Borland Reports 10% Increase in First Quarter 2002 Revenues; Pro Forma Operating Income Increases 29%.Business Editors/High-Tech Writers SCOTTS VALLEY, Calif.--(BUSINESS WIRE)--April 25, 2002 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 first quarter ended March 31, 2002. Revenues Rise 10% in First Quarter For the first quarter, revenues increased 10% to $57.1 million from $51.7 million for the first quarter of 2001. License revenues rose more than 12% to $47.7 million from $42.4 million a year ago. Gross margins remained solid at 85% and consistent with the first quarter of 2001. Based on 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. increased slightly to $4.0 million compared with $3.9 million in the year-ago 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 was even stronger, increasing to $5.5 million as compared with $4.3 million in the year-ago quarter, an increase of 29%. Excluding acquisition-related costs, pro forma net income for the 2002 first quarter was $5.8 million, or $0.08 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 76.0 million weighted average shares outstanding. This compares with pro forma net income of $6.2 million, or $0.09 per diluted share, on 71.9 million weighted average shares outstanding for the 2001 first quarter. Including acquisition-related costs, net income for the first quarter 2002 was $4.6 million, or $0.06 per diluted share. This compares with net income of $5.9 million, or $0.08 per diluted share last year. The decline in interest rates over the past 12 months continued to impact interest income, which declined by $2.0 million, or $0.03 per diluted share, compared with the first quarter a year ago. The increase in diluted shares outstanding reflects the increase in the number of dilutive ("in the money") options and the exercise of warrants and options. Continuing Leadership in Java(TM), Preview .NET Initiatives "We are relatively pleased with our operating performance this quarter, as we continued to grow revenues year over year," said Dale L. Fuller, Borland's president and chief executive officer. "This quarter marks Borland's eighth consecutive quarter of profitability and ninth consecutive quarter of positive cashflow from operations. Additionally, we further strengthened our balance sheet, ending the quarter with cash 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 in excess 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. ." "On an operational basis, during the quarter, we integrated the acquisition of VMGEAR, which we announced in January January: see month. , launched new products, secured new customers, further expanded our distribution network, and signed important partnership agreements," continued Mr. Fuller. "We also previewed a development studio for the Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. (R) .NET(TM) Framework, which enables customers to interoperate See interoperable. between .NET and other major platforms, including Java, through our Web Services (1) Loosely, any online service delivered over the Web. Such usage appears in articles from non-technical sources, but not in IT-oriented publications, because definition #2 below describes the correct use of the term. architectures. Borland continues to lead and influence the evolution of Web Services in developing standards within the Java and .NET frameworks." During the first quarter, Borland's Java business sustained its status as the primary growth engine, increasing its revenues 40% over the first quarter of 2001 and representing 38% of total first quarter 2001 revenues. The company further strengthened its leadership position in the Java development market through agreements with Sprint PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. and Sybase. The Borland Rapid Application Development (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 grew 19% over the first quarter of 2001. The RAD business represented the company's second largest revenue generator generator, in electricity, machine used to change mechanical energy into electrical energy. It operates on the principle of electromagnetic induction, discovered (1831) by Michael Faraday. , representing 26% of total revenues. This business launched Borland(R) Enterprise Studio for Windows(R), a model-driven architecture Model-driven architecture (MDA™) is a software design approach launched by the Object Management Group (OMG)[1] in 2001. MDA supports model-driven engineering of software systems. development suite, and C++Builder(TM) 6.0, which includes Web Services capabilities. C++Builder 6.0 further extends Borland's portfolio of cross-platform Web Services-enabled development and deployment solutions. Borland's Enterprise business declined from the first quarter of 2001, generating 20% of 2002 first quarter revenues. This decline relates primarily to lower OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and sales and reflects the current state of the economy. Services revenues were essentially flat compared with a year ago and represented 16% of total first quarter 2002 revenues. Strong technical support and training sales offset weaker consulting revenues, also a reflection of economic conditions. The Asia/Pacific region grew 45% over the same quarter last year, while 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. increased 10%, and the Americas remained flat. As a percent of total revenues, Asia/Pacific represented 20%, EMEA 35%, and Americas 45%. Borland benefits from a global geographic presence and multiple distribution channels. At March 31, 2002, Borland's financial position remains strong, with cash, cash equivalents, and short-term investments reaching $296.2 million. 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). were 65, within the company's target range of 60 to 65 days. Compared with the first quarter of 2001, deferred revenues rose $6.4 million to $25.2 million, a 34% increase. Frederick A. Ball, Borland's executive vice president and chief financial officer, said, "Our ongoing ability to manage costs in the face of a difficult economic environment helped Borland meet its operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. and pro forma EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. targets. At the same time, we generated approximately $1.9 million in free cashflow from operations. Borland's balance sheet gives us a strong foundation upon which we can continue to grow this company." Concluded Mr. Fuller, "Borland's fundamentals remain intact. Borland's best-in-class software technology helps customers drive efficiency by accelerating developer productivity, improving time to benefit, and lowering the total cost of ownership of enterprise software. Borland's solutions also enable customers to build, deploy, integrate, and manage applications across all major platforms. Freedom of choice and reducing the total cost of ownership have become chief priorities and recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. themes among our customers, and Borland is an ideal partner to help customers achieve their goals." Second Quarter 2002 and Full Year 2002 Outlook Borland expects revenues to increase approximately 2%-8% in the second quarter of 2002 when compared with the second quarter of 2001. Gross margins for the 2002 second quarter are expected to remain in the 83%-85% range, and pro forma operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: are expected to approximate those delivered in the first quarter of 2002. Non-operating income is expected to continue to be impacted by changes in the Federal Funds rate Federal Funds Rate The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight. . Acquisition-related expenses are expected to range from $1.25 million to $1.75 million for the second quarter. 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 are expected to be in the range of $0.06 to $0.09 in the second quarter of 2002. Depending on Borland's stock price performance, weighted average shares outstanding could range from 75 million to 77 million diluted shares as determined by the Treasury method. Borland anticipates 2002 annual revenues to increase 5%-15% over 2001 revenues and gross margins to remain in the 83%-85% range. Conference Call Information The Borland Software Corporation first quarter teleconference and simultaneous Webcast is scheduled to begin at 2:30 p.m. Pacific Time, on Thursday, April 25, 2002. To access the live Webcast, please visit www.companyboardroom.com or Borland's Website at www.borland.com/about/investor 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. About Borland Borland Software Corporation is a leading provider of technology used to develop, deploy and integrate software applications. Delivering best-in-class technology solutions dedicated to interoperability The capability of two or more hardware devices or two or more software routines to work harmoniously together. For example, in an Ethernet network, display adapters, hubs, switches and routers from different vendors must conform to the Ethernet standard and interoperate with each other. , Borland allows enterprises of all sizes to move into Web-based computing computing - computer while leveraging legacy systems. From the Fortune 1000 to the "Borland Nation" comprised of millions of developers around the world, Borland provides customers the freedom to develop applications, deploy them anywhere, and integrate and manage them across the enterprise. Borland solutions enable organizations to increase productivity and deliver higher-performance projects faster and on budget, while lowering total cost of ownership. 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 community site at http://community.borland.com, the Optimizeit site at http://www.optimizeit.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 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 charges, 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 first quarter 2002 results 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 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, 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, the ability to successfully integrate acquisitions, 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 failure to contain costs and unanticipated further deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. of 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 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
March 31, March 31,
2002 2001
------- -------
Revenues
Licenses and other $47,668 $42,407
Services 9,409 9,289
------- -------
Total revenues 57,077 51,696
Cost of revenues
Licenses and other 3,520 2,981
Services 5,035 5,031
------- -------
Cost of revenues 8,555 8,012
Gross profit 48,522 43,684
Operating expenses
Research and development (1) 11,949 11,058
Selling, general and administrative (2) 31,033 28,346
Amortization of intangibles and
merger-related expenses 1,522 412
------- -------
Total operating expenses 44,504 39,816
Operating income 4,018 3,868
Interest income, net and other 1,730 3,448
------- -------
Income before taxes 5,748 7,316
Provision for income taxes 1,151 1,463
------- -------
Net income $ 4,597 $ 5,853
======= =======
Income per share Basic (3) $ 0.07 $ 0.09
Income per share Diluted $ 0.06 $ 0.08
Shares used in the calculation of basic
income per share 70,188 61,863
Shares used in the calculation of diluted
income per share 76,040 71,890
(1) Research and development expenses for the quarter ended March 31,
2001 exclude approximately $220 in acquisition-related expenses
associated with the acquisition of Bedouin Software Inc. These
expenses have been included in Amortization of intangibles and
merger-related expenses.
(2) Selling, general and administrative expenses for the quarter ended
March 31, 2001 exclude approximately $192 in acquisition-related
expenses associated with the acquisition of Engine Informatica
LTD. These expenses have been included in Amortization of
intangibles and merger-related expenses.
(3) The calculation of net income per share for the quarter ended
March 31, 2001 includes an accretion to the Preferred Stock Series
C of approximately $219.
BORLAND SOFTWARE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data, unaudited)
Three Months Ended
March 31, March 31,
2002 2001
------- -------
Revenues
Licenses and other $47,668 $42,407
Services 9,409 9,289
------- -------
Total revenues 57,077 51,696
Cost of revenues
Licenses and other 3,520 2,981
Services 5,035 5,031
------- -------
Cost of revenues 8,555 8,012
Gross profit 48,522 43,684
Operating expenses
Research and development 11,949 11,058
Selling, general and administrative 31,033 28,346
Amortization of intangibles and merger-related
expenses(1) -- --
------- -------
Total operating expenses 42,982 39,404
Operating income 5,540 4,280
Interest income, net and other 1,730 3,448
------- -------
Income before taxes 7,270 7,728
Provision for income taxes(2) 1,454 1,545
------- -------
Net income $ 5,816 $ 6,183
======= =======
Income per share - Basic(3) $ 0.08 $ 0.10
Income per share Diluted $ 0.08 $ 0.09
Shares used in the calculation of basic
income per share 70,188 61,863
Shares used in the calculation of diluted
income per share 76,040 71,890
(1) Pro forma income for the quarter ended March 31, 2002 excludes
approximately $1,522 in acquisition-related expenses associated
with the acquisitions of Redline Software Inc. (VMGEAR) and
Bedouin Software Inc. Pro forma income for the quarter ended March
31, 2001 excludes approximately $412 in acquisition-related
expenses associated with the acquisition of Bedouin Software Inc.
and Engine Informatica LTD.
(2) Pro forma income for the quarter ended March 31, 2002 and 2001 is
presented based upon our effective tax rate for the respective
quarters. Accordingly, an adjustment to increase the provision for
income taxes was included in the pro forma income statement in the
amount of $303 and $82 for the quarters ended March 31, 2002 and
2001, respectively.
(3) The calculation of net income per share for the quarter ended
March 31, 2001 includes an accretion to the Preferred Stock Series
C of approximately $219.
BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
March 31, Dec. 31,
2002 2001
-------- --------
ASSETS
Cash, cash equivalents and short-term investments $296,197 $294,370
Accounts receivable, net 41,040 38,405
Property and equipment, net 18,502 18,994
Other assets 25,781 24,054
-------- --------
Total assets $381,520 $375,823
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue $ 25,247 $ 23,859
Other current liabilities 61,486 64,710
-------- --------
Total current liabilities 86,733 88,569
Other long-term liabilities 10,471 10,469
Stockholders equity 284,316 276,785
-------- --------
Total liabilities and stockholders equity $381,520 $375,823
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