e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-16393
BMC Software, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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74-2126120
(IRS Employer
Identification No.) |
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2101 CityWest Boulevard |
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Houston, Texas
(Address of principal executive offices)
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77042-2827
(Zip Code) |
(713) 918-8800
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of July 25, 2011, there were 175,521,000 outstanding shares of Common Stock, par value
$.01, of the registrant.
BMC SOFTWARE, INC.
QUARTER ENDED JUNE 30, 2011
INDEX
2
PART I. FINANCIAL INFORMATION
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Item 1. |
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Financial Statements |
BMC SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value data)
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June 30, 2011 |
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March 31, 2011 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
1,582.9 |
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$ |
1,660.9 |
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Short-term investments |
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31.9 |
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27.8 |
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Trade accounts receivable, net |
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176.2 |
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284.1 |
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Trade finance receivables, net |
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99.0 |
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112.6 |
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Deferred tax assets |
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64.1 |
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65.1 |
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Other current assets |
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109.2 |
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116.9 |
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Total current assets |
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2,063.3 |
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2,267.4 |
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Property and equipment, net |
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90.9 |
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94.2 |
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Software development costs, net |
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201.9 |
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193.8 |
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Long-term investments |
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64.1 |
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67.8 |
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Long-term trade finance receivables, net |
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132.8 |
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110.8 |
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Intangible assets, net |
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136.6 |
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100.9 |
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Goodwill |
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1,511.6 |
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1,407.0 |
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Other long-term assets |
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236.5 |
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243.5 |
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Total assets |
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$ |
4,437.7 |
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$ |
4,485.4 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Trade accounts payable |
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$ |
33.3 |
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$ |
30.8 |
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Finance payables |
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1.0 |
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16.6 |
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Accrued liabilities |
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204.0 |
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316.0 |
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Deferred revenue |
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1,065.8 |
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1,026.9 |
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Total current liabilities |
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1,304.1 |
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1,390.3 |
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Long-term deferred revenue |
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1,002.7 |
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928.6 |
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Long-term borrowings |
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333.9 |
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335.6 |
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Other long-term liabilities |
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163.3 |
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168.0 |
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Total liabilities |
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2,804.0 |
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2,822.5 |
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Commitments and contingencies (Note 8) |
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Stockholders equity: |
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Preferred stock, $.01 par value, 1.0 shares authorized, none issued and
outstanding |
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Common stock, $.01 par value, 600.0 shares authorized, 249.1 shares issued |
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2.5 |
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2.5 |
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Additional paid-in capital |
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1,099.2 |
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1,077.4 |
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Retained earnings |
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2,940.9 |
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2,845.2 |
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Accumulated other comprehensive income |
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40.1 |
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32.0 |
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4,082.7 |
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3,957.1 |
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Treasury stock, at cost (73.6 and 71.9 shares) |
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(2,449.0 |
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(2,294.2 |
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Total stockholders equity |
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1,633.7 |
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1,662.9 |
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Total liabilities and stockholders equity |
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$ |
4,437.7 |
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$ |
4,485.4 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BMC SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In millions, except per share data)
(Unaudited)
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Quarter Ended June 30, |
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2011 |
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2010 |
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Revenue: |
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License |
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$ |
189.5 |
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$ |
171.2 |
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Maintenance |
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264.6 |
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253.8 |
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Professional services |
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48.3 |
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35.9 |
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Total revenue |
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502.4 |
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460.9 |
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Operating expenses: |
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Cost of license revenue |
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38.3 |
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31.9 |
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Cost of maintenance revenue |
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43.8 |
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40.7 |
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Cost of professional services revenue |
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47.4 |
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37.0 |
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Selling and marketing expenses |
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144.7 |
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142.1 |
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Research and development expenses |
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44.7 |
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38.5 |
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General and administrative expenses |
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58.6 |
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54.2 |
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Amortization of intangible assets |
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9.8 |
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8.4 |
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Total operating expenses |
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387.3 |
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352.8 |
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Operating income |
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115.1 |
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108.1 |
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Other income (loss), net: |
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Interest and other income, net |
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3.8 |
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0.6 |
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Interest expense |
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(5.5 |
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(5.1 |
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Gain (loss) on investments, net |
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0.1 |
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(1.0 |
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Total other income (loss), net |
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(1.6 |
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(5.5 |
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Earnings before income taxes |
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113.5 |
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102.6 |
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Provision for income taxes |
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17.8 |
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9.8 |
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Net earnings |
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$ |
95.7 |
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$ |
92.8 |
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Basic earnings per share |
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$ |
0.54 |
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$ |
0.51 |
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Diluted earnings per share |
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$ |
0.53 |
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$ |
0.50 |
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Shares used in computing basic earnings per share |
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176.3 |
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180.3 |
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Shares used in computing diluted earnings per share |
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180.6 |
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183.8 |
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Comprehensive income: |
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Net earnings |
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$ |
95.7 |
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$ |
92.8 |
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Net changes in accumulated comprehensive income (net of
tax): |
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Foreign currency translation adjustment |
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8.3 |
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(18.8 |
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Unrealized gain (loss) on available-for-sale securities |
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(0.2 |
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0.7 |
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Total comprehensive income |
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$ |
103.8 |
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$ |
74.7 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BMC SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
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Quarter Ended June 30, |
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2011 |
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2010 |
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Cash flows from operating activities: |
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Net earnings |
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$ |
95.7 |
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$ |
92.8 |
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Adjustments to reconcile net earnings to net cash provided by
operating activities: |
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Depreciation and amortization |
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53.5 |
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44.7 |
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Deferred income tax provision (benefit) |
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(3.2 |
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6.1 |
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Share-based compensation expense |
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30.8 |
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25.1 |
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Loss (gain) on investments, net and other |
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(0.2 |
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1.0 |
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Changes in operating assets and liabilities, net of acquisitions: |
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Trade accounts receivable |
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111.1 |
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43.3 |
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Trade finance receivables |
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(7.7 |
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95.6 |
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Prepaid and other current assets |
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4.0 |
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Other long-term assets |
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3.3 |
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2.0 |
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Accrued and other current liabilities |
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(116.2 |
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(107.9 |
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Deferred revenue |
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109.8 |
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(18.0 |
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Other long-term liabilities |
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(4.1 |
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(18.8 |
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Other operating assets and liabilities |
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(15.4 |
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1.5 |
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Net cash provided by operating activities |
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261.4 |
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167.4 |
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Cash flows from investing activities: |
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Proceeds from maturities of investments |
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5.0 |
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50.0 |
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Proceeds from sales of investments |
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1.2 |
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18.4 |
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Purchases of investments |
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(6.7 |
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(1.9 |
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Cash paid for acquisitions, net of cash acquired |
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(145.9 |
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Capitalization of software development costs |
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(28.8 |
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(30.1 |
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Purchases of property and equipment |
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(3.0 |
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(5.0 |
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Other investing activities |
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1.0 |
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Net cash provided by (used in) investing activities |
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(178.2 |
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32.4 |
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Cash flows from financing activities: |
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Treasury stock acquired |
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(180.5 |
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(149.0 |
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Repurchases of stock to satisfy employee tax withholding obligations |
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(21.7 |
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(10.7 |
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Proceeds from stock options exercised and other |
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26.4 |
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11.2 |
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Excess tax benefit from share-based compensation expense |
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11.6 |
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2.9 |
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Repayments of borrowings and capital lease obligations |
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(2.6 |
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(3.0 |
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Net cash used in financing activities |
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(166.8 |
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(148.6 |
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Effect of exchange rate changes on cash and cash equivalents |
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5.6 |
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(9.8 |
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Net change in cash and cash equivalents |
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(78.0 |
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41.4 |
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Cash and cash equivalents, beginning of period |
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1,660.9 |
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1,368.6 |
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Cash and cash equivalents, end of period |
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$ |
1,582.9 |
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$ |
1,410.0 |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
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$ |
11.2 |
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$ |
11.2 |
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Cash paid for income taxes, net of amounts refunded |
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$ |
8.6 |
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$ |
38.6 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
BMC SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the
accounts of BMC Software, Inc. and its subsidiaries (collectively, we, us, our or BMC). All
significant intercompany balances and transactions have been eliminated in consolidation.
These financial statements reflect all normal recurring adjustments necessary to fairly
present our financial position and results of operations as of and for the periods presented
herein. These financial statements have been prepared in accordance with United States
generally accepted accounting principles (GAAP) for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission (SEC). Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been
condensed or omitted pursuant to such rules and regulations. Certain reclassifications have
been made to the prior periods financial statements to conform to the current periods
presentation.
Interim results are not necessarily indicative of results for a full year. Our results
generally tend to be stronger in the third and fourth quarters of our fiscal year, as
compared to the first and second quarters of our fiscal year. These financial statements
should be read in conjunction with our annual audited consolidated financial statements for
the fiscal year ended March 31, 2011, as filed with the SEC on Form 10-K.
Recently Adopted Accounting Pronouncements
In December 2010, the Financial Accounting Standards Board (FASB) issued updated
guidance for intangible assets, specifically related to the annual goodwill impairment test.
This guidance requires entities to perform a qualitative evaluation of whether it is more
likely than not that goodwill is impaired in situations where reporting units have a
carrying value that is zero or negative. If the qualitative evaluation determines it is
more likely than not that goodwill is impaired, step two of the goodwill impairment test is
required to be performed to measure the amount of impairment, if any. The new guidance is
effective for us beginning with our fiscal 2012 goodwill impairment test and is not expected
to have a material effect on our financial position, results of operations or cash flows.
In October 2009, the FASB issued new revenue recognition guidance for arrangements that
include both software and non-software related deliverables. This guidance requires entities
to allocate the overall consideration to each deliverable by using a best estimate of the
selling price of individual deliverables in the arrangement in the absence of
vendor-specific objective evidence (VSOE) or other third party evidence of the selling
price. Additionally, the guidance modifies the manner in which the transaction consideration
is allocated across the separately identified deliverables by no longer permitting the
residual method of allocating arrangement consideration. The new guidance was effective for
us in the first quarter of fiscal 2012 and did not have a
material effect on our financial position, results of operations or cash flows.
(2) Business Combinations
In April 2011, we acquired all of the outstanding shares of Coradiant Inc.
(Coradiant), a global provider of end-to-end performance management of web applications,
for total cash consideration of $130.0 million. Coradiants operating results have been
included in our condensed consolidated financial statements since the acquisition date.
This acquisition expands BMCs current application performance management offering to
provide real-time insight into application performance and its impact on user behavior
across enterprise, software-as-a-service (SaaS) and cloud environments. The purchase
consideration was preliminarily allocated to acquired assets and assumed liabilities
consisting primarily of $18.1 million of acquired technology and $22.7 million of customer
relationships, both with a weighted average economic life of three years, in addition to
other tangible assets and liabilities. This acquisition resulted in a preliminary
allocation of $93.2 million to goodwill assigned to our Enterprise Service Management (ESM)
segment. Factors that contributed to a purchase price that resulted in goodwill include,
but are not limited to, the retention of research and development personnel with the skills
to develop future Coradiant technology, support personnel to provide maintenance services
related to Coradiant products and a trained sales force capable of selling current and
future Coradiant products and the opportunity to cross-sell our products and Coradiant
products to existing customers.
In June 2011, we also completed the acquisitions of Aeroprise, Inc. (Aeroprise), a
provider of mobile IT service management solutions, as part of our ESM segment, and Neon
Enterprise Software, LLCs (Neon) portfolio of IMS solution software as part of our
Mainframe Service Management (MSM) segment, for combined purchase consideration of $21.0
million. The purchase consideration was preliminarily allocated to acquired assets and
assumed liabilities consisting primarily of $17.3 million of acquired technology, with
weighted average economic lives of approximately three years, in addition to other tangible
assets and liabilities. These acquisitions resulted in a preliminary allocation of $7.6
million to goodwill assigned to our ESM segment.
6
We are in the process of finalizing our assessment of the fair value of acquired intangible assets
and will adjust the purchase price allocations when finalized.
(3) Financial Instruments
We measure certain financial instruments at fair value on a recurring basis using the
following valuation techniques:
(A) Market approach Uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities.
(B) Income approach Uses valuation techniques to convert future estimated cash flows to a
single present amount based on current market expectations about those future amounts, using
present value techniques.
The fair values of our financial instruments were determined using the following input
levels and valuation techniques:
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Fair Value Measurements at Reporting Date Using |
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Quoted Prices in Active |
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Significant |
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Markets for Identical |
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Significant Other |
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Unobservable |
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Assets |
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Observable Inputs |
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Inputs |
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Valuation |
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June 30, 2011 |
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Total |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Technique |
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(In millions) |
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Assets |
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Cash equivalents |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money-market funds |
|
$ |
783.1 |
|
|
$ |
783.1 |
|
|
$ |
|
|
|
$ |
|
|
|
|
A |
|
Certificates of deposit |
|
|
81.5 |
|
|
|
81.5 |
|
|
|
|
|
|
|
|
|
|
|
A |
|
Short-term and long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Treasury securities |
|
|
49.9 |
|
|
|
49.9 |
|
|
|
|
|
|
|
|
|
|
|
A |
|
Auction rate securities |
|
|
26.8 |
|
|
|
|
|
|
|
|
|
|
|
26.8 |
|
|
|
B |
|
Mutual funds |
|
|
19.3 |
|
|
|
19.3 |
|
|
|
|
|
|
|
|
|
|
|
A |
|
Foreign currency forward contracts |
|
|
1.5 |
|
|
|
|
|
|
|
1.5 |
|
|
|
|
|
|
|
A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
962.1 |
|
|
$ |
933.8 |
|
|
$ |
1.5 |
|
|
$ |
26.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts |
|
$ |
(2.7 |
) |
|
$ |
|
|
|
$ |
(2.7 |
) |
|
$ |
|
|
|
|
A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(2.7 |
) |
|
$ |
|
|
|
$ |
(2.7 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 classification is applied to any asset or liability that has a readily
available quoted market price from an active market where there is significant transparency
in the executed/quoted price.
Level 2 classification is applied to assets and liabilities that have evaluated prices
where the data inputs to these valuations are observable either directly or indirectly, but
do not represent quoted market prices from an active market.
Level 3 classification is applied to assets and liabilities when prices are not derived
from existing market data and requires us to develop our own assumptions about how market
participants would value the asset or liability.
7
The following table summarizes the activity in Level 3 financial instruments for the
quarters ended June 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2011 |
|
|
Quarter Ended June 30, 2010 |
|
|
|
Auction |
|
|
|
|
|
|
|
|
|
|
Auction |
|
|
|
|
|
|
|
|
|
Rate |
|
|
Put |
|
|
|
|
|
|
Rate |
|
|
Put |
|
|
|
|
|
|
Securities |
|
|
Option |
|
|
Total |
|
|
Securities |
|
|
Option |
|
|
Total |
|
|
|
(In millions) |
|
Balance at the beginning of the period |
|
$ |
27.2 |
|
|
$ |
|
|
|
$ |
27.2 |
|
|
$ |
60.5 |
|
|
$ |
1.1 |
|
|
$ |
61.6 |
|
Redemption of auction rate securities |
|
|
(0.2 |
) |
|
|
|
|
|
|
(0.2 |
) |
|
|
(16.2 |
) |
|
|
|
|
|
|
(16.2 |
) |
Change in unrealized gain (loss)
included in
interest and other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
(0.2 |
) |
|
|
|
|
Change in unrealized gain (loss)
included in
other comprehensive income |
|
|
(0.2 |
) |
|
|
|
|
|
|
(0.2 |
) |
|
|
0.7 |
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the period |
|
$ |
26.8 |
|
|
$ |
|
|
|
$ |
26.8 |
|
|
$ |
45.2 |
|
|
$ |
0.9 |
|
|
$ |
46.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
Our cash, cash equivalents and investments were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
March 31, 2011 |
|
|
|
Cash and |
|
|
|
|
|
|
|
|
|
|
Cash and |
|
|
|
|
|
|
|
|
|
Cash |
|
|
Short-term |
|
|
Long-term |
|
|
Cash |
|
|
Short-term |
|
|
Long-term |
|
|
|
Equivalents |
|
|
Investments |
|
|
Investments |
|
|
Equivalents |
|
|
Investments |
|
|
Investments |
|
|
|
(In millions) |
|
Measured at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Treasury securities |
|
$ |
|
|
|
$ |
31.9 |
|
|
$ |
18.0 |
|
|
$ |
525.0 |
|
|
$ |
27.8 |
|
|
$ |
22.1 |
|
Certificates of deposit |
|
|
81.5 |
|
|
|
|
|
|
|
|
|
|
|
38.4 |
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
|
|
|
|
|
|
|
|
26.8 |
|
|
|
|
|
|
|
|
|
|
|
27.2 |
|
Trading |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds |
|
|
|
|
|
|
|
|
|
|
19.3 |
|
|
|
|
|
|
|
|
|
|
|
18.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt and equity investments
measured at fair value |
|
|
81.5 |
|
|
|
31.9 |
|
|
|
64.1 |
|
|
|
563.4 |
|
|
|
27.8 |
|
|
|
67.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash on hand |
|
|
718.3 |
|
|
|
|
|
|
|
|
|
|
|
412.8 |
|
|
|
|
|
|
|
|
|
Money-market funds |
|
|
783.1 |
|
|
|
|
|
|
|
|
|
|
|
684.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and
investments |
|
$ |
1,582.9 |
|
|
$ |
31.9 |
|
|
$ |
64.1 |
|
|
$ |
1,660.9 |
|
|
$ |
27.8 |
|
|
$ |
67.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in accumulated other
comprehensive income from
available-
for-sale securities (pre-tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses* |
|
$ |
|
|
|
$ |
|
|
|
$ |
2.8 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The unrealized losses on available-for-sale securities at June 30, 2011 and March 31,
2011 relate to the auction rate securities. |
8
The following summarizes the underlying contractual maturities of our
available-for-sale investments in debt securities at June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
Cost |
|
|
Value |
|
|
|
(In millions) |
|
Due in one year or less |
|
$ |
113.4 |
|
|
$ |
113.4 |
|
Due between one and two years |
|
|
18.0 |
|
|
|
18.0 |
|
Due after ten years |
|
|
29.6 |
|
|
|
26.8 |
|
|
|
|
|
|
|
|
Total |
|
$ |
161.0 |
|
|
$ |
158.2 |
|
|
|
|
|
|
|
|
At June 30, 2011 and March 31, 2011, we held auction rate securities with a par value
of $29.6 million and $29.8 million, respectively, which were classified as
available-for-sale. The total estimated fair value of our auction rate securities was $26.8
million and $27.2 million at June 30, 2011 and March 31, 2011, respectively. Our auction
rate securities consist entirely of bonds issued by public agencies that are backed by
student loans with at least a 97% guarantee by the federal government under the United
States Department of Educations Federal Family Education Loan Program. All of these bonds
are currently rated investment grade by Moodys or Standard and Poors. Auctions for these
securities began failing in early 2008 and have continued to fail, resulting in our
continuing to hold such securities and the issuers paying interest at the maximum
contractual rates. We do not believe that any of the underlying issuers of these auction
rate securities are presently at risk of default or that the underlying credit quality of
the assets backing the auction rate security investments has been impacted by the reduced
liquidity of these investments. Due to the illiquidity in the auction rate securities market
caused by failed auctions, we estimated the fair value of these securities and the put
option discussed below using internally developed models of the expected cash flows of the
securities which incorporate assumptions about the expected cash flows of the underlying
student loans and estimates of the rate of return required by investors, which includes an
adjustment to reflect a lack of liquidity in the market for these securities. Periodically,
the issuers of certain of our auction rate securities have redeemed portions of our holdings
at par value plus accrued interest. During the quarters ended June 30, 2011 and 2010,
issuers redeemed available-for-sale holdings of $0.2 million and $10.8 million,
respectively, and trading holdings of $5.4 million during the quarter ended June 30, 2010.
In November 2008, we entered into a put agreement with a bank from which we acquired
certain auction rate securities. On July 1, 2010, we exercised our right under this
agreement to put the remaining securities subject to this agreement, with $11.2 million par
value, to the bank. The auction rate securities subject to the put were classified as
short-term investments and trading securities and, accordingly, any changes in the fair
value of these securities were recognized in earnings. In addition, we elected the option
under GAAP to record the put option at fair value. The fair value adjustments to these
auction rate securities and the related put option, prior to the exercise of the put on July
1, 2010, resulted in minimal net impact to the condensed consolidated statement of
operations for the quarter ended June 30, 2010.
The unrealized loss on our available-for-sale auction rate securities, which have a
fair value of $26.8 million at June 30, 2011, was $2.8 million and was recorded in
accumulated other comprehensive income as we believe the decline in fair value of these
auction rate securities is temporary. In making this determination, we primarily considered
the financial condition and near-term prospects of the issuers, the probability scheduled
cash flows will continue to be made and the likelihood we would be required to sell the
investments before recovery of our cost basis. These available-for-sale auction rate
securities have been in an unrealized loss position for greater than twelve months. Because
of the uncertainty related to the timing of liquidity associated with these auction rate
securities, these securities are classified as long-term investments at June 30, 2011 and
March 31, 2011.
Derivative Financial Instruments
We operate globally and transact business in various foreign currencies. Our foreign
currency exposures relate primarily to certain foreign currency denominated assets and
liabilities, primarily non-U.S. dollar denominated accounts receivable, cash and
intercompany balances held by U.S. dollar functional currency entities. To minimize the risk
from changes in foreign currency exchange rates, we have established a program that utilizes
foreign currency forward contracts to offset the risks associated with the effects of
certain foreign currency exposures. Gains or losses on our foreign currency exposures are
offset by gains or losses on the foreign currency forward contracts entered into under this
program. These foreign currency forward contracts generally have terms of one month or less
and are generally entered into at the prevailing market exchange rate at the end of each
month. We do not use forward contracts for speculative purposes. While these foreign
currency forward contracts are utilized to hedge foreign currency exposures, they are not
formally designated as hedges, and therefore, the changes in the fair values of these
derivatives are recognized
currently in earnings. We record these foreign currency forward contracts at fair value
as either assets or liabilities depending on their net settlement position with each
respective counterparty at the balance sheet date.
9
The fair value of our outstanding foreign currency forward contracts that closed in a
gain position at June 30, 2011 and March 31, 2011 was $1.5 million and $5.8 million,
respectively, and was recorded within other current assets in our condensed consolidated
balance sheets. The fair value of our outstanding foreign currency forward contracts that
closed in a loss position at June 30, 2011 and March 31, 2011 was $2.7 million and $3.3
million, respectively, and was recorded within accrued liabilities in our condensed
consolidated balance sheets. The notional amounts at contract exchange rates of our foreign
currency forward contracts outstanding were:
|
|
|
|
|
|
|
|
|
|
|
Notional Amount |
|
|
|
June 30, |
|
|
March 31, |
|
|
|
2011 |
|
|
2011 |
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
Foreign Currency Forward Contracts (receive United
States dollar/pay foreign currency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro |
|
$ |
197.5 |
|
|
$ |
158.5 |
|
Australian dollar |
|
|
25.3 |
|
|
|
13.9 |
|
Brazilian real |
|
|
13.2 |
|
|
|
5.6 |
|
British pound |
|
|
9.3 |
|
|
|
5.0 |
|
Chinese yuan renminbi |
|
|
8.8 |
|
|
|
7.6 |
|
New Zealand dollar |
|
|
4.4 |
|
|
|
2.9 |
|
Swiss franc |
|
|
3.9 |
|
|
|
1.5 |
|
South Korean won |
|
|
3.8 |
|
|
|
4.6 |
|
Norwegian krone |
|
|
3.6 |
|
|
|
2.0 |
|
Danish krone |
|
|
3.6 |
|
|
|
3.0 |
|
Canadian dollar |
|
|
|
|
|
|
4.2 |
|
Other |
|
|
5.0 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
Total |
|
$ |
278.4 |
|
|
$ |
213.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Forward Contracts (pay United
States dollar/receive foreign currency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Israeli shekel |
|
$ |
161.9 |
|
|
$ |
151.6 |
|
Indian rupee |
|
|
7.7 |
|
|
|
9.1 |
|
Mexican peso |
|
|
6.2 |
|
|
|
9.3 |
|
Other |
|
|
3.8 |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
Total |
|
$ |
179.6 |
|
|
$ |
172.2 |
|
|
|
|
|
|
|
|
Our use of foreign currency forward exchange contracts is intended to principally offset gains
and losses associated with foreign currency exposures. Therefore, the notional amounts and
currencies underlying our foreign currency forward contracts will fluctuate period to period as
they are principally dependent on the balances and currency denomination of monetary assets and
liabilities maintained by our global entities. The effect of the foreign currency forward contracts
for the quarters ended June 30, 2011 and 2010, was a loss of $3.7 million and a gain of $11.5
million, respectively, which, after including gains and losses on our foreign currency exposures,
resulted in a net loss of $1.0 million and $2.2 million, respectively, recorded in interest and
other income, net.
We are exposed to credit-related losses in the event of non-performance by counterparties to
derivative financial instruments, but we do not expect any counterparties to fail to meet their
obligations given their high credit ratings. In addition, we diversify this risk across several
counterparties and utilize netting agreements to mitigate the counterparty credit risk.
Trade Finance Receivables
A substantial portion of our trade finance receivables are transferred to financial
institutions on a non-recourse basis. We utilize wholly-owned finance subsidiaries in these finance
receivables transfers. These entities are consolidated into our financial position and results of
operations. We account for such transfers as sales in accordance with applicable accounting rules
pertaining to the transfer of financial assets and the sale of future revenue when we have
surrendered control of such receivables (including determining that such assets have been isolated
beyond our reach and the reach of our creditors) and when we do not have significant continuing
involvement in the generation of cash flows due the financial institutions. During the quarters
ended June 30, 2011 and 2010, we transferred $11.1 million and $109.0 million, respectively, of
such receivables through these programs. Finance receivables are typically transferred within
several months after origination and the outstanding principal balance at the time of transfer
typically approximates fair value.
10
For those finance receivables not transferred, we evaluate the credit risk of finance
receivables in our portfolio based on regional characteristics specific to the risk climate in each
of our geographic operations as well as based on internal credit quality indicators for individual
receivables. We evaluate the credit risk of finance receivables using an internal credit rating
system based on whether an individual receivable meets specific internal criteria including
counterparty credit rating and receivable maturity date and assign an internal credit rating of 1,
2 or 3, with a credit rating of 1 representing the best credit quality.
For all regions and credit categories, a finance receivable will be specifically reserved once
deemed uncollectible. As of June 30, 2011, we held $231.8 million of finance receivables, net of
$0.3 million of specific receivables which have been fully reserved.
At June 30, 2011, our finance receivables balance, net of allowance, by region and by class of
internal credit rating is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Latin America |
|
|
Total |
|
|
|
(In millions) |
|
Class 1 |
|
$ |
107.2 |
|
|
$ |
38.8 |
|
|
$ |
17.9 |
|
|
$ |
0.5 |
|
|
$ |
164.4 |
|
Class 2 |
|
|
24.1 |
|
|
|
34.8 |
|
|
|
2.2 |
|
|
|
1.5 |
|
|
|
62.6 |
|
Class 3 |
|
|
1.2 |
|
|
|
1.2 |
|
|
|
0.9 |
|
|
|
1.5 |
|
|
|
4.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end
of the period |
|
$ |
132.5 |
|
|
$ |
74.8 |
|
|
$ |
21.0 |
|
|
$ |
3.5 |
|
|
$ |
231.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments
The fair value of our senior unsecured notes due 2018 at June 30, 2011 and March 31, 2011,
based on market prices, was $348.2 million and $348.9 million, respectively, compared to the
carrying value of $298.8 million and $298.7 million, respectively.
The carrying values of all other financial instruments, consisting primarily of trade and
finance receivables, accounts payable and other borrowings, approximate their respective fair
values.
(4) Long-Term Borrowings
Long-term borrowings at June 30, 2011 and March 31, 2011 consisted of:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
|
2011 |
|
|
2011 |
|
|
|
(In millions) |
|
Senior unsecured notes due 2018 (net of $1.2 million and $1.3 million of unamortized
discount at June 30, 2011 and March 31, 2011, respectively) |
|
$ |
298.8 |
|
|
$ |
298.7 |
|
Capital leases and other obligations |
|
|
54.4 |
|
|
|
56.2 |
|
|
|
|
|
|
|
|
Total |
|
|
353.2 |
|
|
|
354.9 |
|
Less current maturities of capital leases and other obligations (included in
accrued liabilities) |
|
|
(19.3 |
) |
|
|
(19.3 |
) |
|
|
|
|
|
|
|
Long-term borrowings |
|
$ |
333.9 |
|
|
$ |
335.6 |
|
|
|
|
|
|
|
|
In November 2010, we entered into a credit agreement with certain institutional lenders
providing for an unsecured revolving credit facility in an amount up to $400.0 million which is
scheduled to expire on November 30, 2014 (the Credit Facility). Subject to certain conditions, at
any time prior to maturity, we may invite existing and new lenders to increase the size of the
Credit Facility up to a maximum of $600.0 million. The Credit Facility includes provisions for
swing line loans of up to $25.0 million and standby letters of credit of up to $50.0 million.
Revolving loans under the Credit Facility bear interest, at the Companys option, at a rate equal
to either (i) the base rate (as defined) plus a margin based on the credit ratings of BMCs senior
unsecured notes due 2018 (the Senior Notes), or (ii) the LIBOR rate (as defined) plus a margin
based on the credit ratings of BMCs Senior Notes, for interest periods of one, two, three or six
months. As of June 30, 2011 and through July 27, 2011, we have not borrowed any funds under the
Credit Facility.
At June 30, 2011, we were in compliance with all debt covenants.
11
(5) Income Taxes
Income tax expense was $17.8 million and $9.8 million for the quarters ended June 30, 2011 and
2010, respectively, resulting in effective tax rates of 15.7% and 9.6%, respectively. Our effective
tax rate generally differs from the U.S. federal statutory rate of 35% due to favorable tax rates
associated with earnings from lower tax rate jurisdictions throughout the world and our policy of
indefinitely reinvesting earnings from certain jurisdictions (primarily in Europe), as well as due
to additional accruals, changes in estimates, releases and settlements with taxing authorities
related to our uncertain tax positions and benefits associated with income attributable to both
domestic production activities and the extraterritorial income exclusion. During the quarters
ended June 30, 2011 and 2010, the overall favorable effect of foreign tax rates on our effective
tax rate was 12.0% and 10.7% of pre-tax earnings, respectively. During the quarters ended June 30, 2011 and 2010, we
also recorded discrete net tax benefits of $6.2 million and $14.0 million, respectively, associated with tax authority settlements related to prior
years tax matters which favorably impacted our effective tax
rate by 5.5% and 13.7% of pre-tax earnings, respectively.
Our effective tax rate could fluctuate on a quarterly basis and could be adversely affected to the
extent earnings are lower than anticipated in countries with lower statutory rates and
higher than anticipated in countries with higher statutory rates.
We file a federal income tax return in the United States as well as income tax returns in
various local, state and foreign jurisdictions. Our tax years are closed with the United States
Internal Revenue Service (IRS) through the tax year ended March 31, 2005. The IRS has completed the
audit of our tax years ended March 31, 2006 and 2007 and all issues except one related to the year
ended March 31, 2006 have been resolved. We received a Notice of Deficiency from the IRS related to
this issue and in July 2011 filed a petition for hearing with the U.S. Tax Court. The IRS has
completed its examination of our federal income tax return for the tax year ended March 31, 2008,
and there were no un-agreed issues. In addition, certain tax years related to local, state and
foreign jurisdictions remain subject to examination. To provide for potential tax exposures, we
maintain a liability for unrecognized tax benefits which we believe is adequate.
(6) Share-Based Compensation
During the quarter ended June 30, 2011, we granted 1.4 million
nonvested stock units at a weighted average grant price of $53.64 to our executive officers and non-executive employees,
consisting of both time-based and market-based awards. Time-based nonvested stock units vest in
annual increments over three years. Market-based nonvested stock units vest in 50%
increments over two- and three-year periods upon achievement of certain targets related to our relative shareholder return as compared to the NASDAQ-100 Index over each performance period.
During
the quarter ended June 30, 2011, we issued 0.9 million
shares of common stock related to exercises of stock options and 1.2 million
shares of common stock related to vesting of restricted stock units.
At June 30, 2011, we had approximately $244.6 million of total unrecognized compensation costs
related to share-based awards that are expected to be recognized as expense over a remaining
weighted-average period of two years.
Share-based compensation expense as recorded in our condensed consolidated statements of
operations is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(In millions) |
|
Cost of license revenue |
|
$ |
1.1 |
|
|
$ |
0.8 |
|
Cost of maintenance revenue |
|
|
3.5 |
|
|
|
2.3 |
|
Cost of professional services revenue |
|
|
1.3 |
|
|
|
0.9 |
|
Selling and marketing expenses |
|
|
9.1 |
|
|
|
8.7 |
|
Research and development expenses |
|
|
2.9 |
|
|
|
2.1 |
|
General and administrative expenses |
|
|
12.9 |
|
|
|
10.3 |
|
|
|
|
|
|
|
|
Total share-based compensation expense |
|
$ |
30.8 |
|
|
$ |
25.1 |
|
|
|
|
|
|
|
|
12
(7) Stockholders Equity
Earnings Per Share
The two-class method is utilized for the computation of earnings per share (EPS). The
two-class method requires a portion of net income to be allocated to participating
securities, which are unvested awards of share-based payments with non-forfeitable rights to
receive dividends or dividend equivalents, if declared. Income allocated to these
participating securities is excluded from net earnings allocated to common shares, as shown
in the table below.
Basic earnings per share is computed by dividing net income allocated to common shares
by the weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income allocated to common shares by the
weighted average number of common shares outstanding during the period, plus the dilutive
effect of outstanding stock options and other dilutive securities using the treasury stock
method.
The following table summarizes our basic and diluted EPS computations for the quarters
ended June 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(In millions, except per share data) |
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
95.7 |
|
|
$ |
92.8 |
|
Less earnings allocated to participating securities |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
Net earnings allocated to common shares |
|
$ |
95.7 |
|
|
$ |
92.7 |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
176.3 |
|
|
|
180.3 |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.54 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
95.7 |
|
|
$ |
92.8 |
|
Less earnings allocated to participating securities |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
Net earnings allocated to common shares |
|
$ |
95.7 |
|
|
$ |
92.7 |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
176.3 |
|
|
|
180.3 |
|
Incremental shares from assumed conversions of share-based
awards |
|
|
4.3 |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
Adjusted weighted average number of common shares outstanding |
|
|
180.6 |
|
|
|
183.8 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.53 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
For the quarters ended June 30, 2011 and 2010, 0.3 million and 4.0 million weighted
average potential common shares, respectively, have been excluded from the calculation of
diluted EPS as they were anti-dilutive.
Treasury Stock
Our Board of Directors has authorized a total of $4.0 billion to repurchase common
stock. During the quarter ended June 30, 2011, we repurchased 3.4 million shares for $180.5
million under the stock repurchase program. At June 30, 2011, approximately $450.2 million remains
authorized in the stock repurchase program, which does not have an expiration date. In
addition, during the quarter ended June 30, 2011, we repurchased 0.4 million shares for
$21.7 million to satisfy employee tax withholding obligations upon the vesting of
share-based awards.
(8) Guarantees and Contingencies
Guarantees
Under our standard software license agreements, we agree to indemnify, defend and hold
harmless our licensees from and against certain losses, damages and costs arising from
claims alleging the licensees use of our software infringes the intellectual property
rights of a third party. Also, under these standard license agreements, we represent and
warrant to licensees that our software products operate substantially in accordance with
published specifications.
13
Other guarantees include promises to indemnify, defend and hold harmless each of our
executive officers, non-employee directors and certain key employees from and against
losses, damages and costs incurred by each such individual in administrative, legal or
investigative proceedings arising from alleged wrongdoing by the individual while acting in
good faith within the scope of his or her job duties on our behalf.
We also had outstanding letters of credit, performance bonds and similar instruments at
June 30, 2011 of approximately $37.1 million primarily in support of performance obligations
to various customers, but also related to facilities and other obligations.
Historically, we have not incurred significant costs related to such indemnifications,
warranties and guarantees. As such, and based on other factors, no provision or accrual for
these items has been made.
Contingencies
We are subject to intellectual property claims and legal proceedings, including claims
of alleged infringement of patents asserted by third parties against us in the form of claim
letters. These claims are in various stages, may result in formal legal proceedings against
us, and may not be fully resolved in the near future. We cannot currently predict the
timing or ultimate outcome, nor estimate a range of loss, if any, for such claims.
In December 2010, a lawsuit was filed against a number of software companies, including
us, by Uniloc USA, Inc. and Uniloc Singapore Private Limited in the United States District
Court for the Eastern District of Texas, Tyler Division. The complaint seeks monetary
damages in unspecified amounts and permanent injunction based upon claims for alleged patent
infringement. While we intend to vigorously defend this matter, because it is in the early
stages of discovery and involves a number of parties, we cannot predict the timing or
ultimate outcome, nor estimate a range of loss, if any, for this matter.
We are party to various labor claims brought by certain former international employees
alleging that amounts are due to such employees for unpaid commissions and other
compensation. The claims are in various stages and are not expected to be fully resolved in
the near future; however, we intend to vigorously contest all of the claims. Taking into
account accruals recorded by us, we do not believe the resolution of these claims will have
a material adverse effect on our financial position or results of operations. However, we
cannot predict the timing or ultimate outcome of these matters.
We are currently litigating a matter in Brazilian courts as to whether a tax applies to
the remittance of software payments from our Brazilian operations. In February 2007, a law
was enacted that clarified that this particular tax did not apply to the remittance of
software payments, retroactive to January 1, 2006. We continue to pursue a favorable
resolution on this matter for years prior to January 1, 2006. While we believe we will
ultimately prevail based on the merits of our position, if we do not, we could incur a
charge of up to approximately $14 million; however, we cannot predict the timing or ultimate
outcome of this matter.
We are subject to various other legal proceedings and claims, either asserted or
unasserted, which arise in the ordinary course of business. Taking into account accruals
recorded by us, we do not believe that the outcome of any of these matters will have a
material adverse effect on our financial position or results of operations.
(9) Segment Reporting
We are organized into two business segments, Enterprise Service Management (ESM) and
Mainframe Service Management (MSM). The ESM segment derives its revenue from our service
support, service assurance and service automation solutions, along with professional
services revenue derived from consulting, implementation, integration and educational
services related to our software products. The MSM segment derives its revenue from products
for mainframe database management, monitoring and automation,
middleware management, enterprise scheduling and
output management solutions.
Segment performance is measured based on segment operating income, reflecting segment
revenue less direct and allocated indirect segment operating expenses. Direct segment
operating expenses primarily include cost of revenue, selling and marketing, research and
development and general and administrative expenses that can be specifically identified to a
particular segment and are directly controllable by segment management, while allocated
indirect segment operating expenses primarily include indirect costs within these operating
expense categories that are not specifically identified to a particular segment or
controllable by segment management. The indirect operating expenses are allocated to the
segments based on budgeted bookings, revenue and other allocation methods that management
believes to be reasonable. Our measure of segment operating income does not include the
effect of share-based compensation expenses, amortization of acquired technology and other
intangible assets or the costs associated with severance, exit costs and related charges,
which are collectively included in unallocated operating expenses below. Assets and
liabilities are reviewed by management at the consolidated level only.
14
The following tables summarize segment performance for the quarters ended June 30, 2011 and
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise |
|
|
Mainframe |
|
|
|
|
|
|
Service |
|
|
Service |
|
|
|
|
Quarter Ended June 30, 2011 |
|
Management |
|
|
Management |
|
|
Consolidated |
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
$ |
118.5 |
|
|
$ |
71.0 |
|
|
$ |
189.5 |
|
Maintenance |
|
|
141.2 |
|
|
|
123.4 |
|
|
|
264.6 |
|
Professional services |
|
|
48.3 |
|
|
|
|
|
|
|
48.3 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
308.0 |
|
|
|
194.4 |
|
|
|
502.4 |
|
Direct and allocated indirect
segment operating expenses: |
|
|
248.6 |
|
|
|
83.3 |
|
|
|
331.9 |
|
|
|
|
|
|
|
|
|
|
|
Segment operating income |
|
|
59.4 |
|
|
|
111.1 |
|
|
|
170.5 |
|
|
|
|
|
|
|
|
|
|
|
Unallocated operating expenses |
|
|
|
|
|
|
|
|
|
|
(55.4 |
) |
Other loss, net |
|
|
|
|
|
|
|
|
|
|
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
|
|
|
|
|
|
|
$ |
113.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise |
|
|
Mainframe |
|
|
|
|
|
|
Service |
|
|
Service |
|
|
|
|
Quarter Ended June 30, 2010 |
|
Management |
|
|
Management |
|
|
Consolidated |
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
$ |
113.2 |
|
|
$ |
58.0 |
|
|
$ |
171.2 |
|
Maintenance |
|
|
137.1 |
|
|
|
116.7 |
|
|
|
253.8 |
|
Professional services |
|
|
35.9 |
|
|
|
|
|
|
|
35.9 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
286.2 |
|
|
|
174.7 |
|
|
|
460.9 |
|
Direct and allocated indirect
segment operating expenses: |
|
|
220.7 |
|
|
|
83.4 |
|
|
|
304.1 |
|
|
|
|
|
|
|
|
|
|
|
Segment operating income |
|
|
65.5 |
|
|
|
91.3 |
|
|
|
156.8 |
|
|
|
|
|
|
|
|
|
|
|
Unallocated operating expenses |
|
|
|
|
|
|
|
|
|
|
(48.7 |
) |
Other loss, net |
|
|
|
|
|
|
|
|
|
|
(5.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
|
|
|
|
|
|
|
$ |
102.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) New Accounting Pronouncements Not Yet Adopted
In May 2011, the FASB issued updated guidance for fair value measurements, primarily
clarifying existing guidance and adding new disclosure requirements for Level 3 fair value
measurements. This guidance requires entities to disclose quantitative information about the
significant unobservable inputs used in Level 3 measurements, and to provide additional qualitative
information regarding the valuation process in place for Level 3 measurements and the sensitivity
of recurring Level 3 fair value measurements to changes in unobservable inputs used. This new
guidance is effective for us beginning with our fourth quarter of fiscal 2012 and is not expected
to have a material effect on our financial position, results of operations or cash flows.
15
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of
Operations |
It is important that this Managements Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) be read in conjunction with: (i) the attached unaudited condensed
consolidated financial statements and notes thereto, (ii) the audited consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the year ended March
31, 2011, and (iii) our discussion of risks and uncertainties included within the section entitled
Risk Factors in our Annual Report on Form 10-K for the year ended March 31, 2011.
This MD&A contains certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are identified by the use of the words believe, expect, anticipate,
estimate, will, contemplate, would and similar expressions that contemplate future events.
Such forward-looking statements are based on managements reasonable current assumptions and
expectations. Numerous important factors, risks and uncertainties, including but not limited to
those summarized under Risk Factors in our Annual Report on Form 10-K for the year ended March 31,
2011, affect our operating results and could cause our actual results, levels of activity,
performance or achievement to differ materially from the results expressed or implied by these or
any other forward-looking statements made by us or on our behalf. There can be no assurance that
future results will meet expectations.
BMC, BMC Software and the BMC Software logo are the exclusive properties of BMC Software,
Inc., are registered with the U.S. Patent and Trademark Office, and may be registered or pending
registration in other countries. All other BMC trademarks, service marks and logos may be
registered or pending registration in the U.S. or in other countries. All other trademarks or
registered trademarks are the property of their respective owners.
Unless indicated otherwise, results of operations data in this MD&A are presented in
accordance with United States generally accepted accounting principles (GAAP). Additionally, in an
effort to provide investors with additional information regarding our results of operations,
certain non-GAAP financial measures including non-GAAP operating income, non-GAAP net earnings and
non-GAAP diluted earnings per share are provided in this MD&A. See Non-GAAP Financial Measures and
Reconciliations below for an explanation of our use of non-GAAP financial measures and
reconciliations to their corresponding measures calculated in accordance with GAAP.
16
Overview
We delivered solid year over year results in the first quarter of fiscal 2012.
Most of our key financial measures increased year over year with the exception of ESM license bookings which
remained relatively flat year over year and came in below our expectations. Select operating
metrics for the quarter ended June 30, 2011 include:
|
|
|
Total bookings, which represent the contract value of new transactions that we closed and recorded during the quarter, were
$615.4 million for the quarter, representing an increase of $172.5 million, or 38.9%, over the prior year quarter.
Within the quarter, one large transaction generated total bookings of over $100 million, principally
related to our MSM business. |
|
|
|
|
Total license bookings were $192.5 million for the quarter, representing an increase of $57.6 million,
or 42.7%, over the prior year quarter. During the quarter, we closed 31 transactions with license bookings over $1 million (with total license bookings
of $122.1 million) compared to 19 transactions with license bookings over $1 million (with total license bookings of $64.2 million
) in the prior year quarter. |
|
|
|
|
Within our ESM segment, where we believe performance is best evaluated
on the basis of license bookings, total license bookings for the quarter were relatively flat as compared to the prior
year quarter. Within our MSM segment, where we believe performance is best evaluated based on total and annualized
bookings over a trailing twelve months basis, total bookings for the trailing twelve months ended on June 30, 2011 increased by
$195.5 million, or 24.6%, and on an annualized basis, after normalizing for contract length, increased by $38.9 million, or 14.8%,
as compared to the prior year period. |
|
|
|
|
Total revenue for the quarter was $502.4 million, representing an
increase of $41.5 million, or 9.0%, over the prior year quarter. The
increase for the quarter was reflective of license, maintenance and
professional services revenue increases of $18.3 million, or 10.7%,
$10.8 million, or 4.3%, and $12.4 million, or 34.5%, respectively. On
a segment basis, total ESM revenue for the quarter increased by $21.8
million, or 7.6%, and total MSM revenue increased by $19.7 million, or
11.3%, over the prior year quarter. |
|
|
|
|
Operating income for the quarter was $115.1 million, representing an
increase of $7.0 million, or 6.5%, over the prior year quarter.
Non-GAAP operating income for the quarter was $170.5 million,
representing an increase of $13.7 million, or 8.7%, over the prior
year quarter. |
|
|
|
|
Net earnings for the quarter
were $95.7 million, representing an
increase of $2.9 million, or 3.1%, over the prior year quarter.
Non-GAAP net earnings for the quarter were $129.3 million,
representing an increase of $15.7 million, or 13.8%, over the prior
year quarter. |
|
|
|
|
Diluted earnings per share
for the quarter was $0.53, representing an
increase of $0.03 per share, or 6.0%, over the prior year quarter.
Non-GAAP diluted earnings per share was $0.72, representing an
increase of $0.10 per share, or 16.1%, over the prior year quarter. |
|
|
|
|
Cash flows from operations for the quarter ended June 30, 2011 were
$261.4 million, representing an increase of $94.0 million, or 56.2%,
over the prior year quarter. We closed out the quarter with a strong
balance sheet at June 30, 2011, including $1.7 billion in cash, cash
equivalents and investments and $2.1 billion in deferred revenue. |
We continue to invest in our technology leadership, including in the areas of cloud
computing, virtualization and software-as-a-service (SaaS). In addition to our ongoing
product development efforts, we consummated three strategic acquisitions across both our ESM
and MSM segments during the quarter ended June 30, 2011. In our ESM segment, we acquired
Coradiant Inc. (Coradiant), which enhances our capabilities in application performance
management across enterprise, SaaS and cloud environments, and Aeroprise, Inc. (Aeroprise),
which expands our on-premise and SaaS IT Service Management offerings by adding mobility
capabilities. Lastly, we completed the purchase of Neon Enterprise Software, LLCs (Neon)
IMS software portfolio which will be integrated with our current IMS offerings to enhance
our customer value proposition within our MSM segment.
We also continue to enhance shareholder value by returning cash to shareholders
through our stock repurchase program. During the quarter ended June 30, 2011, we repurchased
3.4 million shares for a total value of $180.5 million.
It is important for our investors to understand that a significant portion of our
operating expenses is fixed in the short-term and we plan a portion of our expense run-rate
based on our expectations of future revenue. In addition, a significant amount of our
license transactions are completed during the final weeks and days of each quarter and,
therefore, we generally do not know whether revenue has met our expectations until after the
end of the quarter. If a shortfall in revenue were to occur in any given quarter, there
would be an immediate, and possibly significant, impact to our overall earnings and, most
likely, our stock price.
Because our software solutions are designed for and marketed to companies looking to
improve the management of their IT infrastructure and processes, demand for our products,
and therefore our financial results, are dependent upon corporations continuing to value
such solutions and to invest in such technology. There are a number of trends that have
historically influenced demand for IT management software, including, among others, business
demands placed on IT, computing capacity within IT departments, complexity of IT systems and
IT operational costs. Our financial results are also influenced by many economic and
industry conditions, including, but not limited to, general economic and market conditions
in the United States and other economies in which we market products, changes in foreign
currency exchange rates, general levels of corporate spending, IT budgets, the
competitiveness of the IT management software and solutions industry, the adoption rate for
Business Service Management and the stability of the mainframe market.
17
Results of Operations and Financial Condition
The following table sets forth, for the periods indicated, the percentages that
selected items in the condensed consolidated statements of operations and comprehensive
income represent of total revenue. These financial results are not necessarily indicative of
future results.
|
|
|
|
|
|
|
|
|
|
|
Percentage of Total Revenue for the |
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
Revenue: |
|
|
|
|
|
|
|
|
License |
|
|
37.7 |
% |
|
|
37.1 |
% |
Maintenance |
|
|
52.7 |
% |
|
|
55.1 |
% |
Professional services |
|
|
9.6 |
% |
|
|
7.8 |
% |
Total revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of license revenue |
|
|
7.6 |
% |
|
|
6.9 |
% |
Cost of maintenance revenue |
|
|
8.7 |
% |
|
|
8.8 |
% |
Cost of professional services revenue |
|
|
9.4 |
% |
|
|
8.0 |
% |
Selling and marketing expenses |
|
|
28.8 |
% |
|
|
30.8 |
% |
Research and development expenses |
|
|
8.9 |
% |
|
|
8.4 |
% |
General and administrative expenses |
|
|
11.7 |
% |
|
|
11.8 |
% |
Amortization of intangible assets |
|
|
2.0 |
% |
|
|
1.8 |
% |
Total operating expenses |
|
|
77.1 |
% |
|
|
76.5 |
% |
Operating income |
|
|
22.9 |
% |
|
|
23.5 |
% |
Other loss, net |
|
|
(0.3 |
)% |
|
|
(1.2 |
)% |
Earnings before income taxes |
|
|
22.6 |
% |
|
|
22.3 |
% |
Provision for income taxes |
|
|
3.5 |
% |
|
|
2.1 |
% |
Net earnings |
|
|
19.0 |
% |
|
|
20.1 |
% |
Revenue
The following table provides information regarding software license and software maintenance
revenue for the quarters ended June 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
|
Software License Revenue |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
|
(In millions) |
|
|
|
|
|
Enterprise Service Management |
|
$ |
118.5 |
|
|
$ |
113.2 |
|
|
|
4.7 |
% |
Mainframe Service Management |
|
|
71.0 |
|
|
|
58.0 |
|
|
|
22.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total software license revenue |
|
$ |
189.5 |
|
|
$ |
171.2 |
|
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
|
Software Maintenance Revenue |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
|
(In millions) |
|
|
|
|
|
Enterprise Service Management |
|
$ |
141.2 |
|
|
$ |
137.1 |
|
|
|
3.0 |
% |
Mainframe Service Management |
|
|
123.4 |
|
|
|
116.7 |
|
|
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total software maintenance
revenue |
|
$ |
264.6 |
|
|
$ |
253.8 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
|
Total Software Revenue |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
|
(In millions) |
|
|
|
|
|
Enterprise Service Management |
|
$ |
259.7 |
|
|
$ |
250.3 |
|
|
|
3.8 |
% |
Mainframe Service Management |
|
|
194.4 |
|
|
|
174.7 |
|
|
|
11.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total software revenue |
|
$ |
454.1 |
|
|
$ |
425.0 |
|
|
|
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Software License Revenue
License revenue for the quarter ended June 30, 2011 was $189.5 million, an increase of
$18.3 million, or 10.7%, over the prior year quarter. This increase was attributable to
increases in our ESM and MSM segment license revenues, as further discussed below.
Recognition of license revenue that was deferred in prior periods increased $10.0 million
for the quarter ended June 30, 2011 as compared to the prior year quarter. Of the license
revenue transactions recorded, the percentage of license revenue recognized upfront was 45%
in the current quarter as compared to 56% in the prior year quarter.
ESM license revenue was $118.5 million, or 62.5%, of our total license revenue for the
quarter ended June 30, 2011, and $113.2 million, or 66.1%, of our total license revenue for
the quarter ended June 30, 2010. ESM license revenue for the quarter ended June 30, 2011
increased by $5.3 million, or 4.7%, over the prior year quarter. This increase is primarily
due to an increase in the recognition of previously deferred license revenue, along with an
increase in the amount of upfront license revenue recognized in connection with new
transactions.
MSM license revenue was $71.0 million, or 37.5%, of our total license revenue for the
quarter ended June 30, 2011, and $58.0 million, or 33.9%, of our total license revenue for
the quarter ended June 30, 2010. MSM license revenue for the quarter ended June 30, 2011
increased by $13.0 million, or 22.4%, over the prior year quarter. This increase is
primarily due to an increase in the amount of upfront license revenue recognized in
connection with new transactions, along with an increase in the recognition of
previously deferred license revenue.
Deferred License Revenue
For the quarters ended June 30, 2011 and 2010, our recognized license revenue was
impacted by the changes in our deferred license revenue balance as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(In millions) |
|
Deferrals of license revenue |
|
$ |
106.1 |
|
|
$ |
58.8 |
|
Recognition from deferred license revenue |
|
|
(104.3 |
) |
|
|
(94.3 |
) |
Impact of foreign currency exchange rate changes |
|
|
1.2 |
|
|
|
(0.8 |
) |
|
|
|
|
|
|
|
Net increase (decrease) in deferred license
revenue |
|
$ |
3.0 |
|
|
$ |
(36.3 |
) |
|
|
|
|
|
|
|
Deferred license revenue balance at end of
period |
|
$ |
689.1 |
|
|
$ |
587.9 |
|
The primary reasons for license revenue deferrals include, but are not limited to, customer
transactions that include products for which the maintenance pricing is based on a combination of
undiscounted license list prices, net license fees or discounted license list prices, certain
arrangements that include unlimited licensing rights, time-based licenses that are recognized over
the term of the arrangement, customer transactions that include products with differing maintenance
periods and other transactions for which we do not have or are not able to determine
vendor-specific objective evidence of the fair value of the maintenance and/or professional
services. The contract terms and conditions that result in deferral of revenue recognition for a
given transaction result from arms length negotiations between us and our customers. We anticipate
our transactions will continue to include such contract terms that result in deferral of the
related license revenue as we expand our offerings to meet customers product, pricing and
licensing needs.
19
Once it is determined that license revenue for a particular contract must be deferred, based
on the contractual terms and application of revenue recognition policies to those terms, we
recognize such license revenue either ratably over the term of the contract or when the revenue
recognition criteria are met. Because of this, we generally know the timing of the subsequent
recognition of license revenue at the time of deferral. Therefore, the amount of license revenue to
be recognized out of the deferred revenue balance in each future quarter is generally
predictable. At June 30, 2011, the deferred license revenue balance was $689.1 million.
Estimated future recognition from deferred license revenue at June 30, 2011 is (in millions):
|
|
|
|
|
Remainder of fiscal 2012 |
|
$ |
264.4 |
|
Fiscal 2013 |
|
|
211.5 |
|
Fiscal 2014 and thereafter |
|
|
213.2 |
|
|
|
|
|
|
|
$ |
689.1 |
|
|
|
|
|
Software Maintenance Revenue
Maintenance revenue for the quarter ended June 30, 2011 was $264.6 million, an increase of
$10.8 million, or 4.3%, over the prior year quarter, due to increases in both ESM and MSM
maintenance revenue, as discussed below.
ESM maintenance revenue was $141.2 million, or 53.4%, of our total maintenance revenue for the
quarter ended June 30, 2011 and $137.1 million, or 54.0%, of our total maintenance revenue for the
quarter ended June 30, 2010. ESM maintenance revenue for the quarter ended June 30, 2011 increased
by $4.1 million, or 3.0%, over the prior year quarter.
MSM maintenance revenue was $123.4 million, or 46.6%, of our total maintenance revenue for the
quarter ended June 30, 2011 and $116.7 million, or 46.0%, of our total maintenance revenue for the
quarter ended June 30, 2010. MSM maintenance revenue for the quarter ended June 30, 2011 increased
by $6.7 million, or 5.7%, over the prior year quarter.
Deferred Maintenance Revenue
At June 30, 2011, the deferred maintenance revenue balance was $1.3 billion. Estimated future
recognition from deferred maintenance revenue at June 30, 2011 is (in millions):
|
|
|
|
|
Remainder of fiscal 2012 |
|
$ |
590.3 |
|
Fiscal 2013 |
|
|
402.6 |
|
Fiscal 2014 and thereafter |
|
|
350.9 |
|
|
|
|
|
|
|
$ |
1,343.8 |
|
|
|
|
|
Domestic vs. International Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
|
(In millions) |
|
|
|
|
|
License: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
85.3 |
|
|
$ |
87.6 |
|
|
|
(2.6 |
)% |
International |
|
|
104.2 |
|
|
|
83.6 |
|
|
|
24.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total license revenue |
|
|
189.5 |
|
|
|
171.2 |
|
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
Maintenance: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
141.6 |
|
|
|
139.8 |
|
|
|
1.3 |
% |
International |
|
|
123.0 |
|
|
|
114.0 |
|
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total maintenance revenue |
|
|
264.6 |
|
|
|
253.8 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Professional services: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
21.8 |
|
|
|
17.7 |
|
|
|
23.2 |
% |
International |
|
|
26.5 |
|
|
|
18.2 |
|
|
|
45.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total professional services
revenue |
|
|
48.3 |
|
|
|
35.9 |
|
|
|
34.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total domestic revenue |
|
|
248.7 |
|
|
|
245.1 |
|
|
|
1.5 |
% |
Total international revenue |
|
|
253.7 |
|
|
|
215.8 |
|
|
|
17.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
502.4 |
|
|
$ |
460.9 |
|
|
|
9.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
20
We estimate that the effect of foreign currency exchange rate fluctuations on our
international revenue resulted in an approximate $9.1 million increase in revenue for the quarter
ended June 30, 2011 as compared to the prior year quarter, on a constant currency basis.
Domestic License Revenue
Domestic license revenue was $85.3 million, or 45.0%, of our total license revenue for the
quarter ended June 30, 2011, and $87.6 million, or 51.2%, of our total license revenue for the
quarter ended June 30, 2010. Domestic license revenue for the quarter ended June 30, 2011 decreased
by $2.3 million, or 2.6%, from the prior year quarter, due to a $5.0 million decrease in ESM
license revenue, offset by a $2.7 million increase in MSM license revenue.
International License Revenue
International license revenue was $104.2 million, or 55.0%, of our total license revenue for
the quarter ended June 30, 2011 and $83.6 million or 48.8%, of our total license revenue for the
quarter ended June 30, 2010.
International license revenue for the quarter ended June 30, 2011 increased by $20.6 million,
or 24.6%, over the prior year quarter, due to a $10.3 million increase in ESM license revenue and a
$10.3 million increase in MSM license revenue. The ESM license revenue increase was attributable to
increases of $6.2 million and $3.4 million in our Europe, Middle East and Africa (EMEA) and Asia
Pacific markets, respectively, and a combined net increase of $0.7 million in our other
international markets. The MSM license revenue increase was attributable to increases of $5.5
million and $3.6 million in our EMEA and Latin America markets, respectively, and a combined net
increase of $1.2 million in our other international markets.
Domestic Maintenance Revenue
Domestic maintenance revenue was $141.6 million, or 53.5%, of our total maintenance revenue
for the quarter ended June 30, 2011 and $139.8 million, or 55.1%, of our total maintenance revenue
for the quarter ended June 30, 2010. Domestic maintenance revenue for the quarter ended June 30,
2011 increased by $1.8 million, or 1.3%, over the prior year quarter, due to a $1.8 million
increase in ESM maintenance revenue. MSM maintenance revenue remained relatively flat as compared
to the prior year quarter.
International Maintenance Revenue
International maintenance revenue was $123.0 million, or 46.5%, of our total maintenance
revenue for the quarter ended June 30, 2011 and $114.0 million, or 44.9%, of our total maintenance
revenue for the quarter ended June 30, 2010.
International maintenance revenue for the quarter ended June 30, 2011 increased by $9.0
million, or 7.9%, over the prior year quarter, due to a $2.3 million increase in ESM maintenance
revenue and a $6.7 million increase in MSM maintenance revenue. The ESM maintenance revenue
increase was attributable to an increase of $1.6 million in our Asia Pacific market and a combined
net increase of $0.7 million in our other international markets. The MSM maintenance revenue
increase was attributable to increases of $3.0 million and $2.7 million in our EMEA and Latin
America markets, respectively, and a combined net increase of $1.0 million in our other
international markets.
Professional Services Revenue
Professional services revenue for the quarter ended June 30, 2011 increased by $12.4 million,
or 34.5%, over the prior year quarter, which is reflective of a $4.1 million, or 23.2%, increase in
domestic professional services revenue and an $8.3 million, or 45.6%, increase in international
professional services revenue. These increases were attributable primarily to increases in
implementation, consulting and education services revenue period over period, principally due to
the expansion of our ESM business including increased demand for cloud implementation.
21
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
|
(In millions) |
|
|
|
|
|
Cost of license revenue |
|
$ |
38.3 |
|
|
$ |
31.9 |
|
|
|
20.1 |
% |
Cost of maintenance revenue |
|
|
43.8 |
|
|
|
40.7 |
|
|
|
7.6 |
% |
Cost of professional services
revenue |
|
|
47.4 |
|
|
|
37.0 |
|
|
|
28.1 |
% |
Selling and marketing expenses |
|
|
144.7 |
|
|
|
142.1 |
|
|
|
1.8 |
% |
Research and development expenses |
|
|
44.7 |
|
|
|
38.5 |
|
|
|
16.1 |
% |
General and administrative
expenses |
|
|
58.6 |
|
|
|
54.2 |
|
|
|
8.1 |
% |
Amortization of intangible assets |
|
|
9.8 |
|
|
|
8.4 |
|
|
|
16.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
387.3 |
|
|
$ |
352.8 |
|
|
|
9.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
We estimate that the effect of foreign currency exchange rate fluctuations on our
international operating expenses resulted in an approximate $12.3 million reduction in operating
expenses for the quarter ended June 30, 2011 as compared to the prior year quarter, on a constant
currency basis.
Cost of License Revenue
Cost of license revenue consists primarily of the amortization of capitalized software costs
for internally developed products, the amortization of acquired technology for products acquired
through business combinations, license-based royalties to third parties and production and
distribution costs for initial product licenses. For the quarters ended June 30, 2011 and 2010,
cost of license revenue was $38.3 million, or 7.6%, and $31.9 million, or 6.9%, of total revenue,
respectively, and 20.2% and 18.6% of license revenue, respectively.
Cost of license revenue for the quarter ended June 30, 2011 increased by $6.4 million, or
20.1%, over the prior year quarter. This increase was attributable primarily to a $5.8 million
increase in the amortization of capitalized software development costs.
Cost of Maintenance Revenue
Cost of maintenance revenue consists primarily of the costs associated with customer support
and research and development personnel that provide maintenance, enhancement and support services
to our customers. For the quarters ended June 30, 2011 and 2010, cost of maintenance revenue was
$43.8 million, or 8.7%, and $40.7 million, or 8.8%, of total revenue, respectively, and 16.6% and
16.0% of maintenance revenue, respectively.
Cost of maintenance revenue for the quarter ended June 30, 2011 increased by $3.1 million, or
7.6%, over the prior year quarter. This increase was attributable primarily to a $1.6 million
increase in third party maintenance outsourcing costs and a $1.2 million increase in share-based
compensation expense.
Cost of Professional Services Revenue
Cost of professional services revenue consists primarily of salaries, related personnel costs
and third party fees associated with implementation, consulting and education services that we
provide to our customers and the related infrastructure to support this business. For the quarters
ended June 30, 2011 and 2010, cost of professional services revenue was $47.4 million, or 9.4%, and
$37.0 million, or 8.0%, of total revenue, respectively, and 98.1% and 103.1% of professional
services revenue, respectively.
Cost of professional services revenue for the quarter ended June 30, 2011 increased by $10.4
million, or 28.1%, over the prior year quarter. This increase was attributable to a $6.1 million
increase in third party subcontracting fees, a $3.0 million increase in professional services
enablement personnel costs and a $1.3 million net increase in other expenses, commensurate with
increases in professional services revenue.
22
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries, related personnel costs, sales
commissions and costs associated with advertising, marketing, industry trade shows and sales
seminars. For the quarters ended June 30, 2011 and 2010, selling and marketing expenses were $144.7
million, or 28.8%, and $142.1 million, or 30.8%, of total revenue, respectively.
Selling and marketing expenses for the quarter ended June 30, 2011 increased by $2.6 million,
or 1.8%, over the prior year quarter. This increase was attributable to a $2.3 million
increase in sales personnel costs, principally due to an increase in variable compensation expense
as a result of increased revenue, and a $2.1 million increase in marketing campaign expenditures,
offset by a $1.8 million net decrease in other expenses.
Research and Development Expenses
Research and development expenses consist primarily of salaries and personnel costs (including
third party subcontracting fees) related to software developers and development support personnel,
including product management, software programmers, testing and quality assurance personnel and
writers of technical documentation, such as product manuals and installation guides. These expenses
also include computer hardware and software costs, telecommunications costs and personnel costs
associated with our development and production labs. For the quarters ended June 30, 2011 and 2010,
research and development expenses were $44.7 million, or 8.9%, and $38.5 million, or 8.4%, of total
revenue, respectively.
Research
and development expenses for the quarter ended June 30, 2011 increased by $6.2
million, or 16.1%, over the prior year quarter. This increase was
attributable primarily to a $5.6
million increase in research and development personnel and related costs, including third party
subcontracting fees.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related personnel costs
of executive management, finance and accounting, facilities management, legal and human resources.
Other costs included in general and administrative expenses include fees paid for outside
accounting and legal services, consulting projects and insurance. For the quarters ended June 30,
2011 and 2010, general and administrative expenses were $58.6 million, or 11.7%, and $54.2 million,
or 11.8%, of total revenue, respectively.
General and administrative expenses for the quarter ended June 30, 2011 increased by $4.4
million, or 8.1%, over the prior year quarter. This increase was attributable to a $3.1 million
increase in personnel costs and a $1.3 million net increase in other expenses.
Amortization of Intangible Assets
Amortization of intangible assets consists of the amortization of customer relationships and
other intangible assets recorded in connection with our business combinations. For the quarters
ended June 30, 2011 and 2010, amortization of intangible assets was $9.8 million and $8.4 million,
respectively.
Amortization of intangible assets for the quarter ended June 30, 2011 increased by $1.4
million, or 16.7%, over the prior year quarter. This increase was attributable primarily to
amortization associated with intangible assets acquired in connection with our fiscal 2011 and 2012
acquisitions, offset by a reduction in amortization associated with intangible assets acquired in
connection with past acquisitions that became fully amortized.
Other Income (Loss), Net
Other income (loss), net, consists primarily of interest earned, realized gains and losses on
investments and interest expense on our senior unsecured notes due 2018 and capital leases.
Other income (loss), net, for the quarters ended June 30, 2011 and 2010, was a loss of $1.6
million and $5.5 million, respectively. This change was attributable primarily to a $1.7 million
increase in interest income, a $1.1 million improvement in net gains (losses) on investments and a
$1.2 million decrease in net foreign currency losses as compared to the prior year quarter.
23
Income Taxes
Income tax expense was $17.8 million and $9.8 million for the quarters ended June 30, 2011 and
2010, respectively, resulting in effective tax rates of 15.7% and 9.6%, respectively. Our effective
tax rate generally differs from the U.S. federal statutory rate of 35% due to favorable tax rates
associated with earnings from lower tax rate jurisdictions throughout the world and our policy of
indefinitely reinvesting earnings from certain jurisdictions (primarily in Europe), as well as due
to additional accruals, changes in estimates, releases and settlements with taxing authorities
related to our uncertain tax positions and benefits associated with income attributable to both
domestic production activities and the extraterritorial income exclusion. During the quarters
ended June 30, 2011 and 2010, the overall favorable effect of foreign tax rates on our effective
tax rate was 12.0% and 10.7% of pre-tax earnings, respectively. During the quarters ended June 30, 2011 and 2010, we
also recorded discrete net tax benefits of $6.2 million and $14.0 million, respectively, associated with tax authority settlements related to prior
years tax matters which favorably impacted our effective tax
rate by 5.5% and 13.7% of pre-tax earnings, respectively.
Our effective tax rate could fluctuate on a quarterly basis and could be adversely affected to the
extent earnings are lower than anticipated in countries with lower statutory rates and
higher than anticipated in countries with higher statutory rates.
Non-GAAP Financial Measures and Reconciliations
In an effort to provide investors with additional information regarding our results as
determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press
releases and other public disclosures. The primary non-GAAP financial measures we focus on are: (i)
non-GAAP operating income, (ii) non-GAAP net earnings, and (iii) non-GAAP diluted earnings per
share. Each of these financial measures excludes the impact of certain items and therefore has not
been calculated in accordance with GAAP. These non-GAAP financial measures exclude share-based
compensation expense; the amortization of intangible assets; severance, exit costs and related
charges; as well as the related tax impacts of these items; and certain discrete tax items. Each of
the non-GAAP adjustments is described in more detail below. A reconciliation of each of these
non-GAAP financial measures to its most comparable GAAP financial measure is also included below.
We believe that these non-GAAP financial measures provide meaningful supplemental information
regarding our operating results because they exclude amounts that BMC management and the Board of
Directors do not consider part of core operating results when assessing the performance of the
organization. In addition, we have historically reported similar non-GAAP financial measures and we
believe that inclusion of these non-GAAP financial measures provides consistency and comparability
with past reports of financial results. Accordingly, we believe these non-GAAP financial measures
are useful to investors in allowing for greater transparency of supplemental information used by
management.
While we believe that these non-GAAP financial measures provide useful supplemental
information, there are limitations associated with the use of these non-GAAP financial measures.
These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a
comprehensive system of accounting and may not be completely comparable to similarly titled
measures of other companies due to potential differences in the exact method of calculation between
companies. Items such as share-based compensation expense; the amortization of intangible assets;
severance, exit costs and related charges; as well as the related tax impacts of these items; and
certain discrete tax items that are excluded from our non-GAAP financial measures can have a
material impact on net earnings. As a result, these non-GAAP financial measures should not be
considered in isolation from, or as a substitute for, net earnings, cash flow from operations or
other measures of performance prepared in accordance with GAAP. We compensate for these limitations
by using these non-GAAP financial measures as supplements to GAAP financial measures and by
reconciling the non-GAAP financial measures to their most comparable GAAP financial measure.
Investors are encouraged to review the reconciliations of these non-GAAP financial measures to
their most comparable GAAP financial measures below.
24
For a detailed explanation of the adjustments made to comparable GAAP financial measures, the
reasons why management uses these measures and the usefulness of these measures, see items (1)
(5) below.
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(In millions) |
|
Operating income: |
|
|
|
|
|
|
|
|
GAAP operating income |
|
$ |
115.1 |
|
|
$ |
108.1 |
|
Share-based compensation expense (1) |
|
|
30.8 |
|
|
|
25.1 |
|
Amortization of intangible assets (2) |
|
|
22.5 |
|
|
|
20.6 |
|
Severance, exit costs and related charges (3) |
|
|
2.1 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
Non-GAAP operating income |
|
$ |
170.5 |
|
|
$ |
156.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(In millions) |
|
Net earnings: |
|
|
|
|
|
|
|
|
GAAP net earnings |
|
$ |
95.7 |
|
|
$ |
92.8 |
|
Share-based compensation expense (1) |
|
|
30.8 |
|
|
|
25.1 |
|
Amortization of intangible assets (2) |
|
|
22.5 |
|
|
|
20.6 |
|
Severance, exit costs and related charges (3) |
|
|
2.1 |
|
|
|
3.0 |
|
Provision for income taxes on above pre-tax
non-GAAP adjustments (4) |
|
|
(15.6 |
) |
|
|
(13.9 |
) |
Certain discrete tax items (5) |
|
|
(6.2 |
) |
|
|
(14.0 |
) |
|
|
|
|
|
|
|
Non-GAAP net earnings |
|
$ |
129.3 |
|
|
$ |
113.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
Diluted earnings per share*: |
|
|
|
|
|
|
|
|
GAAP diluted earnings per share |
|
$ |
0.53 |
|
|
$ |
0.50 |
|
Share-based compensation expense (1) |
|
|
0.17 |
|
|
|
0.14 |
|
Amortization of intangible assets (2) |
|
|
0.12 |
|
|
|
0.11 |
|
Severance, exit costs and related charges (3) |
|
|
0.01 |
|
|
|
0.02 |
|
Provision for income taxes on above pre-tax
non-GAAP adjustments (4) |
|
|
(0.09 |
) |
|
|
(0.08 |
) |
Certain discrete tax items (5) |
|
|
(0.03 |
) |
|
|
(0.08 |
) |
|
|
|
|
|
|
|
Non-GAAP diluted earnings per share* |
|
$ |
0.72 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
Non-GAAP diluted earnings per share is computed independently for each
period presented. The sum of GAAP diluted earnings per share and non-GAAP
adjustments per share may not equal non-GAAP diluted earnings per share due to
rounding differences. |
|
(1) |
|
Share-based compensation expense. Our non-GAAP financial measures exclude
the compensation expenses required to be recorded by GAAP for equity awards to
employees and directors. Management and the Board of Directors believe it is
useful in evaluating corporate performance during a particular time period to
review the supplemental non-GAAP financial measures, excluding expenses related
to share-based compensation, because these costs are generally fixed at the
time an award is granted, are then expensed over several years and generally
cannot be changed or influenced by management once granted. |
|
(2) |
|
Amortization of intangible assets. Our non-GAAP financial
measures exclude costs associated with the amortization of intangible
assets, which are included in cost of license revenue and
amortization of intangible assets in our condensed consolidated
statements of operations and comprehensive income. Management and the
Board of Directors believe it is useful in evaluating corporate
performance during a particular time period to review the
supplemental non-GAAP financial measures, excluding amortization of
intangible assets, because these costs are fixed at the time of an
acquisition, are then amortized over a period of several years after
the acquisition and generally cannot be changed or influenced by
management after the acquisition. |
|
(3) |
|
Severance, exit costs and related charges. Our non-GAAP
financial measures exclude severance, exit costs and related charges,
and any subsequent changes in estimates, as they relate to our
corporate restructuring activities. Management and the Board of
Directors believe it is useful in evaluating corporate performance
during a particular time period to review the supplemental non-GAAP
financial measures, excluding severance, exit costs and related
charges, in order to provide comparability and consistency with
historical operating results. |
25
|
|
|
(4) |
|
Provision for income taxes on above pre-tax non-GAAP
adjustments. Our non-GAAP financial measures exclude the tax impact
of the above pre-tax non-GAAP adjustments. This amount is calculated
using the tax rates of each country to which these pre-tax non-GAAP
adjustments relate. Management excludes the non-GAAP adjustments on a
net-of-tax basis in evaluating our performance. Therefore, we exclude
the tax impact of these charges when presenting non-GAAP financial
measures. |
|
(5) |
|
Certain discrete tax items. Our non-GAAP financial measures
exclude net tax benefits of $6.2 million and $14.0 million in the
quarters ended June 30, 2011 and 2010, respectively, associated with
tax authority settlements related to prior years tax matters.
Management excludes the impact of these items in evaluating our
performance. Therefore, we exclude these items when presenting
non-GAAP financial measures. |
Liquidity and Capital Resources
At June 30, 2011, we had $1.7 billion in cash, cash equivalents and investments, approximately
52.7% of which was held by our international subsidiaries and was largely generated from our
international operations. Our international operations have generated $513.0 million of earnings
that we have determined will be invested indefinitely in those operations. If such earnings were to
be repatriated, we would incur a United States federal income tax liability that is not currently
accrued in our financial statements. We also had outstanding letters of credit, performance bonds
and similar instruments at June 30, 2011 of approximately $37.1 million primarily in support of
performance obligations to various customers, but also related to facilities and other obligations.
At June 30, 2011 and March 31, 2011, we held auction rate securities with a par value of $29.6
million and $29.8 million, respectively, which were classified as available-for-sale. The total
estimated fair value of our auction rate securities was $26.8 million and $27.2 million at June 30,
2011 and March 31, 2011, respectively. Our auction rate securities consist entirely of bonds issued
by public agencies that are backed by student loans with at least a 97% guarantee by the federal
government under the United States Department of Educations Federal Family Education Loan Program.
All of these bonds are currently rated investment grade by Moodys or Standard and Poors. Auctions
for these securities began failing in early 2008 and have continued to fail, resulting in our
continuing to hold such securities and the issuers paying interest at the maximum contractual
rates. We do not believe that any of the underlying issuers of these auction rate securities are
presently at risk of default or that the underlying credit quality of the assets backing the
auction rate security investments has been impacted by the reduced liquidity of these investments.
Based on our current ability to access cash and other short-term investments, our expected
operating cash flows and other sources of cash that we expect to be available, we do not anticipate
that the lack of liquidity of these investments will have a material impact on our business
strategy, financial condition, results of operations or cash flows. Periodically, the issuers of
certain of our auction rate securities have redeemed portions of our holdings at par value plus
accrued interest. During the quarters ended June 30, 2011 and 2010, issuers redeemed
available-for-sale holdings of $0.2 million and $10.8 million, respectively, and trading holdings
of $5.4 million for the quarter ended June 30, 2010.
In November 2010, we entered into a credit agreement with certain institutional lenders
providing for an unsecured revolving credit facility in an amount up to $400.0 million which is
scheduled to expire on November 30, 2014 (the Credit Facility). Subject to certain conditions, at
any time prior to maturity, we may invite existing and new lenders to increase the size of the
Credit Facility up to a maximum of $600.0 million. The Credit Facility includes provisions for
swing line loans of up to $25.0 million and standby letters of credit of up to $50.0 million.
Revolving loans under the Credit Facility bear interest, at the Companys option, at a rate equal
to either (i) the base rate (as defined) plus a margin based on the credit ratings of BMCs senior
unsecured notes due 2018 (the Senior Notes), or (ii) the LIBOR rate (as defined) plus a margin
based on the credit ratings of BMCs Senior Notes, for interest periods of one, two, three or six
months. As of June 30, 2011 and through July 27, 2011, we have not borrowed any funds under the
Credit Facility.
We believe that our existing cash and investment balances, funds generated from operating
activities and available credit under the Credit Facility will be sufficient to meet our working
and other capital requirements for the foreseeable future. In the normal course of business, we
evaluate the merits of acquiring technology or businesses, or establishing strategic relationships
with or investing in these businesses. We may elect to use available cash and investments to fund
such activities in the future. In the event additional needs for cash arise, we might find it
advantageous to utilize third party financing sources based on factors such as our then available
cash and its source (i.e., cash held in the United States versus international locations), the cost
of financing and our internal cost of capital.
We may from time to time seek to repurchase or retire securities, including outstanding
borrowings and equity securities, in open market repurchases, unsolicited or solicited privately
negotiated transactions or in such other manner as will comply with the provisions of the
Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations
thereunder. Such repurchases or exchanges, if any, will depend on a number of factors, including,
but not limited to, prevailing market conditions, our liquidity requirements and contractual
restrictions, if applicable. The amount of repurchases, which is subject to management discretion,
may be material and may change from period to period.
26
Our cash flows for the quarters ended June 30, 2011 and 2010 were:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(In millions) |
|
Net cash provided by operating activities |
|
$ |
261.4 |
|
|
$ |
167.4 |
|
Net cash provided by (used in) investing activities |
|
|
(178.2 |
) |
|
|
32.4 |
|
Net cash used in financing activities |
|
|
(166.8 |
) |
|
|
(148.6 |
) |
Effect of exchange rate changes on cash and cash
equivalents |
|
|
5.6 |
|
|
|
(9.8 |
) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
$ |
(78.0 |
) |
|
$ |
41.4 |
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities
Our primary method for funding operations and growth has been through cash flows generated
from operating activities. Net cash provided by operating activities for the quarter ended June 30,
2011 increased by $94.0 million over the prior year period, attributable to an increase in net
earnings before non-cash expenses (principally depreciation and amortization and share-based
compensation expense) and the net impact of working capital changes.
Cash Flows from Investing Activities
Net cash used in investing activities for the quarter ended June 30, 2011 was $178.2 million
compared to net cash provided by investing activities of $32.4 million for the quarter ended June
30, 2010. This difference was attributable primarily to an increase in cash expended for our
acquisitions of Coradiant, Aeroprise and Neons IMS software
portfolio and a decrease in proceeds from the sales and maturities of investments.
Cash Flows from Financing Activities
Net cash used in financing activities for the quarter ended June 30, 2011 increased by $18.2
million over the prior year period. This increase was attributable primarily to an increase in
treasury stock acquired, offset primarily by an increase in proceeds from stock option exercises.
Treasury Stock Purchases
Our Board of Directors has authorized a total of $4.0 billion to repurchase common stock.
During the quarter ended June 30, 2011, we purchased 3.4 million shares for $180.5 million. From
the inception of the stock repurchase authorization through June 30, 2011, we have purchased 136.2
million shares for $3.5 billion. At June 30, 2011, there was $450.2 million remaining in the stock
repurchase program, which does not have an expiration date. In addition, during the quarter ended
June 30, 2011, we repurchased 0.4 million shares for $21.7 million to satisfy employee tax
withholding obligations upon the vesting of share-based awards. The repurchase of stock will
continue to be funded primarily with cash generated from domestic operations and, therefore,
affects our overall domestic versus international liquidity balances. See PART II. Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds below for a monthly detail of treasury
stock purchases for the quarter ended June 30, 2011.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenue and
expenses. On an on-going basis, we make and evaluate estimates and judgments, including those
related to revenue recognition, capitalized software development costs, share-based compensation,
goodwill and intangible assets, valuation of investments and accounting for income taxes. We base
our estimates on historical experience and various other assumptions that we believe are reasonable
under the circumstances; the results of which form the basis for making judgments about amounts and
timing of revenue and expenses, the carrying values of assets and the recorded amounts of
liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates and such estimates may change if the underlying conditions or assumptions change. We have
discussed the development and selection of the critical accounting policies and estimates with the
Audit Committee of our Board of Directors, and the Audit Committee has reviewed our related
disclosures. The critical accounting policies related to the estimates and judgments are discussed
in our Annual Report on Form 10-K for the year ended March 31, 2011 under Managements Discussion
and Analysis of Financial Condition and Results of Operations. There have been no changes to our
critical accounting policies and estimates during the quarter ended June 30, 2011.
27
Recently Adopted Accounting Pronouncements
In December 2010, the FASB issued updated guidance for intangible assets, specifically related
to the annual goodwill impairment test. This guidance requires entities to perform a qualitative
evaluation of whether it is more likely than not that goodwill is impaired in situations where
reporting units have a carrying value that is zero or negative. If the qualitative evaluation
determines it is more likely than not that goodwill is impaired, step two of the goodwill
impairment test is required to be performed to measure the amount of impairment, if any. The new
guidance is effective for us beginning with our fiscal 2012 goodwill impairment test and is not
expected to have a material effect on our financial position, results of operations or cash flows.
In October 2009, the FASB issued new revenue recognition guidance for arrangements that
include both software and non-software related deliverables. This guidance requires entities to
allocate the overall consideration to each deliverable by using a best estimate of the selling
price of individual deliverables in the arrangement in the absence of VSOE or other third party
evidence of the selling price. Additionally, the guidance modifies the manner in which the
transaction consideration is allocated across the separately identified deliverables by no longer
permitting the residual method of allocating arrangement consideration. The new guidance was
effective for us in the first quarter of fiscal 2012 and did not have
a material effect on our financial position, results of operations or cash flows.
New Accounting Pronouncements Not Yet Adopted
In May 2011, the FASB issued updated guidance for fair value measurements, primarily
clarifying existing guidance and adding new disclosure requirements for Level 3 fair value
measurements. This guidance requires entities to disclose quantitative information about the
significant unobservable inputs used in Level 3 measurements, and to provide additional qualitative
information regarding the valuation process in place for Level 3 measurements and the sensitivity
of recurring Level 3 fair value measurements to changes in unobservable inputs used. This new
guidance is effective for us beginning with our fourth quarter of fiscal 2012 and is not expected
to have a material effect on our financial position, results of operations or cash flows.
Available Information
Our internet website address is http://www.bmc.com. Our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available through the investor
relations page of our internet website free of charge as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the Securities and Exchange Commission
(SEC). Our internet website and the information contained therein or connected thereto are not
intended to be incorporated into this Quarterly Report on Form 10-Q.
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures about Market Risk |
We are exposed to a variety of risks, including foreign currency exchange rate fluctuations,
the impact of changes in interest rates on our investments and long-term borrowings and changes in
market prices of our debt and equity securities. In the normal course of business, we employ
established policies and procedures to manage these risks including the use of derivative
instruments. There have been no material changes in our foreign currency exchange rate risk
management strategy or our portfolio management strategy subsequent to March 31, 2011; therefore,
the risk profile of our market risk sensitive instruments remains substantially unchanged from the
description in our Annual Report on Form 10-K for the year ended March 31, 2011.
28
|
|
|
Item 4. |
|
Controls and Procedures |
Disclosure Controls and Procedures
Based on managements evaluation (with the participation of our Chief Executive Officer (CEO)
and Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and
CFO have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and
Rule 15d-15(e) under the Exchange Act), are effective.
Changes in Internal Control over Financial Reporting
There was no change to our internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Rule 13a-15 and Rule 15d-15 under the Exchange Act
that occurred during our first fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
29
PART II. OTHER INFORMATION
|
|
|
Item 1. |
|
Legal Proceedings |
There are no items that require disclosure under this item.
There have been no material changes to the risk factors as presented in our Annual Report on
Form 10-K for the year ended March 31, 2011.
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Dollar Value |
|
|
Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
|
Total Number of Shares |
|
|
of Shares Purchased |
|
|
Value of Shares that |
|
|
|
Total Number of |
|
|
Average Price |
|
|
Purchased as Part of a |
|
|
as Part of a |
|
|
may yet be |
|
|
|
Shares |
|
|
Paid per |
|
|
Publicly Announced |
|
|
Publicly Announced |
|
|
Purchased Under |
|
Period |
|
Purchased (1) |
|
|
Share |
|
|
Program (2) |
|
|
Program (2) |
|
|
the Program (2) |
|
April 1 - 30, 2011 |
|
|
415,326 |
|
|
$ |
50.29 |
|
|
|
414,760 |
|
|
$ |
20,858,333 |
|
|
$ |
609,862,770 |
|
May 1 - 31, 2011 |
|
|
2,058,030 |
|
|
$ |
53.55 |
|
|
|
1,990,172 |
|
|
|
106,579,590 |
|
|
$ |
503,283,180 |
|
June 1 - 30, 2011 |
|
|
1,340,402 |
|
|
$ |
53.23 |
|
|
|
996,789 |
|
|
|
53,062,029 |
|
|
$ |
450,221,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,813,758 |
|
|
$ |
53.06 |
|
|
|
3,401,721 |
|
|
$ |
180,499,952 |
|
|
$ |
450,221,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 412,037 shares of our common stock withheld by us to satisfy employee tax withholding obligations. |
|
(2) |
|
Our Board of Directors has authorized a total of $4.0 billion to repurchase common stock. At June 30, 2011,
approximately $450.2 million remains authorized in this stock repurchase program and the program does not have an
expiration date. |
30
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|
|
|
|
|
|
32.1 |
|
|
Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|
|
|
|
|
101.INS
|
|
|
XBRL Instance Document. |
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document. |
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document. |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
|
|
BMC SOFTWARE, INC.
|
|
July 27, 2011 |
By: |
/s/ ROBERT E. BEAUCHAMP
|
|
|
|
Robert E. Beauchamp |
|
|
|
Chairman of the Board, President and Chief
Executive Officer |
|
|
|
|
|
July 27, 2011 |
By: |
/s/ STEPHEN B. SOLCHER
|
|
|
|
Stephen B. Solcher |
|
|
|
Senior Vice President and Chief Financial Officer |
|
|
32
Exhibits
INDEX
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|
|
|
|
|
|
32.1 |
|
|
Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|
|
|
|
|
101.INS
|
|
|
XBRL Instance Document. |
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document. |
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document. |
33