Borland Software Corporation (NASDAQ: BORL), the global leader
in Open Application Lifecycle Management (ALM), today announced
preliminary financial results for the first quarter ended March 31,
2009. All results should be considered preliminary pending the
Company�s filing of its quarterly report on Form 10-Q.
For the first quarter of 2009, Borland reported total revenue of
$35.1 million and GAAP net income of $1.9 million, or $0.03 per
share. The GAAP net income included $0.5 million in stock-based
compensation, $1.4 million in restructuring expenses, $2.0 million
in amortization of intangible assets, a net gain of $0.3 million
from discontinued operations associated with the CodeGear
divestiture completed on June 30, 2008, a net gain of $9.9 million
from the early retirement of debt, and non-cash interest expense of
$1.6 million related to the adoption of FSP APB 14-1 as described
below. Non-GAAP net loss was $2.8 million, or $0.04 per share.
Revenue for ALM products and services for the first quarter of
2009 was $27.8 million and revenue for Deployment (DPG) products
and services was $7.3 million. In Q1 2009, the company signed a
multi-product deal with one customer for $17.8 million in license
and maintenance revenues. The revenue will be recognized as
follows: $6.6 million in Q1 2009, $6.6 million in Q2 and the
balance in Q3, with the potential for recurring maintenance
revenues thereafter.
During the first quarter of 2009, the company repurchased $44.3
million face value of convertible debt for $27.5 million in cash,
leaving $115.0 million face value outstanding.
�In the first quarter we exceeded our guidance, achieved GAAP
profitability, and continued to strengthen our balance sheet,� said
Erik Prusch, president and CEO of Borland. �We are pleased with our
year-to-date progress, and our accomplishments represent tangible
evidence of Borland�s continued commitment to execution, innovation
and customer value.�
Effective Jan. 1, 2009, the Company adopted Financial Accounting
Standards Board's Staff Position No. APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"),
which changed the method of accounting for the Company's
convertible notes. As required by the literature, the Company
revised its previously reported financial statements to apply this
change in accounting to prior periods. Under this new accounting
method, the Company's EPS and net (loss) income calculated in
accordance with GAAP have been reduced as a result of recognizing
incremental non-cash interest expense. In connection with adopting
FSP APB 14-1, the Company recorded $1.6 million and $2.0 million of
additional non-cash interest expense in the three months ended
March 31, 2009 and 2008, respectively.
Proposed Acquisition by Micro Focus
As previously announced by the Company on May 6, 2009, the
Company entered into an agreement with Micro Focus International
plc (�Micro Focus�) pursuant to which Micro Focus will acquire all
the outstanding shares of Borland in a cash merger transaction. All
parties desiring details regarding the transaction are urged to
review the definitive agreement as filed by Borland on May 6, 2009
in a Current Report on Form 8-K, which is available on the
Securities and Exchange Commission�s website at http://www.sec.gov. In connection with
the proposed transaction, Borland will file with the SEC a proxy
statement, and Borland plans to file with the SEC other documents
regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS
ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER FILED DOCUMENTS
CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION . Shareholders
will be able to obtain a free-of-charge copy of the proxy statement
(when available) and other relevant documents filed with the SEC
from the SEC�s website at http://www.sec.gov. Shareholders will
also be able to obtain a free-of-charge copy of the proxy statement
and other relevant documents (when available) by directing a
request by mail or telephone to Borland, 8310 North Capital of
Texas Highway, Building 2 Suite�100, Austin, TX 78731, Attention:
Investor Relations, Telephone: (512)�340-1364, or from Borland�s
website, http://www.borland.com. Borland and
certain of its directors, executive officers and other members of
management and employees may, under the rules of the SEC, be deemed
to be �participants� in the solicitation of proxies from
shareholders of Borland in favor of the proposed merger.
Information regarding Borland�s directors and executive officers is
contained in Borland�s annual proxy statement filed with the SEC on
April�8, 2009. Additional information regarding the interests of
such potential participants will be included in the proxy statement
and the other relevant documents filed with the SEC (when
available).
About Borland
Founded in 1983, Borland (NASDAQ:BORL) is the leading vendor of
Open Application Lifecycle Management (ALM) solutions - open to
customers' processes, tools and platforms - providing the
flexibility to manage, measure and improve the software delivery
process. To learn more about maximizing the business value of
software, visit http://www.borland.com.
Borland and all other Borland brand and product names are
service marks, trademarks or registered trademarks of Borland
Software Corporation or its subsidiaries in the United States and
other countries. All other marks are the property of their
respective owners.
Forward-Looking Statements
Statements made in this release that are not historical facts
are �forward-looking statements� and accordingly involve risk and
uncertainties that could cause actual results to differ materially
from those described in this release. Forward-looking statements
include, for example, all statements relating to projected
financial performance (including statements involving projection of
revenue, income including income (loss), earnings including
earnings (loss) per share, capital expenditures, dividends, capital
structure, or other financial items), the plans and objectives of
management for future operations, products or services; and future
performance in economic terms or other any other measures. These
factors include, but are not limited to, (1)�the occurrence of any
event, change or other circumstances that could give rise to the
termination of the merger agreement with Micro Focus; (2)�the
outcome of any legal proceedings that may be instituted against
Borland and others following announcement of the transaction or the
merger agreement; (3)�the inability to complete the merger due to
the failure to satisfy conditions to completion of the merger;
(4)�the risk that the proposed transaction disrupts current plans
and operations and the potential difficulties in employee retention
as a result of the merger; and (5)�other risks, including our
ability to predict revenue and control expenses, our ability to
grow our ALM business or achieve profitability as planned and the
continued decline in global economic conditions, and those risks
that are set forth in the �Risk Factors,� �Legal Proceedings� and
�Management Discussion and Analysis of Results of Operations and
Financial Condition� sections of Borland�s SEC filings. Many of the
factors that will determine the outcome of the proposed merger with
Micro Focus are beyond Borland�s ability to control or predict.
Borland does not intend to update this information to reflect
future events or circumstances unless required by law.
Non-GAAP Financial Measures
The attached press release and tables include non-GAAP financial
measures. Borland�s management uses non-GAAP financial measures in
assessing the performance of Borland�s ability to develop, sell and
market products and services (�Ongoing Operations�). They are also
used for planning and forecasting in future periods. Non-GAAP
financial measures also facilitate internal comparisons to
Borland's historical operating results. Borland has historically
reported similar non-GAAP financial measures and believes that the
inclusion of comparative results provides consistency in its
financial reporting that benefits investors. Non-GAAP financial
measures are computed using consistent methods from quarter to
quarter and year to year. These non-GAAP measures are not meant to
be considered in isolation or as a substitute for comparable GAAP
financial measures. They should be viewed in conjunction with the
consolidated financial statements prepared in accordance with
GAAP.
In presenting non-GAAP financial measures, Borland has excluded
the following items:
A. Restructuring and severance charges. Borland has incurred
restructuring charges eliminating certain duplicative activities,
focusing Borland's resources on future growth opportunities and
reducing Borland's cost structure. In connection with its
restructuring, Borland has recognized costs related to termination
benefits for former Borland employees whose positions were
eliminated and for the closure of Borland facilities. Borland
excludes these items because these expenses are not reflective of
Ongoing Operations and Borland believes excluding these items from
its measures of non-GAAP net income (loss) and non-GAAP net income
(loss) per share facilitates comparisons with prior and subsequent
reporting periods as well as comparisons to the operating results
of competitors in Borland's industry. Expenses related to severance
and restructuring have, in some cases, had a significant cash
impact and effect on Borland's results of operations, including its
net income (loss) as measured in accordance with GAAP.
B. Goodwill impairment charge and discontinued operations.
Borland recorded a non-cash goodwill impairment charge in the first
quarter of 2008 relating to its CodeGear segment due to business
performance, market conditions and expected purchase price for the
sale of this business. Following the sale of Borland�s CodeGear
division on June 30, 2008, Borland classified its CodeGear segment
as discontinued operations. Impairment charges are not cash items
and have not been frequent or consistently recurring. Borland
believes that excluding these items will provide investors with a
basis to compare the Company�s core operating results in different
periods without such variability.
C. Stock compensation impact of SFAS 123R. These expenses
consist of expenses for employee stock options and employee stock
purchases under SFAS 123R. Prior to the adoption of SFAS 123R in
fiscal 2006, Borland did not include expenses related to employee
stock options and employee stock purchases directly in its
financial statements, but elected, as permitted by SFAS 123R, to
disclose such expenses in the footnotes to its financial
statements. As Borland applies SFAS 123R, Borland believes that it
is useful to investors to understand the impact of the application
of SFAS 123R to Borland's operational performance in comparison to
prior periods in which such expense was not included directly in
its financial statements. In addition, while stock-based
compensation expense calculated in accordance with SFAS 123R
constitutes an ongoing and recurring expense, such expense is
excluded from its measures of non-GAAP net income (loss) and
non-GAAP net income (loss) per share because it is not an expense
that typically requires or will require cash settlement by Borland
and consequently is not used by management to assess the core
profitability of Borland's Ongoing Operations. Borland believes it
is useful to investors to understand the impact of the application
of SFAS 123R to Borland's liquidity and its ability to invest in
research and development and fund acquisitions and capital
expenditures. Borland further believes its measures of non-GAAP net
income (loss) and non-GAAP net income (loss) per share excluding
this item are useful to investors in that excluding this item
facilitates comparisons to the operating results of competitors in
Borland's industry that may have different patterns of activity
associated with equity compensation.
D. Amortization of purchased intangibles. In connection with its
acquisitions, Borland has incurred amortization of purchased
intangible assets. These purchased intangibles include: developed
technology, customer lists and relationships, maintenance
agreements, trade names, trademarks and service marks and
non-compete agreements. For accounting purposes, Borland amortizes
the fair value of the purchased intangibles based on the pattern in
which the economic benefits of the intangible assets will be
consumed as revenue is generated. Although these intangible assets
generate revenue for Borland, Borland excludes the associated
amortization expense because it is non-cash in nature and because
Borland believes its measures of non-GAAP net income (loss) and
non-GAAP net income (loss) per share excluding this item provides
meaningful supplemental information regarding Borland's operational
performance, liquidity and Borland's ability to invest in research
and development and fund acquisitions and capital expenditures. In
addition, excluding this item facilitates comparisons to Borland's
historical operating results and comparisons to the operating
results of competitors in Borland's industry which may have
different acquisition histories.
E. Repurchase of Senior Convertible Notes. In March 2009, the
Company used available cash to repurchase outstanding Senior
Convertible Notes, which resulted in gains on debt retirement.
Borland does not believe that these repurchases have any
significant impact on its core operating results.
F. Impact of FSP APB 14-1. Non-GAAP adjusted net income excludes
certain non-cash interest expense including portions related to our
January 1, 2009 adoption of FSP APB 14-1, which changed the method
of accounting for our convertible notes. In addition, as required,
we revised our previously reported consolidated financial
statements to retrospectively apply this change in accounting to
prior periods. Under this new method of accounting, the debt and
equity components of our convertible notes are bifurcated and
accounted for separately. The equity components of our convertible
notes are included in stockholders' equity in our Condensed
Consolidated Balance Sheets with a corresponding reduction in the
carrying values of our convertible notes as of the date of issuance
or modification, as applicable. The reduced carrying values of our
convertible notes are being accreted back to their principal
amounts through the recognition of non-cash interest expense. This
results in recognizing interest expense on these borrowings at
effective rates approximating what we would have incurred had we
issued nonconvertible debt with otherwise similar terms. Under this
new accounting method, the Company's EPS and net (loss) income
calculated in accordance with GAAP have been reduced as a result of
recognizing incremental non-cash interest expense. We believe that
excluding the non-cash portion of our interest expense allows
management and investors an alternative view of our financial
results "as if" our net income reflected only the cash portion of
our interest expense.
Borland also excluded the common share equivalents that would
have resulted from using the �if-converted� method of calculating
the non-GAAP diluted income per share relating to the common shares
issuable upon conversion of the convertible senior notes.
Borland believes that non-GAAP measures have significant
limitations in that they do not reflect all of the amounts
associated with Borland's financial results as determined in
accordance with GAAP and that these measures should only be used to
evaluate Borland's financial results in conjunction with the
corresponding GAAP measures. In addition, the exclusion of the
charges and expenses indicated above from the non-GAAP financial
measures presented does not indicate an expectation by Borland
management that similar charges and expenses will not be incurred
in subsequent periods.
BORLAND SOFTWARE CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEET (In thousands, except par value and share
amounts, unaudited) �
ASSETS
�
March 31, 2009 �
RestatedDecember 31,
2008
Current assets: Cash and cash equivalents $ 93,942 $ 108,132
Investments, at fair value 40,653 59,575 Accounts receivable, net
of allowance of $1,044 and $1,174, respectively 39,133 33,159
Prepaid expenses 5,643 7,642 Assets of discontinued operation 3,734
443 Other assets � 1,941 � � 2,098 � Total current assets � 185,046
� � 211,049 � Property and equipment, net 7,943 8,494 Intangible
assets, net 22,452 24,520 Non current assets of discontinued
operation - 3,734 Other assets � 3,676 � � 4,112 � Total assets $
219,117 � $ 251,909 � �
LIABILITIES AND STOCKHOLDERS�
EQUITY
Current liabilities: Accounts payable $ 3,997 $ 5,045 Accrued
expenses 13,731 13,956 Accrued restructuring 2,707 3,990 Deferred
revenue 50,583 40,720 Liabilities of discontinued operation 5,611
4,208 Other liabilities � 2,444 � � 5,371 � Total current
liabilities � 79,073 � � 73,290 � � Long-term liabilities:
Convertible senior notes, net of discount of $16,436, and $24,513,
respectively 98,548 134,787 Accrued restructuring 576 911 Deferred
revenue 2,038 2,298 Income taxes payable 16,532 17,157 Liabilities
of discontinued operation - 2,382 Other liabilities � 5,751 � �
5,707 � Total liabilities � 202,518 � � 236,532 � � � Stockholders'
equity: Preferred stock; $.01 par value; 1,000,000 shares
authorized; 0 shares issued and outstanding - - Common stock, $.01
par value, 200,000,000 shares authorized (2009: 94,652,702 issued
and 73,115,736 outstanding; 2008: 94,552,738 issued and 73,015,772
outstanding) 731 730 Additional paid-in capital 717,616 717,141
Accumulated deficit (567,527 ) (569,415 ) Accumulated other
comprehensive income 6,188 7,330 Treasury stock at cost, (2009 and
2008: 21,536,966 shares) � (140,409 ) � (140,409 ) Total
stockholders� equity � 16,599 � � 15,377 � Total liabilities and
stockholders� equity $ 219,117 � $ 251,909 �
BORLAND SOFTWARE
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share amounts,
unaudited) �
Three Months Ended March 31,
2009 �
2008 (Restated) Revenues: License and other
revenues $ 13,724 $ 18,537 Service revenues � 21,326 � � 27,522 �
Total revenues � 35,050 � � 46,059 � � Costs of revenues: Cost of
license and other revenues 945 677 Cost of service revenues 5,918
8,864 Amortization of acquired intangibles � 1,929 � � 2,100 � Cost
of revenues � 8,792 � � 11,641 � Gross profit � 26,258 � � 34,418 �
� Selling, general and administrative 20,128 33,061 Research and
development 10,564 11,787 Restructuring and other charges � 1,544 �
� 1,463 � Total operating expenses � 32,236 � � 46,311 � �
Operating loss (5,978 ) (11,893 ) � Interest income 745 1,752
Interest expense (includes non-cash debt discount amortization of
$1,627 for 2009 and $2,007 for 2008) (2,883 ) (3,658 ) Gain on debt
repurchase 9,942 -
Other income, net
� 157 � � 582 �
Income (loss) from continuing
operations before income taxes
� 1,983 � � (13,217 )
Income tax provision
� 385 � � 1,274 �
Income (loss) from continuing
operations
$ 1,598 $ (14,491 ) � Discontinued operations: Income (loss) from
operation of discontinued operations (net of applicable taxes of $0
for 2009 and $242 for 2008) $ 187 $ (10,728 )
Gain on disposal of discontinued
operations (net of applicable tax of $0 for 2009)
� 103 � � - � Income (loss) from discontinued operations $ 290 $
(10,728 ) �
Net income (loss)
$ 1,888 � $ (25,219 ) � Net income (loss) per share - basic:
Continuing operations $ 0.02 $ (0.20 )
Discontinued operations
� 0.01 � � (0.15 ) Net income (loss) per share $ 0.03 $ (0.35 ) �
Shares used in computing basic net income (loss) per share � 72,953
� � 72,751 � � Net income (loss) per share - diluted: Continuing
operations $ 0.02 $ (0.20 ) Discontinued operations � 0.01 � �
(0.15 ) Net income (loss) per share $ 0.03 $ (0.35 ) � Shares used
in computing diluted net income (loss) per share � 73,010 � �
72,751 �
BORLAND SOFTWARE CORPORATION GAAP TO NON-GAAP
RECONCILIATION (In thousands, except per share amounts,
unaudited) � �
Three Months Ended March 31,
2009 �
2008 � Net income (loss) on a GAAP basis
$ 1,888 $ (25,219 ) Stock-based
compensation expenses 477 1,537 Amortization of purchased
intangibles 2,048 2,242 Restructuring expenses 1,397 1,249 Income
(loss) from discontinued operations 290
�
(10,728 ) Amortization of debt discount 1,627 2,007 Gain on debt
retirement � 9,942 � � - � Net income (loss) on a non-GAAP basis
$ (2,795 ) $ (7,456 ) �
Statements of Operations Reconciliation per
Share
� Basic net income (loss) on a GAAP basis
$ 0.03 �
$ (0.35 ) Shares used in computing basic net
income (loss) per share �
72,953 � �
72,751 � �
Diluted net income (loss) on a GAAP basis
$ 0.03 �
$ (0.35 ) Shares used in computing diluted net
income (loss) per share �
73,010 � �
72,751 � � Basic
and diluted net income (loss) per share on a non-GAAP basis
$ (0.04 ) $ (0.10 )
Shares used in computing basic and diluted net income (loss) per
share �
72,953 � �
72,751 �
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