, Borland's results for the fourth quarter and calendar year ended December 31, 2002, and Borland's near-term and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. outlook. Such forward-looking statements are based on current expectations that involve a number of uncertainties and risks that may cause actual events or results to differ materially. Factors that could cause actual events or results to differ materially include, among others, the following: general economic factors and capital market conditions, general industry trends, the ability to successfully integrate acquisitions, costs associated with acquisitions, our profitability in certain jurisdictions that could affect the company's effective tax rate and our future utilization of net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. and credit carryforwards Carryforwards Tax losses allowed to be applied to offset future income in some specified number of future years. , diversion A turning aside or altering of the natural course or route of a thing. The term is chiefly applied to the unauthorized change or alteration of a water course to the prejudice of a lower riparian, or to the unauthorized use of funds. of management attention from other business concerns due to acquisitions, undisclosed or unanticipated liabilities and risks resulting from acquired companies, the potential effects on Borland of competition in computer software product and services markets, growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. in the software and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. markets that Borland participates in, rapid technological change that can adversely affect the demand for Borland's products, shifts in customer demand, geographic concentration of revenues, market acceptance of new or enhanced products or services developed, marketed or sold by Borland, delays in scheduled product availability dates The date after notification of mobilization by which forces will be marshalled at their home station or mobilization station and available for deployment. See also home station; mobilization; mobilization station. , open source technologies that compete with Borland's products, actions or announcements by competitors, software errors, reduction in sales to or loss of any significant customers, the size and timing of execution of enterprise-level licenses, Borland's ability to protect its intellectual property rights, dependence on technologies licensed from third parties, Borland's ability to attract and retain qualified personnel, Borland's ability to contain costs and the unanticipated impact on economic and financial conditions in the United States and around the world resulting from geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. conflicts and other consequences of the United States' war against terrorism. These and other risks may be detailed from time to time in Borland's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, its latest Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and its latest Quarterly Report on Form 10-Q Form 10-Q See 10-Q. , copies of which may be obtained from http://www.sec.gov/. Borland is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data, unaudited)
Three Months Ended Years Ended
------------------ -------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
--------- -------- --------- ---------
Revenues
Licenses and other $56,423 $50,113 $204,481 $187,044
Services 10,637 8,917 40,098 34,727
--------- -------- --------- ---------
Total revenues 67,060 59,030 244,579 221,771
Cost of revenues
Licenses and other 3,904 3,573 15,222 13,447
Services 5,235 5,826 20,798 22,454
--------- -------- --------- ---------
Cost of revenues 9,139 9,399 36,020 35,901
Gross profit 57,921 49,631 208,559 185,870
Operating expenses
Research and development(1) 13,404 11,774 50,796 46,100
Selling, general and
administrative(2) 37,098 31,643 132,946 120,721
Restructuring, amortization of
intangibles and acquisition-
related expenses 2,502 232 6,974 1,215
--------- -------- --------- ---------
Total operating expenses 53,004 43,649 190,716 168,036
Operating income 4,917 5,982 17,843 17,834
Interest income, net and other 1,555 1,728 6,869 11,117
Non-recurring benefit 1,588 --- 1,588 ---
Loss on write-down of
investments and long-term
asset (3,216) --- (3,216) ---
--------- -------- --------- ---------
Income before taxes 4,844 7,710 23,084 28,951
Provision for income taxes 1,709 1,542 5,724 5,845
--------- -------- --------- ---------
Net income $3,135 $6,168 $17,360 $23,106
========= ======== ========= =========
Income per share - Basic(3) $0.04 $0.09 $0.24 $0.34
Income per share - Diluted $0.04 $0.08 $0.23 $0.31
Shares used in the calculation
of basic income per share 71,671 67,382 71,423 66,494
Shares used in the calculation
of diluted income per share 75,040 75,564 74,769 74,136
(1) Research and development expenses for the quarter and year ended
December 31, 2001 exclude approximately $220 and $880,
respectively, in acquisition-related expenses associated with the
acquisition of Bedouin Software Inc. These expenses have been
included in amortization of intangibles and acquisition-related
expenses.
(2) Selling, general and administrative expenses for the quarter and
year ended December 31, 2001 exclude approximately $12 and $335,
respectively, in acquisition-related expenses associated with the
acquisition of Engine Informatica LTD. These expenses have been
included in amortization of intangibles and acquisition-related
expenses.
(3) The calculation of net income per share for the quarter and year
ended December 31, 2001 includes an accretion to the Series C
Preferred Stock of approximately $0 and $397, respectively.
BORLAND SOFTWARE CORPORATION
PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data, unaudited)
Three Months Ended Years Ended
------------------ -------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
--------- -------- --------- ---------
Revenues
Licenses and other $56,423 $50,113 $204,481 $187,044
Services 10,637 8,917 40,098 34,727
--------- -------- --------- ---------
Total revenues 67,060 59,030 244,579 221,771
Cost of revenues
Licenses and other 3,904 3,573 15,222 13,447
Services 5,235 5,826 20,798 22,454
--------- -------- --------- ---------
Cost of revenues 9,139 9,399 36,020 35,901
Gross profit 57,921 49,631 208,559 185,870
Operating expenses
Research and development 13,404 11,774 50,796 46,100
Selling, general and
administrative 37,098 31,643 132,946 120,721
Restructuring, amortization of
intangibles and acquisition-
related expenses (1) --- --- --- ---
--------- -------- --------- ---------
Total operating expenses 50,502 43,417 183,742 166,821
Operating income 7,419 6,214 24,817 19,049
Interest income, net and other 1,555 1,728 6,869 11,117
Non-recurring benefit --- --- --- ---
Loss on write-down of
investments and long-term
assets --- --- --- ---
--------- -------- --------- ---------
Income before taxes 8,974 7,942 31,686 30,166
Provision for income taxes (2) 3,166 1,588 7,857 6,090
--------- -------- --------- ---------
Net income $5,808 $6,354 $23,829 $24,076
========= ======== ========= =========
Income per share - Basic (3) $0.08 $0.09 $0.33 $0.36
Income per share - Diluted $0.08 $0.08 $0.32 $0.32
Shares used in the calculation
of basic income per share 71,671 67,382 71,423 66,494
Shares used in the calculation
of diluted income per share 75,040 75,564 74,769 74,136
(1) Pro forma operating income for the quarter and year ended December
31, 2002 excludes approximately $2,502 and $6,974 respectively, in
acquisition-related expenses associated with the acquisitions of
Starbase Software, Inc., Redline Software Inc. (VMGEAR) and
Bedouin Software Inc. Pro forma non-operating income for the
quarter and year ended December 31, 2002 excludes approximately
$1,588 in benefit from a reversal of accruals established in prior
periods which, due to changes in facts and circumstances, have
been determined to be no longer necessary. Pro forma non-operating
income for the quarter and year ended December 31, 2002 exclude a
one-time charge of $2,403 for the write-off of the company's cost
based investment, a one-time charge of $500K to write-off a loan
that was deemed uncollectible and $313 in write-off of certain
leasehold improvements due to a restructuring in an international
location. Pro forma income for the quarter and year ended December
31, 2001 excludes approximately $232 and $1,215, respectively, in
acquisition-related expenses associated with the acquisition of
Bedouin Software Inc. and Engine Informatica LTD. For the quarter
and year ended December 31, 2002, the acquisition-related expenses
included $1,190 and $4,623, respectively, in compensation expenses
that will be paid in the next two years determined by current and
future revenues derived from the sale of Redline products and the
retention of certain employees of Redline.
(2) Pro forma income for the quarter ended December 31, 2002 and 2001
is presented based upon our effective tax rate of 35% and 20% for
the quarters respectively. Accordingly, an adjustment to increase
the provision for income taxes was included in the pro forma
income statement in the amount of $1,457 and $46 for the quarters
ended December 31, 2002 and 2001, respectively. Pro forma income
for the year ended December 31, 2002 and 2001 is presented based
upon our effective tax rate of 25% and 20%, respectively.
Accordingly, an adjustment to increase the provisions for income
tax was included in the pro forma income statement in the amount
of $2,133 and $245 for the years ended December 31, 2002 and 2001,
respectively.
(3) The calculation of net income per share for the quarter and year
ended December 31, 2001 includes an accretion to the Series C
Preferred Stock of approximately $0 and $397, respectively.
The following table shows our pro forma results reconciled to the GAAP
Condensed Consolidated Statements of Income for the quarters and years
ended December 31, 2002 and 2001. Our pro forma results for fiscal
2002 and fiscal 2001 exclude restructuring and other charges,
acquisition-related expenses and amortization of goodwill and
purchased intangibles.
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
2002 2001 2002 2001
--------- -------- -------- ---------
(in thousands, except
per share data, unaudited)
GAAP net income $3,135 $6,168 $17,360 $23,106
Restructuring, amortization of
intangibles and acquisition-
related expenses 2,502 232 6,974 1,215
Non-recurring benefit (1,588) --- (1,588) ---
Loss on write-down of long-term
assets 3,216 --- 3,216 ---
Adjustment to provision for
income taxes (1,457) (46) (2,133) (245)
--------- -------- -------- ---------
Pro forma net income $5,808 $6,354 $23,829 $24,076
Basic pro forma net income per
share $0.08 $0.09 $0.33 $0.36
Shares used in computing basic
net income per share 71,671 67,382 71,423 66,494
Diluted net income per share $0.08 $0.08 $0.32 $0.32
Shares used in computing diluted
net income per share 75,040 75,564 74,769 74,136
BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
Dec. 31, 2002 Dec. 31, 2001
------------- -------------
ASSETS
Cash, cash equivalents and
short-term investments $296,156 $294,370
Accounts receivable, net 47,238 38,405
Property held for sale 9,935 ---
Property and equipment, net 7,966 18,994
Goodwill and acquired intangibles 45,000 1,403
Other assets 26,831 22,651
---------- ----------
Total assets $433,126 $375,823
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenues $35,619 $23,859
Other current liabilities 82,120 64,710
---------- ----------
Total current liabilities 117,739 88,569
Other long-term liabilities 14,656 10,469
Stockholders' equity 300,731 276,785
---------- ----------
Total liabilities and
stockholders' equity $433,126 $375,823
========== ==========
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